Condo-to-apartment conversions and redevelopment are on the rise
By Deborah Goonan, Independent American Communities
Every month I see several reports of condominium associations that are struggling to survive.
It’s a growing trend in the U.S., as many condo communities have reached the point where buildings and surrounding grounds require major repair and upgrades.
Many are in the process of converting to conventional rental apartments owned by a single entity. In other cases, the land that sits beneath these dated and declining condos is more valuable than the housing itself, making the community ripe for redevelopment.
And this trend is no longer limited to low-end condo projects. Middle class homeowners and residents are now facing depleted reserves, deferred maintenance, building code violations, unaffordable special assessments, lien and foreclosure, and mandatory sale of their units when investors take over and force termination of the condo association.
Caught in the middle are owner-occupants who purchased their units with the expectation of long-term affordability, the ability to live in a desirable location, and an escape from the inconvenience of being forced to relocate due to rising rents and nonrenewal of leases.
More often than not, these homeowners are disappointed when their expectations collide with reality.
Winners in this high stakes real estate game include well-funded, savvy investors who have purchased their units at low prices, and who will reap profits in the condo-to-apartment conversion process. Co-investors of redevelopment stand to gain from positive cash flow generated by future sales or rent collection.
Other potential winners include real estate developers and local governments who just can’t wait to demolish modest, mid-century low rise condo projects, and redevelop the land with modern tall apartment buildings in dense residential or mixed use planned communities.
After all, more real estate packed onto the same parcel of land equates to higher profits for developers, greater tax revenue for municipalities and counties.
See if you can figure out who the winners and losers will be in the following examples.
Tustin condo dwellers receive letter over holidays demanding $6,000 to repair garages deemed ‘illegal’
By SUSAN CHRISTIAN GOULDING | firstname.lastname@example.org | Orange County Register
PUBLISHED: December 19, 2017 at 4:23 pm | UPDATED: December 22, 2017 at 12:12 pm
Built before space was at a premium, the sprawling Tustin Place condominium complex near the 5 Freeway still has a 1960s feel, with its expansive, tree-shaded grounds and plain facade.
And, it offers 1990s price tags. Home buyers still can get into the market there for under $350,000.
“My wife and I moved here from Riverside for the schools,” said sales representative Tony Ruvalcaba, who bought a two-bedroom unit three years ago. “We wanted to raise our family here.”
For better or worse, Tustin Place also features vintage garages, converted from carports in the late 1970s after the former apartments became condos. Back then, the Tustin neighborhood was still an unincorporated patch of Orange County.
Last summer, residents received a heart-stopping letter from their homeowners association stating that the city, unable to locate county building permits for the conversions, had deemed the garages “illegal.”
They got more bad news in late November, just in time for the holidays — a notice from their homeowners association about a hefty “emergency special assessment” to rehabilitate the structures.
Residents owed $6,000 by Jan. 2, 2018, although arrangements could be made for six monthly payments of $1,000 until June 1.
River City condo owners close to taking $100 million offer
By DENNIS RODKIN, Crain’s Chicago Business
December 11, 2017
Nearly two years after a developer first offered to buy all the condos at River City in the South Loop, the homeowners association finally has enough votes to sell, but just barely.
The $100 million sale of River City’s 448 condos would be the biggest Chicago condo development by far to switch to rentals in the recent wave of deconversions.
The next-largest sale by condo owners for conversion to rental entailed convincing less than half as many different owners: Last spring, owners in the 207-unit building at 420 W. Belmont Ave. approved a developer’s $51.5 million offer.
After a series of delays during the fall when the votes in favor hadn’t quite reached the 75 percent that Illinois condo law requires, the River City Condominium Association announced in an email to River City owners last week that owners of 75.87 percent of the River City complex now support selling.
Some resident owners have maintained opposition to the sale because “we like it here. We don’t want to be forced to move out of a building we love,” said Bob Olsen, who with his husband owns three units in River City and lives in one of them.
He and his family oppose the sale. He said they like their South Loop location and the building’s architectural heritage. Olsen said that even at the increased bulk-sale price, “we couldn’t find anything in the neighborhood at these prices anymore.”
Designed by modernist architect Bertrand Goldberg, the curvy buildings encompass a riverfront marina and are within walking distance of the South Loop’s booming shopping and dining offerings.
Since the beginning, River City owners have divided largely along owner vs. investor lines, said Bret Derrickson of Urban Aire Realty, who manages 25 rental units for their owners and represents others for sale. At least three-quarters of the owners are investors, he said, and “they see this offer from (Marc) as time to cash out.”