Chicago Multifamily Trends, With Jamie Nahon

The “Second City” is sometimes overlooked, but from a multifamily investing standpoint, the opportunities in Chicago are significant.

Jamie Nahon, Founder and President of Eagle OZ joins the show to discuss the multifamily landscape in Chicago, and the series of multifamily properties his QOF is developing in historic Bronzeville, Chicago.

Click the play button above to listen to our conversation.

Episode Highlights

  • The high level overview of where multifamily real estate is in Chicago as of January 2022.
  • The story behind the Eagle OZ opportunity fund, and why they chose to develop workforce housing in Bronzeville, Chicago.
  • What the size and unit mix of the multifamily properties being developed by Eagle OZ are.
  • Why staying true to Chicagoans love of neighborhoods gives Eagle OZs properties an advantage.
  • Which multifamily trends will take hold in Chicago in 2022.
  • How to approach revitalization successfully from a multifamily real estate perspective.
  • Jamie’s rebuttal to those skeptical about the outlook of multifamily real estate in Chicago.
  • Why Opportunity Zone funds offer particularly exciting benefits for multifamily investors.

Industry Spotlight: Eagle OZ

Eagle OZ was established by a group of local developers who are already active with creating and managing hundreds of affordable housing units in these disadvantaged neighborhoods. Yes, we are investors, but at the same time we also have social conscience and we are already working to improve the overall quality of life in the areas south of Chicago’s downtown. We were brought together by the shared vision to use the QOZ for an investment that is great for both investors and the subject communities at large.

We are a seasoned team of real estate professionals with a track record for successful residential property investments in Chicago. Our wheelhouse includes the sourcing of property, construction, stabilization and management, all with strong ties to the local population.

Learn More About Eagle OZ

About The Multifamily Investor Podcast

The Multifamily Investor Podcast covers trends and opportunities in the multifamily real estate universe. Host Scott Hawksworth discusses attractive offerings in the space, including direct investments, DSTs, opportunity zones, REITs, and more.

Show Transcript

Scott: Hello, and welcome to another episode of “The Multifamily Investor Podcast.” I’m your host, Scott Hawksworth. And I am joined today by Jamie Nahon, who is the founder and president of Eagle OZ, which is a Qualified Opportunity Fund that has a series of multifamily properties located in Bronzeville, Chicago, which is just south of downtown and actually Northwest of Hyde Park for those who are familiar with Chicago.

And I’m really excited about the show today because we’re going to be talking about multifamily in Chicago, in the windy city, and finding out about a landscape and, of course, Jamie’s work with Eagle OZ. So Jamie, welcome to the show.

Jamie: Thanks for having me, Scott.

Scott: Thank you for being here. I always love to just kick it off to dive right in. So what is the current multifamily landscape like in Chicago here or January 2020?

Jamie: January 2022.

Scott: 2022. I don’t even know what date it is. Yes, January 2022.

Jamie: Well, you know, for those of you who don’t know Chicago, we are the third-largest Metro in the country. Second only to LA and Manhattan. And we are the hub for the Midwest. Downtown was hit pretty hard by the pandemic, but Chicago has returned now to national averages in most respects, such as average rents and vacancy.

The demographic data shows that population shifts might not appear in Chicago’s favor, but the data implies that people moving south are more home occupants versus home renters. So we expect that these shifts won’t really impact the multifamily rental space, in fact, demand for good quality workforce housing seems to be quite strong with really any new inventory getting eaten up quickly.

Scott: Right. Right. So, you know, and I had 2020 on the mind because I think so many people…the pandemic shifted so many things. And what you’re saying is that Chicago, while there may be some population shifts, specifically when you’re talking about workforce housing, it’s really great indicators.

Jamie: Yep. Yes. I mean, people talk about there being a negative net migration out of Chicago, we’re talking about fractions of a decimal. And it’s true it is happening and people fear it will happen along with anywhere else in the north, where there is a current and expected migration down into Southern states.

But you know, the number of jobs…the Chicago is not going anywhere and it’s really not getting any smaller. And people need a place to live, they need a comfortable, nice place to live. And so that keeps multifamily operators and developers in business.

Scott: Absolutely. So kind of on that line, Eagle OZ, as I said, is an Opportunity Fund that’s focused on multifamily property development in historic Bronzeville, Chicago. What’s the story behind that, and the scope, and why Bronzeville?

Jamie: So the catalysts to growth that you see in Bronzeville in my mind are unbeatable to anything happening in the country. You have in Bronzeville, the redevelopment of the Michael Reese Hospital site known as Bronzeville Lakefront, which is breaking ground as we speak with 8 million square feet of mixed-use space.

It’s a $3 billion project. The city of Chicago, which is on board, projects that this will create 48,000 jobs over the next 10 years with an $8 billion economic impact. That’s happening right in Bronzeville. We are also just north of the New Obama Presidential Center in Hyde Park.

As you mentioned, home to President Obama, which broke ground this past summer also creating a flurry of economic activity in Bronzeville. And more than anything that I just said, revitalization is happening in Bronzeville already. The 2020 census data shows the middle class has emerged here over the previous 5 years with a 10% population growth happening within Bronzeville.

And this middle class is what accounts for this population growth. So when you see this happening in real-time, you don’t need those amazing catalysts that I said. We have unprecedented home sale prices in Bronzeville now. Houses are going into $600,000-plus range.

Opportunity Zones here are found only on certain blocks because many blocks have already undergone the revitalization that they don’t qualify for the Opportunity Zone. We are a stone’s throw from McCormick Place, we are a 10-minute subway ride into downtown.

When you look at all of this, the conditions are perfect for rent and asset appreciation beyond where we are today.

Scott: Absolutely. And you mentioned too right on the lake there as well, which, you know, full disclosure as someone who’s lived in Chicago for 12 years myself, being close to the lake is one of the most exciting things about it. I know we sometimes grumble and complain about January winters and things of that nature, but when you have those Chicago summers, you really can’t beat them.

Jamie: Yeah. I mean, we are walking distance for those who like to walk, and a very short bike ride right to the boardwalk.

Scott: Wow. So can you speak a bit more about the types of multifamily properties that Eagle OZ is developing? What’s kind of the size and the unit mix of these buildings?

Jamie: So one of the special things about Bronzeville, which keeps a lot of multifamily developers out is that there are really no large tracks of land available for large-scale development of, say a 200 or 300-unit apartment building.

What you see when you drive through Bronzeville is a bunch of quaint, nice residential blocks with single-family houses and three or four-unit apartment buildings. What Eagle OZ has done is we’ve gone out and bought many of these infill lots that appear in between the existing houses and small apartment buildings.

And we are building multiple three-unit apartment buildings on these lots, on scattered infill lots. So the assembly of call it 100 3-unit apartment buildings creates the scale that you would have with a 900-unit apartment building or a complex of 900 multifamily units.

We are all in the same neighborhood, mainly all within walking distance. So we have good management efficiencies, but we are able to offer and create exposure really at an institutional level into a submarket, a very appealing multifamily submarket of Chicago through this assembly of multiple infills of parcels.

We are building all three-bed, two-bath units, all with enclosed parking and all really to condo-grade. And the reason why they’re all three-bed, two-bath units is twofold. Number one, the demand for rental house in Bronzeville is mainly from families who want the space.

And given that these are being built to condo-grade, it gives us the optionality in 10 years when the Opportunity Zone lockup period, if you want to call it, is over and we go to sell these buildings, they are appealing to home occupants.

And so we could go ahead and sell these three-bed, two-bath units to home occupants, which are appealing to homebuyers, perhaps more so than a one-bed or a two-bed unit. And he little increments in value that we get for the third bed and the second bath help to justify the cost of new construction, and also justify the cost of building a three-unit building versus, you know, a much larger apartment building where you might have smaller units, but you have other economies, you know, one roof for 200 units versus one roof for 3 units.

Scott: Right. And that makes so much sense. And you made a lot of great points there and highlighted a lot of things that are attractive about what you’re building. And I love the parking as a Chicagoan because that can be a headache.

Jamie: Enclosed parking. Yeah. Yes, enclosed parking.

Scott: That is great. And then when you’re talking about that neighborhood feel that is really unique to Chicago, and that’s something that so many people who move here decide to settle down here, whatever they may be doing, they really fall in love with that aspect. And it sounds like that’s exactly what you’re going for and able to really develop and preserve with how you’re developing the properties, right?

Jamie: Yes.

Scott: So when we’re talking about Chicago and we are in 2022, what trends do you see, I guess, continuing on in 2022 as we kind of come out of the pandemic and we’re looking forward? What trends do you see continuing to take hold in Chicago specifically?

Jamie: Well, you know, the data shows that Chicago is returning to normal patterns of occupancy to where it fit in the national spectrum, which was really near national averages in the post-pandemic.

I really hope it’s post-world.

Scott: Right.

Jamie: Despite concerns of migration to Southern states, economists are predicting that job growth will remain strong with good industry in and around Chicago, including the booming health sciences industry and logistics as a hub for e-commerce, keeping demand for rental housing strong, particularly as I said, for good quality workforce housing.

You know, you have a lot of luxury rentals that have gone up in the downtown neighborhood. You know, you might call it a class A neighborhood. Bronzeville, you know, one day will be a class A neighborhood. Right now, maybe it’s a class B neighborhood. We’re building class A quality housing in what you might call a class B neighborhood.

Good quality workforce housing, we see as being something that the demand for that is going to be on the up and up. And we hope that demand for all multifamily rental space will continue to exist in the market.

Scott: Absolutely.

Jamie: Yeah.

Scott: Absolutely. We were talking a little bit using this word revitalization, which I think is so fantastic, especially when you talk about a city like Chicago with such a rich history and rich culture. And there are really many neighborhoods that are ripe for this revitalization or it’s already happening or has happened. Can you speak a bit to maybe some of the keys behind successful revitalization in Chicago from the multifamily real estate perspective?

Jamie: Sure. I mean, there’s a lot to say there. You know, the catalysts to revitalization come from many forces. They come from the public sector, government endorsing projects, making it easier for developers to build stuff. There is the mayor unleashed a program INVEST South/West in Chicago about a year and a half ago, making certain city lands available and appealing for development.

Those type of initiatives definitely help with revitalization, drawing private dollars into neighborhoods. For sure, the Opportunity zone is a catalyst to revitalization drawing private dollars into neighborhoods in need.

You know, what is the recipe for revitalization it sounds like what you’re asking, and it’s really the public and private sectors committing to work together and help each other to effect positive change.

From my personal experience and my own investigations in this market, I know that community involvement is critical for revitalization to happen. Listening to what the locals want. What type of housing do they want?

What type of commercial activity, what kind of stores, shops, business do they want in a neighborhood in need of revitalization? And as you know as a Chicagoan, I think, the locals have a very strong voice in Chicago. So you need them to be on your side. Careful navigation of the development landscape is an important factor in creating projects that will be successful and lead to the revitalization that you’re talking about.

You know, there are a lot of barriers to successful development in Chicago. There’s affordability requirements, which you face if you want to buy city-owned land. In a lot of these neighborhoods, that’s what the land is. If you want to rezone land, and all of those are challenges which keep developers out of neighborhoods in need of revitalization.

The easiest answer to, you know, what is the key to revitalization or making revitalization happen, you know, Occam’s razor will tell me, you know, go to the neighborhood that hasn’t been revitalized. A great example is Hyde Park, which is to the immediate Southwest of us in Bronzeville, or go to Kenwood and East Woodlawn, which are just south of us, where the University of Chicago is.

Those neighborhoods have undergone a full revitalization. Get on the L on the subway and go to the next stop, that’s where the revitalization is going to happen because there’s a contagion effect. A walk from a block where you see revitalization, go to the next block. That’s where revitalization has happened in the past.

And so that’s where revitalization is going to happen again in the future. And if you were looking for the greatest probability of success here, that’s where it’s going to be, which is what we’ve done essentially. I mean, we go to Hyde Park, we go to Kenwood, and then we walk around the corner, the other side of campus, and we’re in Bronzeville.

Scott: Exactly. Exactly. And that makes it also a place where Chicagoans are going to want to be. Right. Because they’re going to want to be close to all of that and part of this revitalization itself, right?

Jamie: Sure. Yep.

Scott: So, okay, as we kind of wind down, and you’ve talked a little bit about this because we’re talking Chicago. And when it comes to multifamily projects, particularly those located in Opportunity Zones, really I found that other areas across the Sunbelt are just getting more hype. There’s just maybe more of a focus on that. But, you know, I’m a Chicagoan, so I’ve got a lot of pride.

What’s your ultimate pitch to someone who’s skeptical about Chicago multifamily real estate in general?

Jamie: If you look at property value in in the two larger contenders, Manhattan and LA, residential values are generally double what you see in Chicago.

The value gap is insane. You know, over time, that value gap has to shrink in, it has to shrink. And there is a compelling opportunity when you look at the current state of workforce and affordable housing in Chicago, most of it is worn out.

Most of it is old. People want newer space, they want safe space. They want comfortable living space. And so there is an incredible opportunity if you can navigate the development landscape through the different barriers that exist to create a product.

You know, you’re not going into a desert, or into a forest, or to the fringe of a town, you’re building or you’re investing, if you’re looking to invest in multifamily, in the nation’s third-largest city, where there is a very strong demand from renters. Your downside is limited.

Your upside is at best good if you do your proper underwriting as you’re looking to invest, if you do your homework. And, you know, the sky is really unlimited with multifamily in Chicago given the economics, the overall economics of Chicago.

If you can get over what you hear in headline news, everybody knows that the media makes things sound worse than they really are. And anybody who has ever spent any time in Chicago knows that it is authentically American and it is not going anywhere. And, you know, it’s hard to think that things can’t get better there. And so, you know, ride the wave, catch the wave of asset appreciation, rent appreciation in this market.

Scott: Absolutely Jamie. And I’ve found that if ever I’ve known someone who’s skeptical about Chicago, I ask them to come visit me. And usually, a weekend does it, and they completely change their tune once they see what we have to offer here, right?

Jamie: Sure.

Scott: So as we wind down here, if folks want to find out more about Eagle OZ and you, where can they do that, where can our listeners head?

Jamie: You can look at our website, There’s some nice video there of our active construction sites. And you can learn all about us. And you could also send me an email at [email protected], and we can get you information about our offering and how you can invest in this Opportunity Zone fund, where you get some amazing tax benefits if you have capital gains, which you probably are talking about on your other podcasts.

But if you sold your stocks and made money, if you sold your business or your house and made money, you can defer your capital gains tax to 2027 by investing those gains in an Opportunity Zone fund, and your new investment if you hold it for 10-plus years is tax-free. And we’re offering that in Chicago’s historic Bronzeville.

Also before Congress, I don’t know if you knew this, Scott, to be named a National Heritage Area because of its outsized footprint on American black culture, being the home of Louis Armstrong, Gwendolyn Brooks, Nat King Cole, and if approved by Congress as a National Heritage Area, it will get national park status and all kinds of benefits and resources.

And we are proud to do our part to preserve that form of American history.

Scott: That’s fantastic. Jamie, thank you so, so much for joining me on the show today and really offering so many great insights on multifamily in Chicago. Really appreciate it.

Jamie: Thanks, Scott.