According to Crain’s two downtown condo projects may switch to rentals – the Modial (900 W. Huron), which is a 141-unit in River West and the Trie, a 100 unit building in the West Loop. Mr. Berger the developer of the Mondial says he has recently cancelled 50 purchase contracts and returned earnest money to the buyers. He is quoted saying “Do you think someone who has a contract for a $450,000 unit that they signed two years ago is going to close?” “They aren’t going to close, so why allienate the marketplace? We have to do the responsible thing.”

I give Mr. Berger great credit for seeing reality, not being bitter and doing the smart thing.

WHAT ARE THE CHALLENGES THE MONDIAL & TRIO WILL FACE IF THEY GO RENTAL?

The largest challenge they will face, will be their initial challenge of restructuring their construction loan. Both have their loans coming due in the next year and their banks will need to extend them, or re-finance the loan. However, I do not see this being an issue. It is the smart thing for any bank to do given the current economic climate.

The Mondial & Trio will also need to face the challenge of running the rental building. Not too big of a deal, they can farm it out.

The next challenge they will face is a market place with declining rents. Not a huge deal for them, they are into the building cheap, they are the developers!

HOW WILL THIS CHANGE THE RENTAL CLIMATE IN CHICAGO?

In total it will add an additional 241 units to the market, an increase of 10% in comparison to the amount of dedicated rental units that were expected to hit the market over the next 2 years. This will only assist in driving rents lower throughout the downtown market.

One of the largest reasons these buildings will help drive rents lower is because they are condo quality. Hardwood floors for instance is something that is not found in most “all rental” buildings. Renters are becoming more discerning as they are seeing how many private condo rental options are available to them.

I believe at the end of the day the Mondial and the Trio will do well as rental buildings. Perhaps in 5 to 7 years they can convert back to condos; however until then they will join the ranks of several other projects throughout Chicago, such as The Lofts @ Roosevelt Collection that have now gone ALL RENTAL.

And a recent crains article claimed that rental prices are going to increase soon in Chicago…haha…idiots