Investors Circle Over Mixed-Use Chicago Apartment Tower

By Barbra Murray, Contributing Editor

Chicago—It’s not just the shiny new apartment properties that are attracting buyers like bees to honey. The right value-add assets in key locations are also high on the radar, as evidenced by investors’ response to downtown Chicago’s River North Park, a 399-unit mixed-use apartment property that HFF is marketing on behalf of Waterton Associates.

“We’ve already gotten a phenomenal response,” Matthew D. Lawton, executive managing director with HFF, a commercial real estate and capital markets services provider, tells MHN. “We have a lot of requests for offering collateral already.”

Built at 320 W. Illinois St. in 1987, River North Park was transit-oriented before transit-oriented development moved high up on the list of the most desirable features of a residential property. The 24-story apartment tower, located near the renowned Merchandise Mart and major Michigan Avenue employers, sits just a stone’s throw from the El, Brown and Red CTA lines.

River North Park also offers approximately 30,000 square feet of ground-level retail and a 216-space enclosed parking facility. Tenant amenities include a fitness center, which has become a requisite feature in the eyes of renters, as well as an internet café and a landscaped half-acre courtyard. However, there is room for improvement. In a market where, on a national level, renters are practically insisting on luxury accommodations, River North Park offers upside potential.

“This particular asset checks all the boxes right now of what a lot of the capital is looking for today, which is downtown, urban infill, transit-oriented value-add properties,” Lawton notes. “River North Park is an urban asset in a great location. There’s public transportation readily available and there’s a value-add component where you can come in and put capital into the property and push up rents.” In 2011, Class A apartment rents topped out at approximately $2.40 per-square-foot, marking a year-over-year increase of 8.1 percent, as per a report by commercial real estate services firm Colliers International.

It appears to be a win-win situation for both sellers and buyers in the Windy City apartment market, even the non-premier assets. “Class B and C owners can hold and enjoy the rent growth, implement an in-house value-add program in an attempt to bring their assets into the A-, B+ range, or sell now to any of the growing number of value-add buyers looking to get into the mix,” according to Colliers’ report. “Regardless of the apartment investor’s strategy, one constant remains–apartments are a very safe real estate investment and will be through 2012.”

Indeed, the investment community is well aware of the advantages of acquiring apartment properties and sprucing them up. Recent downtown Chicago transactions include Met Life’s $120.2 million purchase of the 249-unit EnV Tower from Lynd Corporate; Prudential’s pending $115 million acquisition of the 324-unit Sono East from Smithfield Properties; and General Investment & Development’s agreement to buy the 198-unit Flair Tower from a joint venture consisting of CalPERS and McCaffery Interests, for $87 million.

There’s no asking price attached to River North Park, but the property is expected to fetch a tidy sum. “The Whisper pricing is north of $100 million,” Lawton says. “Right now there’s a tremendous amount of capital out there pursuing multi-housing; it’s plentiful.”