Albion paid $139.3 million, or $228,000 per unit, for Bourbon Square, Koehn said, generating a handsome return for Broadshore. A Broadshore predecessor company, Lowe Enterprises Investors, paid $97 million for Bourbon Square in 2014. An appraisal valued the property at $115.8 million in October 2019, when it was refinanced, according to Bloomberg data.
The price eclipses the former record for suburban Chicago, set in January, when Ellyn Crossing, a 1,155-unit property in Glendale Heights, sold for $137 million, according to MSCI Real Capital Analytics, a New York-based research firm.
Albion is investing even more into Bourbon Square, about $30 million or more, Koehn said.
“We’re going to do a big makeover,” he said.
Albion plans new kitchens, bathrooms and flooring in the apartments, along with washers and dryers, and to fix up and add amenities at the property, Koehn said. The complex will also get an exterior paint job.
“It looks tired, he said.
Investors can afford major renovations these days because suburban rents have been rising so fast. The median net suburban apartment rent rose to a record $1.87 per square foot in the first quarter, up 17% from a year earlier, according to the Chicago office of Integra Realty Resources, a consulting and appraisal firm.
Albion, which now owns about 2,100 apartments in the Chicago area, has hiked rents by 10% to 12% on new leases, Koehn said.
“All the properties are doing spectacularly well,” he said.
Landlords are raising rents, he said, because renter incomes have risen so much over the past two years.
“They can afford to pay more in rent,” he said.
The net operating income at Bourbon Square, meanwhile, rose to $5.71 million last year, up 5.9% from 2020, according to Bloomberg data.
Bourbon Square is about four miles from another Albion property in Palatine, Albion on Northwest. Albion paid more than $100 million for that complex, formerly known as Birchwood on Sterling, last September.
“They’re complementary,” he said, noting that Albion on Northwest is less expensive and has smaller units than Bourbon Square, which has a lot of two- and three-bedroom apartments.
Though rising mortgage rates have cooled the real estate investment market, the Bourbon Square acquisition was not harder to finance than past Albion deals, Koehn said. One reason: Albion lined up its financing in April before financial markets plunged, he said.
“We certainly had our choices going into it,” he said.
Albion financed the acquisition with a senior loan from Wells Fargo and mezzanine financing from Chicago-based Walton Street Capital, he said. Koehn declined to disclose how much Albion borrowed but said it represented about 65% of the cost of the acquisition and renovation.
Elizabeth Gagliardi, Susan Lawson and Chuck Johanns, senior managing directors in the Chicago office of Newmark, brokered the sale for Broadshore.