Fueled by well-educated young professionals who want to live near the center of everything, Chicago’s West Loop is one of the county’s fastest growing neighborhoods. Heralding its appeal amongst the Millennial generation, Google relocated their Downtown Chicago presence to the neighborhood and several chef-driven restaurants and other cultural amenities. Strong demand for this lifestyle has translated in to some of the strongest rent growth in Chicago. Located in heart of the West Loop’s rehabbed loft spaces and just south of Google’s new offices was a 67-unit failed condominium project. Partnering with an internally-approved equity firm helped us strengthen our purchase profile and reduce buyer competition, which put us in position to acquire the property in June 2013.

Our investment strategy for the asset centered on reacquiring the four condos that had already been sold and collapsing the Home Owner’s Association. Further, about 40% of the units were not rent-ready and needed additional finish work to turn them in to revenue producing units. Immediately upon closing, we were able to repurchase all of the sold units, collapse the HOA and rebrand the property as Lux24. Over the course of twelve months, we were able to increase the occupancy of the property from 60% leased to 93% and were able to generate significant rent increases. “This opportunity represented one of the last urban-infill, boutique apartment assets in Chicago and had a strong value-add proposition given the outstanding and physical and locational characteristics”, said Dave Welk, Managing Director of Acquisitions for Origin Capital Partners.

THE EXECUTION

Converted larger floorplans to make five additional units, creating $1 million in value ($60k annual revenue)

Relocated fitness center to add one unit, creating $400k in value ($23k annual revenue)

Repurchased condo units at basis (average $270k per unit) achieving fee simple title to the property

Executed a 10-year lease on vacant retail space at 35% above proforma projections, generating $25k in annual revenue

Increased rents 15% higher than our three year pro forma in 18 months

Refinanced asset for $17.4 million based on appraised value of $350,000 per door, reflecting a 40% increase in value