Marc, SPNA try cashing out of condo deconversion plays

Two big Chicago landlords are selling properties that underwent a recent condo-to-apartment conversion, and they’ll need to fetch hefty asking prices to get a return on their investment.

Partners Marc Realty and Wolcott Group are looking to sell their 448-unit River City Apartment complex at 800 South Wells Street in the South Loop, while a venture of Strategic Properties of North America is shopping the 207-unit Wave Lakeview high-rise at 420 West Belmont Avenue, Crain’s reported. JLL brokers Kevin Girard and Zachary Kaufman have been hired to market both properties.

Condo-to-apartment conversions have become prevalent in Chicago, as developers renovate stale condo buildings that have had mostly the same ownership for prolonged stretches, typically resulting in minimal changes and diminished value. By upgrading these buildings and turning them into rentals, demand and overall value for these properties usually begins to rise.

The Wells Street and Belmont listings will serve as a strong test for the market — demand for apartments in the city have caused a spike in appraisals in recent years, but rising interest rates and a cooling market have more recently weighed values down.

Marc Realty and Wolcott’s River City conversion was one of the most ambitious condo-to-apartment projects in Chicago as the transactions, called deconversions, became a major trend. The developers paid $90.5 million for the site in 2018 and poured an additional $50 million towards renovations in the ensuing years, such as new unit interiors, a lobby and fitness center. The building is currently 93 percent leased, according to JLL flyers.

There’s currently no official asking price, but the firms will need to sell it for at least $140 million to break even. The venture also took out a $93.8 million loan on the property in 2019.

As for Strategic Properties’ 30-story building near Belmont Harbor, the firm paid $57 million for it in 2017 and invested an extra $11.5 million in upgrades. Its debt-to-value ratio has raised some concerns with the servicer of a loan on the property, as it was appraised at around $78 million when Strategic refinanced it with a new $63 million debt package in 2019. However, the developer’s $6.6 million in equity and the site’s 98 percent occupancy rate in 2021 eased some of those worries.

Strategic is one of the city’s most active condo deconversion players, and is working on closing what would be a record deconversion purchase of $190 million for the 51-story tower at 10 East Ontario Street, where delays involving litigation and obtaining the financing for the deal have been the sources of infighting and hassle among unit owners.

— Quinn Donoghue