March 4, 2010 – Not every Chicago real estate developer is optimistic about the rental market. A wave of new apartment towers are either under construction or poised to open this year, and the shadow market of Chicago condo owners who are open to leasing are making it tough for some developers. Sky55 is one of those rental towers that could have some problems in the future, according to a recent article in the Chicago Journal.

The 40 story rental high-rise located on 1255 South Michigan got a financial boost to the tune of $83 million in 2004 with multi-family housing bonds. The stipulation to accepting those bonds is that a certain percentage of the units have to be offered at below market rate. That translates to 83 of the total 411 units in Sky55 being leased at affordable rental rates.

Central Station Development Corporation is now concerned that those below market rental rates won’t generate enough cash flow to pay of loans coming due. Even though the building is 90% leased, that number was reached by offering rent concessions and other reduced fee incentives .

Tim Desmond of Central Station was quoted in the article as saying that, “The current net income from the rental of the building — while it’s fine right now — we are concerned with what’s happening in our economy, what we’re all dealing with every day. We’re concerned that our rents will not be sufficient to pay the debt on the senior mortgage.”

The senior mortgage of $68 million on Sky55 is held by Citibank. The developer is seeking to reduce that amount to about $48 million and wants the city of Chicago to issue them around $20 million in secondary bonds. That in turn would raise the junior mortgage from $13 million to $33 million, according to the article.

It looks as though it will be a renter’s market for some time to come, so now would be a good time to check out Sky55 and other Chicago Apartments to see what they have to offer.

[tags]Sky55, Chicago Apartments, Chicago Real Estate[/tags]

This entry was posted on Thursday, March 4th, 2010 at 4:39 pm and is filed under Mortgage Information.