Michael Dobrov, one of the most prolific investors behind condo deconversions in the Chicago area, has closed his latest deal: a $63 million takeover of a 357-unit complex in Schaumburg.
The closing means unit owners representing at least 75 percent of the complex at 21 Kristin Drive, dubbed the Apartments at XII, voted in favor of the sale.
Dobrov, the CEO of United Group Development, started buying condo buildings for conversions to rental apartments in 2018. Since then, he claims to have been involved in the sale or purchase of 3,000 deconverted units in the Chicago area.
Deconversion deals are often controversial and occasionally litigious, given that those who vote against a sale wind up stripped of their homes in exchange for the price offered when that 75 percent supermajority is reached.
Some have led to accusations that condo board members and their attorneys — such as the law firm KSN, which frequently represents condo boards, including the sellers on the Dobrov deal — work toward closings to benefit themselves and the buyers, rather than all of a building’s condo owners.
“That’s bullshit,” said Dobrov. “I’ll be the first one to say KSN doesn’t help the buyer. They’re losing a client if the deal closes, so for them, that’s why they’re tough. Even if the buyer backs out, they don’t care.”
Dobrov’s firm was represented in the deal at 21 Kristin by the law firm Taft, whose real estate practice is chaired by Kathryn Kovitz Arnold, a condo deconversion specialist and the daughter of KSN co-founder Alan Kovitz.
CoStar first reported the sale of the complex to Dobrov’s company. KSN didn’t respond to a request for comment.
Complex deconversion transactions have become more commonplace in Chicago than perhaps any other major city, spurred by a rental market that’s accelerated since the mid-2010s, making the area’s apartments more valuable as rentals than as condos — nearly twice as much in some cases. The value of individually owned condos, by contrast, have failed to fully recover from the Great Recession.
Holdout unit owners can threaten these potentially lucrative deals. Dobrov said he spent a year convincing a critical mass of the Schaumburg building’s owners to vote in favor of the sale. Deconversions typically offer unit owners above-market prices.
“I like the niche market, I like the challenge,” said Dobrov, who said he has more suburban deconversion deals in the works. He declined to identify his specific targets, citing confidentiality agreements, but said rising interest rates could slow the momentum of the Chicago area’s deconversion wave.
Dobrov plans to spend about $10 million renovating the 21 Kristin property. Earlier this year, his United Group closed on a $57 million deconversion deal at a 427-unit property in Elk Grove Village.
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