It is one of the 25-storey buildings. number of skyscrapers Downtown Chicago changes owners this year amid a volatile apartment investment market. Multifamily investors have been cautious about buying downtown, worried that rising property valuations could lead to a significant increase in property taxes. More recently, rising interest rates have cooled the market, increased borrowing costs and pushed down real estate values.
The sale of West77 offers a clue as to how much investors are willing to pay for a downtown high-rise apartment these days, not a comp to cheer up landlords. L&B sold the building for $89 million ($293,000 per unit). That’s a lot less than the $90 million he paid for the property in 2011, before the downtown apartment took off, according to MSCI.
L&B and FPA executives did not return calls. An executive at Newmark, the brokerage firm that arranged the sale, declined to comment.
Ironically, the downtown apartment market is still excited, Rents rose to record levels in the second quarter. But rising interest rates have put some buyers on the sidelines and are starting to drive apartment prices down across the country. The value of multifamily homes in the United States has fallen 3% over the past year, according to an index compiled by Green Street, a California-based research firm.
Chicago has another problem for investors. It’s a rise in commercial valuation. Cook County Rep. Fritz Kaegi said he raised the total valuation of all nonresidential real estate, including multifamily homes in the city, by 77% last year. The Cook County Board of Review, the board that considers valuation appeals, offers some relief by lowering Kaegi’s valuation, but the valuation could still rise.
This year’s tax notices based on last year’s assessment are also several months late, with a second notice due in November. Property taxes are such a big expense for landlords that many investors are waiting to see what the taxes will be before moving forward with a large apartment deal.
Still, thanks to the review board, the FPA may be able to avoid a big tax increase on West77. An assessor last year valued the building at his $89.2 million, up 42% from 2020, according to county records. However, the review board reduced the value of the property to 69.7%. That’s a meager 11% rise for him from 2020, well below what FPA paid for the building. Because tax calculation is a complex process involving multiple variables, an increase in assessed value does not result in an equal percentage increase in tax.
West77 is 96.1% occupied, according to real estate data provider CoStar Group. Including concessions, the average West77 apartment rent is $2,646 per month, or $3.18 per square foot.
Meanwhile, FPA has been an active investor in the Chicago apartment market. Last year, the company paid him $175 million. mccragg coat, Two-building 1,061-unit complex in Streeterville.The company recently sold ReNew on York, Acquired a 571 unit property in Bensenville, Tapestry Glenview, 290 unit complex in Northbrook.