The deal also underscores the strength of the DuPage County multifamily market—and its popularity with investors. Over the past year, several large apartment properties in the area have changed hands at high prices, including the Views of Naperville and Dwell at Naperville.
Landlords have the upper hand over tenants in the western suburbs, allowing them to hike rents and boost property values. Vantage is 100% occupied, and apartments there this year are renting for 18 to 19% more than they did during the initial lease-up, Zaransky said.
“There’s just not enough supply for the demand out there,” said Zaransky, founder and managing principal of Northbrook-based MZ Capital Partners. “Rent growth has been amazing.”
He declined to disclose how much the Vantage project cost to build but said, “we sold it for a nice profit.”
Known in Chicago as an owner of big downtown office buildings like the Old Post Office, the Aon Center and the Civic Opera Building, 601W has taken a liking to suburban apartments more recently. In November, the firm paid $86 million for Buckingham Place, a 267-unit property in northwest suburban Des Plaines.
Including the Naperville acquisition, 601W now owns nine multifamily properties overall, in the Atlanta; Miami; Chicago; Columbus, Ohio; and Northern New Jersey markets, according to Real Capital Analytics, a New York-based research firm. The firm, which is based in suburban New York, has acquired most of the properties within the last two years
601W executives did not respond to requests for comment.
In a stroke of luck, Zaransky scored the construction financing for the Vantage project just before the coronavirus pandemic hit Chicago. The early months of construction were a bit nerve-wracking, but to Zaransky’s relief, the health crisis barely scratched the suburban apartment market. To the chagrin of tenants and the delight of landlords, the suburban market is as strong as it has ever been.
Zaransky marketed the Vantage to tenants who want to live in a high-end property but can’t afford high-end rents. By building small apartments—the average unit is just 459 square feet—he could charge lower rents without sacrificing profitability. The average Vantage apartment rents for about $1,200 per month, or $2.75 per square foot, Zaransky said.
Most tenants are single and many are millennials, with a few seniors mixed in, he said.
“We took a little bit of a leap of faith,” Zaransky said. “If you had to pick a market to do it in, I’d pick Naperville.”
Now, Zaransky is focused on projects in Tennessee and Buffalo Grove, where he plans to break ground on a 120-unit project by the end of the year. He’s also going through the approval process for a 140-unit development in Mundelein. He doesn’t see any reason to slow down.
“I don’t see any scary stuff on the horizon,” Zaransky said. Rising construction costs “have been an issue, but frankly rent growth has compensated for it.”
Jones Lang LaSalle brokered the sale to 601W.