In the wake of a vote to approve a sale that would reportedly pave the way for the largest condos-to-apartments conversion in Chicago to date, a group of condominium owners in the River City complex have filed suit to block the more than $90 million sale, accusing the condo association board of working with the would-be buyers to essentially target and bribe certain unit owners to persuade them with secret “side deals” to vote to approve the sale.
The collection of condo owners, including owners on both sides of the vote to sell the South Loop condo complex to developer Marc Realty, filed their complaint in Cook County Circuit Court on Oct. 3 through attorneys with the firm of Chuhak & Tecson, of Chicago.
“By conspiring with Marc Realty to target only those owners who had already voted against the sale at the price Marc Realty wanted to offer, the (River City Condominium Association) Board helped Marc Realty pay far less than they had agreed to pay under the original (Purchase and Sale Agreement), instead electing to award the benefit to a minority of owners who could be bribed into switching their votes,” the plaintiffs said in their complaint.
Attorney Kelly Elmore, of the firm of Kovitz Shifrin & Nesbit, of Chicago, who represents the River City board, did not immediately reply to a request for comment from The Cook County Record.
The dispute dates back years, as Marc Realty has sought to acquire the River City properties to turn the condo units into apartments, apparently to reap rents amid Chicago’s ongoing apartment boom.
Fueled by the continuously rising demand for apartments in Chicago, a number of condo associations across the city have agreed to sell the buildings to real estate companies and developers, under a process known as “deconversion.”
While many condo owners have welcomed the chance to unload their units to cash-paying buyers, others have been more reluctant. However, under a provision of the Illinois Condominium Act, commonly referred to simply as “Section 15,” condo association boards are empowered to compel the sale of all units within a building if a sale proposal receives the approval of at least 75 percent of yes votes from owners within the association.
However, such elections are conducted using weighted ballots – meaning, owners who hold a greater share of the association, such as those who own more units, will also have a greater say on the outcome of the vote. Further, voters can and often do vote by proxy, rather than voting in person at a meeting of the board for the election.
According to the River City owners’ complaint, River City voters rejected two initial offers from Marc Realty for about $83.1 million and $92.2 million, respectively. In December 2017, unit owners appeared to approve a sale worth $100 million, with 79 percent of owners voting yes.
However, in May, Marc Realty terminated the sale, and then came back with an offer worth $90.5 million. About 77 percent of owners purportedly approved the sale at the lower purchase price in balloting that closed at the end of August.
However, opponents of the sale cried foul, and, according to the complaint, conducted an audit of the votes cast. They assert their audit indicates the purchase deal actually received only 72 percent of the vote.
Further, they alleged their information indicates the River City board worked with Marc Realty to hold the vote open, even though more than 90 percent of owners had voted, to allow the buyer to “bribe” as many as 35 owners with “additional consideration not set forth in the contract,” to change their votes from no to yes.
The complaint asserts this maneuver stands as a violation of the law, and should invalidate the vote, which they said “was the result of substantial misrepresentations .. to induce the owners to vote against their best interest.”
And the complaint further asserts the alleged actions by the River City board and Marc Realty particularly harmed those who voted yes, as they were denied the additional compensation allegedly offered to the selected holdouts.
“Obviously, Marc Realty did not make the same offer of additional consideration to any of the voters who had already voted ‘yes’…,” the plaintiffs wrote. “Therefore, all Unit Owners who voted ‘yes’ … prior to July 24, 2018 were limited to receiving the Base Allocation available to them.”
The River City plaintiff owners asked the court to grant a temporary restraining order blocking the sale, and for a permanent injunction against the sale, based on the Aug. 28 vote.