(Read more on the multifamily market.)
CHICAGO-Newcastle Ltd., based here, is buying a seven-property, multifamily portfolio in Chicago's Lakeview and Lincoln Park neighborhoods. The total acquisition price for the 896-unit portfolio is $122.5 million, says Michael Haney, president and CEO of Newcastle. The seller is an affiliate of Wexenthaller Realty Management, based here. Newcastle has already closed on the Belmont House, 3170 N. Sheridan Rd., which it acquired for $56 million, Haney says. The firm expects to close on the remaining properties within 30 days, he says.
Besides Belmont House, the portfolio includes a 75-unit apartment building at 532 W. Roscoe; a nine-story 146-unit apartment building at 425 W. Surf; a 48-unit apartment building at 3610 N. Pine Grove; a 143-unit apartment building at 707 W. Sheridan Rd.; a 90-unit apartment building at 510 W. Wellington; and a 119-room hostel at 616 W. Arlington. All of the apartment buildings have occupancy rates between 97% and 98%, Haney tells GlobeSt.com. The average unit size for the portfolio is 650 sf. The majority of the buildings were constructed in the 1920's. The buildings on Roscoe, Pine Grove and 707 W. Sheridan were constructed in the 1970's. "A lot of these properties have parking associated with them," he says. "Across the portfolio, there are 0.5 spaces per unit, which is pretty unique in this neighborhood."
The 13-story Belmont House has 269 apartments and 9,000 sf of retail space. The apartments are 97% leased and are a mixture of studio, one-, two-, three-bedroom and penthouse units. The average unit size is slightly more than 800 sf and the average rental rate is "in excess of $1,500," Haney tells GlobeSt.com. The retail is 100% leased to service retail for the building and surrounding community. The 315,000-sf building was constructed in 1924 as a luxury hotel and was renovated about 10 years ago. The building has views of Lake Michigan and is near Lake Shore Drive and amenities, Haney says. "We thought this building had an excellent location. It has great access and visibility," he says. The firm expects to spend about $8 million on improvements to the building, such as renovating the common areas and improvements to the units' bathrooms and kitchen.
Newcastle was initially only interested in the Belmont House, but the seller wanted to sell the building as part of the portfolio. "It was a pretty rare opportunity to acquire a portfolio of well-run apartment buildings that have a great location in what is really kind of a core market in Chicago," Haney says. Newcastle is assuming some of the seller's debt and was able to structure the financing so that the seller will not receive pre-payment penalties, he says.
The firm plans to do minor renovations and improvements to each of the buildings, though a total estimate for the improvements was not available. Newcastle does not have plans to redevelop the hostel into an apartment building. "Right now, our plan is to continue to operate it as is. There are very few of these properties in Chicago and it has performed very well," he says. Haney says the firm expects to have long-term holds on the properties. "We like to underwrite properties on a 10-year hold," he says.
Newcastle acquired the properties as part of its $500 million Chicago investment platform. Newcastle is focusing on multifamily and retail properties with a transaction range between $5 million and $50 million. The geographical focus is urban areas in the Chicago area, including the city, and downtown areas of the suburbs. The firm is acquiring stabilized assets, redevelopment properties and developments, he says. Since the beginning of 2007, when Newcastle started the platform, the firm has acquired more than 900 apartment units in the Chicago area.
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