One Arlington – Crain’s Chicago Business

Stoneleigh invests in venture turning Arlington Heights Sheraton into apartments

Crain’s Chicago Business | Alby Gallun | January, 03 2013

The developer that wants to convert a shuttered Sheraton hotel in Arlington Heights into 214 apartments is preparing to begin construction next month after bringing in a joint venture partner, Barrington-based Stoneleigh Cos.

The joint venture between Stoneleigh and a group led by former Prime Group Inc. executive David Trandel is in the final stages of securing a $30 million construction loan for the $46 million project, said Stoneleigh President Rick Cavenaugh. It is the first Chicago-area development for Stoneleigh, a firm Mr. Cavenaugh founded after leaving Fifield Cos. in 2008.

The Sheraton Chicago Northwest and adjoining Coco Key water park closed in 2009, in the depths of the hotel downturn, and Mr. Trandel’s group bought the property in June 2011, with plans to convert the hotel to apartments. Though a slew of suburban apartment developments are under way amid a strong rental market, the Arlington Heights project offers unique design and construction challenges.

“The key is going to be completely changing the whole look and feel of the place so it doesn’t look like a converted hotel,” said Ron DeVries, vice-president and Appraisal Research Counselors, a Chicago-based consulting firm.

But the development, called Arlington Downs, will have an edge over the competition because it will be the first new apartment building in Arlington Heights in a long time, offering the amenities that high-end renters want, he said. The 14-story building at 3400 W. Euclid Ave. will include a 10,000- to 13,000-square-foot health club, a 5,000- to 6,000-square-foot restaurant and a rooftop deck, Mr. Cavenaugh said.

“We’re larger, taller, newer and much higher-quality” than competing buildings, he said.

The property is zoned for 670 residential units, so the joint venture someday could build another 456 apartments on a site just to the east of the existing building, he said. Mr. Trandel’s group also plans to build a 160-room Four Points by Sheraton hotel next door and reopen the water park, he said.

Mr. Cavenaugh expects to close on the project’s construction loan on Feb. 1 and begin interior demolition immediately after that. He expects move-ins to begin in fourth-quarter 2013.

Chicago-based architecture firm Pappageorge Haymes Partners designed the apartment building, while New York-based Tishman Construction has been hired as the project’s general contractor.

Mr. Cavenaugh is a veteran of the apartment industry, working in the 1990s for Ambassador Apartments Inc. and Whiteco Residential LLC before joining Fifield in 2003 as chief operating officer. He picked up the president title a couple years later but left the Chicago-based firm in 2008.

Since founding Stoneleigh that year, Mr. Cavenaugh has amassed a portfolio of more than 3,000 apartments in places like Florida, Tennessee,Texas and Arizona. The firm doesn’t own any apartments yet in the Chicago area but has signed contracts to buy properties in Hoffman Estates and Naperville where it plans to develop new rental buildings, Mr. Cavenaugh said.racts to buy properties in Hoffman Estates and Naperville where it plans to develop new rental buildings, Mr. Cavenaugh said.