When Barbara J. Gaffen, co-CEO of Northbrook, Ill.-based Prime Property Investors, heard about the latest deal coming out of Chicago, she almost couldn’t believe her ears.
Heitman, the Chicago-based global real-estate giant, had agreed to buy a 60-story, 504-unit luxury high-rise in the Loop for $328.2 million, or $651,000 per door, from the Related Companies. According to Real Capital Analytics (RCA), at that price, the property known as OneEleven became the highest per-door sale of any large apartment building ever in Chicago.
Hearing the numbers, Gaffen was baffled.
“I mean, what was the cap rate there? Is there a cap rate there?” Gaffen asked. “You’ve got people paying $5,000 a month to live in a two bedroom apartment—in Chicago. I just don’t know how that works. But obviously, with all the foreign capital in this market, these foreign investment funds have the money, and they have an extremely long-term investment horizon. Those funds are looking at 30 years or more.
"But that’s certainly not how we do it.”
Read more...Cap Rate Limbo: How Low Can They Go? | Multifamily Executive Magazine
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