Condo Deconversions Heat Up in Chicago

2625 N Clark cover shot

Clark Place, a 133-unit property at 2625 N. Clark St., closed in December as Chicago’s largest condo deconversion sale to date. 

As the rental market continues to perform well in Chicago, investors and owners are looking for alternative ways to enter the market and the latest answer has been condo deconversions. 

Already, Chicago has seen several marquee deals, with the largest transaction of this type closing last December at the 133-unit Clark Place

Sam Haddadin, who recently joined CBRE as a condo deconversion specialist, sees many more opportunities on the horizon, as investors are actively targeting condo associations in desirable locations that could benefit from a deconversion transaction.

“There are a lot of buildings in Chicago right now that would be ideal candidates for condo deconversions,” said Sam Haddadin, vice president at CBRE. “For newer product, we had a lot of condos that were bought at the peak of the housing cycle, and owners are now seeing this as a viable way out. In some older buildings, anywhere from 20-to-60 years old, associations have deferred major maintenance expenditures. As many of those are coming due, some owners are finding it is easier to sell the association to an investor or a developer, rather than initiate a huge special assessment and a disruptive construction project.”

In the latter scenario, Haddadin said that investors and developers are willing to take on large maintenance or rehabilitation work with condo buildings because they can achieve good pricing on the work through their relationships in the construction industry, whereas individual owners or condo associations would not have this capability.

“Developers and investors are able to tackle these capital projects more efficiently and at lower costs than your average condo association,” said Haddadin. “This puts them in the unique position of being able to pay condo owners a substantial premium for their units, while still acquiring the property at a price that allows them to complete their planned capital projects within budget.  Condo deconversions are giving investors and developers a once in a lifetime opportunity to acquire properties in irreplaceable locations in Chicago and they are competitively pursuing these opportunities. 

For individual owners, this arrangement can be a boon as well.

Many condo buildings are full of owners with underwater mortgages. After the housing crash, condos were hit especially hard. Many owners have been looking for opportunities to sell their units, but have been unable to as the market has not rebounded to past highs. 

However, a deconversion, which requires 75 percent of the association members to approve, often allows owners to get much closer to the price they desire, or, even see a return on their investment.

“What we are seeing in the current market is that the whole is worth more than the sum of the parts, so on a per unit basis owners are yielding higher sale prices from a deconversion than if they were to list independently,” said Haddadin. 


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