by Deborah Goonan, Independent American Communities
State Parkway Condominium, located on the Gold Coast in Chicago, has had more than its share of financial controversy. In July, the Association passed a $500,000 special assessment to cover the cost of ongoing legal fees, most of them related to lawsuits against a single condo owner, and former board member, Michael Novak.
Troubles began roughly eleven years ago, when the condo association refused to accommodate the Novak family’s disabilities (Michael and his wife are both deaf) by allowing them to keep a service dog.
Over the years, as assessments began to rise, Novak requested access to financial records of the condo association. Many of those requests were ignored or denied. But Novak pressed on, at one point filing a complaint against State Parkway with the City of Chicago.
About a year ago, State Parkway’s insurance company informed the condo board that it had exhausted its $1 million policy limit. The board obtained an insurance policy from another company, but that insurance company also declined to pay for additional litigation involving Novak.
The details of State Parkway’s legal and insurance debacle were posted here on IAC about a month ago.
According to Novak, a CPA who has crticized the association’s accounting methods, and its financial reports and audits (or lack thereof), State Parkway is in a debt hole that’s becoming too big to climb out of.
So Novak was surprised to learn that the current condo board decided to delay informing owners of an investor’s offer of a buyout.
Loop North News
John Buck makes offer to buy condo building drowning in legal bills
By Steven Dahlman
1-Aug-18 – A Gold Coast condominium association that needed a $500,000 special assessment to pay for legal expenses has an offer from an affiliate of John Buck Company to buyout every unit owner and turn the building into a rental property.
In a letter sent to State Parkway Condominium Association on March 26, but only recently shared with unit owners, Buck Acquisitions LLC outlines terms and conditions of an offer to buy 160 units and 110 parking spaces for $45 million. Included would be the building, all fixtures and improvements, leases, and easements. It would not include any money the association has in reserves.
The $45 million would come from a private equity fund.
The company says it would turn the condominium into a “multifamily rental building.” Unit owners could lease back their units. Any pre-existing leases they had with tenants would be honored if the rents are at “market rates” and the leases expire no later than 12 months after the closing date.
Read more (copy of offer to purchase State Parkway Condo Association):
Why would a condo board keep this offer a secret for several months?
Perhaps the condo board believes the offer is too low? But there’s no apparent record of ongoing negotiations.
And, shouldn’t condo owners be made aware of an offer to purchase their units, and the possibility that their building might be deconverted from condominiums to rental apartments?
The fact that a condo or HOA board might choose to keep important information to themselves presents substantial risk to property owners.
While State Parkway condo owners remained unaware of a possible future purchase deal, they have undoubtedly made important decisions about their personal budgets and investment portfolios. Those decisions might have been very different if they had known about John Buck’s deconversion attempt.
At the moment, the deconversion deal appears dead. But, given the difficult financial situation at State Parkway, there may be additional buyout offers in the future.