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June 10, 2011 10:00 pm

Winds of success

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Michigan Avenue, Chicago

The Magnificent Mile: Michigan Avenue in Chicago

Chicago’s reputation among developers in recent years has not been that of the Windy City, but the Stormy City: an economic maelstrom has engulfed the new homes business. Developers have had to work hard to secure funding for construction to even begin, with several schemes either being cancelled or scaled down, quite literally, to fewer floors and fewer units. Once completed, marketers and estate agents have then had to work hard to win sales in a hostile economic climate.

The Chicago Spire, a 150-storey tower on the city waterfront that was to have been the world’s tallest residential block, failed to get off the ground. After the two owners failed to raise sufficient finances, the scheme was officially abandoned in December 2010, despite five years of planning. A swirl of recriminations and legal actions are that scheme’s lasting legacy.

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Those developments that do get built still have challenges. For example, CA Development, a building firm, has had to slash prices by up to 50 per cent at its scheme of luxury 5,000 sq ft, six-bedroom homes – some of which were originally priced at over $1m – at Edgebrook in the north-west of the city. Similar-sized reductions are on offer at 200 North Dearborn Private Residences, a 47-storey Chicago Loop block being converted into condominiums by another developer, American Invsco.

Against that harsh market backdrop, the achievements of the city’s Ritz-Carlton Residences scheme now nearing completion on the city’s Michigan Avenue – better known around the world as the Magnificent Mile – are impressive. Not only is it set to open a little ahead of schedule (the first owners may move in at the end of December, not spring 2012 as originally expected) but over half its 88 units have been sold off-plan at a time when few buyers put down deposits before they see the finished product. Nor has it trimmed back on standards, or indeed asking prices, to attract purchasers. Apartments range from one-bedroom homes, with approximately 1,370 sq ft of space, to large properties of more than 6,500 sq ft stretching over half a floor of the 40-storey building.

Typical features include ceilings up to 12ft tall, private balconies, solid eight-inch panelled doors, limestone floors and top-end kitchen fittings. But it is the services that mark out this development from others in Chicago. There is a 12,000 sq ft private club exclusively for residents and guests, a private dining room with a specialist wine cellar, a gym and spa, outdoor terraces, a state-of-the-art cinema room, and 12 dedicated Ritz-Carlton staff on duty at any one time to meet owners’ needs.

Prices reflect those high standards. Homes range from $1.25m to $4m-plus, the equivalent in some units to over $1,300 per sq ft, a new residential record for Chicago, despite the dawning of the age of austerity. A parking space is another $30,000 extra.

“We’ve sold about 50 per cent of the units, mainly the smaller one-bedroom examples, and that rate is good enough to satisfy all of our funders. That’s a milestone which a lot of other Chicago developments have failed to meet,” says Margo Dahmani, vice-president of the Prism Development Company, which is building the development for Ritz-Carlton.

Purchasers so far have mostly been from the Chicago area and the US east coast, with a few from Canada and India. “Most are aged 40 to 60 and are close to or already are empty-nesters,” explains Dahmani.

However, having a respected global brand has not meant that the sales have come easily. There have been four years of marketing for the project. Now, in a bid to sell the remaining units, a high-profile link with the Art Institute of Chicago is being arranged: five interior designers will use the development to showcase their latest creations in early 2012.

Within a few blocks there are plenty of rival private residence schemes, too. The most notable is the Trump Tower, with its 486 private residences in the heart of the downtown area, and making the most of its riverside location. Prices for its residences range from $463,000 to $1.68m.

A brisk stroll away, and overlooking Chicago’s beach and Lake Michigan, is the Carlyle; a refurbished apartment within this 40-floor building of private residences, constructed in the 1960s, is now on sale for $2.095m.

I ask Dahmani if it is a problem for the Ritz-Carlton Residences that their location does not include clear views either of the river or the lake. “We’re more tucked into the real neighbourhood,” she replies. “To be closer to the water means you’ve got to be cabbing it everywhere. At Ritz-Carlton you’re able to walk out to the stores, restaurants, theatres and the like.”

The success of this scheme does not herald a new dawn for Chicago’s wider housing market, however. Illinois has stubbornly stayed in the top 10 US states for foreclosures since the downturn began in 2007. In April alone, there were more than 10,000 foreclosure processes started by lenders against owners in the state.

In February, the month with the most recent data available, some 207 of the 472 detached houses sold within the Chicago city boundary were foreclosed units marketed by banks. Another 62 were so-called short sales, where the price paid was less than the amount owed on the seller’s mortgage.

Such concerns will not trouble the Ritz-Carlton sales figures. So far, most purchasers are heads of companies or high-net worth private entrepreneurs, exactly the people most likely to spend time and money in the Magnificent Mile’s upscale shops rather than send e-mails pleading for mercy from Fannie Mae and Freddie Mac.

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Buying guide

Pros

● Walkable downtown and shopping areas

● City parks plus a beach and lakeshore

Cons

● Winter temperatures can hit minus 20F,

while summer days are often in the 80Fs

● Parking is expensive

● Property taxes higher than in some states

What can you buy for ...

$100,000 will buy a two-bedroom, two-bathroom apartment

$1m will buy a three-bedroom apartment in the heart of the city centre

Contacts:

The Ritz-Carlton Residences, www.theresidenceschicago.com, tel: +1 312 242 5980

Trump Chicago Residences, www.trumpchicagoresidence.com, tel: +1 312 612 0303

Carlyle apartments through Christie’s, www.christiesrealestate.com, tel: + 1 312 944 8900

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