The Radar Realty | Northern Exposure
Two young developers are transforming distressed North Side buildings into housing stock with potential.
Jay Michael and Alex Samoylovich know what it’s like to be laughed out of a meeting. When the childhood friends from Skokie launched their real estate company, Cedar Street Capital
(estatepg.com), in 2003, one potential investor told them, “You guys are a bunch of Indians with no chief. Who would do business with you?” At the time, Michael and Samoylovich were 21 and 22, respectively, fresh out of college in London (Michael) and at DePaul (Samoylovich). But they weren’t over privileged hotheads, Michael insists. “I grew up exceptionally middle-class,” he says. “In London, I was definitely the poor kid on a rich block.”
Now, Michael and Samoylovich are the landlords of 1,424 units in 19 apartment buildings in Chicagoland—most located in Lincoln Square, Andersonville, Uptown and Edgewater—and banks love giving money to the junior moguls. Brad Bremen, VP of Wintrust commercial banking at Lake Forest Bank & Trust (Cedar Street borrows almost exclusively from local banks like Cole Taylor, Metropolitan Banking Group, Harris Bank and others), describes Michael and Samoylovich as “well-connected in the real estate community.” “They have a good working knowledge of all sides of the business—including construction risk, which sets them apart,” he says. “Their loan requests are reasonable, and they stick to a straightforward business model.” This year, with the help of a Philadelphia-based marketing company, Smarthinking , Inc., Cedar Street Capital is implementing a rebranding push (the parent company will still be Cedar Street, but the management company has changed names from Estate Properties to the more accessible-sounding, renter friendly FLATSChicago) as part of an effort to make the new FLATSChicago buildings the most sought-after rentals on the North Side.
Cedar Street Capital’s formula isn’t a new one, but those who have worked with the company say they approach it thoughtfully, and with necessary restraint. They hone in on distressed or failing buildings— usually old mid-rises known as “corridor buildings,” which are often single-room occupancy hotels and courtyard buildings for low-income residents—and buy them from the banks that own them because someone else got in over their head on an earlier attempt at rehabilitation. “These buildings have been mismanaged—people try to over-improve,” Michael says. “But spending more money doesn’t always mean you’re doing the right thing.”
Step two is waiting out the leases of the current residents and helping them find ways to move on. It’s a sensitive process; terms like “gentrification” (a word Michael and Samoylovich won’t let cross their lips) and “displacement” are bound to arise whenever there’s a movement to remake an old neighborhood, though the duo says they take steps to ease the transition by offering special rental rates for original tenants in good standing with the buildings, and connecting others with social agencies that can help them relocate. e bottom line, though, is that most people living in the buildings pre-rehab will not be living there once the FLATSChicago transformation is complete. “We have to find a marriage of what exists and what is soon to come,” says Michael.
A longtime family friend and business mentor to Michael, the well known Chicago businessman Arnold Levy, is the former president of JMB Hotels and the retired CEO of Stone-Levy LLC. Levy sees it this way: “Gentri cation is another word for physical change. Real estate that is not being invested in is decaying.” In the past, Levy says, now-defunct public programs took the lead on creating affordable housing. But now, “Abandoning neighborhoods to avoid change is not the answer. Our leaders must commit on a larger scale to affordable housing, and allow developers to create it. Jay’s work is saving neighborhoods.” Samoylovich, who plays the numbers man to Michael’s aesthetics director at Cedar Street, says, “If it’s failed, it becomes an abandoned building. The city boards it up, and it creates opportunities for gangs and other negative activities. Restabilizing failed assets helps us rebuild the community.”
After meeting at an Equality Illinois event last summer, Michael began collaborating with the office of 46th Ward Alderman James Cappleman on relocation strategies for current tenants of the rehab buildings. “He’s very proactive about making sure we’re finding safe, affordable housing for them,” says Cappleman. The alderman is impressed by Cedar Street Capital’s commitment to currently standing—some would say historic— structures. “ is keeps the feel of our unique neighborhood intact, which is one of the reasons many residents live in Uptown.”
True, FLATSChicago buildings are equipped with sexy stainless steel kitchens and modern signage—the lobbies even smell the same, scented with a trademark fragrance. This is partly the work of Smarthinking. “We’re teaming with Jay and Alex to build a 360-degree brand,” says the firm’s Mark Natale. “You will be equally impressed by the building welcome package [which includes shirts from neighborhood business the T-Shirt Deli] as the interior design in the apartments.” FLATSChicago’s signature look is updated and comfortable, but no one would mistake these for Gold Coast luxury buildings. In a recently finished example on Rockwell Street in Lincoln Square, Rockwell Commons, one bedroom apartments rent for around $1,150, and two-bedroom units go for between $1,300 and $1,500. A tenant there, Andrew Thompson, says he and his fiance were persuaded to sign a lease because the place looked nicer than anything they’d seen in the same price range. “The quality was there,” he says. They found the other tenants to be young professionals like themselves, people in their late 20s who were starting families. And the most important part: “It’s dog-friendly. That’s tough to find.”
There are Dumpsters stationed outside an attractive, Tudor-style, soon-to-be FLATSChicago building on Kenmore Street in Edgewater, near a picturesque stretch of historic Bryn Mawr. The street is lined with beautiful old houses, and around the corner are a sparkling new Nookie’s diner, a Starbucks and a Mia Francesca restaurant—but it’s still common to hear reports of gang-related shootings on blocks not so far away. From behind the steering wheel of his Volkswagen SUV, Michael points out the worth salvaging details on the exterior of his latest project, and regales his passenger with tales of the bedbugs and rats that had taken over inside. Soon, this FLATSChicago property will be occupied by fresh-faced, upwardly mobile renters who will use the company’s tech-generation friendly website and social media tools to communicate their needs to their landlords and pay their rent. It’s easy to imagine them traipsing out the front door with their pooches in tow, headed to the lakefront path for a run.
“If you build it, they will come.” That’s the adage every real estate developer hopes will come true, and Michael and Samoylovich are well on their way to making it FLATSChicago’s North Side reality.
Chicago Social | Amalie Drury