Two recent apartment sales in Chicago this month point to the highs and lows of investing in the multifamily market since the pandemic rocked the economy, as local firms sold with disparate results to out-of-state buyers.
Near the Lakeview neighborhood’s border with Roscoe Village, a 95-unit, two-building complex known as the Low-Line Commons sold for $40 million to Utah-based Highland Partners, notching a solid win for its Chicago-based developers. The deal came out to about $421,000 per unit.
Meanwhile, Chicago-based Origin Investments didn’t fare as well on its $63 million sale of a West Loop complex to New York-based real estate fund LRE Management.
Together, the transactions illustrate the pitfalls of investing even with Chicago climbing the ranks of the nation’s strongest multifamily markets, with a significant lack of new supply driving rents up in a trend poised to continue.
A Chicago-based venture led by Matt Katsaros of Wildwood Investments and Michael Breheny of Contemporary Concepts broke ground in 2022 on the four-story Low-Line complex at 3431 North Ashland Avenue, which lines almost an entire block. The team refinanced the property for $27 million in January and less than a year later was able to sell it for well more to Highland.
“It took us about just under four years to start and finish, which was our goal, and we sold it at about a 6-cap, which I think fits the current market environment,” Katsaros said, referring to the deal’s capitalization rate of about 6 percent. “It was a fair deal for us and for the purchasers … and we’re very happy with the outcome.”
The team also developed the adjacent 53-unit Topaz Apartments, which sold to local firm KMA Cos. and Property Management for $17.1 million, or about $322,000 per unit, last year.
In the West Loop, Origin sold the 120-unit Monroe Aberdeen apartments for a slight discount from its last purchase price to LRE. The property at 1050 West Monroe Street last traded for $65.8 million in early 2020, when Origin bought it from Michigan Avenue Real Estate Group, a developer backed by Chicago Bulls and White Sox owner Jerry Reinsdorf.
For buildings like Monroe Aberdeen, which last traded at the onset of the pandemic, a sharp rise in interest rates and construction costs have disrupted otherwise strong fundamentals.
Origin typically invests in Mountain West and Sun Belt markets, but it’s not walking away entirely from Chicago.
“Origin will reinvest sale proceeds in select ground-up development projects in markets where Origin believes supply and demand imbalances create greater opportunities for rent growth and value creation on behalf of its investors,” the firm said in a statement.
Since the pandemic, distressed properties have been on a wild ride to recovery as investor appetite for the market, and Chicago in particular, grows.
“The strength of the rental market is the driving force behind these deals,” said Interra Realty broker Joe Samzal, who represented the developers in the Low-Line Commons sale. “It certainly gives me confidence in what to expect in the next couple of years.”
Highland, the Low-Line Commons buyer, has spent $150 million on acquisitions throughout the U.S. this year, about half of which are in Chicago and its northern suburbs. That includes another project led by Breheny’s Contemporary Concepts at 516 West Arlington Place in Lincoln Park. That sale came out to $10.3 million, or $739,000 per unit.
Low-Line Commons’ proximity to the Southport Corridor and mix of one- to three-bedroom units, which is unique for the area, were just two of several factors that piqued Highland’s interest. The firm has offices in Chicago; Tucson, Arizona; and Ogden, Utah.
“We love the Chicago market,” Highland Partners co-founder Ben Frazer said. “The demand side has been great and there’s really been strong employment growth.”
Even those who were previously hesitant to jump into Cook County’s chaotic property tax system say it’s worth the risk now.
“From an underwriting perspective, we are comfortable with the uncertainty with the taxes,” said Eric Londa, founder of LRE Management, the Monroe Aberdeen buyer based in Mamaroneck, New York.
LRE has deployed about 40 percent of its capital in its fund so far, with a focus on not just Chicago but also Atlanta and Sarasota, Londa said.
Increased multifamily investor interest is also translating to an uptick in office-to-residential conversions, either subsidized or unsubsidized.
Wildwood, the seller of Low-Line Commons, recently took over a conversion project in Streeterville that was started by Horizon Realty Group. Horizon bought the property at 230 East Ohio Street for $5.6 million in late 2024, completed some of the interior work and then sold it to Wildwood for $9.75 million last week.
