Something to Watch in 2011: Developers Versus the Owners at 1211 S. Prairie in the South Loop
Crain’s is reporting on a lawsuit filed in mid-December by Ronald Shipka Sr. and Gerald Fogelson, developers of One Museum Park at 1211 S. Prairie, against the building’s condo board.
Says Crain’s:
Their venture, which also includes Cleveland-based Forest City Enterprises Inc., still owns 41 units in the 298-unit tower at 1211 S. Prairie Ave., which was completed in 2008, according to a complaint filed in Cook County Circuit Court. Amid slow sales, the developers want to rent out about half of those unsold units but have been stymied by a recent tenfold increase, to $1,000 a unit, in the fee charged for moving in and out of units being rented, the complaint alleges.
The condo board also has falsely told condo owners in a letter that the development venture improperly used nearly $450,000 in reserve funds to pay routine expenses, according to the complaint, filed Dec. 16.
And the board has tried to thwart any new sales by refusing to issue accurate “assessment letters” to prospective buyers saying the development venture is up to date on monthly fees, the complaint says.
As a result, the developers can’t sell or rent their units, according to the complaint, which seeks several remedies including an accounting of assessments and court order forcing the board to retract the misappropriation allegation.
Liens filed against the unsold units by the condo board would likely bring sales to a halt. A lawyer for the developers says they had no choice but to sue.
Meanwhile, according to public records, just 3 units have sold in the building since July (those that have been recorded. Some may be pending.)
This 2-bedroom unit has been on and off the market since February 2009.
It is now listed at $136,000 under the prior 2008 purchase.
The listing says the unit has Grant Park, lake and city views.
At 1495 square feet, it has hardwood floors throughout.
The kitchen has Brookhaven cabinets, granite counter tops and stainless steel appliances. There is a marble master bath.
2-car tandem parking is included.
How will the developer/condo board litigation affect re-sales in the building?
Ryan Yi at New Star Realty has the listing. See the pictures here.
Unit #3205: 2 bedrooms, 2 baths, 2 car parking, 1495 square feet
- Sold in June 2008 for $780,500
- Sold in September 2008 for $885,000
- Originally listed in February 2009
- Listed in May 2010 for $819,000
- Reduced
- Currently listed for $749,000 (2 car tandem parking included)
- Assessments of $545 a month (includes doorman, pool)
- Taxes are “new”
- Central Air
- Washer/Dryer in the unit
- Bedroom #1: 16×12
- Bedroom #2: 11×10
Central Station developers sue condo board [Crain’s Chicago Business, Andrew Schroedter, December 29, 2010]
Man these people have really got to be kicking themselves. They bought it from a flipper for 100K more than the original purchase price 3 months after the first sale. The building looks great and the views must be awesome, but otherwise this is just another 2/2 with parking and a pool. And I can’t be the only one not impressed with the finishes in the bathroom. The second picture of the bathroom looks like it is a carbon copy of my buddies place, who lives in a CMK building. 3/4 of a million should get you a lot more than that.
Over priced and sounds like a HOT MESS of a building/condo board
I gotta say, the staging of the living room is making me laugh. It looks so lonesome. And it looks like that’s a therapist’s couch, with a chair for the therapist, and not a very comfy chair at that.
I suppose the intent was to make the room look spacious?
The views are pretty fantastic, but I guess I never figured that to be a prime location, as the price would lead you to believe. Is that area hot, or is it just the building?
oh duh, nevermind. I just mapped it; Museum Park! Double DUH.
This is along with horror stories from co-workers are beginning to make SFH ownership look preferable to condo life.
i know a lawyer and a doctor that live in museum park complex; they will lose a bunch of money, but they have money to lose. I don’t feel bad for them at all. They bought the hype. overall it is a real hood; near downtown so it has a real value but how much more than other loop/streeterville 2/2’s.
i would love to live in this building….for about $275k, which is prob what it is worth given the glut of supply in the SLoop.
This grabbed my attention “have been stymied by a recent tenfold increase, to $1,000 a unit, in the fee charged for moving in and out of units being rented, the complaint alleges.”
$1000 to close off an elevator for a few hours, assuming they don’t have a special freight elevator — which a building like this should.
I toured about a half dozen of these units about 2 years ago – post card views of Grant Park, the skyline and the lake as long as you don’t look straight down at the numerous ugly freight train tracks running below.
For the 2 bedroom units I remember thinking the kitchens were nice, but I was very unimpressed by the size of the second bedrooms For 3/4 of a million dollars for what amounted to a 1 bedroom plus den, there’s gotta be better options out there.
I do like the architecture of the actual building itself though.
No freight or diesel trains there, Eric. Just metra and south shore electric commuter lines.
This is a unique location. Unobstructed views of the lake and the park and terrific access to the lake and museums. If you like to bike or run or walk a dog this location is tough to beat. 700k will get it done.
I don’t think this owner realizes that this thing isn’t worth just a slight haircut from the pre-con pricing. 750k is not going to move this–try 625k.
I don’t understand why the condo board would want to prevent the developer from selling or renting vacant units?
Icarus, that is a good way to control rentals, which are a growing problem throughout the SL. It is especially useful against short term “hotel altetnatives” that are popping up everywhere. You don’t see this often in new bldgs since stuck flippers won’t vote for it. I would consider it a strong plus for owner-occupants.
South Loop is the big disaster of Chicago real estate. Now that everything’s come down in price – who would ever want to live in the soulless South Loop? It’s not a real neighborhood, just a concrete jungle.
I doubt they don’t want sales. It seems that the developer doesn’t agree with outstanding assmts levied by the board and doesn’t want to pay up at closing. The rental issue probably has more to do with exceding lender limits and crippling other sales. My guess is they didn’t have the votes to limit them further.
For those of you who haven’t made the connection, the board raised the move in and move out fee to prevent people and the developer from renting out their units. What prospective renter wants to pay 2000$ to just move in and out.
This is a great move by the people who own and actually live there. I hope they win te lawsuit and make the developer pay their attorney fees.
“$1000 to close off an elevator for a few hours, assuming they don’t have a special freight elevator — which a building like this should.”
This is not that unusual (although the amount is.) I’ve heard of move-in and move out fees of anywhere from $250 to $500. Never heard of $1000, though.
But as Mike HG pointed out- they did this specifically so that it would make it very unattractive to rent out the units.
oven next to freezer. fail.
Raising the move in fee was necessary to prevent renters b/c if the building is over 30% non-owner occupied, conventional lenders will not loan in the building. Hence, owners and flippers would have a hard time selling their units as few people can pay all cash. Renting gets the developer cash at the expense of owners who may need to sell in the future. Its a very pro-owner move. Screw the developers and the bankers….yeah!
Thanks a local
well as was said yesterday I’ll take unit 2505 if I have to buy here for 750k http://www.redfin.com/IL/Chicago/1211-S-Prairie-Ave-60605/unit-2505/home/21786656
look at what a difference the ceiling height makes!
I would personally rather have rental units than foreclosures. Condo Boards are usually compromised of retirees who don’t have a care in the world except making sure they collect their social security checks and banning renters.
I understand the motivation for the move-in fees. But those also end up hurting legitimate owners.
Condo Boards also sometimes dont see the long term effects of a short term solution. If those units cannot be rented out, the developers wille eventually dissolve their partnership and reform and then you have a slew of foreclosures to deal with.
Tony – I love the generalizations we all use on CC. I’m on our condo board (even the president! woot!) and I’m neither retired nor collecting SS yet. It’s not all that that much responsibility and as long as you’re transparent in all decisions it limits the drama that we’ve seen in our building. This comes with the experience of having to rectify developer shortcuts – value engineering was it?. I figure if I was in a SFH I’d be making the same sort of decisions so why not be involved with a larger building.
Also I find it odd when a person includes that they are on their condo board in their resume or Linked In.
I’m going through this with a current customer. He developed a midsize condo building and the HOA is claiming he owes money for work done after the building was turned over. A handful of units remain for sale and they’re denying him the paid assessment letters required to close those units. The problem is that sales of the units in this building are his only source of income and his reserves are depleted. The HOA is shooting themselves in the foot because if he stops paying and we have to foreclose, we’re going to blow the remaining units out for the $100M a piece we are owed, not for the $250M a piece the other owners paid. Derp.
“What prospective renter wants to pay 2000$ to just move in and out.”
If you stay there for a year that’s only an extra $167 a month. The developer is stuck mostly with higher end 3 bedroom units (I think they only have 2 more 2 beds that are 800k+), so rents would be well over $3k. 2k ain’t shit in comparison. I know I wouldn’t have a problem paying that to live in a high end building.
I applaud the association. Turning condos into apartments is a dick move by the developer. If they want to get out just dump the units for cheap.
The 450k assessment issue is more interesting. I wonder if what they say is true or if it’s just cooked up to let the developer know that they better not mess with them or they’ll make it impossible for them to do business.
The owners are trying to protect their investment. It is the right move. It may hurt in the short term but if the owners don’t want their building turned into yet another 2/2 McCrap Box high rise with a bunch of short term renters junking up the place they have to do this.
The problem is a lot of the sales in many of these larger developments were to flippers. As a result, many can’t get out and are two weeks away from being broke. They all want to rent their units further hurting the current owners who bought in the building to actually live in as a home long term. The specuvestors with cheap financing are why we are in this mess now. The owners are right to say screw you.
In the future, you are going to see more and more of this. Even some developers at the tail end of the bubble started trying to thwart flippers by putting in clauses that they couldn’t sell or rent for like two years. I’ve had numerous conversation with clients asking about rental restrictions for the condo board so they can discourage current owners from just renting out their places.
It is a fine balance between setting up rules so legitimate owners aren’t hurt but also preventing new buyers from being able to get financing. I really think that condo ownership is going to morph closer to quasi coop like status since the effect of financially weaker neighbors can have a devastating effect on the other owners.
Definitely the right move by the condo association- to the comment that it’s the wrong move because it will force the developer to default and the units to be foreclosed upon – that’s wrong here because these developers are quite wealthy – so I would guess that they have personal guarantees on the project.
Will be interesting to see how this all plays out of course.
Possible similar situation might happen at the Trump. The association is about to take over the building yet about 30% of the units are unsold. For now the development company hasn’t been renting them out, but what if they decided to? (Many of the condos are already rented anyway.)
I understand the move to prevent rentals, but why would they want to prevent sales?
“And the board has tried to thwart any new sales by refusing to issue accurate “assessment letters” to prospective buyers saying the development venture is up to date on monthly fees, the complaint says.”
An interesting story in Crain’s today about the Astoria Tower at 9th+State in Sloop being converted to condos:
http://www.chicagorealestatedaily.com/article/20101230/CRED0701/101239996/buyer-to-make-unsold-south-loop-units-apartments#axzz19bsGwPpS
There is no way this place turns into a 2/2 mccrap box with renters junking up the place. Very unique property with very unique location means renters will always pay big premium to live here. That said it’s in everybody’s best interest including the developer to lower prices to where the market is and get the places sold. Probably wish they did that 2 years ago.
“Very unique property with very unique location means renters will always pay big premium to live here. ”
Nopes. Last year they featured a 2/2 on here for $2,500 (parking $200 extra). That was rented quick but other 2/2s listed for $2,800 were languishing iirc.
Bob if you think it’s easy to get 2500 a month plus parking for 2/2 I will hire you to rent some out for me.
The condo board is correct. You cann’t put the interests of flippers and the developers above owners who bought with the intent to live there. Allowing rentals is going to drive down the value as these will still have to be sold at some point in the future. In the meantime, legitmate owners who may need to move (job relocation, etc…) won’t be able to sell b/c there are too many rentals (hence no bank will lend). They will then walk away. Either way you play it, you likely end up with short sales and foreclosures…but its better than owners not being able to sell at all. No one promises you that you will not lose on a property, but its crazy to think that you might not be able to sell at all (i.e., too many renters and no financing). Its better to make the developer sell for less/short sell and get it over with than to have long term rentals that slowly go out to market over years (still undercutting prices) and in the meantime legitimate owners can’t sell at all. Its a rock and a hard place…but I believe it would be a breach of fiduciary duty for the Board to place the interests of the developer/flipper over that of legitimate owners. Setting the building up so that lenders won’t lend would surely cause a lawsuit from legitimate owners and I think courts, at the end of the day, would recognize the right of the owner over developer. The developer should bear the risk of not being able to sell the development…no buyers.
Thanks Sabrina for featuring this. I am a potential buyer but honestly the prices don’t make much sense to me. If this place was for sale for say 615K (including the parking), then I would make an offer. At this prices no way.
I understand that the association is trying to protect the owners but this seems like an impasse. I feel the developer should lower the price on his remaining units and get them sold asap. That being said many of the 2BRs with great views are not owned by the developer. I have noticed it is much tougher to deal with people who bought at a high price and emotionally cannot let go of the place at the current market price. Lets see what transpires.
Oh and the second bathroom makes my stomach turn. Reminds me of a South African safari lodge. This is a Chicago modern high rise for heaven’s sake!
I saw this unit and the floors are so ugly, I didn’t know if I should laugh or cry.
Funny how it doesn’t matter if it’s a wealthy developer with a multi million dollar project or a guy with a 200K condo, the mind set is exactly the same: I refuse to sell until prices go back up to where they were. You would think the professional developer would be a little smarter.
Its already obvious this developer is mondo incompetent by the mere fact that it took them a couple of years to even cover the building completely in glass. For the longest time that central pillar just stood there as a hulking piece of concrete.
“to the comment that it’s the wrong move because it will force the developer to default and the units to be foreclosed upon”
It’s extra wrong considering the construction loan is completely paid off on OMP east.
@Bob 2 — well if $167 isn’t a lot of change to you, i’d be happy if you tossed it my way every month 🙂
@wicker and other condo board members — you thoughts on this: 13 unit courtyard condo building has a leaky gutter on one side. It’s basically causing lots and lots of water to fall on the decks of two particular units (my friend’s gets the most because one of the gutters crosses over her deck, the guy below her gets some water as well but the top floor is spared be virtual of the gutter design).
What’s happening is the water is turning to ice and causing a very unsafe environment for those who have to exit from this side of the courtyard to access the dumpsters and other common areas. Most of the condo owners don’t care because its not their unit being affected by the board doesn’t want to spend any money to fix anything they don’t have to.
I’ve told my friend that if someone slips there and injuries themselves, they could sue the association. Also the long term effect of extra water constantly pouring on the deck cannot be good — it will weaken it and require the deck’s lifespan will be shorter than expected.
Any suggestions for getting her board to realize that spending some money today will save them in the long run?
I’ve been in one of the 2/2 units, but it looks like it was slightly smaller than this place. The views are great, but otherwise, it was just so tiny, I couldn’t stand it.
When I first moved back here from Napa and was looking for 1 BDs in Aqua and River East(LOFL), I remember seeing like 5 people living in each apartment. I’d go by the pool on a mid-week day and it would be FILLED with 30 somethings who were all divorces or funemployeds. That was two years ago. I imagine things are starting to get pretty, pretty, pretty bad out there now that all that money has dried up.
I wonder what it’s like being a rental agent having to wait for four sets of parents to come and see the 700SF 2/2 they are trying to rent out for 3k a month.
That’s why these “ownerz” don’t want any rentals in their buildings. Because the people who used to be the market for these buildings are BROKE out there. The days of 6 figure Trixie and Chad walking into your high rise and plunking down $5K to move in are oooooooveeeeeeeer! These rental buildings need to take ANYTHING they can get, they don’t care if 4 dudes are living in a 2 BR, they just want that $$$$$. They don’t care if 4 kiddies are shacked up in a 2/2 with moms, they just want that $$$$$.
First comes lax rental standards, then come dead beat renters, then comes section 8 because at least they have guaranteed money.
Kudos to the condo board for having the stones to pull this move. The courts are going to side with the developers, of course, but at least they tried.
http://www.chicagorealestatedaily.com/article/20101229/CRED03/101229902/j-p-morgan-to-buy-majority-stake-in-aqua-apartments#axzz19c7RDbnj
JP morgan disagrees and buys a bunch of units in aqua
If anyone has their finger on the pulse of the real estate market, it’s the I-bankers! Those guys can’t miss when it comes to picking housing as the next hot asset class!
LOOLZ!
Get ready to fire up the printing press again, Benny!
Yeeeeeeeeeeeee Haaaaaaawwwwwwwww!!!
“Funny how it doesn’t matter if it’s a wealthy developer with a multi million dollar project or a guy with a 200K condo, the mind set is exactly the same: I refuse to sell until prices go back up to where they were. You would think the professional developer would be a little smarter.”
Re the 200k condo, it’s possible the owner can’t sell until prices go back up to where they were. It’s not pride, it’s finances. This may sometimes be true for the “wealthy developer” too.
Does someone know how to find out the number of rented out units in a building? Thanks!
“well if $167 isn’t a lot of change to you, i’d be happy if you tossed it my way every month”
I value every penny. All I’m saying is you just have to add that fee to your monthly cost and see if it’s worth it for you.
As for your friend’s problem. Talk to everyone in the building, explain the situation. If those deadbeats still can’t be arsed to spend a couple bucks to fix it threaten to sue and follow through. His deck is getting damaged by their stupidity. (and this kinda retardation is why I would never buy in a small cheapo development. Too many idiots trying to run things ghetto)
The solution is for the developer to lower prices for a sale. Yes, it hurts owners in that comps are lower, but that is market. You can’t stop the market. Even if the developer defaults, its still better than going rental. If owners can’t sell, then they will just default.
I know a few people have mentioned this already but…. the staging. Come on! It looks like these people just moved from a studio apartment into a 2BR and paid so much for this place that they couldn’t afford any additional furniture to fill it.
If the developers were smart they would do whatever they could to get out of this place as soon as possible. The association is going to make this a nightmare for them. Better to take their lumps and move on then to get stuck in a drawn out battle with the board. The board would be wise to instead of wasting everyone assessments on a silly pissing match make it easier for the developer to fill the building so that other owners who want to sell, can.
So fellow crib chatterers…
A friend of mine is relocating from the East Coast. He and his family (2 kids) plan to reside in Illinois long-term (20 years….) so he wants to buy. He asked whether he should buy in a large unit in a condo/highrise in gold coast, LP (with lake views), River North, or along Millenium Park or a SFH in Lincoln Park or on the North Shore (wilmette, winnetka, Kenilworth, etc…). He has 1 million for a down payment. What is the best long-term investment?
North shore right on the lake.
“North shore right on the lake.”
Seconded. Unless they are *definitely* sending their kids to private school, regardless of location of residence, in which case proximity to school of choice needs to be considered.
a local, does your friend want to live in the city or not? If not, then he’ll have lots of great buying opportunities in east Wilmette, Winn, Kworth, all either on or within short walking distance to the lake.
If he wants the city, does he want views and services, or a SFH? He’s got plenty of options either way, all within walking distance to Latin or Parker (and obviously the park/lake).
3rd north shore on the lake; dupage county or barrington.
A local – If suburbs, then Northshore with Lake frontage. If City and depending on whether kiddos are 10 years of age, then a nice huge northside LP condo with Park/Lake views (for kiddos >10 yrs) or a SFH east of Halsted south of Fullerton in LP (for kiddos
“are 10 years old”
a local, if I were your friend I would rent for a year and see which part of the city appeals to me. Nobody else can make that decision for your friend. I will never buy before living in a city for at least couple of month. Everyone has his/her own taste. For instance, loads of people here love LP, but it is just not my cup of tea at all.
I’m curious to see how the lawsuit will affect lending in that building. When we were selling, two contracts fell through due to pending litigation (albeit the board suing the developer; not the other way around like this situation). Neither buyer could secure lending citing the litigation. Granted, these places are selling for a heckuva lot more than ours was listed, so perhaps a buyer wouldn’t have the same hangups as our first two did…?
(**I’m short on time and quickly skimmed, so apologies if this point has already been discussed.)
Happy New Year everyone.
All,
My friend’s kids are ages 2 and 4 and they do not plan to have more. He is not opposed to private school and given that his kids are young getting in seems a possibilty. He comes from NYC where private is common. Also, he realizes that the cost of private school for 2 kids in the city (30-40) is about the same as the increased taxes on the North Shore…so schooling costs are about the same.
He is also used to living in a highrise as they have resided in NYC (Upper West) for the past 10 years. He never contempated a SFH in NYC as they were way beyond his price range (starting at 8 million). If he did purchase a condo he would want one with gym, 4 bedrooms and a great view (city or lake). In his mind, there is no point in getting a condo without a view…he would buy a SFH instead. (Obviously you give up the view for a SFH.).
He is also considering the North Shore as he will work in the Loop, one block from Oglivie. I have explained to him that the commute from the North Shore to Ogilvie is not that bad, about the same as driving from Lincoln Park. Transportation time is a consideration but he can work from home 2 days a week.
He never previously considered a suburb while in NYC since his kids were young and he would have not seen them awake given his hours. He is a litte nervous about DuPage/barrington/hinsdale and leaving the city and/or lake front as apart from big houses and good schools nothing really distinguishes these suburbs. (Sorry Clio.) Plus, the commute is worse.
He really just wants to get a sense of what will hold its value the best — SFH in LP, downtown luxury condo with view or North Shore house. He thinks that any of these would work for them.
“He never contempated a SFH in NYC as they were way beyond his price range (starting at 8 million)”
I think you mean the green zone in New York County (Manhattan).
“downtown luxury condo”
Given he has lived in the UWS for the past 10 years in a highrise this might be the best route. Not sure a North Shore house should be on the radar for him–it likely won’t be lively/urban/cultured enough. SFH in LP is another option.
a local: A couple of things.
First, will his wife be working? If so, and it’s in the city, that’s a strike against the northshore (a place I happen to like very much). Even if she’s not working (or not working full time), what does she plan to do when the kids are at school, or more importantly, what does she plan to do with the kids when they’re not at school? The city certainly has a lot more going for it in terms of activities.
Second, while I agree that the train commute from the northshore to the loop is a breeze, I’m not sure that it’s the same as driving from LP. I got in a cab at Clark and Webster this morning at 8:45 and was sitting at my desk by 9.
“a local on December 30th, 2010 at 9:56 am
The condo board is correct. You cann’t put the interests of flippers and the developers above owners who bought with the intent to live there.”
Why? Investors have no say in this? If you bought a unit with the purpose of renting and then the Board throws a $1000 moving penalty on you – that’s fair? Who is running this place? Hugo Chavez?
“Who is running this place? Hugo Chavez?”
No Hugo Chavez is a totalitarian regime controlled by the minority (ie: one). You getting scr_wed by owner occupants because you were a specuvestor in the minority is justified.
You’ve should’ve taken that contingent liability into account that if you wound up being a non-owner occupant and in the minority, that owner occupants might, as a bloc, put their interests ahead of yours. Sounds like you didn’t do your due diligence, no?
Looks like the streets weren’t paved with gold, afterall, were they?
Tony:
That is the point, most of these buildings don’t want specuvestors in the building renting their units.
Renters destroy the property value of the actual owners. This is why mortgage lenders don’t like to lend in buildings with too many renters. Rental units are also much more likely to go into foreclosure further hurting the owners of primary residences.
“Renters destroy the property value of the actual owners.”
While true I do wonder why this is. Is it because rental yields provide a good benchmark for what the real estate valuations should actually be in the building and appraisers take this into account?
My bad, the Obama regime is running this place. I heard the 1br assessments are going to be $50 a month and penthouses pay $50k a month. (sarcasm for all of you CC’ers who take things too literally).
As someone who has served on a Board – you can’t ban rentals without 2/3 voting for it. That’s unlikely to happen in a building like this considering the location. The Board can adjust the rentals rules (duration and moving fees). A $1000 move in fee will limit rentals. It’s a good thing I don’t own a unit here because I would make sure I got my $1000 worth…
Just what I would want as the Board president – to have my name show up in Google searches for a lawsuit against me.
Of course they arent paved with Gold – this is America. They are paved in Yuans.
I’d say a nicely located SFH in LP or Old town will hold its value the best. personally I think the gold coast sucks and it would probably suck with kids but what do I know
Russ and Bob hit the nail on the head! I think its more fair the say that an investor should calcuate the risk of not being able to rent it than it is for an owner occupant to calculate the risk that no lender will lend to the building because the % renter is too high. I suppose that total restraint on sales is always hypothetically possible but not as likely as a board having rental restrictions. Plus, investors should be more sophisticated and do the diligence. Lastly, once a building goes majority rental it rarely goes back b/c for deals to get financed they have to be rent only. Even if the investor wanted to sale later, he couldn’t b/c the rent ratio is too high. See…even the investor/flipper get’s screwed b/c even he can’t sell years later. The only owner it benefits is someone who wants to rent the unit in perpetuity….which is not even a flipper.
“While true I do wonder why this is. Is it because rental yields provide a good benchmark for what the real estate valuations should actually be in the building and appraisers take this into account?”
no its because owners don’t want to ever come in contact with those filthy, dirty, disgusting, hideous, scumbag renters that are destroying the common areas!
(yes im being facetious, but some people actually think this way about renters)
As for my friend, his wife is an OT or PT who works part-time. Her plan was to buy, get the family settled and look for a job a year later, probably part time. Thus, she could just as easily work in the city as the North Shore.
“He really just wants to get a sense of what will hold its value the best — SFH in LP, downtown luxury condo with view or North Shore house. He thinks that any of these would work for them.”
Tell him to buy whatever he wants. No one can predict house prices 20 years from now. SFH in LP and North Shore are probably the safest bets. If he goes condo get something overlooking grant park so the views are safe. This isn’t really an investment question, more of a “do I want to rot in the boring burbs with a soul crushing commute or have an exciting urban life”. [nothing wrong with burbs if that’s what you’re into]
I own a unit in the Optima Views building Evanston – which has an 18 month rental limit and a $400 moving fee. The rentals are around 20%-25% of the building. This is pretty standard considering its 2 blocks from NU. There is another Optima building down the street (literally, 3 blocks away) similar type building, floor plans, etc. They have zero rentals and ban them. This building has been absolutely slammed with price declines. Short sales galore. As an owner, I have no problems with the rentals. This is just my own personal experience which is why I disagree so much with these statements. Yes, investor beware – condo board might not have any business sense.
Bob:
Typically, renters do not take care of a place to the same degree as an owner. They have less invested in the overall community. This is why the government, whether right or wrong, pushes home ownership. When people own their homes they are more likely to care about their neighborhood.
Banks don’t want the exposure to rental units because the owners are more likely to default thus endangering their collateral.
While not a direct comparison, think about how you treat a rental car versus your own…
The specuvestors absolutely destroyed a lot of developments. The cheaper Museum tower next to this one is nearly 50% rental now.
Tony…there is nothing wrong with 20-25% rentals and this is good so that people don’t have to short sell. However, if you read the whole string, you will see that when rental rates increase above 30% conventional lenders refuse to lend on all refinances and sales. Thus, if people want to sell and can’t because no one will finance, then they will strategically default and short sell to all cash offers. You see, the best business sense is to allow the maximum number of rentals under 30% and then cap them. If you don’t cap them at 30% then the building loses value becuase buyers can’t get mortgages and/or sell. Would you buy into a building if you thought you might not ever be able to sell…of course not, or if you did, you would seriously lower your offer. Buildings with greater than 30% renters will lose value and may never recover b/c if 50% are rental how are you going to get the rental rates back below 30% so lenders will lend…Do you think 20% of the units will just not rent out for a few years and sit empty so units can sell…of course not….you don’t have a clue. The 1000 fee was the boards way of limiting rentals (keeping it below 30% likely) but not completely disallowoing them so that hardship cases can rent and cover most of the mortgage while they try to sell. It just keeps speculators from profiting at the expnese of others. Also, the board can instutte fees without amending the declaration which takes 2/3 vote and time. Likely the developer did not cap rentals at 30% to give them the flexibility to rent it out and amending a declaration takes time.
Instead of the massive fee, why not just say we are limiting the rental to 30%? Is that legal?
There is no real perfect solution here. If people cant rent and foreclose, then pricing goes down and then the owners can’t sell anyway – without taking a serious loss or foreclosing like everyone else.
I bought into a condo building where the bylaws stated that rental restrictions do not apply to the developer owned units. I sold my unit in that building before we ever were able to challenge the legailty of that but I’m sure it was legal.
I once worked with a guy who specuvested on a Florida condo. The board wound up preventing rentals. I’d imagine its in foreclosure now if not already back to the bank.
These rules, while perhaps legal, are walking a very narrow ledge between protecting the interests of the owners or actually doing the opposite.
Personally if I was a non-OO and the board stuck it to me like that I’d have no qualms with defaulting and sending in the keys.
Very seldom in business when you are scr_wed over by another party financially do you have the opportunity to turn the tables on them and put it right back on ’em.
You can cap it at 30% but you have to amend the declarations which takes some time b/c to be legal you have to provide notice and get 2/3 vote, etc… A developer could rent out tons of units in a short amount of time….this is probably why the Board took this interim step. It would not surprise me if the condo is in the midst of changing the declaration to a 30% cap.
“Very seldom in business when you are scr_wed over by another party financially do you have the opportunity to turn the tables on them and put it right back on ‘em.”
Very true indeed…
Icarus: In regards to the gutters, you’ve taken the first correct tact on impressing upon the board that they are knowingly allowing a created hazardous condition to occur. But it shouldn’t need to get there – check the bylaws and I’d be surprised to find out that the gutters weren’t common property and as such should fall under the yearly maintenance budget. We had something similar at our place, and while people groaned who weren’t directly impacted it went through fairly easily. We’ve also ran a tight ship, keeping solid reserves up for the past 6 years without needing to raise assessments.
In regards to rental – we did institute a max % on renting, and then put in a very detailed rights section on who could rent when (mainly to allow everyone a shot at it rather than just the first few owners and then sit on it). I also pushed to make certain that once a year the board would be forced to contact mortgage brokers for updated rental % quotes and adjust if needed. This was done as the conversation got heated around exactly what percentage to cap at (as it swung the # of units). Building is happy from that point of view.
So … $350 for this?
I think the condo Board may have a problem here. First, legally they have to explain the support for the fee. Also, I don’t think you can charge one fee for a rental move and another (lesser) for an owner move.
Also, there are probably alot of owners that rent their apartments that are also stuck with this “rule” (not approved by the ownership (by-law change)) which would have more credibility in court.
This will likely be a real mess and in the end only the lawyers will win.
They are probably in the process of amending the declaration, which would be a permanent legal fix to which a court will defer.
we tried to rent here about a year ago, couldnt get the flipper/specuvestor to come down on rent. if there were a 2k in-out fee i would want that built into the rent and i still would want the price i was asking.
creative way of keeping rental down! usually with pissing matches there is really no winner just a wet smell floor leftover.
also until you view a unit and pitcure where you bed will angle for the best morning and bedtime view, then you will get this building.
“This building has been absolutely slammed with price declines. Short sales galore”
Tony, would that be the Optima Horizons?
“Tony, would that be the Optima Horizons?”
any word on how the optima buy old orchard is doing. i have seen a few more lights on over there lately?
This unit just closed @640K. Only 10k under listing. Though listing agency seems to have changed from when Sabrina listed this.
Sorry, $10k under the last listing price, opps, not Sabrina’s 12/2010 listing price, which was at $750K.
I was in the south loop several times over the last two weeks preparing my wife’s condo for the new tenant. Previously I have not spent much time there but it was a nice surprise to see how much the immediate area had improved. (She owns at 17th and Prairie) The landscape was lush, more stores were open, and the area was clean and I saw no graffiti. It was much better than I recalled.
Her building has had some issues in the past and major special asessments however I was also pleased to see that it was spotless and that there was not a single unit up for rent.
“A friend of mine is relocating from the East Coast. He and his family (2 kids) plan to reside in Illinois long-term (20 years….) so he wants to buy. He asked whether he should buy in a large unit in a condo/highrise in gold coast, LP (with lake views), River North, or along Millenium Park or a SFH in Lincoln Park or on the North Shore (wilmette, winnetka, Kenilworth, etc…). He has 1 million for a down payment. What is the best long-term investment?”
Where did a local’s friends land?
I also agree about the south loop improving. Few weeks ago I was down there visiting a friend and was surprised at the hustle and bustle on the streets and the strollers, young people and just much better general vibe of the area.
I ate at an amazing place on 13th and wabash too on that little strip called ‘Flo and Santos’ seriously get their buffalo pork wings and raviogi you will LOVE them oh god mouth watering just thinking about it soooo good polish/italian cuisine