Bisnow Exclusive: Record-Breaking Downstate Deal

Two apartment properties in Springfield just sold for $18.95M, the largest multifamily deal the city's ever seen. (Apparently, there's more to do in our state capital than just rub Lincoln’s nose for good luck.)

Marcus & Millichap SVP and golf enthusiast Jim Walsh repped the seller of 288-unit Orchard Park Apartments and 120-unit Orchard Park South Apartments, which were developed by a retired Springfield physician in 1986. The assets, which sold for $46,446k/unit and at a 6.9% cap rate, are in great condition since the seller built them to be as energy efficient as possible, Jim tells us. The 1031 buyer, a Chicago area-based family investment trust, outbid 10 other semi-institutional offers (from Texas, Florida, and both coasts). That's evidence of a renewed national focus on the Midwest, Jim says. (Time to reinforce your souvenir shop, Mitchell Corn Palace.)

Above is Orchard Park Apartments; both properties are 95% occupied. In Chicago, multifamily investors are all looking for the same thing: Class-B properties in B-plus locations where they can add value, he tells us. A few years ago, this meant a focus on properties built in the ‘70s, but those are much more difficult today given their heavy capex requirements. So local buyers have widened the search to include downstate markets like Springfield, in the hopes of finding more disparity in cap rates and growth opportunity. For this deal, there’s fairly immediate upside for new management if it raises rents more aggressively and trims the expense budget, Jim says.

Marcus & Millichap Capital Corp’s Rick Lynn arranged the buyer’s financing, a loan for 75% of the purchase price from two local banks. Jim’s seeing a balanced multifamily market in Springfield without overbuilding. As a state capital (above), Springfield also has stability that other secondary markets might not have. With caps like 6.9%, the market will remain desirable provided investors believe there’s NOI growth to be had, he adds.