L.A. investor pays $81 million for Glenview apartments

17 August 2017

Alby Gallun, Crain's Chicago

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The developers of a two-year old apartment project in Glenview have cashed out, selling the complex to a Los Angeles investment firm for nearly $81 million.

A venture led by Lowe Enterprises Investors has acquired the Reserve Glenview, a 239-unit development at Waukegan and Gold Roads that opened in 2015. Lowe bought the property from a joint venture of Chicago-based Focus Development, Atlanta-based Atlantic Realty Partners and the Carlyle Group from Washington.

The Reserve is one of several multifamily projects built on the North Shore over the past few years, and an important bellwether indicating how much investors are willing to pay for new luxury suburban rental buildings these days. The Lowe venture paid $80.5 million, or $336,820 a unit, for the property, said Focus CEO Tim Anderson.

That's slightly more on a per-unit basis than the $330,000 a unit that another new North Shore project, Woodview Apartments in Deerfield, sold for last October.

Suburban apartment developers and landlords have profited amid high occupancies and rising rents, fueled by the healthy job market and a continued preference among many suburbanites for renting over owning. Though the recent North Shore construction boom spurred worries of overbuilding—even Anderson admitted to being a little nervous about it—demand has kept up with supply, he said.

"The North Shore market has been amazingly resilient," he said.

With investors pushing up suburban property values, many developers have been able to sell their projects for hefty gains. Anderson declined to say how much the Reserve cost to build, but he told Crain's in 2013 that the cost would total about $60 million. The development venture financed the project with a $43.9 million construction loan, according to Cook County property records.

Using rough numbers, that implies that Focus and its partners more than doubled their equity investment in the sale, before paying taxes. That calculation that does not include rental income, which further boosted their return.

The Focus venture built the Reserve on the site of a former Avon Products distribution center. On the south end of the Avon property, Regency Centers, a Jacksonville, Fla.-based real estate investment trust, built a shopping center anchored by a Mariano's supermarket. Regency sold the shopping center for $50 million in 2015.

The Regency, at 195 Waukegan Road, consists of three-story buildings that wrap around a parking structure. It includes a fitness center pool and outdoor grilling and picnic area. To attract commuters, the project has one big competitive advantage: It's just west of a Metra train stop.

"It provides easy access to the area's major employers and is steps away from public transit for commuting to downtown Chicago," Lowe Managing Director Andy Sands said in a statement.

A brokerage team led by Peter Evans of Chicago-based Moran brokered the sale.

The Reserve is 84 percent occupied, according to real estate information provider CoStar Group. The average effective rent in the complex is $2.12 per square foot, with rents ranging from $1,682 a month for a studio to $2,800 for a three-bedroom unit, according to CoStar.

Including the Reserve, Lowe now owns 1,061 apartments in the Chicago. The firm also owns Bourbon Square, a 612-unit property in Palatine and the 210-unit Fairways of Naperville.

Focus, meanwhile, is busy with other residential projects in Lake Forest, Wheaton, Vernon Hillsand Chicago, where it is renovating a 410-unit property on the West Side. The firm and partner CA Ventures also plan to break ground early next year on a 242-unit tower in downtown Evanston, Anderson said.

Read the original article in Crain's Chicago Business.

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