Chicago’s new 758-unit Trump Tower made front page news again yesterday after a Sikorsky S-61 helicopter spent more than four hours in blustery conditions on Saturday delivering the building’s communications “spire.” Now, Chicago’s newest luxury hotel and condominium building is officially the second tallest building in the United States at 1,361 feet – just 90 feet shorter than the Sears Tower.

Inside the Tower

I give Trump credit for the fact that he has built a very impressive building. The Tower’s amenities include its dramatic lobby, a state-of-the-art 23,000 square foot spa and health club, the Rebar lounge (a clever nod to the building’s unique concrete construction), and the signature restaurant Sixteen. All appear to be first class.

I heard from friends who spent a weekend in one of Trump’s hotel rooms that they are quite elegant – definitely as nice as (if not better than) Chicago’s other 5-star hotels including The Peninsula and The Four Seasons.

I have been inside some of the finished condominium units, and the expansive floor-to-ceiling windows offer stimulating city and lake views, especially on the higher floors facing north, east and south. Unfortunately the finishes are simply “okay” – nothing special. These average finishes can be easily remedied with the help of a good designer, however.

The Donald’s Chicago Reputation

So, why is it that Donald has not exactly endeared himself to this city?

The fact that Chicago did not welcome Trump with open arms was evident in the 1999 Crain’s Chicago Business article about Trump’s initial scouting expedition for building sites entitled “Chicago No Longer Safe from Trump.”

Trump was in the news again in January 2007 when his attorneys used a loophole in his sales contract to cancel deals with “friends and family” – mostly architects, attorneys and real estate agents who worked on the project and purchased units at a discount back in 2003. Trump killed their contracts (or required the buyers to increase their purchase prices to then-market pricing) in an effort to increase his profits. After cancelling those sales, his intent was to resell the same units to new buyers at substantially higher prices. Several Chicago real estate colleagues were burned by this high profile play. At least one disgruntled buyer filed suit.

Trump’s name was again splashed all over media headlines in November 2008 when he sued his lender to extend his loan citing “an unprecedented financial crisis”. His appeal ticked off homeowners who were also impacted by the financial crisis. The question was asked, “Why is Donald so special that he should get special dispensation when regular people are losing their homes in foreclosure or selling at a loss often due to economic circumstances that are largely beyond their control?”

The Tower Today

At this moment, Chicago’s Trump Tower is a source of concern for many people who opted to invest in the project. Buyers are worried that their homes are worth less today than the prices they paid or are contracted to pay. Trump Tower is the first building in Chicago’s history to deliver units and allow people to start moving-in while the building was still under major construction. Buyers have closed on their homes and put them back on the market in direct competition with units that have yet to close or are still owned by the developer. Back in July 2008, Crain’s Chicago Business wrote about buyers flipping hotel condos at discounts off of Trump’s current asking prices.

The Hard Numbers

Here is the lay of the land according to Chicago’s official real estate database, the Multiple Listing Service (MLS):

52 hotel units are listed for sale with an average asking price of $1,167,604. That includes 29 units listed by the developer and 23 that are re-sales. Most of these units are studios, however, 15 one-bedroom suites and 5 two-bedroom suites are included among the 52. They have been on the market for an average of 223 days. Only two hotel units have resold with an average sale price of $587,500. None are pending.

62 condo units are listed for sale ranging from $579,623 for a 580 square foot studio apartment to $9,642,060 for a 6,850 square foot penthouse on the 87th floor. The average asking price is $1,874,768. The breakdown of available units includes 28 listed by the developer and 34 re-sales. 40-K is the only unit that went pending in the last six months according to the MLS. This 2,063 square foot 2 bedroom, 2½ bath unit is priced at $2,260,335. 12 units have closed in the last six months including six developer units and six re-sales.

27 condos are listed for rent. The asking prices range from $2,300 per month for a studio apartment to $16,000 per month for a 3,942 square foot, 3 bedroom, 4 ½ bath unit on the 43rd floor. 12 units have already been rented.

As the developer closes on additional units, more are expected to be listed as re-sales.

The Situation for Trump Owners

I have received calls from several people who are under contract to purchase condominium units at Trump Tower. In most cases, they had no intention of moving into the building. They made their purchases as investments expecting to make a sweet return when they sold years later. Now, they are facing multiple challenges.

It is very hard to get financing to close on units in the building. Lenders are demanding exceptional credit and high down payments. Buyers who expected to be able to close with a minimum down payment cannot borrow enough today to close. Another challenge is that the units are not always appraising for their contract price.

For buyers who bought later in the selling cycle, their contract price may be higher then the asking price of comparable units available on the re-sale market today. For example, I spoke with a buyer who is under contract to buy a unit for approximately $850k. The same unit on a slightly lower floor is now being offered as a resale for less than $600k. Given that his earnest money is only $85k, I suggested he consider this an expensive mistake and walk away from his earnest money. If he were to close and then try to flip the unit, he would almost assuredly loose $250k in equity plus carrying and transaction costs including real estate commissions.

On the other hand, I have clients who are under contract to purchase a large unit in the building. They bought early for a very reasonable price, and provided they can get sufficient financing and get their other home sold, they intend to move into their new Trump Tower unit and make it their home.

Here are a few points to consider if you are an investor under contract to buy a unit at Trump Tower and don’t know what to do: How much money did you provide toward your down payment? While the standard was 10% of your purchase price, I have heard that people who bought through the Friends and Family program were only required to put 5% down. What is the estimated value today of the unit you are under contract to buy? If you bought well and you made a substantial down payment (and you have the resources to carry the unit for a while), then you might be better off closing on your unit and taking your chances in the resale market. If you are already upside down, you will probably want to cut your losses and move on.

Their Loss is Your Opportunity

The good news is that if you have an interest in living downtown in a new luxury building, there are some outstanding opportunities at Trump Tower. I heard a story of one buyer who walked away from their contract (and earnest money) to buy a small unit at Trump Tower in order to purchase a larger unit in the same building at the discounted pricing offered in the resale market.

If you are interested in learning more about Trump Tower, or would like information about what is currently available in the building (including units that are not advertised in the MLS), call me at (312) 440-7525 or send an email to jenny@jenniferames.com.


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Comments

  • John Alex

    I've stayed at Trump Tower which is the tallest hotel i've ever stayed at. What a view from up there.

  • I just discovered this post, following a link from Crain's Chicago Business.

    I wish we'd see more agents sharing their expertise at this level.

    Great work, Ms Ames!

  • Thanks! It was prompted by all the calls I am getting from buyers under contract to purchase units in the building. Many are really in a quandry as they cannot get financing to close, or if they close, their value is already below their contract price. Unless they plan to close and live there for a while, their options are not good in many instances.

  • Jenny Ames

    Thanks! It was prompted by all the calls I am getting from buyers under contract to purchase units in the building. Many are really in a quandry as they cannot get financing to close, or if they close, their value is already below their contract price. Unless they plan to close and live there for a while, their options are not good in many instances.

  • Thanks! It was prompted by all the calls I am getting from buyers under contract to purchase units in the building. Many are really in a quandry as they cannot get financing to close, or if they close, their value is already below their contract price. Unless they plan to close and live there for a while, their options are not good in many instances.

  • Trump Towers' architectural design is really amazing. And I am proud that it's the second tallest building in the US. 🙂

  • I've been looking for more info about Trump's Chicago Tower. It's really one of a kind. I can't even find a word to describe how beautiful it was. It's really amazing. Thanks for posting it.

  • gray marshall

    I needed to fill out IL Apartments/Investments Purchase and Sale Contract several days ago and came across an online service that hosts a ton of fillable forms . If you need IL Apartments/Investments Purchase and Sale Contract too , here’s a https://goo.gl/gvNClB.