Owner Still Wants Out But Now It’s 3 Years Later: 60 W. Erie in River North
We’ve chattered about this 2-bedroom unit at 60 W. Erie in River North several times before.
See our August 2010 chatter here.
Back in 2008, the listing said the overseas owner wanted out. But it has been on and off the market, with several reductions since.
It is now listed about 17% under its 2004 purchase price.
The current listing still says the owner wants out but now it’s also a “Perfect opportunity for an investor. Owner received $4750/mo for 2009/2010 rent.”
60 W. Erie is a boutique high rise building built in 2004 with only 24 units.
The unit has 9 foot ceilings and city views. It also has a 15×15 terrace.
The kitchen has stainless steel appliances and granite counter tops and the baths are marble.
Will we see more of these listings- which had been on the market several years prior, rented out, and now return back to the market at a lower price?
Katherine Chez at Baird and Warner still has the listing. See the pictures here.
Unit #1102: 2 bedrooms, 2.5 baths, 2157 square feet
- Sold in March 2004 for $926,500
- Was listed in March 2008 for $930,000 included 1 car parking
- Withdrawn
- Was listed in June 2010 for $890,000
- Reduced
- Was listed in August 2010 for $790,000 (includes 2 side-by-side parking spaces)
- Was re-listed in March 2011 for $710,000 (parking extra)
- Reduced
- Currently listed at $695,000 (plus $80,000 for 2 side-by-side parking spaces)= $775,000 total
- Assessments of $1369 a month (includes gas and doorman)
- Taxes now listed at $5377 but last August were $10304
- Central Air
- Washer/dryer in the unit
- Bedroom #1: 18×10
- Bedroom #2: 12×11
- Den: 15×10
why doesn’t the association spend some money and paint the facade iron black? I don’t get it.
I agree. The blue-green is ugly. How did the taxes get lowered by 50% when its not even owner occupied. Really, my unit has more taxes than this and its worth less and is owner occupied. Can these taxes be right?
A butt-ugly building designed by Lucien Lagrange
the taxes are correct because it is ludicrously underassessed.
Estimated 2010 Market Value 344,860
Did the owner protest taxes and argue that market value is this low…if so then that’s all he should get.
Its worth more than 345K. I would buy this unit for 345K.
Those taxes are crazy low for the location, value and size of this unit. Maybe he has some friends in the right places.
“How did the taxes get lowered by 50% when its not even owner occupied. Really, my unit has more taxes than this and its worth less and is owner occupied. Can these taxes be right?”
Held for sale and unoccupied? That’ll get you a reduction.
OK, not that. Just straight up reduced by the assessor.
This is rediculous….I’m even is a worse school district. I’m submitting this as a comp with my protest next year.
I really like the layout of this unit, and the taxes make it a pretty darn good deal. Is it possible to get just one unit in a building like this reduced or does your association file an appeal on behalf of all unit owners?
I suspected that the reduction was for being considered an unoccupied unit. Is that correct Anon? In my understanding that can only be counted as an option for 1 year. In the listing didn’t it suggest that the unit was rented out in 2010 for $4500? If that was so how could they be claiming the unoccupied status with the assessors office?
BTW have they fired the 24 hour doorman for 24 units yet? If not then…
“no soup for you” or should I say “no sale for you”
That was a terrible idea from the start because once it is there then no one wants to give it up. Unfortunately the unit prices will not justify that level of monthly expense.
$4750 a month to rent? For that money they couldn’t find something better?
Assessments at $7.61 PSF seems pretty high, but you consider there’s a doorman and only 24 units, it makes sense. If it were up to me, I’d get rid of the doorman or at least he/she would be part-time.
“I suspected that the reduction was for being considered an unoccupied unit. Is that correct Anon?”
Not based on the appeal records–they got a ~50% reduction from the *assessor* and still filed an appeal.
May have been a full building appeal that got a reduction and is not reflected in the individual online appeal records.
“This is rediculous….I’m even is a worse school district. I’m submitting this as a comp with my protest next year.”
It’s all one school district, and this (most likely) won’t be close enough to qualify as a comp.
I live in a slightly smaller unit in RN on the north side of Chicago avenue…less desireable. How can this not work in my favor…I live in a smaller place, that cost less than this will close or last sold at, pay more in taxes, and am zoned into one of the worst schools in Chicago (Jenner Academy). Both have doorman.
“I live in a slightly smaller unit in RN on the north side of Chicago avenue…less desireable. How can this not work in my favor…I live in a smaller place, that cost less than this will close or last sold at, pay more in taxes, and am zoned into one of the worst schools in Chicago (Jenner Academy). Both have doorman.”
Oh, it all works in your favor. But that and $2 won’t get you a sammy, nevermind a assessment reduction. “neighborhood” dividing line is at Chicago. Maybe if you use a Berrios crony firm, but otherwise, I wouldn’t expect anything based on *this* place.
“zoned into one of the worst schools in Chicago (Jenner Academy)”
Franklin is the east boundary up to Oak, then Wells to Division. East of that is Ogden.
Anon — I’m sure I’m zoned into Jenner and this one is zoned in to Ogden, a good school…checked the CPS school locator website.
“I’m sure I’m zoned into Jenner and this one is zoned in to Ogden”
That’s fine; and, yes, it just further emphasizes your WTF? point about the AV on this one, but b/c of the distance I just don’t see the likelihood of it being a comp influential to an appeal on your place.
paging Laura:
http://www.redfin.com/IL/Chicago/3750-N-Lake-Shore-Dr-60613/unit-13G/home/28845975
Great catch Roma. Let’s chatter about it tomorrow.
Cool. You could throw this one in to double the pleasure:
http://www.redfin.com/IL/Chicago/2341-N-Commonwealth-Ave-60614/unit-2B/home/12557163
Anon – its only 4 blocks away from my place. Pretty close…same gas station, same grocery store, same neighborhood amenities, except school. I’m definitely using this as a WTF comp…mine should be lower.
This building has electric heat. If I’m not mistaken I’ve seen the electric bill for one unit in this building and for January it was $900. Never understood why developers do electric heat.
Might not be electric heat but rather pipes that are hot or cold and an electric fan that propels air over the coils to regulate the temp of the room. That is a standard protocol for high rise. I would be surprised if they put electric baseboard heating in the whole home.
I’m pretty sure it’s actually electric. The MLS listing even indicates it. I’ve seen a number of buildings in the area that have electric heat. For instance, 55 E Erie, though the electric bills there don’t seem too bad.
I’m 90% sure this is the building where I saw the high electric bill. It was approximately this address, 2 units per floor, with the blue/green glass. I don’t think there are too many buildings fitting that description.
I’ll tell you another weird thing developers did: One thermostat with heat and A/C available all year long but no heat/ A/C selector. So the A/C comes on in the winter if the unit temp rises.
So I got curious and dug up a heating disclosure for another unit in the building where it was available. It’s a 3411 sq ft unit and the annual electric bill, which included the heat, was $3466
Wow Gary. That is crazy. But these are the hidden issues that are out there in some buildings (that having a good agent might help the buyer discover.)
“its only 4 blocks away from my place”
Blocks are so squishy–the se corner of Jenner area, NE corner of Chicago/Franklin, is 6.5 blocks from this building, but yeah, its .5 miles, so four Chicago “blocks”.
But, again, its in a different assessor’s neighborhood, so i wouldnt have much faith in the comparison, no matter how unfair it is.
Gary, Just read that post you have on your website with the insurance on housing. It smells so wrong, and is SO incredibly mispriced, that it is frightening.
and Gary.. I am giving a cursory glance to Shiller pg 37 and 38 and he doesn’t come anywhere near close to 1.7% as you said you saw.
Yeah, now that I read the report more carefully I’m not sure what to think. Pages 37 and 38 are prices for put options. In the case of these insurance policies they only pay out if you actually sell and move and they are banking on people staying put for a typical amount of time. In that regard they might encounter adverse selection.
Anyway, I was originally reacting to a statement they make at the top of page 44 where he says something like insuring a $100K home against price declines for $172/year. But that is in the section on life event policies. I suspect that the policy these guys are selling is more like a life event policy.
Total Scam… Captive insurance company is my bet, will use less than the 1.7% to maintain capital requirements which are probably absurdly low. They know damn well they can’t pay and all the arguments they make and want you to make changes nothing!
They are writing 1 15yr put at the money. Even accepting a few cuffs that Shiller made, he came up to a 2 yr option at almost 10%. Imagine what a 15yr has to be worth?
A less than 2yr out put (Jan 2013) on the dow jones U.S. index is about 10% right now.
What these guys are doing is letting you buy the house, buy the put, and create exactly the payout of a call that should cost you a ton of money, for 1.7%
No f’ng way!
They are reserving about half that 1.7% and they are using a captive insurance company. Interestingly, the state approved their plan – but of course that’s the government. But their product does look like the life event policy that Shiller says should cost 0.172% per year.
Are we sure the electric heat is the only heating source, or is it just supplemental heat to use along with the fan coil which gets its heat from the building’s boiler? I’ve seen this approach a lot, and you don’t really use the electric heat except on the coldest days. But to have electric heaters as the only heat source would be absurd in this climate.
Gary,
My above analysis stands. What Shiller is quoting is a valuation done ASSUMING 6.36% growth yr over yr. So basically the insurance on a 500k house drops to absolutely near nothing because the simulation they run has that house worth 680k 5yrs out and 1.26mil 15 yrs out. So what’s insurance on a property worth 1.26 mil going below 500k.. NADA!! Nice trick!
As for State requirements being way too low that was the safest bet I could have made this decade. ONLY having to reserve half.. let me guess the other half.. business expenses? salaries? That’s the rub in it for these guys. Prices up they take the other half, prices down… bye bye!!
it’s pg 37-38 unless the terms of the insurance are different than what you lay out.
Oh btw.. I have my own captive insurance company. Get me a TBTF to write me this and i’ll buy it tomorrow.
oh yeah I just noticed this building today… nothing around it so it should have pretty good views if the unit is on the south side of the building, north side would have bad views of the lakewood hotel
“So basically the insurance on a 500k house drops to absolutely near nothing because the simulation they run has that house worth 680k 5yrs out and 1.26mil 15 yrs out. So what’s insurance on a property worth 1.26 mil going below 500k”
Isn’t it whether the *index* drops, rather than the value? With the premium and the payout based on the initial value of the house? The website showed the K paying out even if the sale of the house resulted in a gain.
Or are you not talking about the actual product Gary referred to?
“Isn’t it whether the *index* drops, rather than the value? With the premium and the payout based on the initial value of the house? The website showed the K paying out even if the sale of the house resulted in a gain.”
That’s how I read it.
It is hard to believe you could expect to collect from this plan if prices dropped say 15 percent. Like a flood insurance policy that works unless there’s an actual flood.
anon for some reason I can’t get on the website. I am going with the terms gary laid out. Regardless, index or value it is crazy insane underpriced and the pg 44 nonsense Gary is referring to is a joke. It says so itself. How do you insure something with a std deviation in yr 1 alone of 6.8? Simple raise the price of the asset as fast as possible moving the insurance out of the money. This is what i’m pointing out. And this is at best. See pg 37-38 and tell me if that makes more sense. I used options on the index just 2 yrs out. These guys are writing naked 15 yr options from the terms Gary laid out.
“These guys are writing naked 15 yr options from the terms Gary laid out.”
Yeah, I agree, but I was just trying to clarify what the strike was, and, from the website, it’s the index value at sale, rather than the sale price. So, example, using CS as the index (incorrect, I know):
Purchase K in ’06 at peak along with $1mm SFH in Chicago. Pay $17k.
Sell house in Jan-11 with CS down by 31.3%.
K pays you $313,000, regardless of what your sale price was–same $313k payout whether sale was $500k, or $2mm.
So, yeah, not sustainable for the prior period, no matter their hedging, but also not clear that 170 bips would have been price in ’06.
Anon.. I know my writing is pretty sloppy. But the reason I used value above is because Gary pointed to a study referenced in a Shiller paper showing how the insurance should only be .172% a year. So I am showing how they manipulated the parameters to get away with that number.
Like you and I said before about auditors…say it fast and hope everyone nods their head in agreement with no one wanting to be the guy to ask the question that may make him look like he didn’t get it.. Been there, done that!
“But the reason I used value above is because Gary pointed to a study referenced in a Shiller paper showing how the insurance should only be .172% a year.”
Thing is, I’m not looking at the Shiller article, just the product website, so we’re very obviously talking past each other a bit, but I was only interested in being on the same page about when the actual product supposedly pays out, not the pricing.
Might be able to make it work okay *if* there were sufficient liquidity in the index futures market, but I don’t believe that’s the case–correct me if I’m wrong. And, of course, if there were sufficient liquidity, this is just a middle man taking his vig for the duration and using insurance rules to bond the obligation.
Anon.. Everything you said is accurate. The 170 bips is never an accurate price, it is bad bad behavior with modeling. An accurate price would be looking at something like the dow jones housing index ATM option which is 10% less than 2 yrs out, and probably over 50% 15 yrs out (if they had one) This is an expensive product and from your example of 31.3% drop you know it too, they know it, and that the gov’t will make them hold reserves of less than 1%, their taking in premium of 1.7% allows them to ALWAYS cover reserves of every new policy (so write as many as possible), they know if prices of *index* rise they can lower reserves and take all the income, they know if like in your scenario prices drop 20% they are dead but they can’t pay and it’s all been made kosher by the state… nice!
“I’ll tell you another weird thing developers did: One thermostat with heat and A/C available all year long but no heat/ A/C selector. So the A/C comes on in the winter if the unit temp rises.”
This was SOP for large office buildings for a period of time. I work in one of them. Designed to be co-dependent and to balance out the temperature evenly. From my understanding, most of these dual systems disabled in an effort to save energy, and from my experience the buildings haven’t had proper HVAC ever since. Miserable place to work, especially in the shoulder seasons.
Another unrelated factoid is that many large office building need very little heat since most of it supplied by the lighting/equipment and people. Another reason why cooling is actually needed more or less year round.
I get some weird wix error I have never seen before, trying to enter the site. I see the terms from Gary listed on his site, attached to his name.
No! It could have all the liquidity in the word and you couldn’t hedge this thing. No one is that good, not even close. You would chop yourself up to itty bity pieces and pull your hair out of your head tryin… Market values this at 10% for just 2 years. ON INDEX!
“No! It could have all the liquidity in the word and you couldn’t hedge this thing.”
Oh, and I wasn’t clear–I meant that, if they charged appropriate fees (don’t call’em premia) they might be able to hedge if there were sufficient liquidity in the index market. Obv impossible at those rates.
yeah, i realized after that u meant back to back…
“yeah, i realized after that u meant back to back…”
And, again, if we were reading the same material, we wouldn’t be going past each other. The site mentions their “hedging” strategies, complete with the quotes.
when i get in front of my computer again i am dying to read it. Do u see the trick the study pulled to get to the .172 percent number?
84 and sunny, sittin by the ocean for a few more minutes….
weird being in this enormous housing boom and not a crane to be seen.
“Are we sure the electric heat is the only heating source, or is it just supplemental heat to use along with the fan coil which gets its heat from the building’s boiler?”
It is 100% electric as I recall. Baseboards. And it’s not the only building like that. I agree it’s crazy – especially now that natural gas is so cheap.
Regarding the insurance product: Yeah, my first gut reaction was that it was pretty cheap and I mentioned that to the guy. He said they modeled it using Monte Carlo simulations using the last 4 years of data. Let me get their name in here so that if they are monitoring social media they can come in here and defend themselves: EquityLock Financial.
BTW, he told me they were NOT hedging it. It was purely a reserve strategy.
Anon.. Gary’s link was bad. I just read their hedging policy and they have none, just states they CAN implicate one using different products.
This is a beautiful quote too, love the last 3 words… “As mentioned above, the company retains on reserve (Gary told us .85%) enough contract revenues to pay all project losses, even assuming that 100% of the markets decline given … certain loss levels”
“I just read their hedging policy and they have none, just states they CAN implicate one using different products. ”
Like I said, quotes in teh original.
Gary.. They will try and talk over you knowing you don’t understand this stuff. How can the last 4 years of data support a simulation that shows no loss scenario over 1.7% when the last 4 yrs have been worse than that every year.
I called this shit the checkmark curve. Every time i see it I cringe. Every capital intensive project pro-forma always assumes prices go into happy land after REAL market data runs out. Again if you go through the .172% price on pg 44 you will see they did exactly that. CLEAR AS DAY!!
Monte Carlo simulation just means black box, I’m not telling you the inputs, and you don’t understand it so what I said sounds more impressive and must be right.
“Every capital intensive project pro-forma always assumes prices go into happy land after REAL market data runs out.”
Say, how’s Harry Macklowe doing these days?
“How can the last 4 years of data support a simulation that shows no loss scenario over 1.7% when the last 4 yrs have been worse than that every year.”
Well the big assumption in the Monte Carlo simulation is how long people stay in their homes and how many actually move. I’m not saying their assumptions are reasonable – just providing information.
“EquityLock maintains reserves on each contract to cover all expected payouts assuming that 100% of the markets decline by 50% over the following five (5) years).”
WTF!! We take in 1.7 and pay 50… It’s actually funny.
Think these maybe the guys structuring off shore swaps to reduce your tax liability for 20% of the savings , which you will one day pay the IRS with penalty as they send you to jail.
Well, keep in mind that it only pays out in the event that you move. As I’ve said I actually think that is the big assumption. Don’t people move every 7 years on average? That’s like 15% vs. 3% that I think Shiller assumed. But no way they would need to pay out on every policy even if every market declined.
“Well, keep in mind that it only pays out in the event that you move. As I’ve said I actually think that is the big assumption. Don’t people move every 7 years on average? That’s like 15% vs. 3% that I think Shiller assumed. But no way they would need to pay out on every policy even if every market declined.”
You don’t think people might be more inclined to move if they were incented to do so?
So my home is worth $100 when I bought it, it then declines to $50. I have an insurance policy that pays me $50 if I sell it (assuming change in index is same as the price of my actual home). I pay the $6-8 dollars in transaction costs to sell and move. And I can buy the same home for $50. What do I do? Maybe nothing since there’s no way my insurance pays off.
Not sure of the terms but at down 20% on a 700k condo I trade apartments with my neighbor in my generic 2/2 in Streeterville pretty fast.
Gary, I hypothesize about a lot of things here knowing my opinion is not worth much more than the world cup team selecting squid, but this topic, 100% sure… these guys are scum.
Hey DZ.. I live in 5407 and you in 5507.. we have same generic floorplans, we both got this condo for about 750k and now down 20%, want to swap apartments? No broker, my lawyer, only transfer fees??
“Hey DZ.. I live in 5407 and you in 5507.. we have same generic floorplans, we both got this condo for about 750k and now down 20%, want to swap apartments? No broker, my lawyer, only transfer fees??”
Deal, I’ll even bring the Champagne. Oh wait, no, we don’t actually have anyone who will pay off the insurance.
Well can we drink the champagne anyway? Now you made me thristy. 🙂
“Hey DZ.. I live in 5407 and you in 5507.. we have same generic floorplans, we both got this condo for about 750k and now down 20%, want to swap apartments? No broker, my lawyer, only transfer fees??”
Now, further imagine that you live in Cali, where the lower transaction price *directly* lowers your taxes. So you get (over a few years) your 1.7% back right there.
What state insurance commission approved this?
Listen.. I still haven’t fully gotten over Prop 19 not passing.
“Well can we drink the champagne anyway?”
Might as well. Everything else sucks about this hypothetical.
I love watching property owners find out how arbitrary their levied real estate taxes actually are. It’s as if previously they were under the impression as big taxpayers that the Chicago government was designed to be equitable and efficient and serve them. LOL.
and anon, I can happily say that I just found out that the property I mentioned I hold actual title to that is technically null and void, I will finally be getting legally sanctioned control of on Friday.
That was almost a real mess.
Electric heat is less expensive to install, keeping costs down on construction. High quality buildings have supplemental electric baseboards.