A traffic report for downtown housing deals

January 14, 2009

BY DAVID ROEDER Staff Reporter

Chicagoans often ask why, with most forms of real estate development in deep slumber, do they still see construction activity.

It's a matter of timing and the target market. Projects conceived and funded years ago could just be wrapping up. And just because a new building is completed, it doesn't mean it's financially well.

A case in point is the Trump Tower at 401 N. Wabash.

With a stubborn 30 percent of the 92-story building's condo and hotel units unsold, Donald Trump has had his own issues with the deal. He hasn't paid about $334 million owed on a $640 million loan from Deutsche Bank, so he and the bank are suing each other.

The credit markets are mostly closed to developers unless they're happy to pony up equity worth about 40 percent of the project's cost. Across town are innumerable deals -- some announced, through the zoning process, and even with substantial sales -- that banks are turning down. But not everything has stopped.

Here is a look at three residential projects affected in different ways by the real estate collapse. We'll label them "green," "yellow" or "red" according to whether they exhibit forward progress.

GREEN: The only type of housing being built is rentals. Rising unemployment is causing the apartment market to soften, but many lenders still like its fundamentals.

Several apartment high-rises are under construction downtown, but there's also a notably large development in Oak Park. The 200-unit, 14-floor Oak Park Place Apartments is close to completion at the southeast corner of Ontario and Harlem.

The developer is Whiteco Residential LLC of Merrillville, Ind. Oak Park puts developers through the wringer, and this proposal was stuck in one for a couple years. But as a result, Whiteco got a large municipal subsidy, about $4 million, as an incentive to build less than it originally wanted.

Whiteco President Stephan Beck said the project has financial backing from Wells Fargo & Co. and Capri Capital.

The building has a contemporary look and the units, with rents quoted at about $1,160 to nearly $2,000 per month, have a soft-loft vibe. It also has "green-friendly" elements to the design, but I suspect the "green" that will have the most significance to the neighbors is the produce at the Trader Joe's store on the ground floor, which already has opened.

YELLOW: Northbrook-based Integrated Development Group LLC closed on a roughly $40 million purchase last February on the old Lakeshore Athletic Club, 850 N. Lake Shore Drive. The sale was widely hailed for the buyer's plan to preserve the 1927 building.

The credit crisis could yet threaten this roughly $80 million renovation for senior homes. But it hasn't yet, said Integrated President Matthew Phillips, because of a go-slow approach. Phillips said equity from his firm and National Electrical Benefit Fund is covering the cost of facade improvements.

A loan would allow the expensive gut rehab to continue. Phillips wants to deliver the building by late 2011.

RED: The recession was just too much for the plans to demolish the gamy old Purple Hotel, 4500 W. Touhy in Lincolnwood. The village's community development director, Timothy Clarke, said the would-be developers have backed out.

Clarke said Inland Real Estate Acquisitions Inc. and TMK Development Ltd. cited economic conditions in withdrawing from the $27 million purchase.

Their proposal called for almost a self-contained town, starting with a small hotel and condos and including a bowling alley and a movie theater. So much for big plans in 2009.

ROEDER ON THE RADIO

David Roeder reports on real estate every Thursday at 6:22 p.m. on Newsradio 780 WBBM. The reports are repeated at 10:22 p.m. Thursday and 7:22 a.m. Sunday.