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REIT pays $92 million for suburban apartments

After a record year for apartment sales in the Chicago suburbs, an investor from Rochester, N.Y., is helping get 2015 off to a strong start, selling one suburban property and acquiring two more.

 

Home Properties, a real estate investment trust, sold New Colonies, a 762-unit property in south suburban Steger for $49.3 million in January, according to a company filing with the Securities and Exchange Commission.

 

The apartment REIT also paid a combined $92 million in January for the Mansions of Mount Shire, a 512-unit property in Mount Prospect, and the Mansions Apartments, a 198-unit complex next door in Arlington Heights, according to the SEC filing.

 

Suburban apartment sales and prices have surged in recent years as rents and occupancies have risen and more investors have jumped into real estate amid low returns on other investments. The Steger property, for instance, was the first Chicago investment for CityR, a British real estate investment firm.

 

ACTIVE INVESTOR

Suburban Chicago apartment sales totaled $1.19 billion last year, a record and up 14 percent from 2013, according to Appraisal Research Counselors. Home Properties has been an active investor in the suburbs, paying about $67 million for the 428-unit Lakes of Schaumburg last November. At the end of the year, the company owned eight Chicago-area properties comprising 2,994 units.

 

Home Properties has combined the Mount Prospect and Arlington Heights properties, which were developed in phases from 1978 to 1984, into one complex called the Park Grove Apartments.

 

“Low-hanging fruit on this acquisition is the below-market occupancy rate of 91.8 percent, which should be in the 95 percent to 96 percent range,” Chief Investment Officer John Smith told analysts on a February conference call, according to a transcript. The properties are “quality assets located in very strong submarkets of one of our smaller regions.”

 

The average rent in the complex is $1,103 a unit, he said. Over the next four years, Home Properties expects to spend $14 million renovating the property, which straddles Mount Prospect and Arlington Heights along Golf Road.

 

A Home Properties executive did not return a call. The company acquired the two properties from ventures controlled by the DiMucci family, which developed them.

 


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