Midsize Chicago multifamily wins buyers over apartment tower deals

A pair of midsize multifamily portfolios sold on opposite ends of Chicago show mid-market buildings stand to benefit the most from the city’s notable rent growth.

On the far North Side in Rogers Park, a portfolio of three courtyard-style buildings totaling 115 units sold for $16.1 million last month. The price comes out to about $140,000 per unit. Similarly, Chicago-based investor David Pezzola bought a portfolio of 110 units in the far South Side neighborhood of Beverly for $16.3 million around the same time.

Taken together, the deals underscore how midsize multifamily buildings on the city’s fringes have attracted an influx of interest from investors who can afford the properties and bank on rent growth overpowering other uncertainties in the market.

Interra Realty’s Brad Feldman represented the Rogers Park seller, longtime landlord George Triff, and said the deal represented an opportunity for the new buyer to tap into Chicago’s nearly nation-leading rent growth.

Feldman declined to share the name of the buyer of the Rogers Park portfolio, who is an individual investor. Records for the sale of the properties located at 7405, 7415 and 7415 North Damen Avenue have not been made publicly available yet.

“A lot of the units were in the $900, maybe a little bit over $1,000 rent range and could be doubled just by having the building spruced up,” Feldman said.

Sean Connelly of 33 Realty represented the Beverly seller, another local multifamily investor, John Brauc.

“[The buyer] was buying it looking at the long-term ability to raise rents in this submarket,” Connelly said.

The buildings, located at 10206 and 10500 Walden Parkway, contained a mix of market rate units and units rented out to tenants whose rents were partially subsidized by affordable housing vouchers. Pezzola assumed at least one $4 million loan tied to the portfolio that was taken out in 2022, likely at an interest rate that’s lower than what could be achieved today. But the specifics of the rest of the portfolio’s pricing have not been recorded publicly yet. The price comes out to $148,000 per unit.

The new owner plans to continue to accept vouchers, Connelly said.

Chicago’s rent growth has been fueled by an influx of college-educated residents, a diverse job market and a severely constricted multifamily development pipeline. Only about 500 units are expected to come online this year, down from the 10-year average of more than 3,500 units, according to Integra Realty Resources.

The city’s downtown apartment market has dominated headlines and reached new heights last year, when the average unit within a group of 84 buildings tracked by Luxury Living surpassed $3,000 for the first time ever, according to the multifamily brokerage and consultant. The mean figure landed at $3,077, up 28 percent from 2023.

But the market for high-end downtown building purchases has proven more stagnant because risk-averse institutional investors who typically have the capital needed to buy such properties have been hesitant to jump in.

High interest rates and reforms to the county’s property tax system have muddled revenue projections and hastened the descent from a mid-2010s downtown multifamily investment boom.

Sometimes, bigger players snap up midsize properties, too.

Multifamily giant Morgan Properties announced last week it had bought $501 million worth of apartment buildings across the Midwest. The one building the firm chose to buy in Chicago was a midsize, 138-unit apartment building in Logan Square called NoCa Blue.

In Rogers Park, the recent portfolio buyer plans to perform some standard maintenance and potentially expand units to create more 2 to 3-bedroom apartments. But regardless of the renovations, the properties will benefit from growth in the neighborhood, access to downtown and the broader city’s rent growth.

“People are always looking for a place that may have untapped value. It’s equidistant to Northwestern to the north in Evanston and Loyola University to the south and in close proximity to the lake,” Feldman said. “You’re getting a good bang for your buck.”

Unlike Rogers Park, which is a densely populated neighborhood, Beverly is dominated by single-family homes. The scarcity of multifamily could prove to be a long-term benefit for the new owner.

“There’s not that much density. So if you buy up big chunks of the market, you can control

the market,” Connelly said.