Multifamily Real Estate Investment Launches in Chicago with Nearly 22% Target IRR

A significant portion of real estate activity is concentrated in the Sunbelt regions, yet the Midwest, particularly Chicago, offers substantial opportunities for investors. As the third-largest city in the United States, Chicago boasts a dynamic blend of culture, employment opportunities, and renowned sports teams.

A June report from JPMorgan highlights the stability of the multifamily market. In the first quarter, asking rents increased by 2.7% year-over-year, with a vacancy rate of 5.6%. Matt Felsot, Senior Regional Sales Manager at Chase, noted, “These are healthy metrics supported by a robust job market and a multifamily sector where renters can find units at various price points throughout the Chicago metro area.”

EquityMultiple’s latest mixed-use property offering in the City West submarket aligns with this stable backdrop. The Linkt complex, established in 2017, features 47 Class A residential units with a 94% occupancy rate. The ground floor includes a Wingstop and the VannHardin barbershop. Amenities include an outdoor sun deck, a rooftop with skyline views, a fitness studio, grills, and a lounge area. Located in the River West neighborhood on Milwaukee Ave., the property is a minute’s walk from the Chicago Blue CTA ‘L’ train line and provides access to major thoroughfares.

The current owner developed and stabilized the property but has not adjusted rents to current market levels due to the pandemic. As a result, this presents a value-added investment opportunity. The sponsor is purchasing the property for $14.1 million, with total capitalization at $15.1 million. This purchase price reflects a 27% discount on comparable sales and a 30% discount on replacement costs, with a 2023 appraisal valuing it at $16.8 million.

EquityMultiple is offering investors a $4M limited partner equity opportunity, co-sponsored by repeat sponsors DMG Capital and EM Investment Partners. This deal, intended for accredited investors, requires a minimum investment of $15,000. It targets a net internal rate of return of 21.9%, an average net cash on cash return of 5.8%, and a 1.6x equity multiple, with a planned hold period of three years.

DMG Capital intends to renovate common areas and refresh units to align rents with market levels. Roger Daniel, founder of DMG Capital, emphasized during an investment webinar that their company focuses heavily on property management, ensuring minimal disruption to cash flow due to the relatively light renovations needed.

For those seeking a lower entry point, EquityMultiple offers an alternative. The Ascent Income Fund targets stable income from senior commercial real estate debt positions, with a historical distribution yield of 12.1%, backed by real assets. With payment priority and flexible liquidity options, this fund is ideal for income-focused investors. First-time investors can now participate in the Ascent Income Fund with a minimum investment of $5,000.

The sponsor plans to exit the property after three years at a 6.0% exit cap rate. Market cap rates for comparable properties range from 4.8% to 5.7%, averaging 5.2%. Three key factors make this deal appealing: an attractive purchase price, in-place cash flow, and a sponsor with local expertise. Market conditions can change, so investors should conduct thorough due diligence before investing. Offering documents and the investment webinar are available on the Equity Multiple website.

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