The residential market has been rapidly recovering across the U.S., with developers striving to keep up with rising demand and new trends. Even though Chicago’s recovery has been slower compared to other markets, the metro’s pipeline continues to expand, according to Yardi Matrix.
In December 2021, construction broke ground on The Shops at Big Deahl, a $250 million, multi-building project in Chicago’s Near North Side. Structured Development is behind the property that will comprise an uncommon mix of residential typologies, adjoined by a new public park.
The Seng is the smallest of the trio and the first to break ground. The community is set to include 34 affordable condos to first-time homeowner families. Located on the west end of the site, the largest building is a 23-story rental tower, slated to encompass 327 market-rate units. The second-largest building, dubbed Common Lincoln Park, will be a co-living community comprising 126 three- and four-bedroom apartments with shared living and kitchen areas.
Mike Drew, founding principal at Structured Development, along with Associate Zack Morrison from GREC Architects—the designers of the project—revealed details about the history of the development and its unique mix of housing types.
Tell us about the site’s past and how you came to own the property.
Drew: The 2.3-acre site was originally home, in part, to Seng Manufacturing Co., which at one time was the largest furniture hardware manufacturer in North America. Seng thrived in Chicago’s industrial era of the late 19th and early 20th centuries and after its departure, the buildings became a film studio owned by Rosemary and David Deahl called Big Deahl.
Structured Development assembled the current site from this parcel and two others from 2015 through 2018. At the time, the site’s zoning permitted commercial uses but excluded residential, despite its location in the amenity-rich Clybourn Corridor, the city’s second-largest retail district, behind Michigan Avenue.
In July 2017, the city adopted the Industrial Corridor Modernization Initiative, which unlocked some 760 acres of underused industrial land along the North Branch of the Chicago River for mixed-use and residential development. The Big Deahl site is located in the center of the newly zoned corridor. In 2019, Structured initiated eﬀorts to secure governmental and community approval for its master plan for the site, which called for 487 residential units. Final approval was issued in December 2020.
What was the driving concept behind this project?
Morrison: In designing Big Deahl, we sought to establish continuity and connectivity between buildings and the adjacent open space, which is a literal connection through the site. While each building has a unique formal and programmatic arrangement, together they frame the park and provide a dynamic silhouette. Common Lincoln Park and The Seng frame the park’s entrance, while Building A serves as a dramatic backdrop and a gateway to Kingsbury Street and The Wild Mile Chicago, a floating eco-park located on the North Branch Canal of the Chicago River.
The mix of residential typologies seeks to produce a diverse and dynamic community. Aesthetically, the goal was for each building to stand on its own, reacting to the scale of the city. At the same time, they complement each other through shared materials and palette cues.
What makes The Shops at Big Deahl stand out and how will it benefit the larger community?
Drew: Big Deahl is an excellent example of the type of community redevelopment suggested by the late urbanologist Jane Jacobs. It adds residential density of varying types and income levels and provides previously lacking open park space as a centerpiece of the development. Additionally, the project brings affordable housing to an already established, amenity-rich neighborhood.
The smallest residential building is perhaps the most unique. The Seng contains 34 affordable condominiums marketed to and priced for first-time homeowners with incomes limited to 100 percent of AMI—currently at $100,000 for a household of five occupants. These units contain predominately three or four bedrooms and will be sold to workforce families at prices 40 percent to 60 percent below market rate. The units will remain affordable in perpetuity through the Chicago Community Land Trust, providing a bulwark against further displacement through gentrification.
The varying types of residential choices are located around a 3/4-acre park, named Wendelin Park, open to the entire community.
Morrison: The park serves as a jewel at the center of the composition. Each building is oriented to provide residents with views of the adjacent green space. Acting as an extension of each building’s amenity spaces, it will serve as a center of community for the full development. A community lawn, playground, dog park and shared garden provide a diversity of gathering areas for residents and neighbors.
Drew: The final building on-site is the already operating climbing gym, Movement Lincoln Park, which provides 55-foot rock walls and 45,000 square feet of space for bouldering, fitness and yoga. Movement is the most recent recreational facility in a community already containing theater, dining, retail and entertainment offerings.
Please tell us a few details about the amenities at The Seng.
Morrison: Knowing that residents will have access to a great outdoor amenity just steps from their front door allowed us to focus on elements within the units. A number of the four-bedroom units in The Seng will have one bedroom outfitted with sliding doors, to serve as a flex room that can be opened up to extend the living space or closed off to offer a bedroom, office or playroom.
Residents will also have access to a rooftop amenity space, providing the opportunity for smaller-scale outdoor gatherings, while an on-site fitness room offers the opportunity to stay active without having to leave the building.
How did you finance The Seng, and what is the targeted buyer pool?
Drew: Targeted buyers for The Seng and its affordable condominiums are workforce families currently renting but struggling to find or maintain quality housing in the face of increasing gentrification and displacement.
These families include the typical schoolteacher, firefighter, police officer or nurse. This workforce faces the same challenges as those at lower-income levels. The Seng meets those challenges by providing quality and affordability in a gentrifying neighborhood with superior schools, shopping and transportation.
What is the difference between developing income-restricted rental units vs. condominiums and why did you choose the latter for The Shops at Big Deahl?
Drew: Chicago’s current ARO requires a typical 20 percent of total built units to be income-restricted, usually at 60 percent of AMI. This level of affordable rents typically yields a net operating income per unit that reaches a third of market rents. While the cost to deliver an affordable unit is the same as a market-rate unit, its value is reduced due to the restricted rent. That lost valuation is magnified as the units become larger in size from a studio to a two-, three- or four-bedroom.
The unintended consequence of the ARO requirement to mirror the market units in size and amenities led to the vast majority of affordable units delivered through the ARO being studios and one-bedrooms. This left an underserved community of families in search of new affordable housing large enough to accommodate them.
Our construction lenders recognized the community benefits delivered through the affordable homeownership and embraced Structure’s pro forma underwriting, which demonstrated the ability of the market-rate rents and valuation as a means of supporting the very real costs of ARO compliance.
Finally, the offering of for-sale product at affordable prices meets Chicago’s goals of the One Chicago Housing Plan for 2019-2023, by expanding affordable homeownership for families.
What were the biggest challenges in developing the project and has the ongoing health crisis influenced the outcome?
Drew: Compliance with Chicago’s Affordable Requirements Ordinance required collaboration among Structured Development, the city’s Department of Housing, corporation counsel and the surrounding community. Once negotiated and recorded, the financial structure for a project that included co-living, affordable condos, and off-site affordable townhomes required explanation to potential construction lenders.
Construction pricing was impacted by the supply side constraints of COVID-19, leading to a nearly 10 percent increased cost. Such costs required sponsors to provide additional equity. In December 2021, construction financing was secured through a consortium of lenders: BMO Harris, Heartland Bank and Kayne Anderson.
How do you expect a co-living community such as Common Lincoln Park to perform in a post-pandemic market?
Drew: Although there was consolidation of co-living companies during the pandemic, and they initially took a hit similar to traditional multifamily rentals, by fall 2020 their occupancy was back in the low 90 percent range and by fall 2021 the high 90 percent range, according to Cushman & Wakefield. They fill an important niche in the market—an affordable, flexible option in the city.
The shift to remote and hybrid work schedules has led many renters and homeowners to reevaluate their living environment, which in the “new normal” must also double as a working environment. Common recognizes that need and provides a creative and socially inviting atmosphere through the amenities provided on-site, including co-working spaces, community rooms and health facilities. That active management, coupled with an ideal location and affordable rents, makes Common Lincoln Park well positioned to thrive in the post-pandemic world.