JDL, Kayne Anderson Buy Bank OZK’s Former Lincoln Yards Site

Jim Letchinger is in the driver’s seat for one of Chicago’s most notorious North Side real estate projects.

The Chicago-based developer’s firm JDL and its investment partner Kayne Anderson closed Tuesday morning on an $84 million purchase of most of the troubled former Lincoln Yards site from lender Bank OZK, which took a hefty loss on debt issued against the property with the deal.

JDL’s takeover of the project is the latest in a series of positive signs for Chicago megadevelopments targeting sprawling vacant landscapes that have all been caught in limbo for years.

Earlier this month, publicly traded asset manager Blue Owl and developers Related Midwest and CRG closed on a $58 million deal to take control of the former U.S. Steel South Works site to start building a multi-billion dollar quantum computing and microelectronics campus for PsiQuantum, advancing a rethink of the South Side property after decades of uncertainty and multiple failed plans.

Furthermore, Related Midwest’s project The 78 received an infusion of momentum last week when the Chicago City Council approved billionaire Joe Manseuto’s Major League Soccer team Chicago Fire FC to build a $650 million privately financed stadium on the property nestled between the South Loop and Chinatown, providing the megaproject the anchor it has sought for years.

The 31-acre northern portion of Lincoln Yards — which JDL and Kayne renamed Foundry Park — was seized by Bank OZK after its previous owners, Dallas-based Lone Star Funds and Chicago-based Sterling Bay, defaulted on a $126 million loan. Bank OZK wrote the loan value down to $84 million before selling to Letchinger and Kayne, which have redrawn the previous plans for the land, envisioned by Sterling Bay as a $6 billion mixed-use campus, to focus on residential development.

Foundry Park, which sits along the Chicago River between Bucktown and Lincoln Park, will feature far less office use than planned by the previous development team, which planned 14.5 million square feet of buildings. Instead, JDL and Kayne’s $1 billion plans include 3,300 housing units, mostly rentals, with some to be designated for sale in later phases. Their plan also includes up to 350,000 square feet of office space, 435,000 square feet of retail, 250,000 square feet of hospitality and 12 acres of open space, according to city records.

It is also likely to scale back the required infrastructure improvements on the site, an aspect that proved to be a difficult hurdle for Sterling Bay, which agreed to front the cost of nearly $500 million in public works construction before starting construction, as part of its redevelopment arrangement with the city.

Like Sterling Bay, Letchinger at one point also eyed the vacant land on both sides of the Chicago River at the site, but his plan to purchase the southern portion, consisting of 22 acres, from a joint venture of JP Morgan Asset Management and Sterling fizzled out as the bank’s investment arm balked at making a deal earlier this summer. Letchinger has said he would still consider purchasing the southern acreage if it becomes available but is focused on advancing the northern side’s development for now.

Bank OZK didn’t immediately return a request for comment on the transaction, and Letchinger confirmed the closing.

For Sterling Bay — which spent hundreds of millions assembling industrial real estate along the river, demolishing structures and remediating the sites to prepare their redevelopment — the Lincoln Yards project turned into a financial disaster. JP Morgan has also explored exiting its position on the southern side at a loss, as Lone Star did by declining to further support the cost of debt service and refinancing for the northern side.

Next door to the southern portion, the only property Sterling Bay completed in the area is a vacant life sciences-oriented building that’s for sale and carrying a $64.7 million loan from Bank OZK that matured earlier this month. It’s expected to fetch a value that’s less than the loan balance, according to commercial real estate insiders.