An Oak Brook developer has paid more than $100 million for a Palatine housing complex with a complicated history that includes the condo bust, lawsuits and fraud convictions.
Albion Residential said it has acquired Birchwood on Sterling, a 719-unit property in the northwest suburb that has morphed from apartments to condominiums and back again. Albion plans to spend $23 million on a major renovation of the complex, which covers 52 acres near U.S. Route 14 and North Quentin Road, said Albion President Jason Koehn.
Suburban apartment sales are picking up again as rents and occupancies continue to rise and investors grow more confident about the post-COVID future. Albion, which has developed apartment buildings in Oak Park, Evanston and Highland Park, is high on Palatine in part because developers haven’t built much there recently, Koehn said. Birchwood doesn’t face much competition from new apartment projects.
“It’s just a good, solid, upscale suburb and there’s not a ton of new construction,” he said.
A person familiar with the sale said Albion paid more than $100 million for Birchwood, a figure Koehn declined to confirm. At that price, it would rank among the biggest suburban Chicago apartment sales in three years, according to Real Capital Analytics, a New York-based research firm.
The property comes with baggage. In 2006, at the height of the condo boom, a group of developers paid $68.1 million for the complex, then called the Woods at Countryside. It had been a rental property since it opened in the 1970s.
The property’s new owners decided to convert it into condos, but the condo market crashed before they could sell all the units. A messy several years followed, including legal battles between investors and criminal mortgage fraud charges in 2015 that resulted in convictions for some people associated with the property.
Meanwhile, the apartment market took off, and developers started hunting for condo properties to “deconvert” into apartments. With most condos in the Woods at Countryside’s already rented out, a deconversion seemed like the right move for the property. But getting all of its owners on board wasn’t so easy: In 2018, a group of investors sued to block a sale of the entire property for $49 million, arguing that it was worth as much as $70 million.
Cook County property records indicate that Albion acquired Birchwood from a venture led by investor Chase Chavin. In June 2018, the venture took out a $72.4 million mortgage on the complex secured by its units, county records show. Efforts to reach Chavin were unsuccessful.
Albion, led by former executives of Village Green, a Michigan developer, plans to renovate Birchwood’s apartments, adding washers and dryers to some, fix up its clubhouse and pool and invest in landscaping, Koehn said.
“It just needs some TLC from a community perspective,” he said.
Albion expects to generate a return on the investment by charging higher rents. The average apartment in the complex now rents for about $1,200 per month, or $1.35 per square foot, he said. Its current occupancy rate is in the low-90% range.
The company’s other properties, meanwhile, are performing well. Albion Evanston, a 268-unit building that opened in 2019, has been “spectacular,” Koehn said. Its 265-unit Albion Oak Park, which also opened in 2019, hit a soft patch during the pandemic but is now 97% occupied, according to Koehn.
Albion Highland Park, a 161-unit project completed in April, is now 98.5 percent occupied, and the developer is getting ready to move on to second phase of the project across the street that will encompass 89 units, Koehn said.