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Waterton to buy Tides and Shoreham apartments from AFL-CIO pension fund – Crain’s Chicago Business

The owner of the Presidential Towers housing complex in the West Loop is stocking up on more apartments in Chicago, with a deal in the works to buy two high-rises totaling more than 1,100 units in the Lakeshore East development.

Waterton, a Chicago-based apartment landlord, has a preliminary agreement to buy the Tides, a 608-unit tower in Lakeshore East, and the Shoreham, a 548-unit building next door, according to people familiar with the transaction. It’s not clear what Waterton is paying for the properties, but the combined price could approach $400 million.

The deal could represent a further thawing of the downtown apartment investment market, which froze up in the early months of the COVID-19 pandemic last year. Investors and lenders hunkered down as rents and occupancies plunged, with few large buildings changing hands.

But the downtown market has shaken off its funk this year, with rents bouncing back to above pre-pandemic levels and investors more willing to put their money at risk. Sales of big buildings are starting to pick up: In July, San Francisco-based FPA Multifamily paid $175 million for McClurg Court Center, a 1,061-unit complex in Streeterville now known as Arrive Streeterville. More recently, Dallas-based Lincoln Property has agreed to pay more than $90 million for the Bernardin, a 171-unit tower in River North, according to people familiar with the property.

Yet investors still have one reason to be wary of the city: Cook County Assessor Fritz Kaegi is in the process of reassessing downtown properties, and some have already been hit with big increases, raising the prospect of higher property taxes, which can depress the value of buildings.

Waterton is buying the Tides, at 360 E. South Water St., and the Shoreham, at 400 E. South Water, from the AFL-CIO Building Investment Trust. The trust invested in the construction of the buildings and bought out its development partner, Chicago-based Magellan Development Group, about five years ago. The towers are directly south of the St. Regis Chicago, a new 101-story skyscraper on East Wacker Drive designed by Jeanne Gang.

A Waterton executive did not return calls, nor did a representative of Washington-based PNC Realty Investors, a unit of Pittsburgh-based PNC bank that oversees the properties for the trust. An executive at CBRE, the broker selling the two buildings, declined to comment.

The Shoreham, which opened in 2005, and the Tides, which opened in 2008, aren’t that old, but they could use some work, like new appliances and finishes in their apartments. By investing some money into a renovation, a new owner could hike rents, boosting the value of the buildings, according to CBRE marketing brochures for the properties.

“While in excellent condition with good bones and achieving desirable rents, there remains a rent gap compared to the top-tier downtown Chicago multifamily assets,” says the brochure for the Shoreham. “Additional premiums can be achieved by instituting an upgrade program on the interior finishes to improve the premier luxury features such as quartz countertops, under-mount sinks, new cabinets, lighting, tile backsplashes, and flooring.”

Waterton specializes fixer-uppers, or “value-add investments,” in industry parlance. Founded in 1995, the firm owns about $7.7 billion in assets nationwide. In addition to Presidential Towers, a 2,346-unit property in the West Loop, Waterton’s Chicago properties include the Belden-Stratford in Lincoln Park, River North Park in River North and North Harbor Tower, next to Lakeshore East.

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