Not all high rises are created equal & other financing challenges

With all the recent financing changes, I have had to become very aware of each condo building’s financing considerations. I specialize in condominiums in Downtown Chicago and the Near North Side. When showing buyers around it has been very handy to know each building’s profile with respect to financing. It goes beyond the basic question of “is this condominium building FHA approved?”

As recently as last year, many banks and Fannie Mae & Freddie Mac have changed their policy on what types of buildings they will underwrite. It has started to be like peeling back the layers of an onion.

My recent issues have been:

1. Condotel or hotel components of a building.

You will have a very difficult time finding financing for your buyer at the new Trump Tower or Aqua. Both buildings have a hotel component and most lenders will not lend in this type of building. A survey of the listings that have closed in the last six months at 401 N. Wabash (Trump) shows that almost all closed with the CASH flag highlighted.

My lender contact stated that one might be able to get financing through their credit union or local bank, but would likely need to have a significant portion of their net worth on deposit.

2. Number of homeowners delinquent on their assessments.

Banks are now very conscious of the number of homeowners who are not paying their condominium monthly assessments. On the 22.1 disclosure form (bank questionnaire), there is a question for the number of delinquencies. Above a certain threshold and the property will be very difficult to finance. According to my mortgage banker, this is a problem at several recent condo conversions downtown. All of these buildings had sold briskly during the real estate bubble at higher than average prices for the square footage. Many investors had purchased in this developer’s buildings and had taken advantage of a two year incentive program that offered guaranteed rent and no taxes & assessments during that time. When the music stopped and prices slid, those investors were unable to keep up the payments. There are now many foreclosures and many short sales in these buildings.

3. Litigation

The third issue that has complicated the financing picture is litigation. Depending on the extent of the litigation that the condo association is involved in, a mortgage may be difficult.

For example, a new development in the loop near Macy’s has had a litigation issue for some time now. The mechanic’s liens that two subcontractors filed when the building was complete are being litigated. These subcontractors have filed suit to collect on what they are owed. They have sued the developer AND the homeowner’s directly. At this property, the condo association is suing the developer to complete several warranty items for the building. These two issues should be worked out in the near future, but provide a snag for buyers and sellers in the building.

Make sure that your agent checks the high rise before completing an offer to avoid any financing hangups.

Why You Still Need a Real Estate Agent

I came across this great Forbes article, "Five Reasons Why You Still Need a Real Estate Agent".


With all the internet tools available to buyers and sellers, some may think that an agent is a thing of the past or optional. My feeling is that a good agent is a project manager that gets a listing sold or helps a buyer purchase a property. The agent makes sure each step of the project plan gets completed and handles any breakdowns when they occur (they usually do).

The Forbes article highlights five points that an agent is needed: 1. Better Access/More Convenience, 2. Negotiating Is Tricky Business, 3. Contracts Can Be Hard To Handle, 4. Real Estate Agents Can't Lie, and 5. Not Everyone Can Save Money


I have several additional points to add:

6. Local knowledge and intuition.
Specializing in downtown Chicago, I keep up to date on the latest news that affects property. A new grocery store being announced next to The Heritage would have a positive effect on home values in that development. Conversely, negative news or happenings can have an effect. Wherever the property you plan to sell or buy, it would be an advantage to enlist the help of someone who specializes there. A neighborhood specialist also knows how to promote the best qualities of an area and how to handle common objections to a property. I expand on this in my ChicagoNow interview with writer Dan Rafter.


7. Managing the transaction
Despite what some may think, a real estate transaction is a complicated process that involves carefully coordinated steps. Based on a list prepared by Belton Jennings, CEO of the Orlando Regional Realtors Association, the selling process from start to finish involves up to 180 steps. When issues come up, having an experienced agent with a cool head is a must. For example, a problem with financing or a problem found during inspection could quickly kill a deal if not handled effectively.

8. Let a professional handle it.
Having an advocate that is not emotionally attached to the property can be a huge asset. How would an owner react to feedback from a showing of their property. That beautiful heirloom clock that Aunt Millie got you when she was in Switzerland might mean the world to you now that she's gone. Unfortunately, if a buyer comments negatively on it, emotion could take over. Emotion is the worst thing that can creep into a real estate transaction. It can color communications between buyer & seller, buyer's agent & seller's agent and ultimately sour the deal.

Lastly, knowing who to turn to when things go completely off track is critical. A buyer or seller may not have access to a senior managing broker or real estate attorney to help them put things back on track. The best metaphor I can think of is that you can go to court and defend yourself without a lawyer, but it is very difficult. Similarly, you can juggle knives and not get injured, but the likelihood of success is very low.

Real Progress at Block 37

As reported in Crain's, the judge overseeing the foreclosure case has given approval to new leases for several new stores. "Eight retailers, with products ranging from high fashion to frozen custard, have received court approval to open at Block 37."

CB Richard Ellis is handling the leasing at Block 37 and has announced the following tenants:

- Andy’s Frozen Custard
- Alternatives Shoes
- Comic Vault
- Which Wich, a Texas-based sandwich chain



- iCandylicious, a candy store
- Simply Thalia, which has sushi and French-Asian sandwiches
- Ladies & Gentlemen, an Aveda lifestyle salon and spa















I think that this great progress for the neighborhood. All these new businesses are just a couple blocks away from The Heritage.

Nothing Short Term About Renting Downtown

Downtown Chicago Alderman Brendan Reilly is pushing to limit short term "vacation rentals" in condominium buildings in the city.

From Crain's Chicago, "Under the measure proposed by aldermen Brendan Reilly (42nd) and Edward Burke (14th), condo owners who want to rent out their units for short vacation stays would be subject to licensing fees, inspections and taxes"

The above picture is something that the new legislation aims to reduce or eliminate. Short term rentals are defined by the proposed law as two to five days. From Greg Hinz's Crain's Blog, Reilly had these comments, "In many cases, these units are never owner-occupied but become party pads," Mr. Reilly said. "Older residents are concerned about safety. . . .People see strangers in the elevator."

I am in agreement with the new proposal. I don't feel like the building's maintenance and door staff at the Heritage should have to take the time to 'check in' a guest and answer questions about what elevators go where and where they can or cannot park their car temporarily.



Also, let me be clear and say that living in Marina Towers downtown, I don't mind helping guests or relatives of family that might be staying in the building. Conversely, I don't want to be the unpaid concierge for 'guests' that will only be here a couple of days. I think that most people would agree that these guests also would not care for the building as well as a conventional tenant or owner would.

I would love to hear what you have to say.

No Show at Block 37

The new Block 37 has suffered another set back. Is the Block 37 parcel hallowed ground?

From the Chicago Tribune:

The chance of bringing a long-anticipated movie house to the Loop at the Block 37 mall is fading as a foreclosure battle over the stalled retail project winds its way through the courts.

Michael Whalen, CEO of Paragon Entertainment LLC, which would run the movie house, said he wants to move forward with the theater but is doubtful a deal will be reached.

The article mentions that the foreclosure drama has put the theater in jeopardy of becoming a tenant. Muvico is an upscale movie theater that also serves drinks and dinner to guests.



I was really looking forward to the new theater. Being able to walk out the door at the Heritage / Garland, cross the street, get dinner, drinks and a nice movie was an excellent option. I think that the theater would have been a great outlet for all the new downtown residents along with downtown travelers. Let's keep hope alive that the decision makers can come to an agreement.

Commuting the old fashioned way

On the Blue Line today I saw a CTA advertisement that said, "the average rider saves $11,000 a year by switching from their car to the CTA." That got me thinking how much I enjoy not being tethered to a car. Why should I bother with $250 + parking fees and worrying about someone backing into it or taking it for service.




When needed, I have a car at my disposal. I take cabs when I am really pushing time and cannot wait for the bus or train. The occasional Red Line ride to Lakeview to visit my fiance is still very tolerable on more crowded trains after the CTA cuts.














I am honestly not writing this to gloat. This entry is more about one of the great benefits of living downtown in the River North neighborhood. Most everything I need to go to is a nice walk or easy cab ride away.




I can honestly say that the 30 - 45 minutes others spend on the train or in their car everyday each way to work is time well spent for me. I do miss the greenery of the neighborhoods and haven't heard birds chirping that often, unless you count cooing pigeons. I do have an outlet for that when I get down to the Printer's Row for a Hackney's burger or up to Roscoe Village to my real estate office.

Looking out this morning, I can say that I am in the right place when I watch the sun rise over Lake Michigan from my 51st floor balcony.

Aqua Building Still Tall in Uncertain Times

If you have ever walked over on the 'New Eastside', you have probably noticed the beautiful & unique new tower. Aqua was completed last year and has been awarded skyscraper of the year by Frankfort based Emporis. It is also the tallest building ever designed by a woman (Chicago based Jeanne Gang). The building is currently comprised of condominiums and apartments.

The architect speaks about the building here.


Chicago Journal has written an article outlining the building's completion and struggles to find tenants and buyers.