Condo Owners Vote on Deconversion at 200 North Dearborn

A group of Chicago condo owners are experiencing deja-vu as they prepare to vote on a bulk buyout proposal from an investor who has already failed to close a deal to buy the building before.

The condo board of 200 North Dearborn Street, a 310-unit building in the loop, voted 3-2 last week to advance a proposal to sell the building to an entity known as YK Investments, led by local investor Yitzy Klor, for $98 million.

Klor, along with business partner Saul Kupperwasser, first attempted to buy the building in 2022, via their Skokie, Illinois and Lakewood, New Jersey-based real estate investment company, Strategic Properties of North America. But after failing to secure financing for two years and leaving condo owners in a state of limbo, the board voted to terminate the contract in May 2024.

A few months ago, Strategic Properties returned to the board with another offer that board members unanimously declined to advance to a building-wide vote. Under city ordinance, investors can only conduct a bulk-buyout of a condo building if 85 percent of the condo owners agree to the sale.

For some condo owners, the prospect of working with Klor again is giving them pause.

“The same buyer who couldn’t close before (and has since built quite a reputation for deals falling apart) is back,” said one member of the condo Facebook group. “Somehow, we’re being told by our so-called ‘board’ to take this more seriously than before while accepting worse numbers.”

Strategic Properties bought up dozens of units with the intention of eventually buying out the remaining owners and converting all of the units to rentals. But that plan has failed to materialize so far.

It is unclear if YK Investments LCC, which public records show is managed by Klor, also has ties to Kupperwasser. Klor and Kupperwasser did not respond to requests for comment.

Despite Klor’s prior failures to buy the building, board treasurer Jonathan Taylor said he voted to advance the sale because it was a stronger offer than the one made by Strategic Properties in January.

“Initially the offer was too far below the last offer from four years ago,” he said.

YK Investments’ offer of $98 million sparked criticism from some owners as inadequate when compared to the $95 million deal from 2022. The offer also sets aside $3.1 million for a buyer vote incentive and $1 million for unit owner upgrades, separate from work YK Investments would perform after acquiring the building.

“This deal’s straight-up absurd — the price is locked in at 2020 levels and by payout time it’ll feel like 2030 inflation hit. No way anyone with half a brain signs off on that nonsense,” a member of the condo’s Facebook group wrote.

Taylor noted that many unit owners would see higher offers than the prior deal.

A proposal from loan brokers shared in the Facebook group noted that YK Investments could potentially secure a principal loan for $108 million from Baltimore-based Capital Funding Group and $13 million in preferred equity from Santa Monica-based private equity firm, Crest Capital.

The proposed loan has a 7.7 percent interest rate and the equity investment has a 15 percent interest rate, both with 36-month terms. Including closing costs and money already spent acquiring initial units, the proposal estimates the total investment is expected to top $136 million.

But some condo owners are wary of getting involved with Klor after getting stuck waiting on the 2022 deal to close. While the sale was pending, condo owners who wanted to move on were not allowed to sell their units.

Tensions escalated between condo owners who wanted to sell to Strategic Properties and those who wanted to cut ties with the company, resulting in a contentious condo board election in late 2023.

It also spurred a lawsuit from Taylor, who alleged that Strategic Properties had committed consumer fraud by making an offer it couldn’t support. The case is currently pending in Illinois appeals court.

Still, Taylor said it is the board’s duty to advance offers that have a chance of drawing interest from unit owners.

“We are not endorsing the deal. This is a decision for the owners and it’s for them to decide,” he said. “We don’t want to decline the deal on their behalf.”

The vote is set to take place in the next few days, according to Taylor, although a firm date is not set. YK Investments offered to pay the legal fees necessary to fund the building-wide vote, which was part of the appeal of advancing the offer, Taylor said.

Swings and misses

Strategic Properties has successfully converted condo buildings in Chicago to rentals in the past. The cyclical business thrives when the condo market is oversupplied, and rent is on the rise.

Yet, since 2020, Strategic Properties has fumbled three Chicago conversion deals, including the two offers to buy all the remaining units at 200 North Dearborn Street.

The third failed deal was a $190 million offer to buy a River North condo building called Ontario Place. Initially, the building’s condo board also agreed to the bulk sale. But after Strategic Properties failed repeatedly over three years to secure the funding necessary to close the purchase, the board backed out of the deal. At the time, one condo owner called the waiting game, “hell for the past three years.”

The firm’s failed condo deconversions aren’t the only setbacks it is facing.

Attorneys for Chicago-based Byline Bank filed a foreclosure complaint against Strategic Properties for a promissory note that the bank alleges has been in default since August.

Byline alleges that it issued a $496,000 note to Kupperwasser and Klor in 2017, but in August they stopped making payments. Byline alleges the duo currently owe $340,000 on the loan.

Around the same time that the pair took out the promissory note, they also secured a $397,000 mortgage from Byline on their one-story, 5,400-square-foot Illinois office property at 5009 Oakton Street in Skokie.

Byline is now requesting that a judge order a judicial sale of the building to pay back the note, though the case is still pending.

Strategic Properties also recently sold a converted apartment building in Chicago at a loss, while listing another for sale.

Laramar Group bought Strategic Properties’ Wave Lakeview apartments for $57 million in December. Strategic Properties last refinanced the property for $62 million in 2019, public records show. The firm converted the nearly 60-year-old building from condos to apartments in 2017 and took out a $46 million loan from Ladder Capital to help fund the deconversion, according to public records.

It’s unclear how much total capital Strategic Properties put into the deconversion of the 30-story, 207-unit Wave Lakeview at 420 West Belmont Avenue, or if the company paid down the principal on its latest $62 million note from MF1 before selling the property.

In October, the company also listed the K Square Apartments in Lincoln Park. Strategic Properties converted the 22-story, 268-unit property from condos to rentals in 2018, and listed the building for sale in 2023 with CBRE, before eventually taking it off the market. It is now listed with Berkadia brokers Nick Harris, Pete Evans and Richard Evans.