[The Pimp]

Spire developer adds a new twist
By: Eddie Baeb June 28, 2008
The world's tallest residential tower is turning into rent-a-spire.

To boost condominium sales in the proposed Chicago Spire, Irish developer Garrett Kelleher is catering to investors by offering to rent out the high-priced units at a guaranteed 7.5% return for two years.

The "investor package" is an unusual ploy for a luxury condo project, where typically speculators are discouraged and rentals restricted because buyers balk at paying top dollar to live in a building with lots of short-term residents. Mr. Kelleher's Shelbourne Development Group Inc. is actively marketing the program overseas, where more stringent U.S. securities regulations do not apply.

"If we would try to introduce that at our building, oh my god, would our buyers be in an uproar," says Michael Schramm, a principal with Chicago-based Prism Development Co., which is building the Ritz-Carlton Residences at 664 N. Michigan Ave. "They just wouldn't accept it."

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smart idea. u.s. wake up and get on board…

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chicago - spire - new twist - investor package - united statesSponsored by Shelbourne announced this month that it had sold more than 350 units, or about 30% of the 1,193 in the 2,000-foot-tall tower proposed for a site at 400 N. Lake Shore Drive. Roughly half of the buyers are from outside the United States, says Dominic Grace, head of residential development sales for Savills PLC, the British firm marketing the Spire.

About 400 of the smallest units are being sold with a promise by Shelbourne to pay buyers 7.5% of their purchase price for two years and then rent out the units. The offer "is of sufficient level to cover mortgage payments, annual real estate taxes and apartment service charges, ensuring the investor does not incur any costs in the first two years," according to a May 14 press release issued in South Africa.

The program is intended to bolster sales abroad because Mr. Kelleher believes those buyers have the greatest interest in the smallest condos, which start at $750,000 for a 550-square-foot unit, Mr. Grace says. No buyers have complained about the program, which isn't uncommon outside the United States, he adds.

"People are seeing this project in a different light," he says. "This particular detail isn't fazing anyone at all."

The investor package is "not being proactively offered" in the United States, a spokeswoman for the Spire says.

That's an important distinction, says Robert Chasnow, a real estate attorney at Holland & Knight LLP in Washington, D.C., who isn't familiar with the Spire's marketing. The Securities and Exchange Commission in 2002 said such programs are permissible if the developers don't outwardly promote them to the general public or even to prospective buyers.

Thomas Corfman contributed to this story.

©2008 by Crain Communications Inc.