Crib Chatter

You can tell a lot about the state of the Chicago highrise market by the buildings that are currently closing on units downtown.  Most of those closing now were sold three to four years ago- at the peak of the “boom” and when investors were most active in the market.  Several analysts of the Chicago market have commented that they believed the percentage of investors in downtown buildings was between 20% to 30% of all buyers during that time period.

We should be seeing that now in the buildings that are closing.

One way to monitor the investor interest is through the number of rentals that are springing up on Craigslist and the MLS.  With the sales market as slow as it is, many investors will have no choice but to try and rent out their units to try and cover some of the carrying costs (though at the prices I am seeing out there- many will not even come close to covering their costs every month.)

Take, for instance, Unit #1202 at 340 on the Park, a two bedroom, two bath, 1500 square foot, north facing unit.  They are asking $3500 a month in rent (parking included) when they paid $639,000 for the unit.

I don’t know about you, but I don’t see how you’re covering your taxes, assessments and a mortgage payment on $639,000 with $3500 a month.  And that’s IF they get that rental price.  It’s a bit more competitive (aka not a bad price) compared with some of the others I’ve seen in these newer buildings- but there are only so many renters out there who can afford that kind of nut a month.

And all the investors are competing against each other to sell or rent out their units.  Every month that goes by without a renter in the unit, is more money lost.

What’s the competition like right now?  If you are a renter looking for a new construction “luxury” unit in Streeterville or near Millennium/Grant Park, you have quite a few to choose from.

Avenue East, 160 E. Illinois: 7 for rent (on MLS and Craigslist) out of 130 units.  Closings still continuing.  The building is not yet sold out.  There is a two bedroom with the parking for $3350 a month or you can get a 772 square foot one bedroom for $1795 (parking extra) which seems like a “deal” compared with the one bedroom rental at 600 N.  Fairbanks (see below).

Cityfront Plaza, 240 E. Illinois: 4 for rent (on MLS and Craigslist) out of 281 units.  Closings still continuing.  The building is not yet sold out.  You can get 1360 square feet here without the parking for $3000 a month.  Unit #1203 is a pricey 1 bedroom, 1 bath, 874 square foot unit at $2175 with parking extra.  Here is a one bedroom with den available for $2800 a month with the parking. That is very expensive for the square footage. I’d be surprised if they can get that price. It’s not even a two bedroom.

The Columbian, 1160 S. Michigan: about 20 (on MLS and Craigslist) out of 221 units.  Closings still continuing???  The building is only 75% sold from the developer and there are other flipped units also for sale.  This building has the best “deals” for renters.  Investors keep lowering prices on the units in order to rent them. 

You can get a straight on view of the lake with 1600 square feet for only $2500 a month.  I’ve also seen others with views of the lake that are also very nice for even cheaper- like this 1491 square foot two bedroom for $2300. 

I’ve seen the one bedrooms for as low as $1700 a month including the parking (for about 720 square feet and decent lake views.)  That is cheaper than you’d find in the new luxury apartment buildings in Streeterville and River North and you get hardwood floors and nicer kitchens here.

Here are the views and the livingroom from one of the rentals.  Not bad at all for rental.  This unit is listed for $2300 a month:

600 N. Fairbanks, Helmut Jahn’s new building: 2 for rent (on the MLS and Craigslist) out of 227 units.  The building has not yet begun closings.  There could be quite a few rental units in this building as there were 5 one bedroom units per floor and investors historically like the one bedroom units.  One investor is asking a pricey $2400 a month without the parking for a 850 square foot one bedroom.  Will they get this price?  That’s mighty expensive for that square footage.

340 on the Park, 340 E. Randolph: approximately 25 (on the MLS and Craigslist) out of 344 units.  The building is only about 30% closed so far.  These are the most expensive of the rentals I’ve seen, especially for the one bedrooms.  Yes, the one bedrooms are all over 1000 square feet.  But they’re still one bedroom units (not preferred by couples).  Many are listed at expensive prices of over $2500 to $3800 – plus $250 for parking.  The two bedrooms are in the $4000s and up.

Take this 1300 square foot one bedroom.  Yes, that is huge.  But it’s still a one bedroom.  They are pricing it at $3250 a month with the north views.

A renter can pay $4000 for a one bedroom with lake and park views at 340 on the Park or they can pay about $2500 for pretty good lake and park views and two bedrooms and two full baths at the Columbian.  Granted, the finishes aren’t as nice in the Columbian.  But they’re both brand new and both have access to great parks and nearby restaurants.

The Columbian started closings several months ago so that building is telling about the rental market and how quickly investors will be able to rent.  Granted, there is not much “buzz” about the Columbian now (as there is for 600 N.  Fairbanks and 340 on the Park).  But every building loses it’s “buzz” pretty quickly.  Shortly, we will have closings beginning in 600 N. Lake Shore Drive and I’m expecting to see quite a few rentals in there as well.

There are lots of reductions in rental prices in the Columbian right now because,  again, investors must rent quickly in order to lower their losses on these units.  Every month that ticks by is another mortgage payment lost.

If the 20% to 30% investor figure holds up, then we should be seeing nearly 100 units for re-sale or rent in a building like 340 on the Park and about 50 or 60 units for sale or rent at 600 N. Fairbanks.

Currently, there are about 36 units for sale and rent at 340 on the Park (that means they are NOT both currently for sale AND rent- but either or.)  36 total units are being sold/rented out.  With only about 30% of the building closed- I would say we are on track to see the 100 units rented or re-sold with this building in the next six to eight months.

Many of the luxury hotels have apartments that are available for weekly or monthly stays (for celebrities and CEOs etc.)

The famous Drake Hotel at 140 E. Walton on Lake Shore Drive is no different.  They currently have a 4 bedroom, 4 bath unit available for $20,000 a month.   Here is the listing:

Live Graciously And Call The Drake Hotel Your Home, And Utilize The Amenities Included At The Hotel; Fitness Center, Concierge Service, Local Phone Service, Hotel Cable, International Club Membership, Bell Service Business Center And Engineering Calls. Arrange For Room Service, Private Banquets, Dry Cleaning, Maid Service And Wait Staff At Published Rates All With A Simple Phone Call.

Apparently, for your $20,000 a month, maid service is not included. But thank goodness for that “hotel cable” for your 20 grand. Whew.

But look at the pictures. Does this look like a “luxury suite” you’d want to rent for your family for a month? What if you were Brad and Angelina- would you want to stay here?

It looks like they put in a newer kitchen:

But who is the interior designer for the living room? 

Could this apartment look any more dated?  I could get better furniture at the Embassy Suites.  The bedroom isn’t much better:

But the best is the bathroom.  Blue tile in the shower.  Classic.

Maybe I expect too much.  Maybe the Drake has really lost its way (compared to the Peninsula, the Four Seasons and other luxury hotels.)

If you rent this, it is $666 a night (with no maid service.)  If you have a bunch of kids,  maybe it is a “deal” (with the four bedrooms.)  Otherwise, I don’t understand who would be renting such a tired apartment.

If you take one of the architectural boat tours down the Chicago River, the guides will no doubt comment about the high rise condo building at the bend of the north and south branches of the river at 333 N. Canal.  It’s hard not to miss it.

Originally touted as a prestige luxury building with stunning views down the Chicago River (and they are stunning), River Bend fell on hard times with even the developer having to secure additional funding in order to keep the project going.  The original developer finally went bankrupt and new financiers stepped in.  The building was completed in 2002. 

But the building always had slow sales.  There are a half dozen townhomes at the base of the building and even though it was completed about 6 years ago, there is still one  townhouse available from the developer.  Unit #104 is on the market for $1.825 million (was listed for $2 million over the summer.)  From the listing:

FEELS LIKE A SINGLE FAMILY HOME….DEVELOPER LOOKING AT ALL OFFERS! 3 LEVELS, 5000 SQ FT. OVERLOOKING CHICAGO RIVER W/ AMAZING CITY VIEWS. IN-UNIT ELEVATOR, WALK OUT TERRACES FROM LIVING ROOM & KITCHEN. MASSIVE MASTER SUITE 18X29 W/ 2 STROLL IN CLOSETS. 3B+DEN (BEDROOM), 4 1/2 BA. 3 PARKING SPACES AVAILABLE. ASSES. INCL GAS, AIR, WATER, CABLE, INTERNET, VALET, 24-HR DOORMAN, ONSITE MGR, FITNESS CTR, …

The problem with the townhouses is that they have almost no outdoor space since they are built into the base of the building. There is no backyard.  And the nice riverwalk on your front steps goes, basically, nowhere, as it doesn’t connect to any other riverwalk. It runs only the length of the building.

But the slow townhouse sales weren’t even the worst of it. A year ago the condominium association sued the developer (or, we should say, the new developer) for shoddy construction work. From the Sun-Times in August:

A year ago, the condo association at the prestigious 333 N. Canal building, known as River Bend, sued its developers over allegedly cheaping out on construction materials and causing water damage. Now, the association has settled the case and put out a letter averring that the developer, Norman Radow, and his fiscal partner, Lehman Brothers Holdings Inc., are great people.

Such is the nature of truth as it gropes through the legal process. The association really had a beef with the building’s original developer, who went bankrupt. Suing her would be foolhardy. Radow came in much later, but he had cash when the association wanted some.

Radow said he settled for $300,000, far less than the association demanded. He said that while the litigation surprised him, it was never personal and it appeared more of an “intellectual exercise” by lawyers trying to hang on him the past developer’s sins.

As part of the settlement, the association issued Radow a letter that read, in part, “To the extent anything we said or did in litigation suggested you have not been an outstanding steward of River Bend, we sincerely apologize. We regret that the lawsuit was brought at all, and are equally remorseful for any problems this caused you or Lehman.”

It’s no wonder the assessments in the building are much higher than they should be.

The building also suffers from the problems with its valet parking. Everytime you come home, you have to hand your keys off to the valet who parks your car (and you pay an additional monthly assessment for that privilege.) From talking with people who have lived in the building, it’s an added pain in the behind (to call down ahead of time and “schedule” when your car will be ready for you to leave) not to mention the added cost of doing so.

The architecture of the building was brilliant though. Why even bother with the west side? All anyone would care about were the river views. So they designed the building with the hallways on the west side of the building and all of the units on the east. Every unit, therefore, has a river view.  And there are small windows at the top of the rooms in the back of the units to take advantage of western light (as the hallway is one long wall of windows.)

And the view, as I said above, is spectacular. Question is, how long will they have it? As you can see from this picture below, the piece of land with the parking lot on it, otherwise known as Wolf Point, is scheduled to be developed into three high rises, including one 89 story building, by the Kennedy family. Whether or not, in this slowing market, such a project could now get built in the next few years remains an open question. But the vacant land is looming in the picture and at some point, someone will develop it. The river is “hot” now.

How are re-sales faring in the building? Nearly six years after closings, some of the units are showing their age a bit. The building never had the skyrocketing appreciation as other new construction buildings (maybe because of the problems with the developer.) 

Unit #2102: 2 bedroom, 2 bath, den, 1783 square feet

• Sold in February 2003 for $580,000
• Currently on the market for $699,000 plus $40,000 for parking
• Clare Spartz at Keller Williams Lincoln Park has the listing
• See picture below of the kitchen in #2102

Unit #1506: 1 bedroom, 1 bath, 1047 square feet

• Sold in January 2003 for $337,000
• Sold in January 2005 for $310,000
• Currently listed for #399,900 plus $35,000 for parking
• Assessments are $621 a month
• Deborah Thomas at Coldwell Banker has the listing.

Unit #1401: 2 bedroom, 2 bath, 1617 square feet

• Sold in October 2003 for $568,000
• Currently listed for $646,000 with parking extra
• Koenig & Strey has the listing.
• The pictures below are of #1401

There are approximately 19 units currently for sale, out of 149 in the building.  Unit #1506 is also available to rent for $2600 a month.

I went to Six North Michigan expecting to see the same ole product that is in many of these office building conversions (such as Metropolitan Tower, 888 S. Michigan etc.).  I especially expected it with this conversion, given its iffy history.  The building was originally marketed back in 2004 and anyone who went to that sales center knows what I’m talking about.  It was an awful conversion with cheap kitchens and baths. 

Even during the boom, it ran into trouble and the developer actually went under and had to sell the building.

Finally, after years of sitting vacant, Six North Michigan is back with a new developer and a new lease on life.

But, like I said, I was a bit dubious when I decided to check out the sales center.

I was, however, pleasantly surprised.  This is the nicest conversion I have seen in several years.  The developer decided to go high end on the finishes and put that as “standard”- meaning every unit will have Italian cabinets and European appliances (all stainless steel, of course.)  They used real hardwood floors and marble in the baths.

Classy.

(If you go to the sales center, be sure to check out the model unit with the Asian marble in the bathroom. It is like nothing you have ever seen. Really unique.)

This product is very different to the finishes we’ve been seeing on South Michigan Avenue and the Millennium Park area.  It is clear the developer is NOT appealing to the suburbanite masses here as they, for the most part, will not like the sleek white kitchen cabinets with frosted glass. (No offense to suburbanite buyers.)

What about the units themselves?  They have already sold out the smaller 2 bedroom units that face Millennium Park.  Because it is a historic building (it used to be part of the Montgomery Wards empire), they can not change the outside structure that faces the lake or the street.  These units, therefore, have no balconies.

The sales agent I talked with said they had 150 people on their opening day and they wrote 9 contracts, nearly all of them for the cheaper 2 bedroom, 2 bath that faced the lake.  While the views were nice with those, the units themselves were only so-so. Some of the units in the back of the building were actually much more stunning.  The units on the west part of the building have balconies- with the corner unit on the northwest side having TWO outdoor spaces.  Rather unusual for a historic building.

These corner units were also rather spacious and had peak-a-boo views of Millennium Park.  The developer was apparently leaving the loft style windows that graced the entire north face of the unit- giving those units a “loft” feel. 

This is an impressive rehab.  Parking is available for the larger two bedroom units.

Prices ranged from the mid $500,000s for smaller units with one bedroom plus den on the southwest corner to the mid-$700,000s and up for the northwest corner units (which were 1821 square feet.)  Check out the great floorplan for this tier of units (the 08 tier).

There are a bunch of one bedrooms that face the street (not the lake) that have bedrooms in the back of the unit with no windows. The finishes were equally as striking. But these units, without any balconies or parking, will be a harder sell for the building. And they weren’t cheap (in the $300,000- $400,000 range.)

I’d love to see one of the penthouses with the big terraces. If anyone is so lucky to do so- please fill me in.

[P.S. To the @Properties team that is marketing the building, please do something about the awful website. It has no pictures of the interior of the units, even though there are three furnished models right now at the sales center in the building. Also, put prices on the website. Or, at least, put a range. Otherwise, you’ll waste a lot of people’s time.

And why aren’t you touting the great “standard” finishes? These are some of the best finishes I’ve seen in a new building in some time. They rival the classy finishes in 600 N. Fairbanks and blow away the nearby Heritage, now several years old, and the soon to be built The Legacy. Advertise your selling points! Because the building has a lot of them. It’s a great product. But you need a better website.]

As I’ve talked about before, it’s apparently become common to try and list your investment unit for re-sale in new construction buildings in Chicago about three months or so before the closing.  We’ve seen this happening in several new construction buildings in Streeterville.

But this investor in Burnham Pointe,  at 730 S. Clark in the South Loop/Printers Row area, is trying to get out of his contract a full YEAR before the units are supposed to close.

According to an ad on Craigslist, he’s asking $402,990 for a 2 bedroom, 2 bath, that is only 1030 square feet with a NW facing view (Sears Tower/financial district) on the 24th floor (there are 26 floors total.)

He says:

This unit now sells for $463,990 (due to the price increases). Burnham has 2 more price increases scheduled before building completion (end of 2008).

I am an investor and have 3 units in the building. I need to let one go.

My loss is your gain. There is already $60,000 equity in this unit. I also won $1000 Free Upgrades at the Grand Opening ceremony. You can choose your finishes now (before end of October).

The developer’s website says the building is only 50% sold. Maybe it’s just me, but how do they think price increases are going to sell more units?

It’s always interesting when investors try and get out of the flipping game early. There is no reason he should have to “let one go now” because he isn’t paying a dime until it closes. And with two more supposed price increases, he would only increase his equity in the unit before next November.

Who would walk away from “guaranteed” money?

Except, of course, it’s not.

The flippers are getting very, very nervous out there. In some of these buildings that are only 50% or 60% sold- they will be competing with the developers to try and unload their units. Not a great situation to be in.

There are a lot of new buildings going up in the Printers Row area that will be competing for buyers including The Vetro and Library Towers.

The pictures above don’t do the units justice.  The Montgomery, at 500 W. Superior in River North, is more than just the building that houses Japonais and now Brassiere Ruhlmann Steakhouse, a french inspired steakhouse.  The old Montgomery Wards headquarters, originally constructed in 1972 by architect Minoru Yamasaki, who designed the World Trade Center, was converted to residential housing in 2005.  There are 220 units in the building.

It was originally a very successful conversion, despite its location far west of the Magnificient Mile near the River.  The opening of Japonais in the building definitely gave it a cache.  Brasserie Ruhlmann Steakhouse opened this week.

The finishes were originally very modern for the type of product on the market at the  time and appealed to those who liked the cleaner asthetic.  And because of the way the building was originally constructed, there are very few pillars that break up the interior space.  Now, it is not unusual to see the modern look (aka 600 N.  Fairbanks and 500 N. St. Clair.)

Two  years later, some owners and investors are trying to get out of the building.  How are they faring?  Several units are currently on the market:

Unit #707: 2 bedroom, 2 bath

• Originally sold in June 2005 for $347,000
• Currently listed for $489,000 plus $35,000 for parking
• Assessments of $443 a month
• Hughes Realty has the listing.

Unit #911: 2 bedroom, 2 bath, plus den, 1265 square feet

• Originally sold in June 2005 for $428,000
• Currently listed for $515,000 plus $35,000 for parking
• Just reduced $25,000
• The pictures above are of Unit #911

Unit #1209: 2 bedroom, 2 bath, 1095 square feet

• I can’t find the original sales price.  Perhaps still owned by the developer?
• Originally listed in April 2007 for $499,000
• Currently listed for $475,000 plus $35,000 for parking
• Just reduced
• Assessment of $549 a month
• Koenig & Strey has the listing.

Are these units “deals” compared to other similar square foot two bedroom units in other newer buildings?  Take Unit #911.  With the parking, that is priced under $550,000 for over 1200 square feet.  Flippers are trying to get similar prices for one bedroom units of only 845 square feet at 600 N. Fairbanks.  For the same price (or possibly even cheaper) you can have a virtual palace at The Montgomery.

Or does the not as great location really make the difference?

The “investors” are alive and well in Printers Corner, at 170 W. Polk (on the corner of Polk and Wells) in the South Loop/Printers Row area.  The 11 floor building is about to begin closings and already the investors are appearing on Craigslist to try and re-sell or rent out units.

Rentals are appearing for the one bedrooms, like this one asking $1750 for a 743 square foot one bedroom.

Then there are some trying to re-sell their units such as this one on Craigslist.  He is asking $410,000 for a 2 bedroom, 2 bath unit.

One of the unique features of this building is that every corner unit had two bedrooms, two baths and both bedrooms have windows. They were on the smaller side- less than 1200 square feet- but the prices weren’t too outrageous when they were first marketed.

It seems like this owner isn’t going to make much money off of a flip in this building- as I don’t remember them being much cheaper than the $410,000 he has listed (maybe $385,000 or so.)

Anyone know what they were listed for pre-construction?

The building is not yet sold out.

The Illinois Association of Realtors just released the September numbers.

Sales were down statewide and also for the Chicagoland area.  From the press release:

The median home price for the Chicagoland Primary Metropolitan Statistical Area (PMSA) was $257,500 in September, up 5.1 percent from $245,000 in September 2006. The average home sale price for Chicagoland was $327,855, up 5.9 percent from $309,710 in September 2006. In the Chicagoland PMSA, home sales totaled 6,794 in September 2007, down 27.0 percent from 9,307 home sales in the same month last year.

Sales were down in August year over year as well.

But the IAR remains ever optimistic about the longterm market:

“Most Illinois homeowners are experiencing very healthy long-term gains in the value of their homes, and real estate remains the single best investment over the long term providing wealth accumulation especially for those who keep the home for a typical holding period of six to 10 years,” said REALTOR Kay Wirth, president of the Illinois Association of REALTORS. “Market basics are solid and with low mortgage interest rates, strong household formation and job creation—moving forward these factors should bode well for a recovery in the housing economy.”

The average price continues to inch higher meaning either that sellers continue to hold onto boom prices (hence why sales are down) and/or the higher end is selling more briskly than the lower end which pushes up the average sales price.

No talk in the press release about foreclosures or other distress among homeowners. Also no talk about when the “bottom” might be reached. But if you’re holding for the longterm, according to the IAR, it will be your “best investment.” They give no guidance about whether or not you should be buying right now.

There is just something about the 1920s that evokes glamour in Chicago architecture. 

Check out Casa Bonita, at 7350 N. Ridge Blvd., in Rogers Park.  Built in 1928, it is a terra cotta masterpiece of 66 units, complete with an indoor pool, billard room, and library.

Unit #21B: 2 bedroom, 1 bath, 1200 square feet with formal dining room

• Currently listed for $219,000
• No Parking Available
• Assessments of $487 a month

Check out the funky indoor pool!

@Properties has the listing.

Several new construction buildings are either just starting to close on units or are slated to close in early 2008.  Suddenly, there are lots of investors who may want to sell who realize they are going to be in competition with many other sellers (and not just in their own building.)

Recently, sellers have been trying to re-sell their units even earlier than ever.  They are trying to get the word out even before the unit has officially closed. Take this ad from Craigslist on 550 N. St. Clair:

Spectacular one-bedroom unit in the heart of Streterville. Floor to ceiling windows. Hardwood floors throughout. Beautiful terrace overlooking Michigan Avenue. Stainless steel appliances. Deeded parking included.

Current price for the same unit in lower level at $518K. This is a great opportunity! You are saving at least $48K!

The ad says that the building is estimated to be completed in January 2008.

It seems to me that the flippers are getting a bit jittery these days. The ads for these units are coming earlier and earlier before closings in the building.