Vultures Spotted Over South Loop

There are plenty of anecdotal stories regarding the extreme difficulty the ordinary home purchaser experiences in obtaining a loan to purchase a new development condo here in the South Loop, Chicago.  This inability is not just the result of much higher credit requirements but a tighter examination of the overall financial health of the development project one may have an interest in. The development, as an example, must have a higher percentage of units under contract before a lender will commit to funding a loan for the purchase of an individual condo. This may have been a contributing factor for the failure of the Roosevelt Collection in the South Loop. Existing contracts were eventually cancelled and Centrum Properties, its developer, converted the project into rental units.

The overall cost of the Roosevelt Collection project is estimated to be $350 million. This includes almost 400,000 square feet of retail space. That is a whole lot of vacant retail space to lease out in a downturned economy. Only 25% of the retail space has been leased –and to only 1 tenant- Kerasotes Showplace movie theater.  One may suspect that cost of carrying the loan debt (estimated at $285 million) for this project would be a crushing financial hardship for Centrum Properties.

This might explain the sour and disgruntled review by one tenant at the Roosevelt Collection:

“Don't waste your time, money, or sanity with this building. The Lofts are very poorly run and since the development is not hitting its revenue quotas due to all the vacant units, they will do their best to squeeze every penny out of their residents.

We have been here for over a year, and while nothing has changed about our unit or the quality of living, they are constantly changing how much they charge for small things like overnight parking, lockouts and storage units. It costs $25 for a guest to park overnight...in the South Loop! Not to mention, $125 for an engineer to walk up to your apartment and open your door in case of a lockout...really?!?! Plus, they have drastically over-promised and under-delivered with regard to the retail units that are still sitting vacant now for about a year and half since they first opened. It was supposed to be finished fall of 2010. Also, don't be fooled by their friendly leasing team...things change the minute you sign your lease.

If you are thinking about moving here...stop, and keep looking. You will save yourself a ton of time and frustration.”

Parker B

This is where the smell of blood from a bleeding developer attracts the proverbial vulture! Centrum is reportedly selling the project for approximately $170 million. This is far less than the $285 million extended by the lenders to Centrum and more than 50% less than the overall cost of $350 million. A huge commercial short sale!! The purchaser is a joint venture of Dan McCaffery and LA-based Canyon Capital Realty Advisors LLC.
This is the same Dan McCaffrey who has been in court for the last 15 months fighting a foreclosure suit against one of his own commercial dealings-The Hotel Burnham. The hotel was recently appraised at $22.7 million. As a result of loans taken out against the property during the real estate boom there remains $37 million due. The lender and Mr. McCaffrey have been unable to agree to a restructuring of the existing debt. What to do? Walk away!!! The parties have agreed to a mutual consent foreclosure.
Now-wouldn’t you like to walk away from that condo in the South Loop that is worth far less than what you paid for it 6 years ago and buy a short sale condo now for half the price it sold for in 2006?

Let’s hear your comments!!