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05/26/2010
by Alby Gallen
(Crain’s) — A South Michigan Avenue development site that would have
been a hot commodity during the condominium boom is being sold in a
court-ordered auction more than two years after a lender filed to
foreclose on the property.
Rick Levin & Associates Inc. has scheduled a July 27 auction of the
parcel at 1000 S. Michigan Ave., where local developer Warren Barr
wanted to build a 40-story tower with 346 condos. But the condo crash
foiled that plan and Elk Grove Village-based First American Bank sued
in May 2008 to collect a past-due $18.7-million loan secured by the
site.
In another era, a property along Grant Park offering unobstructed views
of Lake Michigan would command a premium, fueled largely by demand from
condo developers. But the South Loop remains swamped with unsold
condos, and most lenders aren’t financing development of any kind,
limiting the pool of potential buyers.
The site could attract interest from a company or non-profit group
hunting for a headquarters site or a nearby college that needs more
space, says Rick Levin, president of the Chicago-based auction firm.
Bidders may also include deep-pocketed investors looking to buy and
hold property until the residential market rebounds.
“When it does come back, land along Grant Park should be the first to
benefit,” he says. “There aren’t a lot of vacant parcels on this
stretch that could offer this large of a development opportunity.”
It’s difficult to estimate what the property is worth given the lack of
comparable sales over the past two years, one reason an auction makes
sense, Mr. Levin says. The most recent comp is another development site
at 830 S. Michigan that Mr. Barr sold in November 2008, after a
mezzanine lender filed to foreclose on the property.
In that transaction, a venture linked to Matthew Pritzker paid $17.6
million for the estimated 36,000-square-foot property, where Mr. Barr
had planned 376 condos. Mr. Pritzker, who received a roughly
$500-million settlement in 2005 in a dispute over the family fortune,
was unavailable for comment. An executive at his investment firm,
Matthew Pritzker Co., did not return phone calls.
That sale equates to a price of about $488 a square foot, or $47,000 a
unit. At that level, 1000 S. Michigan would be worth about $16.4
million, though the economy and financial markets have improved over
the past 18 months.
“There is interest for land,” says John Jaeger, first vice-president in
the Chicago office of CB Richard Ellis Inc. “There wasn’t last year,
but there is now.”
It’s unlikely, however, that an auction would generate enough money to
pay off the $25.3 million in principal and accrued interest owed to
First American. The suggested opening bid is $9 million.
First American won a judgment of foreclosure in January 2009 and held a
sheriff’s sale two months later. But Mr. Barr’s partners challenged the
sale, preventing the bank from taking control of the property. On May
17, Cook County Judge Robert Quinn ordered a new auction conducted by
Rick Levin.
A bank executive did not return a phone call late Tuesday.
Though Mr. Barr, president and CEO of Oak Brook-based Renaissant
Development Group LLC, and his partners have lost control of the site,
they have a big stake in the auction: They guaranteed the First
American loan, meaning they could be on the hook for any shortfall.
Like a lot of condo developers, Mr. Barr is lying low these days.
“I’m just trying to wade my way through a very difficult market,” he
says. “The condo market will come back eventually. There’s just a lot
of uncertainty.”
Alby Gallun, Crain's
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