At the height of the condo boom in Chicago, there were developers building buildings of all shapes and sizes who only several years before were in a completely different profession and who has little experience in the real estate industry.
Is speculation ramping up again?
Crain’s reports on the surge of plans for new apartment buildings in the GreenZone:
Two more developers are joining in the fun, one who wants to build a 15-story, 198-unit apartment building in the West Loop and another who plans a 16-story, 240-unit project in River West and a 51-unit building in River North. They are getting in on a development boom that’s expected to add about 4,700 apartments to the downtown market by the end of 2014, and possibly many more after that.
The question is whether construction lenders will let the party get out of control — like they did during the condominium boom — or whether they’ll take away the taps at the right time. Many apartment developers and investors continue to express faith in the ability of lenders to stay disciplined, financing only the most worthy projects and preventing a potential glut.
“Even if we’re not concerned, the lenders are concerned,” said Jay Javors, president of Midwest Property Group Ltd., a Chicago developer.
But there are some new players on the scene who have little to no history of building apartment or condo buildings in the city.
Dan Moceri, co-founder and CEO of Convergint Technologies LLC, a Schaumburg-based firm that specializes in security and fire systems integration and was ranked 37th on the Crain’s 2012 list of the 50 fastest-growing Chicago-area companies.
Last fall, KRG Capital Partners, a Denver-based private-equity firm, invested an undisclosed sum in Convergint, presumably freeing up money for Mr. Moceri to plow into other investments.
A venture led by Mr. Moceri agreed to buy a property at 601 W. Jackson Blvd. in the West Loop, with plans to build a 198-unit apartment building there, according to a source familiar with his plans. Mr. Moceri was traveling Tuesday and not available for comment.
Developers of some apartment buildings also seem willing to convert them into condos if the condo market were to heat up more than it has.
Developers have flocked to apartments as rising rents, occupancies and property values offer the potential for tantalizing investment returns relative to other assets. But the condo market is coming back, too, and Mr. Breheny has designed his projects with the option of converting them to condos if that makes sense, either before or after they are finished.
“Everything we’re building, we’re building with that in mind,” he said. “It could go either way.”
Is the apartment building frenzy sending up red flags?
Building bash: More developers plan downtown apartments [Crain's Chicago Business, Alby Gallun, February 6, 2013]