Market Conditions: Remember The Catalyst? More Chatter About The Sizzling Apartment Market
High rise condo development might be dormant, but the apartment market is alive and well.
From Crain’s:
Marquette Cos. has taken control of Catalyst, a proposed 223-unit rental tower in at 630 W. Washington St., from developer Gary Rosenberg, who was facing foreclosure while trying to secure financing for the project, one of several planned downtown high-rises amid a sizzling apartment market.
Marquette acquired the loan on the development site from lender Kennedy Funding Inc. and worked out a so-called deed-in-lieu of foreclosure that allowed Mr. Rosenberg to retain a stake in the project, said Darren Sloniger, Marquette’s managing director of acquisitions.
The developer aims to break ground on the tower in the fourth quarter and has received “a preliminary commitment” from a lender to finance construction, he said. He declined to identify the lender but said Marquette was seeking a loan of less than $50 million. Mr. Rosenberg did not return a call Tuesday.
But are the developers worried about too many apartment buildings being built at once?
Mr. Sloniger isn’t worried, saying the Catalyst project won’t face as much competitive pressure as other new buildings because it doesn’t have very many nearby. The project’s proximity to downtown office towers also will give it an edge in attracting professionals who want to be within walking distance of work, he said.
“We’re in a spot that we really like,” he said.
There is also new apartment activity further west, across the highway.
Northbrook-based Michigan Avenue Real Estate Group, which counts Chicago White Sox and Bulls owner Jerry Reinsdorf among its co-founders, wants to build four, four-story buildings totaling 81 apartments at the intersection of Madison and Aberdeen streets in the West Loop, said its president, Thomas Meador. It would be the firm’s first new-construction project, which Mr. Meador said the company is undertaking because of the strength of the rental market.
“We’re a strong believer in the West Loop for new apartment projects. There’re very few actual rental properties there — there’re a number of rented condominiums, but there are very few ground-up apartment developments in the West Loop, period,” said Walter Rebenson, CEO of Ascend Real Estate Group LLC, a Chicago-based firm planning a nine-story, 216-unit apartment building at Madison Street and Racine Avenue, just about a block west of the Michigan Avenue group site.
One apartment building would have 18 units and be located at the corner of Madison and Aberdeen. There would be another 9-unit building across the intersection. The other building would have 54 units.
The buildings would primarily offer two-bedroom, two-bathroom units between 1,100 and 1,200 square feet, with rents averaging $2 per square foot. A smattering of one- and three-bedroom apartments are on tap as well. The buildings will have covered parking, 10-foot high ceilings and rooftop patios.
“You can only be bullish on the apartment market in Chicago,” Mr. Meador said.
Most of the press I’m seeing recently is in apartment rentals. Heck, even the housing blogs are covering the rentals now.
Are some of these new buildings providing a real alternative to buying in neighborhoods which have few rentals?
Reinsdorf-founded firm plans West Loop apartments [Crain’s Chicago Business, Micah Maidenberg, August 22, 2012]
Marquette plans apartments in West Loop, suburbs [Crain’s Chicago Business, Alby Gallun, August 22, 2012]
Rents have to remain high to cover construction & finishes costs. Developers get paid the fees, and equity investors get a low “cap rate” or yield/return.
If any variable changes negatively, the deal heads towards break-even or loss.
PS The worst position to be in here is the LP position in the equity. Lots of risk, probably proforma return (leveraged) of 11% (guess).
“You can only be bullish on the apartment market in Chicago,” Mr. Meador said.”
These comments and articles sound a lot like the coverage of the for sale market in 2005. ‘Prices can only go up’. Look what happened there.
now with the cheap prices in the suburbs watch 20 something leave the city in mass to buy in the soulless suburbs. yesterday the Wife met at the library a recent lincoln park transplant who moved to the burbs to renovate a home. my instinct tells me the rent bubble is topping out about now and as renters are now old enough and secure enough in their financial position, or family life , to purchase.
Do large apartment complexes have to set aside a certain number of units for “the poors” like large condo buildings are required to?
ah Jenny?
http://chicago.everyblock.com/pets/aug22-lost-missing-stolen-tortoise-5272533/?utm_medium=email&utm_source=message_email&utm_campaign=headline
Ohhh… That tortoise story is sad. I hope they get their pet back!
“Do large apartment complexes have to set aside a certain number of units for “the poors” like large condo buildings are required to?”
The condo buildings don’t have to, if they they don’t need any special permissions from the city, and don’t take any public money. Same with apartments.
“yesterday the Wife met at the library a recent lincoln park transplant who moved to the burbs to renovate a home.”
And the other day we met a young(ish) couple (with kids under 4) who recently sold a SFH in a prime northside hood. They’re certainly not heading to the burbs, nor are they looking for a bigger SFH in the city. They’re looking for a huge unit in a building along the park in LP or within a couple blocks south of the park (North Ave east of Clark) in the GC. Basically, they’re doing exactly what we’d be doing right now, if only we had about 300% more buying power.
It is funny to see these developers saying that the rental market is so hot right now when they’re starting projects that won’t be complete for a year or more. I’m not sure that the rental market will cool off, but the market *today* doesn’t necessarily translate into a good market in a year or two.
That said, I’m always happy to see another surface parking lot developed.
“Basically, they’re doing exactly what we’d be doing right now, if only we had about 300% more buying power.”
yeah, that’s the problem with the city, is that there is always someone else out there with a lot more money who will outbid you on a property. there just seems to be a infinite number of doctors, hedge funds, PE, ins. execs with god amuonts of money who are willing to pay whatever they want to live wherever they want. In the real world out here, there’s less of that, and life is more affordable.
“yeah, that’s the problem with the city, is that there is always someone else out there with a lot more money who will outbid you on a property. there just seems to be a infinite number of doctors, hedge funds, PE, ins. execs with god amuonts of money who are willing to pay whatever they want to live wherever they want.”
Are you actually saying now that Heitman was mostly right?
[homedelete] “now with the cheap prices in the suburbs watch 20 something leave the city in mass to buy in the soulless suburbs.”
Except those that see the opportunities available with newly affordable property in fringe areas of the city. I know of a few late 20s, early 30s individuals snapping up buildings in Bridgeport/Lower West Side/East Humboldt… not exactly the places that CribChatter follows, but the city is a lot bigger when you take off the blinders.
“but the city is a lot bigger when you take off the blinders.”
dude, those parts of the city are *terrifying*. And full of creepers. And the schools are terrible. Not to mention all of theHof’s complaints about those areas.
“Are you actually saying now that Heitman was mostly right?”
Partially right – Steveo was from the pre-explosion era where everyone bought on IO ARM loans with no money down. Today it’s a bit different because the buyers with real money buy without the IO ARMS and no money down and it buoys some areas.
as far as fringe: avondale is the next hot area, mark my words .
Chicago RE values are by and large unsustainable across most of the city. Which areas get imploded remains to be seen. I see RE developers/speculators furiously buying up units in the downtown/south/west loop areas we’ll see whether the rents can hold up. I still think there aren’t enough jobs to cover these $1,500+ studios/1-bedrooms but they seem to be willing to carry the units vacant vs. cutting rents for the time being. Thank ZIRP.
http://www.redeyechicago.com/news/redeye-burbs-over-the-city-20120822,0,3936795.photogallery
“That said, I’m always happy to see another surface parking lot developed.”
And I’m happy that damn shipping company is out of my neighborhood. Granted they’re on the other side of the building so not an eyesore to me, they park their damn trucks on the street (despite having two large parking lots) and take up what little free street parking is in the area.
As far as I’m concerned, this is only good news for the West Loop.
Thanks for that link, Fred. I especially enjoy the last point about chain restaurants. That’s a reason why the burbs beat the city? Then GTFO of my city. A big reason I live in the city is because I despise those awful chain restaurants. There’s no creativity, no flavor, no chef to stop by and ask me how my dinner tastes.
“Do large apartment complexes have to set aside a certain number of units for “the poors” like large condo buildings are required to?”
I thought *all* renters were “the poors”
the city has most of the bad chain restaurants too. it just has more plentiful non chain options. but I wouldnt mind a sonic opening up near me. or a culvers. instead we get more starbucks, overpriced hamburgers and chipotle knock offs
there was a shoneys in rogers park, maybe 15 years ago. shoneys is probably the worst chain I’ve experienced. the deservedly defunct Hot & Now was terrible as well.
“the city has most of the bad chain restaurants too”
We managed to drive that damn Red Lobster out. And I don’t think the places on the absolute fringes count: Outback, Applebees, etc.
What counts as “bad chain” to you? The point of that “plus factor” wasn’t McD, BK, Wendys, but the fast casual places that are slightly “nicer”.
‘Except those that see the opportunities available with newly affordable property in fringe areas of the city’
Sounds like Sheffield (LP was already getting too expensive by then) when I moved into that fringe neighborhood 30 years ago. You had your Latino gangs, muggings/car thefts/break ins, bad public schools, and basically everything that still strikes panic in the HDs and the suburban bound . But somehow people carved out a nice life for themselves (have a look the next time you’re in the area), and although I was just a teen 30 years ago, I ended up buying east of Halsted in my 20’s and I’ve never left.
You can either pay dearly in a neighborhood that others have already fixed up, or buy in the fringe and do it yourselves for a fraction of the price. Nice to hear another generation is doing just that; you’ll be the subject of much rage and secrete jealousy for your efforts on CC in 2042.
“What counts as “bad chain” to you?”
Pei Wei. I tried my damndest to like that place bc it’s close by and the soda machines are fun, but it’s truly dreadful, and this is from someone who will eat at panda express.
Jealousy? Gentrification is ending and areas are receding. I don’t have until 2042 to live in some bad neighborhood.
“Pei Wei. I tried my damndest to like that place bc it’s close by and the soda machines are fun, but it’s truly dreadful”
Yeah, that’s a good one for the list. Still only the two in the city?
“and this is from someone who will eat at panda express.
mmmmm, MSG, mmmmmmm!
“Gentrification is ending and areas are receding.”
I thought avondale was hot hot hot.
“mmmmm, MSG, mmmmmmm!”
Not that there’s anything wrong with msg, but:
http://www.pandaexpress.com/Company#!/faq/faq-3
“Panda Express does not add MSG to any of our entrees or sides and we do not purchase products from suppliers who add MSG.”
” I don’t have until 2042 to live in some bad neighborhood.”
No, you had to go ahead and do it now!
Any neighborhood with as many old lawyers as you’ve claimed is a bad neighborhood in my book.
““Panda Express does not add MSG to any of our entrees or sides and we do not purchase products from suppliers who add MSG.””
That leaves open the GMO that produces MSG in tis cells thru respiration.
Also, “not in entrees or sides” = “sauces contain not less than 92% added MSG”
Panda Express is awesome. It’s the same food as as PF Chang or the (closed) Ben Pao at a fraction of the price. Vegetables at Panda Express look fresh to me, etc. Fried rice is fried rice. Actually I think the chain probably uses better oil, and is probably cleaner than an actual Chinese place, since the chain is American and has hygenic standards. I thought Pei Wei was trying to be too clever in pricing etc., it’s menu was obviously overseen by an accountant.
“the soulless suburbs”
Doesn’t anyone else get sick of the monotony of the city? It’s the same thing: blacks (homeless, drifters, scattered site), unlimited/unending streams of short and corpulent hispanics and their obese teen daughters, everyone else white has a tattoo, and then there’s the couples with young kids always too busy making sure their kiddies aren’t going to get run over to pay attention to anyone else. It’s the same thing over and over and over. Some people moving to the burbs are utterly sick of eating out, and probably need to lose 25 pounds anyway, how much food do people need to consume? … the people pushing middle age can’t deal with the hangovers.
I’d like to see one of those trim “soulless” suburban women wearing St. John right about now…
“Sounds like Sheffield (LP was already getting too expensive by then) when I moved into that fringe neighborhood 30 years ago…But somehow people carved out a nice life for themselves (have a look the next time you’re in the area), and although I was just a teen 30 years ago, I ended up buying east of Halsted in my 20?s and I’ve never left.”
I’m confused JAy. You bought when you were a teen? In Sheffield or east of halsted? I thought you were an LP pioneer?
‘Panda Express is awesome’
I suppose if I ever found myself at Fox Valley mall and needed some very America Chinese’ish food, I’d eat there Dan. I’d understand that my dollars would be supporting an immigrant who’s also a Buddhist, lives in SF, supports gay rights and other liberal causes, is BFF with Deepak Shopra… well you get the point. Sounds like one big leftist egg roll if you ask me.
‘I’m confused JAy. You bought when you were a teen? In Sheffield or east of halsted? I thought you were an LP pioneer?’
I first moved to Sheffied as a teen with family, then rented there, then bought there (early 20’s), then bought in LP in my mid 20’s. A pioneer? Those people bought in the 60’s, I was certainly another later wave. Also, I still call areas by their *neighborhood* names… Sheffield, Ranch, Wrightwood, LP, and so on. There was a distinct division between east of Halsted and west of Halsted, both in name and ‘class’, and I was hell bent on living in the east part. That division blurred when the brokers started calling everything LP in the late 80’s.
Wow. What a bunch of fuddie duddies. From the self-important nouveau riche denigrating others based solely on income to the supposed urbanites who never leave the DZ (that’s Douche Zone) due to their child-like, unjustified fears of “urban terror,” so much of the CribChatter community has come to resemble the real estate market: Desolate, lonely and full of fear and anger.
Has Cribchatter coined a term for the scared yuppies, or are there even yuppies left now? I mean, I get gunfire in my hood at night, I’m still not a pioneer LOL… Just urban.
“I suppose if I ever found myself at Fox Valley mall and needed some very America Chinese’ish food, I’d eat there Dan. I’d understand that my dollars would be supporting an immigrant who’s also a Buddhist, lives in SF, supports gay rights and other liberal causes, is BFF with Deepak Shopra… well you get the point. Sounds like one big leftist egg roll if you ask me.”
Panda Express is in the Loop and on Clybourn. The Girl and the Goat uses just as much salt, and charges 7x the price, using the same wholesale vegetable purveyors. Get real. Trust me, the oil is cleaner at the chain, than in chinatown.
anyone remember “Wags” diner chains? (I believe owned by the walgreens people)
Now that was a truly dreadful place to eat.
“We’re a strong believer in the West Loop for new apartment projects. There’re very few actual rental properties there — there’re a number of rented condominiums, but there are very few ground-up apartment developments in the West Loop, period,”
Hmm..ground-up apartments four blocks North we have K Station which for those that have no idea is RENTAL ONLY and It’s not just one building it’s 4 with a fifth building being built NOW. Totaling about 2200 K Station rental units and TRIO Tower as well. Another big rental two block south is Presidential Towers 2350 units again is all rental.
Girl and the Goat DOES use a lot of salt. This may be the first, and probably will be the last, thing Helmethofer-Dan has said that I agree with.
And while we’re speaking if Chinese food, another Lao Sze Chuan will open shortly, this one not in Chinatown, but Uptown. Though I still dearly miss Marigold in that spot, I must say.
http://www.uptownupdate.com/2012/08/lao-sze-chuan-coming-to-uptown.html?m=1
lao sze chuan’s food is awesome but the service in the restaurant is absolutely terrible… don’t even attempt to get delivery from there… its comically bad
[jay] “You can either pay dearly in a neighborhood that others have already fixed up, or buy in the fringe and do it yourselves for a fraction of the price. Nice to hear another generation is doing just that; you’ll be the subject of much rage and secrete jealousy for your efforts on CC in 2042.”
Thats the general idea… saving beautiful buildings in fascinating neighborhoods all while earning a good return on the investment. I hope it works out as well as your past endeavors.
Size Penance just changed her tune on real estate telling people we are at bottom. You should only buy though if ur rent would be as much it would be to buy.
“You can either pay dearly in a neighborhood that others have already fixed up, or buy in the fringe and do it yourselves for a fraction of the price. Nice to hear another generation is doing just that; you’ll be the subject of much rage and secrete jealousy for your efforts on CC in 2042.”
I’m all for this. I hope some of the beautiful graystones and brownstones and other historic buildings are saved in areas like East Garfield Park.
But some people don’t have 10 or 20 years to wait it out while gunfire flies around them. They might have children they don’t want to expose to this or just don’t want to deal with the stress of living with that. I know someone who bought a historic mansion in Wicker Park in the late 1980s. I’ve mentioned this story before. They got it cheap and fixed it up. Now it’s worth several million. But it wasn’t without pain. They heard gunshots (out on the street) for years after moving in. They don’t have kids- so children weren’t an issue (but others with kids probably wouldn’t have done it.)
Many people don’t want to live their lives waiting for the neighborhood to turn around (for every Wicker Park there is an Uptown- which everyone has said is on the “verge” of a breakout for the last two decades.)
But I am all in favor of people being urban pioneers and rescuing neighborhoods. We wouldn’t have Pullman without those who take chances.
“Size Penance just changed her tune ”
She doesn’t appear to exist on teh intertubez, so why should we care?
“Panda Express is in the Loop and on Clybourn. The Girl and the Goat uses just as much salt, and charges 7x the price, using the same wholesale vegetable purveyors”
Hofer – My money is that you have never even been inside the Girl and the Goat. Sure you are correct that they are more expensive than Panda Express. Big shocker! Do you think that Pizzeria Uno is more expensive than the Sbarro at the mall? Would people pay more for Art Smiths buttermilk chicken at Table 52 than an order of extra crispy from KFC? How about comparing The Fronterra Grill taco’s vs. Taco Bell?
Once again you make little sense. A sit down white table restaurant is always going to be more expensive than a fast food carry out place. Oh, and rest assured that there are good protocols for chain places however they are not always followed strictly. Half ass managers and lame hourly employees often can not be bothered to do things perfect. A business owner like Stephanie and BOKA group can demand excellence from it’s staff and actually get that excellence. We had dinner again at G&TG on Saturday. It was excellent and perfectly seasoned. The only thing I did not like was the fried pickles!
.
‘But some people don’t have 10 or 20 years to wait it out while gunfire flies around them.’
I wish there were some magic solution that would turn around neighborhoods quickly, but there isn’t. The *one* big difference I see in renovating a blighted area then vs now, is that there was an ‘oh well’ attitude that existed then that I don’t see today, and there were just enough of them in the late 70’s early 80’s to actually change neighborhoods. Too many people today want a sure thing, want it their way, and they want it quickly with a minimal amount of work. I can guarantee you that few people were in it for the money (we were just as uncertain about our jobs/future as folks are today… the crash of ’87 and the housing recession of the early 90’s – I was under water 20% by then). It was something you just had to do, and a way of urban life you just had to live. Remember, this was during This Old House popularity, and Chicago was hardly unique in renovating houses/neighborhoods. If *just enough* of the current generation thought as previous generations did in regard to fixing up old neighborhoods, risks and all… they’d be UNSTOPPABLE.
“If *just enough* of the current generation thought as previous generations did in regard to fixing up old neighborhoods, risks and all… they’d be UNSTOPPABLE.”
I’m on the same page as you except this is just wishful thinking. Demographics, incomes and housing demand is at the point that there really isn’t a need for large scale gentrification like what occurred in the previous generations. I have plenty of affordable options for places to live that I don’t need to ‘gentrify”.
and there’s always the flip side of gentrification, the residents who don’t like the new money coming in and changing their neighborhood.
https://www.youtube.com/watch?v=c9_f51eIjJM
“Once again you make little sense. … We had dinner again at G&TG on Saturday. It was excellent and perfectly seasoned.”
He’d probably just had too much salt earlier in the day:
http://discovermagazine.com/2012/jul-aug/08-what-seasoning-is-essential-for-life-deadly-at-high-doses-and-confusing-to-neuroscientists
I’ll let others theorize how.
“I’m on the same page as you except this is just wishful thinking … I have plenty of affordable options for places to live”
If you think that’s being on the same page as jay, I think you too must be reading different books.
http://slightlyinsultingchicagoposters.tumblr.com/post/27019559002