Kiser Group brokers have been summoned to sell a Lakeview tower as part of a condo deconversion project — a growing local trend within the asset class.
The condo board at 3033 North Sheridan Road hired Kiser’s Andy Friedman and Jake Parker to land a buyer for the entire 16-story, 145-unit building, with bids expected to start at around $52 million CoStar reported. That’s about $358,000 per unit.
Once a deal is reached, unit owners will vote on whether to follow through with the sale. If they agree to the deal, the building will be converted to an apartment tower with only rental options. Illinois law requires 75 percent of unit owners to approve the bulk sale for the transaction to be valid, according to the outlet.
Condo deconversions, though still rare, are becoming more common in markets like Chicago and South Florida. In the Lakeview neighborhood, just three residential buildings with over 90 units have sold in the past five years, and they were all deconversion deals.
What often happens is condo owners holdout too long as the market ebbs and flows, and the buildings become stagnant because the units aren’t tested on the market.
“Lakeview has concentrated ownership,” Friedman told the outlet. “There are really a handful of property management companies that own most of the properties. Once they buy them, they don’t sell. You just don’t get inventory creation until you get the deconversion.”
Older buildings, such as the Sheridan Road tower, are often targeted for deconversions because a developer will pay a premium for the units and make necessary renovations, while still leaving room for a healthy profit margin. Plus, owners avoid the headache of paying thousands of dollars for upgrades or repairs needed for their unit.
“Like many of these condo buildings, it’s a building with a large number of investor-owned units,” Friedman told the outlet. “That always hurts individual condo owners. It’s less attractive to owners when 40-50 percent of the units in the building are renters.”
Chicago’s market stability is another reason deconversion deals are more popular in the area. The projected annual rate of return is higher than other metros because even as the market softens, rents remain steady enough to maintain decent margins.
— Quinn Donoghue
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