A Hospital Becomes Housing…with Healthcare
By Scott Beyer
6 min read
Funding With Medicaid Waivers, RAD & LIHTC
America has seen shifts in senior care provisions. There are at least some elderly people who prefer to retire near urban centers, not suburban campuses, since that puts them near a greater diversity of people and amenities. And their preferences are changing in respect to setup. Rather than living in full-blown nursing homes with on-site, full-time staff—a model that’s isolating, expensive and somewhat infamous after the Coronavirus nursing home scandals—the elderly choose various arrangements along a continuum leading into that.
The rise of remote medical care has made it easier for seniors to age in place, either with families or in their long-time homes. But others have chosen independent and supported living arrangements that aren’t fully autonomous, yet still not as involved as nursing homes. A recent project in Chicago, called Ravenswood Senior Living (RSL), fits both these changing trends.
RSL was once Ravenswood Hospital, a medical center that was built in 1907 and served as a community pillar in north side Chicago. It was shut down and slated for demolition in 2002, before some portions were re-occupied by a private French international school called Lycée Français de Chicago. The rest of the site was bought by Evergreen Real Estate Group, a Chicago-based firm that specializes in affordable housing development, with a portfolio of over 10,000 units. The firm spent several years getting legal changes made to the site, before breaking ground in January 2020 on the $81 million redevelopment of this ten-story, 201,000 square foot complex. The project is a collaboration with the Chicago Housing Authority and will provide affordable housing and medical care to seniors in Chicago making 60 percent area median income.
Levels of Need
RSL fits the “urban” description based on location.
It’s adjacent to Uptown and just north of Wrigleyville, meaning tenants will be within a walk or short drive of daily needs. RSL fits the senior continuum of care aspect in that it’s segmented based on different levels of medical need. Seventy-four units will be in the building’s Independent Living Facility (ILF), which is for seniors who want to live more or less autonomously. The other 119 units will be in the Supportive Living Facility (SLF), which gives tenants a form of care that sits between independence and nursing home provision.
This ILF/SLF dichotomy forced the project into complex legal maneuvering, but also helped get more financing, says David Block, Evergreen’s director of development. Illinois state law used to prevent independent and supportive living facilities from mixing in the same building, because folks from the latter group are generally older and more fragile. Their exposure to outside populations could expose them to infection. Evergreen lobbied to change that law, and in 2018 the legislature did under the condition that both segments within a building must have separate entrances, elevators, common spaces and staff. This added to the RSL redevelopment’s complexity: Evergreen needed to effectively create two buildings in one, subdividing a structure that already had a preexisting layout.
Medicaid for Preventive Care
But the legal change also meant Evergreen could qualify for more financing. The SLF, says Block, opened a large reserve of Medicaid Waiver funds, which are distributed to states, and meant to solve medical needs at community level.
Rather than incentivizing localities to warehouse people in hospitals, nursing homes and institutions, the funds go to preventative care facilities, like SLFs. Evergreen will use the funds to provide SLF tenants with three meals a day, recreational activities, medical wellness programs and more.
The ILF opened some additional funds that would not have been available had Ravenswood remained solely an SLF. To get Chicago Housing Authority money, for example, Evergreen needed to provide some units that fit HUD protocol. So, it put the ILF unit conversions through the Rental Assistance Demonstration (RAD) program, which qualified them for project-based vouchers.
The common funding element for both the SLF and ILF segments was four percent Low Income Housing Tax Credits. But to prevent the three financing sources—Medicaid Waiver funds, RAD vouchers and LIHTCs—from clashing legally, Evergreen had to set the building’s two segments up as separate LLCs, making this like two projects in one.
“The structure we came up with was a single LIHTC partnership – SLF and ILF combined,” says Block. “And then two separate entities that are owned by that partnership that are borrowing a different first mortgage loan.”
The SLF segment got the vast majority of the $29 million first mortgage, because the SLF tenants will receive more services. This is reflected, continues Block, in the differing rents.
“The total project-based voucher rent that we get through the RAD program—what’s called a contract rent—is $1,125. The total payment for the Medicaid Waiver units on the SLF is almost $4,000.”
According to a company spreadsheet, the project will benefit from $22 million in housing authority funds, $17 million in LIHTC equity and over $4 million in SLF and ILF operating revenue grants. There were some other unique financing sources, like a $563,000 grant from ComEd, the main electric utility serving Chicagoland.
This isn’t the first time Evergreen has converted an old shuttered hospital into senior living, having done the same in the Chicago suburb of Aurora. But RSL—which the company will also manage upon completion—better fits the urban and diverse provision model described above. It will place low-income seniors in an urban setting and in a building where staff can address some of their needs to prevent more serious future medical care. Block sees it as a model that would be useful elsewhere in America.
“This project helps to fill a gap in available housing, particularly for low-income seniors who are aging in place and may not have good options for finding a place to live that can help support their basic activities of daily living. It is a vastly better alternative than a nursing home for most individuals and will allow these tenants to live with a certain amount of independence.”
Story Contact:
David Block, Director of Development, Evergreen Real Estate Group
dblock@evergreenreg.com
