Two downtown apartment buildings are being auctioned, testing investor demand for the Chicago apartment complex as dealers face challenges including a decline in Loop office inventory and a tightening lending standard.
LG Development is selling Jax, a 166-unit property at 1220 West Jackson Boulevard in the West Loop, and a joint venture between D2 Realty and Wood Partners is selling Alta Grand Central, a 346-unit building at 221 West Harrison Street, Crain's reports . . Newmark Agents are marketing both properties.
The Jax is expected to attract more than $50 million in offers, as it is located in one of Chicago's most desirable neighborhoods for new development and investment opportunities. However, it is not clear what price Alta Grand Central might sell for. Rising vacancy rates in downtown office buildings since the pandemic have hampered real estate activity in the Central Loop, making Alta Grand Central a potentially risky investment.
In general, the multifamily sector in the Windy City is doing well. Most apartment buildings have good occupancy rates and the city has seen increasing rent growth since last year. However, rising interest rates depressed house prices while borrowing costs rose.
"It's a market consensus," said Daniel Hagny of LG Development. "Underlying fundamentals are stronger than ever and capital markets are as weak as we've seen."
LG completed Jax in April 2020, just after the pandemic. The company funded the project with a $28.3 million construction loan. The building's occupancy rate is about 93% and the average rent is about $3.80 per square foot. Haughney is confident it will attract a wealthy buyer.
The company D2-Wood secured a $65.7 million construction loan from Compass Bank to finance Alta Grand Central, which also opened in 2020. They refinanced the property in September 2021 with a $64 million mortgage from Banco Santander.
Gross income at the 14-storey twin-tower complex has risen by 22% over the last 12 months, while occupancy remains at 93%.
– Quinn Donoghue
