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CHICAGO-Tax increment financing, which promises to pay enormous dividends with the Central Station redevelopment project, will be used to help make affordable housing work in the red-hot neighborhood. The community development commission recommended up to $14 million in TIF money for a 502-unit Park Boulevard Tower multifamily rental project at Michigan Avenue and 13th Street.

While market rates for one- and two-bedroom units are expected to range from $1,800 to $2,400 a month, 83 of the 409 units in a 40-story rental building will be earmarked for residents earning 50% of the area’s median income, dropping the rents to the $670 to $800 a month range. All of the 93 units in a 10-story building for senior citizens will rent from $730 for one-bedroom units.

Construction will be financed by a $95-million tax-exempt bond issue, leaving $13 million in equity from developer Central Station Development Corp.

While developers concede the multifamily rental units will throw off virtually no net operating income in their first two years, the project will benefit from a property tax reduction of 50% because of the number of affordable units they are setting aside.

“It doesn’t make a whole lot of sense initially,” Fogelson says. “Unless you’re a long-term player, it doesn’t make sense to have a return of 5.5%.”

The multifamily rental development, which is expected to be completed in 2005, is part of the 80-acre Central Station redevelopment of the former Illinois Central Railroad property south of Grant Park and west of Soldier Field. The partnership between Fogelson Properties, Inc. and Cleveland-based Forest City Enterprises, Inc. has 1,500 units under construction in an area that is expected to see population increase from 1,000 now to more than 10,000.

Fogelson expects that the gap between North Side and South Side rents will close between now and completion of Central Station rental units, which also could put a little more black on the bottom line. Fogelson also notes the market will see virtually no rental housing being produced in 2005 and 2006. “That’s a terrible problem, because not everyone wants to own,” he says.

While the Downtown multifamily market has seen a slowdown in condominium sales and concessions from rental operators, a different story is being told south of Roosevelt Road. “We’ve sold 150 units in the last four weeks with a falling stock market and the threat of a war in Iraq,” Fogelson says.

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