If you use "Select Subset" you can still turn the prop into a smart prop, but you have to edit the pp2. You need to have saved the prop with "Use file compression" turned off in your General Preferences, then just open the file in a text editor and replace any lines reading "parent UNIVERSE" with "smartparent NameOfParent" where "NameOfParent" is the internal name of the actor the prop is meant to be parented to.