Ventures led by Connor Group, based outside Dayton, paid $105 million, or about $179,000 a unit, last month for Stonebridge of Arlington Heights, a 586-unit complex in northwest suburban Arlington Heights, according to a deed filed with Cook County. It is the third acquisition in 18 months in the Chicago suburbs for Connor, which owns 14,000 apartments in the eastern half of the country.
Connor is expanding its presence in a strong suburban apartment market that shows few signs of weakening in 2016 amid steady job growth and a continued preference for renting over owning among many suburbanites. The median net suburban rent rose nearly 4 percent last year, with similar increased expected in 2016, according to Chicago-based consulting firm Appraisal Research Counselors.
Rents have been rising since 2009, about when Connor started shopping for apartments here. The firm made its first acquisition in September 2014, when it paid $61.8 million for Glenmuir, a 321-unit property in Naperville. About a year later, it completed its second deal, paying $62.1 million for Alara at Summerfield, a 368-unit complex in Aurora now called Aurora at Summerfield.
Chicago is “a big market, there are a lot of renters by choice and the submarkets we’re in are highly desirable,” said Connor Partner Pat Rini.
Connor acquired Stonebridge from its longtime owner, a venture led by local investor Maria Magnus, who did not return calls. Connor financed the acquisition with a $78.7 million loan from Freddie Mac, count records show.
The Stonebridge deal is the biggest sale of a suburban Chicago apartment complex since September 2014, when Woodland Creek, a 640-unit property in Wheeling, sold for $118.5 million.
Rini said a confidentiality agreement prevented him from discussing the transaction but not the Chicago apartment market or Connor’s plans for the Arlington Heights property.
Stonebridge, at 600 W. Rand Road, is a so-called value-add acquisition for Connor, which plans to spend $6 million on a major interior and exterior renovation, Rini said. The firm is revamping the apartments with new countertops, appliances, flooring and other improvements, he said. The project will allow Connor to charge higher rents and ultimately boost the value of the property.
Built in 1975 and last renovated in 2011, Stonebridge is considered a Class C property, with rents ranging from $1,250 a month for a one-bedroom apartment to $1,480 for a two-bedroom, according to an Appraisal Research report. Rents have held roughly steady over the past year or so, at $1.34 per square foot, the report says.
Connor is being patient in its search for apartments here, but it ultimately could end up with another half-dozen properties here, possibly even some downtown, Rini said. To achieve scale, the firm aims to own six to 10 properties in each of its markets, enough to cover the cost of a local office and other operations.
“We’ll get there,” he said. “I don’t know if it will be sooner or later, but we’ll figure it out.”
Source: Chicago Real Estate Daily, Alby Gallun April 6, 2016