CHICAGO—Investors are always hunting for better yields, and some in the multifamily sector have decided it’s time to establish footholds on Chicago’s South Side. Kiser Group, a Chicago-based multifamily brokerage firm, recently brokered the sale of a $29 million South Side portfolio.
“With nearly $30 million, someone buying on the North Side will get one-quarter of the inventory,” and far less of a return, Kiser broker Aaron Sklar tells GlobeSt.com. Sklar, along with Kiser director Noah Birk, brokered the transaction.
Multifamily buyers on the South Side can typically secure cap rates of around 9% or 10%, Sklar adds. “Up on the North Side, a big portfolio deal like this means you’re looking at a 5% cap rate.”
The 21-buildings in the portfolio are located throughout Chicago’s South Side neighborhoods with a large presence in Washington Park, East Woodlawn and South Shore. The properties include studios, one-bedroom, two-bedroom, three-bedroom and four-bedroom units as well as retail. The units are of good quality and are well managed, Sklar says.
“Chicago’s South Side has seen a huge pickup in demand recently,” says Birk. “Given the new developments such as The Obama Library and the redesigning of the Jackson Park golf course by Tiger Woods, coupled with higher returns, we’re seeing large interest from both new and current investors.”
And all that interest is having an impact. “Cap rates are definitely starting to compress across the South Side,” says Birk, “although they are still significantly higher than any other area of the city.”
The seller, WPD Management, is one of the largest owners and third-party managers on the South Side. Owners Kevin Nugent and Eric Green say that they will continue to acquire value-add South Side properties and expand their property management business. Following the sale, WPD will still manage more than 2,000 units on the South Side.
And if the company does decide to part with another portion of its portfolio, Birk expects potential buyers to be plentiful. “This trend does not seem to be slowing down.”