Judge to rule on attempt to block record-breaking Chicago condo deconversion

The last stand is coming up for two Chicago condo owners seeking to block a record $190 million deal led by Yitzy Klor’s Strategic Properties of North America, one of the state’s most aggressive condo deconversion buyers.

A federal judge is set to rule on a suit filed by Julius Cherry and Gerald Glazer, California residents who own condos in the 467-unit structure at 10 East Ontario Street in the River North neighborhood. Unit owners collectively holding at least 85 percent of the building’s value have already voted in favor of a sale, meeting a legal threshold in order to close.

At stake is the biggest condo deconversion deal in Chicago history as multifamily values exceed those of condo properties, prodding investors to buy out homeowners and transform buildings owned by individuals into apartments owned by a single company that can cash in on rising rents. Unless the judge agrees with Cherry and Glazer, the deal would forcibly turn their homes into apartments.

The suit says the condo association’s board improperly handled offers from Strategic Properties and illegally extended a voting period to obtain approval after a previous attempt failed. It alleges the board broke its fiduciary duty, including by paying its law firm Levenfeld Pearlstein to work on the offer, even before a vote had been held on whether to consider such a sale.

“The board chose to negotiate in complete secrecy with the prospective purchaser,” the complaint said. “This resulted in unit allocations which greatly favored the prospective purchaser SPNA and the individual board members at the expensive of plaintiffs and others.”

It also claimed the sale breaches a 2019 amendment to the condo community’s bylaws that precludes any sale or transfer that would give one person or entity more than 5 percent of total ownership in the building. The suit is asking the judge to block the sale and remove the board members and bar them from ever again holding seats.

Board members refute the claims. They cite the fact that many other condo boards have negotiated deconversions without first seeking a vote of approval, seeking a final vote on a full contract instead. The defendants have legal momentum on their side and aim to have the case resolved in time for Strategic Properties to close the week of July 11.

Cherry and Glazer filed the federal complaint in California court, making almost identical allegations to one they filed in Illinois state court. That suit was dismissed with prejudice by a judge who sided with the condo board. An appellate court rejected Glazer and Cherry’s appeal in February, and the Illinois Supreme Court declined to take up the case.

That leaves the California case as the only chance they have to unwind the deal.

“Plaintiffs lost at every procedural and substantive turn because their claims were without merit,” said attorney Howard Dakoff of Levenfeld Pearlstein.

Lawyers for the plaintiffs declined to comment. Attempts to reach Cherry and Glazer weren’t successful.