Osso ups its ante on suburban multifamily as DRA cashes out for $95M

Suburban Chicago’s multifamily landlords have found paths to profitable exits that have ended with sales to Osso Capital.

The upstart New York-based firm co-founded by former Blackstone executives Spencer Vegosen and Olivia John spent $168 million this month to buy two apartment complexes in the western and southwestern suburbs, according to public records.

In its latest deal, Osso paid New York-based DRA Advisors $95 million for the 732-unit Woodlands complex in Crest Hill, a Will County town just north of Joliet. That came after Osso paid San Francisco-based Stockbridge $78 million for the Ovaltine Court multifamily asset in the DuPage County suburb of Villa Park.

Together, the deals illustrate rabid investor demand for suburban Chicago apartments, as the sellers notched huge gains in property values with their respective sales despite surging interest rates chewing into real estate prices and slowing the volume of deals — especially big ones — nationwide.

Osso and DRA did not return requests for comment.

Over the past two years, Chicago-area multifamily rents grew by 24 percent, according to Chicago-based Integra Realty Resources. Only 10.4 percent of the buildings tracked by Integra are offering any kind of concessions on leases, with half a month’s rent being the standard giveaway by landlords this year, down from two years ago, according to the firm’s August report.

“I wouldn’t say the market is opening up,” said Ron DeVries of Integra, which wasn’t involved in the deal. “It’s just tough to make a deal work with interest rates. But a lot of these deals were acquired before there was a big run-up in value, so sellers can still make a healthy spread in terms of return if they can sell today. The problem is they’re looking at the return they could have made if they had sold 18 months ago, and it’s not as good as it could have been.”

Since DRA purchased the Crest Hill asset for $65 million in 2018 — meaning the property value increased by 46 percent — it’s been through a renovation and is nearly fully leased today, according to JLL marketing materials.

The seller was represented by JLL brokers Kevin Girard and Zachary Kaufman, and neither returned requests for comment.

In both suburban Chicago purchases, Osso used mortgages provided by JLL Real Estate Capital, including a $71.3 million loan for the Crest Hill property, according to Will County records. For the Villa Park property, Osso borrowed $54 million from JLL, DuPage County records show.

During its ownership, DRA spent nearly $7 million on renovations of the property, which was built in 1972, and it was 95-percent occupied with new leases up 17 percent versus previous rents and renewals up 7 percent, according to JLL.

Average occupancy in suburban Chicago apartments as a whole dipped to 97.5 percent in the first half of this year, down from a rate of 98 percent and higher that held for much of last year but still well above the historical average, Integra said.

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When DRA bought the Crest Hill asset, it assumed a previous mortgage on the property, and then in 2019 it refinanced the asset with a $65 million loan from CBRE Capital Markets, public records show.

Although DRA over the past year has been selling much of its 24-property, $540 million retail portfolio concentrated in Chicagoland, it has still found occasions to buy big properties in the market. Last year, the firm paid San Francisco-based FPA Multifamily $106 million for an apartment complex in Bensenville.