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Investors Love The Yield In Rogers Park And Edgewater Multifamily

KIG Managing Partner Todd Stofflet

Real estate investors are always seeking opportunities that provide the best yields. While StreetervilleĀ crushed the multifamily sector this year, a packed construction pipeline, lower cap rates and narrower rent growth are leading investors into the outlying neighborhoods, seeking opportunities in value-add properties.

On Dec. 8, KIG brokered the $18.9M sale of 6801 North Sheridan Road in Rogers Park, a nine-story building with 160 units and ground-level retail, to Spirit Bascom Ventures. It's the second deal in a year KIG brokered for Spirit Bascom; last December KIG brokered theĀ $21.5M sale of 5220 North Sheridan Road in Edgewater. KIG managing partner Todd Stofflet told Bisnow that Rogers Park and Edgewater have statistically no new multifamily inventory built after 2010, but that the median age of renters veers to Gen-X'ers and older, affluent Millennials. In Rogers Park, the average age of renters is 35.2 years with an average income of $55,459. Those statistics are higher in Edgewater: the median age of renters is 39.9 years with an average income of $66,167.

6801 North Sheridan Rd, Chicago

These renters are flocking to Rogers Park and Edgewater for the same reasons Millennials and Baby Boomers are moving to the downtown core. They want smaller apartments and want to be close to nightlife, and these neighborhoods have both in spades. What Rogers Park and Edgewater have that downtown doesn't is wider rent growths. Five-year rent spreads in Edgewater increased 19%, while in Rogers Park those spreads grew by 12%. Stofflet said investors buying assets in these markets can increase those spreads further by rehabbing the units and bringing in more desirable retail.

Other investors have taken notice. Besides KIG's Sheridan Road deal (shown), The Kiser Group brokered a $20M sale for a 220-unit Rogers Park portfolio at 1412 West Chase, 6945 North Ashland, 1310 West Lunt and 1257 West Lunt to Winnemac Properties. And Golub acquired Lake Shore Tower in Edgewater in October. Golub EVP Lee Golub told Bisnow at BMAC Midwest that the opportunity to widen the rent spreads by rehabbing the building's apartments and upgrading amenities make it an attractive long-term investment.

WASHINGTON DC 08.16.2017

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