Real estate investment firm JRK Property Holdings bought a suburban Chicago apartment complex from Lennar’s multifamily arm as the homebuilder unloads properties that have been a drag on its earnings.
Financial filings from the second quarter show Lennar’s multifamily business, known as Quarterra, posted losses exceeding $36 million in the first half of the year. It comes after the company reported $50 million in multifamily losses in 2023.
Company executives have been flirting with the sale of some of Quarterra’s properties for months, with Lennar executives teasing the disposition of several multifamily properties on the company’s second-quarter earnings call.
“We are repatriating capital that has been deployed in prior multifamily engagements,” said Stuart Miller, executive chairman and co-CEO at Lennar. “There are multiple buyers, and we are working through the closing process of each asset with those buyers.
Miller indicated the company was under contract to sell properties from two Lennar funds that he expected would close in the second half of 2024 with combined proceeds expected to reach roughly $250 million.
The deal with Los Angeles-based JRK includes The Brook on Janes Apartments, a 288-unit, Class A property located at 401 Janes Ave. in Bolingbrook, Illinois. The property was completed by Quarterra in 2017. At a purchase price of $69 million, it marks Bolingbrook’s largest multifamily deal of the year thus far and the sixth largest in the greater Chicago area, according to CoStar data.
The acquisition of the garden-style property that sits 30 miles west of downtown Chicago was financed through JRK’s Platform V Fund, a $1 billion pool of capital targeting multifamily investments completed after 1990.
“This acquisition expands our footprint in suburban Chicago, a market where we’ve had a lot of success,” Daniel Lippman, JRK’s president, said in a statement. “We’re finally seeing seller capitulation on pricing expectations, which has allowed us to significantly ramp up our acquisition activity. We remain confident in the strong fundamentals and long-term outlook of the multifamily sector.”
JRK said the Platform V Fund has two additional purchases under contract totaling more than $100 million that it expects to close in the next 45 days. Since closing in 2022, roughly 20% of the fund’s capital has been deployed. Properties in the portfolio are roughly 5 years old on average and located across Illinois, Florida, Kansas, and California.
The Brook on Janes transaction adds to recent dispositions by Quarterra, including a $2.1 billion deal with KKR announced in June that is expected to unload 5,200 units across 18 properties in coastal and Sun Belt markets, including California, Washington, Florida, Texas, Georgia, North Carolina, Colorado and New Jersey.
That sale came after media reports indicated Quarterra could be putting roughly 11,000 units, or roughly a quarter of its total inventory as of its 2022 annual report, up for sale for an estimated $4.5 billion.
JRK currently has $7 billion in properties under management through so-called value-add and core-plus strategies. The Bolingbrook acquisition adds to the company’s Chicago-area portfolio that includes the 504-unit Residences at Lakeside in Lombard and The Residences at Arlington Heights, an 838-unit property in Arlington Heights.
Lippman said the company could invest an additional $2 billion in multifamily properties over the next year and a half.