About a year after leaving the Chicago apartment market, a Michigan landlord has returned, paying more than $41 million for a 276-unit property in northwest suburban Palatine.
An affiliate of Southfield, Mich.-based Hayman Co. acquired Clover Ridge East from Michigan’s public employee pension fund, said Hayman President Andrew Hayman. He confirmed that the property sold for more than $150,000 per unit.
With suburban apartment rents AT RECORD HIGHS, investors are paying up for properties, creating an attractive cash-out opportunity for landlords.
“It’s a good market to sell into,” said Mark Hahn, asset manager at Chicago-based Kensington Realty Advisors, which advised the Michigan pension fund on the Palatine investment. The pension fund had owned the apartment complex at 1445 E. Evergreen Drive since 1997.
Brokers in the Chicago office of CBRE sold Clover Ridge East to Hayman, which last year sold its sole apartment property in the Chicago area, the 640-unit Addison of Naperville.
Hayman, which has been an investor in the Chicago market for much of the past four decades, is counting on strong rent growth in the suburbs to continue.
“We’re hoping to ride that wave . . . and get aggressive on rents,” Andrew Hayman said.
Clover Ridge East is considered a Class B property, with monthly net rents ranging from $1,362 for a one-bedroom unit to $1,431 for a two-bedroom, according to a report from Appraisal Research Counselors, a Chicago-based consulting firm. The property is 96 percent occupied, said CBRE Executive Vice President John Jaeger.
Kensington oversaw a major renovation at the complex from 2009 to 2011 that included new kitchen cabinets and countertops and new bathroom fixtures. Hayman could go a step further by replacing carpeting in the apartments with laminate flooring, Jaeger said.
Apartment buildings that need to be fixed up are in especially high demand from investors these days. So-called value-add deals offer buyers the opportunity to generate higher returns than they would on other acquisitions, allowing them to hike rents after a renovation is complete.
“I’m seeing an extremely deep buyer pool for value-add properties,” Jaeger said. Demand “is off the charts.”