A venture involving Zell Kravinsky’s Morning Sky Capital scooped up a 63-unit apartment complex on the bank of the Fox River in the northwest suburbs of Chicago from multifamily giant Greg Fowler’s firm, which previously bought it out of distress.
Kravinsky’s company partnered with several other investors to pay $19.3 million for the ReNew on Main property at 1 North Main Street in Algonquin, public records show. The price of $302,000 per unit included assuming an existing mortgage with a balance of more than $11 million that the San Francisco-based seller, FPA Multifamily, previously took out on the property, sparing the buyer from shopping for debt at today’s elevated interest rates.
For FPA, one of Chicagoland’s largest multifamily landlords, the deal extends a streak of activity in the area that has tended to follow the same pattern: the firm is selling off its smaller assets and buying up bigger ones with funds the transactions generate. The Algonquin deal closed right as FPA bought a 356-unit Naperville apartment complex for $68 million, in another deal where it assumed the existing debt of the seller, Chicago-based Rockwell Partners.
“There is not a lot of liquidity in the market right now, which is good for people who have a conviction in the market and are ready to make a bet,” said Morning Sky’s Lev Kravinsky. “In general most of what we’re buying nowadays is either all cash or loan assumption. It’s difficult but not impossible to find deals that pencil with fresh debt.”
FPA didn’t return a request for comment on the Algonquin transaction.
While the deal is relatively small for FPA, the seller posted a gain on the property after buying it out of distress in 2018 for $12.7 million ($201,600 per unit). The complex, which also includes six ground-floor retail units, has a checkered ownership history after running into delays during its development, and financial trouble after its 2011 completion.
FPA bought it from a financial institution, Boston-based UC Funds, which acquired the property through foreclosure. The property was conceived as a 54-unit luxury condo project, awarded to Aspen Homebuilders back in 2006 by the village of Algonquin. Aspen went bankrupt two years later, and the firm’s owner, Bruce Hawkins, pleaded guilty in 2013 to defrauding a bank of more than $1 million, the Northwest Herald previously reported.
The building remained unfinished for years, until developer John Bruegelmans took over the project in 2011 and gained approval to convert the project into rentals. Residents started moving in during 2015, but Buregelmans filed for bankruptcy in 2016 to restructure construction debt, the newspaper reported.
That’s what prompted a UC Funds entity to take over the building and eventually sell it to FPA.
Meanwhile, buyers in Chicago and its suburban multifamily markets are set to raise rents in the coming year as new supply craters amid a development dropoff.
Morning Sky owns several other apartment complexes in the area, with three in the suburbs and one in the city, Lev Kravinsky said. His father, Morning Sky principal Zell Kravinsky, is well-known as a philanthropist and longtime real estate investor.
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