Condo/Hotel Short Sales Appear in Trump Tower: 401 N. Wabash in River North
Crain’s reported yesterday that two short sales have appeared in Trump Tower at 401 N. Wabash in River North in the hotel/condo section of the building.
The investors who bought the two units from the developer last year are trying to sell them at steep discounts through so-called short sales, or for less than the debt owed on the units. One hotel room is on the market for less than half of what it sold for in March 2008.
The cases also raise questions about how low condo-hotel prices in the riverside project can go. And one broker with listings in the building expects more foreclosure suits in the future.
“No question about it,” says Andrew Glatz, president of Chicago-based brokerage Crown Heights Realty. “There will be a flood of them.”
Mr. Glatz is trying to sell a condo-hotel unit on the 20th floor for $379,000, less than the $493,589 loan balance on the unit. The owner bought the room from a Trump affiliate for $664,000 in February 2008. Wells Fargo Bank N.A. last month filed to foreclose on the unit.
Wells Fargo has also sued to foreclose on a unit on the 24th floor with an original mortgage of $712,000. The unit is on the market for $389,900, 56% less than the $895,000 Trump sold it for in March 2008. Wells Fargo would have to approve both sales if the investors can’t repay the loans in full but want to be released from the mortgages.
Mr. Trump says the two suits and potential short sales say nothing about the project at 401 N. Wabash Ave., which includes 486 residential condos and 339 hotel units. The development is “doing very nicely,” he says, and foreclosure suits in new condo developments are “common all over the place,” not just in his building.
In the condo portion of the building, which is on the higher floors, the Chicago Tribune has been reporting on former Bears quarterback Rex Grossman’s attempts to sell his 2-bedroom unit that he bought only last year.
The 3,437 square foot unit is now listed for $595,000 under the October 2008 list price.
It is also now listed $385,000 under the 2008 purchase price.
Susan Miner at Premier Relocation has the listing. See the pictures here.
Unit #36A: 2 bedrooms, 4 baths, den, 3437 square feet
- Sold in 2008 for $2.68 million (according to the Tribune)
- Originally listed in October 2008 for $2.89 million
- Reduced numerous times
- Currently listed for $2.295 million (two parking spaces available for extra)
- Assessment of $1745 a month
- Taxes are “new”
- Snaidero cabinets
Grossman drops asking price [Chicago Tribune, Bob Goldsborough, Nov 8, 2009]- Scroll down to the bottom of the article
2 Trump hotel unit owners face foreclosure [Crain’s Chicago Business, Alby Gallun, Nov 18, 2009]
Prices have to continue going down in this building. I recently had a client walk from a 30% off deal for almost 4000sf at 575/sf…. He rented a similar unit for less than half of what it would cost to buy, even at that discount. The developer is trying to hold the Lind on prices which is a joke when you look at resale. There is a huge shadow inventory of speculators who would jump at the chance to get out even at a loss. Any guesses on when this building stabalizes? Over under is 5 years.
That being said I like it in the low 500s/sf if it gets there.
I’m hesitant to pick an over/under that close as I suspect interest rates will be rising in five years time and that many of these were financed with ARMs. I’d peg it closer to 10 years.
Easy money on the over. The hotel industry won’t stabilize in 5 years (if it ever does…or has, for that matter.)
Matt you’ll be able to buy these all day long at under $500 soon enough. Your answer lies in your client’s math. Enjoy.
You guys may be right! We will see. Only on Crib Chatter can I come out with bearish outlook and be called bullish! LOL
I suppose it would only be befitting for the TT to wind up with the moniker of River City North.
Interesting data point: the unit went under contract immediatly when we cancelled contract.
It wouldn’t surprise me if the building became a “repartment” I am actually bearish on this building. Overpriced and way too many people bought in at the top with a large number of them being specuvestors. They are going to bring the building down with them.
There is nothing about this building or pretty much any in Chicago for that matter that justifies more than $500/sqft.
As it has been said many times before, this ain’t manhattan.
Matt,
I read or saw a thing, where in the trump building there is a underground sales market of “rights” to buy from the preconstruction buyers that havent closed and these cant be listed on the MLS.
(i dont think i worded that paragraph well, i may have confused myself)
At $2.295 million the parking spaces are extra?
Groove77,
There is considerable truth to what you say, though I’m not sure the underground market really exists. There are a number of buyers who can’t/won’t close and they want to assign their contract to another buyer. For a while they had their units on the MLS but Trump made them pull them off because they don’t own the units, therefore can’t list them. Trump was trying to thwart the resale market, which was about 30% below the price Trump was selling at.
However, Trump was allowing friends and family to list theirs on the MLS and some agents claimed they were able to get Trump to reassign the contracts at closing.
The whole thing made me very nervous – aside from the fact that I thought the building was way overpriced.
One more thing. I had a conversation with the Trump folks a while back and they claimed (of course) that buyers were closing, that they would not allow people to reassign their contracts, and that if people couldn’t close they were going out of their way to help them via extensions, financing, etc… The implication was that if someone couldn’t close Trump would resell the unit, not the buyer.
The problem with these new developments – and I don’t get this – is that they usually don’t give you a mortgage contingency. WTF?
I am really curious as to the number of units that are closing. My gut tells me that there is a huge amount of contracts that can’t close due to lack of financing. We get calls/inquiries pretty frequently about financing units and most are a no go. Most lenders won’t touch developments with condotels in them now even if the unit isn’t part of the hotel and if they do, the down payment requirements are significant – upwards of 50% down. Given most of these contracts were done three plus years ago when financing was readily available, I would bet a large number of the contracts were for 10% down and the buyers no longer qualify for financing now.
Rex Grossman’s place or a North Shore estate? I’m not one for the suburbs, but I could buy the estate AND keep a pied a terre in the city for what they are asking.
Regarding financing in the building, lenders do not want to have anything at all to do with the condos here. When lenders see the condotel portion of this building, it is not possible. I believe that Aqua has a similar issue since a significant portion of that building is designated apartments and is owned by a single entity.
Most buyers would have to do cash. The only other option for financing is an affluent buyer asking their bank, Harris, Northern Trust, etc. to write a mortgage and keep it in house. Typically, this type of buyer would have lots of $$$ invested with these banks.
On the broader subject of condo/hotels, what is the future for these? Raffaelo for example is a nice place in a great location but prices are now 1/3-1/4 of their peak. I guess these end up as serviced 1 bed/studio? Any other views?
“The whole thing made me very nervous – aside from the fact that I thought the building was way overpriced”
Gary,
i was bullish on trump even with its crazy prices, i just thoought the with the hotel amenities and insane views that the preimium was worth it. I for one like it in the skyline and am waitng for next spring to see if the river walk will be open to the public and a brunch place will pop up there.
It seems personal feelings aside that financially this building is getting scary.
I think you guys are overly bearish – perhaps because you look at the homes/condo’s as an investor rather than as a person who would live there, and because you don’t have all of the trend data.
Anyway, here are some stats on the downtown condo market:
Between 1995 and 2009, 31,206 condo units have been delivered to the downtown market, of which 27,383 have been sold. There are 4,854 units delivered or scheduled for delivery between 2009 and 2011, of which 3,004 are sold/under contract with 33 in 3Q09 – this is net of the cancelled projects. The unsold inventory has steadily dropped from a high of 5,814 in 4Q07 to 3,823 in 3Q09. Of the unsold inventory, only 931 units are completed.
Of the new construction condos engaged in active marketing, 1,185 condos have closed in 2009. HOWEVER, in 3Q09, there were NO new sales of units +$400/SF.
Trump Tower is 75% sold at an average $/SF of $874. Note that the average price was over $1,400/SF for a while and hung at +$900/SF until recently – this is largely due to the fact that the premium units sold first (who wants to stare west into Jenner & Block’s spaces in the IBM building?). The Ritz Carlton, which broke ground in July 09 is 47% sold at an average $/SF of $1,200. The Elysian is 92% sold at an average of $/SF of $1,047.
All data is from the Appraisal Research Counselors.
So, what conclusions can we draw. First, long term, Chicago is clearly a market for downtown condo buyers, even in the luxury ($500-$699/SF) and super luxury (+$700/SF) segment. If that weren’t true, there wouldn’t be a 15 year track record of sales across all segments. Second, condos are moving, but only at the lower end of the market – likely dominated by first time buyers. It seems to me that the rich and the investors are largely waiting on the sidelines until a general consensus that the market has begun to clear. First time buyers feel smart given their purchase prices compared to peers and don’t want to risk timing the market given their current life circumstances (have the money, rates are low, units have deep discounts).
That being said – to the building at hand and my prediction – Trump Tower is certainly in the super luxury class and units will eventualy move at above $500/SF given the discount to historic prices. Its a great building in a great location with an auroa that is still holding – if you don’t believe that, look at its hotel occupancy and average daily rates compared to the rest of the market.
Its funny reading the Rex Grossman details, where it gives all of these multi-million dollar listing prices followed by “Snaidero Cabinets”.
That just seems so weird, random, and out of place. What the hell are Snaidero Cabinets anyway?
Difficulty on prediciting a recovery is inflation outcomes. Might be faster if we actually get inflation (not sure). In real terms though, I could believe it takes 10 years.
As an alternative to cash (practically zero interest LT bonds) though, I agree Trump at $500 per sq ft looks interesting.
I can see people with the money paying $500/SF but Trump was charging $1000 when we looked at it. I’m talking about the residential area.
And yes, Groove, the views were outstanding.
This is just further proof that the spire will remain a hole in the ground. What a disaster this building is going to be!
“What the hell are Snaidero Cabinets anyway?”
If you walk past the Merchandise mart on the west side of the building you will see a Sniadero setup in the windows, they are nice Italian kitchen cabinets that probably cost an arm an a leg (or heloc).
Views are great.
Finishes are good but definitely not $1000 per sq ft good. From my recollection, kitchen area is small and some folks may not like the quantity of cabinet space.
I don’t love the layouts either.
“From my recollection, kitchen area is small and some folks may not like the quantity of cabinet space.”
Rexy’s kitchen looks plenty big, but then I’m sure you’re referring to the smaller units, and those do look quite small on the floorplans.
I am not sure it anyone already mentioned this but Trump wants to drop the developer owned unit pricing to meet the market, but the loan agreement with Deutsche Bank will not allow for it. Seems counter intuitive but a lot of things in banking are counter intuitive right now.
“Trump wants to drop the developer owned unit pricing to meet the market, but the loan agreement with Deutsche Bank will not allow for it”
You believe what Trump says on this matter (or in general, but esp. this)? Please.
I def. believe banks will do the dumbest thing possible. Trump knows how to save his a$$.
“All data is from the Appraisal Research Counselors.”
Logan Square, do you realize that when ARC says “sold” they are typically (if not always) referring to “under contract” and not “closed”?
“if you don’t believe that, look at its hotel occupancy and average daily rates compared to the rest of the market.”
The market is in freefall. Even IF Trump is outperforming the luxury sector (any data?), that might only be the differnce between a disaster and more of a disaster.
“I def. believe banks will do the dumbest thing possible. Trump knows how to save his a$$.”
Sure. But Trump would lie to a blind widow to save two bits and then threaten to take her to court.
If Trump says “they’re keeping me from lowering prices” and not publicly threatening to take them to court, I think he’s lying.
Those loans from Wells Fargo on the units under foreclosure were ridiculous. What morons. Too bad my kids will be paying for them.
I’ll tell you, this is a beautiful building but everytime I look at it I see alligators. Very hungry alligators.
There are few entities I have more disdain for than Trump but DB is one of them. I had an interview there some years back, one of the interviewers was a Spaniard who got into an argument with his wife over the phone during the interview, yeah apparently some MDs really do feel they can treat the world and people like assholes because they’re rich. Needless to say it wasn’t much of an interview and I didn’t get the job.
However the kicker was the argument was over their spec house!
I wonder how thats working out for him. 😀
G –
ARC lists units as sold/under contract – net of cancellations (cancelled contracts and cancelled buildings). Some of the stats are sold/under contract, others are closed. Regardless, its the best available source on the downtown condo market.
I saw a STR (Smith Travel Research) report for a luxury set in downtown – I believe the hotels were Trump, Ritz Carlton, James Hotel and I forget the 4th and 5th. Trump was crushing their competitive set in terms of occupancy, RevPar and ADR. The alure will not last forever, but it is still out performing the market. The real question to ask is if this is a relevant corollary to the condo’s. I think it is in terms of perceived quality, but is not 100%.
Neither the condo nor hotel markets will stabilize until the unemployment rate stabilizes anyway.
“The alure will not last forever”
No but while I consider him a mediocre businessman he is excellent in terms of exposure for his brand. So long as he keeps appearing on TV I think some allure will stay for awhile.
Imagine your Joe beer belly from Iowa planning a weekend vacation for him and the Mrs. anniversary. He’s got some extra cash saved up and really wants to impress the Mrs. He’s going to take her to Trump because most of America eats Doritos and watches TeeVee and they see Trump.
Joe beer belly and his Mrs. from Iowa dosn’t know James Hotel, and likely associate Ritz with crackers. But they knows Trump from TeeVee.
wonder if Rexy’s dad will be in the papers soon spouting off on what a great price his son is listing at.
“ARC lists units as sold/under contract – net of cancellations (cancelled contracts and cancelled buildings). Some of the stats are sold/under contract, others are closed. Regardless, its the best available source on the downtown condo market.”
Yes, but it tells us nothing about closed sales in the luxury props you mentioned. That is the problem – getting them to close.
Given how poorly the Texas are faring in their division it might not be Rex’s pad his dad will be pitching but rather what a great QB his son is despite the rest of the team!
Joe Beer belly visiting from Iowa stay at the Best Western so they can eat out at a “nice restaurant” like the Chilis on State st. You think those clowns have $$$ to throw down $400 a night? yeah.. no.
Given how poorly the Texans are faring in their division it might not be Rex’s pad his dad will be pitching but rather what a great QB his son is despite the rest of the team!
“like the Chilis on State st”
doode that so stereotyping, they can get chili’s anywhere. silly they go to the weber grill.
“doode that so stereotyping, they can get chili’s anywhere. silly they go to the weber grill.”
no… they dont. They go to places they are familiar with even though they are surrounded with probably the best restaurants per square mile outside of Manhattan. And that’s why they live in Iowa, because they’re idiots.
“You think those clowns have $$$ to throw down $400 a night? yeah.. no.”
Uhh yeah some do, actually. Ever see what kind of trucks they drive out there? You’d be surprised to learn that many of those trucks likely cost more than your wheels.
I don’t think the ability to drop $1k for a weekend getaway is beyond the reach of most yokels to be honest. In fact that’s probably why our country is in the debt problem it is.
Trust me, I live in tourist row with a direct view out my window of the Trump I know how these yokels behave, and I can tell you they aren’t staying at the Trump. Nobody is!
“I can tell you they aren’t staying at the Trump. Nobody is”
yeah cause the yokels are staying in rosemont by ohare and rent a car to pay for parking in the city. cause all they know is car culture and TGI Fridays is the trendy place to eat.
BTW sadly i live in the city with the greatest restaurants and yet i still go to Weber grill three time a year. (well given one time a year its at the one in oakbrook)
Weber Grill sucks what the hell is wrong with you!
“Weber Grill sucks what the hell is wrong with you!”
i didnt want t admit it sorry 🙁 but they have this grilled appetizer thing i crave it sometimes….i am sorry so sorry.
“yeah cause the yokels are staying in rosemont by ohare and rent a car to pay for parking in the city. cause all they know is car culture and TGI Fridays is the trendy place to eat.”
Case in point: my parents.
Come out to visit my for graduation but couldn’t find a hotel downtown (all booked up for graduation weekend by mid-May–DUH!). So what do they do? Instead of looking outside of downtown in the city at one of the many, many B&Bs they stay at an O’Hare Hotel because its a chain and in suburbia chain=good. At least they didn’t rent the car though: I was the gopher.
Trying to explain non-car culture to one from car-culture is like trying to explain calculus to a monkey.
“Joe beer belly and his Mrs. from Iowa dosn’t know James Hotel, and likely associate Ritz with crackers. But they knows Trump from TeeVee.”
I love the James Hotel. If I win the lottery I’m opening my own hotel… something cool like the James.
Trump has apparently cut prices. A studio on the MLS, unit 2212, is now listed for 343k. Crazy assessments of $1,837 though!
Median sale price in 60661 seems to have fallen from $3M in early 2009 to $1.5MM in January 2011.
Unit 2410 is a hotel condo listed for 330k now and not a short sale with much more reasonable assessments of $1,080. Something weird going on with this disparate assessments.