Wheaton Apartments Sell for $50 Million

August 22, 2016 | Wheaton apartments sell for $50 million | By: Alby Gallun | Crain’s Chicago Business – Chicago Real Estate Daily

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A New Jersey investment firm with a taste for Midwestern apartments paid $50 million for a 342-unit property in west suburban Wheaton.

Strategic Properties of North America bought Briarbrook Village earlier this month from Redwood Capital Group, another deal in what could be a record year for apartment sales in suburban Chicago.

At $50 million, or $146,000 per unit, the sale generated a big gain for Chicago-based Redwood, which paid $34.2 million, or $100,000 per unit, for the property in 2011, according to DuPage County property records.

Suburban apartment sales and prices have surged the past few years amid high occupancies, soaring rents and low interest rates. Some landlords, worried about what the future may bring, are taking advantage of the favorable market to lighten up on their holdings here.

“The growing concern amongst owners regarding real estate taxes, the state of
Illinois’ financial situation and overall supply is resulting in more product being brought to market,” Appraisal Research Counselors, a Chicago-based consulting firm, wrote in a recent report. “That said, there is no shortage of buyers in the market—particularly when real estate tax risk can be quantified.”

Yet renter demand for apartments has been strong in Wheaton, and Strategic expects that to continue, said Julian Blumenthal, chief financial officer of the Lakewood, N.J.-based firm. He expects high rents in Chicago and other suburbs to push more people to properties like Briarbrook, at 1147 Briarbrook Drive.

“Wheaton is really holding its own compared with Naperville,” he said.

Strategic bought Briarbrook, a midprice property built in the early 1970s, and then sold the land under the apartment buildings for $10.5 million to One Liberty Properties, a Great Neck, N.Y.-based investor, according to a document One Liberty filed recently with the Securities and Exchange Commission. Strategic is expected to pay One Liberty $1.1 million in annual rent under a 30-year ground lease, the filing says.

One Liberty and Redwood Capital representatives did not respond to requests for comment.

Briarbrook was 97.1 percent occupied in the second quarter, with a net rent of $1.57 per square foot, up a healthy 15.4 percent over two years, according to the Appraisal Research report. Rents range from $1,103 a month for a one-bedroom unit to $1,593 for a two-bedroom.

The complex, which was renovated several years ago, is in relatively good shape, but Strategic plans to spend about $1 million or more on a light rehab, including new kitchen countertops and appliances, Blumenthal said.

Strategic has had a big appetite for apartment buildings in the Midwest, with holdings in Peoria, Rockford, Springfield and St. Louis. In the Chicago area, it owns properties in Evanston, Lakemoor and Grayslake.

In Grayslake, the company earlier this year bought 301 out of 396 units at Grays Pointe, an apartment complex that was converted to condominiums during the condo boom but never sold out. Strategic is deconverting the entire property back to apartments and has bought all but seven of the remaining condos, Blumenthal said. The firm is in the process of buying six of those units, leaving one more to complete the entire deal, he said.

Strategic also plans to deconvert a 133-unit residential tower in Lincoln Park that was redeveloped into condos in 2005. Blumenthal expects to complete that acquisition in October.

As suburban apartment sales have risen the past few years, more landlords have decided to cash out, and they haven’t had much trouble finding buyers. Investors have paid $745 million for major apartment buildings in suburban Chicago this year, according to Appraisal Research. With so many properties still on the market, it’s possible that sales volume this year could eclipse the annual record of $1.17 billion in 2007.

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