Gurnee apartments near Six Flags sell for $42 million

November 23, 2016 | Gurnee apartments near Six Flags sell for $42 million |  Crain’s Chicago Business  | By: Alby Gallun

A Chicago investor paid about $42 million for an apartment complex near the Six Flags amusement park in Gurnee, another deal in a record year for suburban multifamily sales.

Redwood Capital Group bought Woodlake Apartments, a 260-unit property at 101 Woodlake Blvd., from Sherman Residential, confirmed Redwood Managing Partner David Carlson. The price, which works out to about $162,000 a unit, is 22 percent more than the $34.3 million Sherman paid for Woodlake in 2008.

Woodlake joins a long list of suburban Chicago multifamily properties that have changed hands this year. Strong, steady demand for apartments has pushed up rents, occupancies and property values, tempting many landlords to sell and attracting buyers like Redwood confident the good times will continue.

Apartment sales in the Chicago suburbs have exceeded $1.3 billion this year, breaking the prior record of $1.2 billion set in 2007, according to Appraisal Research Counselors, a Chicago-based consulting firm.

Carlson is high on Woodlake because it’s close to many companies with large offices in the northern suburbs—and a rising employment base in Southern Wisconsin. Development also has been limited in the area, keeping the supply of apartments in check.

“We feel very positive about limited supply in suburban Chicago and steady employment prospects,” Carlson said.

A Sherman executive did not return a call.

Developed in 2000, the 25-acre Woodlake property includes 12 residential buildings, a clubhouse and an outdoor swimming pool, according to a flier from Moran, the Chicago brokerage hired to sell the complex. The property is just east of Interstate 94 and just south of Six Flags Great America.

Woodlake was 96.2 percent occupied in the third quarter, according to Appraisal Research. Rents range from $1,145 a month for a one-bedroom apartment to $1,700 for a two-bedroom.

Redwood plans to spend about $9,000 a unit—about $2.3 million—sprucing up the apartments with things like new appliances and countertops and renovating the property’s clubhouse, fitness center and other common areas, Carlson said. Tenants expect high-end amenities these days, forcing landlords to spend money on new features like televisions and heating in outdoor entertainment areas, something Redwood plans to do at Woodlake.

“It’s a competitive disadvantage if you don’t do it,” Carlson said.

Founded in 2007, Redwood owns nearly 11,000 apartments in places like Nashville, Tenn.; Denver, Raleigh/Durham, N.C., Atlanta and Minneapolis. Earlier this year, the firm sold three properties in the Chicago suburbs; it now owns apartment complexes in Hoffman Estates and Bolingbrook in addition to its new acquisition in Gurnee. Redwood is also negotiating to buy a property in Naperville, Carlson said.

Though investors are paying up for apartment buildings these days, interest rates have started rising, raising borrowing costs for buyers. That could dampen future price gains and maybe even scuttle some deals as buyers try to renegotiate price cuts.

“We’re kind of in a wait and see period,” Carlson said. “I suspect you’ll see a couple deals fall out of contract.”

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