How Closely Do You Look at the Condo Association? A 2/2 at 1749 N. Wells in Old Town

1749 n wells

This 2-bedroom duplex in Kennelly Square at 1749 N. Wells in Old Town came on the market in January 2017.

The listing says it has been fully rehabbed with a new kitchen and baths.

The wraparound kitchen has granite counter tops,  including on the breakfast bar, stainless steel appliances and wood cabinets.

The two bedrooms are on the top floor accessed by a spiral staircase.

While the unit has central air, it doesn’t have in-unit washer/dryer and parking is rental in the building.

Built in 1972, Kennelly Square is a full service building with an outdoor pool, doorman and exercise room.

Many of Chicago’s 1960s and 1970 apartment and condo towers are facing repair.

From DNAInfo:

An Old Town condominium building is facing an estimated $18 million repair bill — leaving some residents on the hook for one-time payments of as much as $80,000.

Bruce Theobald, a condo owner at the Kennelly Square condominium at 1749 N. Wells St., said the more than 260 unit owners had been told that estimated repairs were $18 million, requiring a special assessment.

According to Theobald, that would mean “rough numbers” of about $30,000 for a studio, $50,000 for a one-bedroom and as much as $80,000 for a two-bedroom.

“This problem has been developing literally for decades,” Theobald said, adding that repairs were put off too long.

Theobald, who is also a real estate broker, said that makes a compelling case for selling the building in a so-called deconversion, returning it to apartments. He accused the Kennelly Square Condo Association Board of not adequately pursuing that as an option.

Theobald called it “a building in a state of crisis,” saying that the property manager had passed along figures that the city was mandating $2 million in necessary repairs, while “reskinning” the building — a practice that has been called an “energy-saving face lift” — would bring the total cost to $18 million.

The building is supposedly assessed at about $60 million.

It is considering its options, including de-converting back to apartments. According to DNAInfo, it was converted to condos in 1979.

How closely do you look at the condo association when you’re buying?

And is the day of reckoning coming for many older buildings who have put off repairs?

Joel Holland at Coldwell Banker has the listing. See the pictures here.

Unit #409: 2 bedrooms, 2 baths, 1400 square feet, duplex

  • Sold in September 1991 for $132,000
  • Sold in June 2013 for $295,000
  • Currently listed at $375,000
  • Assessments of $863 a month (includes heat, doorman, cable, exercise room, outdoor pool, exterior maintenance, lawn care, scavenger, snow removal)
  • Taxes of $5348
  • Central Air
  • No washer/dryer in the unit. Laundry room in the building
  • Garage parking is rental
  • Bedroom #1: 21×12 (second floor)
  • Bedroom #2: 15×13 (second floor)

 

28 Responses to “How Closely Do You Look at the Condo Association? A 2/2 at 1749 N. Wells in Old Town”

  1. I live in high-rise built in 2003. What warning signs should I look for that my building is heading down path like the one in this post? Also, in general when and what breaks down in high rise buildings that make them difficult to maintain as they age?

    Thanks!

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  2. This building needs to “SELL SELL SELL” (Jim Cramer voice) to a developer / REIT company ASAP.

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  3. A nightmare special assessment like this is what terrifies me about condo ownership. Do lenders take into account situations like these? I have to wonder who could buy these units now unless you’re paying cash. A smart lender should have buildings like this one flagged.

    As for the unit, nice granite countertops and building amenities can’t offset the lack of in unit laundry and parking for me.

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  4. It’s stories like this that make me love my wife for picking a building with an extremely strong, active and long-serving condo association that is completely on top of running the building. This was a huge factor for her, and it has paid off handsomely.

    All those little old ladies (many former city attorneys, judges and other professional types) stay on top of business, in addition to seemingly always watching the closed-circuit feeds for nefarious activity. THEY ARE ALWAYS WATCHING.

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  5. This is a really tough issue to get a handle on. If they have (and are willing to give you) a copy of their reserve study – that’s always the best indicator since it shows the age of all the major building systems and when they are estimated to need replacement. Cash reserves are always a good indicator plus capX for the past few years (if you can get it). I always request 2 years of Board Meeting minutes but the best you usually get from that is whether or not the same subject keeps coming up at meeting after meeting. Some buildings you can just look at from the outside and know something is wrong – facade issues, poor landscaping, cracked paving stones or cement sidewalks.

    I’ve walked by this complex dozens of times and never suspected there was a problem.

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  6. The building isn’t blacklisted from what I can tell. Typically, a huge upcoming special assessment has to be settled by seller or buyer needs to put money up. Too many condo buildings keep kicking the can down the road.

    Seems like it is best to only buy in buildings that have been around for a few years. Need an association that is mature enough to show the building is stable but not too old that there has been a lot of deferred maintenance put off. New buildings sometimes have surprises too though as it often takes a year or two for shoddy construction work to show up.

    I definitely would stay away from these older buildings, especially those catering to the lower end of the market. Doesn’t seem worth the risk.

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  7. The biggest issue facing most of these 60s and 70s era buildings is the life safety upgrades mandated by the city in the early 2000’s. The city gave something like 10 years to comply then extended it, so theres no excuses for these associations to have kicked it this long. Furthermore most of these aged buildings need elevator replacements and window / facade upkeep or replacement. When you push all of these off for 15 years, this is the result. A well run building will have a seemingly large assessment, but not extreme, so that they can save for a major expense every 10 years.

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  8. My friend was hit with a $40k special on a 2/2. They were given the choice between financing through the building or paying cash or refinancing their mortgage and taking money out. I don’t think this type of special assessment means you need to deconvert the building.

    Condo boards change. Just because a building is being run well at the moment doesn’t mean it will always be run well.

    In short, I wouldn’t discount buying a unit in this building. If you factor in the special assessment, the real cost of this unit would come to about $455,000. That sounds about right for Old Town.

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  9. Mike HG posted “This building needs to “SELL…” … to a developer / REIT company ASAP.”
    marko “..Furthermore most of these aged buildings need elevator replacements and window / facade upkeep or replacement.”

    There are many similar under-maintained 50-60 yr old condo bldgs in OT/LP/GC. Unfortunately ime it’s only possible to deconvert when 50%+ of owners are investors. Owner occupants delusionally hope to continue kicking their can down the road & then hope to deceive prospective buyers by hiding info re existing issues. Long time owners who fought to keep assessments low requiring deferring maintenance now blame previous board decisions for high costs of required repairs. Items to look for include previously mentioned city life safety requirements like sprinklers, facades, windows whether common element or not, corrosion in galvanized water pipes (shockingly expensive pressure blow-outs are occurring), original electric service & heating plants, original elevators…caveat emptor!

    Finally no jenny ime just b/c it sounds like a good deal doesn’t make it one – there’s almost always more deferred maintenance to repair – jmho.

    Here’s from 1501 N State’s $6.5 mil special: replace windows @ $4.775 mil; rehab pool, skylights, party room @ $900k; facade repair/reseal @ $580k & repair gar. boiler and driveway @ $245k. Facade costs are a fraction of what similar bldgs spent and what’s their engineer’s opinion of condition of elevators, other mechanicals & roof? The would be rehabber/ flipper of 3rd fl unit here is screwed imo (altho he’s pitching special as an issue to be borne solely by purchaser!). He’s dropped ask but there’s only 55 units splitting this $6.5 mil cost – so despite already high assessments ($2300/mo) this could add addn’l $1000-$1250/mo. for 10-15 yrs (results in $40k-$45k/yr assessments plus $20K+/yr re taxes)! That’s only if no other building repairs require another special assessment during next 15 years.

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  10. What’s the $18M repair bill for?

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  11. The deferred maintenance problem is a characteristic of all condo buildings. The current owners do not want to pay for repairs, or reserves, that benefit future owners.

    If this building followed good facility management, they would have been collecting about $160 per month, average, from the 260 unit owners for the past 36 years in order to have the reserves ready for an $18 million repair expense.

    But no condo board will operate like that. It’s against human nature.

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  12. Description
    Architect: (((Gordon & Levin)))

    HD, I won’t even comment on this large hunk of cheap ugly modernist garbage. OK? Figure it out yourself. Not hard.

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  13. “In 1975, the Gordon-Levin partnership received a distinguished building award from the Chicago chapter of the American Institute of Architects for Kennelly Square and its commercial component.”

    LOL!!!!! Let’s look at the composition of that decision-making AIA board. The building is totally butt ugly.

    “Some of these buildings drew critics’ ire. In 1978, for example, Tribune architecture critic Paul Gapp termed River Plaza a “hulking apartment tower.”

    http://articles.chicagotribune.com/2009-06-30/news/0906290450_1_wrigley-building-mr-gordon-floors

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  14. Yes its ugly HH but YHWH aint got nuthin’ to do with it, everything from the 70’s, except film, is like this.

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  15. “Here’s from 1501 N State’s $6.5 mil special: replace windows @ $4.775 mil; rehab pool, skylights, party room @ $900k; facade repair/reseal @ $580k & repair gar. boiler and driveway @ $245k.”

    Every single building with a parking garage is going to have big maintenance bills. The concrete only lasts so long. If the garage is open to the elements (not enclosed) then the repairs will need to be done sooner.

    The John Hancock garage was shut down for months while they did repairs.

    And this engineering firm describes quite a few projects around the country, with many here in Chicago high rises (none of the links to “read more” work for me.)

    http://www.rrj.com/9-uncategorised/81-projects-by-structure-type

    The elevators also have to be replaced after a certain time period. It’s one of the largest expenses.

    But this is the price you pay for high rise living. With your single family home you also have to replace the roof, the windows and re-do driveways. You have to replace furnaces, air conditioning units. How long will your pipes last? What about your electrical system? If you live anywhere long enough, all of these things are a cost.

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  16. “A nightmare special assessment like this is what terrifies me about condo ownership. Do lenders take into account situations like these?”

    Yes. Since 2008, lenders will request the condo association minutes and the budget details. And they even ask follow-up questions.

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  17. “I live in high-rise built in 2003. What warning signs should I look for that my building is heading down path like the one in this post?”

    Go to the board meetings!

    If anything is going on, they’ll talk about it there.

    What is the maintenance plan? Any talk about the elevators? Repairs? Re-doing the hallways? Replacing the boilers?

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  18. The article makes it sound like the re-skinning is $16 MM and that it’s discretionary. Odd. Not enough information.

    Once something like this has been discussed in association meetings it has to be disclosed to potential buyers and the buyers get to see the meeting minutes anyway. A good buyer’s agent can cut to the chase even faster with a quick phone call to the property manager before an offer is even written to ask several pertinent questions.

    Yes, buildings of this size should theoretically have reserve studies but a lot don’t. I know this is not a popular opinion among urbanites but this is the cost of living in a high density area. You have to build up and with that comes all kinds of extra costs. Several Gold Coast buildings replaced their elevators in the last few years for instance. And what about those brick high rises?

    I don’t understand how a deconversion can get you a 50% premium over the market value unless the units are outdated and the buyer has a really economic way of updating them. I guess with economies of scale that’s possible but a 50% premium? That means you could buy a single unit and make a killing renting it out if permitted in the building.

    The biggest problem with special assessments like these – especially in buildings where the owners have been there for decades (common in these older buildings) – is that a lot of the owners simply can’t afford the special assessment. Even if you get it financed for them they can’t afford the payments. They are either at the end of their career or retired and spend all their income. So either they have to sell or the building has trouble getting the money from them.

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  19. If you are trying to figure out whether a condo building will face a fate similar to this one, there is a great indicator: a capital reserve study.

    Ask these 5 questions: Do they have a capital reserve study prepared by a reputable firm? Has it been updated within the past five years? Are the condo reserves within 10-20% of the level suggested by the study? And is the total of CapEx and reserve additions for the past 5 years consistent with the average annual cost shown in the study? If the answer to all questions is yes, the likelihood of a huge special is pretty low and the association has likely been managed well for quite some time.

    Having run two condo boards over the years, I can tell you that boards face a lot of pressure from residents not to spend money on reserve studies and loss reserves. Most residents are very shortsighted about these matters and only want to keep assessments low next month, figuring that next year will be the next owner’s problem.

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  20. As a long time Condo board member: All buildings – even low rises – need a reserve study to know when to expect the big hits and start building their reserves accordingly. In a perfect world special assessments would be rare. What really irks me are the Condo owners who won’t serve on the board or any committees but constantly complain about how the board handles things. No one comes to board meetings until it’s budget approval time. They have no idea what we’ve been talking about for a year and are critical. Get off your butt and run for the board if you think you can do so much better. It’s the most thankless job in the world.

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  21. “I don’t understand how a deconversion can get you a 50% premium”

    Lots of weasel in what he said”

    “a deconversion could bring you a price of as much as 40 percent to 50 percent over the current market value of your unit”

    could. as much as. 40 to 50. current market value. your.

    Are there at least a handful of units in that building that are so outdated that a deconversion *might* get them 40% over what they could sell it for as-is? I would bet on it.

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  22. There are web sites avaialable for review of condo associations, but I’m not sure if they’re available to the general public or only licensed Realtors on a “need to know” (and pay upfront) basis.

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  23. Due dillegance can only go so far. When we bought a few years ago we did everything including reading every word of the minutes form the condo association meetings, and not a word of any pending issues appeared anywhere. Within months of moving in we were slapped with a $50K special assessment for roof and facade work. Asking around the building, it turned out that this was common knowledge, but not a word of it appeared in paper anywhere. The association hid it. And oddly, it turns out they were feathering their nest since many of them then sold just before the news of the assessment hit. Actually, this lack of transparency continues, and the current minutes tend to be “we met on [date]”.

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  24. @Jim – that is exactly why a reserve study is useful. A reserve study details the remaining useful life and replacement cost of the common elements. Then shows if the reserves are projected to be able to fund those projects. If the answer is “no”, then a special assessment will be needed when some of those project comes due.

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  25. Jim in Chicago,

    I would check out the 22.1 that the association filled out and see exactly how it was filled out. As I understand it the question reads “assessments under consideration”. Sounds like this was clearly under consideration and you could sue someone.

    Unfortunately, if it’s a really small, self managed building the filling out of these forms and the keeping of minutes can be the wild west.

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  26. @vb: agree with you. But even better to do reserve study & then plan the assessments accordingly, so no special assessment is needed. My building has this planned out for next 15 years of more, including all the major elements, their useful life, and expected replacement cost.

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  27. According to the DNAInfo discussion, many owners in this building state that an investor is “pushing” this story in an attempt to panic owners to sell at deeply discounted rates. And the real cost here is $2MM, not $18MM.

    Sounds like this is way overblown.

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  28. @vb and @Gary

    In my case there was no trail of evidence that a special assessment was under consideration, and the reserves showed a reasonable amount for normal expenses. There was not a trace of the issues anywhere. And then when the special hit we all heard “we didn’t anticipate this.”

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