Investment firm ESG Kullen has put a nearly century-old lakefront highrise on Chicago’s Gold Coast up for sale, seeking to cash out on a tough purchase it put together in 2019 for individually owned condo units.
The New York-based real estate investor has listed the 21-story, Roaring 20s-era building at 1400 North Lake Shore Drive, Crain’s reported.
While the asking price was not disclosed, the 21-story building fetched $107 million in 2019 from the condo owners, a record price for the type of transaction known as a condo deconversion. ESG has since put $10 million more into renovating it.
The historic highrise, dubbed The Deco for its Art Deco design, was built in 1927, according to its website. It now features 389 luxury apartments.
The deconversion sale nearly collapsed several times, as condo owners in the building argued over the deal, rejecting it in one vote. ESG then struggled to obtain financing, asking for a price cut in the end.
JLL, which has created a brochure, is marketing the property.
Condo deconversions became popular several years ago as a form of housing arbitrage, allowing investors to profit from a growing pricing gap between condos and apartments, which were jumping in value.
Such deconversion deals include a pending $190 million sale in River North to Strategic Properties of North America that would break ESG’s price record, however was delayed for at least the second time last month as the buyer requested more time to hash out the deal with its lender amid rising interest rates.
Some investors have already cashed out for a profit, including a New York investor that sold a deconverted 188-unit building in Edgewater Beach in 2021 for $43 million. ESG hired a broker last year to list a 250-unit building at 1140 N. LaSalle Street that it deconverted in 2018, which didn’t sell.
Now ESG is giving it a shot with The Deco, after taking out a $92.9 million loan to finance the purchase and upgrades.
The luxe Deco property has a wood-paneled period ‘20s lobby, renovated rooftop patio, laundry facilities and two new fitness centers. Rents range from $2,537 for a one-bedroom unit to $3,949 for a three bedroom apartment, according to its website.
ESG has been able to sign leases with new tenants at rents that are 25 percent higher than those for expiring leases, according to JLL, suggesting a buyer could boost the property’s income — and its value — with ongoing rent hikes.
— Dana Bartholomew
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