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Elie Rieder has no doubt that the multifamily market in Chicago has plenty of boom years left. That’s why his company, Castle Lanterra Properties, has purchased its first multifamily property in the city, the former Southgate Apartments in the Mt. Greenwood neighborhood on the south side of Chicago.
Castle Lanterra paid $28.5 million for the 425-unit eight-building property. It has since renamed the complex, which is now known as Midpointe Apartments, and plans $2.6 million in upgrades to modernize the buildings.
Rieder, founder and chief executive officer of Castle Lanterra, said that the Mt. Greenwood neighborhood is an intriguing one. It sits at the very southwest edge of Chicago. Because it is inside the boundaries of the city, residents here get the benefit of Chicago living. But they also experience the feel of suburban living. The suburbs, after all, start just about across the street from the property.
That combination inspired Castle Lanterra to enter Chicago’s still thriving multifamily market, Rieder said.
“Any city worker — firemen, police officers, teachers — has to live in Chicago. However, many of these workers want the amenities and quality of life that you find in a suburban community,” Rieder said. “They want that suburban feel and taste. This property offers a combination of both. That’s why we are calling Midpointe. This is the midpoint between urban living and living in suburbia.”
Rieder said that Castle Lanterra looks to invest in multifamily communities in stable areas that can be improved with an influx of money. The goal is to pump money into exterior and interior upgrades that can transform a B-minus property into a B-plus or A-minus property, Rieder said.
Since acquiring Midpointe Apartments, Castle Lanterra has renovated the property’s interior units. It has also repaired the property’s roofs and renovated its elevators. Now Castle Lanterra is adding a modern onsite gym and building a new leasing center from scratch. The leasing center will also provide meeting rooms and community space for the property’s residents.
“We want to give the residents a much higher quality of life,” Rieder said. “We want to attract people who have higher incomes, people who care about their surroundings.”
Rieder said there has already been a noticeable difference in the community since Castle Lanterra started making its improvements. Before the company started its upgrades, residents might leave empty soda cans or candy wrappers on the floor. Today, tenants pick up their own garbage and, even more impressively, anyone else’s old cans and wrappers that they might find, Rieder said.
“This is their home. They have pride in it,” Rieder said. “They want friends to visit them. We think this change in attitude comes from the responsive management team we’ve put in place here.”
The acquisition of Midpointe Apartments is part of Castle Lanterra’s overall strategy to invest in communities that are stable and in growth mode. Rieder said that his company doesn’t look at entire cities when deciding where to invest. For instance, Castle Lanterra did not decide to merely invest in Chicago. Instead, it chose this specific property in this specific neighborhood.
Midpointe Apartments made a good investment opportunity because it borders a quiet cemetery and a private school, Rieder said.
“In general, we don’t look at Chicago as a whole. We look at specific and unique submarkets,” Rieder said. “We don’t look at Chicago and say, ‘We like Chicago.’ There are areas in Chicago that we love and areas that are less attractive. We look at specific submarkets, looking at factors such as stability, low crime rates, a vibrant local economy and local job growth. We want to be in certain types of submarkets. Mt. Greenwood is one of them.”
Like others specializing in multifamily, Rieder isn’t worried that supply is outpacing demand for multifamily housing. He predicts that the multifamily market will stay strong — in Chicago and across the country — for many more years.
“People need a roof over their heads,” Rieder said. “Debt terms are attractive to investors today. There is a very big push for the safety of the stable commercial asset classes like multifamily. Multifamily historically is the safest asset class of them all. The office market goes up and down with the economy like a yo-yo. With hotels you are at the mercy of things you can’t control. Industrial and retail have their ups and downs. Multifamily is a stable asset class. That causes a lot of people to want to invest in that class.”