Apartment values grow fast in Logan Square area

A 41-unit apartment building on the edge of Logan Square recently sold for nearly double what the previous owner paid in 2015, underscoring how hot the area is for multifamily real estate—and paving the way for continued gentrification, according to a housing expert.

After buying 1627 N. Humboldt Blvd. for $2.78 million in February 2015, Chicago-based boutique real estate investment firm Hanover Hamilton Investments conducted a significant renovation and put it on the market in April. Local real estate investor Mark Fishman bought it for $5.35 million in mid-June, according to the Cook County recorder of deeds.

The transaction is an example of rising property values and the big profits investors can reap on apartment buildings in the Logan Square area. Such increased valuation exacerbates concerns about displacement due to rent hikes.

Fishman is a prominent and controversial landlord who’s become somewhat of a lightning rod in the gentrification debate. His Logan Square-based property management company, M. Fishman, manages more than three dozen apartment buildings throughout the city, most of which are in Logan Square. He didn’t respond to a request for comment.

The transaction history of 1627 N. Humboldt tells the story of how the neighborhoods surrounding the 90-year-old building, including Logan Square, West Town and Humboldt Park, are losing affordable housing, according to Geoff Smith, executive director of the Institute for Housing Studies at DePaul University.

Those neighborhoods are seeing a trend in small-scale, longtime owners selling their buildings to an investor that improves it or addresses deferred maintenance and eventually sells the building at a much higher price. Apartment rents often are increased to account for investments in the property.

“You’re having this turnover of ownership and new owners are investing in the property and therefore raising rents,” Smith said.

There are other examples of buildings in the area that have sold for roughly twice what seller paid a few years earlier.

In February 2018, a 32-unit building at 4500 Fullerton Ave. in Hermosa sold for $4.33 million, more than double its previous sale price $2 million in October 2015.

As part of a portfolio sale, Beal Properties bought three buildings in Logan Square from JAB Real Estate in June 2017. A 52-unit building at 2317-2327 N. Rockwell St., purchased for $6 million in November 2015, sold for about $10.5 million; a 36-unit building 2834 W. Palmer St., purchased for $2.9 million in November 2014, sold for about $5.4 million, and a 52-unit building at 2420 N. Kedzie Blvd., purchased for about $5.6 million in May 2016, sold for about $9 million.

Chicago-based Beal bought the buildings because “it was a great opportunity to be in a vibrant Chicago neighborhood where a lot of things are happening,” said Joshua Samson, director of rental operations. The three buildings are the only ones Beal owns in Logan Square; the firm intends to hold them a long time.

“It’s a great neighborhood overall just due to the fact that it’s close to public transportation, a lot of diverse local merchants popping up in the area, quick access to downtown and kind of everything that Chicago has to offer,” Samson said.

In general, the Logan Square area has been “a very strong real estate market” that’s seen fairly rapid price appreciation, demographic changes and loss of affordable housing, according to Smith. It’s also one of the areas that’s seen the biggest loss of affordable housing in the city in about a decade.

“It’s seen a lot of transition, where the real estate values and rents are strong and continuing to increase, but the result of that is you’re starting to see a lot of demographic transition, where you’re seeing a lot of higher-income households moving in and a lot of lower income households getting pushed out,” he said.

DePaul’s Institute for Housing Studies analyzes price per unit instead of sales price of an entire building. Between 2012 and 2018, the median sales price per unit of buildings with at least five units has increased from about $103,000 to $183,000 in West Town, about $86,000 to $200,000 in Logan Square and about $31,000 to $52,000 in Humboldt Park, according to the institute. Citywide, the median sales price per unit of buildings with at least five units rose from about $37,000 to $70,000 over the same period.

Relative to the surrounding neighborhoods, Logan Square and West Town in particular have seen substantial increases in sales price per unit, with averages much higher than the citywide figure.

“By those indicators, you can say that those are strong and appreciating rental markets or real estate markets,” Smith said.