A 166-unit apartment building in an expanding area of Chicago is set to be sold more than four years after it was completed in the early weeks of COVID-19, changing hands amid the new challenge of rising interest rates that have pushed down property values throughout the country.
MZ Capital Partners is under contract to buy The Jax, a 10-story building at 1220 W. Jackson Blvd., Newmark broker Chuck Johanns confirmed to CoStar News.
He is part of a team of brokers that has been marketing the property for sale on behalf of its developers, LG Development and AEW Capital Management, since last year.
It’s unclear how much the Northbrook, Illinois-based buyer is paying in the deal.
If the sale is completed as expected, it will wrap up a rocky development cycle for the property, which was completed in April 2020, the month after the onset of the pandemic. LG Development considered not opening the building at the time as demand for downtown apartments plunged, the developer told Crain’s Chicago Business when the property went on the market for sale in May 2023.
Relative Strength
AEW and LG are selling the property at a better time, although a series of interest-rate increases has brought new challenges, with higher borrowing costs slowing the pace of deals and depressing prices.
Downtown Chicago multifamily deals are outpacing the broader Chicago area, though.
There have been a combined $874 million in sales over the past year, down less than 2% from the previous 12-month period, according to CoStar data. That is a much smaller drop in volume than the more than 40% reduction in overall Chicago-area deals during that time.
Two of the three highest-price sales over the past year have been nearby.
The largest was Spanish billionaire Amancio Ortega, Zara’s founder, paying $231.5 million for the 492-unit tower at 727 W. Monroe St. last year. The third-largest deal in that time was Tishman Speyer’s nearly $128 million deal for the 357-unit Union West complex at 939 W. Washington Blvd.
In another pending sale, former Blackstone real estate executive John Schreiber is part of a venture buying the 227-unit Parker Fulton Market tower at 730 W. Couch Place.
Loan Payoff
Developers of The Jax will use the sale to pay off a $28.3 million construction loan from Wintrust Bank. The loan has been amended multiple times, now set to mature in December, according to Cook County property records.
Michael Zaransky, MZ’s founder and managing partner, declined to comment to CoStar News.
His firm’s website says MZ’s current investment focus includes “high growth markets with the opportunity to enhance value through renovation, repositioning or management efficiencies.”
The sellers, Chicago-based LG Development and Boston-based AEW, did not immediately respond to requests for comment on Friday.
The Jax is less than 3% vacant, with average asking rents of $2,531 per unit and $3.92 per square foot, according to CoStar data.
It is located between two growing areas, Fulton Market and the Illinois Medical District. A few blocks west, owners of the NBA’s Chicago Bulls and NHL’s Chicago Blackhawks earlier this week announced plans for a $7 billion mixed-use development around their arena, the United Center.
“Proximity to the West Loop and Fulton Market and the Illinois Medical District has proven to be very attractive to both renters and investors,” Johanns said. “A large portion of residents in the building work in the Illinois Medical District.”
For the Record
The seller is represented by Newmark brokers Chuck Johanns, Liz Gagliardi, Susan Lawson, Joe Raucci and Bishop Polizzotto.