Sue Fox, @Properties. Direct 773.816.1788
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Archive for the 'Condo auctions' Category
The pain is spreading. We’ve already seen developers resort to condo auctions downtown to finally rid themselves of unsold units, but now the fallout from Chicago’s condo implosion is spreading north to the Gold Coast.
The developer who converted a 391-unit apartment building at 1400 N. Lake Shore Drive into condos in 2006 just announced an April 25 auction to sell off 30 of the 80 remaining units. “People are going to get a great deal,” Robert Mosky, president of RDM Development & Investment LLC, told Crain’s Chicago Business. “It’s going to help out the building.”
Help out the building? Mosky said that bidding for studios — that once sold for $140,000 to $160,000 — will now begin at $50,000. One-bedroom condos will start at $90,000, a devastating reduction from the original prices of $250,000 to $270,000. This may be an attractive deal for new buyers who value the location, but these fire sale prices will hardly help out the rest of the building’s owners, many of whom are likely now underwater on their mortgages.
With Chicago condo sales sluggish (particularly downtown), some developers are turning to auctions as a last resort to jumpstart sales. It’s so hard to get a condo loan these days in buildings with many unsold units that auctions — where the financing is already lined up for potential buyers — can help get people in the door. Then, the hope is that other buyers will be able to qualify for conventional loans to buy the remaining units.
But at 1400 N Lake Shore, trouble has been brewing for months for many existing owners (see my Dec.16 post). There are now at least four condos being offered as short sales in the building, and many more for sale with price tags well above the planned auction prices.
The bursting of the real estate bubble sounds more like a balloon slowly deflating in the South Loop. Condo developers badly overbuilt this area, and in the last three years we’ve seen many projects — once hyped with glossy promises of sophisticated urban living — fade into half-occupied shells as prices fell so sharply that many units were converted into rentals.
After failing to find buyers through the usual channels, some developers are now hauling their leftover condos to the auction block. This week, two auctions involving condo developments in the South Loop and Near South Side produced dramatic discounts for buyers, according to Crain’s Chicago Business.
In a 269-unit condo tower at 1400 S. Michigan Ave., known as Michigan Avenue II, 43 units were auctioned off at prices 27% off the previous list price. And at Motor Row, a 51-unit loft conversion project at 2301 S. Michigan Ave., 19 units were sold at a 45% price reduction.
The fire sale comes after a similar auction in March at the Vetro condo project, 31-story tower at 611 S. Wells St. that was built two years ago.
And now, with Chicago’s Olympic bid crushed and Illinois foreclosures and unemployment on the rise, I think it could be many years before the South Loop becomes the trendy destination its backers are hoping for. Lenders on other stalled downtown condo projects may also force developers to hold auctions, clearing out the overbuilt inventory by taking an axe to condo prices.
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