After years of bidding against condominium converters to buy properties, billionaire financier Sam Zell’s apartment company, Equity Residential Properties Trust, is becoming a condo converter.
The Chicago-based real estate investment trust has identified about 50 properties for conversion over the next two to five years out of a nationwide portfolio of 1,079 properties, confirmed Alan George, executive vice president with Equity Residential.
The condo conversions are a new wrinkle in an ongoing strategy of selectively selling off assets and redeploying the proceeds by buying higher-yielding properties or investing in markets with high barriers to entry.
The conversion program will begin this fall with 120 units in the Four Lakes Village development in southwest suburban Lisle, where Equity Residential owns more than 1,500 units of the 2,500 units in the landscaped complex, George said.
The complex includes about 1,000 units that were converted in the early 1980s before Equity Residential acquired the development.
Depending on demand, the company may convert as many as 1,000 units in Four Lakes. Residents who don’t want to buy will have the option of moving elsewhere in the gated community, which has a swimming pool, fitness center, a small ski slope and covered parking.
George would not comment on how much the company expects to gain from the sales, or identify other properties earmarked for conversion.
“In general, they are well-located assets that have layouts and construction quality suitable for condominiums, and where we believe we can extract more value than we could if we sold it as an apartment project,” he said.
Construction woes: The Wacker Drive reconstruction is hurting business at Smith & Wollensky, the popular riverfront steakhouse that opened in 1998 in Marina City.
Last year, the 610-seat restaurant recorded annual sales of $14.3 million, according to documents filed by Smith & Wollensky Restaurant Group Inc. with the Securities and Exchange Commission.
The $200 million construction project started in February, and during the first quarter of this year, sales were just $2.4 million at the 21,543-square foot restaurant at 318 N. State St.
The New York-based chain didn’t break out sales for its Chicago restaurant for the second quarter, when “same-store” sales for the company’s seven restaurants fell 10.9 percent to about $17 million.
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The firm attributed the companywide drop in sales to the economic slowdown, particularly in New York, and to “disruption caused by major bridge repairs adjacent to the Chicago Smith & Wollensky.”
General Manager Patrick Norton said business started to pick up after the State Street Bridge re-opened in July, but doesn’t expect sales to regain their lofty levels until the project is completed next year.
Mall discord: Still recovering from the loss of two anchor department stores, the Randhurst Shopping Center is becoming embroiled in litigation.
Earlier this year, Montgomery Ward & Co. and J.C. Penney Co. closed their stores in the Mt. Prospect mall. While Ward’s filed for bankruptcy and went out of business, Penneys closed its store as part of a restructuring by the Texas-based company.
Penneys’ decision prompted a lawsuit by Randhurst’s owner, Rouse Co., a Maryland-based real estate development and management company.
The case filed earlier this year, involves a common provision in retail leases called an operating covenant. Such clauses require that tenants not only pay rent, but also keep their stores open. Landlords often demand such promises from anchor tenants who are crucial to attracting customers to a shopping center’s smaller stores.
Rouse claims that Penneys’ promise in 1989 to operate a department store in the mall until 2005 required it to renew its lease when it expired in June of this year.
Meanwhile, Home Depot USA Inc., which moved into the mall in 1995, has filed suit in federal court against Rouse, claiming that the shopping center company is not maintaining the parking lot. The Atlanta-based home improvement chain wants a court order allowing it to repair the lot at Rouse’s expense.
A Rouse Co. spokeswoman did not return calls requesting comment.