Top 5 Suburban Submarkets for Multifamily Transactions in Chicago
- Mar 02, 2020
Multifamily investment in Chicago softened in 2019, in part due to property tax legislation changes. Despite having some of the highest tax rates in the U.S., some $2.7 billion in assets traded last year in the Windy City, with activity in suburban submarkets surpassing urban asset investment by $200 million, Yardi Matrix data shows.
Investors were most interested in value-add opportunities, whichs was reflected in the overall average price per unit, which dropped 4.4 percent year-over-year to $184,247, well ahead of the $168,177 national average. Of the $1.5 billion that investors poured into the suburbs, nearly half was directed at five submarkets, four of which posted sale volumes in excess of $100 million, detailed below.
5. Buffalo Grove
The sale of the upscale Deer Park Crossing, a 236-unit community completed in 2018, placed the submarket on the fifth position of our ranking. Redwood Capital Group acquired the property from REVA Development Partners for nearly $91 million, or $383,475 per unit in November, using a $54 million loan originated by Metropolitan Life Insurance Co.
The 10-building community is located on more than 11 acres at 21599 W. Field Court and comprises apartments with one- to three-bedroom floorplans averaging 1,246 square feet. Common-area amenities feature a chef’s kitchen as well as a demonstration kitchen in the clubhouse.
Naperville sits about 30 miles west of Chicago and boasts a multitude of bridges and fountains, symbolic of the town’s ties to its historic past as the oldest town in DuPage County. Investors spent $126 million in Naperville–East last year, on two assets built in the 1970s: the 568-unit Lakeside and the 176-unit Highcrest Townhomes.
The former sold in March to Hayman Co. and partner Rialto Capital Advisors for $100 million, or $176,056 per unit, and holds a $70 million CMBS loan with payments of $295,874 per month and a 4.9 percent interest rate, due in March 2029. The 30-building community is located on more than 56 acres at 4800 Lake Trail, featuring a unit mix comprising one- to three-bedroom apartments averaging 845 square feet.
Monument Real Estate Services acquired Highcrest Townhomes from Laramar Group for a little over $26 million, or $148,864 per unit. The transaction was subject to a 10-year $22 million loan funded by Fannie Mae at a rate of 3.93 percent per annum. The 10-building property is spread across more than 10 acres at 3514 W 83rd St. and was 93.8 percent occupied at the time of the sale in July. The community comprises one-, two- and three-bedroom floorplans.
The western side of Naperville totaled $169 million in sales. Three assets traded in the submarket, all in the last quarter of the year: Fairways of Naperville, The Ponds of Naperville and Railway Plaza.
The latter was the largest deal—it totals 417 units in 13 buildings spread across nearly 21 acres at 507 Railway Drive. Railway Plaza was completed in 2000 and consists of one- and two-bedroom units averaging 1,057 square feet. BH Equities and partner Cantor Fitzgerald acquired the property in December from Clarion Partners for $96 million or $230,516 per unit, marking their second acquisition in Chicago. The sale was subject to a $61 million loan held by Freddie Mac, due in January 2030. The two partners also own Aurora at Summerfield, a 368-unit community they acquired in November for $78 million, or $212,364 per unit.
2. Downers Grove
Downers Grove is only 25 miles away from downtown Chicago, which is ideal for those working in the city and commuting by Metra. Investors took notice and, in 2019, some $179 million in multifamily assets traded in the submarket.
Of the three properties that changed ownership, Twin Lake Towers was the largest. It sold for the highest amount: F & F Realty acquired it from Aimco for $79 million, or $197,995 per unit. The three-building community occupies more than 17 acres at 200 W 60th St. and was built in 1969. Totaling 399 apartments with floorplans ranging from one to three bedrooms, Twin Lake Towers was 91.5 percent occupied at the time of the sale in May. The transaction was subject to a 10-year loan of nearly $60 million funded by Fannie Mae with an interest rate of 3.9 percent per annum.
The northwestern suburb is part of the Golden Corridor and home to headquarters of companies like Zurich North America, Motorola Solutions and Career Education Corp. Investors spent here $181 million in 2019, on three assets: the 550-unit Haven Hoffman Estates, the 368-unit Savannah Trace and the 367-unit Legend Park.
Tricap Residential Group and partner Wolcott Group paid for the larger asset a little over $60 million, or $109,636 per unit. The 11-building garden-style community completed in 1972 was previously known as Autumn Chase Apartments and is spread across more than 19 acres at 725 Bode Circle. To acquire the property, the buyers assumed a $46 million outstanding balance of a $50 million loan held by Fannie Mar, originated in May 2015 with an interest rate of 3.63 percent per annum, due in 2025. At the time of the acquisition, the new owners announced the intention to renovate the community and spend between $15,000 and $20,000 per unit in capital improvements.
Yardi Matrix covers all multifamily properties of 50+ units in size across 133 markets in the United States. This ranking reflects transactions for properties within that sample group.