Berkadia Facilitates $21M Fort Myers Transaction

Berkadia Facilitates $21M Fort Myers Transaction

ESG Kullen’s purchase of 186 units in a fractured sale secures the new owner’s control over the southern Florida condominium association.

Berkadia has brokered the $21.3 million fractured sale of Cobblestone on the Lake, a 290-unit community in Fort Myers, Fla. Gestion Sebring sold part of the garden-style property. ESG Kullen purchased 186 units, thus gaining complete control over the condominium association. The acquisition includes 144 rent-ready units and 42 apartments in shell condition, which are set to undergo renovation.

Senior Director Tal Frydman, Director Yoav Yuhjtman and Associate Director Nicholas Perrone of Berkadia’s South Florida office, along with Senior Director Jason Stanton of the company’s Tampa office, represented both parties in the transaction. Recently, brokers from the firm’s South Florida office were also involved in a $27 million Louisiana portfolio transaction.

Located at 4301 Executive Circle, Cobblestone on the Lake is within 2 miles of Edison Mall and within 3 miles of both Interstate 75 and Highway 41. The asset encompasses 13 buildings, with one-, two- and three-bedroom units ranging from 764 to 1,835 square feet. Community amenities include a swimming pool, a clubhouse, a fitness center and jogging/walking path.

Year’s End Brings Another Big Condo Deconversion

Year’s End Brings Another Big Condo Deconversion

ESG Kullen acquired the eight-story 1140 North LaSalle Drive for $38M and plans to turn its 250 condos into rental apartments.

The deal was brokered by Kiser Group’s Lee Kiser, Michael D’Agostino and Jake Parker. The Kiser team also introduced equity broker Alpha Capital to ESG Kullen, resulting in Harrison Street Capital becoming a partner in the deal.

According to state law, buyers seeking deconversion deals need to secure an agreement to sell from 75% of a condo property’s owners. New York-based ESG Kullen has been one of the most active investors hunting for such deals in Chicago. It recently convinced the homeowners association of 1400 North Lake Shore to sell its 391 condo units for $112M, but pulled out of the deal when it could not find an equity partner, according to Crain’s.

That failed transaction, along with an extended battle over the eventually successful sale of River City at 800 South Wells, illustrates that good deconversion deals are getting tougher to find, even though the rental market remains as lucrative as ever.

ESG Kullen’s latest acquisition was originally built in 1924 as a luxury hotel. It was converted into a mix of studio and one-bedroom apartments and in 2006 turned into condominiums. The deconversion process began with an unexpected bid.

“After being approached with an unsolicited verbal offer, the board of directors interviewed multifamily brokerage firms to meet our fiduciary responsibility in securing the highest possible offering,” Flats on LaSalle Condominium Association President Jim Bright said.

The Kiser team was selected and vetted more than a dozen offers. ESG Kullen’s $38M proposal was approved by more than 85% of the owners, Bright said. “This is a hybrid property, meaning although size and location would be attractive to institutions, the vintage and unit size are more closely associated with the private market,” D’Agostino said.

ESG Kullen got the nod not only because of price and terms but also due to its experience with condo deconversions and 1920s construction, D’Agostino added. Converting apartment buildings into condominiums was quite popular in Chicago during the decade or so before the Great Recession. Returns to condo developers were higher than those for apartment owners, but today the reverse is true.

“While the price of a condominium may not be attractive to the homeowner, the whole may be greater than the sum of the parts — meaning an apartment investor might pay a lot more for the unit,” Lee Kiser said.

More than 20 deconversions closed in Chicago in the last two years, according to a September report from Avison Young, citing Real Capital Analytics data, although the true number is probably higher.

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ESG Kullen does bulk condo buy in Delray Beach

ESG Kullen does bulk condo buy in Delray Beach

The deal for the 391-unit Lake Shore Drive tower is the most expensive deconversion in Chicago history

ESG Kullen just closed on a bulk condo deal in Delray Beach, and plans to immediately renovate and sell them off individually.

The New York-based real estate firm, headed by Eric Granowsky and Thomas DelPonti, paid $7.5 million for 93 units at the 275-unit Murano at Delray Beach, according to Mark Meland, an attorney who represented the firm. The seller was USO Norge Murano LLC, an affiliate of Norwegian investment firm Obligo. The deal at 15005 Michelangelo Boulevard comes out to about $81,000 a unit.

MidCap Financial Services provided an $8.4 million loan.

ESG will upgrade the condos and hopes to sell them starting in June 2019 for about $200,000 each, Granowsky said.

Records show the Obligo affiliate sold the units at a loss. It paid $8.8 million for the units in 2009.

In October, ESG bought 118 units of the 219-unit Monteverde at Renaissance in Boynton Beach for nearly $18 million.

ESG Kullen’s deconversion bid accepted by Gold Coast condo owners
 after initial rejection

ESG Kullen’s deconversion bid accepted by Gold Coast condo owners
 after initial rejection

The deal for the 391-unit Lake Shore Drive tower is the most expensive deconversion in Chicago history

If at first you don’t succeed in deconverting a condo building into apartments, try, try again.

After failing to win condo owners’ approval two weeks ago, New York-based ESG Kullen successfully bought the 391-unit tower at 1400 North Lake Shore with an eye toward turning those units into apartments, Crain’s reports.

The deal, at $112 million, will be the biggest condo-to-apartment deconversion in Chicago.

Owners of condos in the Lake Shore Drive building rejected ESG Kullen’s first offer in late July. Under state law, 75 percent of ownership needed to sign off on the sale, but only 74.6 percent did.

The firm secured the deal not by upping its price, but by agreeing to pay some owners a premium for recent renovations to their units.

One condo owner at the Gold Coast tower told Crain’s the deal was a “no-brainer.” That’s because owners will be paid about about $425 per square feet, well above recent sales prices in the building that were closer to $300.

More and more investors have been willing to pay a premium for residential towers in order to take advantage of Chicago’s hot rental market.

Recently, Marc Realty Capital attempted a similar buyout of the 449-unit River City complex, but the deal fell apart after the developer abruptly lowered its offer from $100 million to $89 million.