Seller Asking $51M for 528 Apartment Units

CHICAGO-Three apartment buildings on South Shore Drive, with a total of 528 units, are now on the market. The 21-story building at 7345 S. Shore Dr., the 34-story building at 7447 S. Shore Dr. (also known as the South Shore Beach apartments) and the 13-story building at 7300 S. Shore Dr. have an asking price of $50.8 million.

The “private seller” is based in Chicago, says John Olar, an associate VP of investments and director of Marcus & Millichap’s national multi-housing group, who is marketing the buildings. The owner is “selling, as they were really an add-value buyer,” Olar says. “They are also a condominium developer and these buildings were in their pipeline for conversion purposes.”

The seller had acquired the buildings within the past five years and renovated them for condominium conversions but, given the current housing market, has decided to sell the buildings, he says. All three of the buildings have undergone significant capital improvements in the past few years, Olar says. The owner had done improvements to the roofs, windows, elevators, electrical systems and boilers in addition to redoing the parking. A fitness center was installed at 7447 S. Shore Dr., he says.

The properties are all near Lake Michigan and the building at 7447 S. Shore Dr. “sits right on the lake and has its own private beach,” Olar says. The building at 7345 S. Shore Dr. has a solarium with “unobstructed views of downtown and the lake,” he says. The three buildings have a combined occupancy of 97%, Olar tells GlobeSt.com.

The building at 7447 S. Shore Dr. has 330 units and was constructed in 1968. The building at 7300 S. Shore Dr. has 108 units and was constructed in 1927 and the building at 7345 S. Shore Dr. has 90 units and was constructed in 1967, he says. The units are a mix of studios, one bedroom and two bedroom units. The studios have an average size of 500 sf with an average rental rate of $1.28 per sf. Standard one-bedroom units have an average size of 700 per sf with an average rental rate of $1.12 per sf while deluxe one-bedroom units have an average size of 880 sf and an average rental rate of $1.07 per sf. The two bedroom units with one bathroom have an average size of 825 per sf and an average rental rate of $1.09 per sf while the units with two bathrooms have an average size of 1,100 sf and an average rental rate of $1.04 per sf, Olar tells GlobeSt.com.

A buyer will likely be able to raise the rental rates 3.5% to 4% each year for the next several years, he says. There are also cell towers on two of the properties which generate income, Olar says.