Several investors at the long-troubled Woods at Countryside condominiums in Palatine have filed a lawsuit contesting the proposed sale of the complex so it can be turned into rental apartments, alleging the deal would be far below market value.
Originally built as a 1,200-unit rental development in the mid-1970s, 719 of the Woods at Countryside apartments were converted into condos after gaining Palatine village council approval in 2007. Since then, there was a spate of foreclosures during the housing crisis and five people were convicted in federal court of mortgage fraud connected to condo sales there.
Now, a three-man majority ownership group on the Woods at Countryside condo association board wants to sell the entire complex to a company that would turn the units off Sterling Avenue near Northwest Highway back into apartments.
However, the tentative $49 million sale has been deemed well below market value by other owners trying to halt the deal through the lawsuit filed April 5 in Cook County circuit court.
Court documents filed by the attorney for 32 plaintiffs who own 54 condos contend an appraisal shows the Woods at Countryside should sell for $65 million to $70 million -- not the proposed $49 million. The suit seeks a temporary restraining order and injunction to prevent the sale from closing April 27.
Plaintiffs attorney David Rudolph said owners typically do better financially in a bulk sale than in individual deals.
"In this deal, it's reversed," Rudolph said. "It doesn't make any sense that they're getting 40 to 50 percent less on this deconversion than they would if they just sold their units (individually)."
Named in the suit are Chicago-based VennPoint Real Estate principals and co-founders Nick Marietti and Rob Palley, along with company vice president Jake Gantz. Court papers say those three are on the Woods at Countryside condo board, which has had a "troubled financial history" since forming in 2007.
Under Illinois condo law, Gantz, Marietti and Palley were allowed to vote for a bulk sale because they own at least 75 percent of the Woods' units, according to court documents. The condo board members and their attorney, Howard Dakoff, did not return messages seeking comment.
What's happening in Palatine is part of a trend of condo deconversions seen in the suburbs for about the past two years.
Board members of the River Trails Condominium Association in Prospect Heights want to sell the 16-building, 360-unit complex to developers interested in shifting the homes into apartments. The effort resulted in a lawsuit last year from homeowners opposing the plan.
If the Woods at Countryside sale succeeds, the proposal would have to go through Palatine's approval process, including the village council, officials said.
"They're going to have to do a whole property inspection report, give us the condition of all the property, what needs to be done to be upgraded to meet any current codes we have out there," Village Manager Reid Ottesen said. "Do they have the financial wherewithal to do that?"
In 2010, about 100 properties at the complex were reported to have fallen into foreclosure during the housing crisis.
Rudolph said most of the Woods at Countryside residents are renting from condo owners involved in the lawsuit. No one will be forced from their homes if the complex, featuring two-story garden-style buildings on landscaped grounds, is sold and turned back into apartments, he added.
"When the leases are up, the buyer might say, 'We're gutting it, you've got to move out,'" he said. "If a tenant has a lease, they don't have to worry that all of a sudden they're going to be kicked out."