$111M JV to Develop Major Mixed-Use Project in Chicago
Guggenheim Real Estate selected two partners to renovate a two-tower community and expand the site into a large mixed-use project in the Illinois Medical District.
Chicago—Real estate brokerage firm KIG did some matchmaking recently, arranging an $111 million joint venture partnership to invest in and renovate Medical District Apartments, a 410-unit community in Illinois’ Medical District on Chicago’s Near West Side. The partnership includes property owner Guggenheim Real Estate LLC (GRE), Atlantic Realty Partners and Focus Development Inc.
“Guggenheim has owned this asset for 10 years and we were tasked with finding them a JV partner who specialized in new construction and development,” Susan Tjarksen, principal and managing broker at KIG, told MHN.
The trio will not only renovate the two-tower community—which was originally built in 1972—but will also ultimately develop a larger, mixed-use project on the site. The nearly 5.7-acre site located on Ashland Avenue includes the two 12-story residential towers with two two-story garage decks that could potentially be redeveloped. The partnership is proposing a multi-phase development on the site that would include a mix of residential communities.
“The existing parking garages are underused and their footprints are big enough to allow for two new towers,” Tjarksen said. “The (Illinois Medical District) is right across the street and is the fastest-growing submarket in Chicago—high paying, skilled jobs with a captive audience in a neighborhood that hasn’t seen new construction since the early 1970s.”
She added that the site offers potential in both value-add renovation and ground-up development and will allow the joint venture “to capitalize on continued demand for rental housing in downtown Chicago…Ongoing investment on the Near West Side, including the proposed redevelopment of the Cook County Hospital, will only raise the profile of the neighborhood–and underlying real estate values–in the months and years ahead.”
From a pool of eight potential partners sourced by KIG, GRE selected Atlantic Realty Partners and Focus Development’s joint equity, development and construction plan. Atlanta-based Atlantic Realty Partners and Northfield, Ill.-based Focus Development will co-develop the property, and Focus Construction will serve as the general contractor for the renovation and new construction.
KIG Managing Director Todd Stofflet and Tjarksen led the team that represented GRE in the formation of the partnership.
Medical District Apartments is currently 94 percent occupied and includes studio, one- and two-bedroom units. Residents have access to jobs at the nearby Rush University Medical Center, the University of Illinois at Chicago and the overall Illinois Medical District. The property also offers convenient access to the CBD and West Loop, which serves big-name employers like Google and McDonald’s.
“It’s very rare to find an infill opportunity like this that has ‘eds and med’s’ job growth coupled with a declining rental housing stock stemming from the Rush expansions,” said Richard Aaronson, president & CEO of Atlantic Realty Partners.
The joint venture plans to upgrade residences at Medical District Apartments as part of its capital improvement plan, which will include installing new flooring and upgrading kitchens and baths. Select common areas will also be renovated. Current amenities include an outdoor pool and sundeck, fitness center, business center, lobby with concierge, bike room and garage parking. The renovation of the towers is expected to begin in third-quarter 2016.
The improvements will “allow ownership to increase rents and better compete with nearby rental properties while offering a relative value to new construction,” said Stofflet. “The additional land gives the venture maximum flexibility to pursue phased development tailored to the needs of the surrounding neighborhood, which until recently has been underserved in terms of new retail and residential investment.”
Future phases of the project might also be eligible for incentives under the city’s transit-oriented development ordinances because of the property’s proximity to Polk Pink Line station and Blue Line.
The partnership is reportedly planning to build another 500 apartments across two towers, hoping to attract workers and students from the Illinois Medical District and the university, according to Crain’s Chicago Business.
Image courtesy of Guggenehim Real Estate