CHICAGO—Origin Capital Partners and Randolph Street Realty Capital have formed a joint venture to acquire the Iroquois Club, a multifamily apartment complex in suburban Naperville where a condo conversion project stalled out years ago, and plan to launch an extensive renovation. The purchase price of the complex, the fifth joint venture acquisition between the two firms, was about $38 million.
Officials from Origin and Randolph Street say they can improve the performance and value of the asset by renovating, repositioning, rebranding and more efficiently managing the complex. As part of the investment strategy, the partnership is acquiring 238 existing apartment units. The entire complex consists of two phases and 264 total units; one phase, totaling 136 units, remains apartments while the second phase of 128 units was converted to condominiums in 2006. But like many conversion efforts of that era, the recession helped derail it and only 26 condo units were sold. The rest of the units in the second phase, about 100, are now apartments.
“The business plan is for a medium-term hold, but, the partnership is always considering ways to maximize value on behalf of its investors, so, it constantly monitors the state of the micro and macro-market fundamentals for the most opportunistic time to sell,” David Welk, the managing director for acquisitions at Origin, tells GlobeSt.com.
The Iroquois Club was developed in 1989 and has had only one owner. At the time of acquisition the class B asset was 81% leased. The average occupancy rate for similar properties in Naperville is about 96% and the area has a limited new development pipeline. Furthermore, average rents in competing properties are roughly 10% to 15% higher.
The partners plan to remodel 35% to 45% of the complex. Unit improvements will include new stainless steel appliances, new kitchen and bathroom countertops and updated flooring and carpet. The work will begin with the vacant units and avoid tenant disruption as much as possible.
Origin and Randolph Street previously partnered to acquire Lux24, a distressed 67-unit condominium project plus retail in Chicago's infill West Loop submarket. At the time of acquisition, the property had four condominium owners and was about 50% occupied. The partnership completed about 20 unfinished units, repurchased the outstanding condo units and added six new units. Other improvements added included a fitness center, two outdoor amenity spaces and upgrades to the lobby and clubroom. The now 73-unit property was re-branded and leased up as apartments.
“While the partnership would certainly look to acquire more of these types of opportunities, at this point in the market cycle, finding situations where you can complete a bulk purchase of the majority of the units in a condominium that is well-located, has renovation upside and is of institutional-quality are very difficult to find,” Welk adds. “Most of the renovation opportunities that exist today are of existing rental product.”
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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.
