Lake & Wells, a 329-unit multifamily high-rise located at 210 N. Wells St. in Chicago, has been sold to Green Cities for $98 million—a figure 20% less than the $123 million spent on the building when it was developed by Chicago-based Jay Javors and NEBF in 2008.
According to a recent article by Crain’s, the significance of this lies in the trend of declining property values in Downtown Chicago, where rising interest rates and property taxes, along with investor and lender wariness, are taking a toll on the market. This trend has forced some investors to sell their properties, leaving them with big losses as market conditions make it harder to secure financing on favorable terms.
While Green Cities acquired only the building and not the ground underneath it, the company has the option to invest more money in the building to raise rents and increase its value. But will tenants stick around if faced with a rent spike upon renewal? Crain’s reported Lake & Wells is currently 92.3% occupied, with rents ranging from $2,177 per month for a studio apartment to $3,076 for a two-bedroom unit.
Although the current market may not be favorable to sellers, Crain’s said selling a property might be the best option for some investors—especially those who need to pay off a maturing loan. In a different market, investors could refinance their loans with new debt, but since borrowing costs have increased, they may have to use their own funds or find a new partner with money to pay off the old loan. In some cases, selling a property may result in losing some of all of their equity, but it can be better than investing more money into the property. In the case of Lake & Wells, NEBF was ready to move on, and an $80 million mortgage on the building was set to mature this year, according to Crain’s.
Despite the market challenges, Green Cities is familiar with Chicago and has experience in navigating the current market. At the end of March, the firm sold Xavier Apartments, a 240-unit building near Old Town, for $81 million.
