Meridian Capital Group arranged $72 million in acquisition financing for the condo deconversion of Kennelly Square in Chicago into multifamily rental units, on behalf of Strategic Properties of North America (SPNA). The 24-month loan features a floating rate and two 12-month extension options.
Located at 1749 North Wells Streetin the heart of Chicago’s Old Town Triangle neighborhood, Kennelly Square is a boutique residential condominium community consisting of 268 studio to two-bedroom units spread across two buildings, the 24-story Tower building and the nine-story Warehouse building, which are connected via internal hallways and are serviced by the same lobby and elevators. Kennelly Square features more than 4,000 square feet of ground floor retail in addition to a pool and sundeck, fitness center, laundry facility, and 140 enclosed parking spaces.
Many of the lakefront buildings in Chicago that are undergoing deconversions were built in the second half of the 20th century, and were converted to condos during the boom of the 1970s and 1980s. As these properties go through standard wear and tear, the owners are hit with hefty repair bills, which can transform into a special assessment if the work is postponed. As such, securing financing for the deconversion process proves incredibly challenging, as the low cash flow and steep repair costs impact the risk level of the deal.
“In today’s real estate market, individual condominium values can be lower than that of stabilized apartments on a per-unit basis,” said managing director, Shaya Ackerman, who negotiated the financing for this transactionand along with senior vice president Shaya Sonnenschein. “The bulk sale of a condominium association to an apartment investor is extremely complex, but is beneficial for both sellers and buyers, as sellers receive a premium on their unit at closing and buyers receive a discount on standard apartment pricing. While terrifically challenging, this unique transformation will offer SPNA a significant return on their investment and bring the property under consolidated ownership.”
This is the fourth successfully executed condominium deconversion transaction for both SPNA and the Ackerman team in the past 24 months, with almost half a billion in loan proceeds received from these transactions.
“We see a lot of upside in these transactions,” said SPNA principal Saul Kuperwasser. “And as a product of Shaya’s expertise on these deals, his broad lens view of the entire capital stack and his ability to continue to navigate our debt and investment needs, we are the largest buyer of these properties in the state.”
