Monday, January 3, 2011

Another Condo Building Goes Rental

In our first real post of 2011, it seems fitting that a real estate story starts off the year. This past Thursday, Crain's Chicago reported that a Miami Developer bought 200 units at Astoria Tower (Northeast corner of State and 9th):
A Miami developer has purchased more than 200 unsold units in a South Loop tower, a deal that chips away at the glut of new condos for sale in the beleaguered neighborhood. Crescent Heights Inc. last week paid roughly $45 million for 205 units, or about 83% of the 248-unit Astoria Tower.
Although some might see this as a bad thing, the article puts an interesting spin on this:
The shift to apartments could help other condo projects in the South Loop, which have been competing over a seemingly dwindling supply of prospective buyers.
“This deal gets (condo) inventory off the market and puts bodies in the units,” says Chris Huecksteadt, a local director at Metrostudy, a Houston-based housing market research and consulting firm.
Sure, having bodies in units is a good thing, but it will be interesting to see if this really alters the market. People are optimistic that the economy is going to get better in the new year, but who knows about the real estate market.

We will be watching with eager eyes!

(Hat Tip: ND and AV!)

17 comments:

Anonymous said...

This is bad. As apartment dwellers are "renters" not "owners," they tend not to care about the equity in either the building or they neighborhood becase they, by definition, are transient as opposed to "in it for the long haul." Also, the type of people who look to rent on the south side tend to be of the Section 8/HUD crowd. It's true. Trust me. We are having massive issues with renters in our building, especially when the owners are absentee. As these units are now owned by a Miami-based company, I think the owner can be considered "absentee."

Anonymous said...

One could argue that those renters can turn into buyers down the road. Many people, especially in this market, need to determine if a certain neighborhood is appropriate to make a long term investment. It also does take inventory off the books. So yes, if not managed properly the renters could become a problem. But long term, these renters could turn into buyers which would be a positive.

Anonymous said...

"Also, the type of people who look to rent on the south side tend to be of the Section 8/HUD crowd. It's true. Trust me."

Trust, but verify.

Anonymous said...

Pricing for the units is on apartments.com - the prices arent a steal at all.

Anonymous said...

Why would they be? I'm sure the buyer bought the units to make money not to break even. Maybe if no one rents, the prices will drop, but you don't ever start off with low prices.

Anonymous said...

"This is bad. As apartment dwellers are "renters" not "owners," they tend not to care about the equity in either the building or they neighborhood becase they, by definition, are transient as opposed to "in it for the long haul." "

As a renter in the South Loop, I take offense to that statement and also find it to be quite a hasty generalization. As a renter, I care deeply about my neighborhood and my building. So I advise you to rethink your stance on renters and I for one, will not be "trusting" your thoughts on "apartment dwellers".

Anonymous said...

Really? Renters in the South Loop tend to be Section 8/HUD? I'm not. I have a good job in the Loop. And I have a whole circle of friends who rent in the Sloop who are similar. Some of us just wanted out of the ownership game. We want to live in nice apartments, but we got tired of paying the never-ending special assessments. I owned a condo once. It wasn't worth it.

Anonymous said...

15% sold? What does this say about the fishy sales projections provided by the paid marketers pretending to be impartial Real Estate blogs (like YoChicago) who reported far higher sales numbers in previous media releases.

Rent Sheffield said...

Definitely the buyers purchased the element to make wealth not to break even. Is there no one to rent I think the prices will drop.

Anonymous said...

@Anon#1 -- I've been renting in the South Loop for over 5 years -- well before most of the condo buildings went up and well before a lot of the "owners" I know in the area would come anywhere near the neighborhood. I'm invested in the neighborhood because I love it, and because I live there. While I understand your argument to some extent, I think it is a little obtuse and offensive. There are many city dwellers who have no interest in owning property, and end up being long-term renters who care about their buildings, their units, their neighborhood, etc but do not want to be saddled with the taxes, property maintenance, and assessments that accompany condo-ownership. Going rental is much more ideal than letting ANOTHER condo building in the South Loop sit vacant -- bringing people into the neighborhood will fill the vacant store fronts, and filling this building will make that stretch of state street boxed in by Dearborn Park less desolate. All of these things will make the neighborhood more appealing for those who are interested in buying, but do not want to invest in a ghost-town neighborhood.
Not to mention, the people who look to rent on the south side are students, young professionals looking for a real neighborhood, medical residents affiliated with University of Chicago, UIC, and Rush, and maybe some are of the Section 8/HUD crowd, but if you don't want to live amongst a wide variety of people, you should have bought in the gold coast or lincoln park.

Anonymous said...

The fellow who writes "this is bad" wouldn't know finance if it hit him over the head.

A purchase of 205 units for 45 million implies a purchase price of about 220K per unit. Going to Astoria Tower's web site, we have monthly rents for studios at around $1,350, one-bedrooms at $1,630 and two-bedrooms at $3,000. If those were mortgages going at 5%, those rates would imply purchase prices of $252K, $303K and $560K, respectively. Even taking the lowest studio rate gets a present value of $225K. You can call this anything you want, but discounting it ain't.

Like any savy purchaser, the buyer has bought in bulk, at discount. Presumably they are comfortable garnering income at this level and expect at some point in the distant future to obtain a windfall. But it's difficult for me to see a purchase price of $220K of rental units as anything other than good news.

Anonymous said...

I wish the HOA's would prevent things like this from happening. We have two renters on our floor and they are human waste. They are young, loud, dirty, and act as if they are they actual owners. I am sick of filing complaints with our HOA with nor results. Owners in the sloop need to come together on this issue before the renters render our home values worthless!

Anonymous said...

I rent in the south loop as well, and find some of these comments offensive and huge over generalizations. Why would I not care about my unit or my building or my neighborhood? I'm still paying to live there. I certainly spend alot of time and money there. I live in the south loop because I love the neighborhood. I take pride in my unit because its where I live - not because I'm financial bound to it for 30 years. I've owned before, its not all its cracked up to be. But go ahead and feel superior if you want to. Hopefully you don't have to sell anytime soon.

Anonymous said...

methinks those who speak poorly of renters are describing how they behaved when they were renters themselves. either that or they're hypocrites.

actually in reality, they're probably just the typical flame throwers on the blog who post comments solely with the intent to rile up other blog readers who are more sensible. there's at least one flamer who always likes to bring up "section 8/HUD" boogeymen no matter the topic. my money says this poster doesn't even live in the south loop and is probably trying to sell property in another neighborhood that competes with ours. he probably makes similar posts to blogs in other neighborhoods where he doesn't own property. crude, and i presume ineffective, marketing.

Tim said...

Re: Renter Hating Anon

How about some specifics instead of name calling and generalizations. No one is going to take you seriously if you don't make a constructive argument, especially if we have no idea who you are, whether you've posted here before, or if you even live in this neighborhood.

Tim, owner in the South Loop

Anonymous said...

What happens to the 40-odd people who already bought units in the building?

U.S. WARRIOR said...

This is a reply to the person who made the comment " Section 8 Hud Types.. I am a service connected disable veteran. I served my country honorably for 17 years and I fought in two wars, including Iraqi Freedom, in the U. S. Navy. After I retired In 2006, I served my community, from 2007 to 2012, by providing social services to the low and no income people of Chicago. I was laid off from that job And I became homeless. Thanks to my VA benefits, I was awarded a housing voucher (SEC 8) via the VA HUD-VASH program. Im now enrolled at Cisco IT-LABs in pursuit of my CCNA and other Cisco certifications.. I LOVE LIVING IN THE SLOOP and I told you my story just to say this; Most people on section 8 are, not lazy, unintelligent, bad people. Most are in school, vocational training, disable, or elderly.. Most want to live in a nice decent neighborhood like the Sloop. Section 8 is not permanent for alot of people including myself. I will keep it for as long as I need it