June 19, 2023 12:07 PM
An Atlanta investment firm has taken a big loss on the sale of a Streeterville multifamily complex, a discouraging data point for downtown landlords wondering how much their apartment buildings are worth these days.
Invesco sold North Water Apartments, a 398-unit property at 340 E. North Water St., to Miami-based Crescent Heights for $173 million, according to real estate data provider CoStar Group. While that’s the most paid for a downtown apartment building since December 2021, the price represents a 28% drop in value for the Streeterville property since 2016, when Invesco bought it for $240 million.
Commercial properties of all stripes have lost value since the beginning of last year, when the Federal Reserve started hiking short-term rates and financial markets went into a funk. Amid higher borrowing costs, investors can’t use cheap debt to pay up for properties anymore. Many are demanding higher yields — and lower prices — to account for the increased risk in the market.
Chicago has its own set of problems. Brokers and landlords say many out-of-town investors have “redlined” Chicago, wary of the risk of rising property taxes, the city’s struggles in addressing crime and the progressive agenda of new Mayor Brandon Johnson. Fewer investors chasing deals in Chicago means less competition — and lower prices — for buildings on the market.
But it’s hard to tell where values have settled because the volume of big apartment building sales has dropped in Chicago. Few landlords want to sell their properties when prices are falling. In one of the few big downtown deals this year, Lake & Wells, a 42-story tower in the Loop, sold for $98 million at the end of April, down from its $123 million construction cost in 2008.
If you don’t have to sell, it’s still a good time to own a high-rise apartment tower in downtown Chicago. Amid healthy demand for apartments in downtown Chicago, occupancies remain high and rents are still rising, albeit a lot more slowly than they were a year or so ago.
North Water Apartments is 95.2% occupied, with its effective rent at $3.98 per square foot, down from $4.05 per square foot a year ago, according to CoStar. Monthly rents range from $2,255 per month for a studio apartment to more than $8,000 for a three-bedroom unit.
Invesco has been courting buyers for North Water Apartments since last fall. Developed by Chicago-based investment firm DRW Holdings, the apartments opened in 2016, part of a 50-story building that also includes a 500-room Loews Hotel. The hotel was not included in the sale.
At $173 million, the building’s sale price is the most paid for a downtown Chicago apartment property since December 2021, when the Tides, a 608-unit building in the Lakeshore East development, sold for $209 million.
Representatives of Invesco and Crescent Heights did not respond to requests for comment.
Crescent Heights has been an active buyer, seller and developer of apartments in downtown Chicago over the past several years. The firm built Nema, a 76-story skyscraper at the south end of Grant Park, and plans a 413-unit building at 640 W. Washington Blvd. in the West Loop and a 52-story high-rise at 420 N. May St. that would be the tallest building in the Fulton Market District.
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June 19, 2023 at 11:46PM
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North Water Apartments in Streeterville sold - Crain's Chicago Business
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