Story of the 2009 Market. Lincoln Park 2520 Scaled Down by a Third.
Posted by ChicagoismynewBlog! on December 24, 2009
Proposed Lincoln Park condo project scaled down
(Crain’s) — Developers of a proposed luxury condominium complex overlooking Lincoln Park are slashing the number of units by nearly a third in a bid to break through the locked-up market for large construction loans.
Ricker-Murphy Development LLC told buyers last week that the number of units would be cut by a nearly a third, to 198 from the 292 previously proposed, in Lincoln Park 2520, a three-building complex proposed for the site of the demolished Columbus Hospital, 2520 N. Lakeview Ave.
As a result, developers plan to lop off eight stories from the tallest building, reducing the height to 33 stories from the 41 stories previously proposed.
“Our opportunity to reduce the scale we believe will actually make us more attractive for not only construction financing, but also more attractive for the buyers” who want a smaller project, says John Murphy, a co-principal in Ricker-Murphy, whose joint-venture partner is the General Electric Co. pension fund.
Although the building will be shorter, the changes would not affect the design by Chicago architect Lucien Lagrange.
But even at a reduced size, the project would likely require a construction loan of more than $200 million to complete. As a result, the venture plans to start work without a loan on the foundation, which alone could take 12 months to finish. A smaller building still could be completed by late 2011, as required by the current contracts with homebuyers.
The shift in strategy comes as Ricker-Murphy faces an Aug. 15 maturity date on a $28.75-million loan on the site held by Bank of America, property records show. Mr. Murphy says talks are already under way for an extension of the loan.
B of A executives could not immediately be reached for comment, a spokeswoman says.
Ricker-Murphy and the GE pension fund are taking an aggressive approach to challenges facing many residential developers, who have instead opted to put their projects on hold.
“The cheapest thing to do is to sit and wait it out,” says developer Harry Huzenis, a principal in Chicago-based Jameson Development LLC. “The type of buyer they have will be there when the market is better.”
With asking prices of $885 a square foot, the project has not been immune from the broad downturn in the condo market, despite its premium location. Sales have stalled at about 50% of the units, a level that was once more than enough to obtain a construction loan. But lenders have become fearful of new condo projects because of deep concerns about weak demand and the glut of units already being built.
By reducing the number of units, the percentage of condos under contract would increase to 74%, from about 50%, assuming the number of buyers does not change, Mr. Murphy says. Reducing the number of units eliminates 29 condos that are already under contract, giving those buyers the chance to walk away and possibly washing out any advantage to the developers….