Within days of Strategic Properties of North America having a $190 million housing deal killed following its multiple failures to close, Chicago’s most prolific condo deconversion player is looking to exit another property.
Strategic, led by Yitzy Klor, listed the 267-unit K Square apartments in Old Town, a property the firm turned into rentals after a bulk condo buyout it completed in 2018. The landlord hired CBRE’s John Jaeger and Justin Puppi to market the property.
The listing did not include a price, but the property has an $88 million mortgage with a 2.64 percent interest rate that can be assumed by the buyer. The loan was issued in 2020 by an affiliate of Greystone, Cook County records show. Assumable debt at low interest rates has been coveted by many commercial real estate buyers since the Federal Reserve began restricting monetary policy to fight inflation.
It’s unclear why the company is selling the 22-story asst at 1749 North Wells Street now, but the move comes just over a week after the sellers pulled out of the Ontario Place deal, which would have been the priciest deconversion in Chicago history at $190 million for the 51-story, 467-unit building at 10 East Ontario Street. Negotiations for that deal fell apart at the eleventh hour, signaling the end to a three-year saga where the Strategic struggled to get financing for the ambitious deconversion.
Earlier this spring, Strategic listed another big Chicago apartment property for sale, the 207-unit Wave Lakeview high-rise at 420 West Belmont Avenue. Residents of Ontario Place and the highrise condo building at 200 North Dearborn Street, which Strategic is also targeting for a nearly $100 million deconversion, have theorized Strategic is looking to raise cash to complete more bulk condo purchases, which can be tricky to close when attempting to take over a whole building because they require a vote of approval among unit owners who hold a collective 85 percent of a building’s value.
Even when that threshold is reached, there is often foot-dragging and litigation by holdout unit owners that deconversion buyers must overcome, as Strategic knows all too well after having secured the vote of approval nearly three years ago at Ontario Place and not being able to close. The broker assigned to sell the K Square property declined to comment and emails and calls to SPNA and its attorney went unanswered.
Average rent for K Square is $2,631. The property is 94 percent occupied and 98 percent leased. It also has a 140-space garage that is 100 percent leased. According to the listing, Strategic has renovated about 30 percent of the apartments, bringing in a premium of an additional $330 on rents for those units.
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Strategic Properties shakes up condo deconversion strategy
The property was originally built as condos in 1971 before being converted by Strategic into a standard rental building in 2018. The asset also has a 4,000-square-foot commercial space that’s fully leased.
It’s unclear what the firm’s next steps are in Chicago, and whether selling off some of its assets is a sign of greater distress than the Ontario Place deal.