Crescent Heights pays $80M for discounted Lake Shore Drive apartments

Multifamily developer Crescent Heights has expanded its Chicago holdings by snagging a huge discount on a Lake Shore Drive apartment complex from seller JPMorgan Asset Management.

Miami-based Crescent Heights paid $80 million for the 19-story, 198-unit property at 850 North Lake Shore Drive, according to Cook County records. That’s about $404,000 per unit.

The price is down from the $140 million that JPMorgan’s investment vehicle paid to buy it in 2016, demonstrating the crushing impact of rising interest rates after the cheap-money era following the Great Recession through 2022, when the Federal Reserve began a rate-hike campaign to battle inflation.

Crescent Heights used a $61 million mortgage loan from Centerbridge Martello Advisors and Massachusetts Mutual Life Insurance Company to finance the Lake Shore Drive acquisition, public records show.

Elsewhere, the firm is set to build a 52-story Fulton Market apartment complex at 420 North May Street.

Crescent Heights last year paid $173 million for the 398-unit North Water apartments in Chicago’s Streeterville neighborhood, about $447,000 per unit. That was another big discount from the property’s previous sale price of $240 million, when Invesco bought it in 2016.

“Crescent has a history of buying the very best properties at the right time,” Crescent Heights co-founder Russell Galbut said. “This [Lake Shore Drive] property with its direct location on the lake makes it irreplaceable.”

JPMorgan Asset Management didn’t immediately return a request for comment.

The seller last year hired a Newmark team including Liz Gagliardi, Chuck Johanns and Susan Lawson to market the property. It was the second time JPMorgan tried to sell the property, having first listed it with a Newmark team in 2020. But demand for downtown rentals waned as the pandemic raged, and the property didn’t trade until it was relisted last fall in another attempt.

The eventual price was enough to prevent a loss for Ohio-based Nationwide Insurance on the Lake Shore Drive deal, which was JPMorgan’s lender behind its $70 million acquisition loan taken out in 2016. Its maturity was previously reported to be in 2026.

The Beaux Arts-style building was completed 97 years ago, when it was initially called the Lake Shore Athletic Club. Northwestern University bought it in the 1970s and turned it into dorms. In 2008, a venture that involved a Northbrook-based firm, Integrated Development Group, bought it for $38.5 million and transformed the property into high-end rentals before selling to JPMorgan.

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Crescent Heights buys Streeterville apartments for $173M