San Francisco-based FPA Multifamily early this month bought the 47-story Paragon apartment tower in the South Loop for $144 million, the biggest apartment deal in Chicago so far this year, according to CoStar. The 500-unit building was completed in 2019 by CIM Group and Chicago investor John Murphy.
Downtown neighborhoods such as the South Loop and River North are popular places to live, but new investments on this scale are rare, largely due to high interest rates and the economic uncertainty they bring, according to Ron DeVries, senior managing director of Integra Realty Resources.
“It’s hard to get enough equity to the table and cut a check,” he said. “FPA already owns a number of buildings in Chicago, so this makes a statement that they are still confident in the city. They are an institutional investor, and it’s good to see that kind of investor is still buying. There are not a lot of them around right now.”
FPA Multifamily did not return a call seeking comment.
A few big apartment sales were completed in December, DeVries added. Vista Property, a New York-based firm, bought 3Eleven, a 245-unit tower at 311 W. Illinois St. in River North, for $76 million, or $310,000 per unit. And Union West, a 357-unit building at 939 W. Washington Blvd. in Fulton Market, was bought by Tishman Speyer for $128 million, or about $360,000 per unit. FPA Multifamily bought Paragon for less than $300,000 per unit.
“It’s not surprising their price would be a little bit below the others,” DeVries said. “It’s in the South Loop where the rents are lower.”
Even though few prospective buyers are checking out downtown Chicago apartments, the market is still strong, he added. Unlike downtown office properties, where vacancy climbed to more than 20% after the pandemic, the vacancy rate for apartments hovers around 5% to 6%.
But the high interest rates squelching buyer interest have also caused developers to step back, and by 2025, DeVries expects Chicagoans will see few apartments completed downtown.
“The pipeline is mostly shut down,” he said.
