Two suburban apartment properties fetch $88 million

July 22, 2013

 - Lincoln at Ovaltine Court. Photo from CoStar Group Inc.Two suburban apartment complexes have changed hands for a combined $88 million, a sign of rental housing’s continued appeal with investors.

In the bigger deal, the developer that converted a former Ovaltine factory in Villa Park into 344 apartments sold the property this week for about $58 million to Stockbridge Capital Group, a San Francisco-based real estate investment manager, according to people familiar with the transaction.

About 20 miles to the southwest, a venture led by Wilmette investor Cameel Halim paid about $30 million for the Innsbruck Apartments, a 475-unit complex in Bolingbrook, according to CBRE Inc., the broker that sold the property.

Investor demand for suburban apartments remains strong, fueled by high occupancies and slow but steady rent growth. Chicago-area apartment sales totaled $649.1 million in the first four months of the year, up 9 percent from the year-earlier period and more than double the volume in the same period in 2011, according to Real Capital Analytics Inc., a New York-based research firm.

Yet multifamily prices aren’t likely to go much higher in the short term given the recent increase in interest rates, said Alasdair Cripps, senior managing director and head of Mesirow Financial Institutional Real Estate’s direct investments unit.

Stockbridge acquired Lincoln at Ovaltine Court from a joint venture of Dallas-based Lincoln Property Co. and the AFL-CIO Building Trust of Washington, D.C. Ovaltine made its cocoa drink at the property from 1917 to 1985, when the plant was shut down.

The Lincoln venture, which completed its redevelopment of the property in 2000, hired HFF Inc. to sell it in March. The complex at Villa and Kenilworth avenues is 96 percent occupied with rents ranging from $1,119 a month for a one-bedroom unit to $1,685 for two bedrooms, according to an HFF marketing flier. Executives at Lincoln and Stockbridge declined to comment.

Ovaltine Court is a good investment opportunity, said Mr. Cripps of Chicago-based Mesirow, which bid on the complex.


“The job market around Oak Brook continues to be strong, and (the property) has great access from a transportation standpoint,” he said. The converted factory also offers loft-style apartments, a rarity in the suburbs, and a chance for Stockbridge to fix up units, improvements that should allow it to boost rents.

Innsbruck, built in the 1970s, offers an even bigger opportunity to add value through renovation. Calling the complex at 601 Preston Drive “a C property in an A location,” the property is a candidate for a “deep rehab,” said Dan Cohen, senior vice-president in the Chicago office of CBRE, the brokerage that sold it for an affiliate of Oak Brook-based real estate firm Inland Group Inc.

The surrounding area has been filling in with retail development, including the Promenade Bolingbrook and Ikea and Costco stores, making it more appealing to would-be renters.

“If you ask someone if (the location) is going to be better in 10 years, the location is definitely going to be better,” Mr. Cohen said.

Efforts to reach Mr. Halim, owner of Wilmette Real Estate & Management Co., were unsuccessful. The Halim venture acquired Innsbruck from a limited partnership formed by Inland that has owned the property since the 1980s, said Philip Menolascina, senior vice president at Inland Partnership Property Sales Corp.

“We just felt that it was the time to market it given the hot market for multifamily,” he said.
This article was originally published on Chicago Real Estate Daily on July 17, 2013.

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