A venture led by Handler acquired Stratford Place, a 342-unit property near Stratford Square Mall, said Handler, CEO of TLC Management. The seller was a venture of San Francisco-based Friedkin Realty Group, which paid $52.5 million for it in December 2012.
It’s Handler’s fifth big suburban apartment deal since the end of 2014, when he began to expand beyond his base in Chicago and Evanston. Using a slow and steady approach and targeting the mid-market, he has amassed a portfolio of about 4,500 units, including more than 1,500 outside the city and Evanston.
Handler, who doesn’t bring in outside investors on his deals, aims to buy one more property in the Chicago area by the end of the year.
He has nothing fancy in mind for Stratford Place, a property that he classifies as B-plus. The 27-acre complex at 232 Butterfield Road, which has an occupancy rate in the mid-90 percent range, was completed in 1991. He expects to spend $1 million or so sprucing it up but doesn’t see a need to do much more.
“It’s a strong asset now,” he said. “We’re just going to move it up to another level.”
Suburban apartment landlords have been operating at a high level for the past several years, a period of rising rents, occupancies and property values. The median net suburban apartment rent per square foot rose 3.7 percent last year, according to Chicago-based consulting firm Appraisal Research Counselors. Rents were up 22 percent over five years.
Handler remains optimistic about the market, but with interest rates rising again, he doesn’t expect property values to rise much more.
“It’s not as hot as it has been, but it’s still good,” Handler said.
Friedkin Realty, meanwhile, still likes the Chicago market and has been scouting the suburbs and downtown for more properties to buy, said Morton Friedkin, founder and chairman of the company. Friedkin Realty owns eight properties totaling more than 2,100 apartments in the Chicago suburbs. In its most recent acquisition, the firm paid $42 million for a 144-unit building in Des Plaines.
Though other suburban multifamily properties have sold for big gains the past few years, Stratford Place bucked that trend, with Handler paying roughly what Friedkin bought it for more than four years ago.
“We overpaid, and he underpaid,” quipped Friedkin.
He expects Stratford Place to fare well under Handler, who can give it more attention than he could from 1,800 miles away.
“Stuart’s local to the area,” Friedkin said. “He’s there to stay, and he’s an operator.”
Source: Crains Chicago Business May 15th 2017 Alby Gallun