http://skylineviews.typepad.com/skyl...uld-cease.html
Expert Panel: If 444 Lake Fails, Chicago Development Could Cease
By Tony Wilbert
CHICAGO (Jan. 27, 2009) - In normal times, a proposed 1.1 million-square-foot office tower that pre-leases about 60 percent of its space to two good-credit tenants is a sure thing to secure financing and get off the ground.
But in these far-from-normal times, it's uncertain whether Hines will be able to get construction financing for 444 Lake, a $330 million tower planned in Chicago’s West Loop submarket. It’s also known as River Point.
Hines has issued a financing package and now must brace itself for the response from lenders.
If Hines and its partners fail in their quest, speculative high-profile development in downtown Chicago could halt, according to a panel of commercial real estate experts. The panel was a highlight of the 7th Annual Commercial Real Estate Forecast Conference & Expo held Jan. 27 at the Hyatt Regency Chicago.
Tom Corfman, a veteran commercial real estate reporter now with Chicago Real Estate Daily.comand Crain’s Chicago Business, moderated the panel and kept it interesting with provocative questions and insight gained from covering the market for so long.
"It would probably kill most - if not all - development in the next couple of years," said Bill Rogers, managing director of Jones Lang LaSalle's tenant rep business in Chicago. Rogers and his team represented law firm Baker & McKenziein its 300,000-square-foot pre-lease at 444 Lake, designed by Pickard Chilton.
Steven Schnur, senior vice president of Duke Realty Corp., agreed. "It's probably going to put a cease to building in the near future."
Rogers said he's optimistic, in fact 90 percent certain, that Hines will secure financing for River Point but acknowledged that "it's a little bit of a guessing game." Arthur Nieman, principal-in-charge of product leasing at the John Buck Co., says its competitor Hines stands a "50-50" chance of getting financing. "It's really a tough market," Nieman said.
"It's a good time to be finishing a project," Nieman said. "What's happening with Hines will set a tone."
Bob Bach, chief economist at Grubb & Ellis said financing any project during these times will be tough. He kicked off the forecast event with an overview of the U.S. economy.
“It has been a difficult year for commercial real estate,” he said, though he needed not tell that to this crowd. They live it every day. “A good chunk of credit has been frozen.”
Time will tell whether a well pre-leased signature office tower can help thaw the credit markets.