There's no money out there, the analysts are saying. Credit has tightened, hard on the heels of a collapse in the sub-prime lending market, and that would point to a decline in new development for some period of time.
On Wednesday, Garrett Kelleher will set his Chicago Spire on the world stage, confident that he can get funding for a $1.5 billion project and that there are people out there who will buy the ultra-posh condominiums.
His confidence has a solid footing, in that the building is being designed by one of the world's leading 'starchitects'. A flat in the Spire is unique, and far different from anything that Donald Trump is trying to sell at his tower on the Chicago River. Given a choice, a status seeker would pick Calatrava over Trump any day, giving Mr. Kelleher a leg-up on the competition.
In Europe, the shaky markets have caused a ripple in consumer confidence. Real estate investment in the States was billed as a can't miss proposition, a safe place to park a few euro and earn a decent rate of return. No more, as England and Germany step in to prop up banks that are on the fringes of insolvency. Europeans may not feel that they have the extra cash to invest anywhere.
Given that Mr. Kelleher has plans to push his Calatrava confection to the European market, he's got a tough go ahead of him. He has to sell a considerable number of units before he can even think about seeking financing, and no one can say where the financial markets will be at that time. On top of that, he can expect to pay a higher interest rate, reflecting the market's perception of greater risk.
One thing in his favor is the weak dollar, which makes prices translated into euros seem absolute bargains.
In real estate, it's all about location, and Savills PLC, estate agent to the project, is touting the property values in Chicago. Not sinking like a stone, a la Miami, and not quaking unsteadily like Los Angeles.
Talk to Gerard Kenny of Palladian Development or James Kinney of Rubloff Residential Real Estate and you'd get a picture that's less than ideal. No one's project is copper-fastened, with an assured source of financing. Sean McMahon of Teng Associates has told the Chicago Tribune that the firm's Waterview Tower project, while under construction now, has not as yet secured its construction loans.
Will the Spire pierce the sky above Chicago? And why are there so many Irishmen involved in the real estate and construction markets in that city?
No comments:
Post a Comment