Loop condo owners approve $96M sale to Yitzy Klor’s SPNA

Get to 85% threshold by two votes in 310-unit building

Dov Grinblatt and 200 North Dearborn, Chicago (LinkedIn, Getty, City of Chicago)
Dov Grinblatt and 200 North Dearborn, Chicago (LinkedIn, Getty, City of Chicago)

Yitzy Klor’s Strategic Properties of North America is closing in on its latest Chicago condo deconversion deal after swaying enough owners of a 310-unit Loop building into accepting a $96 million offer to turn the property into apartments.

Such deals — known as a condo deconversions — have been on the upswing since 2015. They have steadily transformed much of northern Illinois’ condo stock into rentals.

Klor’s latest deal for the building at 200 North Dearborn Street in the Loop could close by the end of the year, said Jon Taylor, owner of the 47th floor penthouse at the property.

Taylor said he supported the sale in an election held by the property’s condo association board, although the decision wasn’t unanimous, meaning some of its residents are being forced into selling against their will.

City law allows a buyer to close on an entire condo building in Chicago without all of its unit owners on board if an offer is approved by owners holding at least 85 percent of a building’s value, giving those who object no choice but to relinquish their units.

Aaron Robinson, a 37-year-old United Airlines employee who works at Willis Tower and has been a unit owner at the building on Dearborn for three years, said the ballot on the sale made the 85 percent threshold by just two vote. He was disappointed by the approval and the process that led up to it, which he and another resident said included offers not made in writing of additional cash beyond the value of their units from Strategic Properties to convince owners to vote in favor of the deal.

“For me, it’s just a fantastic location downtown,” Robinson said. “The idea of selling and leaving was a little crazy for me, especially right now as mortgage rates are rising and after I refinanced at the bottom of the mortgage market during Covid.”

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Klor, whose Strategic Properties didn’t respond to requests for comment, is CEO of the city’s most prolific condo deconversion buyer. The company also is working to close a $190 million record-breaking purchase of the condo building at 10 East Ontario Street that’s been delayed by litigation.

The Dearborn building was a prime target for a deconversion sale because it was originally developed as apartments in 1989 and turned into condos in the 2000s, and most of the units are now investor-owned and rented out to their residents. Such condo building ownership structures became more common after the 2008 financial crisis caused the Chicago condos market to crash, making them less appealing to live-in owners and leaving investors with plans to run rental businesses as a way to pick up the pieces.

Deconversion sales started appealing to investors as condo unit values fell short of their levels from before the Great Recession and multifamily rents soared, making condo buildings far more valuable when run as a single-owner apartment property asset than the sum of the unit values as individually owned homes. The phenomenon has allowed deconversion buyers to make offers to condo owners above-market from what they would get out of an individual unit’s sale.

Some condo lawyers have criticized the lack of guardrails governing the condo deconversion process in Illinois, which have led to a dearth of clarity surrounding the legality of buyers performing backroom negotiations with unit owners to reach the supermajority of votes needed to close a deal.

A condo board member for 200 North Dearborn and KSN, the law firm representing the condo board, didn’t respond to requests for comment.

For Taylor, the penthouse owner who purchased the unit that had been left as raw space and poured cash into finishing the home, the deal provided an exit from the property he’d been seeking since moving to Park City, Utah, and a path to the building undergoing much-needed improvements unlikely to be funded by the condo owners.

“The buyers reached out directly to me, and we spoke about how to try and get the deal through,” Taylor said. “They really didn’t play too much hardball. I came in very honestly, saying here’s what it’s worth, here’s what I spent. They came back with an honest assessment.”

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Strategic Properties’ Dov Grinblatt, former Sacramento fire chief Julius Cherry and 10 East Ontario Street, Chicago (Apartments.com, LinkedIn, Morton Golf Foundation)
Commercial
Chicago
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