Real Estate

Condo Board Cancels $95M Sale to Strategic Amid Financing Delays

Condo board cancels $95M sale to Strategic after two years of failed financing attempts.

By Doug Elli

5/22, 17:38 EDT
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Key Takeaway

  • The condo board at 200 North Dearborn Street terminated a $95M sale to Strategic Properties due to prolonged financing delays.
  • This follows another failed $190M deal with Strategic for Ontario Place, highlighting ongoing issues with the firm's financing capabilities.
  • Rising interest rates and market uncertainties have led condo owners to reconsider their options, impacting potential future sales.

Strategic Properties' Second Failed Deconversion Attempt

Strategic Properties of North America has faced another setback in its efforts to deconvert downtown Chicago condominiums. The condo board of 200 North Dearborn Street recently voted to terminate its agreement to sell the 310-unit Loop building to Strategic for $95 million. This decision comes after more than two years of failed attempts to secure financing for the deal. This is the second major deconversion failure for Strategic in less than a year, following a similar collapse of a $190 million deal for the 467-unit Ontario Place in River North last July. The recurring theme of financing difficulties and prolonged delays has left condo owners frustrated and eager to move on.

The Details Behind the Collapse

The agreement to sell 200 North Dearborn was initially made in July 2022, a time when interest rates were significantly lower. Strategic had promised to close the sale within five months, but the firm struggled to secure the necessary financing. According to a statement circulated among condo owners, Strategic cited "unprecedented disruption in the lending market" as the primary reason for the delays. Despite assurances that financing was forthcoming, the firm failed to provide detailed updates or meet the closing deadlines. This lack of transparency and progress led the condo board to vote 3-0 to terminate the deal, with one abstention and one absence.

Broader Market Implications

The failure of Strategic Properties to secure financing for these large-scale deconversion projects highlights broader issues in the real estate and lending markets. Rising interest rates have made it increasingly difficult for developers to secure loans, affecting not just Strategic but the industry as a whole. This trend is evident in other markets as well. For instance, CH Planning recently abandoned a controversial 50-story condo project in San Francisco's Outer Sunset due to similar financing and regulatory challenges. These cases underscore the volatility and uncertainty in the current real estate market, particularly for large-scale developments.

A Perspective on Strategic's Challenges

From my viewpoint, the repeated failures of Strategic Properties to close these deals reflect a combination of market conditions and perhaps a lack of strategic foresight. While the firm blamed the lending market's disruption, the prolonged delays and lack of detailed communication with condo boards suggest deeper issues. The rising interest rates have undoubtedly played a role, but the firm's inability to adapt and secure alternative financing solutions raises questions about its operational efficiency. Moreover, the tension and legal battles among condo owners further complicate these deconversion attempts, making it a challenging environment for any developer.

Management Quotes

  • Jonathan Taylor, Condo Board Member at 200 North Dearborn:

    "I am beyond ready to move on."
    "They wasted two years of time that people could have been selling their units and putting that capital to work."

  • Strategic Properties of North America (Statement):

    "[We are] having difficulty securing debt because of the unprecedented disruption in the lending market... [We have] secured financing but faced unexpected delays for regulatory processes, and [are] continuing to search for additional lenders in the meantime."