Trammell Crow is back in the dirt in Fulton Market, undeterred by the rising cost of capital to start construction.
A subsidiary of the Dallas-based firm called High Street Residential scored a $125 million construction loan from Otera Capital for a 368-unit apartments project that recently broke ground at 1114 West Carroll Street — a feat given today’s tightening lending climate, Crain’s reported.
High Street, which is overseen by Trammell owner CBRE and its head of real estate investments Danny Queenan, may be one of the few big multifamily developments to break ground in the buzzing Fulton Market District this year.
The West Carroll apartment is the first phase of a two-building project, as High Street is planning a 650,000-square-foot office tower to the south at 315 North May Street. The site is also near Trammell Crow’s 425,000-square-foot Fulton Labs, which the developer delivered in 2022, receiving commitments from big-name brands like Google.
Fulton Market has become a hot spot for developments across all sectors of real estate, but especially for multifamily. Last year, over 9,000 units were planned or under construction in the broader West Loop neighborhood.
Although a slew of projects are in the pipeline, current market conditions are preventing shovels from actually going in the ground. Banking uncertainties along with boosted interest rates are making it difficult for developers to receive adequate financing
“With the cost of capital where it is, it’s just really difficult to make the numbers work,” Ron DeVries, of appraisal and consulting firm Integra Realty Resources, told the outlet.
In the past, apartment builders would typically borrow about 60 percent of a project’s total costs from the banks. Developers are now lucky to have 50 percent of costs covered, Walker & Dunlop’s Dave Hendrickson told the outlet.
High construction costs cutting into profit margins is another reason why so many developers are hitting the pause button.
Montreal-based Otera has made a loan for just one other project in Chicago, but it was a prominent one: Jeff Shapack’s 750,000-square-foot Fulton Market office building at 167 Green Street.
This story has been updated to correct the number of units in the project, and CBRE’s organizational oversight for its High Street Residential business.
— Quinn Donoghue
Read more
Development
Chicago
Crescent Heights pays $35M for Fulton Market development site
Commercial
Chicago
Plans ramp up for 800 W Lake
Development
Chicago
Alex Najem, Shanna Khan complete $49M Fulton Market assemblage