Donald Trump is trying to unload the lower floors of the 92-story Trump International Hotel & Tower.
The New York developer has hired a broker to market the building's four-level retail space overlooking the Chicago River, set to open next summer with room for 20 shops and restaurants.
Mr. Trump won't disclose an asking price, but an offering memorandum obtained by Crain's suggests the space could fetch $115 million to $130 million.
The move is a long shot given the condition of the real estate and financing markets, especially since Mr. Trump has no retail leases signed yet. And it's the latest signal of strain at the city's most high-profile new development, which will be the nation's tallest residential building.
Typically, a developer leases retail space before selling it to increase the property's value and appeal to more buyers. But Mr. Trump may be willing to forgo future profits for cash now — particularly with condo sales stalled at his project and citywide.
"In this kind of slow residential market, he's got to be looking to get revenue to pay down his construction loan," says Daniel McLean, chief executive of Chicago-based MCL Cos., who has built condos, retail space and a hotel at nearby River East. "I'm sure he's under pressure to pay down his loan."
Mr. Trump, whose funding for the massive project at 401 N. Wabash Ave. comes primarily from a $640-million loan from Deutsche Bank A.G., says he's not strapped for cash. He insists that condo sales are steady and that the project is on track, saying he's merely exploring a sale of the retail space in response to interest from potential buyers.
"We're just looking to see whether or not there's value there," Mr. Trump says. "I think it's unlikely I'll do it. . . . If the right price came along, it's something we'd consider."
Meanwhile, Mr. Trump says talks are under way with seven potential tenants for some of the roughly 83,000-square-foot retail space, including a few "very fine" restaurants. He declines to name them.
Local real estate experts agree the site is prime for restaurants but question whether the project would garner rents as high as the $75 to $225 a foot suggested in the offering memo, which would be in line with some rents along tony Oak Street but less than the $300-to-$450 range on Michigan Avenue.
"Traditional retail is going to be tough there," given Trump's distance from the Mag Mile and the unusual layout of the retail space, says Larry Freed, president of Chicago-based Joseph Freed & Associates LLC, which is developing the new mall at Block 37. "From a restaurant standpoint, it's good, dramatic space."
Executives with the firm marketing the property, CB Richard Ellis Inc., decline to comment. Local brokers for the Los Angeles-based company also were hired by Trump in May 2007 to lease the retail space.
According to the sales memorandum, a buyer would be able to build out and reconfigure the space. That would allow a new developer to scrap plans for small spaces that seek to lure upscale apparel stores and jewelers and instead replace them with bigger spaces that would accommodate more restaurants or a grocery store.
While Mr. Trump says he has sold off undeveloped retail space before, such a move on this project would seem out of character for the image-obsessed developer.
"Retail can dictate the image of a building," says David Stone, president of Chicago-based retail brokerage Stone Real Estate Corp. "When you sell retail like this, you can lose control of the image of your building."
©2008 by Crain Communications Inc.