Trio of Investors Pay Combined $165M for Suburban Apartments

Suburban Chicago’s nation-leading apartment rent growth stats and lack of new oncoming supply has drawn in a trio of buyers for big multifamily complexes who are likely intent on raising rents amid a short new development pipeline.

In the biggest of the three deals closed in recent days, an affiliate of Oak Brook-based property giant Inland Real Estate Group paid $101 million for the 306-unit Wheaton 121 apartment complex in the southwest suburb, DuPage County records show.

Adding to the string of deals were Miami-based Pensam Capital, which paid $40 million for the 216-unit Aurora complex known as Covey at Fox Valley, and New York-based Avery Capital, which paid just under $24 million for an 80-unit D.R. Horton-developed built-to-rent townhome community in Hampshire, public records show.

Furthermore, the deals closed in succession with a sale of about $90 million for a St. Charles apartment complex bought by New York-based DRA Advisors and Naperville-based Marquette Companies. Together, the acquisitions show the momentum suburban Chicago multifamily values have gained while the area’s rent growth by percentage increase has ranked tied for the most in the U.S. over the past year, alongside scorching hot Miami.

The surge stems in large part from the lack of new supply set to hit suburban Chicago as developers have pulled back since interest rates jumped in 2022, combining with rising construction costs to make building less feasible. Meanwhile, rents in markets such as Austin and Phoenix have been flat or even on the decline due to booms in new supply, as developers flocked to those markets while their populations climbed during the pandemic.

“Chicago and the Midwest in general have been the best performers for us,” said Pensam Capital’s Hen Shoval, whose firm added to its portfolio of thousands of units it already owns in the suburban Chicago market. “We have investments throughout the U.S. and the Midwest is outperforming any region by far and has been for the past three years. That’s really a function of a lack of new supply.”

Only 2,500 Class A apartments are projected to be completed this year, down from 3,500 units last year, according to a midyear report by Chicago-based Integra Realty Resources.

“The Chicago suburban apartment market currently has a low development supply and Wheaton 121 benefits from a high traffic location in a very stable and affluent town which also has little to no new developments in the pipeline,” Inland’s Mark Cosenza said in a statement. “The Midwest markets are directly benefiting from its prior stable rent growth through the past few years while some other growth markets had some very large rental increases during that period, resulting in negative to flat (current) rent growth.”

The Wheaton deal ended a drawn-out sale process, as the seller, Ohio-based Connor Group, first listed the property at 121 North Cross Street in 2022, and the property was marketed by three brokerages before finding a buyer. Its sale to Inland came out to be about $330,00 per unit, and was last listed with Walker & Dunlop’s Todd Stofflet before stints with Newmark and CBRE.

Soaring property taxes have suppressed property values in the Chicago area, especially for large commercial assets. While some investors have sought refuge in suburban markets outside Cook County — all three of these deals fall in either DuPage or Kane counties — many of those have still faced substantial financial impacts.

“We are not currently looking to add assets in Cook County due to the overall economic climate, which includes property tax valuations, but we will continue to look for assets in the surrounding counties,” Cosenza said.

Still, Connor netted a big win with the sale, as it bought the complex for just $72 million in 2018 from Atlanta-based Invesco, which took a bath after buying the property for $99 million in 2018. Connor Group declined to comment. A mortgage loan to Inland hasn’t yet been recorded on the property, meaning the buyer either paid cash or the financing information hasn’t yet been made public.

Meanwhile, the Aurora deal was financed with a nearly $28 million Freddie Mac loan originated by Berkadia Commercial Mortgage, while Avery took on a nearly $18 million Fannie Mae loan that was originated by Greystone to fund its Hampshire townhomes acquisition, records show. Berkadia also originated the Aurora property’s previous loan to Chicago-based Laramar Group, the seller in this deal, which had bought the property in 2021 for $34.5 million, records show.

D.R. Horton began building the townhomes community in 2023. The Hampshire property features units with three-bedroom and four-bedroom layouts, and marks at least the second large townhomes deal so far this year, after Chicago-based JDI Realty paid $34 million for a portfolio of 164 townhomes spread throughout the suburbs of Chicago to a venture of former owner Ken Buckman, a locally based landlord.

Avery, based in Thiells, New York, declined to comment. Laramar and D.R. Horton didn’t immediately return requests for comment Wednesday.

JLL’s Kevin Girard, Mark Stern and Zachary Kaufman listed the Aurora property for sale. It was 96 percent occupied and new leases have recently been at rates of 13 percent more than previous rents on average, according to marketing materials.