June 11, 2008 (Crain’s)
By Eddie Baeb

(Crain’s) — Sedgwick Properties Development Corp. has landed a $50-million construction loan for a new, 180-unit condominium building in the South Loop, in a deal that seems to defy the downtrodden condo market.

Dubbed Terrazio, the seven-story building is going up at 1935 S. Wabash Ave., thanks to the loan inked last month from Amalgamated Bank’s LongView Ultra Construction Loan Fund.

Chicago-based Sedgwick has sold about 80 of the 180 units in the project, just less than a year after sales kicked off, says H. Jay Feeley, the firm’s director of business development.

Few other new condo developments this year have approached the roughly 50% of pre-sales required to get a construction loan, particularly with so many lenders skittish about providing loans for new condo buildings.

“(Terrazio) will be on the short list that breaks ground this year,” says Gail Lissner, a vice-president with Appraisal Research Counselors, a Chicago-based consulting firm that tracks the downtown residential market. “It will be a short list, a very short list.”

Downtown condo developers had their worst first quarter in at least a decade, selling just 201 units, down a staggering 83% from the first quarter last year, according to an Appraisal Research report. A handful of proposed condo projects have been scrapped due to sluggish sales, while in other cases developers are converting condo projects into apartment buildings.

While the South Loop has been the most active downtown submarket for new condo sales in the past few years, the neighborhood also has the biggest pipeline of proposed projects as well as the most unsold units, Ms. Lissner says.

“All things considered, we feel like we’re in a pretty good position,” Sedgwick’s Mr. Feeley says. “We think we’re on a very good pace right now.”

Mr. Feeley says Sedgwick’s newest project is drawing buyers in part because of its low prices. Units at Terrazio range from about $189,000 for a one-bedroom unit to $450,000 for a three-bedroom unit.

Terrazio’s average price is about $325 a square foot, fourth-lowest among 31 new condo buildings in the South Loop tracked by Appraisal Research.

Mr. Feeley says Terrazio’s other selling point, and the inspiration for its name, is the building’s traditional brick-clad, courtyard design. In addition to an interior courtyard, the building also has a rooftop lounge and sun deck that includes pergolas and a wading pool.

“In a land of high-rises, this is something unique,” Mr. Feeley says.

The project also is to include about 11,000 square feet of retail space on the first level, which is likely to include a restaurant.

Concrete work on the building began last week, Mr. Feeley says, and the building is to be completed next fall. Sedgwick bought the site last May for $6.8 million.

Sedgwick also is finishing its first South Loop condo project, the 25-story Marquee tower at 1464 S. Michigan Ave. Buyers this week began closing on units in that building, where just about 20 of the 214 units remain unsold, Mr. Feeley says.

New York-based Amalgamated, a union-owned bank, also was a lender on that project. The bank’s Ultra Construction Loan Fund finances projects that use 100% union labor.

The variable-rate loan for the Terrazio comes due Nov. 11, 2010, according to documents filed with the Cook County Recorder of Deeds.