LaSalle stuck with 20% loss on $65M Deerfield apartments sale

When LaSalle Investment Management started shopping the Woodview Apartments property in Deerfield, its broker touted that leases signed last year hiked rents more than 14 percent from the previous deals.

It was likely because the previous rents were uncharacteristically low. That’s reflected by the 20 percent loss in property value that the Chicago-based firm endured with its $65 million sale this month of its 248-unit asset at 15 Parkway North Boulevard, according to a person familiar with the deal. LaSalle didn’t return a request for comment.

Jim Glikin’s Highland Park-based firm Eagle Management RE bought the complex. It last traded in 2016 for $82 million, when LaSalle, the investment arm of JLL, bought it shortly after the development was completed in 2015.

LaSalle’s loss stands out among suburban Chicago apartment deals. Few large multifamily properties have driven losses to sellers over the past couple years. Rent growth in the Chicago area was outpacing the nation by several times over as of January.

And most other real estate players that have sold apartment buildings in Chicago’s suburbs did so at a juicy profit. When Blackstone Real Estate Income Trust sold off $247 million-worth of its assets in the area earlier this year, it marked increases in value by 29 percent and 40 percent for two of the three properties involved in the deals, and none of the sales came at losses.

But the market has tightened. Financing is harder to come by for buyers, who will also have to pay more for debt due to rising interest rates. LaSalle’s slow play to hike came at a time when prices began accelerating in 2021. Other landlords also scaled back on concessions such as a month, two or even more of free rent for new residents. Such tenant-friendly deals were more common earlier in the pandemic.

Instead of driving rents up, LaSalle opted to keep Woodview Apartments as close to fully leased as possible, even though that occurred at depressed rates, according to an individual familiar with the asset. The company also never took on debt against the property, including to fund its 2016 acquisition, another individual familiar with the property informed The Real Deal, which Lake County records confirm. That means the firm may have sold because it needed to raise cash. 

Plus, the potential relocation and retooling of big corporate campuses nearby Woodview Apartments factors into their future value. Baxter International is considering selling its 10-building complex in Deerfield to Bridge Industrial, which would pay around $100 million for the property and turn it into a logistics campus, a development trend for office complexes throughout the suburbs. There’s also the questions if a similar fate could be in store for a piece of the Walgreens Boots Alliance campus holding five vacant buildings in Deerfield after its owner marketed it for sale.

“For my part, it’s a bet on the viability of Deerfield and the viability of the project location,” Glikin of Eagle Management said.

A few investors have made missteps on suburban apartment plays. In Glenview, BJB Properties in December paid Fortress Investment Group $67 million for the 425-unit GlenLake Village property, down from the $73.5 million the property fetched from Atlas Residential, which lost the property to Fortress in foreclosure.

Eagle borrowed $41 million from Nationwide Life Insurance Company to fund the Deerfield transaction, according to a mortgage filed in Lake County records. The company will raise rents to boost the property’s income. “We’re not planning on raising rents considerably, but we’re going to stay competitive,” Glikin said.

LaSalle has been an active seller elsewhere lately, including in Chicago. It was a partner with another Chicago-based firm, L3 Capital, in the Time Out Market cafeteria and hangout in Fulton Market that they sold last month for $35 million to an unknown European investor. The firms bought that property for $14.6 million in 2016.

But in California, LaSalle took a 55 percent loss in value this year when it sold a 217,000-square-foot office building in Orange County for $25 million.