18 June 2009 ? The developer of the 342-unit Lofts at Roosevelt Collection is shifting its units from condo to rentals, ignoring existing contracts with potential buyers. This shift to rentals is not new in Chicago, but is now gaining momentum as developers of large projects balance the losses of continuing to struggle in the sales environment against the equally unattractive option of becoming a rental property.
Many buyers who signed contracts up to three years ago are unable, or unwilling, to close on their units, and developers are being forced to reevaluate their positions. This move is not easy. It requires restructuring of loans and can destroy any equity in the building, since rental properties are worth less than the potential value if the condos can be sold. Additionally, while condo projects are usually made up of primarily two and three-bedroom units with higher end finishes, the bulk of the rental demand is for one-bedroom units, and renters have lower expectations on finishes.
“The good news is there’ll be more people living and shopping in the South Loop,” says Gregory Mutz, CEO of AMLI Residential Partners LLC in Chicago, which owns a new apartment building at 900 S. Clark St. that’s about 60% leased. “The bad news is there is more rental supply in an already competitive marketplace.”Email This Post To a Friend.