Banner Real Estate secured $124 million in construction financing for a suburban apartment complex, despite a tight lending environment and a historically dry multifamily pipeline,
The financing consists of an $84 million construction loan from PNC Bank and $20 million from a joint venture partner, according to a news release from JLL’s Capital Markets team, which secured the debt on behalf of Banner. The joint venture partner wasn’t identified.
With the debt secured, Chicago-based Banner started construction last week on the seven story, 334-unit Faywell Apartments in Wheaton. Construction costs come out to about $371,000 per unit.
The project came together via an assemblage of 13 parcels spanning 2.59 acres. Assembling and entitling the land took over two years, according to the release.
The complex will include direct entry townhomes as well as studios and one- and two-bedroom units. A 4,500-square-foot retail space will be filled by restaurant Egg Harbor Cafe. Amenities include three courtyards, a pool, hot tub, roof decks, fitness center, co-working space and 438 parking spaces. The project is expected to be completed in the first quarter of 2027.
The development comes at a time when multifamily players are caught in a push-and-pull dynamic within the Chicago market.
On the one hand, the region’s strong rent growth and job market are enticing to investors. But on the other hand, interest rates and property tax uncertainty are giving them pause.
Construction deliveries are expected to fall by 40 percent this year, according to MMG Real Estate Advisors. The slump in new supply is driving rent growth.
Rents increased 2.6 percent last year in Chicago, which was double the national average, MMG found. That trend is forecasted to continue due to a slow supply pipeline. MMG predicted rents will grow by 3.5 percent this year.
Those trends are more pronounced within the city of Chicago, where property tax reforms are creating a whiplash effect between initial appraisals and final values determined through the appeals process.
In the suburbs, where the property tax environment is considered more manageable, multifamily sales and listings are picking up steam.
The number of multifamily transactions in the suburbs jumped 65 percent year-over-year in the first quarter, according to Interra Realty.
It’s not all bad news in the city.
This Spring, Vista Property scored $173 million in financing to begin work on an apartment tower in the bustling Fulton Market neighborhood.
The funds came from a $151 million construction loan from CIBC and a $22 million preferred equity investment from PGIM Real Estate. The loans equate to $350,000 per unit.