Updated List of Chicago Condo Towers Canceled or In Doubt
Crain’s reported yesterday that Related, co-developer of 340 On the Park, is canceling Canyon Ranch in River North but is mum on what will happen with its other proposed new building, The Peshtigo.
There are several buildings that are now either canceled, on the verge of being canceled, or the developer is in financial difficulty.
Condo Towers Canceled:
- Canyon Ranch: Hotel/condo building in River North developed by Related. Canceled in March 2008 (per Crain’s)
- James Place, a 16 story River North highrise at 100 W. Huron. Canceled in February 2008 (per YoChicago)
Developers in financial distress:
- Burnham Pointe at 710 S. Clark: Terrapin facing foreclosure on several of its other properties but fate of Burnham Pointe unclear (per Sun-Times and Crain’s) in February 2008
- Park Michigan at 830 S. Michigan: Developer facing foreclosure suit (per Crain’s):
Plans for an 80-story condominium tower that would overlook Grant Park on South Michigan Avenue are in doubt after a lender filed a foreclosure lawsuit, seeking to recoup more than $4.25 million.
The foreclosure action by Chicago-based Hermes Capital LLC is the first on a high-profile project here since the condo market tanked early last year.
At 855 feet, the Park Michigan project at 830 S. Michigan Ave., three blocks south of Congress Parkway, would be the tallest tower in the burgeoning South Loop.
In a foreclosure lawsuit filed Feb. 15, Hermes Capital claims that Oak Brook-based developer Warren Barr and his firm, Renaissant Development Group LLC, defaulted on the $4.25-million loan by failing to raise at least $2.13 million in new equity to help cover pre-development costs by Dec. 31.
Mr. Barr’s firm has not broken ground or begun marketing units in the proposed skyscraper and is still seeking buyers for a proposed 40-story condo tower nearby at 1000 S. Michigan Ave.
Buildings in doubt:
- The Peshtigo in Streeterville also a Related development. According to YoChicago, it is only 15% sold.
The Park Michigan [website]
Park Michigan was the one I hoped were built.
It doesn’t look good for Park Michigan, though I did like the design myself.
I think Burnam Pointe will be completed because its already almost done.
Pitty about Canyon Ranch, that was a very attractive and striking design and would have uniquely broken the monotony of painted concrete monoliths in River North. Never seemed like they really had their act together on that project though, and it took the way too long to start sales from the time the project was announced at the height of the boom. Slightly different timeline and it probably would have succeeded.
I am wondering about the beautiful tower that the Waldorf-Astoria was to build. In addition, there was to be a hotel/condo tower across the street from 600 Fairbanks that looked like a mini-Heritage design. It was to be built by a boutique hotel chain from Minneapolis called Graves.
I think condo-hotels were a figment of the housing bubble. It’s popped so bye-bye to future condo-hotels. It is going to be very very very messy to unwind the current condo-hotels. Most condo-hotel owners will figure out they overpaid for a fancy hotel room that losses money each month. The only people that will have made money are: (1) the developer and (2) the condo-hotel management company (assuming people can pay their assessments). If you want to invest in a hotel why invest in a condo-hotel where you invest in just one room? Diversify and invest in a hotel company or hotel sector fund. Same goes for apartments, don’t be a landlord, just invest in a real estate fund instead. Silly people, they bought a dream, now it won’t go away. You buy a condo-hotel room, not only are you stuck with that particular room, but you at the mercy of the market and the management company. Let the lawsuits and infighting begin. There things are going to get messy. Once the banks get involved with foreclosures, even worse. I was always skeptical about condo-hotels.
John,
I think this niche was created and existed because there is always a segment of the population that prefers tangible assets/investments over intangible ones.
This is similar to the people that use their IRA funds to invest in real estate, private equity, small businesses and other non-listed securities. These investments have much larger transaction costs, aren’t as liquid and don’t often beat the overall market when all of these are factored in, but the niche is is still booming. The only explanation I can think of is the ‘tangibile’ factor.
Or irrational exuberance…. Why overpay to buy a a hotel room (maybe Priceline.com should get involved with these prices too!)? If they were such a great investment, the hotels would keep them all for themselves. The ONLY way condo-hotels made sense was if they appreciated in value, not from the income stream. Now we know homes aren’t investments. In fact, you should keep housing and investments separate (like you should also do with insurance) and not lump them together. Also, just like keeping owning tulip bulbs separate from investments. When people fixate on potential capital gains, and not the business fundamentals, they make dumb investments. The hospitality business it tough and competitive, why invest in just ONE hotel room! Condo-hotels are DOA going forward.
John –
Nice reference to the tulip bulb. When I think about the individuals walking around in the sales office of the Trump, I think about people who sit around in the North Shore and brag about owning property at the trump (they also were the people who bought the red yacht and lost a bundle and never sailed). These people don’t care about REITS or Funds, or what they do with their interest. They care about status and brand, about material, not about digital money and financial instruments. Who will live in the PH of the Spire? Who will buy in the Aqua and bring their friends out on Mich to see it from the water? Who will leave their condo and visit the U-club without going outside?
There is a nice size contingency of mid-thirty trust fund playa’s and 50 year old widows who have only been given the financial advice to protect the principal and play with the interest.
All of us who read this blog are from a more financially intelligent crop than the hotel/condo investors – we may not realize that most people have never seen an amortization schedule. That’s one reason they but the hotel/condo, but then again, if you had 800k/year of interest and 20 mm in principal, conservatively, would you be in the trump sales office?
No if I had 20mm in principle I’d be a real playa in NYC so I could do impromptu visits to the offices of my interests in private equity and hedge funds. 🙂
Fairbanks,
Your not hearing much about the Waldolf, but the project is still kicking around. It went for review by the plan commission on Monday.
G – I think a lot of these people are needy wannabes looking for status….and they are going to have a lot less status once the sheriff comes knocking to foreclose on some of that status. I doubt many of these people really have the means to support such a lifestyle and when there is no capital appreciation it will get interesting. Glad I don’t play that game.
Anyone know how sales are going at the Waterview condos above the Shangri La Hotel? (Now in construction.) Are they selling well?
Canyon ranch was very pricey and that’s why it won’t be built-I am waiting to see what happens to waterview tower and Trump. Does anyone have a good idea on how many units are sold in these two projects
According to the latest Apprasial Research report (Q4), Waterview reported that 80 of 200 hotel condos were sold (40%), Trump reported 191 of 286 were sold (67%) and dont forget about Mandarin Oriental which reported 110 of 252 sold (44%).
Condo-Hotels are doomed going forward. They make almost no economic sense for buyers in today’s real estate market. Once the appreciation was gone, that was it. I would think banks would be running from financing any of these purchases. Condo-Hotels are complicated animals and a fraught with the individual owners complaining and complaining. It is hard enough to run a hotel with one owner, think about it with 300 owners! Knowing what I know about condos (complicated enough) and hotels (challenging business) why would I want to add those two together and be part of that (unless of course I was the developer!). Nope, not for my. The only synergy is negative synergy. Run, don’t walk, from these things.
I think condo hotels are this decade’s version of timeshares. Timeshares don’t make economic sense either but people still buy them.
Timeshares: you get to pay $10k for a week in a shared condo once a year and if you don’t use it or find an occupant yourself the management fee to find one and rent it out cancels out any revenue from it. Oh yeah and lets not forget periodic bills to get new furniture and increased hurricane insurance, etc.