Suburban Townhouse Complex Hits Market in Rare Bulk Listing

A sprawling townhouse community in Chicago’s far northwest suburbs is testing investor appetite for one of the region’s largest deconversion plays in years.

Owners of all 220 units at Treehouse in the Woods in Round Lake are targeting a $59.5 million bulk sale and a full shift to rentals, according to 33 Realty, which is marketing the deal, CoStar reported. The asking price is just under $270,500 per unit.

Bulk deconversions — in which all individually owned units are sold to a single buyer and reverted to rentals — helped reshape Chicago’s multifamily landscape after the condo glut of the early 2000s. The practice remains largely a Chicago-and-Florida phenomenon, but activity has slowed as interest rates rose and multifamily development cooled.

Chicago has produced some headline-grabbing deconversions in recent years — River City’s 448 units in the South Loop, the 293-unit Century Tower in the Loop, and big suburban efforts like the 357-unit building at Schaumburg’s 21 Kristin Drive. But the pipeline has thinned. Prolific condo deconversion buyer Strategic Properties of North America, based in Skokie, had two big downtown Chicago deals fall apart in the last two years.

Rising rates and softer multifamily returns stalled many candidates. Still, the region’s rental market has outpaced other major metros on rent growth, opening the door for conversions to reemerge as a practical alternative for condo associations that may need to to shell out for expensive repairs.

Deconversions aren’t without controversy. Illinois law requires 75 percent of owners to approve a bulk sale, and Chicago raises the bar to 85 percent to protect holdouts. Critics say reluctant owners can be forced out; proponents argue that bulk deals let owners sell at a premium and sidestep costly assessments.

Sean Connelly of 33 Realty, who is leading the Round Lake listing with colleagues Liam Moore and Matthew Petersen, said the pendulum may be swinging back as construction pipelines thin out and apartment rents climb.

The 27.5-acre Round Lake property offers something slightly different from typical urban deconversions: two- and three-bedroom townhouses built in 1996 with attached parking and balconies, spread across Treehouse and Whispering Oaks lanes and Macgillis Drive.

About half the units are already rented, a marker that financing hurdles for new buyers may have nudged the association toward a bulk sale. The layout resembles a turnkey entry for investors looking to get into the booming build-to-rent sector — without the cost or timing risk of ground-up construction.

Connelly told the outlet that suburban rents remain strong, especially for single-family-style rentals where the tenant stays an average of around five years, reducing turnover costs. Light rehabs and amenity upgrades could push rents higher, he added, giving a potential buyer the value-add room that’s been scarce in today’s high-cost construction climate.

— Eric Weilbacher