South Loop Condo Tower Converting to Apartments
(Crain's) — Another failed South Loop condominium project — the 333-unit Lexington Park — is going rental about 10 months after its Irish builder abandoned the development.
ST Residential LLC, the current owner of the high-rise at 2138 S. Indiana Ave., plans to list units in the building for rent within the next three months, with move-ins starting by late summer, an ST spokesman says.
ST, a joint venture led by Greenwich, Conn.-based Starwood Capital Group and TPG Capital of Fort Worth, Texas, took control of the 35-story tower in May after Lexington Park's developer, Limerick, Ireland-based Chieftain Group Ltd., relinquished the struggling project through a so-called deed-in-lieu of foreclosure.
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Completed in fall 2009, the building has sat nearly empty for more than 18 months, as the South Loop condo market has shown few signs that it's pulling out of its depressed state.
About 55% of Lexington Park's 333 units had been under contract as of early 2010, but those deals were canceled, the spokesman says. Buyers have closed on just three condos in a seven-story portion of the project that has 36 loft units, according to property records.
Meanwhile, the downtown rental market is booming, one reason a switch to rental makes sense. Rents at downtown luxury apartments rose 7.2% last year and could rise another 7% to 8% this year, according to Chicago-based Appraisal Research Counselors.
Still, ST Residential will face tough competition from other former condo projects that recently went rental, such as Terrazio, 1935 S. Wabash Ave., and the 30-story Astoria Tower at Ninth and State streets, says Aaron Galvin, broker/owner of apartment marketing service Luxury Living Chicago.
They'll also be “competing with the shadow condo market,” says Mr. Galvin, who isn't involved in Lexington Park. “You still have a lot of individuals renting out their units and they can undercut (Lexington Park's prices).”
The ST spokesman says the venture hasn't chosen a property manager or decided on rents. But people familiar with Lexington Park estimate that one-bedroom units will rent for $1,300 to $1,600 a month, while two-bedrooms will go for $1,700 to $2,100.
By comparison, monthly rent for a one-bedroom unit starts at $1,500 at Terrazio, a 180-unit development about a half-mile north of Lexington Park, says Jennifer Witt of Coldwell Banker NRT, who is leasing a block of unsold units for Terrazio's developer, Sedgwick Properties Development Corp. of Chicago.
The spokesman says ST is building a new sales center and renovating some of the common areas like the fitness center.
In late 2009, a flood on an upper floor damaged some units and an elevator shaft. He had no information about those repairs.
Chicago-based Corus Bank loaned Chieftain $84 million in fall 2006 to build Lexington Park on the property, which formerly was home to the Lexington Hotel, best known as gangster Al Capone's headquarters.
Three years later, after the bank had shuttered, Starwood and TPG acquired an equity interest in a venture that controls Corus' portfolio of loans and real estate.