John Buck makes offer to buy condo building drowning in legal bills

John Buck makes offer to buy condo building drowning in legal bills

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1-Aug-18 - A Gold Coast condominium association that needed a $500,000 special assessment to pay for legal expenses has an offer from an affiliate of John Buck Company to buyout every unit owner and turn the building into a rental property.

In a letter sent to State Parkway Condominium Association on March 26, but only recently shared with unit owners, Buck Acquisitions LLC outlines terms and conditions of an offer to buy 160 units and 110 parking spaces for $45 million. Included would be the building, all fixtures and improvements, leases, and easements. It would not include any money the association has in reserves.

The $45 million would come from a private equity fund.

The company says it would turn the condominium into a "multifamily rental building." Unit owners could lease back their units. Any pre-existing leases they had with tenants would be honored if the rents are at "market rates" and the leases expire no later than 12 months after the closing date.

Page 1 of Buck acquisition offer

If the offer is approved, parties would negotiate the sale of every unit, but the sale would still go through if less than ten percent of the units had not closed, with the purchase price adjusted accordingly.

A $500,000 deposit would be kept in an escrow account, according to the offer (left), which is signed by Kevin Hites, President and Chief Investment Officer of John Buck Company.

$2.6 million in legal bills over 13 years

Since 2005, State Parkway has spent an estimated $2.6 million on legal expenses, according to Michael Novak, a unit owner and former CPA with an MBA in Finance.

Travelers Indemnity Company says State Parkway exhausted a $1 million insurance policy that covered legal expenses. The condo association had planned on using Great American Insurance Group as the excess carrier, but Great American has refused to pay and on April 25, 2017, sued State Parkway, seeking a declaration from a federal judge that it owes no insurance coverage obligations to any party.

Much of the legal expenses were incurred suing and responding to lawsuits and counterclaims filed by Novak, who is deaf. He has filed complaints with the City of Chicago and battled his condo association in Cook County Circuit Court, Illinois Circuit Court, and United States District Court.

The disputes between Novak and his condo association include Novak being cited for a "pet violation" for having a service dog. Novak has accused the association of discrimination, harassment, and retaliation.

Novak calculates the $45 million offer equal to $276 per square foot.

"That's hardly enough to persuade unit owners, especially the elderly and/or handicapped that live on fixed incomes, to leave their homes and find suitable replacement housing," wrote Novak (right) on July 31 in his blog about management issues at State Parkway Condominium. "On the other hand, landlords may rush to sell their units at an appropriate sweetened offer."

Photo by Steven Dahlman

John Buck Company is a real estate development and investment firm. The company says it has completed $10.5 billion in capital transactions since it was founded in 1981.

• Contact Steven Dahlman at sdahlman@loopnorth.com