Interest Perks Up For Hyde Park Apartments
The Chicago market for multifamily properties has been on fire for a long time, and even though most investors concentrate on downtown or the new neighborhoods on its periphery, more now cast glances at Hyde Park, an older community that has until recently avoided notice.
Interra Realty just brokered the sale of 5424 South Cornell Ave., a 64-unit Hyde Park rental community, for $6M, or about $94K per unit. That is a low price compared to apartments in hot submarkets around The Loop, but what caught Senior Managing Partner Joe Smazal's attention was the level of interest.
"It was a deep buyer pool," he said.
Interra received six written offers on the property, including several bidders from outside Hyde Park and even out-of-state national buyers, and that is a big change.
"This is a submarket that more and more people are considering, far more than they did five years ago," Smazal said.
Nautilus Investments, a Chicago-based firm led by Sandeep and Carolyn Sood, ended up winning the bid. Smazal represented the private seller, while Interra Managing Partner Ted Stratman and Director Jeremy Morton represented Nautilus.
Built in 1924, the property has 61 studios and three one-bedroom apartments, which were 90% occupied at the time of sale. A portion of financing was obtained through the Opportunity Investment Fund, set up by nonprofit lender Community Investment Corp. and Preservation Compact to preserve affordable housing in neighborhoods like Hyde Park that have experienced significant rent growth.
"That allows the buyer to both free up some equity and make improvements to the building and preserve 20% of the units as affordable housing units for the next decade," Smazal said.
The increased level of interest in Hyde Park hasn't yet resulted in any stampede for neighborhood properties, he said. A lack of large properties hitting the market keeps some buyers out of Hyde Park, and overall sales velocity remains moderate.
According to CoStar, 27 multifamily properties in Hyde Park have traded hands since January 2017, and Smazal brokered about half of these. The largest neighborhood deal was 5242 South Hyde Park Blvd., a 140-unit building that sold for $23.5M, but most had a couple of dozen units.
Still, Smazal expects velocity is likely to pick up as investors searching for yield notice Hyde Park has all the attributes desired by tenants, including proximity to the lakefront, a quick connection to downtown by Metra train and institutions including the University of Chicago and Museum of Science and Industry. Also nearby are Washington Park and Jackson Park, the future home of the Obama Presidential Center.
Smazal said the neighborhood has also seen a surge of new retail along 57th Street, and new hospitality offerings, such as The Sophy, Hyde Park’s first boutique hotel, which recently opened a half-mile from the Cornell property. He sees more deal flow on the horizon for multifamily.
“We continue to work with a variety of owners and investors, including those looking to maintain housing affordability as property values continue to climb.”