Housing Initiative Clinic Closes on Two Limited Equity Housing Cooperative Transactions
This fall quarter, the Housing Initiative Clinic closed on two transactions for limited equity housing cooperatives, helping to bolster the co-op model as a means for promoting resident participation and long-term affordability in Chicago.
In the first closing, the Housing Initiative Clinic represented the Winthrop Apartments Cooperative in the acquisition of an 18-unit apartment building, with an appraised value of $1.7 million, in north Uptown. In the second closing, the Clinic represented Washington-Woolman Cooperative Apartments in Wicker Park on a $600,000 loan closing to finance building repairs at its 51-unit apartment building.
Winthrop Apartments Cooperative
The building was opened in 1992 by Habitat for Humanity as a rental housing project for low- and moderate-income tenants. The project qualified for low-income housing tax credits and has provided community residents with affordable rental units since its completion.
Habitat for Humanity’s original plan for the project was to convert it to cooperative form after the fifteen-year compliance period for the tax credits expired. Building residents and Habitat for Humanity approached the Clinic in 2012 for help in structuring the co-op and facilitating the conversion. In early 2013, the Clinic worked with residents to incorporate Winthrop Apartments Cooperative, with three of the building renters serving on the board of directors. The co-op was formed for the express purpose of buying and operating the building. The Housing Initiative Clinic aided the co-op in drafting its bylaws, occupancy agreements and other organizational documents, as well as providing and coordinating training sessions for residents who wished to join the co-op. When the time came to acquire the building and commence operations, the Housing Initiative Clinic prepared or reviewed the documents for the transaction, including the conveyance documents, the construction contracts for the building rehab, the loan documents for a $158,000 loan to finance building repairs, and the assumption of $250,000 of existing building debt. In these efforts, Housing Initiative Clinic students negotiated with attorneys at leading Chicago-area law firms including Paul Hastings LLP and Gould & Ratner, who represented the lender and seller, respectively.
Although it has taken two and a half years, the transfer of ownership to the co-op has been worth the effort and the wait. The successful conversion of a tax credit rental property to homeownership is a rare occurrence. It requires a community organizing component as residents as residents build their membership and leadership team, on top of all the usual complexities of a sophisticated real estate acquisition and financing. The board of directors of the co-op has grown to five members, and the president has been on the board since the beginning. All the members are dedicated to making the co-op a success, and are committed to keeping membership and monthly housing charges affordable. Roof and other major, timely repairs to the building are being finished up as well.
Many law students provided invaluable assistance to the project over the time of the clinic’s involvement, including Seo-Young Lee ’17, Jacob Walley ’17, Jackson Rudd ’16, Max Looper ’16, Clara Kim ’15, Ashley Graffeo ’14, Rob Greer ’13, and Hallock Svensk ’13.
Woolman-Washington Cooperative Apartments
The Woolman-Washington Cooperative is one of the very few affordable housing options in upscale Wicker Park, having operated as a HUD-subsidized building since its inception in the mid-1980s. When the co-op approached the Housing Initiative Clinic for representation in 2014, the co-op had a strong membership base and committed leadership, but needed technical and legal assistance in closing on a loan with The Chicago Community Loan Fund to address some needed repairs at the building.
The Clinic negotiated and drafted the construction contract, with some 30 pages of plans and specs. Clinic students also negotiated the loan documents for CCLF’s $600,000 construction loan, in which CCLF was represented by lawyers at McDermott Will & Emery. Clinic students Max Looper ’16 and Michael Savage ’16 handled the closing (under Clinical Prof. Jeff Leslie’s supervision), building on earlier groundwork laid by clinic students Maia Lamdany ’16 and Sarabeth Peele ’15.
The Clinic’s work for Woolman-Washington continues, with the next item on the agenda the overhaul and modernization of the co-op’s operational and organizational documents and policies.