Auctioning off the South Loop

Residential units in search of bidders on Nov. 15

11/04/2009 10:00 PM

By MICAH MAIDENBERG
Editor

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Motor Row Lofts

Facing the reality of selling empty condominiums in a difficult real estate market, South Loop developers are turning to a method more associated with herds of cattle in the Old West than with residential housing just steps from Chicago’s Loop: the auction.

On Nov. 15, two developments will put vacant units up for sale in auctions open to the public.

At noon on that date, 20 condominiums in Motor Row Lofts, 2303 S. Michigan, will be offered in a McCormick Place ballroom.

An hour later, the bidding will start for 41 condominiums in the Michigan Avenue Tower II building, 1400 S. Michigan.

Discounted prices in both developments are promised. Minimum bids for the Motor Row units are 55 percent off the original developer prices, ranging from $140,000 for a one-bedroom unit to $359,000 for a three-bedroom, two-bath residence that includes a rooftop deck.

Starting bid prices at Michigan Avenue Tower II undercut last asking prices by up to 56 percent, according to sample units listed on the property’s Web site.

“Developers definitely have the inventory. They want to sell and really need to sell. They’re looking at [auctions] as one way to do that,” said Gail Lissner, vice president of Appraisal Research Counselors, a real estate consulting firm.

This year has been one of “slow sales velocity,” she noted. Developers were expected to deliver more than 1,500 new construction residential units in the South Loop in 2009; approximately 50 percent were under contract through the second quarter of this year.

At both auctions, buyers must have checks at the ready for units they win. At 1400 S. Michigan, for example, winners must be ready to write checks worth 5 percent of the purchase price and close on the unit by Dec. 28.

In March, 45 units were auctioned off at Vetro, a 232-unit building at 611 S. Wells, representing more than $12 million in sales. The auction, the first ever of residential units in downtown Chicago, drew some 450 people.

Buyers at auctions set new price points for buildings, said Jon Gollinger, president of Accelerated Marketing, which is promoting the Michigan Avenue II auction and worked on Vetro as well.

“What my auction at 1400 S. Michigan is going to do to the market is it’s going to tell the truth,” he said, on price.

Thomas FitzGibbon, executive vice president at MB Financial Bank, said it was safe to assume the units offered Nov. 15 would be sold for less than what the developers originally hoped for.

That could help push home values down, he said, tough for those who bought “at the top of the market in a development that has suffered in sales.”

“Does that mean you overpaid? I don’t know. You may have paid the right price when you bought it,” he said.

Buffeted by foreclosures and inventory coming onto the market, condo prices across the region are down, according to the latest quarterly report released by the Illinois Association of Realtors (third quarter numbers are due out Nov. 9).

The median price of a condominium in Cook County fell by nearly 18 percent in the second quarter of this year versus the same period in 2008, the group reported.

Michigan Avenue Tower II was built by Russland Capital Development, a Skokie-based firm that built the Michigan Avenue Tower, 1250 S. Michigan, and owns Franklin Point, a six-acre vacant parcel at Harrison and Wells.

A call to the firm was not returned.

According to Lissner, from Appraisal Research Counselors, the light could be at the end of the tunnel for condo owners, at least on the supply side. Delivery of new construction units will slow this year and cease the year after.

“The main point people have to realize is in 2010, we’re only talking about a few buildings delivering, only one of which is in the South Loop,” she said. “In 2011, deliveries in the downtown market, our large wave of deliveries, this construction boom that’s been going on for the last four years, is ending.”

Contact: mmaidenberg@chicagojournal.com


3 Comments - Add Your Comment



By Gary Lucido from University Village
Posted: 11/16/2009 5:23 PM

Here are the detailed results from the 1400 S Michigan auction: http://blog.lucidrealty.com/2009/11/15/1400-s-michigan-avenue-tower-ii-auction-results/


By Simo from South Loop
Posted: 11/10/2009 11:52 PM

I agree with Solo and the article. THIS IS IT. Conmstruction is over for a long long time. It is going to be a game of musical chairs for the remaining and best available units if you get a good one fine. Asset prices will grow in the years to come and competition will start to heat up for the most deirable locations, units, and buildings to live ine.


By Solo from South Loop
Posted: 11/05/2009 9:24 AM

The South Loop will strive and continue to boom. If you can get a unit right now at a lower price, god bless you. It does not drive your value down (in the future). As long as you take care of your own unit & building, the area will help sell your unit in the future. The local developers, communitty members have been making all the correct steps to make sure every street, every store, every loft/condo bldg looks clean & spacious.