Apartment investors have long coveted coastal properties. And, over the past decade, money has swarmed multifamily assets in the Sun Belt.
In the process, many ownership groups have overlooked the Midwest. But two deals announced this week have shown Chicago still holds appeal for apartment buyers, as new deliveries continue to suppress rents in the Sun Belt.
“Unlike what we’ve seen in the Sun Belt region over the last 24 months, Chicago and the Midwest have experienced limited new supply relative to their existing inventory, supporting the steady rent and occupancy growth we see there,” Pat O’Rourke, principal at LRE Management, said in a press release shared with Multifamily Dive announcing his firm’s acquisition of the Monroe Aberdeen Place.
Here’s a look at the two sales.
Fox Valley Villages
On Tuesday, Standard Real Estate Investments, which has offices in Los Angeles and Washington, D.C., and Chicago-based The Vistria Group, announced the $93.2 million acquisition of Fox Valley Villages in a press release shared with Multifamily Dive. The 420-unit community is in the Naperville/Aurora submarket within the Chicago metro area.
“Chicago is a market we like,” Standard CEO Robert Jue told Multifamily Dive. “We believe in the growth there, and we think that relative to, for example, some of the Southern markets, it hasn't seen as much supply.”
Fox Valley Villages contains 18 three-story buildings, as well as a free-standing clubhouse, fitness center and maintenance garage. The property has 208 one-bedroom and 212 two-bedroom residences, with an occupancy rate of 97%.
Standard and Vistria plan to invest over $8 million in building improvements and renovations. “There will be some levels of upgrades to the units, but most of that is just bringing things up to our normal standards today, as opposed to something super high-end,” Jue said.
Standard and Vistria plan to preserve long-term affordability for a portion of the units at the property through a state of Illinois tax incentive program. “You have to set aside 15% of the units at 60% AMI, and you have to spend $8 per square foot in qualifying improvements,” Jue said. “In exchange, you get a 25% property tax abatement.”
Monroe Aberdeen Place
On Wednesday, Mamaroneck, New York-based LRE Management announced the acquisition of Monroe Aberdeen Place, a 120-unit multifamily property in Chicago's West Loop neighborhood, in a press release shared with Multifamily Dive.
“With Monroe, we are acquiring a newer vintage, core, luxury property well below replacement cost, in an ‘A’ location within a gateway city; we are increasingly focusing on opportunities in the Midwest, as the region continues to outperform the rest of the country in both rent and occupancy growth,” Eric Londa, founder and managing partner at LRE, said in the press release.
LRE contributed $20 million in equity for the deal. Agency debt was secured for the purchase, with an interest rate of 4.95% and a seven-year maturity, featuring full-term interest-only payments.
Monroe Aberdeen Place, built in 2018, offers one-, two- and three-bedroom apartments. Its amenities include private balconies, personal rooftop terraces with skyline views, bike storage and a private heated parking deck.
In the press release, LRE boasted Monroe Aberdeen Place’s condo-style features. Given the difficulty of building in the city, the firm said it will be difficult for developers to build new projects that can compete.
“Chicago’s constrained development environment, driven by rising construction costs, long entitlement timelines, and added headwinds from zoning and affordability mandates, labor union pressures and community resistance, has historically tempered development and the threat of oversupply,” O’Rourke said.
