An Illinois state authority issued $72.5 million in bonds to develop housing in Chicago’s South Shore neighborhood.
The bonds, issued by the Illinois Housing Development Authority (IHDA), mature on June 1, 2026 and have an initial mandatory tender date of June 1, 2025. They have a coupon rate of 4% and yield 4%. The bonds received a rating of Aaa/VMIG 1 from Moody’s Investors Service. Last month, Fitch Ratings upgraded the authority’s underlying rating to AA.
The upgrade reflected “IHDA’s strengthened asset quality, with continued increases in the mortgage-backed securities and multifamily FHA risk-share loan portfolios, combined with the authority’s continued strong profitability and low leverage ratios,” according to Fitch.
The issuance comes amid a dearth of affordable housing in the city of Chicago. More than 200,000 families are on waitlists for public housing in the city, according to the Chicago Housing Authority. The wait time for public housing ranges from six months to 25 years.
The bonds will secure a loan to a borrower, an entity owned by Wells Fargo Bank, that will finance the development known as the South Shore Apartments. Payment on the bonds will be backed by revenue from the borrower.
The development will include the rehabilitation and construction of 446 apartments, located across 20 buildings. At least 40% of those apartments are required to be occupied by tenants who make less than 60% of the area’s median gross income, adjusted for family size. However, the borrower anticipates that nearly all units will meet that criteria.
Wells Fargo Securities served as lead underwriter on the issuance.