Berkshire Residential Tests River North Multifamily Market

Berkshire Residential Investments is looking to offload a River North apartment tower even as high interest rates continue to hammer property values across Chicago.

The Boston-based firm, led by CEO David Olney, has hired CBRE to sell the 292-unit Eight O Five building at 805 North LaSalle Street, about seven years after acquiring the asset, Crain’s reported.

Berkshire bought the 32-story tower for $112.5 million in 2016, and now it’s testing the market as rising interest rates are weighing on property values and making it especially tough to pull off nine-figure deals. Along with the tightening capital markets, crime and an overall pessimistic outlook on Chicago real estate has curtailed apartment values in the city, despite a relatively strong local multifamily sector, with area rent growth outpacing the national average as of earlier this year.

The Eight O Five, built in 2015, has an occupancy rate of just over 94 percent, with an average rent of $2,564 per month, or $3.75 per square foot. CBRE is playing up the property as a value-add opportunity, noting that a buyer could improve its amenities and jack up rents. Potential upgrades include adding a yoga studio, expanding the fitness center or adding fire pits and couches to its rooftop deck.

Another desirable aspect for prospective buyers is the high income among tenants. With residents who are employed by household companies like Bank of America, Oracle and Amazon, the building’s average tenant earns $128,885 annually and is 33 years old, a listing said.

Other apartment buildings in Chicago have recently traded for far less than what sellers originally invested in them. Green Cities recently purchased the 329-unit Lake & Wells building for $98 million, compared to the $123 million it cost to develop the apartment complex 15 years prior.

Less than two weeks ago, Crescent Heights bought a 400-unit apartment tower in Streeterville for $173 million. That’s 28 percent less than the $240 million Invesco paid for the property in 2016.

— Quinn Donoghue