R+D 659
Aug 19th, 2014


Cool-headed and exhaustive analysis followed by decisive action enabled the successful workout of this West Loop condominium development during the depths of the financial crisis

Location: 659 West Randolph, West Loop
Developer: Mesirow Financial Real Estate & NEBF
Total # of Units: 252
Price Range: $150,000 - $600,000
Current status: Sold Out

Challenge

R+D 659, a 252-unit high-rise in the West Loop, began sales in 2007. Naturally, sales slowed as the economy worsened; and by spring 2009, upon completion of construction, the development stood at 40% sold. Roughly half of those buyers walked away from their earnest money, leaving almost 200 unsold units in the worst housing market in decades.

Solution

  • Mesirow Financial and its equity partner, NEBF, directed @properties to examine a variety of scenarios, including price reductions, auctions and conversion to rental apartments. Ultimately, the owners opted for the most aggressive sell-through with the goal of exiting the project quickly while salvaging as much equity as possible
  • Re-priced the project to achieve absorption of 20 units per month; pricing was set above levels that other distressed projects were achieving via auction, but below open-market pricing at the time
  • Instituted aggressive advertising program featuring ads in print, online, billboards and on public transportation lines frequented by target audience of first-time buyers
  • Held phased reintroduction of the development to recent prospects, @properties brokers, outside brokers and the public — validating new pricing and creating a renewed sense of urgency
  • Project was also marketed as a cash-flowing investment opportunity to brokers who were known to work with investor-clients
  • Added sales and support staff to meet anticipated increase in traffic and to offer a high level of customer service in order to minimize contract fallout

Results

  • 50 new contracts were written in the first 5 weeks of sales
  • Over a 6-month period from June 2009 to January 2010, 150 solid new contacts were written
  • Project was sold out in 10 months
  • Achieved $40 PSF premium over competing projects sold via auction
  • Falling prices and slow sales would continue to plague the downtown housing market for the next two years
  • @properties’ execution of the developer’s aggressive strategy enabled the developer to maintain control of the project, get out and pursue other opportunities

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