Wednesday, September 16, 2020
After bankruptcy filing, 185 condos near O'Hare go up for sale
An investor could buy the 185 of the 498 units in the Catherine Courts housing complex with a plan to turn the entire property back into apartments.
Source: Crain's Chicago BusinessBy Alby Gallun, Senior reporter, Commercial real estate
Nearly a year after landing in bankruptcy court, 185 units in big condominium complex near O’Hare International Airport are hitting the market, a key step forward for a property still suffering the consequences of a failed deal cut 15 years ago.
A bankruptcy judge has approved a proposal to sell the 185 units in the Catherine Courts Condominiums, a former apartment complex that was converted to condos in 2005. An investor could buy the condos in bulk with a plan to turn the entire 498-unit property back into apartments, said David Levy, the broker hired to sell the condos.
Condo deconversions, as they are known, emerged as a popular investment strategy several years ago amid a hot apartment market. Because multifamily values rose so much, investors could profit by acquiring entire condo buildings, an often messy and contentious process, and reincarnating them as rental properties. Even though many apartment buildings have suffered due the coronavirus and recession, investors continue to pursue deconversions here.
“I certainly think some of the buyers looking at this will have an eye toward that,” said Levy, vice president at Chicago-based NRC Realty & Capital Advisors.
The housing market has flipped on its head since 2005, when condo sales and prices were soaring and converting apartments to condos was the rage. That year, a venture led by Chicago architect Guido Neri paid $48.4 million for Catherine Courts, a four-building rental property on North Cumberland Avenue just south of the Kennedy Expressway.
The venture began selling off the apartments individually as condos, but sales stalled when the economy crashed in 2008. Unable to sell 185 of the 498 condos, Neri rented them out instead.
But Neri has clashed with the property’s condo association over unpaid assessments, building repairs and other issues, a series of disputes that culminated in the venture’s Chapter 11 filing in U.S. Bankruptcy Court last October. The venture owes Harwood Heights-based Parkway Bank more than $14 million, but it contends in court filings the bank will get all its money back in a sale.
Bidding for the 185 units starts at $15 million. The deadline to bid is Nov. 13, and an auction for the units is scheduled for Nov. 20.
Under a Chicago ordinance governing condo deconversions, an investor can take over all the units in a building only if owners of 85 percent of the property vote in favor of the sale. Though the 185 condos at Catherine Courts only account for 37 percent of the total, an investor could buy them as first step and then lead the charge for a sale of the entire property.
“The buyer is going to have significant voting power,” Levy said. “If they decide to take a leadership position on the (condo) board, they’ll probably be well-positioned to do that.”
In 2018, an investor offered to pay $61 million for the whole property, a deal that would have resulted in a $19 million payout for Neri’s venture, according to a court filing signed by Neri last October. But the building’s condo association never put the offer to a vote of its owners, the filing said.
Neri didn’t return a phone call seeking comment and an attorney for the Catherine Courts condo board declined to comment.
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