The Bernardin represents another opportunity for investors that want to bet on downtown Chicago’s comeback. The downtown apartment market went into a tailspin last year as the coronavirus pandemic and civil unrest depressed demand for housing in the central business district.
But occupancies and rents are bouncing back faster than many expected. With professionals returning to downtown offices and the city and state lifting the last of their COVID-19 restrictions today, the market could return to pre-pandemic levels next year, if not sooner.
“Downtown Chicago’s apartment market has staged one of the strongest urban market recoveries in the country,” CBRE says in its marketing brochure.
The Bernardin has staged a remarkable comeback, too. Its occupancy rate dropped to 85 percent last year, down from 94 percent in 2019, public filings show. Its net operating income fell to $3.3 million, down 20 percent from $4.1 million in 2019.
The Bernardin’s apartment occupancy rate today? Ninety-nine percent, according to the CBRE flier. Its retail space, about 21,000 square feet, is fully leased, too.
Still, it’s hard to know what the property’s worth because so few big downtown multifamily properties have sold in the past year. Will it fetch more than its $89.4 million price in 2005? Here’s one reason it might not: Even if the Bernardin’s net operating income recovers to its 2019 level this year, it would fall short of its 2005 NOI of $4.7 million.
NOI, which factors in a building’s revenue and costs before debt service, isn’t the only variable investors use to figure out how much to pay for a property, but it’s a key one.
A CBRE executive declined to comment, and a UBS spokesman did not respond to a request for comment.
The Bernardin also faces a big, new competitor: One Chicago, a 735-unit development just a block away. The project’s leasing office just opened, with first move-ins expected in October.
Though the downtown apartment investment market went quiet during the pandemic, it’s likely to get louder in the coming months as landlords put more properties up for sale. Downtown properties that have hit the market recently include the Shoreham, a 584-unit tower in the Lakeshore East development, and 1407 on Michigan, a 199-unit building in the South Loop.