Social investing: a couple of rich old developers give something back | Neighborhood News | Chicago Reader

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Social investing: a couple of rich old developers give something back

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The old high rise in Uptown was vacant and falling apart when Herbert Heyman and Howard Landau offered the Lakefront SRO Corporation a grant of $250,000 to buy and renovate it. Come fall, Lakefront will open the Malden Arms Apartments at 4727 N. Malden, and its 86 units will be open to the poor.

Heyman and Landau are retired developers. They were born and raised in Chicago and made their fortune building shopping centers and strip malls in the suburbs. About two years ago they decided they wanted to give something back to the city that gave them their start, so they launched the Community Ventures Program. Working with the Jewish Council on Urban Affairs, a not-for-profit social-service group, they announced their plan to cover the predevelopment costs on housing deals put together by community-based not-for-profit developers.

Since then, they have helped engineer five deals and invested $1.5 million. If all goes well, that money could spur the construction or rehabilitation of more than 1,000 units of low- to moderate-income housing across the city. "This is our contribution," says Heyman. "This is what we want to do for Chicago."

Their generosity may be unprecedented. Scores of developers have struck it rich in Chicago, but once on top few look back. Many quickly forget that there was a time when they (or their families) were poor. And few have been willing to donate a portion of their fortunes to poor neighborhoods--or even invest in them. For all the bold talk one hears these days about the merits of entrepreneurial risk taking, there are risks only a fool would afford.

But Heyman and Landau are not fools. And they're not investing for an economic return. They're making a social investment. Still, they don't want to take the risk of seeing their grants or loans squandered, which would make them look like chumps. "We understand that this is not like building a shopping mall in Schaumburg," says Heyman. "You have to remember that there are risks in any investment. Frankly, at our stage in life we would rather accept this risk. We don't want to back losing propositions. But Howard and I would be less unhappy losing our money here than in Schaumburg."

There are potential drawbacks to their endeavor. Some hard-hearted conservatives may use the Heyman-Landau success story to justify cuts in federal housing funds--even though Heyman and Landau would be the first to acknowledge that none of their recent deals would exist without some sort of governmental assistance. "The money they gave is critical--it's what makes a project," says Larry Pusateri, housing-development manager of Lakefront SRO. "It made our project. These guys can say they took 86 people off the street. I don't know how many other people can say that. They did it. Give them credit for that."

Ironically, their efforts have brought them back to some of the neighborhoods where they got their start. Heyman, who's 81, and Landau, who's 88, both grew up on the south side and both graduated from Hyde Park High School and the University of Chicago. They've been in business since the early years of the Depression, but struck it rich after World War II, when the federal government spent millions of dollars building highways. That was the death knell for the city, for the new roads gave the middle class an easy drive out. But they created a boom time in the suburbs, and Landau and Heyman, who have been partners for almost 60 years, became experts at developing suburban shopping malls and strip centers. "The key is to know what your customers need and to know the market," says Landau. "We had a long inventory of businesses, so we knew when a mall goes up who would want to go there."

By the end of the 1980s they had retired and created their own not-for-profit foundations. Later, the drastic shortage of single-room-occupancy hotels triggered their interest in building low-income housing. "Over the past years the city had lost thousands of single-room units as old buildings and hotels were either demolished or fell apart," says Landau. "There's never been much of a movement to help these people."

So Heyman and Landau, who had helped found the Jewish Council on Urban Affairs back in the 1960s, went to JCUA with a new idea. "They said that if they set up a fund of $500,000, they could spur development," says Alan Goldberg, a community consultant for JCUA. "We had never really thought about doing a program like that. It's not something JCUA usually gets involved with. Basically, we give staff time to neighborhood organizations and we work in citywide coalitions."

But the more JCUA leaders thought about it, the better they liked the idea. So many low-income-housing initiatives die early for lack of start-up funds. "You need money to get an idea off the ground," says Landau. "You have to pay the so-called predevelopment costs. You have to pay your architects and lawyers, et cetera."

Predevelopment money can also be used as collateral to persuade banks, the government, or other lenders of a project's worthiness. "Sometimes you have to give people that little push or boost of confidence before they will invest," says Goldberg. "As it is, so many developers have trepidations about investing in poor neighborhoods. But if they see that someone like a Heyman or a Landau--someone with a long and proven track record--is getting involved, well, then it's a different story."

One of Heyman and Landau's first projects was the Malden Arms Apartments SRO. "There were two things that interested us in that deal," says Goldberg. "For one thing it was an SRO, meaning it would be for the very low income--people who would need housing the most. Secondly, it would be a blended-management approach. It was not just housing--it was also social services and good management. The Lakefront people were going to set up programs that would enable the homeless people to get skills and the support they need to get their lives together."

After meeting with the Lakefront SRO Corporation's leaders, Landau and Heyman gave the group a $250,000 grant. "The $250,000 enabled us to borrow less money," says Pusateri. "With a lower debt service, we have less money to pay back--and that means our rents can be even lower."

The grant also enabled Lakefront to woo other investors. "We took that $250,000 shopping, so to speak," says Pusateri. "We were able to go to the city and state and show them our project was legitimate."

Another successful grant was made to the Ahkenaton Community Development Corporation, a not-for-profit development group affiliated with the community organization Centers for New Horizons. Both operate in Grand Boulevard, a poor, mostly black south-side community. Heyman and Landau gave Ahkenaton a $250,000 grant to establish a revolving-loan fund. With the money, Ahkenaton can buy and rehab single-family homes and two-flats, which can then be used to obtain second mortgages to buy more property.

"If all works well, this is a self-sustaining program," says Goldberg. "It's aimed at making tenants self-sufficient home owners. Ahkenaton will train residents to take care of their property, teaching them everything from how to repair a leaky faucet to how to establish credit. The idea is to use the rent as equity, so that after five years or so the residents will be in a position to buy the building."

Landau and Heyman have also given a $250,000 grant to the Latin United Community Housing Association to build an SRO in Humboldt Park, a $200,000 loan to the Eighteenth Street Development Corporation to construct new housing in Pilsen, and a $250,000 grant to the Carmen-Marine Tenants' Association, Inc., to buy their Uptown high rise.

"We're eager to make more grants and loans," says Heyman. "But our next challenge is to convince other developers to work with JCUA to set up similar programs."

That might be the greatest challenge of all. "We're working with several people who might be interested, though I have nothing concrete to report at this time," says Goldberg. "Because of Herb and Howard we have momentum, and we want to keep it going. They're great. But we want this program to be more than the generous contributions of two wonderful men."

Art accompanying story in printed newspaper (not available in this archive): photo/Jon Randolph.

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