ROCKFORD, ILL. - Star Development became involved in Champion Park—a scattered-site development of 52 for-sale homes and 52 rental units—just when all hope seemed lost.

The Winnebago County Housing Authority (WCHA) had won an $18.8 million HOPE VI grant in 2002 for the demolition of the 76- unit Champion Park apartment complex and construction of replacement units. The authority started predevelopment work with an out-of-state developer in 2002, but a year later, the project was in serious jeopardy.

Citing poor communication and project delays, the WCHA fired the original developer toward the end of 2003 and put out a request for proposals. Star Development won the bid and began predevelopment work in January 2004, as the clock on the HOPE VI grant continued running.

“We were told by the Department of Housing and Urban Development that you’ve got this year to get a shovel in the ground, or you’re going to lose this grant,” said Mary Moore, a managing member at Star.

But the project faced many challenges.

The Washington Park area of Rockford, where Champion Park is located, was a forgotten region that had more vacant land than homes. Infrastructure was practically nonexistent: Paved roads turned to dirt, many private wells were contaminated, some streets lacked water and sewer services, and stormwater drainage was non-existent.

“Part of the project involved finishing the city grid that was never fully developed there,” said Perry Harenda, Star’s director of acquisitions and development.

What’s more, the financial assumptions of the original developer were faulty—specifically, that the new units could sell for $110,000 when existing houses in the neighborhood were selling for $30,000.

The faulty assumptions, infrastructure work, and construction and demolition costs meant the project needed much more funding. “We had to basically double the amount of HOPE VI money we had to work with and raise a lot of other funds to bridge the gap,” said Harenda.

Between January and April, the company quickly put together a low-income housing tax credit (LIHTC) application for the rental phase while starting work on the first homeownership phase.

The company netted $8.8 million in LIHTCs, syndicated by the National Equity Fund, Inc.; received tax-increment financing from the city of Rockford for about $2.5 million; figured in home sales proceeds of about $3.7 million; and got about $710,000 from the Federal Home Loan Bank of Chicago’s Affordable Housing Program; among many other funding sources.

Star also used a portion of the HOPE VI money to set up a second-mortgage program to help buyers with up to 40 percent of the purchase price. The success of the project is evident in the sales prices of the first and second phases. The first phase had an average price of $65,000, and a year or two later, the houses in the next phase sold for about $76,000 apiece.

By demolishing the existing 76-unit public housing complex, Star was able to create 11 acres of park space next to the new development. Star also expanded a community center located in the park, adding a computer center for local residents, as well as office space that houses WCHA’s new headquarters.

All of the homes had been sold as of June. The rental phase is fully leased with a waiting list 200-long.