JPMorgan’s investment arm is willing to test the waters with a Streeterville apartment tower sale, and risk taking a bath.
The venture of JPMorgan Asset Management that owns the 19-story, 198-unit apartment building at 850 North Lake Shore Drive is marketing the property for sale, even as rising interest rates have contributed to substantial losses in value for other downtown Chicago multifamily towers sold this year, Crain’s reported.
The landlord hired Newmark’s Chicago office to market and sell the building, which JPMorgan acquired for $140 million in 2016, setting a new price per unit record for downtown Chicago apartments at that time.
Newmark’s Liz Gagliardi, Chuck Johanns, and Susan Lawson are leading the marketing efforts on behalf of JPMorgan.
There’s a good chance the building’s value has diminished due to increased interest rates and reduced demand for commercial real estate in Chicago, even though the demand for rental units downtown remains strong. Recent sales of other downtown apartment buildings have also fallen below their pre-pandemic values, exemplified by the sale of a 398-unit apartment tower in Streeterville for $173 million, a 28 percent decline from its 2016 purchase price.
While the Lake Shore Drive property does not have an official asking price, people familiar with the asset estimate it could attract bids ranging from $85 million to $90 million, the publication reported. It remains uncertain whether JPMorgan will accept such a price, and the company didn’t return the outlet’s request for comment.
The building is one of a handful of downtown apartment properties currently on the market, with landlords capitalizing on the high demand for rentals in the city. New developments are expected to slow down, with only 400 new apartments projected to be added in 2025, the lowest annual figure since 2004.
While high demand has been driven by factors like limited new supply and higher interest rates, the cost of borrowing has been a significant obstacle, leading to a significant gap between sellers and buyers regarding property prices. National apartment sales through July 2023 have declined by 67 percent compared to the same period in the previous year, reaching just under $65 billion, the outlet reported, citing MSCI Real Assets.
Newmark is emphasizing the Lake Shore Drive building’s consistent demand from key Streeterville employers such as Northwestern Memorial Hospital and Northwestern University. The building boasts relatively large apartments, averaging 1,264 square feet, with an average monthly rent of $3,574. As of this month, the building is 95 percent leased.
The Lake Shore Drive building, a Beaux Arts structure dating back 96 years, was originally known as the Lake Shore Athletic Club. It was converted into a dormitory by Northwestern University in the 1970s. In 2008, it was acquired for $39 million by a joint venture involving Northbrook-based Integrated Development Group, which transformed it into high-end apartments, eventually selling it to JPMorgan in 2016.
JPMorgan financed its 2016 acquisition with a $70 million loan from Nationwide Insurance, with the mortgage set to mature in May 2026, according to Cook County property records.