Waterton to sink $15M into renovations of Lakeshore East apartment high-rise

The firm refinanced the property at 175 North Harbor Drive this month with a $171M loan, records show

TRD CHICAGO /
May.May 30, 2019 01:00 PM
Waterton CEO David Schwartz and Senior Vice President, Debt Capital Markets Steve Carlson and 175 North Harbor Drive (Credit: Waterton and Google Maps)

Waterton CEO David Schwartz and Senior Vice President, Debt Capital Markets Steve Carlson and 175 North Harbor Drive (Credit: Waterton and Google Maps)

One of the city’s biggest multifamily investment firms is getting ready to spend up to $15 million dollars to refurbish a Lakeshore East apartment high-rise.

Waterton is closing in on the renovation plans for the 600-unit North Harbor Tower about a year after it bought the building from Miami-based Crescent Heights, an executive told The Real Deal.

The Chicago-based investment giant secured a $171 million refinancing on the tower, according to Cook County property records. The loan from HFF replaces old debt Waterton inherited from Crescent Heights as part of its deal in June.

Crescent Heights paid $237 million in 2016 to acquire the 55-story tower at 175 North Harbor Drive from the Florida State Board of Administration, Crain’s reported at the time.

Waterton did not disclose how much it paid to pick up the property two years later, but it was “pretty close” to what Crescent Heights had paid, according to Steve Carlson, senior vice president of debt and capital markets at Waterton. Aside from some light renovations to common spaces, the previous owner didn’t add much to the property, Carlson said.

Waterton plans to tap existing capital to fund the work, instead of taking out new debt, Carlson added. He did not say whether Waterton would tap its $920 million multifamily investment fund to bankroll the project.

The building was completed in 1988, and about 500 of its units have hardly seen any update in the last decade, Carlson said. During the next few years, Waterton plans to replace the appliances, cabinets, countertops, lighting and floors in those units.

“There’s a pretty substantial difference between some of the renovated product on the market and where current rents are on un-renovated units,” Carlson said, “so we think there will be a pretty good return on investor capital.”

The tower includes a mix of units ranging from studios through three-bedrooms, with rents starting around $1,800 for a 465-square-foot studio, according to its website.

At 958 square feet, the average apartment is larger than most competitors’, part of what drew Waterton to the tower in the first place, Carlson said. He did not say how high the firm plans to raise rents post-renovation.

Carlson called the Lakeshore East area an “insulated pocket” that could avoid competition for renters among the frenzy of multifamily construction rising from River North and the South Loop. But with Magellan Development Group planning a crop of new high-rises in the area, it may not stay that way for long.

After it completes the 101-story Vista Tower next year, Magellan will build four new residential towers, three of them in partnership with Lendlease on opposite ends of the 28-acre neighborhood combining for up to 2,340 units.

Waterton plans to hang onto North Harbor Tower for about another four years, Carlson said.

The investment firm lists eight Chicago properties in its portfolio, with investments in 13 other states. At the end of last year, Waterton claimed about $4.9 billion in assets.

In January, the firm announced that it had bought a controlling share in senior housing operator Pathway to Living, with plans to expand the brand across the country.


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