Rezmar’s corporate backers had to repay millions

CHICAGO EQUITY FUND | Failed apartment buildings caused federal tax problems for companies that invested

The fund was created in 1985 to help fulfill President Ronald Reagan’s vision — offer tax breaks to get businesses to invest in housing for the poor. It has helped to renovate about 10,000 apartments, getting companies to invest in exchange for federal low-income-housing tax credits — a lucrative investment.

The credits were given by the city or state to developers like Rezmar, which sold them to the Equity Fund and its investors for as little as 40 cents on the dollar. The developer got cash; the investors got tax breaks for 10 years, making as much as 25 percent in the early 1990s, according to William Higginson, a former Presbyterian minister who started the fund.

One potential hitch: The investors might have to repay the tax breaks if a project failed within 15 years. Many did. About 2,000 apartments — one in five the fund invested in — fell into financial problems, and developers abandoned them. The fund created a management company to salvage the buildings — and the tax breaks. A third of those were Rezmar’s. It was the fund’s biggest developer.

“I believed that the right thing to do was take the properties over and for us to find a way to make those things work,” Higginson said. “It didn’t work in the end.”

The fund ran Rezmar buildings as long as five years. But they were in such bad shape, with deep financial problems, that lenders began foreclosing, according to Higginson and the lenders.

As the buildings went into foreclosure and investors had to pay back their tax credits, Higginson was forced to resign.

The fund declined to identify companies that invested in Rezmar buildings but acknowledged the companies have had to pay $7.8 million in tax credits, penalties and interest because the buildings failed.

Housing officials are searching for developers to take over Rezmar buildings, rehab and run them as low-income housing.