Last week, the apartment industry was understandably focused on a REIT merger that created one of the country's largest apartment ownership platforms.
But in the Chicago area, two active local development firms with national reach also teamed up.
In a strategic alliance announced on Aug. 18, UrbanStreet Group and Wingspan Development Group, the national development arm ofNicholas Family of Cos., agreed to combine their multifamily development efforts, according to a news release shared with Multifamily Dive.
Under the terms of the agreement, Wingspan will transition its future pipeline of multifamily and mixed-use developments to UrbanStreet and focus on expanding into non-apartment sectors, including sports and entertainment venues, retail, industrial and land development, per the release.
Schaumburg, Illinois-based UrbanStreet will lead the partnership’s multifamily development efforts. At the same time, Mount Prospect, Illinois-based NFOC’s general contracting arm, Nicholas & Associates, will continue to provide construction services for multifamily projects that fall under the alliance in Illinois, Florida and Wisconsin, in addition to other markets when feasible.
There will be no changes to the ownership stakes or management structures of either entity. UrbanStreet Group will remain separate from the NFOC umbrella of companies. The alliance will not affect either firm’s current projects, partnerships, investment structures or financial commitments, per the release.
Nick Papanicholas Jr., chief executive officer and managing director of Nicholas Family of Cos., said Wingspan is contributing a pipeline of 7,500 to 10,000 units in various stages of development to the alliance.
UrbanStreet will lead the development of these projects. “The plan here is to activate more projects quicker by kind of getting arm-in-arm,” he told Multifamily Dive.
In the future, Wingspan’s multifamily focus will center on investment and third-party construction services. “We're really looking to ratchet up our capital arm,” Papanicholas said. “We’ve probably got about $225 million of assets under management. I mean we're probably looking to take that up to $500 million.”
Papanicholas said he believes the construction cycle has reached a point where it makes sense to ramp up again, with taxes and insurance costs becoming more predictable and new deliveries bottoming out. In addition, the Chicago area posted one of the highest year-over-year rent increases in the country at 3.1% as of July 28, according to ApartmentList.com.
“Now things have calmed, and with calm comes certainty,” he said. “And I think that it's easier to get projects to pencil, and we're going to, hopefully, be looking forward to doing more deals.”
A track record of cooperation
UrbanStreet Group and NFOC are not strangers. For more than a decade, the two firms have collaborated on a number of projects in the Chicago area.
“Over the years, we have built a strong relationship with Wingspan Development Group based on a shared commitment to quality, innovation and creating lasting value,” said Bob Burk, co-founder and managing partner of UrbanStreet Group, in the release.
The two companies have delivered more than 7,500 multifamily units across 25 completed projects, representing more than $3 billion in combined value, per the release.
NFOC had traditionally been involved in sports and recreation and in retail, but entered the multifamily space around 2015. Over the following decade, it developed between 3,500 and 4,000 units, according to Papanicholas.
“Our alignment with UrbanStreet was programmatic,” Papanicholas said. “We, as Nicholas, the construction company, had done five projects for them. We invested alongside them as part of the capital stack.”
At that point, it made sense to bring the two firms together and align their infrastructure, with two Wingspan Development employees transitioning to UrbanStreet.
“UrbanStreet still remains,” Papanicholas said. “Wingspan still remains. But any future multifamily project we will be doing will be under the UrbanStreet flag.”
Click here to sign up to receive multifamily and apartment news like this article in your inbox every weekday.
