Edgewater Beach building purchased after deconversion
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Greenstone paid about $ 27.2 million, or about $ 144,700 per unit, to purchase all of the condos in the 12-story building at the end of 2018. TLC’s price, which stands at $ 228,700 per unit, represents a 58% increase in value in less than three years, a period that included a global pandemic.
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The deconversion trend started in Chicago several years ago as the apartment market heated up. Amid a sluggish condominium market and rising apartment values, developers searched for condominiums that would be worth much more than rentals. Several greats in Lakeview, the Gold Coast, Lincoln Park and the South Loop have made the switch.
The deconversion process can be arduous, especially for large properties, as owners of at least 85% of a condominium in the city must approve a block sale of the property. A buyer must make an offer acceptable to dozens or even hundreds of homeowners. Some refuse to sell regardless of the price.
The sale at TLC shows that the offers can offer a nice reward at the end. The Sheridan Road property is one of Chicago’s tallest buildings, if not the largest, for sale after a deconversion. Kiser has sold several small, deconverted buildings and is working on large ones, said Lee Kiser, director and management broker at the Chicago-based company.
“It is the only ladder that we have reached to the end,” he said.
Although Greenstone performed well on the sale, his yield on 5815 N. Sheridan was likely above normal for a deconversion, Kiser said. A Greenstone executive did not return a phone call.
Besides its acquisition cost of $ 27 million, Greenstone also spent around $ 5 million to repair the property, TLC CEO Stuart Handler said. TLC plans to invest an additional $ 5 million in the building, spending it on patching, landscaping, lobby renovations, fitness center and around 40 apartments that Greenstone was unable to access, did he declare.
“It has a lot of potential in terms of added value,” Handler said. “That’s exactly what we do: we take a sow’s ear and turn it into a silk handbag.
The building also has a rare amenity: a beach. It’s the only apartment building north of downtown to Loyola University with its own private beach, Handler said.
Although Greenstone sold 5815 N. Sheridan for a big gain, Handler sees an opportunity to further increase the value of the property. After a major renovation, apartment investors will typically increase rents on the assumption that they can charge more for a better product. Higher rents generate more income for a building, increasing its value.
Handler declined to disclose occupancy or rental rates for the building.
With its acquisition of Sheridan Road, TLC now owns more than 5,500 apartments in Chicago and the suburbs, including Evanston, St. Charles, Mundelein and Bloomingdale.
