In Skokie, Trilogy Real Estate Group plans to buy out all 277 units in one of three towers in the Optima Old Orchard condo complex on the west side of the Edens Expressway. Under Illinois condo law, a single investor can take over an entire condo building only if owners of 75% of the property agree to a bulk sale of the property.
But a group of residents in the Optima development who oppose the sale are pressing the village board to increase that threshold to at least 85%, hoping it might foil Trilogy’s plans. If the village board approves a proposal to raise the bar, it would follow the path of the Chicago City Council, which passed an 85% requirement for deconversions in the city three years ago.
Leading the charge in Skokie is Rabbi Ralph Ruebner, who lives in the tower and has spoken passionately at recent board meetings. He calls Trilogy’s buyout a “hostile takeover” and argues that it would result in many elderly and vulnerable residents losing their homes in the building, known as Maple Tower.
“If Maple goes, it will be open season and open the floodgates to many other buildings,” Ruebner told the board at a recent meeting.
Flare-ups over deconversions have become common in the city over the past several years, amid a sluggish condo market and sizzling apartment market. Developers have approached condo boards with generous buyout offers, betting they can profit from the big spread between condo values and apartment values. The deals are hard to refuse for many condo owners because the developers typically offer so much more than a condo would fetch in a traditional sale.
Others won’t sell regardless of price. The reasons vary. Some refuse out of an emotional attachment to their condo. Others worry that they won’t be able to find a comparable new place to live nearby at a reasonable cost.
A small group of owners at a 51-story tower in River North have even gone to court to block a $190 million buyout offer approved by nearly 90% of the building’s ownership last year. It would be the biggest deconversion in the city, but the buyer is having a hard time lining up financing to complete it.
Trilogy only wants to deconvert one of three towers at Optima Old Orchard, a 660-unit development completed after the condo crash. In 2016, Trilogy paid $44.2 million for 172 unsold condos in Maple Tower, at 9725 Woods Drive, with the plan to rent them out for a while and possibly sell them individually as the condo market rebounded.
But the market never recovered enough, and apartment rents and values continued to climb. So Trilogy decided to buy out the rest of the tower and reconstitute it as a pure apartment building. Trilogy’s plans don’t involve the other two Optima Towers, which operate as condo properties governed by separate condo boards.
“The reality is that the property has been rentals for the past decade,” said Jesse Karasik, Trilogy’s chief investment officer. “If we don’t convert it, somebody else will.”
Trilogy controls the tower’s condo board because it owned about 61% of the building when it floated the deconversion idea with residents a few months ago. Its stake has increased since then, because multiple owners in the building have agreed to sell their units to Trilogy in recent weeks.
“Every week, there are another two or three who come to us who want to sell,” Karasik said.
Simply because Trilogy owns so much of the building, it’s already very close already to hitting the 75% threshold for a buyout of the entire property. Owners of another 30 condos rent their units out rather than occupying them. That could work in Trilogy’s favor, because investors who rent their condos typically support deconversion deals, depending on the price.
So Karasik is confident that a proposed bulk of the tower would go through, even if the village hikes the voting requirement to 85%. But Trilogy has not made a formal offer for the building, and Karasik declined to say how much it would be willing to pay.
“We are full steam ahead to some extent,” Karasik said. “However, we’re waiting for a response from the city.”
Karasik would say that Trilogy would offer Optima owners a premium for their condos over what they would receive in a regular single-unit sale. In its recent condo purchases, Trilogy has agreed to pay about 10% to 15% over current market prices, he said.
“At least from a financial standpoint, everybody will be better off,” Karasik said.
This year, Maple Tower units have sold for as little as $194,000 and as much as $600,000, according to Zillow.
Yet to Rabbi Rueben and other opponents of Trilogy’s buyout plan, the whole process stinks. Rueben argues that the three-person Maple Tower condo board is tainted by a conflict of interest, because two Trilogy representatives sit on the board and the company is both buyer and seller. To address conflict-of-interest concerns, the board has appointed the non-Trilogy member to oversee the sale process.
The opponents are pushing the village board to approve a new 85% threshold for the village. Chicago is the only municipality in the state that requires 85% approval for condo deconversions.
Skokie Mayor George Van Dusen said he’s unsure how the eight-member board will vote when the trustees consider a deconversion proposal on Nov. 21. He still hasn’t decided where he stands. Van Dusen initially thought raising the minimum to 85% made sense, but after hearing from some residents who favor a sale, he’s not so sure.
“I don’t know,” he said. “I just keep going back and forth.”