The miracle on Lake Shore Drive? At $107 million, it’s the most ever paid in a condo deconversion in Chicago—and possibly the country.

It took nearly a year and a half, lots of lawyering and a “Hail Mary pass,” but a New York investor has finally pulled off its takeover of a big lakefront condominium tower in the Gold Coast.

ESG Kullen on Nov. 22 closed on its acquisition of the 391-unit vintage building at 1400 N. Lake Shore Drive, ending a process that began in the spring of 2018. ESG pursued the 21-story high-rise so it could convert the property’s condos back into apartments, a popular strategy among real estate investors trying to capitalize on the strong Chicago multifamily market.

The sale nearly fell apart multiple times, as condo owners in the building argued over the deal, rejecting it in one vote, and ESG struggled to obtain financing for it, asking for a price cut in the end. ESG said it wound up paying about $107 million for the building, the most ever in a condo deconversion in Chicago.

“It was a miracle that we were able to do it,” said Michael Arrington, president of the building’s condo board and owner of 87 units in the high-rise.

He said a last-ditch effort saved the deal after ESG said it couldn’t pay the full contract price of $112 million. Forecasting that the building’s property taxes would jump by a lot, ESG asked for a reduction of about $6 million. Rather than holding another owners’ vote to approve the lower price, Arrington asked the building’s owners to accept less for their condos on a voluntary basis.

More than half agreed, including Arrington himself, enough to reach ESG’s lower price.

“It was kind of like a Hail Mary pass, but we got it done,” Arrington said.

The sale of 1400 N. Lake Shore highlights how hard it is to pull off a large condo deconversion in Chicago. Most property sales involve two parties: a buyer and seller. But a bulk condo sale can require the approval of dozens or, in the case of 1400 N. Lake Shore, hundreds of sellers with different motivations. Some, especially investors who rent out their units, are willing to sell their units for a premium and move on, while others, especially people who have lived in their condos for a long time, refuse to sell even at irrationally high prices.

Under state law, owners of at least 75 percent of a condo building must vote to approve a bulk sale to a single investor. Many votes fall short. The Chicago City Council made the process even harder in September, voting to increase the threshold to 85 percent.

Getting over 75 percent was ESG’s first obstacle. The first vote, in July 2018, fell just short, at 74.6 percent. After ESG sweetened its offer, the deal passed in a second vote a couple of weeks later, with 85.8 percent of owners voting yes.

The sale hit another snag last December, when ESG, unable to line up an equity partner to finance the transaction, terminated its purchase contract. It revived the deal in January, with an expected April closing date. But ESG kept pushing the closing back, fueling concerns that the sale would fall apart again.

The firm asked for the lower price a few months ago, citing the prospect of higher property taxes, which would depress the building’s value. Landlords all over Cook County are bracing for tax increases after Cook County Assessor Fritz Kaegi jolted owners of commercial properties in the northern suburbs with big assessment hikes this year. Some investors are lowering purchase offers to account for the risk of higher taxes, a major cost.

To keep the sale of 1400 N. Lake Shore alive, Arrington came up with his novel idea: Instead of putting the new, lower price up for a vote that might not pass, he bet that many owners would be willing to part voluntarily with some of their sale proceeds just to get the deal across the finish line. Even a slightly lower price—about 5.2 percent overall—would be better than nothing, he figured.

“That was the only way we could do it legally, without having a revote,” Arrington said.

Arrington put his money where his mouth was, agreeing to give back about a third—roughly $2 million—of the price cut ESG requested. Some owners gave up nothing, but many gave more than their suggested share, he said. He valued the deal at $106 million, slightly lower than ESG’s value, but legally the deal closed at the contract price of $112 million, he said.

ESG still paid all owners more than what they would have received in an individual sale of their condos, Arrington said. Investors that deconvert condo buildings can typically pay a premium over market prices because the units are worth so much more when reassembled as apartments under one owner.

Overall, ESG extended its purchase agreement eight times, he said. In the final months, many owners, including himself, just wanted the whole ordeal to end.

“I had one guy who said, ‘Mike, I’ll give you 20 percent just to get out of this,’” Arrington said. “I think they were just beaten down.”

For ESG, it’s just the beginning. With financing from its equity partner, New York-based DVO Real Estate, the company plans to invest an additional $10 million into major renovation of 1400 N. Lake Shore, including improvements to its lobby, common areas, roof deck and units that haven’t been rehabbed, according to an ESG spokeswoman.

ESG likes the Gold Coast. The firm also owns a 250-unit deconverted condo building at 1140 N. LaSalle St. and has agreed to pay $92 million for a 309-unit condo tower at 2 E. Oak St. Yet delays have also pushed back the sale of 2 E. Oak, which was approved in July. In an email, the ESG spokeswoman said only that the sale “is proceeding.”

Dan Cohen, executive vice president at CBRE, and CBRE Vice President Sam Haddadin brokered the sale of 1400 N. Lake Shore to ESG.

The sale of the 448-unit River City housing complex in the South Loop goes down as the largest Chicago deconversion when ranked by number of units. The sale of 1400 N. Lake Shore Drive is tops in price paid not just in Chicago, but nationwide, according to Arrington.