By Deborah Goonan, Independent American Communnities
Think condo to apartment conversions only happen in Florida? Or in the core of major cities such as Chicago?
Think again. If the latest attempt at deconversion survives a pending lawsuit against investors, The Woods at Countryside will be one of the largest suburban condo communities to go rental.
Originally built as apartments in the early 1970s, the Palatine community was converted to condos at the height of the real estate frenzy, but sales suffered when the market tanked in 2008, leaving more than half the units unsold.
Of course, when 485 out of 719 units remain unsold after more than a decade, that’s a financial disaster for a condo association.
Suburban condos-to-apartments move would be the biggest yet
By STEVEN R. STRAHLER, Feb. 28, 2017 (Crain’s Business, Chicago)
A 719-unit Palatine complex could become the biggest “deconversion” of condos to rental apartments in the Chicago region, according to a lawsuit that says investors are targeting it for that purpose.
The complaint, filed Feb. 21 in Cook County Circuit Court by a shareholder of the property’s indirect owner, alleges Trilogy Investments is acquiring debt on the Woods at Countryside with the aim of carrying out a deconversion by implementing forced sale provisions of the Illinois Condominium Act.
As a result, the plaintiffs, VM Condos and its sole shareholder, Vincent Manglardi, contend current ownership would be put out of business and VM Condos would lose its $8.05 million equity stake.
What continues to boggle the mind is the fact that local planning and zoning commissions do not bother to investigate the marketability of condo conversions (or new construction condominiums for that matter) before they offer their rubber stamp of approval to developers.
Again, just because a condo is affordable to buy, doesn’t mean it will be affordable to own. And apartment to condo conversions are especially vulnerable when basic infrastructure is already 30 years old, with no reserve account for future improvements.
When a buyer walks into a remodeled apartment turned condo, and the finishes are shiny and new, and the price tag is low, it can be tempting to purchase. The buyer thinks it must be a good investment, or a dream come true.
But if it seems to good to be true, it probably is.
The few owner-occupants or small-time real estate investors that still own condo units at the Woods at Countryside are low-hanging fruit. Investors know that. It is only a matter of time before non-investor owners are forced out during the condo termination and conversion process. And most of them will probably lose money on the deal.
Generally speaking, the risk of hostile takeover of your condo association is not disclosed to buyers before they agreed to purchase.
But it should be.
Incredibly, although most of the units are rented, a website for Woods at Countryside still markets condominiums for sale.