REAL ESTATE - California State Teachers Retirement System and Waterton Associates have acquired the 2,346-unit Presidential Towers apartment complex in Chicago for around $470m (€345.4m).
This transaction represents one of the largest single apartment transactions in the United States over the past six months.
The transaction was completed on April 18. Waterton Associates had its Senior Vice President of Acquisitions Mark Stern working on the transaction. He said, "It’s our opinion that this deal is a good value-added transaction. The property has not been updated since it was built in 1986. We will bring the property up to current market standards. The actual amount spent on this work hasn’t been determined yet."
Stern also believes there could be a value added play with the retail component of the complex.
He commented: "Opening the retail to the street could add a new component to the property. The previous ownership had just signed Pot Belly Sandwich as a new tenant." The other parts of the retail include a McDonalds, grocery store and a health club that has 800 members that don’t live in the apartment complex.
The long-range goal for the complex is to improve it from a B quality complex up to a B+ or A- facility. It’s currently a B property because of its age. This will happen over the next several years. Waterton is planning on holding on to the property for at least five years.
CalSTRS has bought the property from the Pritzker Family based in Chicago. The asset was purchased with a combination of 65% debt and 35% equity. The cap rate on the transaction was at market rate. This puts it at something less than 5%.
CalSTRS made the acquisition in Chicago for its apartment investment fund, Waterton Residential Property Fund IX. This fund was formed in February of 2006. There is a total amount of equity in the venture of $300m. The pension fund contributed 90% of the equity and Waterton 10%. The total capitalization in the venture is close to $1bn.
Waterton still has some capital left to invest after buying the complex in Chicago. The investment fund owns two other projects in Chicago. These are a 306-unit property called 1 E. Delaware Place and a 400-unit property in the River North area of town.