One of the largest development sites in the country is getting new owners, a new identity and a scaled-down vision for a residential community along the Chicago River.
Florida-based Kayne Anderson Real Estate and Chicago firm JDL Development on Thursday confirmed that they have entered an agreement to buy a 31-acre portion of the North Side site previously known as Lincoln Yards when the project was led by Chicago developer Sterling Bay.
Kayne Anderson and JDL said they plan to rebrand the Chicago project Foundry Park in a nod to the site’s industrial past, while planning to shift the focus to a smaller, residential-focused vision from the 14.5 million-square-foot, mixed-use project long imagined by Sterling Bay.
The expected purchase could bring major changes to one of the biggest real estate projects ever planned in Chicago, a development that was supposed to bring rows of skyscrapers as high as 595 feet tall to the site but so far has resulted in just one structure — a vacant, eight-story life science research building at the southern tip of the property — years into the project.
Kayne Anderson and JDL expect to close on the purchase of the land by the end of the third quarter, they said.
They plan to build homes, condominiums, rental apartments and commercial space on the site, according to a statement, while working with the city on specific plans that are expected to increase the amount of affordable housing on the site.
The statement did not say how many residential units are planned or how many square feet of commercial space is envisioned, other than to say plans were being scaled back from Sterling Bay’s previous design.
Kayne Anderson and JDL said their vision for Foundry Park is a walkable neighborhood with tree-lined, low-traffic streets and green space for year-round recreation along the river.
Stalled project
Kayne Anderson and JDL’s statement confirms previous reports that the joint venture was working on a deal to take over the long-stalled, multibillion-dollar project from Sterling Bay and its partners after years of financial challenges and other setbacks that have left the approximately 55-acre site mostly unbuilt. The land runs along the river between North and Webster avenues.
“We are thrilled to partner with Kayne Anderson to execute on our shared vision for this iconic Chicago property,” Jim Letchinger, founder and CEO of JDL, said in the statement. “We see incredible potential to establish this site as a place that thousands of Chicago residents can call home and create a shared space that brings together members of the Bucktown, Wicker Park and Lincoln Park communities for years to come. As dedicated investors in Chicago, our goal and legacy has always been to leave Chicago neighborhoods better than we found them for residents and visitors alike, and we look forward to working closely with Kayne Anderson and the city of Chicago to bring our vision for this renowned property to life.”
Thursday’s statement references a deal to buy a 31-acre section of the land with an address of 2001 N. Southport Ave. That indicates that the purchase is for the northern part of the land that is owned by Bank OZK.
Sterling Bay and investor Lone Star Funds in March handed back the land to the Arkansas-based lender after the high-profile Chicago developer was unable to bring in new investors and lenders to recapitalize the stalled project.
In May, JDL emerged as the expected buyer of the land from Bank OZK, which confirmed in public filings that it planned to sell the northern portion of Lincoln Yards for about $84 million. Kayne Anderson, which previously talked with Sterling Bay as a potential investor, later emerged as JDL’s expected partner on the purchase of the northern part of the site as well as the southern half, which is owned by Sterling Bay and J.P. Morgan Asset Management.
The statement from Kayne Anderson and JDL did not mention the status of the deal to buy the southern stretch of land.
Longtime industrial area
Northern parcels within Lincoln Yards were occupied for decades by gritty users such as the A. Finkl & Sons steel plant before sweeping changes to land-use rules along the river cleared the way for a mixed-use megadevelopment on the site. Sterling Bay and its investors spent hundreds of millions of dollars assembling the land before the onset of COVID-19, rising borrowing and construction costs and other challenges stalled their progress.
One of the biggest hurdles was an unusual deal that Sterling Bay struck with the city in 2019 in which the developer agreed to pay for infrastructure such as roads and bridges in the congested area, with an agreement to be reimbursed in future years by tax revenue generated from new buildings it would develop within the tax increment financing district.
The huge upfront infrastructure costs became too much to overcome as interest rates and construction costs rose in the years after the development agreement was reached with the city.
The only completed building is at 1229 W. Concord Place, within the southern portion of the site.
“I am pleased to see progress on the site with JDL and Kayne Anderson,” 32nd Ward Alderman Scott Waguespack said in the statement. “We will be working closely with the surrounding communities and city officials to revitalize the area with new housing and development that will help grow our local economy.”
JDL is known in Chicago for major residential projects including the two-tower One Chicago, the tallest of which rises 77 stories, as well as the ongoing, 12-building North Union development on the Near North Side.
Boca Raton-based Kayne Anderson Real Estate is part of $38 billion alternative investment management firm Kayne Anderson. Its real estate investments in Chicago include the recent purchase of the apartment and retail portions of the 47-story Millie on Michigan tower at 300 N. Michigan Ave. from Sterling Bay and Magellan Development Group. That property sold for $122 million, according to online property records.
“At Kayne Anderson Real Estate, we seek to partner with industry-leading developers to identify and invest in assets with strong fundamentals and demographic tailwinds,” Al Rabil, co-founder and CEO of Kayne Anderson Real Estate, said in the statement. “Bringing together our extensive experience and deep industry relationships with JDL’s unparalleled legacy in the Chicago market, we are ideally positioned to deliver on this best-in-class property’s potential. We are pleased to diversify our existing portfolio as we continue to scale our business and capitalize on what we view as one of the strongest buying opportunities in our firm’s history.”