Des Plaines Apartments LLC is an investment in an existing condominium community in suburban Chicago. The investment represented a unique opportunity to acquire 918 units on 32 acres of land in the desirable and stable Des Plaines, IL market, at favorable pricing and with the opportunity to increase rents by upgrading units. The community operated as individual condominium units, which is being de-converted and managed as rental units under single ownership, as all units were purchased at closing. This is a true value-add opportunity, as the developer will then capture untapped rent potential by upgrading all unit interiors in addition to addressing deferred maintenance on buildings and common areas.

The Property is zoned for and originally comprised of 924 units within 154 identical apartment buildings that were built in 1973. Each building contains six apartments with two units per floor. However, developer underwriting assumed 912 units for two reasons. First, there is a vacant building pad where one apartment building once stood, but due to a fire, the building was razed, thus eliminating six units from the property’s original unit count. Second, as the property does not feature an adequate management or leasing office, the developer plans to set up a temporary management and leasing office in an apartment building located adjacent to the newly renovated entrance of the property. This maximizes the manager’s presence to current and prospective tenants and allows us to effectively capture and absorb leasing traffic during lease-up. We are building a new clubhouse to accommodate community amenities as well as our management and leasing office, and when complete, the six units used as the interim management office will be rented.

The Des Plaines apartment community is strategically located within convenient drive times to the area’s largest employers, thoroughfares, shopping districts and public transportation, thus driving economic growth and apartment demand. The community is 10 minutes north of O’Hare International Airport, the area’s largest employment hub. In 2018, O’Hare was named America’s busiest airport in terms of flight count, topping off at 947,000 annual flights. Given the increasing demand for more efficient airport operations, The City of Chicago is now in the final stages of planning an $8.5 billion deal to expand O’Hare International Airport with dozens of new gates and several additional concourses. Once completed, more than 3.1 million square feet of terminal space will be added — reflecting a 72 percent increase over the current 4.3 million square feet.

Des Plaines Apartments is also within 10 miles of the corporate headquarters for multiple Fortune 500 companies including Walgreens, Caterpillar, Mondelez, Allstate, Discover, US Foods, and Illinois Tool Works, as well as numerous smaller corporate and back office employers who value the area’s convenient access to the airport. Additionally, Des Plaines provides residents with the convenience of easy access to Interstate-294, Chicago’s main North/South interstate and Chicago Metra train lines, providing quick and comfortable rides for those commuting on a daily basis or simply visiting Chicago’s Central Business District. This combination creates a desirable and stable multifamily market in this Northwestern Chicago suburb.

The Des Plaines apartment de-conversion project offers a compelling value-add opportunity as there is a noticeable gap between current in-place rents at the property and at renovated vintage properties/new construction in Des Plaines. By renovating this property, the Des Plaines Apartment community is on track to being the most desirable in the area in its apartment class, while still renting at a lower rate than newer construction.

This community was purchased in December 2019 and is anticipated to be upgraded by 2022.