MULTI-FAMILY CASE STUDY
Location: Chicago, IL
Purchase Date: June 1, 2012
Project Returns: 51% IRR / 2.26x EM as of 1/1/19
Years Held: Current Portfolio Asset. 6.5 Years
Coming out of the Great Recession, many failed condo projects existed in Chicago. In most cases, a small percentage of condo units were sold to individuals and the developer’s foreclosing bank owned the remaining majority of condo units. At Greenleaf Paulina, 38 of 40 condominium units were owned by Republic Bank which at the time of acquisition were 45% vacant. Two individuals owned the remaining 2 units.
Solution & Outcome
MK Asset Investment purchased Republic Bank’s 38 units. MK Asset immediately installed its principals on the Condominium Association Board and inserted its captive management company. In conjunction with bringing its management expertise, MK Asset completed the remaining capital improvements involved in the completion of the construction of the project. MK Asset’s leasing team over the first 6 months of ownership brought occupancy to 98% with rental rates 18% higher than as a bank owned property.
MK Asset successfully litigated the Section 15 construct of the IL Condo Act winning judgments against both unit owners and banks forcing the sale of those units back to MK Asset at market valuations below a traditional sale based on the broken development and MK Asset owning the majority of condo units effectively limiting available financing for such arm’s length transactions. Within 17 months of original acquisition, MK Asset attained ownership of all 40 units. At the same time, MK Asset conducted a complete tax segregation study to enhance returns on a tax adjusted basis. MK Asset was the first Plaintiff to argue and win judgments against banks and individuals under the Section 15 construct under the IL Condo Act.
Effective December 15, 2013, or 19 months from the time of acquisition, MK Asset refinanced the project returning 130% of the original equity invested. MK Asset continues to own this project and has maintained over 93% occupancy throughout the entire life of the investment.