A group of “shocked” suburban Palatine condominium owners are trying to prevent their association board from allegedly under-selling the condo development for $49 million, allegedly for the board's personal gain, claiming the price would short owners of what they could get if they independently sold their units by more than $25 million.
The suit was filed April 5 in Cook County Circuit Court by 32 owners of 54 units at Woods at Countryside, a 719-unit condominium development at Countryside Drive and Sterling Avenue in Palatine. Defendants are the condo associations' board of directors, including named defendants Nick Marrieti, Rob Palley and Jake Gantz.
David Rudolph | Rudolph Kaplan
The three board members are also representatives of Renaissance Residential of Countryside, of Chicago, the corporation that created the condo development in 2007, the lawsuit said.
Plaintiffs want an injunction to keep the board members from selling the development.
Plaintiffs said the development has been in “financial distress,” with the majority of units never having sold. Specifically, plaintiffs alleged RRC is in default on the first and second mortgage liens for the several hundred units it owns. Plaintiffs also pointed out several members of RRC have been charged with mortgage fraud in federal court.
RRC must own at least 75 percent of units to wield the power as a super majority and sell the entire condo development, under the Illinois Condominium Property Act. The board has arranged to sell the development to a buyer identified as DREP Master III LLC. At a meeting of condo owners Feb. 26, a vote was taken on the proposed sale, with RRC's 76 percent ownership carrying the day.
None of the plaintiffs voted for the sale, which is to close by April 27.
Plaintiffs said they were “shocked and confused” when they looked at the sale contract and saw that as part of the bulk sale, their units were “inexplicably” being sold for 40 to 50 percent less than they believe they could sell for individually. This information led plaintiffs to conclude the board is allegedly breaching its duty to “seek the highest and best value for the association development.” As a consequence, plaintiffs complained they could be deprived of any equity or proceeds from the sale.
The board never engaged a real estate broker or put the property on the open market, according to the suit, but plaintiffs did, hiring John Meyer, of 33 Realty, whom they described as a leader in suburban Chicago multi-family brokerage. Meyer said the condo property would be worth $65 to $70 million on the international market.
The suit contended the board's focus has been “clouded by a financial incentive to inflate the default interest, penalties, etc., on the second lien payoff,” while “scheming to deflate property values,” without caring what financial injury the deal will inflict on plaintiffs.
Plaintiffs want the board barred from going ahead with the sale and for the pending sale contract to be rescinded. They further seek unspecified punitive damages.
If the sale goes through, plaintiffs want the buyer to make up the difference between the value of plaintiffs' condo units in the bulk sale, compared to the greater value of units if sold individually. Also, any underwater mortgages at the time of the bulk sale must be satisfied by the buyer, not the plaintiff-owners. The pending contract wrongly puts this burden on owners, plaintiffs said.
Lastly, plaintiffs alleged Marrieti, Palley and Gantz bought 60 units through a corporate entity they set up, but did not pay off special assessment bills pending on those units, as required whenever a unit is sold. Plaintiffs want this money paid into the condo association's reserve account.
Plaintiffs are represented by David Rudolph, of the Chicago firm of Rudolph Kaplan.
The case is assigned to Cook County Judge Anna Demacopoulos.