Synchronicity?
When apparently unrelated things occur. But when all is said and done it turns out that the things weren't all that unrelated after all.
I thought of synchronicity today. It turns out The Elysian in Chicago has decided to rescind contracts for 130 or so hotel condos at the property at 11 E Walton. And like its mythic namesake, one of Chicago's most expensive condo buildings is vanquishing 130 hotel condos like so many perished heroes to wander the Elysian Fields.
I wouldn't think the progenitors of this upper end Gold Coast project had synchronicity in mind when they dubbed the idea of 54 residential condos and 180 hotel condos as The Elysian. And yet as we slog through the 23rd month of this recession, it turns out that the the concept of privately owned hotel condos at The Elysian is dead on arrival like mythic heroes who arrived at the open doors of the Elysian Fields.
Turns out what a handful of boosters were heartily advocating for the downtown Chicago real estate market just a short time ago looks like nothing more than a very bad idea not only at The Elysian but also the Mandarin Oriental (project shelved), the Shangri La (bankruptcy) and another eight projects that have all crashed and burned.
The cost of the canceled purchase contracts at The Elysian? Between $80,000,000 and $100,000,000.
And the reason? The debt related to the $280,000,000 Gold Coast condo building's construction loan needed to be restructured.
What this news, reported in Crain's Chicago, means is that The Elysian should open in a few weeks, allowing closings to start for the luxury residential condos that are under contract. It also likely frees The Elysian from the defaults that may have occurred because some (and possibly many) of the hotel condos wouldn't have made it to closing because funding has become so scarce for hotel condos.
The truth behind this paucity requires looking no further than The Trump Tower Chicago just six blocks south where a hotel condo closed on just last year for $894,524 is now on the market for $389,900. The reason? It has to be a cash deal. No funder today is willing to provide financing for a purchase of this type.
In the meantime, I can't help but wonder what to expect as the risk that The Elysian management team had hoped to foist on private investors through individual hotel condo purchases has bounced back on to The Elysian. Especially as the upper end hotel market has hit a rough patch.
I have no doubt as to the quality of the product at 11 East Walton. I have watched with approval as the building has matured into a handsome edifice. But owners of the units there with purchase prices well into the seven and eight figures must have some misgivings about the shifting nature of their neighbors and the manner in which the hotel and its management team now has singular risk of steering some 180 rooms to occupancy through one of the toughest Chicago hotel markets in memory.
If I was a purchaser awaiting a closing in the next month or so I would be concerned that the risk would not solely be management's.
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