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Developer likes these 4-to-1 odds in Lincoln Park
By Dennis Rodkin
As more developers convert two-flats into high-end single-family homes, Bob Berg is going a step further and trying the same idea with four-flats in Lincoln Park.
Berg, owner and president of Foster Design Build, recently listed a three-story 19th century building at 1957 N. Dayton, currently four apartments, for sale as a custom-rehabbed house with up to seven bedrooms. The price: $3.8 million.
On Aug. 10, he'll list another four-unit apartment building, 1942 N. Mohawk, as a single-family home for almost $4.4 million. And he's looking for more four-flat conversion candidates in Lincoln Park.
"The demand around here is more for the larger single-family homes than for the little apartments in vintage buildings," Berg said. While he and other developers are cranking out new and rehabbed houses in the area, the former four-flats offer an as-yet untapped route to "meeting the demand for more inventory."
He's trying to meet that demand in multiple ways. Berg said his firm has 17 projects on the boards, including teardowns and renovations. Three projects on the 2000 block of Dayton are each priced at over $3.4 million. In late May, Foster bought a red brick 19th century home on Fremont for less than $1.18 million and turned around to offer it at more than $2.6 million with an extensive rehab and addition. He's already lined up a buyer.
Berg's four-flat plan ups the ante on a trend that's sweeping less-expensive neighborhoods farther north: turning two-flats into single-family homes.
Like builders who are riding that wave, Berg said preserving an existing multi-unit shell and refilling it with the floor plan, utilities and finishes of a lavish single-family home provides an all-new warrantied interior wrapped with a classic Chicago facade. It also has the advantage of using a wider footprint than current zoning allows on new construction.
"There's a lack of teardown possibilities, so the next step is, 'Hey, let's start buying apartment buildings,'" said Brian Goldberg, a partner in LG Construction & Development, another residential developer.
In January 2014, LG paid $1.1 million for a Deming Place two-flat, which had originally been a single-family home, and turned it back into a single-family home. Priced at $3.35 million, it's now under contract.
The four-flat strategy also limits Berg's risk because the properties, both of which are occupied, are generating rent from tenants while he waits for them to sell. Many builders are stuck with land that generates no income, a potential problem if it takes a long time to sell their homes.
On the other hand, Goldberg said, when the time comes to push existing renters out, "you could be delayed by a tenant who refuses to go, and while you're working that out," the buyers of the future house move on to something that's ready to roll.
A venture led by Berg bought the Dayton rental building in 2012, according to Cook County property records. County records and Berg did not disclose a price. Another Berg entity paid more than $1.5 million for the Mohawk building in May, the records show.
Though Berg's four-flat strategy is unusual, others have thought even bigger. In 2011, developer Bill Varney converted a St. Ben's six-flat into a single family home and converted it into a single-family home that he listed for nearly $3 million.
It didn't go well. Varney, who paid $1.1 million for the Grace Street building, gave the property back to his lender, PrivateBank, in a deed-in-lieu-of-foreclosure deal. The bank then sold it for less than $1.45 million.
At that time, the housing market was only starting a fitful recovery, and the project was a tad ambitious for the St. Ben's neighborhood, a piece of Lakeview.
"There's only one Lincoln Park," Berg said.
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