The Real Deal

South Loop landmark leased as short-term rental sells just under asking price for $16.8M

May 10, 2022

Chicago-based developer LG Group finally found a buyer for a recently renovated South Loop landmark first listed in the early days of the pandemic, and it’s offering a similar property used for short-term rental lodging in River North.

The Plymouth, an 11-story, 30-unit multifamily building originally built in 1899 at 417 South Dearborn Street, sold for $16.9 million, just shy of the $17.5 million LG listed it for last June. That’s when it was remarketed after initially being offered for $16 million in March 2020.

Short-term rental owner Sonder leases the entire property and rents it out to travelers and tenants on short-term stays.

“We had a ton of interest right out of the gate,” said Essex broker Jordan Gottlieb, who represented the seller. “We still hung onto a deal for a little while during the first part of the pandemic. We kind of sat and waited to see what would happen. Sonder emerged as a stronger tenant throughout all of this. A lot of their competitors went out of business during the pandemic, and (Sonder) raised a ton of money.”

Sonder went public on NASDAQ in January; its shares have tumbled 66 percent since then.

The seller, LG, spent at least $6.5 million on renovating the property, according to Chicago building permit data, and had planned to turn it into student housing from former office space, with the work completed in 2017. In addition to the dwelling units, The Plymouth project added amenities like a fitness center, bike room, rooftop terrace, and coffee shop. The developer switched from the student housing plan and leased it to a different short-term rental operator for one year, before switching and signing a three-year lease with Sonder starting in 2018. Gottlieb said the operator’s lease was extended as a part of the sale by five years. Essex, which also represented the buyer, declined to identify the purchaser.

The brokerage was also hired by LG to sell another property that the developer leased to Sonder for short-term rentals called The Opal, a 28-unit property in River North at 61 West Erie Street, with an asking price of $16.9 million, or $603,500 per unit. If it fetches that, it would surpass the Plymouth’s $562,000 per unit value implied by its sale price, which was similar to other River North deals Essex has recently brokered, such as the 23-unit boutique luxury apartment building at 858 North Franklin Street sold this year for $539,000 per unit, just below its initial asking price of $595,000 per unit.

“That per unit it’s not cheap, but $500,000-plus a unit in River North is pretty normal,” Gottlieb said. “Given that there is very little work to do and you have a publicly traded company in there for years, it should trade for a premium.”

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Tagged in this post: Jim Darrow , Jordan Gottlieb , Matt Feo