(To read more on the multifamily market, click here.)
CHICAGO-Locally based D2 Realty Services Inc. has purchased a 110,000-sf development site at 1000 S. Clark St. for its future multifamily rental project, the Curve. Once complete, the $150-million development will consist of 600 multifamily units above a base housing 50,000 sf of retail and parking.
Unlike several other residential towers going up in the Printer's Row neighborhood that are for-sale, the Curve will offer townhomes and units for lease. Designing the building as a rental project rather than a condominium tower quiets the fear of oversupply in the marketplace, David Kleiman, principal with D2, tells GlobeSt.com.
"Condos are still very feasible use, but I think that between condos and multifamily at present, returns are more attractive on the multifamily side," Kleiman tells GlobeSt.com. "A large number of REITs and funds are looking for large projects in which to invest their capital. They need to buy product with cash flows, and if you can sell your project on a 5% cap rate, you can be just as profitable with less risk than condo players."
Kleinman adds that if a developer is willing to take a smaller return going in, the building owner can presell the asset to minimize risk. As for now though, that's not in the plans for D2. "It just depends on how the deal goes," he says. "We're under no pressure to develop or sell it, and the numbers are going to make sense of how we finance it."
The Chicago apartment market is benefiting from local economic improvements and a reduced supply of rental housing as units are converted to for-sale condominiums, according to a recent research report by Marcus & Millichap Real Estate Investment Brokerage Co.
"Market trends are tipping supply and demand fundamentals in favor of owners," says Greg A. Moyer, a managing director of Marcus & Millichap and regional manager of the firm's Chicago office. "Improving job growth is generating tenant demand, which will result in increasing occupancy levels and slightly higher rents."
Although Kleiman couldn't predict what rents would be once the development was complete, he says the project will be geared toward younger people who can afford competitive lease rates. He estimates rents will average $2 per sf to $2.50 per sf.
The Curve's site sits adjacent to the newly-opened Target store at Clark Street and Roosevelt Road. Acquisition financing for the purchase was provided by California-based Fremont Investment & Loan. The firm acquired the site from Clark/Taylor, LLC.
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