The on again, off again, Gold Coast tower deconverion is off again – thanks to a lawsuit from the condo owners themselves.
The owners of five units in the 38-story tower at 2 East Oak filed a complaint with the Cook County Circuit Court over wrongdoings in the building’s voting process as well as the misuse of the building’s funds. Their goal is to halt the $92 million sale of the building to ESG Kullen – set to close in February – and to acquire ballot records from the voting process.
The group is suing the condo association, members of the board as well as the management firm. New York-based ESG Kullen is not named as a defendant in the suit.
Deconversion votes are often fractious for the residents of condo building. Some see it as an opportunity to cash out at above-market rates as deferred maintenance costs pile up. Others see it as investors forcing them out of their longtime homes.
In 2016, investors in Chicago began scooping up aging condo buildings and converting them to rental properties. It quickly became the hottest real estate play in town. Between 2016 and 2018, dollar volume tripled each year, totaling $523 million in 2018, according to a prior analysis by The Real Deal. But even before the City Council made it more difficult for investors to force condo owners to sell – by increasing the threshold from 75 percent to 85 percent of owners – the market had been slowing dramatically. Through Sept. 30, only $240.5 million in deconversions had been announced in 2019, about half as much as last year.
The plaintiffs in the 2 East Oak case argue that because ESG Kullen requested extensions that took place after the city implemented the 85 percent vote requirement, a new vote should be taken.
The $92 million deal with ESG Kullen, if it goes through, would be the third-largest deal of its kind in Chicago and part of a deconversion trend sweeping over condo buildings in the city. ESG has been especially active in the deconversion wave, holding the title for the largest deconversion deal in the city, paying $112 million for a 391-unit condo building on North Lake Shore Drive last year. [Tribune] — Jacqueline Flynn