What's Driving the Sale of Downtown Luxury Condos?

By Dennis Rodkin, Chicago Magazine

In the first few months of 2010, as some local developers slashed prices or staged auctions on their newly built condominiums, a small segment at the upper end of the condo market flourished. As Gail Lissner of Appraisal Research Counselors notes, “There are always wealthy people with the ability to buy.” The big difference lately is that those well-heeled folks have been shelling out princely sums to buy luxurious new condos in downtown high-rises. “These are not speculators buying cookie-cutter condos,” says Lissner. “By and large, they are buying to live in these really high-end, unique places.”

Consider these numbers: From the beginning of the year until the middle of May, about 40 downtown condos have been sold for $2 million or more—and most of those condos were in buildings that opened in the last two years. (Some sales may have not yet appeared in public records.) They ranged from an $8.182-million sale at the Elysian—the 60-story tower at 11 East Walton Street designed by Lucien Lagrange—to a three-bedroom unit that went for a little more than $2.24 million at Aqua, the much-praised skyscraper at 225 North Columbus Drive that Jeanne Gang designed for Magellan Development. (The Elysian sale was the highest price paid for a Chicago condo since November 2006, when a 61st-floor unit at the Park Tower—at 800 North Michigan Avenue—went for $8.275 million.)

What’s driving the sales? To update an old real-estate adage: timing, timing, timing. Many of these new elite homeowners made their decision to buy several years ago, while buildings were under construction or still in the planning stage—and before the recession punctured the real-estate boom. With those condo towers now ready for residents, the folks who agreed years ago to buy are finally inking the deals.

That’s generally what’s been happening at the Elysian, according to Caryl Dillon, who was the tower’s sales agent. Since January 1st, at least 16 buyers there closed on condos priced at $2 million or more (in addition to the $8.182-million sale already mentioned, one condo went for $7.25 million and another for $6.9 million). That’s on top of a first round of December 2009 closings at $2 million and up. Meanwhile, at The Legacy (which recently opened at 60 East Monroe Street), three units priced at more than $2 million were among the first closings in the building—and usually the earliest buyers sign off on the earliest closings. (Since condos on a building’s bottom floors are often finished first, some lower-level, lower-priced units bought during construction can also be among the earliest closings.)

Buyers who signed contracts before the bust could have opted to cancel their contracts when the economy soured—as did numerous buyers of medium-priced homes. But “10 percent [the standard deposit on a condo] is a lot to walk away from” on a multimillion-dollar sale, Lissner says. Still, as she suggests, it’s also likely that for many of these rich buyers “their lifestyle hasn’t changed in the downturn.”

Janet Owen, a Sudler Sotheby’s International agent who works exclusively in the luxury market, points out that many rich people have not had to worry about the tight mortgage-financing climate that has contributed to the drag on the larger real-estate market. Mortgage lenders have been requiring bigger down payments, higher credit scores, and more detailed documentation of financial histories from average buyers. “These aren’t issues [wealthy potential homeowners] have to think about,” says Owen. On top of this, she notes, “their buying had nothing to do with the $8,000 federal tax credit.”

That is especially true of well-to-do buyers who made their purchase decisions recently. In early May, someone paid $2.3 million for a previously owned condo on the 51st floor of the Trump International Hotel & Tower (that building, at 401 North Wabash Avenue, opened in 2008). Another buyer spent $3.45 million in April for a 54th–floor condo at 55 East Erie that an investor had held on to since 2003. These new purchasers “are almost always cash buyers,” says Tere Proctor, who was the director of sales at Trump before returning to agency work (at Koenig & Strey Real Living). “They see the value in buildings like Trump and the Elysian, and they’re banking on knowing that whenever the market gets better, they will be holding valuable real estate.”

Read the full article and see building highlights here.

Highlights Around Town for the Month of July

Looking for some summer fun? Try one of these events!

• The River North scene will take center stage again at the Taste of River North, Saturday, July 17th 12pm-10pm and Sunday, July 18th 11am-8pm. Located in and around magnificent Erie Park, this fest gives food lovers and weary art shoppers a taste of the best of everything the trendy River North neighborhood has to offer along a picturesque green riverfront setting. Near Erie & Kingsbury.

• The Dearborn Garden Walk, Sunday, July 18, and the Chicago Yacht Club’s Race to Mackinac, Saturday, July 24! These two colorful & memorable events have always made the middle of summer most enjoyable by showcasing warm weather enjoyment on land and in water!

• Your love of flowers will flourish on as you also enjoy the Sheffield Garden Walk, July 17 & 18 as well as the continuing Summer Tropical Flower Show at the Garfield Park Conservatory here through September 26. The show is featuring Chicago-weather friendly fauna to enjoy throughout the year.

• Enjoy an evening of music in one of our many intimate music venues in and around Chicago! David Sanborn will be performing his long known sweet jazz saxophone Saturday, July 31 in Wentz Concert Hall at North Central College in Naperville. Andrea Marcovicci will serenade you with her soft & melancholy voice July 14 – 18 At Davenport’s Piano Bar & Cabaret. For something a little hotter, enjoy Chichito Valdes Afro-Cuban Ensemble July 23 & 24 at the Green Mill

• Want to get away? Day-Tripping is the way to go! A day in the country is a sure way to revive yourself from the daily city grind! County fairs abound with all the fun food and events that are a traditional part of them! The Kane County Fair in St. Charles, July 14-18; The DuPage County Fair in Wheaton, July 21-24; The Lake County Fair in Grayslake, July 27 though Aug 1

• Still can’t come back inside because the weather is so nice? How about an outdoor concert? Millennium Park & Ravinia are offering a wonderful line-up of classical favorites! If classic rock is more your style, Chicago will be performing with the Doobie Brothers on Friday, July 16 and REO Speedwagon along with Pat Benatar, Sunday, July 18 at Carter One Pavilion at Northerly Island.

• Art fairs are also a wonderful way to get a nice walk in as part of your exercise routine while enjoying the talents of many local and national artists as they showcase their sculptures and painting. The North Shore Festival of Art will be held July 25 - 26 in Skokie.

• The Gold Coast Art Fair! This year the fair has a new address…Butler Field in Grant Park! Save the Date! Aug 20-22

NOTICE OF MOVIE FILMING IN THE AREA

DW Studios Productions is currently filming scenes for the upcoming motion picture “Transformers 3” in the area. One of the principal locations in the film is Michigan Avenue in the vicinity of the Chicago River. Major filming with special effects is scheduled for Friday, July 16th, Saturday, July 17th and Sunday, July 18th from approximately 7am until 7pm. Scenes will include low flying helicopters and special effects such as gunfire, spark hits, explosions, fireballs and black smoke.


Please note the following proposed schedule for the area:

Tuesday, July 13th 8am to mid-morning: 1-2 helicopters flying closely at the top of the Trump Tower.

Thursday, July 15th 8pm – Monday, July 19th 5am: Michigan Avenue between Ohio and Wacker Drive will be closed. Lower Michigan Avenue will be available to vehicular traffic until Friday July 16th at 8pm. During these days, the loudest stunts and special effects will be filmed. Please note that gunfire and explosions will take place after 8am on Saturday, July 17th and Sunday, July 18th.

Saturday, July 17th and Sunday, July 18th from 7am throughout the morning: Precision skydivers with parachutes will be flying around the building and landing on the Michigan Avenue Bridge. They will be circling along the Chicago River. This will result in occasional closures for 10-15 minute periods for affected streets below the fly zone. This will include a lockdown of vehicular and pedestrian traffic. Areas expected to be affected include:
Hubbard between Clark and State
Kinzie between Clark & State
Dearborn between Wacker and Hubbard
State between Wacker and Hubbard
Wabash between Wacker and Kinzie

Monday, July 19th from 10am-4pm: 3 Base jumpers will be jumping from the Trump Tower roof to the south side of the Tower. The River Walk will be closed during this time. Additional closures may occur as necessary.

Tuesday, July 20th from 10am-4pm: If weather is inclement on Monday, July 19th this is the back-up date for the base jumpers.

Monday, July 19th - Wednesday, July 21st: Filming will occur at Hotel 71 and expected closures include Wacker from Michigan to Wabash as well as intermittent traffic control on nearby streets.

Saturday, July 24th – Tuesday, July 27th and Saturday, July 31st - Sunday, August 1st: Filming will occur at 35 E. Wacker and expected closures include portions of Wabash and Wacker as well as intermittent traffic control on nearby streets.

Tuesday, July 27th: Filming will occur in immediate areas surrounding Trump Tower and there will be intermittent traffic control in the area. Filming will also include helicopters.

Please note that businesses in the affected areas are scheduled to remain open during this time. Bus stops on North Michigan Avenue between Ontario and Wacker will be relocated. Signs are expected to be posted. Please be advised that loading zones for boats along the river may be relocated and signage will be posted indicating the alternate loading zones.

Public Assistance personnel will be placed at the pedestrian lock-up points and will provide detour information. The personnel will be wearing yellow shirts with the “Transformers” logo.

Rents up at downtown apartments for first time in 2 years

(Crain’s) — A construction wave coupled with 11.2% unemployment would normally make life miserable for apartment owners, but downtown landlords are holding up surprisingly well.

The occupancy rate for top-tier downtown apartment buildings rose to 93.6% in the first quarter, up from 91.4% in the fourth quarter and 90.9% in the year-earlier period, according to Appraisal Research Counselors, a Chicago-based consulting firm.

Including concessions like free rent, net rents at Class A buildings rose to $2.16 a square foot, up 3.9% from $2.08 in the fourth quarter and 1.9% from $2.12 in first-quarter 2009. It was the first year-over-year rent increase in two years.

“There’s just huge demand for rental product downtown right now, and owners have been quick to capitalize on it,” says Appraisal Research Vice-President Ron DeVries.

Apartment demand is usually low when unemployment is high, as would-be tenants try to save money by doubling up or living with their parents. But that’s not the case downtown, where many prospective condominium buyers are renting as they wait out the depressed condominium market.

“They’re not convinced that the market has bottomed out on the ownership side,” Mr. DeVries says.

That helps explain why a much-feared surge in apartment supply so far has not kept occupancies and rents from rising. Developers have added 4,077 units to the downtown market since the beginning of 2008 and will complete another 799 by the end of the year, according to Appraisal Research.

“Six months ago all of us were nervous,” says Steven Fifield, president of Chicago-based Fifield Cos., the developer of Alta at K Station, a new two-tower, 848-unit apartment project at 555 W. Kinzie St. in the West Loop.

The nerves have given way to relief. Fifield estimated it would lease about 10 units a week at Alta’s 420-unit west tower, which opened March 1. Instead, Alta is averaging more than 20 and the west tower is already 50% leased, Mr. Fifield says.

“The supply is getting absorbed substantially faster than I expected,” he says.

One key measure of demand is rising at its fastest pace of the past 10 years. The number of occupied downtown apartments rose by 2,190 units from first-quarter 2009 to first-quarter 2010, the biggest annual gain of the last decade, according to Appraisal Research.

By contrast, the number of occupied apartments fell in the last recession by more than 1,400 units.

Granted, developers are offering good deals to attract tenants, in many cases as much as two months of free rent. As a result, developers are collecting lower net rents than they projected when they broke ground, before the jobless rate soared.

And while downtown Class A net rents are rising again, they have fallen more in the current recession than they did in the last one. Net rents declined 13% from their peak in the third-quarter 2007 to their low of $2.08 a square foot in fourth-quarter 2009, according to Appraisal Research. They fell 12.4% in the prior recession.

Still, given how strong demand is, Mr. DeVries expects net rents to rise about 4% this year and occupancy to hit 95%.

“Once those jobs do start coming back, it will be fascinating to see what happens with rents,” he says.

If there is one spot where oversupply is a concern, it’s in the South Loop, where new construction and competition from condo rentals is depressing rents.

“There’s been a bit of divide in the market,” Mr. DeVries says.

But optimism is returning, with some developers already laying the groundwork for the new round of construction.

They are looking forward to 2012, when the economy is stronger and the market has had time to absorb the supply from the current development wave. After completing 2,234 units this year, downtown developers will finish none in 2011.

“There’s a lot of people talking now and trying to work up numbers for a new rental building,” Mr. DeVries says.

By: Alby Gallun May 24, 2010 for Chicago Business

We Are At the Nordstoms on Michigan Ave. - Check Us Out

Check us out at the Nordstrom Kiosk during mall hours 7 days a week.

Chicago Magazine Link:

http://www.chicagomag.com/Radar/Deal-Estate/April-2009/Housing-Bulletin-House-Hunting-at-the-Mall-and-in-Harbor-Country/

Sex (and Gender) and the City

Nothing seems to divide the sexes like "Sex and the City." The Chicago Tribune has advice for he-men who would rather "soak in a bathtub of lemon juice and slit our wrists with Manolo Blahnik credit-card receipts" than see the film. (For the ladies, the sidebar provides some lovely pictures of fashion at the London premiere). Meanwhile, The New York Times reports that even studio executives are stunned by the rate at which women are rushing theaters. Can we look forward to more spin-offs and/or imitations?...

The Ribbon Has Been Cut!

Chicago's Trump Tower (official name: Trump Tower International) has celebrated the completion of its hotel; the condo floors are still under construction. Check out this video of the ribbon-cutting ceremony. The Trump tour is here -- fun stuff!

Florida? No Thanks!

Hard as it may seem to believe, some people actually choose to vacation in Chicago in the dead of winter. From ice skating in Millenium Park to browsing the shops on Montrose Avenue in Ravenswood, there is plenty to do in this city of ours without being overrun by those creatures no one wants to see, much less admit to being (i.e. tourists). Go here to post your own tips!

Should Chicago Take the Gamble?

Chicago politicians are tired of seeing a potential source of huge income leave the city and even the state. Should Chicago, with its checkered history, get into the casino business? Listen to the story here. NPR funnyman and Chicago native imagines "da casino" here

Five Top Reasons to Buy a Condo

In short (to see the American Chronicle article click on the link above):

1)Condos Do Not Require Upkeep
As any single-family-homeowner knows, this is a biggie!

2)A Condo is an Investment
Like a house...but unlike a rental. And in downtown Chicago, it is a very good investment!

3) Amenities
I am addicted to indoor swimming pools now -- for exercise and fun with my grandchildren -- but would hate to have to clean one!

4) Space
Square foot for square foot, condos are more reasonably priced than single-family-homes.

5)Social Life
Ever wonder why the elevator plays such a big role in soap operas and nighttime dramas?...

Chicago on a Shoestring

Click the above for the Frugal Traveler's take on our fair city!

Is Big Brother Watching You?

If so, he is getting "smarter"! Click on the title for the NPR story on smart surveillance cameras in our fair city. For reading or listening.

Prairie Avenue Remembered

The Chicago Firehouse Restaurant is hosting an evening with two Prairie Avenue historians tonight. Visit their website for more details.

New Addition to the Family

Watch this space for info on our new building, THE HURON! The Sales Office will be opening in early October. We can't wait to introduce this great opportunity at the corner of Huron and State.

In more personal news, my new grandson George Gumz Patterson arrived ahead of schedule on Wednesday, September 12! Welcome George, and special congratulations to big sister Edie!

High-Rise Architecture

Good 9/11 reading on the state of high-rise architecture in America a year ago today.

Steve and Barry's

Steve and Barry's is planning a Magnificent Mile store. (You may need to register with Crain's to read the entire article).

Bash on Wabash

Looking for something to do today? The Bash on Wabash has something for everyone, from toddlers on up. Click on the link for details of this festival in the South Loop.

Barneys move may shake up Oak

Block of boutiques could see development wave

January 29, 2007 By Thomas A. Corfman and Eddie Baeb
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Barneys New York is close to a deal that would move its Oak Street store across the street and double its size in a proposed new building, a development that would signal a dramatic transformation of the tree-lined block of quiet boutiques and salons.

The luxury department store would lease about 100,000 square feet in a five-story structure to be built on the site bounded by Oak, Rush and State streets, according to sources familiar with the negotiations between Barneys and developer Mark Hunt of Chicago-based M Development LLC. Mr. Hunt declines to comment.

Barneys would move in two years when its lease expires on its 46,000-square-foot store at 25 E. Oak St.

The Chicago location is a fraction of the size of Barneys' flagship stores in Manhattan and Beverly Hills, Calif. A spokeswoman for Barneys, a division of New York-based Jones Apparel Group Inc., didn't return calls for comment.

Oak Street, once a quaint strip of gray-stone and red-brick buildings, is already a haven for national and European luxury retailers such as Italian clothier Prada and French leather-goods designer Hermès. But a Barneys deal would be a key step in a wave of new development along Oak Street, including possibly the retailer's current site.

That, in turn, could boost other developers' chances of luring high-end retailers to nearby projects, such as the Elysian Hotel, under construction at Rush and Walton streets, and a proposed mixed-use development for a site at State and Walton that includes the Scottish Rite Cathedral, say real estate brokers not involved in the Barneys deal.

"With the lack of supply of high-rent, specialty-store space along Michigan Avenue, this deal could open up significant opportunities for new fashion and high-end-goods retailers to come to Chicago," says Stanley Nitzberg, a principal in Mid-America Real Estate Corp., an Oakbook Terrace-based retail real estate firm.

The new Barneys building could also include a Citigroup Inc. bank branch at the corner of State and Oak, sources say. The branch would move from a 6,800-square-foot storefront that's part of the Esquire Theater building at 58 E. Oak St., which is owned by Mr. Hunt. He is working up plans to replace the shuttered theater with a retail and boutique hotel development. If the Barneys move is completed, its current site is expected to draw interest from developers.

But the department store's current landlord also is expected to market the space to new tenants and could charge substantially higher rent. Barneys, which has been at the location since 1992, currently pays an estimated rent of less than $28 a square foot a year, not including taxes and expenses. That figure is well below the market on Oak, where prime street-level space can rent for $250 a square foot. Some places would need to take out payday loans with that big of a difference. Ben Ashkenazy, president of New York-based Ashkenazy Acquisition Corp. and a member of the landlord group, did not return calls requesting comment.

Copyright 2007 by Crain Communications Inc.

Apartment wave forms on Chicago's horizon From the Crain's Chicago Business Newsroom As condos cool, rental construction heats up

August 20 08:28:00, 2006 By Alby Gallun
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Amid rising occupancies and rents, the downtown apartment market is on the verge of its biggest construction boom in nearly 20 years.

Developers will add more than 1,250 apartments to the downtown market this year and are working on plans to build as many as 8,000 units over the next four years, according to a report by Appraisal Research Counselors, a Chicago real estate consultancy. That would increase the total 44% to roughly 30,250 units.

Condominiums have been the property type of choice for many downtown developers, but some now are turning to apartments as the condo market slows.

The rental market, meanwhile, is surging after a long slump, as an improved job market boosts demand for apartments and thousands of units are converted into condos, shrinking supply. The number of units fell 25% since 1991.

"Supply has gone way down and with the rise in rents and occupancies, a lot of these projects are feasible right now," says Appraisal Research Vice-president Ron DeVries.

After bottoming out at 89.7% in 2002, the downtown rental occupancy rate hit 97.2% at the end of the second quarter, according to Appraisal Research.

With the upper hand over tenants, downtown landlords have nixed concessions like free rent, fueling a 13% increase in effective rents at luxury buildings over the past year.

The timing couldn't be better for a few developers who are close to completing projects, including Chicago-based Golub & Co., which is leasing units at the Streeter, a 481-unit tower at 345 E. Ohio St., and Fifield Cos. of Chicago, which is wrapping up the 450-unit Residences at Left Bank at 300 N. Canal St.

Yet the party is about to get more crowded. Five new buildings accounting for 1,976 units are expected to open in 2008. Dallas-based Lincoln Property Co. and Amli Residential of Chicago each have South Loop projects in the works, and Chicago's Magellan Development Group LLC is working on two East Loop towers with a combined 1,083 units.

On top of that, Appraisal Research is tracking projects that could add about 5,562 apartments to the market over the next four years. With a slowing condo market, some condo developers are thinking about selling their sites to firms that build apartments, or even doing it themselves.
The question is whether the exuberance of developers will come back to haunt them when the supply of apartments exceeds demand. Appraisal Research's Mr. DeVries says he's not overly concerned, noting that condo conversions have removed so many apartments from the market that there are actually fewer rental units downtown now than there were 15 years ago.

"I think the market is there to absorb" extra supply, says Matthew Lawton, who sells apartment buildings and lines up financing as senior managing director in the Chicago office of Holliday Fenoglio Fowler L.P. "Will it put a governor on . . . rent growth? Absolutely."

copyright 2006 by Crain Communications Inc.
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Downtown Chicago Festivals

Chicago Festivals Events Calendar


7th Annual Mayor Daley's Kids and Kites Festival
May 14
7th Annual Great Chicago Places and SpacesChicago Architecture Foundation
May 20 - 22
Bike The DriveLake Shore Drive
May 29
21st Annual Chicago Gospel Music FestivalGrant Park - Free
June 3 - 5
22nd Annual Chicago Blues FestivalGrant Park - Free
June 9 - 12
21st Annual Printer's Row Book FairDearborn St. btwn Polk & Congress - Free
June 11 - 12
31st Annual Wells Street Art FestivalWells St between North & Division
June 11 - 12
46th Arts Experience420 N Michigan
June 16 - 17
Chicago SummerDance FestivalGrant Park
June 16 - Aug 28
Taste of Randolph StreetRandolph & Racine
June 17 - 19
25th Annual Taste of ChicagoGrant Park
June 24 - July 4
15th Annual Chicago Country Music FestivalGrant Park
June 25 - 26
13th Annual Race to the Taste
June 26
6th Annual Chicago Outdoor Film FestivalGrant Park - Free
July 12 - Aug 23 (Tuesdays)
Old St. Patrick's World's Largest Block Party650 W Madison St, $35 - $40 (21+)
July 15 - 16
Arts & Crafts ExpressionsCanal & Madison, Free
July 21 - 22
12th Annual Mayor's Cup Youth Soccer Tournament
July 23 - 24
An Arts AdventureSuperior & State, Free
July 24
48th Annual Venetian NightMonroe Harbor - Free
July 30
Gold Coast Art FairRiver North Gallery District, Free
Aug 5 - 7
Chicago Distance ClassicGrant Park
Aug 7
47th Annual Chicago Air and Water Show
Aug 20 - 21
47th Arts Experience420 N Michigan, Free
Aug 26 - 28
17th Annual Viva! Chicago Latin Music FestivalGrant Park, Free
Aug 27 - 28
Accenture Chicago TriathlonLake Michigan, Lake Shore Drive
Aug 28
27th Annual Chicago Jazz FestivalGrant Park, Free
Sept 1 - 4
9th Annual Celtic Fest ChicagoGrant Park, Free
Sept 17 - 18
6th Annual Mayor Daley's Kids and Kites Festival
Oct 2
Chicago Marathon
Oct 9
Chicagoween
October
State Street Halloween Happening
Oct 22
Daley Plaza Santa's HouseDaley Plaza
Nov 24 - Dec 24
Tree Lighting CeremonyDaley Plaza
Nov 25
Mayor Daley's 6th Annual Holiday Sports Festival
Dec 28 - 30
New Year's Eve Fireworks at Buckingham Fountain
Dec 31

Source: TheLocalTourist.com