Chicago–To sell condos in the current environment, price reductions seem to be the way to go. But how much of a discount? In the case of 200 N. Dearborn, a residential property in downtown Chicago, quite a lot–but only for a little while.
Certainly the environment is tough, even in a market like Chicago, which was once friendly to condo developments and conversions. Condo sales in the market have been sluggish of late. The Illinois Association of Realtors reported in January that 11,051 units sold in the city during all of 2010, down 2.5 percent compared with 2009. Moreover, the medium price of the units that did sell last year was down 4.3 percent from the previous year.
Late last year, American Invsco, a multifamily specialist based in Chicago, found itself needing to sell a selection of condos in the 47-story, 309-unit 200 N. Dearborn, which was built as rental apartments in 1989. American Invsco acquired the property in the mid-2000s, intending to convert it to condos, as it had done successfully with other downtown Chicago buildings.
Before the credit freeze and the Great Recession started in earnest, about half of the units were sold, but the conversion has been much slower going since then. In late 2010, to meet recently revised Fannie Mae pre-sale requirements, American Invsco determined that it needed to sell 36 more units in the building, so it took the idea of discounting and ran with it. For those units only, the company started offering discounts of 40 percent to 55 percent compared with previous asking prices. So far 20 of the units have sold, leaving 16 more to go.
For example, one of the remaining one-bedroom residences is sale-priced at $180,400, which is about 48 percent less than the former price of $349,900. A two-bedroom unit that formerly had an asking price of $502,000 will now go for $231,500, roughly a 53 percent markdown.
“Unless we did something very special, there wasn’t going to be financing for any more sales, period, so we put a special program in effect to generate the necessary 36 sales,” Nicholas S. Gouletas, chairman and CEO of American Invsco, tells MHN. “After those sales, we’ll be able to get whatever the market will bear.”
Virtually all the sales of the discounted units are cash sales, Gouletas adds. “Cash closes,” he says. “The buyers are people who want to occupy the property, or people who want to use it as a second home, and they see a price they might not see again.”
The building also includes 25,000 square feet of retail space, with a convenience store and a dry cleaner. Other amenities include an indoor swimming pool, fitness center, a 3,200 square-foot landscaped “Vincent Van Gogh terrace” with barbeques, a party room and a 24-hour doorman. Five floors of indoor parking are also available.