Historic Strand Hotel Repurposed
Location: Chicago, Illinois
Project Description & Impact: Holsten Real Estate Development Corporation’s rehabilitation of the Historic Stand Hotel has created 63 residential units, 53 of which are set-aside for residents at or below 60% of area median income, and ground floor retail for the Woodlawn community.
Client: Holsten Real Estate Development (Developer)
Financing Tools Used: Low-Income Housing Tax Credit financing, Historic Tax Credit financing, HOME loan, DCEO funds
The Story Behind this Project:
Built in 1914, the Historic Strand Hotel, located near the corner of 63rd Street and S. Cottage Grove Avenue, became the destination point for entertainment in the Woodlawn community. Artists like John Coltrane and Sonny Rollins performed in McKie’s lounge. Sadly, the hotel fell into disrepair and became a magnet for crime, and then sat vacant for almost a decade. In 2014, the City of Chicago donated it to an affiliate of Holsten Human Capital Development NFP, which then conveyed it to an affiliate of Holsten Real Estate Development, the Historic Strand, LP (the “Historic Strand”), in 2014, pursuant to a regulatory agreement, restricting its use. The Strand Hotel was listed on the National Register of Historic Places in 2013.
Holsten Real Estate Development Corporation (“Holsten”) launched a restorative rehabilitation to bring the 5-story Strand back to its original glory, by creating 63 residential units, ground floor retail space, and surface parking, while preserving many original architectural details. Of the 63 residential units, 9 are market-rate, 1 is a manager’s unit, and the remaining 53 are set aside for residents at or below 60% of area median income, making the Strand eligible for low-income housing tax credits. The City allocated 9% low-income housing tax credits to the Historic Strand, and Alliant Credit Facility, Ltd. acquired an ownership interest in that entity in exchange for low-income housing and historic credits. In addition to Alliant’s equity, Holsten secured financing from a variety of sources: (i) a construction/equity bridge loan from Citibank, N.A.; (ii) a HOME loan from the City; and (iii) a loan from Holsten made from its receipt of an Illinois DCEO grant. Additionally, the City also provided: (a) tax-increment funds to Holsten, which Holsten contributed into the Historic Strand; and (b) proceeds from the sale of Illinois donation tax credits, generated from the City’s donation of the Strand to an affiliate of Holsten Human Capital Development NFP, facilitated by Alliant Capital, which proceeds were contributed by Holsten Human Capital Development NFP into the Historic Strand.