CHICAGO | Chicago Spire | 610 M / 2,000 FT | 150 FLOORS | NEVER BUILT

[george]

^Thanks for the update, harry. It's always fun to see your perspective on this site. This thread has become "the show about nothing".^

[10023]

Originally Posted by BVictor1

It'll take at least 4 years to build and hopefully tings will have improved by then anyway. It's an investment and I can't see them not making a nice financial return on it.

You can't? Really?

I've been scolded so let me say up front: I am expressing opinions and not stating facts. But based on what I know about the financing markets and the actual current state of housing, not to mention the likelihood of a further correction as soon as the Fed takes off the monetary policy training wheels, I think this project is as dead as the dodo.

Sorry folks.

[steveve]

This tower is such as shame

I hope it starts again

[GregBear24]

Originally Posted by Taft

It may not be the most fiscally sound of all possible moves, but there is precedent here. The unions have, in the past, used their considerable monies to kick start projects that put their members back to work. Whether they do so this time is up for debate...

A point I think you are overlooking: the unions wouldn't be putting up ALL of the money used to pay their members. The idea would be to put enough money on the table to secure the project moving forward, then let other lenders and stakeholders fill out the rest of the funding.

Again, in terms of dollars-and-cents and risk-reward tradeoffs, this might not be the best place for an investor to put their money. But I really doubt the unions is ONLY looking at that fact when determining whether this is a good move for them. Nothing is going to play better with their members than: "remember all of that money you paid in dues over the years? we used a good chunk of it to put you guys back to work." The pro-union PR on such a deal could be priceless...

Some good points here. Also, there is considerable sunk costs already in this project (foundation work, fees already paid for) that provide more incentive. I'm just surprised there hasn't been near this much talk about waterview, which has more than a couple dozen floors already completed. This scenario of haulted construction is a repeat of what we've seen in past troughs in the real estate cycle, and there are still developers and financiers out there with capital waiting for the perfect time to use it. Also, we need to just downright think a bit more positive- it couldn't hurt.

[ethereal_reality]

^^^Well said GregBear24. I couldn't agree more.

[lawfin]

Originally Posted by 10023

You can't? Really?

I've been scolded so let me say up front: I am expressing opinions and not stating facts. But based on what I know about the financing markets and the actual current state of housing, not to mention the likelihood of a further correction as soon as the Fed takes off the monetary policy training wheels, I think this project is as dead as the dodo.

Sorry folks.

I tend to agree

[wrab]

Originally Posted by Ryan81

Wrabbit,

Do you have pictures from different angles that you care to post?

Here ya go:

[J_M_Tungsten]

Originally Posted by wrabbit

Here ya go:

The spire looks so massive in this shot! Almost unrealistically large.

[Cro Burnham]

I took it upon myself to try some analysis - granted I am not an expert on condo sales. But I made the following basic assumptions:

150 floors
25,000 avg SF per floor
3,750,000 total SF
250,000 common / mechanical SF
3,500,000 residential SF

42 months to completion

$750 development cost PSF (not including loan interest)
$2,812,500,000 development cost (not including loan interest)
$1,968,750,000 construction loan draws @ 70%
$46,875,000 monthly construction loan draw
8.00% construction loan interest rate

$294,615,868 capitalized interest during construction
$3,107,115,868 total project cost

$932,134,760 equity @ 30%
$2,174,981,108 loan at construction completion (including capitalized interest)

$1,250 sales PSF
$4,375,000,000 gross potential sales
$4,068,750,000 less commission @ 7%
50% units sold by completion
50% units sold after completion
0% units remain unsold

$2,034,375,000 net sales by completion

60 months after completion to sell out units
$33,906,250 net sales per month from completion to sell out

($22,193,685) equity investment per month during construction
($140,606,108) equity (draw)/distribution at completion
$33,906,250 equity distribution per month through sales period

1.50% safe rate
($907,536,524) PV construction equity
($133,419,087) (PV) / FV of (draw)/distribution at completion
$2,111,238,253 FV distributions after completion

($1,040,955,611) PV equity investment adjusted per safe rate
$2,111,238,253 FV equity distributions adjusted per safe rate

8.35% equity IRR

Based on these assumptions, I get an 8.35% IRR on equity. Seems a little low for a project of this risk level, but it's much better than I would have anticipated. My assumptions could be way off though - obviously, the most important drivers are those relating to average sales per square foot (I estimated $1,250 PSF) and development cost per square foot (I estimated $750 PSF) - small adjustments in either direction result in pretty big changes in IRR.

Anybody who knows about construction - in the US, how much do you think it would cost PSF to develop a very high end, 2000 ft tall condo tower? Is $750 realistic / high enough? I heard that Kelleher was suggesting average sales per SF at $2000, but that sounds absurd to me. Possibly London, NYC, Hong Kong, Tokyo, but no place else.

This analysis is full of holes, I'm sure, so tear it up if you have any interest, it's only a back of the napkin attempt. But it least if provides for me a framework which hitherto I did not have.

[Tacoma Boy]

Originally Posted by J_M_Tungsten

The spire looks so massive in this shot! Almost unrealistically large.

And to think the Burj is nearly 800' taller than the Spire. Talk about unrealistically large.

Being not from Chicago (though I did go through it once when I was 12), I don't know jack diddly about how things work there. So I can't fairly comment on how the city is ran or on it's own economy, etc etc.
But what I can say is that the tons of negative press I've heard lately about Chicago (conventions leaving, no Olympics, 75 year leases on parking meters, Oprah retiring, etc) certainly wouldn't be making my heartstrings flutter if I was an investor these days...

I think that if the Spire is to have a chance at all, some PR repair work needs to be done.


...you guys better get crackin' on that. This is the ONE building of all the ones that are stalled/on hiatus that NEEDS to be built.

[ethereal_reality]

Why would we close down the thread due to 2 or 3 immature comments?*

As recently as Monday both parties involved in the negotiations stated they were closing in on an agreement.
I enjoyed seeing Wrabbit's photos of the city model featuring the Spire.
I found Cro Burnham's analysis interesting as well.


*the post before mine was deleted, as well as several others.

[Nowhereman1280]

Originally Posted by CRE8IVEDESTRUCTION

Yeah I see what you mean. Maybe if our economy was better perhaps?

No, no matter how good the economy is it wouldn't support larger floorplates. When he says economics it doesn't mean economy in the sense of do people have jobs or how much money is there floating around, he means the economics of that design don't work since no one wants to buy a unit where only 1/3 of the floor area has any natural light.

Think about it, if you bought a 5000 sqft apartment would you want it to be 100' by 500' with only 100' of window on one end so most of the rooms have no windows or would you want it to be 250' by 200' where there are 250' of windows and all rooms but the bathrooms and hallways have windows? No one is going to buy the units if they are 100' by 500', its the economics of the design, larger floorplates are worse for residential and better for office. Thats why all of our residential towers are skinny and all of our office towers are huge blocks.

[Miguel Rodriguez]

^^"I heard that Kelleher was suggesting average sales per SF at $2000, but that sounds absurd to me."

You were right on the money with your $1250 estimate. The current Spire units online are listed at approximately $1200-1350/sqft. But those units are obviously still listed online for a reason, and in reality they may sell for less.

[10023]

From the WSJ today:



http://online.wsj.com/article/SB1260...Tabs%3Darticle

[pico44]

Am I missing something, or does 150 million for a $2 billion tower seem like a drop in the bucket?

[TonyAnderson]

If the bucket can only hold about 13 drops.

[Krases]

Originally Posted by pico44

Am I missing something, or does 150 million for a $2 billion tower seem like a drop in the bucket?

That spire is only worth 2 billion dollars? I thought something that huge would be worth a lot more.

[Tom In Chicago]

Just to clarify. . .

She said the group is confident it can secure financing to complete the building, which she said would cost "significantly" less than $2 billion. "We are obviously in an extremely good position with more than 30% of the units sold and $194 million of [Mr. Kelleher's] personal money in the building," she said.

[Cro Burnham]

How many square feet is the building supposed to be?

[Taft]

Originally Posted by GregBear24

I'm just surprised there hasn't been near this much talk about waterview, which has more than a couple dozen floors already completed.

The more I think about this potential deal, the more I think it is about marketing above all else.

What I'm getting at is that when you look at Waterview vs. the Spire in the context of marketing, it is pretty much a no-brainer: you go with the higher profile project that people nationwide will be talking about. Let's face it, people in NY won't be talking about Waterview, but they will talk about the Spire, should it be completed. Pull it off and the unions get their name placed in the news with generally positive connotations. Even if they lost a bit of money in the deal, it seems like it would be a win overall (and I'm not at all convinced that this is a clear money-loser over the long haul).

IMO, this is a savvy move. With unemployment as high as it is, now is a great time to burn a bit of your cash reserves to bask in some positive PR and drive some more disillusioned workers into the union fold.