I could not resist the old Disneyland ticket system analogy in thinking about the Chicago market right now. (For you younger folks, search the term and you will understand.)
The great news in Chicago? Two trophy properties are trading. The Hyatt Center is under contract to
The Irvine Company (Billionaire Donald Bren is the long time head of TIC) at what is understood to be just over a 6-cap, or $625 million/$419 per square foot. I suppose that is not a B-ticket price for that great property. Then you have 353 North Clark trading from a Mesirow/Friedman Properties venture to Tishman with a purchase price, they say, of $385 million/$321 per square foot. The difference? Well, while I like both buildings, Hyatt is perhaps better located, but even more important is that little detail of a $374 million construction loan at Clark Street.
So, does this mean we are back? Not for all of us. Institutional buying is back to some extent for the right (meaning, Class A) property at the right price, whatever that may be to the buyer. What it could mean, though, is a little melting that will eventually reach to the non-trophy deals.
Once again, it is a matter of unclogging a logjam at the lender level and at the investor level, where money sits without the ability to finance deals at what many players consider acceptable returns for the risk. (Remember, pension funds and institutional folks often have completely different objectives than, say, opportunistic funds or developers.)
So yes, I'm glad to see properties trading. But I want to see different types of deals and financing and more volume before I can say the corner is really turning.
