A pair of investors will walk away with a sizable return on their investment after selling a deconverted condo building in Naperville for $70 million.
Origin Investments and Randolph Street Realty Capital sold the Iroquois Club to a group led by Chicago apartment investor Stuart Handler, according to Crain’s Chicago Business. Built in 1989, the 272-unit property was initially built as an apartment complex. Located at 1101 Iroquois Avenue in Naperville, the property was converted into condominiums in 2006, but tapered out after Chicago’s condo bubble burst during the Great Recession.
The investors purchased the property for $38 million in 2015. That excluded 30 units that had been sold to individual owners. Origin and Randolph Street then purchased the 30 condos one by one. They sold the property for $69.8 million, about 47% more than the $47.5 million they invested in it, Origin Managing Director Marc Turner told Crain’s. The venture’s total cost included renovations in addition to the purchase price.
Aerial view of the entire complex (Iroquois Club Apartments)
A brokerage team led by Marty O’Connell and Wick Kirby of Jones Lang LaSalle represented the Origin-Randolph Street joint venture in the sale of the Iroquois Club.
A condo deconversion is when an investor buys out all condo owners in a building and converts the building into apartments, where demand is stronger. The deconversions are complicated deals typically done by veteran buyers, but they’ve had strong returns for those investors able to pull it off.
The Iroquois Club deal shows the upside, but many deconversions face challenges.
Cunat, a multifamily developer and landlord, offered $30 million to buy out residents of a 300-unit condo complex in Lake of the Hills, about 40 miles northwest of Chicago, and are facing pushback from residents who knew they would be unable to find other comparable condos to purchase.
Residents are still dead-set against a sale, even after Cunat raised its offer in December to almost $34 million. They’re hoping for $40 million, almost 35 percent above market value. The standoff is a microcosm of the chasm between developers keen to convert condos to rentals, boosting their valuations by anywhere from 40 to 70 percent, and owners who say they’re trapped. It adds up to a seller’s market that isn’t all that it seems as supply shrinks and prices soar, leaving owners little option beyond hanging on.
[Crain’s Chicago Business] — Miranda Davis
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