Nearly 4 Years Later and Still Foreclosures in The Sterling: 345 N. LaSalle in River North
We have been talking about foreclosures in The Sterling at 345 N. LaSalle in River North since I started Crib Chatter in 2007.
In March 2008, Crain’s actually ran an article describing The Sterling as the top foreclosure building in Chicago.
See our prior chatter on that article here.
But nearly 4 years later, the foreclosures keep coming.
The latest is a 2-bedroom on the 17th floor on the curve of the building.
It appears to have the kitchen and bathrooms intact. It also looks like there have been some upgrades in the kitchen, at least with the granite counter tops. There are white appliances.
The living space, including the bedrooms, appears to have carpet.
Listed at $256,000, this appears to be in line with what other 2/2s have sold for in the recent past in the building.
Because this building was one of the first to have massive distress sales, does this give it a leg up on other River North buildings?
Basically- first to crash, first to recover?
Coya Smith at Smith Partners & Associates has the listing. See the pictures here.
Unit #1706: 2 bedrooms, 2 baths, no square footage listed
- Sold in December 2002 for $445,000
- Lis pendens foreclosure filed in December 2010
- Bank owned in September 2011
- It is a Homepath property- with just 3% down required
- Currently listed for $256,000
- Assessments of $538 a month (includes heat, cable, doorman)
- Taxes of $4156
- Central Air
- Washer/Dryer
- Parking is only rental in the building
- Bedroom #1: 16×11
- Bedroom #2: 12×10
The going rate these days, 250’s for a 2/2 that needs updating, doesn’t seem like such a good deal anymore. It is amazing how perceptions can change in the span of 3-4 years.
It is not my cup of tea but the price and the assessments seem pretty decent.
Crains-flagged notoriety is hard to overcome. I’d avoid any high-rise building which relies upon those “heater in the wall” arrangement (see photo) and has standard Home Depot-caliber finishes and hardware. It’s a building intended as a corporate dormitory rental with a high transient population that frequents long-stay hotels and upscale highway-side motel chains, and not a good home purchase location. This building won’t age well. Anyone know status of its HOA budget?
I’ve been reading Crib Chatter now for a few months, but I’m still a newb when it comes to the housing game and I’m trying to understand more behind distressed buildings. (For background, I’m currently in the market for a 2/2, in the River North/Gold Coast neighborhoods).
Say for example, that I purchased this unit for the asking price of $256k, and renovated the entire unit, adding hard wood floors and updating the kitchen and bathrooms with high end fixtures and appliances. If I tried to flip the unit and sell soon after finishing the renovations (lets say 6 months and the market is relatively the same as it is now), would I have a leg up on all of the other units for sale in the building due to the upgrades? OR does the fact that the building itself is overall in distress and there are so many foreclosed units still depreciate the value of the home, no matter how much work you put into upgrading it?
The reason I ask is because externally, I think the building looks stylish and desirable to live in. The location is perfect for what I’m looking for, close to the river (and my job which is at the mart), major shopping, restaurants, and transportation. The building has a door man, so safety is also inherently included. I guess I just don’t understand the big deal is…
I’d appreciate any insights! Ready…Go…
You cant buy parking in the building? I would never buy a home without a parking spot (and I dont even own a car).
Architect, while I agree with your take on the finishes in most of this building’s units (it WAS a condo conversion afterall) I disagree with you saying that the population here is a bunch of transient renters, that may have been the case long ago, but I’m sure almost all the young professionals that bought here during the boom are stuck and likely going to stick it out. This building is in a seriously great location, (if you haven’t been in the area in the last few years, it has drastically changed) I dont know why everyone bashes it so bad because its not as bad as you guys think, and the HOA has millions in reserves, if you can pick up a unit here dirt cheap go for it I’d say, long as you’re willing to put in some work to update it, it could be a really nice condo for cheap.
jbou,
this will not be a profitable flip for many reasons:
1. closing costs on both ends
2. cost of renovation
3. high initial cost (for a flip).
That being said, an investor can make money on this unit if he holds long term (which also has its risks). To be a profitable flip, you would have to get this unit for under 200k – and that ain’t gonna happen.
Jbou, you won’t get a dollar for dollar return on renovations. If you put $50k of work into the place, you won’t necessarily see a value increase of $50k. Given the current market and this building in particular, I’d say 50% return if you are lucky.
It also depends on what type of work is done and if the future buyers see any value in those improvements. If you have bad taste, renovations might make the place worthless. You also have to be careful to not over improve for the building because you really won’t get your money back as the people who would be considering ultra high end renovations won’t be considering buying in this building in general. For example, I know someone who pimped out a 1 bedroom in one of these overly generic rental/conversion high rises and couldn’t get it sold. There price point overlapped with the unrenovated 2/2’s in the building and the buyers who would consider paying $400k for a 1 bedroom (and appreciate the high end renovation) would not choose to live in that building, but prefer buildings with a much higher income demographic in general.
JP$, what’s the big deal if parking isn’t purchased in a building? If parking is in the building and guaranteed, why does it matter so much that it’d apparently be a deal breaker? Less to mortgage and if you don’t own a car, then no need to pay for the space (mortgage, assessments, taxes). I guess you could rent it out but it seems that the income and appreciation for a parking space might not amount to too much and it means going through the hassle of finding a renter, collecting rent, etc. Certainly not such a cash cow as to kill a potential sale.
FWIW, in my Lincoln Park high rise, the parking is rental only ($150/mo. I believe) and is guaranteed upon move-in. Most new residents end up having to valet for a year or so before a stall opens up, but the price is the same whether valeted or self-parked in assigned stall.
I agree, the location is fantastic. Close to everything, easy to get everywhere from here. I live in the city of Chicago, but if I were going to have an “in-town” in Chicago, it would be right around here.
Seems like a pretty competitive price. It might not appreciate over the next ten years like a condo in a nice building, but the benefit here is how cheap it is. This also seems pretty attractive as a purchase for when a kid is in grad school or just starting out. I make it a monthly payment of less than $2400 all in on a 15 year fixed with 20% down at the list price.
Jbou, I definitely think the overall building would still depreciate the value. In a condo building, you are tied to the other owners. If 30% of the building is foreclosed on and the banks aren’t paying assessments, then your assessments will be higher. If the building has lots of renters, most likely costs will be higher and assessments will be higher. Most buyers want to be surrounded by buyers, not renters.
However, with the added risk of a building in distress comes a lower starting and ending price. If you buy when the building is down on luck and it turns around before you sell, then maybe you end up making more. It is all about the amount of risk you and a potential buyer when you sell is willing to take on.
I personally wouldn’t want to be in such a building, but others feel it is worth it for the lower cost.
Please explain – not sure I get why having a lot of renters would raise assessments? Aren’t the rented units owned by someone?
” If the building has lots of renters, most likely costs will be higher and assessments will be higher. “
“the HOA has millions in reserves”
Sure about that? Given the rather low assessments and high foreclosure rate, is the building really that healthy financially at present?
“I’d avoid any high-rise building which relies upon those “heater in the wall” arrangement”
So basically every high rise built over the last 10 years? I’ll take shitty fan coil units over shitty wall ac and electric heating any day… a high rise that actually has a competent hvac system is a very rare treat.
Associations sometimes rent out forclosure units after they seize them since associations can forclose before banks do and they will use the below market rent to pay for past due and current assessments, this building has tons of units, and from what I remember a healthy reserve
“Please explain – not sure I get why having a lot of renters would raise assessments? Aren’t the rented units owned by someone?”
More likely to lower assessments since landlords are less likely to want to make updates or replacements.
“Associations sometimes rent out forclosure units after they seize them since associations can forclose before banks do”
I highly doubt that any bank has let a unit get taken back by the association in this building. The point of the assoc acting to foreclose on an assmt lien is to make the bank pay up. The only time a bank won’t is when they see the value of their collateral as less than the cost of the mortgage foreclosure plus the assoc’s lien. Like I said, not likely here, or in any condo in RN.
“Please explain – not sure I get why having a lot of renters would raise assessments? Aren’t the rented units owned by someone?
More likely to lower assessments since landlords are less likely to want to make updates or replacements.”
While that is true, G, I was going on the assumption (some renters here may kill me for this…) that renters generally take less care of the property causing more repairs and expenses. Renters generally move more frequently than buyers, causing more damage to hallways/elevators/etc. causing them to be repainted/repaired more often and raise assessments.
Perhaps these even out, or maybe the lack of desire to do updates/repairs does win out.
“Perhaps these even out, or maybe the lack of desire to do updates/repairs does win out.”
Move in fees and excess damage charges help out the calc, too.
The only updates this unit needs are a swap of the carpeting to hardwood, and a replacement of the glass kitchen cabinet inserts.
This building is in a great location and is extremely unlikely to have views blocked within the next few decades (the building directly to the south is in good shape, on the national register of historic places, and filled with paying tenants).
There are probably a few more years of foreclosures left in the building – after that it will probably be fine. Anyone buying here now should be in it for the long term. If you are… there’s nothing wrong with this unit.
werent the exterior walls falling apart here at some point recently? seems like a red flag given it aint old
“I’d avoid any high-rise building which relies upon those “heater in the wall” arrangement”
What is so bad about the inwall thermostat vs. a complete HVAC unit. Maybe I’m not understanding the gripe here…but I lived in this building and it seems like every high rise has a similar heating element.
Location can’t be beat. Although the exterior of the building is showing some major cracks. The building itself is basically young professionals who have graduated from the lincoln park scene to the hubbard nightclub scene.
The price isn’t the problem, its finding a bank to finance the transaction with the number of rentals and I highly doubt the reserves are “in the millions” for this place. Although give that there are about units give or take per floor and 46 floors, a 7 figure reserve doesn’t take much to either build up or burn through.
As some of you have pointed out, the individual units may be fine but the main issue is not with the units as it is with the building. Fannie and Freddie historically have not wanted to lend in condominiums where the rentals outnumbered the owners. It is a fact that owners take better care of properties than renters. How ironic now that many of these foreclosures are sponsored by Fannie’s Homepath program which only requires 3% down. I’d say this is a perfect example of kicking the can down the road. Someone suggested buying for a graduate student. Years ago a young man getting his MBA at Chicago was referred to me (mortgage broker) by his realtor. He was interested in the Sterling and was very motivated by Invesco’s offer to pay 6 months of assessments IF he signed by Sunday. I convinced him not to buy and explained all the incentives Invesco had thrown out there for investors/buyers…this is where all the problems started!
At large condo high-rises, individual unit owners have little say on assessment increases beyond voting out board members. Assessments are set by board, based upon property management vendor’s recommendation, and depending on personalities on board, increases are typically approved w/little fanfare. Whether building has a large percentage of renters is not a large factor, but capital budget requirements can be affected if frequent moves have damaged common areas, and extra security is needed due to rowdy clientele (often renters rather than owners). Many owners pay little heed to association management or associated politics – sort of like suburban municipal government.
Regarding wall-recessed units, I’d personally avoid them. I’d avoid through-wall exterior units too, if that was comparison. Doesn’t matter to me if they’re often used in recent construction; many of those newer buildings are cheaply built. Central system w/in-unit fan-box would be my preference, and yes, I like the older buildings.
For non-investor purchases, I’d avoid buying a unit where rentals aren’t very restricted – perhaps limited to no more than 25% units, only after one-year minimum new owner occupancy, for no more than/minimum 12-month lease term, etc. That would be MY preference. Buildings filled w/rentals have more management problems, and rental imbalance can complicate unit financing.
How likely is it that this unit will keep its “city views” for the next 10-20 years?
Jbou – working at the mart is the tell sign for your potential real estate downfall. there are amazing showrooms all over that building that could make this unit amazing. Regardless of the perceived discount you may receive the next buyer will not reward you for your efforts. There was a time not long ago where an idiot with a credit card and a pickup cold go to a Menardeoptlowes spend a few bucks put up a for sale by owner sign and make a 25% return on their investment. Those days are way over.
In this era almost any renovations that you make are for yourself and your own personal enjoyment. There is nothing wrong with making improvements to your property however do not do this in a quest to make money. The market will punish your efforts!
jPS – given the issues with the Waterview tower project on the other side of the river I’d say that the Fultons on the River aka old courthouse building is not going anywhere soon. north of the building is low rise multiple owner properties. It would be hard to amass enough of them to make a footprint that would allow for a tall building. East and West seem somewhat suspect but not anytime soon.
Bottom line Jbou:
Two words.
Marina City.
Thanks all!
Jp3chicago,
Waterview is about to restart construction with new owners (sometime early in 2012). The new owner has no intention of finishing to the original planned height and no intention of following the original design either.
Chicago prices are so low compared to NY. I was just looking at a place in NY and it was 1bd for $700,000. Yikes that’s crazy compared to Chicago. I understand that is not NY but the disparity is so large. I’m glad to be living here… I used to live in NY.
“Chicago prices are so low compared to NY. I was just looking at a place in NY and it was 1bd for $700,000. Yikes that’s crazy compared to Chicago. I understand that is not NY but the disparity is so large. I’m glad to be living here… I used to live in NY.”
Every time I was that HGTV show “Selling NY” I think, “thank goodness I don’t live in NY.” They recently had on a 40 year old woman looking to buy her first place. Price range was $750k to nearly $1 million. She got a 780 square foot square box, vanilla one bedroom for that money. That is it!
I understand Chicago is NOT NY. (thank goodness.) But I felt so sad for her (and so glad to live somewhere “affordable.”)
The question about “flipping” in a building like this is a recipe for doom. Even if you could find a buyer gullible enough to make an offer that reflected a profit on the upgraded finishes the likelihood of an appraiser coming up with values to support such a loan are essentially nil — that just is not happening in building like this…
The NYT still has the best rent vs buy calculator — http://www.nytimes.com/interactive/business/buy-rent-calculator.html
It would take a VERY expensive rental price to convince this is a smart building to be buying into …
Unit is under contract…in only 9 days.
I am not in real estate but currently live in the building. I can comment on the HOA health. The current reserve is in the 2-3 Million dollar range and the assessments have not increased in the past 3 years. In the 2011 Operating budget, the building was above plan in revenue and below plan in expenses. With some of the excess reserves, the HOA has approved a renovation on the building gym.