TLC Management snagged a multifamily property in Evanston, taking advantage of assumable debt with a low interest rate.
TLC paid $45.4 million for the 103-unit Centrum Evanston apartments at 1590 Elmwood Avenue, acquiring it from developers John McLinden and Arthur Slaven, Crain’s reported. That amounts to $441,300 per unit, which is among the highest for multifamily properties in suburban Chicago.
High interest rates have pushed down property values and hindered apartment sales across the Chicago area, but TLC hit the jack-pot by inheriting a low interest rate. The firm will take over the $30.7 million loan on the property, with a fixed rate of 3.97 percent. The loan doesn’t mature until 2029.
If TLC financed the acquisition with a new loan, the interest rate would have likely hovered above 6 percent, TLC CEO Stuart Handler told the outlet. That rate would tack on more than $600,000 in annual interest costs, shaving more than $10 million off the property’s value.
Other multifamily assets that have recently traded without an existing loan assumption and required buyers to obtain new debt resulted in losses for the sellers. That includes New York-based Vanbarton Group, which sold a 268-unit apartment building in Chicago’s Streeterville neighborhood to an affiliate of FPA Multifamily for $55 million, down 26 percent from what Vanbarton paid for the property in 2014.
Chicagoland’s multifamily sector has taken a hit from spiked interest rates, but it’s still performing well. High demand for apartments has led to strong occupancy levels, allowing landlords to keep rents high.
The building at 1590 Elmwood, now called the Scholar, is fully occupied. The average rent is $2,791 a month, or $3.08 per square foot. Almost all of the tenants are students at Northwestern University’s Kellogg School of Management. The Scholar is across the street from Chicago Transit Authority and Metra stops, an attractive feature for people who work in downtown Chicago.
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McLinden and Slaven developed the building in 2017. They previously co-owned Chicago-based Centrum Partners, before McLinden founded Hubbard Street Group, while Slaven remained with Centrum.
— Quinn Donoghue