Sun-Times: Waterview Tower Construction May Halt
Another sign of the times, but much more serious because they’ve already started construction, is this news from David Roeder of the Sun-Times that construction may have to halt at Waterview Tower, the 90+ story high-rise condo/hotel at 111 W. Wacker Drive in the Loop due to financing issues.
They have already built up to at least the 16th floor.
It doesn’t sound good:
But progress on the building, marketed as Waterview Tower, has been excruciatingly slow. Sources said the the developer, Teng & Associates Inc., has been unable to secure about $320 million in construction financing and may be forced to stop work. With the shell of the lower floors in place, it’s possible the structure will serve merely as a multilevel parking garage until the market for high-priced housing revives.
The project could be put on hold and the structure used for a parking garage.
Five contractors have filed liens on the property since January. The most significant appears to be a claim by Thatcher Engineering Corp. for $207,000. One lien can indicate just a payment dispute; several indicates a project is in trouble and creditors are protecting their interests in case of a bankruptcy or property sale.
Teng is an engineering firm that bought the property at Wacker and Clark for $12 million in 2006 and used its own architect, Thomas Hoepf, to design Waterview. The plans received critical praise. Teng started signing condo sales contracts and a deal with Shangri-La International Hotels Inc. during a roaring economy. With its own money and later a $20 million stopgap loan from LaSalle Bank, Teng started construction in 2006.
These are my fears for The Spire. Yes, they’ve started construction. But what if they only make it up to the 20th or 30th floor?
High end hotel was set for Wacker Drive hit by money crunch [Sun-Times]
Poor Teng…first Grand Pier Tower before the boom and now this during the bust. He has impeccable timing. These units are just too expensive. I wonder if Shangri-La will go into a more successful space? I had a feeling about this development!
its a shame I liked the shangra la brand name so much more than trunp.
Roeder is not very credible on the Chicago construction scene.
I have no idea how the finances stack up, but his analysis is a bit hard to believe.
5 liens with the most significant being $207,000 – the way this is worded makes it sound like the total amount is well under $1 million. The developer used his own money and got a “stopgap” loan from LaSalle Bank. This seems to indicate that the debt ratio is pretty small on this project. If you think that a project is going bankrupt, you only scramble to file liens ahead of everyone else if you think there won’t be enough money to go around to pay every creditor.
Teng might get wiped out, but there just isn’t enough debt to make the project upside down. It would be profitable from day 1 as a parking garage, plus the right to finish the building would carry on to the new owners. I have to assume that whoever buys this (bankruptcy sale or regular sale) will be able to finish the project and make a large amount of money no matter how bad the housing market gets.
It’s the same deal with the Chicago Spire. That project doesn’t have a penny of debt (yet). If it goes under, whomever buys it will essentially be getting $300-$500 million in free construction work. It will be super easy to make an incredible profit finishing the job. Knock 30% off the price of each unit and still make boat loads of money…
please, please shangri-la come to chicago! especially as the peninsula chicago isn’t as good as peninsula hk.
but alas….hotel-condos have proved to be investment duds in So. Fla. and Vegas. occupancy rates are lower during recessions, thus driving investment income lower. gosh, what a surprise! :(….
Tipster, they have a $20 million loan to repay LaSalle. Correct me if I’m wrong but isnt that considered debt. They cant repay the loan until they close on the units.
disregard my previous post, I see that you were referring to the Spire not having any debt
They’re definitely above the 16th floor–as I count, they’re at least to 24 or 25. And the hotel portion is intended to end at floor 27. So it’s almost to a level where it could be a “complete” building as far as the Shangri-La (or another hotel) is concerned–albeit a building with way too much parking.
Maybe Chicago is not that far behind Miami after all? Where are all the lawyers and doctors and oil shieks that were gobbling up all of these 2 bed 2 baths before??
I am not to worried about this one. We might see a work stoppage for a short while, but the developer will get financing or sell to someone that will. I would be shocked to see a parking garage, especially since the parking on this building only goes up to the 12th floor and they are on the 26th floor right now. Roeder doesnt have much credibility. Who knows though, anything could happen.
Everyone is always so fast in defending this project and saying they’re not worried about it. Clearly there are underlying issues here. They started construction long before the credit crisis began and couldnt get a construction loan then.
Anon, they may be close to completing the shell of the hotel portion of the building but lets not forget the amount of construction that is involved in the interiors.
“lets not forget the amount of construction that is involved in the interiors”
Sure, but the uncompleted, unoccupied box is (a) worth something to someone who can get financing and (b) simply a liability to Teng, who apparently cannot. If things are really bad for Teng, a credit-worthy (or cash-rich) buyer could probably acquire the project for little more than the assumption of the existing debt–maybe even with preferential terms–and at least complete the hotel portion.
Depending on the terms of the Shangri-La agreement, there may be substantial value for someone else.
We went to the Waterview sales center twice to see the models and obtain information. Both times there was no one there. Were they really trying to sell their units?
DD – When did you go to the sales center? I agree that it is odd that no one was there. And something is going to happen here, whether Waterview LLC finishes the product or someone else does. Location/opportunities are too great.
The problem with Waterview tower and several of the other high profile developments isn’t that no one wants to build in those locations it’s simply that in this credit crunch no one can get the loans.
Look at the Ritz project. It was supposed to start construction in February. It’s now April and nothing is happening at that prominent location on Michigan Avenue.
Even for the best of developers, the banks are very, very leery about condo loans right now given the inventory in the market and the lack of sales. (All of which makes sense.)
I looked at this property twice over the past two years- No matter how you look at it, real estate is location-location-location. This is not a good location and that is why the units are hard to sell.(They are also trying to compete with trump and spire at a price point that i am not sure chicago will be at for many years) It is not a great location for a five star hotel either. So we will see what happens and Im sure the lenders are very worried
The problem with this isn’t location. It’s that it’s a condo/hotel. Stupid, stupid idea.
“a condo/hotel. Stupid, stupid idea”
Yep. It’s basically a time-share where you buy all 52 weeks. If not everyone knows, timeshares are horrible “investments”–they can make sense for a given individual if you use them ALL the time, but you need to think of it as pre-paying vacation lodging. Condo-hotels only make (any) sense for businesses with regular travelers to the destination and a very limited number of individuals who want (and can afford) a no-involvement pied a terre.
Anyone who bought into the idea that these were good investments didn’t know anything about real estate, timeshares or hotels–they were all whales.
steve said “No matter how you look at it, real estate is location-location-location.”
Only in the fantasies of used home salespeople and declining asset holders. I think it is more accurately stated as “location-price-affordability.”
My understanding on the Ritz project is that there is an easement issue with the building to the west, and it is holding up the start. There are only 85 units in the building, the lender is not too worried about that kind of risk at that location, which is amazing.