Even the New York Times is interested in Chicago real estate.
We’ve chattered several times about the lack of construction at both The Spire and Waterview Tower in recent months. It’s a combination of there being absolutely no financing going on for these massive buildings along with the rapid slowdown in condominium sales.
“If I’d known in July of 2006 that the world would be where it is today, I would have done a lot of things differently,” Mr. Kelleher, developer of the Spire, said.
So far, Mr. Kelleher has invested about $250 million in the Spire; $180 million was cash from his own holdings and $70 million was in the form of two loans from the Anglo Irish Bank in Dublin.
When construction started, the plan, while aggressive, made sense. Total condominium sales were estimated at $3.4 billion, against total costs of $2.3 billion.
The project initially did well, selling just over 30 percent of its 1,194 units in the first eight months, at prices ranging from $750,000 to just under $40 million. The latter — for the 10,000-square-foot penthouse — is the highest price ever paid for a condominium in downtown Chicago. The contracts extend until the fourth quarter of 2013, and deposits are held in escrow until then.
Also significant was the fact that more than half of the sales were to individuals or entities outside the United States. “We launched in January” of 2008, Mr. Kelleher said, “and went to Beijing, Singapore, Hong Kong, Dubai, London and a number of other markets.”
In late September, Mr. Kelleher announced the penthouse sale — to Ty Warner, founder of the company that makes Beanie Baby toys. Since then, “things have slowed down,” he said.
Mr. Kelleher estimates it will take about $1.75 billion to complete the Spire and says he has had conversations with numerous financial institutions, both in the United States and around the world, over the last 18 months. “There’s no financing available to build the Spire today,” said Mr. Kelleher. “It’s a matter of waiting. And that’s what the plan is.”
Specifically, Mr. Kelleher is waiting for next fall, when the city will learn whether it will be the site of the 2016 Olympics. “If Chicago lands the Olympics, it will certainly be a boost to the local economy,” Mr. Kelleher said.
Waterview Tower, on the other hand, had apparently secured a $400 million loan from the Chinese last summer to complete the project but that was allegedly withdrawn as the credit crisis deepened.
Many people have speculated on the fate of Waterview Tower with some believing that only the hotel portion will ever be built (as 26 stories are already constructed.)
Steven DeGraff, a lawyer who specializes in real estate workouts, says there are few good options in the current environment. “It may be cheaper to tear it down,” he said, “or it may be cheaper just to leave it in its current state.”
Meanwhile, even without the completion of these two buildings, as we’ve chattered about in recent months, condo inventory continues to grow downtown.
The city added 4,600 new condo units in the downtown area in 2008, with another 4,700 units scheduled to be completed this year. The rate at which these new units are being occupied is lagging, however.
“Absorption last year was terrible — probably around 1,000 units,” said Gail Lissner, vice president of the Chicago-based Appraisal Research Counselors, which tracks downtown condo sales. “It’s going to take some time to work through this inventory.”
The upside, she adds, is that only 500 new units are expected in 2010 and fewer than that in the following years. “Any project that is not out of the ground now is going to have a very difficult time getting financing,” she said.
Prices, meanwhile, are down anywhere from 5 to 25 percent, depending on location and amenities.
“The more generic, the more negotiable,” Mr. Kinney said. “If you want a two-bedroom two-bathroom plain-vanilla condo in downtown Chicago, I can get you a very good deal.”
Two Chicago Towers Fall Victim to Scarce Financing [Robert Sharoff, The New York Times, Feb 3, 2009]
