After more than a year of negotiations and setbacks, ESG Kullen closed on the most expensive condo deconversion in Chicago history.
The multifamily investment firm paid $107 million for a 391-unit building at 1400 North Lake Shore Drive. New York-based ESG also secured a nearly $93 million loan from Arbor Realty Trust to finance the purchase and a substantial renovation, The Real Deal has learned. RE Journals first reported on the sale last month.
An initial $112 million deal for the property fell apart in late 2018 because of financing issues. The sale was held up multiple times as equity partners backed out, citing pending property tax increases as a main reason, according to ESG co-founder Eric Granowsky.
“Ultimately, we were able to reach an agreement with the condominium association on a price reduction that enabled us to go forward with a partner and to get it done,” he said. “We’re very bullish on Chicago and excited to have this one closed.”
Condo owners voted to move forward with the bulk sale in 2018, before the Chicago City Council voted in October to increase the threshold required for building approval citywide from 75 percent to 85 percent. The latest vote by condo owners did surpass that requirement.
Condo deconversions in Chicago peaked between 2016 and 2018, as the demand for rentals skyrocketed. The increased approval percentage required for each building was expected to drastically reduce the number of buildings that would make the switch.
The $90.5 million sale of the 449-unit River City complex previously held the title of Chicago’s priciest condo deconversion.
ESG has been one of the big players in the deconversion market in the city. It is under contract to close on what would be the second most expensive deal, a $92 million purchase of 2 East Oak Street. That building has 309 condo units, with the deal expected to close next month.
The firm also closed on a $38 million deconversion deal for 1140 North LaSalle Street at the end of 2018.