Suburban apartments have delivered hefty profits for landlords. Except for this one.
Alby Gallun
GlenLake Village, a 425-unit complex at 4300 W. Lake Ave. in Glenview.
The suburban apartment market is about as good as it gets, but a big deal in Glenview shows some boats can sink in a rising tide.
Fortress Investment Group has sold GlenLake Village, a 425-unit complex in the north suburb, for $67.2 million after seizing the property from its owner, according to public records and CoStar Group, a real estate data provider. As a distressed property, GlenLake is a rare case in a booming suburban multifamily market that has delivered hefty profits for many landlords.
Suburban apartment rents are up nearly 12%, but it's not all bad news for renters
Here are the tax winners and losers among Chicago's trophy towers
GlenLake delivered headaches and legal bills for Atlas Residential, a Chicago-based apartment investor. In 2017, Atlas paid $73.5 million for the property at 4300 W. Lake Ave., a midpriced garden-style complex built in 1972. Atlas financed the acquisition with a $64.9 million mortgage from TPG Real Estate Finance Trust. The firm also launched a $10 million renovation of the property, then called Brookview Village.
In 2019, TPG sold the property's loan to Fortress, according to Cook County property records. Less than a year later, as the pandemic was turning the real estate market upside down, New York-based Fortress moved to seize the property, not through a traditional foreclosure but by taking over the corporate entity that owned it.
Atlas fought the move, accusing Fortress of making a "transparent attempt . . . to obtain an unjust windfall by taking advantage of a global pandemic," according to a lawsuit it filed in August 2020 in New York state court.
Though the pandemic fueled fears of a real estate crash in 2020, the suburban apartment market coasted through without much trouble. Rents have soared to record highs over the past two years. As property incomes have risen, apartment values have jumped, though rising interest rates have cast a chill over the market the past few months.
According to Atlas, GlenLake was in fine shape financially. Atlas hadn't missed any interest payments on its mortgage and had only tripped some "technical" defaults of its loan agreement, according to its lawsuit. Atlas also argued that the property was worth $99 million, much more than what it owed Fortress.
Fortress' "motive is obvious—it seeks to obtain the $99 million property at a fraction of its value, then resell the property when the real estate market recovers," the complaint says.
But the property's occupancy rate had dipped to 62.9% by early 2021, according to CoStar. And Atlas never paid back the mortgage after it matured in 2020. Fortress prevailed in court and took over the property.
Though the investment turned out badly for Atlas, it's unclear how Fortress made out. Its return depends largely on how much it paid for the $64.9 million loan, a figure that isn't publicly available. Fortress and Atlas representatives didn't respond to requests for comment.
GlenLake's buyer is BJB Properties, a Park Ridge-based apartment landlord with properties in Chicago and the northern suburbs, according to CoStar. A BJB executive didn't return a phone call.
Rents at GlenLake range from $1,433 for a one-bedroom apartment to $1,935 for a two-bedroom unit, according to CoStar. The average unit rents for $1.87 per square foot, up from $1.51 at the beginning of the year.
Sign up for our Commercial Real Estate Report newsletter for exclusive news and analysis right in your inbox.