FPA Multifamily just snagged a South Loop apartment tower, resulting in the most-expensive multifamily deal in Chicago so far this year.
An affiliate of the California-based investor paid $144 million for the 500-unit Paragon Chicago tower, at 1326 South Michigan Avenue, earlier this month, CoStar reported. The sale equates to roughly $288,000 per unit.
Newmark brokers Chuck Johanns, Liz Gagliardi and Susan Lawson represented the sellers, local investor John Murphy and Los Angeles-based CIM Group, which completed development of the 47-story building in 2019.
Since last year, only three multifamily properties in Chicago have traded for more than what FPA paid. The priciest sale occurred last summer, when the family office of Spanish billionaire Amancio Ortega, the founder of Zara, bought the 492-unit luxury apartment tower at 727 West Madison Street for nearly $232 million.
Despite the high price, the sale appears to come at a loss for the developers, as the Paragon Chicago cost $171 million to build. Plus, Murphy and CIM refinanced the property with a $148 million loan from Deutsche Bank in 2019, the outlet reported. The status of that loan is unclear.
The loss on investment sheds light on the impact of high interest rates, which continue to depress property values across the city, even for well-performing assets in a relatively strong multifamily sector.
The Paragon Chicago has an occupancy rate of nearly 96 percent. The average rent is $2,633 per unit and $3.49 per square foot.
The acquisition expands FPA’s Chicago-area portfolio. In another purchase from CIM, the firm recently bought the 525-unit 888 at Grand Hope Park tower for $188 million. Last year, FPA paid $96 million for a 558-unit complex in the southwest suburb of Westmont.
Chicago’s multifamily market was scorching during the initial years of the pandemic, but it cooled down last year, with sales totalling $3.9 billion, compared to $5.7 billion in 2022, according to CoStar data.
—Quinn Donoghue
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