Kayne Anderson eyes Lincoln Yards amid Sterling Bay’s hunt for capital

Sterling Bay’s search for new financing on its stalled Lincoln Yards megadevelopment has led to a major investment firm based in Los Angeles, courtesy of a familiar face on the Chicago development scene, The Real Deal has learned.

The local firm’s $6 billion plan to redevelop 53 acres along the Chicago River between Lincoln Park and Bucktown has gotten the interest of a high-ranking real estate acquisition executive of Kayne Anderson, a venerable alternative investment firm with $35 billion in assets under management, who recently met with top city planning officials. The parties came together with an assist from Darren Sloniger, a veteran developer who left his post as CEO of Naperville-based Marquette Cos. last year, according to city records obtained by The Real Deal.

The meeting came as Sterling Bay renewed its search for additional capital to advance the project, which lost previous financial backers J.P. Morgan Asset Management and Dallas-based Lone Star Funds.

The exits by Lone Star and J.P. Morgan sent Sterling Bay into the market for new capital at a difficult time for financing ground-up development. The developer initially asked the Chicago Teachers’ Pension Fund for an infusion of upwards of $300 million, but got rejected in August.

Kayne Anderson’s Brian Lessans and Sloniger — who oversaw the development of the Parq Fulton and Evo Union Park buildings on the western edge of Fulton Market during his tenure with Marquette Cos.— participated in the meeting on February 26, city communications show. Those two were labeled members of the Lincoln Yards “investment group” by attorney Richard Klawiter, who was representing Sterling Bay and also was scheduled to attend the meeting.

Sterling Bay’s Dean Marks, Jessica Simons and Fred Krol were also expected to participate. So were top city Planning and Development Department officials, including newly appointed Commissioner Ciere Boatright and the department’s former interim commissioner Patrick Murphey, who both prepared their staff and comments for the meeting, the records indicate.

“It involved a basic discussion of zoning entitlements and [redevelopment agreement] obligations for Lincoln Yards,” a Planning Department spokesperson said, directing further questions to the development team. “There is no proposal to amend the [agreement].”

It remains unclear how much funding the Kayne Anderson and the Sloniger-led group would inject into Lincoln Yards, if it moves forward as a partner on the project.

Arkansas-based Bank OZK in November approved a fifth loan modification and maturity date extension for a $126 million mortgage debt owed by Sterling Bay’s development entity for a large portion of the Lincoln Yards site, Cook County records show. That loan was originally issued in 2019, and the latest maturity date extension came after the loan was reported to be out of additional extension options last year, unless Sterling Bay found a new capital partner.

The loan has ties to properties that Sterling Bay spent more than $250 million to buy between 2015 and 2017 as it assembled key parcels in the former industrial zone to carve out a new path for development along the river. While a Sterling Bay fund held some equity in the properties, J.P. Morgan Asset Management and Lone Star were the biggest investors, and those two firms were reported to be ready to unload their stakes in the project at a discount, sparking Sterling Bay’s search for a new investor.

Sterling Bay didn’t return requests for comment, Sloniger declined to comment and Kayne Anderson also declined comment other than to say it would provide information “on this process as there are updates to share.”

Sterling Bay CEO Andy Gloor previously blamed the administration of former mayor Lori Lightfoot for Lincoln Yards hitting a snag with getting funding help for public infrastructure work required on the development site as part of the plan.

Unlocking up to $488 million in tax increment financing subsidies the city pledged to Sterling Bay to help with that work proved challenging, partly because the developer promised to take on the costs up front before being reimbursed; it sought to bring on Wisconsin’s Public Finance Authority to help fund that work but Gloor claimed the Lightfoot administration dragged its feet in approving the proposal.

Kickstarting the infrastructure work is key to proceeding, and how to do so appears to have been a key point of the discussion.

The city’s agreement with Sterling Bay called for completing work on a bridge connecting the northern and southern portions of the site and several roads within the former industrial corridor by 2022. The extension of The 606 trail and a realignment of Elston Avenue were also supposed to begin in 2022. Those projects are behind schedule.

Lincoln Yards is set to eventually include 14 million square feet, with a large focus on office and laboratory space, and as many as 6,000 residential units. One lab building at 1229 West Concord Place is now complete, but so far the company hasn’t announced any leasing for the 285,000-square-foot property. Upon the original approval of Lincoln Yards granted in 2019, several buildings were expected to have been completed by this year.

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