DRA Advisors Pays Broadshore $90M for St. Charles Apartments

DRA Advisors is no longer just a seller in Chicagoland.

The New York-based investment firm has become a buyer again, with its purchase of a 400-unit apartment complex in St. Charles, a western suburb, for over $90 million. The transaction closed late last month, public records show. The property is the Ascend St. Charles complex, a garden-style property featuring 20 three-story buildings spread across more than 20 acres. The price came to about $225,000 per unit.

Naperville-based multifamily player Marquette Companies partnered with DRA on the acquisition, according to people familiar with the deal.

Before the purchase, DRA had been selling off pieces of a $540 million Midwest retail portfolio concentrated in the Chicago area, and it still has a few such properties to offload.

Its return to the region’s multifamily market comes as a slight letdown for Ascend’s seller, Los Angeles-based Broadshore Capital Partners. When Broadshore listed Ascend for sale with real estate brokerage Berkadia earlier this year, market insiders pegged its potential sale price at close to $100 million.

Still, Broadshore came out ahead in the deal, as it bought the property for $81.5 million from Chicago-based AMLI Residential in 2017.

While suburban multifamily deals have typically outperformed those in downtown Chicago in recent months, several other apartment properties have traded at prices well below their previous values in both the city and suburbs since interest rate hikes started jumping in 2022. Yet, suburban Chicago’s apartment market has featured some of the largest rent hikes by percentage in the country over the past year, reflecting a lack of the new supply that has kept rents flat or even caused drops in markets such as Austin and Phoenix.

Neither DRA, Marquette nor Broadshore returned requests for comment. Berkadia dealmakers also declined to comment.

Skyrocketing property taxes have chopped into Chicago-area property values, for large commercial assets in particular, and while some investors have looked for shelter outside Cook County to suburban markets like St. Charles, which falls into Kane County, they’ve still been hit hard in many cases.

The Ascend property, for instance, carried a $1.2 million property tax bill in 2017, when a predecessor to Broadshore, Lowe Enterprises Investors, bought it. Last year, the property cost its landlord more than $2.1 million in taxes, marking a 75 percent increase during the seller’s holding period.

DRA and Marquette’s purchase price was recorded as only $80 million in Kane County records, but the buyers made an additional allocation toward the seller’s personal property, closing costs, reserves and guaranties, which was not reflected in the real estate value. Other buyers have structured deals similarly, in attempts to keep real estate tax assessments from soaring too rapidly, market insiders have said.

It’s unclear how effective that strategy is with tax officials, who tend to take a property’s operating income into account when setting assessed values.

An AIG fund also invested in an equity position in Ascend alongside the Broadshore venture, property records show, but it’s unknown how the firms split shares of equity in the property. Lowe in 2018 became a part of Broadshore, a re-branded company name following Lowe’s consolidation into the firm by its longtime equity partner Guardian Life Insurance Company of America.

It’s also unclear how DRA and Marquette split their shares of equity in Ascend with their purchase. The buyers snagged a $62 million mortgage loan from Iowa-based Athene Annuity and Life Company, with the debt pegged at about 65 percent of the purchase price, people familiar with the deal said. The sellers had taken out a $53 million loan in 2017 for their acquisition. Athene declined to comment.

Berkadia’s Pete Evans and Richard Evans brokered the sale.