James Schloemer’s Continental Properties reeled in debt to place a bet on the Chicago suburbs even in a tough lending environment.
Wisconsin-based developer Continental in recent weeks secured a $54 million loan from The Bank of Oklahoma to build a 254-unit apartment community in Deerfield, a northern suburb of Chicago about 25-miles from downtown and served by Metra.
The 8-building complex will be located on a 10-acre property that is part of the Deerbrook
Shopping Center at I-94 and South Waukegan Road. Continental bought the land for the development from Deutsche Bank affiliate DWS Group for an undisclosed price – the deal didn’t require transfer tax payments so its pricing couldn’t be determined from public records.
The apartments will range from studios to three bedroom-units and amenities will include a pool, fitness center, dog park, and pickleball court.
Out of the 254 units, 25 will be set aside as affordable.
The Village of Deerfield requires that projects of this size set aside 10 percent of units as affordable with half of those affordable to people making 80 percent of the area median income and the other half affordable to those making 100 percent of the AMI. For a family of four in the Chicago MSA, that’s an annual household income of $89,700 and $112,100, respectively.
Rents for the market-rate units will range from $1,550 to $3,200 a month. Construction is expected to be completed by April 2026.
Even though Continental is embarking on the project amid high interest rates and construction costs, the suburban Chicago market could be worth the risk.
Suburban Chicago multifamily sales are outperforming the city even as strong rent growth continues in both the urban core and the greater metro area. A recent analysis from The Real Deal found that of 27 recent Chicago area multifamily sales for over $10 million, 17 sold at a markup from their last sale price. And 11 of those marked up sales were in the suburbs.
Demand for suburban apartments has stuck out nationally. Suburban Chicago was named the most in-demand market in the county for renters, according to a September study from RentCafe, which showed the area tied with Miami.
Even before the Deerfield project is complete, Continental should get a good sense of demand in the market based on the performance of a McHenry apartment complex that the firm recently listed.
Last month, Continental listed Authentix McHenry at 3415 Blake Road, which the firm developed starting in 2021.
A few months prior, Continental bought a 284-unit complex at 14750 Wallin Drive in Plainfield, 40 miles Southwest of Chicago, for a little more than $276,000 per unit. The sale price represents a 30 percent increase in value from the project’s $60 million reported cost when seller Wingspan Development Group began pre-leasing for the property in 2021.
Continental bought the property with a $51 million loan from New York-based Equitable Financial Life Insurance Company of America.
At the time, Northmarq broker Alex Malzone said Continental was pursuing more acquisitions than the firm had in the past.
“Given the recent surge in interest rates and extremely high construction costs for new developments, Continental recently launched an opportunistic fund to solely focus on acquisitions in markets it’s looking to grow in,” Malzone said in a statement.
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