Chicago condo conversions are a dying breed now that the real estate market went into a nose dive. In the late 90’s a few firms were converting condos in Chicago but there weren’t a lot of them. As the decade and century ended, it seemed like out of nowhere every mom and pop was converting their buildings to condominiums.
Today it’s different. The cost for buying an apartment building, renovating it and then lifting the price to sell the units as condos is not possible. Primarily the reason behind this is the amount of condos that are selling at a discount right now. The Chicago condo market is filled with short sale condos and foreclosed condos causing this huge wholesale condo market. It will take several years to remove this wholesale market before condo conversions come back in Chicago. Until then there is a huge amount of conversion inventory that needs to be moved. There were dozens of developers that were in the middle of conversions when the market tanked sending the developments into a standstill. Today this product is sitting there unsold and at a tremendous discount from two tears ago when it came to a screeching halt.
You can buy condos today from converted units for a 20%-30% discount from what they were selling at in 2006. I’ve seen deals that are beyond comprehension. One of the reasons a developer will come down on his price is the bank that hold the loan is at a point of not renewing it. Banks will give a developer a loan for a certain amount of time. If the number of condo units is not sold by a particular time, the bank will demand repayment of the loan immediately. This will put the condo developer in a sticky situation of having to dump a number of units at a discount to meet their quota for the bank. There are so many developers in this situation today. You can go in a buy a block of condos at a huge discount, sometimes thirty and forty cents on a dollar if the developer is in that type of trouble.
Chicago condo conversions will come back someday, but not soon. I predict it will take about five years to clear up this mess with the foreclosures going on today. There are so many foreclosed condo units that it’s just about impossible to keep up. The banks have condo inventory like never before. Until that happens, we won’t be seeing too many condo conversions in Chicago soon.
