Thomas McCarey

The auction team came last week.

Mostly men, mainly white. Their hands showed the markings of occasional manicures. And they had a propensity to stand with feet splayed, arms crossed, hooking their thumbs in the crook of the opposing arm. Chewing mints as they nodded, always looking away from the person with whom they spoke.

Where they came from, I cannot say. The reason for their arrival was to try to sell off 41 Chicago condo homes at 1400 South Michigan Avenue.

At the end of the day last Sunday, they had succeeded, tickling 40+ condo homes into the sold column in the Chicago real estate market.

When you hear certain words, it's reasonable to have specific responses. The word "fire" evokes a sense of warmth. Carnivores hear "steak" and salivate. My sons hear "Nick toon" and they celebrate an anticipated cartoon.

"Auction"? The mere suggestion drums up a cavalcade of mental images of getting a good deal. And with this in mind the preview session of the 41 Chicago condo homes for sale last Saturday was wall-to-wall with consumers jotting notes, going from condo to condo from floor to floor and imagining themselves in their new construction high rise home at the best possible price.

At the end of the day Sunday, after the dust had settled and about 45 actual condo homes sold in roughly 90 minutes I knew with certainty that only one consumer had gotten a reasonable deal. My clients.

Sure, there may have been others. But amid the syncopated beat of the steady-voiced auctioneer steering the conversation in upward spirals of dollars being spent, when start bids burst up $100,000 on one bedroom condo homes with the quickness of a sneeze, it seemed that the bulk of participants, would be and actual, were moving quickly toward the point of paying market price.

And market price at an auction is not a good deal in the estimation of The Real Estate Lounge Chicago.

Viewed through the prism of comparison, my clients purchased a 1500+ square foot three bed/two bath condo home with parking at 15% less than similar units (on a square footage basis) had sold for in the past six months in the South Loop. One foreclosed unit with comparable specs sold for approximately the same amount.

The one beds? In the South Loop they are trending toward $225,000. (Bank owned and short sales are more than 10% less in transacted amounts.) And that is where a number of the one beds at the auction crossed the finish line. Slightly smaller one beds offered a slight mitigation, landing near $190,000. Of the seven two beds that sold, four sold at market price, roughly $330,000 (before parking) and three ranged roughly 10% less. The cost of parking was another $35,000 and storage an additional $1,000.

Yikes!

Bottom line is this - folks walked into the gathering last week expecting a good deal. They walked away with half of that. They got a deal.

Who got a good deal was the building and the auctioneers who managed to clear the shelves of inventory in one afternoon. Meanwhile the area features hundreds of one bedroom and two bedroom condo homes that will continue to chase the market amid a gross oversupply of inventory. Prognosis? The passing of time and reduction of pricing.

One last note - what disheartened me last week that most consumers were flying solo. And they didn't have somebody with them to temper them if the bidding rapidly escalated beyond what was reasonable. At the end of the day a consumer will do what a consumer will do. But in this instance where the setting is essentially fever pitched (it felt like a casino) and a contractual mechanism that veritably establishes an inescapable agreement I would veer more toward having unbiased and professional counsel to help me make my decision.

What appears to be the case overall though, the auction was an unbelievable success for 1400 South Michigan and its auctioneers. In 90 minutes they were able to propel more than 40 Chicago condo homes into the sold column while hundreds and hundreds of units remain languishing on the market in the South Loop.

Back in the day the best reads in the Chicago papers came on Thursdays or Fridays when Roger Ebert was presented with a really bad movie. One of the finest of film reviewers in America, Ebert was at his best (and funniest) when he had a chance to sharpen his pencil and scribble notes about the whys and wherefores of some particularly smelly film he had witnessed that week.

I thought of Roger earlier today as I read a review in the New York Times about Sandra Bullock's latest cinematic expression.

Since The Times doesn't give its readers a head start by using stars in reviews you have to muck through the prose to gain a sense of what the reviewer thinks. And even then sometimes you are left with a blank look, unaware of the plus or minus of a particular movie. Trust me, today's review of "The Blind Side" leaves no doubt.

While reviewer A.O. Scott doesn't seem to have an ink pot at his disposal that lends itself to the scalding words that Ebert might use, there is no doubt what his sentiments are after being subjected to the "two hour holiday greeting card" that he finds "The Blind Side" to be.

But what really struck me in his review was a single line that may have broader application when he said the movie was guilty of

shedding nuance and complication in favor of maximum uplift.

So it's a case of the energizer bunny being bright-eyed and bushy tailed over and over and over and over, pushing us and cajoling us to look on the bright side. No matter what.

Heck, it's something most of us are guilty of doing occasionally. Jeez, some might say the real estate industry as a whole suffered from the collective amnesia of pursuing "maximum uplift" all the way up to the start of our current economic downswing.

The question, though, is in the face of revised information, what is the next choice.

In the "The Blind Side" the movie's title was perfect because Bullock's character never moved out of the darkness of her blindness. She continuing to saunter forth, blithely and daftly. The good news is that such daftness is not permeating the Chicago real estate market as I see more and more of a shift away from the darkness.

In other words more and more realtors and their selling clients are taking constructive steps to, as Dr. Phil would admonish us, "get real."

An important question that has yet to be fully and completely answered relates to whether lenders are going to step up to the plate to constructively assist prospective buyers get funding to take advantage of the shift toward more realistic and pragmatic pricing.

Stay tuned.

Synchronicity?

When apparently unrelated things occur. But when all is said and done it turns out that the things weren't all that unrelated after all.

I thought of synchronicity today. It turns out The Elysian in Chicago has decided to rescind contracts for 130 or so hotel condos at the property at 11 E Walton. And like its mythic namesake, one of Chicago's most expensive condo buildings is vanquishing 130 hotel condos like so many perished heroes to wander the Elysian Fields.

I wouldn't think the progenitors of this upper end Gold Coast project had synchronicity in mind when they dubbed the idea of 54 residential condos and 180 hotel condos as The Elysian. And yet as we slog through the 23rd month of this recession, it turns out that the the concept of privately owned hotel condos at The Elysian is dead on arrival like mythic heroes who arrived at the open doors of the Elysian Fields.

Turns out what a handful of boosters were heartily advocating for the downtown Chicago real estate market just a short time ago looks like nothing more than a very bad idea not only at The Elysian but also the Mandarin Oriental (project shelved), the Shangri La (bankruptcy) and another eight projects that have all crashed and burned.

The cost of the canceled purchase contracts at The Elysian? Between $80,000,000 and $100,000,000.

And the reason? The debt related to the $280,000,000 Gold Coast condo building's construction loan needed to be restructured.

What this news, reported in Crain's Chicago, means is that The Elysian should open in a few weeks, allowing closings to start for the luxury residential condos that are under contract. It also likely frees The Elysian from the defaults that may have occurred because some (and possibly many) of the hotel condos wouldn't have made it to closing because funding has become so scarce for hotel condos.

The truth behind this paucity requires looking no further than The Trump Tower Chicago just six blocks south where a hotel condo closed on just last year for $894,524 is now on the market for $389,900. The reason? It has to be a cash deal. No funder today is willing to provide financing for a purchase of this type.

In the meantime, I can't help but wonder what to expect as the risk that The Elysian management team had hoped to foist on private investors through individual hotel condo purchases has bounced back on to The Elysian. Especially as the upper end hotel market has hit a rough patch.

I have no doubt as to the quality of the product at 11 East Walton. I have watched with approval as the building has matured into a handsome edifice. But owners of the units there with purchase prices well into the seven and eight figures must have some misgivings about the shifting nature of their neighbors and the manner in which the hotel and its management team now has singular risk of steering some 180 rooms to occupancy through one of the toughest Chicago hotel markets in memory.

If I was a purchaser awaiting a closing in the next month or so I would be concerned that the risk would not solely be management's.

[Original blog post at The Real Estate Lounge Chicago]

In as much time as it takes to send an email the folks at Lincoln Park 2520 have boosted their sales from 50% to 74% of the massive new construction luxury project located in Chicago's toney Lincoln Park neighborhood.

How, in a market as constricted as what we are experiencing in Chicago this summer, were they able to achieve this prodigious feat?

By a mathematical sleight of hand whereby they are reducing the number of units from 292 to 198. As reported yesterday by Crain's Chicago Business the Lincoln Park luxury condominium and townhome project at 2520 N Lakeview has been reduced in size. And with the reduction in size comes an increase in the percent of units sold.

Unfortunately, though, the reduction impacts 29 units already under contract which makes pending sales nearly 60% of the overall units (though developers say the bulk of these folks intend to purchase another condo in this Lincoln Park location).

At the outset the shift in numbers would appear to be an attempt to garner additional funding to move forward with the project. Some $200 Million in construction loans are perceived as needed to complete work. But the current state of the financial markets creates a timeline of maybe a year before construction loans might be available for this Chicago luxury project or larger scale residential real estate work across the United States.

Which brings us to a more immediate concern - the August 15th maturity date of a $28.75 Million loan with Bank of America that financed the $44 Million purchase price of the former site of Columbus Hospital. Crain's quotes the head of the development as saying talks are underway with the bank to extend this deadline.

Meanwhile the jury is out as to the overall look of this Lucien Lagrange designed site that intermingles townhomes with a 33-story tower that is 8 floors fewer than originally planned. With a price tag that trends toward an average of $900 square foot many observers have opined that its size simply doesn't integrate well with the neighborhood where Chicago's gracious Lincoln Park is its front yard.

The builder's website is currently being redesigned, so it doesn't offer any additional information. There are presently 8 new listings at 2520 listed on the Chicago mls ranging from below $500,000 for a 960 square foot one bedroom (parking extra) to a nearly 7,000 square foot four bedroom penthouse with almost 3,000 feet of terrace that is listed at $11,544,000 (parking extra).

Among the questions that come to mind with respect to this project relate to timeline (when is it realistically anticipated to be done (and will it truly be built)), assessments (the sleight of hand reducing overall units will push up monthly fees by how much), and value (what is the true worth of a home at this address)?

By the way, the assessments for the one bedroom are $201 while the four bedroom are indicated on the Chicago mls as $4681.

If you have any interest in this or any other property in Chicago (including the Lincoln Park neighborhood and the Gold Coast, Streeterville, Bucktown, Wicker Park, Roscoe Village, Edgewater, Lincoln Square and the north side Chicago real estate, don't hesitate to reach out to me either at tom.mccarey@gmail.com or by calling or texting 773.848.9241.

[See in original format at The Real Estate Lounge Chicago]

When in Rome, goes the old saw, do as the Romans.

That was our experience when we traveled with the boys to Europe not last Christmas but the one prior. And like our Roman friends, we did likewise as we walked and walked and walked and walked.

Certainly some folks in the states and even our home town of Chicago like to lace up their sneakers and walk, but the tendency to hit the trail as a pedestrian is an art form in the historic district of Rome.

Of course part of the reason is that gas is so intolerably expensive in locales like Rome or Paris. And then, of course, consider that the narrowness of the lanes where anything larger than a Vespa will have difficulty passing.

But part of the reason, methinks, perhaps boils down to culture. Many Americans, whether in Chicago, New York, Los Angeles (definitely LA), don't like to ambulate for the sake of ambulation. Consider, conversely, our British counterpart who likes doing it so much that he has afforded the act a piece of his lexicon. And thus the Brit engages in what he calls a "constitutional."

Maybe we are a more driven group of people with our errands and tasks that don't allow, in our mind at least, an extra moment. And so we rush and dash and scurry.

Certainly I am as prone to the mad and harried pursuit as I sprint from point a to point b as I show my Chicago real estate listings whether a downtown Chicago highrise condo or a Wicker Park single family or a Logan Square top floor home or a Roscoe Village extra wide home. But every once in a while a blessed respite occurs and I catch a passing glimpse of peace amid the din of servicing my Chicago real estate clientele.

Such as when I walk.

Like yesterday when we started out the door in a typical enough manner but wound up behaving so very Euro as we headed through our Edgewater neighborhood on foot to our local Dominick's grocery store carrying our own reusable bags with which to head back home with our assorted organics upon which later we would dine.

Just like when we held residence for a week on Via Vecchio in Rome's city centre and walked the cobbled lane to the corner grocer with the white aproned employees who made us feel like we had turned back the pages of the calendar to an earlier day with an exquisite form of customer service.

We didn't have aproned employees at Dominick's, but the lady at the register did her best to placate Lucas as she offered him a neon orange sticker that took his mind off whatever was derailing his typically serene disposition.

In a way the walk is like the Mastercard priceless commercials...

Pound of organic apples - $3

Pound of organic plums - $3.50

Half pound or nitrate and hormone free turkey - $4

Gallon of organic milk - $6

Walk with the family in our Chicago neighborhood - priceless

And so it goes until my next day of back-to-back-to-back showings at my listings in Lakeview, River West, Wicker Park, Logan Square, and Roscoe Village.