Kuwaiti bank pegs Michigan Avenue condos at $242 million
(Crain’s) — A Kuwaiti bank that has invested in the Ritz-Carlton Residences, a 40-story condominium tower under construction on Michigan Avenue, said Sunday that the project is worth $242 million.
The investment is a pricey bet that the market for new luxury condos will rebound strongly by 2011, when the project is scheduled to be completed.
The $242 million refers to the gross sales proceeds from the 88 condo units, says Bruce R. Schultz, a principal with Prism. He estimates the cost of the project at $200 million. The development has a $137.5-million construction loan from the German financial institution known as Helaba.
Of the remaining capital in the deal, Kuwait Finance has put up 95%, which would be about $59 million. That includes a $40-million preferred-equity investment when the sale of the site closed last year.
After KFH and Prism each recoup their equity investments, they will split the projects’ profits 50-50, Mr. Schultz says.
The project is about 40% sold, roughly unchanged in more than two years.
But in a hopeful sign, two contracts have been signed in the past 30 days, Mr. Schultz says. The development is slated to be completed at the end of 2011, with the foundation to be complete by March 1.
“We’re moving forward,” Mr. Schultz says, adding that the project is “very fortunate” to have KFH and Helaba on board.
Despite the current slowdown in sales, the project could benefit next year from a pent-up demand for high-end condos, says Gail Spreen, president of residential brokerage Streeterville Properties.
Also, Ritz-Carlton Residences will face less competition than it might have because of cancelled projects, she says….