17 September 2009 ? The Block 37 project in the heart of the Loop has included a constantly shifting group of participants since its inception, at one time including Apple, who has since canceled its plans to open a retail store with the project. This week the Loews hotel chain announced its withdrawal, drawing claims from Mayor Daley and the developer, Joseph Freed and Associates, that the project is still healthy. The initial retail opening is scheduled for this November when Puma, Zara, and Anthropologie are planning to begin operations. The developer also states that the movie theater, live theaters, additional retail, and restaurants will still open in spring 2010 as planned.

14 August 2009 ? The likely demise of the Spire along with other new construction buildings now being marketed for rent instead of sale continues to contribute to the reduction of Chicago?s housing inventory. Another nail in the Spire?s coffin is the lawsuit filed Thursday by Bank of America against the Shelbourne Development Group for default on loans on the 1194 unit development. This comes on top of substantial liens placed on the “Lien – ing Tower of Chicago.” Peter Holstein, developer of Parkside of Old Town announced he is going forward on construction of rental units in place of the planned condominiums on the land where Cabrini Green low income housing once stood. Centrum development also is converting the Lofts at Roosevelt Collection from condos to rentals, canceling all contracts for sale. This is the third major project the developer has terminated sales on.

29 July 2009 ? PrivateBank & Trust Co. has filed to foreclose on Pearson on the Park (222 E. Pearson St.) a 219-unit condo conversion that as of late has been struggling to sell its remaining twenty percent of units. According to records found in MLS (Multiple Listing Service), three developer units have sold since the beginning of the year. In order to counter this significant slow-down in sales, the developer, Ganesan Visvabharathy, has reduced prices in the past few months by an average of 13%. According to records in the MLS, it looks like that has resulted in one unit going under contract.

According to today?s Crains Chicago Business: The developer paid $46.6 million for the apartment building in July 2005. He borrowed $52.5 million from Hypo Real Estate Capital Corp. and $7.5 million from American Mortgage Acceptance Corp. to finance the purchase and convert the apartments to condos.

The loans came due in August of 2007, and he refinanced the development with a new $17 million loan from PrivateBank. To secure the loan, the developer, pledged 55 acres of undeveloped land in downstate Mount Vernon and signed a personal guarantee. The loan originally matured last November but was extended to March. The developer asked for another extension, to March 2010, however, the bank just wants its money back.

Less South Loop Construction Means Reduced Supply...Eventually

I think there is light at the end of the tunnel. We can certainly see it in our showing activity and in the market. It’s still not an easy market or necessarily a fair market for all involved, but it is changing for the better. Statistics from Illinois Association of Realtors (IAR) definitely back up the these feelings.

Chicago-area sales in May had the smallest drop so far this year at -18.7%. 5,634 single-family homes and condominiums were sold in May in the nine-county Chicago region, compared with 4,747 in April 2008, the IAR said. The association is reporting the following Year-on-Year Declines:

Monthly Year-on-Year Comparison of Home Sales (Single-Family and Condo) in the Nine-County Chicago Area:

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Month-on Month Home Sales Up In Chicago Area

Month-on-month total home sales (which include both single-family and condominiums) were up 19.3% in May 2009 with 8,945 homes sold compared to 7,501 homes sold in April 2009. This is showing the market picking up some speed and buyers feeling more confident in purchasing. Now take this compared to a year ago, when month-on-month home sales were down 21.0% from May 2008 with a home sales number of 11,326 for 2007. We are not back to 2008 numbers yet, but are working on it. The activity is growing and there is an air of growing confidence as well. This is what the market needs right now. There is still a plethora of inventory available, but I think by fall it will start to thin out and come back to more a stable market. Everyone is looking for a good deal right now. Prices are still dropping to meet consumer demands, but are stabilizing just a bit and not falling so drastically. If you have an aggressively priced listing in this market, odds are it will sell.

“We are seeing more activity in the housing market with increased listings, more activity at showings, a surge in interest from first-time buyers as well as some improvement in time on market,” said REALTOR® Pat Callan, president of the Illinois Association of REALTORS®. “First-time home buyers who want to take advantage of the $8,000 tax credit need to be aware that the purchase has to close no later than November 30, 2009 given the December 1 cut-off under current guidelines by the federal government. That means being under contract by early fall.”

Dr. Geoffery J.D. Hewings, director of the Regional Economics Applications Laboratory (REAL) of the University of Illinois said, “Month-to-month sales have recorded increases for the months of March, April and May and this is expected to continue into June. The modest recovery in housing prices and sales has been constrained by the job losses in the economy as a whole. A sustained housing recovery is still not within sight and much will depend on the degree to which federal stimulus funds and the resolution of the state?s budget generate a much needed boost to employment.”

Chicago Home Sales Up 11.5% in May

In the city of Chicago, month-on-month May total home sales (single-family and condominiums) were up 11.5 percent to 1,537 sales compared to April 2009 sales of 1,378; year-on-year sales were down 27.5 percent from 2,119 homes sold in May 2008.

“We?re encouraged to see the bank-owned inventory moving in the marketplace, indicating buyers are finding good bargains, especially in single family homes and flats,” said David Hanna, president of the Chicago Association of REALTORS®. “The city of Chicago condominium sales numbers continue to reflect a critical need for governmental agencies to review the growing disparity in the ability to finance a condominium purchase in the city. This affordable housing will become unaffordable and unattainable to many qualified first-time home buyers in the city of Chicago unless existing federal guidelines, which do not take into account nuances of the local market, are modified.”

Buyers Will Come Out in the Fall

To David Hanna’s quote I say, I think that the feds are addressing this…not quickly enough, but it is being addressed. The FHA guidelines that make it nearly impossible to get financing on a condo in the city are being removed as of October 2009. Some of these guidelines include right-of-first-refusal, liens against the association, and association controlled by the owners (not the developer). Come fall I think we will begin to see a larger number of FHA condo buyers enter the market and also use the $8,000 first-time home buyer tax credit. Watch out lenders…take your vacations now!

We’d like to thank Payton Chung for sharing today’s photo via the Creative Commons License.

Drop After Drop Adds Up

In the first articles I showed how you can save energy and money and have a positive impact on the environment by going green and I showed how important an energy audit is for providing a road map to going green in your own home.

Now that I?ve laid some of the groundwork, most people want to know how to pay for it. My basic tenet is that there is a shade of green for every project and every budget?. Finding the right shade for your individual lifestyle and budget will mean some compromises along the way. But making the most of your energy audit is important. You only have the mental and physical fortitude to undergo disruption to your daily life so many times. So making the most of the time you devote to any home renovation project, green or otherwise, is critical.

In the US, the bulk of the homes that are currently being occupied were built during the housing boom of the 1970?s and 1980?s. These homes are nearing architectural and mechanical obsolescence. Also, these structures account for over 40% of energy consumption and 75% of electricity consumption annually. Can you imagine the impact to our economy if we could reduce those numbers by 10%? The way to do that is to renovate existing buildings, starting with residences.

Let’s Assume You Aren’t Rich and Want to Go Green

I’m going to assume that the family interested in going green does not have the cash available to pay for all the costs of an energy efficiency renovation all at once. You don?t want to use a credit card to finance the purchase, as the interest that you would pay makes the entire process much more costly than needed. So where can you turn?

There are federal and state programs available to help offset the costs of going green. There are local incentives, grants, and rebate programs available to help people achieve energy efficiency improvements, and there are various types of lending programs, from home equity loans to personal lines of credit available form many different sources that are specifically geared to the energy efficiency market. I will give you the ?get started? information to help you find the right program for you.

Federal Resources for Helping to Pay for Going Green

At the federal level, the American Recovery and Revitalization Act (ARRA) passed on February 17, 2009 included billions of dollars in stimulus funds for energy efficiency improvements. Chief among these are the federal tax credits that are available to take for energy efficiency upgrades to your own home for 2009 and 2010 tax years. In summary, the federal government will repay you up to $1500 (previously limited to $750) of the costs of energy efficiency improvements for windows and doors, roofing material, water heaters, insulation, and biomass stoves. In addition, the federal government will pay for 30% of the installed costs of renewable energy upgrades like solar power, geothermal heating and cooling, solar hot water heating, small wind energy systems, and fuel cell technology. Previously the allowable tax credit was capped at $2000. Now, it is uncapped, so they will pay for a full 30% of the costs!

Builders, developers, and commercial property owners can take advantage of these credits as well, but in this care they are based on square footage, not on costs. See the IRS website or the above link for the details.

State-based Resources for Going Green

In addition to the rebates available from the federal government, there are programs from the state that are available to offset costs of energy efficiency improvements. If you visit DSIRE (Database of State Initiatives for Renewables and Efficiency), you can click on any state and find out what rebates and incentives are available. For the Chicago area, the state will rebate up to 30% of the costs of solar power installations. The program is administered through the Illinois Department of Commerce and funded through the Illinois Renewable Energy Trust Fund. The current plan expired on May 1, 2009, but the next round of funding will begin July 1, 2009. The city of Chicago also encourages green building and will fast-track permits and waive up to $25,000 in fees for green certified projects.

For those of you in Wisconsin, you hit the jackpot! There is a fantastic program available for renewable energy and efficiency upgrades called Focus on Energy. This program will offset costs for a host of renewable energy products up to 25% of costs or a maximum of $35,000. Its current funding expires June 30, 2009, but will renew.

Energy Companies Help You Go Green

Grants and rebates are available from the utility companies as well. People’s Gas and NorthShore Gas both have rebate programs that they have extended until October 31, 2009. This program will cover costs of insulation up to $750, clothes washers up to $100, water heaters up to $75 – $400, gas furnaces up to $450, and gas boilers up to $600. It requires professional installation of everything, and you can apply for the rebate online.

ComEd does not have as much of a program available. They will sell you discounted CFL bulbs, can help arrange a home energy audit, and can set up electricity cycling programs for you. Also, they will pay you $25 to recycle that old refrigerator that you plan on replacing with a new, EnergyStar® model.

For those of you in southern Illinois or some of the western suburbs, Ameren has a different set of programs, much better than ComEd. They will help with heating, air-conditioning, lighting, and with the home energy audit, as well as refrigerator recycling.

How About Weatherization Help?

Now, for funding of weatherization improvements, the Illinois Home Weatherization Assistance Program is the place to start. On their web site you will be able to locate local programs. This is geared to low income families, but the information available is good, and at the very least, you can get a good contractor to help with your project. This is funded through the Department of Energy and the money is given to each state to distribute through its weatherization programs. This program will also cover the cost of the home energy audit in some cases.

Can I Get a Loan To Go Green?

The last topic I want to cover is funding though loans. The Department of Housing and Urban Development administers a huge number of programs that are designed to help average Americans finance, refinance, or improve their homes. There are a few income and home value limits, but a vast majority of Americans will fit into its broad criteria.

First, there is the Energy Efficiency Mortgage (EEM) which is a stand-alone product available to help cover the costs of home efficiency improvements. The maximum amount is 5% of the home?s value not to exceed $8000. Now, this may not seem like much, but the beauty of this program is that it can be added to any other FHA/HUD program without penalizing the owner/purchaser on the percentage of loan to value. So, say you want to borrow $250,000 to buy and renovate a home (or refinance an existing home). Though this program you can borrow $258,000 even if that additional $8000 would push your loan over the maximum loan to value. It?s a ?free? $8000 to use for energy efficiency upgrades.

Where this really works out is with the 203k loan program which is designed to encourage purchasers to either renovate their existing home or renovate a home they intend to purchase and live in. (See this previous The Chicago 77 post for more details.) The beauty of this program is that it looks at the value of the home as completed after the renovation, not the value at the time of purchase. The program will help pay for design, inspection, and the energy audit, as well as all the construction. Click here to see a visual overview of this program. There is also a limited repair program that provides $35,000 for home improvements to a home purchased. This additional $35,000 becomes part of the mortgage, allowing the buyer to do significant work to a home before moving in and paying for it over the life of the mortgage.

Fannie Mae also has innovative programs for renovation/purchase of single family homes.  This is called a HomePath® program. There is another program called HomeStyle®

Freddie Mac has a similar array of programs. The best bet is to contact an FHA/HUD approved lender to determine the best program for your situation.

In the more commercial market, Wells Fargo Bank has a variety of loan programs available that are geared toward energy efficiency and green living. There are others, but Wells Fargo seems to have the most developed program. The idea for all of these programs is that the lenders know that you will be saving significant amounts of money in utility costs and reward you with either a larger amount available to borrow based on your credit score, or a discount on the rate you are borrowing at.

That about covers what I know regarding funding, financing, rebates, and rewards for energy efficiency improvements.

For those who are immediately interested in upgrading their home, purchasing a new home, or renovating an existing home, make sure to read by bio below for ways I can help.

My thanks to Brad Walbrun for providing some background material on the 203k-mortgage program.

Going Green Series

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Sunrise On New Buildings in Chicago

There’s a lot to love about a new building: the smell of fresh paint, the gleam of new stainless steel appliances, the anticipation of waiting for the cardboard protecting the walls of the elevator to be taken down so you can finally see what’s behind it, the excitement of people wearing hardhats carrying blueprints around the unfinished lobby. It’s exactly like an adult version of waking up on Christmas morning to a mound of presents, but then mom says you have to eat breakfast and wait for Aunt Flo to arrive before you can open them.

But, as many of the people who have bought new construction condos over the years are eager to tell you, there are a lot of pairs of underwear waiting for you under all that wrapping paper. Sure, there will be the occasional Lego Death Star or Cuddle Me Elmo, but red checked flannel shirts and itchy hand-knitted scarves will be in the mix as well.

Here are some of the basics that buyers of new condos, be they in high rises or three flats, need to know:

1. How the Turn Over Works

When looking at a new building, you need to understand exactly how the developer is going to turn the building over to the association. Huh? Fair question?let me explain. As the condo building is being built and the condos are being sold, the developer’s company owns the building. At some point, when a specific percentage or number of the units has been sold, the responsibility for the building is turned over to condo association. At that point, the developer simply owns the remaining units and is no longer the owner of the entire building. Undoubtedly the developer will have more units, and therefore more votes, than anyone else in the association, but he/she is still just a unit owner after the building has been turned over. All of this is spelled out in great detail in the mountain of paperwork that comes with buying a condo. This mountain of paper that used to be a pine tree is usually divided up into two documents: the condominium declarations and the condominium bylaws.

It’s important for you to know how many of the units have been sold and how many more need to be sold before the turnover happens. Why is this important? Read on.

2. The Assessments Will Go Up After The Turn Over

Going Up!

While the developer is trying to build and sell the condos, he/she/it owns the building. They can say the assessments are whatever they want. They are supposed to reflect what the developer believes the operating expenses will be after the turn over, but somehow they often seem to under budget…often by a lot. When the turnover takes place, the condo board then starts getting the bills instead of the developer: electric, gas, insurance, maintenance (yes, it starts right away), staff for large buildings, and on and on and on. The developer is supposed to have built up some money for the association to begin paying these bills, and of course there is money coming in from the assessments. But, is it enough? Not usually.

It’s simple…the developer wants to make the building attractive, so they keep the price of the assessments low. However, when the board has to begin paying the bills, they may find that the money coming in isn’t going to cover the money going out. And that’s when you see your assessments go up.

Take my good friend, Kelly. She bought a gorgeous unit in the south loop with views of the lake, the skyline, and Veteran’s Stadium. She was in heaven. Then the board took over the building and they quickly realized that they needed to nearly triple the assessments to get out of the hole they were in. After four months of triple, they were able to reduce the assessments to double of what they were before the turn over.

This doesn’t happen every time, and the assessments aren’t always going to double, but your agent and your attorney better be digging into the numbers to give you an idea of what to expect after the turn over.

3. There Will Be Problems With the Building

You’re buying new construction. Everything is new, right? Everything should work, right? Agreed, but that’s not the real world. In the real world, there are manufacturing defects in heaters, windows, and tile glue that can’t be seen when they are installed. All of these problems will usually present themselves sooner rather than later. Be prepared that your brand new dishwasher’s water pump may spring a leak after it’s fifth load. That’s why it’s under warranty. Be prepared for these types of things to happen. The developer didn’t do it on purpose, and they’re bound to happen.

Equally importantly, the building is going to settle. Gravity works. And, like rust, it never sleeps. Walls will crack. Windows will need caulk to fix newly appearing gaps. Cupboard doors will need to be adjusted. Unless you can get a reprieve from Sir Isaac and his pesky laws, you have to expect that you will have issues regarding settling for a year or two…maybe more. Complaining to the board will do no good (unless one of them knows Sir Isacc). This is something you have to expect.

4. The Developer May Not Be as Responsive as You’d Like

The cheerful sales agent working for the developer isn’t going to come out and tell you that the developer will have started a second or third building by the time you move in. Many of the crew that are working on your building will be moving on to the other buildings. Normally the developers will get everything fixed, but it may not happen as quickly as you’d expect. Make sure to talk about this with sales agent and the developer. What are their policies? How long will the developer take care of small problems? I have seen developers who have fixed problems long after their legal liability expired (see below). They were fixing problems to make sure their reputation was polished to a high shine. These are the people you want to buy from.

5. Usually a Company Built the Building

A company built the building you’re going to buy into, not a person. And, that company will likely be dissolved as soon as possible. Most developers create companies for every building they make: “123 N Main Development LLC.” As soon as the company is no longer legally responsible for the building (one year after turning it over to the association) they will undoubtedly fold the company. This means if there are problems, the entity that built the building no longer exists and the association is on its own. The developer isn’t 100% off the hook at this point however; there is no statute of limitations on negligence. But for cracks in the walls, broken tile, and under lit hallways…the developer is essentially gone.

You and the association need to make sure you know exactly what day the developer can close up shop. You need to make sure that you have all of your issues on the table by then.

Get a Good Team to Help You

This post is not to try to dissuade you from buying new construction. It’s simply to make sure you, dear buyer, go into your new home with your eyes wide open. And how best to do that? By having a bulldog of a buyers’ agent working for you. You need to have someone who has a lot of experience and knows the ropes. The agent working for you should know all of the information above and be able to dig deep into the building to find out as much of what you face in the future as is possible.

You need to make sure your attorney is earning his/her money and looking over the condo declarations and bylaws very, very carefully and alerting you to potential issues. You should have an experienced inspector look over the unit very carefully. They may be able to hear the bad water pump in the dishwasher, giving you the chance to make sure they’re taken care of before you move in.

Mostly, you need to know that your gorgeous new home will have issues, but that’s life isn’t it? All homes have problems. (Want to see my To Do list??) The important thing is that you know as much about what is coming down the path as is possible. It will make enjoying that view and gorgeous kitchen all the better.

Photos by Alan Levin & Iris Shreve Garrot

Rendering of 155 N. Wacker Drive Being Developed by The John Buck Co.

CoStar is reporting that Ernst & Young have signed a 10-year lease for 203,618 square feet at The John Buck Co.’s new office development at 155 N. Wacker Drive. According to The John Buck Co’s web site, the 46 story, 1.13 million-square-foot office tower is scheduled to be completed in July of 2009. Costar is reporting that asking rent in the building is $33 per square foot.

This creates a bit of a problem for The Sears Tower, where Ernst & Young are currently their largest tenant, leasing almost 387,000 square feet.

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Chicago Mayor Richard M. Daley

On Wednesday Chicago mayor Richard M. Daley held a news conference at an affordable housing development at 642 N. Kedzie. He announced a five-year plan to build 50,022 new, affordable rental and for-sale units over the next five years.

The plan will cost $2.1 billion with the money coming from federal and state funding, low-income tax credits, bonds, loans and tax-increment financing subsidies.

The Sun Times quotes Daley as saying that due to the economic slowdown, affordable housing is “more important than ever.” He went on, “But, when a recession comes in, it slows everything down. That’s when government must re-invest.”

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Rendering of Proposed Development Near Halsted & North

The Sun Times is reporting that the proposed retail and housing development slated to go on the land where the New City YMCA used to stand at 1515 N. Halsted is, amazingly, still moving forward. The fact that the development, like so many others like it, has not been shelved is news enough. I found a couple of other bits of the article interesting.

J. Michael Drew, principal of Structured Development LLC is planning to start construction on the half-million square feet of retail space by mid-2009, with one major change: there will not be any condos in the project. Originally the plans called for 480 condos to be sold above and along the enormous retail space. The new plans are scaled back considerably, opting for 280 residential rental units. This new configuration has been enough to keep Commonfund Realty Inc. involved. With Structured Development and Commonfund Realty providing 40% of the equity, banks are willing to stay involved.

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The most amazing thing I found in the article is a quote from Drew, “It helps that the stores already in that neighborhood see retail sales at or near the top of their national chains. It has become the prime shopping area of the city, second to Michigan Avenue.” With the number of store fronts looking closed or closing and the number of empty stores I’ve seen while driving past in that stretch of retail, it seems like a sad commentary that it is one of the hottest retail locations nationwide.

All of these plans are subject to approval of a zoning change request.
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