CHICAGO–The robust market for residential properties in Chicago is beginning to have an impact far from the West Loop and other hot neighborhoods. The institutional partnership of Spirit Bascom Ventures, LLC, a joint venture between Spirit Investment Partners, LLC and The Bascom Group, LLC, has just purchased 5200 Sheridan Rd. in Edgewater from The Kopley Group for $21.6 million and plans to give the 8-story, 223-unit building a full rehab and renovation.
"We are seeing a significant amount of interest from the institutional investors in these up-and-coming neighborhoods," Todd Stofflet, managing partner, KIG, tells GlobeSt.com. He and the multifamily brokerage's principal and managing broker, Susan Tjarksen, and associates Jason Stevens and Laura Ballou represented Kopley in the deal.
Built in the 1920s, the former luxury hotel was later converted into studios and one bedroom apartments. The units have historically high occupancy, Stofflet adds, well-maintained original hardwood flooring and a large number of units offer views of Lake Michigan. "It's all representative of the neighborhood's standard units, but miles away from the type of luxury found in Lincoln Park and downtown."
Still, "it's a really perfect location for an investor go in and do a sizable redevelopment. It's pretty much got everything that you would need on your list." The building is near the vibrant Andersonville retail corridor and Foster Beach and just two blocks from the El, where the city has invested significant dollars to renovate nearby stations.
And in perhaps the best sign of Edgewater's new status as a destination for more upscale households, a Mariano's grocery storerecently opened adjacent to the building. "These pockets of retail are exactly where tenants now want to live."
This deal marks the second acquisition this year of a large neighborhood asset for renovation and repositioning by an institutional buyer. In April, Waterton Associates paid $66 million for the 18-story tower at 4334 N. Hazel St. in Uptown. Furthermore, Somerset Place, a former nursing home at 5009 N. Sheridan Rd. was recently re-opened as a luxury apartment building by owner Zidan Management. And Greystar Investment Group has announced plans for a new 198-unit luxury high rise development at 5440-50 N. Sheridan Rd. "The demographics are changing so quickly up there as people are looking for an affordable alternative to downtown," says Stofflet.
"We have an experienced, well-capitalized team in place to replicate this business model and add to our growing portfolio of assets," says Scott Zwilling, principal of Spirit Investment Partners. He can't disclose the amount the partners will spend on the repositioning, but it will include the repair or replacement of major mechanical systems, windows and elevators, and the addition of a tenant lounge, fitness center, and rooftop deck. The renovated apartments will feature modern, open floor plans with new kitchens and bathrooms with stone counters tops, stainless steel appliances, refinished hardwood floors, and contemporary fixtures and finishes.
The demand for this type of property can be seen in the fact that it went for about $100,000 a unit and at a cap rate of 5.5%. "That's pretty impressive pricing for this neighborhood," says Stofflet, and "we expect to see similar investments with institutional backing."
However, these may be limited in number. "The difficulty for institutional investors is that you need enough units to make it work, and many properties in the neighborhood have far less than 100 units." Buyers could decide to collect several buildings into portfolios to achieve the needed scale, but more likely investors will stick to the big structures along Sheridan Rd. and Lake Shore Dr.
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Brian J. Rogal
Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.
