A Chicago developer wants to buy all 448 condominiums in the eccentric South Loop complex called River City and convert them back to apartments, an unusual type of deal that is catching on in Chicago.

Marc Realty Capital has offered to buy the entire residential portion of the mixed-use complex at 800 S. Wells St., according to a Jan. 19 letter sent to condo owners on behalf of the buildings’ homeowners association. Marc is offering $225 per square foot for the condos; the association will hold an owners meeting Jan. 26 to discuss the offer, the letter said.

If approved, the sale would reverse an early-2000s conversion to condos at the pair of Bertrand Goldberg-designed buildings, which opened as apartments in 1986. It also would be the biggest downtown condo building to “deconvert” to apartments, an emerging trend fueled by the hot multifamily rental market. With investors paying up for apartments and prices in some condo buildings still depressed, developers are trying to arbitrage the two markets and profit from the gap in value.

At $225 per square foot, Marc’s offer amounts to $86.2 million for the residential part of the two connected modernist buildings, one 13 and the other 19 stories tall, on the South Branch of the Chicago River.

The offer comes at a time when “it’s very hard to sell” condos at River City, said one owner, Crotan Zakarija. The high numbers of foreclosures and renters in the property are twin turnoffs to lenders, making it hard for buyers to get financing.

Under Illinois condo law, the owners of 75 percent of a condo building’s units—336 in River City’s case—have to approve the sale for it to go through. If they do, any who opposed it are required to sell anyway.


With several apartment towers with thousands of units planned or under construction in the South Loop, the plan to deconvert River City “looks like a chance for Marc to come in and get a lot of units cheap,” said Michael Wax, a real estate investor who owns a one-bedroom River City unit he rents to tenants.

Yet the offer of $225 per square foot tops the going rate for River City condos. On Jan. 15, four days before the association’s letter went out, a buyer paid $147 a foot for a one-bedroom on the 10th floor, according to sale information posted by Midwest Real Estate Data. Three units sold last fall for between $160 and $174 a foot.

David Ruttenberg, principal of Marc Realty Capital, did not respond to requests for comment, nor did Kelly Elmore of Chicago law firm Kovitz Shifrin Nesbit, who signed the letter to River City owners. Association board President Micheline Magharious and River City property manager Laura Cullen declined to comment.

Getting a few hundred owners to agree to the sale will be a challenge, said Ari Topper, an agent at Jameson Commercial Real Estate who is representing the owners in a pending 14-unit condo sale in Old Town.

“The more owners you have, the more complicated it is,” Topper said.


Though a precise breakdown could not be determined, investors may own as many as 80 percent of the condos at River City, said real estate agent Bret Derrickson of Urban Aire Realty, who lists several units there for sale and for rent, as well as marina slips outside.

“They’re almost all owners of one or only a few units,” he said. “I don’t know anyone who owns a large block of them.”

For investors, deciding whether to support the Marc proposal “is going to come down to the numbers,” Derrickson said. “Will they come out better than if they held on long term and watched the value go up?”

Owner-occupants may have more complex feelings, though many of them have been upside-down on their mortgages “for so many years that this may look like the way out,” he said.

During the housing meltdown, values in the building dropped by as much as 75 percent, Derrickson said. They haven’t fully recovered. The 10th-floor unit that sold last week went for $97,000, 13 years after its sellers bought it for $179,000, according to the Cook County Recorder of Deeds.

Deconversion from condos to apartments has been snowballing since summer 2014, when a developer paid $7 million for all 24 units in a Lincoln Park condo building. Several other deals followed, and recently the board of a 133-unit condo on Clark Street started peddling the building as a deconversion opportunity. Last year, the board of a 492-unit building on LaSalle Street rebuffed a developer’s proposal to buy them all out.

Alexis Eldorrado

“As a seasoned Chicago Real Estate Broker and having represented both Sellers and Buyers in River City along with almost buying a Boat Slip in the Marina there myself at the time of the conversion, Marc Realty Capital’s David Ruttenberg’s offer to owners of $225 per square foot is phenomenal. The building was a giveaway promotion when converted by Nick Gouletas’ American Invesco. Nick, who I have met and truly admire, was raising capital for a Las Vegas development and needed a high percentage of River City under contract in order to get his funding for that project. Nick’s River City marketing was brilliant and successful. It caused a frenzy, as buyers, most of them first time investors, were guaranteed rental income for 1 year, even if the unit was vacant, and guaranteed 2 years of paid assessments. The result was a building with a very low owner occupancy ratio that became unwarrantable for lending purposes. The original owners were limited to selling to only cash buyers. An inordinate amount of them ending up short selling or being foreclosed on. Those that survived are dramatically upside down in value to this day. Marc Realty Capital’s offer, I am sure, is a huge light at the end of the tunnel for many of them. With the 75% vote needed, I would predict a slam dunk for David Ruttenberg’s purchase and a lot of happy owners. For the owner-occupants who may be forced to sell against their will, there is still good inventory and good value in the surrounding area. The low steady ebb of appreciation has still made living downtown or near downtown doable. There are still good deals to be had but not “too good to be true.” Crain’s Dennis Rodkin’s article on River City is reflective of his usual great, accurate, and detailed reporting.”

Alexis Eldorrado
Eldorrado Chicago Real Estate

(Source: Crain’s Chicago Business)