Big Style in Small Spaces

Jay Michael and his business partners are intent on building apartments and a brand. They insist they can do it in a way that helps neighborhoods turn around. Uptown and Edgewater on the North Side are about to put them to the test.

Michael’s Cedar Street Co. has acquired seven buildings representing 1,200 apartments, primarily in those communities. By early next year, Michael plans to have finished a complete rehab on each and to rechristen them as part of his nascent brand, Flats Chicago.

Flats, he said, is supposed to stand for “big style in smart places” at rents that don’t overshoot the market. With partners Alex Samoylovich and Thomas Kim, Michael hopes Flats will become known for offering modern finishes and unexpected amenities, such as a pool, sports club or skydeck lounge. The projected rents range from $800 a month for a studio to at least $1,400 a month for a two-bedroom.

The three men, all in their early 30s, are school chums from Skokie who reconnected to launch their real estate venture. Samoylovich said they have raised $75 million in equity and acquired the buildings in distress sales at 20 percent to 30 percent of their debt. Many apartments were unused or uninhabitable.

They range from early 20th century vintage buildings to four-plus-ones. Except for a deal in west Lincoln Park at 2478 N. Clybourn, the other Flats will be in Uptown or Edgewater at these addresses: 1025 W. Sunnyside, 1325 W. Wilson, 5718 N. Winthrop, 5411 N. Winthrop, 5051 N. Kenmore and 4875 N. Magnolia.

Those areas are “ripe” for investment, Michael said, with prices falling to a point that allows for responsible, moderately priced housing. Michael likes the momentum that could come from City Hall’s plan to make Uptown an entertainment district but he said that more than anything else, he and his partners are “following our gut.”

Uptown remains a hard sell for private developers, so Cedar Street deserves credit for taking the risk, said Jacqueline Loewe, founder of Sheridan Park Consulting and a neighborhood resident.

The trio has made its plans known to local groups and some bemoan that the redevelopment will eliminate low-rent units. But Alyssa Berman-Cutler, president of the community development group Uptown United, said most realize that the properties Cedar Street bought could not be fixed for anything but market-rate units.

Michael “seems very interested in working with the community. He’s got a big vision,” she said.

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Published by David Roeder on September 16, 2012.