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Cover Story-Developing Chicago and Beyond

by Chicago Agent

For our 100th issue, we got in touch with some of the biggest names in development around the country. We checked in with developers in hot markets like Atlanta, Las Vegas, Miami and Phoenix and we found interesting information about up-and-coming markets in Boston and Houston.
We started our journey in Chicago, where it doesn’t get much bigger than the name Trump. Ivanka Trump, daughter of the real estate mogul Donald Trump, and the woman in charge of the Trump International Hotel & Tower project in downtown Chicago, took some time to answer questions about everything from her latest project to what it’s like to be a developer.

Chicago
Trump International Hotel & Tower Chicago
Ivanka Trump, Vice President Development, Trump Organization
Interviewed by Zipporah Porton

What is your role in the Trump International Hotel & Tower project in Chicago?
The project actually started prior to my arrival at the company. I wasn’t involved in the pre-development planning, but ever since then I’ve worked with the architects at Skidmore (Skidmore, Owings & Merrill). I’ve been working with our architects on the design of not only the suites, but also the spas and the restaurant, which is going to be amazing. It’s [the restaurant] called 16, because it’s on the 16th floor and hopefully the Olympics will be coming to Chicago in 2016, as well. My involvement on all of our jobs is both macro and micro. From coordinating what’s going to be on the spa menu and the restaurant menu to overseeing the day-to-day construction process.

How much time do you spend in Chicago?
I’m there roughly one day a week. I breeze in and breeze out. Sometimes I’m there a little bit more, sometimes a little bit less. Pretty much once a week I try and get there.

Did you find any special challenges in Chicago that you didn’t see in other locations?
I think every project is unique in its challenges, in terms of the environment in which it is built and also the structure in and of itself. We don’t build purely glass boxes. A lot of developers do. They have a formula and they stick by it and they replicate it. All the buildings in our portfolio really just sing to the appropriate market that they’re in. And I think that’s one of the reasons we’ve been able to create such excitement when we introduce new buildings in new markets. Trump Chicago is very appropriate for the city of Chicago, a city that places a very high premium on modernity and on contextual architecture, really on architecture in general. It’s one of the most beautiful cities in the country, if not the most beautiful in terms of the architecture. And we wanted to [create] something extremely special and fitting of Chicago. [The Trump International Hotel & Tower] will actually be the tallest building built in North America since the Sears Tower, so it was quite an engineering and architectural feat. All of our developments are very contextual in nature.

Are you involved in any groups or organizations in Chicago?
I’m actually not. I’ve participated in a few fundraisers and a few events. We’ve done some events with the Joffrey ballet. I have a ballet background; I actually danced with American School of Ballet here in New York. I’m looking forward to getting more involved. Once the hotel is open we’ll have a great place to go and actually spend the night.

Do you know what percentage of the Trump Chicago project has been sold by agents?
It was a large percent. We had a large amount of co-brokes in the building. And most of them are outside brokers, because we’re working with Koenig & Strey internally. But most of our outside brokers were from the Chicago area, or from the Midwest in general. Ninety-one percent of co-op broker sales are locally from Chicago. At the end of the day one of the most important things to us is to really embrace the local brokerage community and not to alienate ourselves in that sense. I think a lot of the developers make the mistake of stepping on some important toes in the market, especially in one they’re not as familiar with as their own backyard. We’ve always made a very active effort in reaching out and educating local brokers and I attribute a large amount of our success in Chicago to that.

Do you know what percentage was sold to out-of-town buyers?
We had a lot of people who were looking for weekend homes, but weren’t from very far away. They were people who had homes in the suburbs and they loved the concept of having a hotel/condominium, having access to that within the city proper right in the heart of the cultural district and being able to come into the city on the weekend. We had a lot of baby-boomer buyers who want the flexibility of both.

Why did you decide to continue in your father’s real estate footsteps instead of taking a different path?
Quite frankly, I don’t know what the whole though process was. It never really occurred to me to do anything else.

Are you happy that you’ve made the decision to continue in this industry?
Oh, 100 percent. There is nothing that I enjoy doing more.

Do you have any advice for women who want to get into real estate development?
My advice would be make sure it’s what you love at the end of the day, and that you really enjoy doing it. I think there are some obstacles. With sales and marketing and brokerage we’re very well represented in terms of proportion of females to males. I don’t know what the exact number is, but just visually it seems from my experience there are many females in that field. But on the development side it’s substantially less, so that can be a challenge. With that also there are some advantages.

If you could build a project anywhere in the world where would it be?
I think London is a great market. It’s a hard market to enter, prices are extremely high. With the weakness of the dollar it’s a particular challenge for an American developer. But, I love it; it’s a terrific market. Paris is another market that we haven’t entered that I’d like to.

What is a recent accomplishment that has made you proud?
One of my great accomplishments since I’ve been at the company was when we brought the Trump International Hotel & Tower in Waikiki to the market in December of last year. The building sold out in six hours at 50 percent premium to market with a gross sell out of $729 million, which is a world record. I was written up in Forbes as the most impressive real estate sale within a single outfit, the largest transaction that had ever occurred in a single building. I love that story.

If you could live anywhere in the Chicagoland area other than the Trump building where would it be?
Honestly, I wouldn’t be interested in living anywhere other than our building. That’s part of why we entered the Chicago market after a long time. It’s not because Chicago wasn’t on our radar. The best site wasn’t available to us and then when it became available, that’s when Trump came to town. We did a very comprehensive analysis of new condominium projects that were in the market and we found that the market is always extremely deficient in providing the highest echelon of luxury to buyers. With us our base template is what most would consider the ultimate upgrade. I think our price and our success in the market is reflective of the fact that people really responded. Nobody believed what we were going to do until we started seeing the momentum, so I think we’ve broken through a lot of hurdles in the Chicago market.

Atlanta
Atlantic Station and eon at Lindbergh
John Bell, Southeast Regional Partner, Lane Company

What is your history with Atlanta?
I have been in Atlanta for seven years. Originally I am from Nashville, but Atlanta has become my home base now. I’ve worked on numerous projects in Georgia, Florida and Tennessee. Most of those projects have been in and around Atlanta.

I see Atlanta as an attractive, growing and changing city. I’ve found, and continue to find, many great opportunities that offer tremendous growth potential.

What percentage of eon and Atlantic Station have Realtor participation?
Approximately 60%

What are the co-op commissions for eon and Atlantic Station?
Approximately 4%

Why are your recent projects are a good fit for the Atlanta market specifically?
We have two projects that are in the sales stage right now that are doing very well because they fit the current market needs.

First, there’s Atlantic Station, a great mixed-use development that incorporates almost everything a person could want in one site. It includes shopping, theaters, restaurants, parks and walking areas, entertainment venues, as well as offices nearby.

The next project is eon at Lindbergh. This project fits into the urban inner-city movement because it is a transit-oriented development, as eon sits on the main Marta transit hub for the commuter trains and buses. It is in a convenient in-town location and it is walking distance to shopping, restaurants and entertainment venues.

Both of these communities speak to the desire to live in a modern urban environment and are attractive to young professionals who are looking to live in the city.

What is your take on the Atlanta market?
Currently the Atlanta market is definitely down. In particular the “for sale” sector, i.e. multi-family, townhome, single-family home, etc., have all been equally hit. I think that it will take approximately two years for the market to make a recovery. Certainly this will require that all the current inventories are burned-off in order to begin that cycle of recovery.

How is the Atlanta market different from the rest of the country?
The Atlanta market is different in a number of ways. Obviously, there are no physical barriers to contend with, water, mountains, etc.

There is an issue here with extremely long commutes ­— some of the worst in the country. So this is creating a tremendous drive for people to move into the city.

In addition, young professionals, in the 25 to 35 year old range, are also looking to moving into the city because they are attracted to the convenience of city life, they want to be close to work and close to all the urban amenities.

All together, there is a push for more urban projects in Atlanta, in particular mixed-use developments that will bring all those desirable elements into attractive community settings.

Miami
City Park Aventura
Yizhak Toledano, CEO of Sky Development and Paul Stone, CFO of Sky Development

What is your take on the Miami market?
Presently, the Miami market is in transition on account of numerous economic forces, such as a global and local lending crisis, oversupply of condos and the overall increased cost of living in South Florida due to skyrocketing property insurance and real estate taxes. These are the most significant bottlenecks that we are presently experiencing and remain hopeful they vanish by late 2008 or early 2009.

When do you think it will recover, and what will it take?
There is pent-up demand for housing in Miami and South Florida in general. Whether it’s a condo or single-family home, there is a tremendous number of homeowners who cannot get to the next stage of the selling cycle because they cannot sell their entry-level property to the next guy. Moreover, Yizhak Toledano and Paul Stone see merit with the FHA’s most recent decision to increase its lending requirements for conforming loan limits to $729,750. Given that other expensive housing markets, such as Alaska and Hawaii, are eligible for 50 percent higher loan limits than the rest of the states, then why not Florida?

How is the Miami market different from the rest of the country?
The Miami market is experiencing deep challenges since this market differs from the rest of the country, namely on account of it’s high investor concentration and declining market value in the Condo market.

In light of this situation, the recovery for Miami and South Florida’s market in general will be deeper and longer than the rest of the country. Specifically, our region will need to wait until the banks clear off their problems since some of our local lenders have stopped financing condo purchases in Dade, Broward and Palm Beach counties altogether. While there are buyers ready to purchase condos, our lenders that finance condo units have stiffened lending requirements, thus, taking a much more conservative approach to their lending practices.

Overall, the shift for lenders has returned to the old days, employing the real estate fundamentals of the past. Unlike Miami’s recent boom period whereby real estate turned into a growth industry instead of a normal anti-inflationary, slow and steady growth industry.

Why is City Park Aventura a good fit for the Miami market specifically?
In light of land constraints, which continue to dictate building type in Miami and specifically Aventura where a large percentage of new construction is residential condos, City Park Aventura is the city’s first mixed-use development that combines residential, retail and office space. Toledano, the developer of City Park Aventura, successfully assembled three adjoining parcels over the course of a year to create this exceptional site. The project occupies an irreplaceable location in the heart of bustling Aventura. It is surrounded by upscale shops, a densely-built residential market that has recently experienced extraordinary growth and an inventory of office buildings that attain the highest rents in metropolitan Miami.

As noted, there is a strong demand for office, hotel and retail space. The Aventura sub-market is one of the hottest commercial districts in the state. The vacancy rate for Class A office in Aventura is under 5 percent, with average base rents of $32 per square foot

What is your history with Miami? Do you have a personal connection?
Toledano has a special connection with Miami on account of its large Orthodox Jewish community and the ethnic and cultural diversity that Miami and South Florida hold. With strong family and business ties to both the local South Florida community and Israel, and as a father of six, all of Toledano’s children were born here and are being raised in South Florida. As a philanthropist in both Miami and Israel, Toledano feels that South Florida is a wonderful place to lend support to those who need it most. Toledano has been involved with the Joe DiMaggio Children’s Hospital Foundation along with being a strong supporter of K’far Chabad in Israel.

What percentage of your project has Realtor participation?
Working closely with both residential and commercial Realtors is important to Sky Development. “Realtors are our life blood, especially for the Miami market that caters significantly to both the local and international communities,” according to Gavin Susman, COO of Sky Development.

“For the inauguration of City Park Aventura’s gallery, there were in excess of 500 Realtor and guests in attendance,” says Deanna Turpin, City Park Aventura project manager. “Our in-house sales support personnel and outside sales force work very hard on Realtor relationships, because it’s important for Realtors to know about our product and show our product; it’s part of my job to make sure they are familiar with our product.”

What are the co-op commissions for City Park Aventura?
We work with all the commercial and residential brokers in the local community and offer market rate co-op commissions to all brokers.

Las Vegas
CityCenter
Tony Dennis, Executive Vice President,
CityCenter’s Residential Division
Interviewed by Zipporah Porton

What is your take on the Las Vegas real estate market?
It’s a tale of two cities actually. The suburban market is off significantly, as I’m sure you’ve read in various publications. But CityCenter, which is on Las Vegas Boulevard, has enjoyed a tremendous first year of sales. The strip market is actually very buoyant and that speaks to the higher-end of the market being stronger than the middle of the market. I’m sure you’re seeing that in Chicago as well.

Do you think that the middle ground will recover any time soon?
I think the inordinate supply opportunity in the last three or four years and the abruptness of the shift from growth to slowing caught a number of the builders off guard. It’s going to take a little while to get the new equilibrium in the market from a supply and demand point of view, but it’s not far off. I would say by the middle of 2008 we should expect to see things improve. I think this is different than the rest of the U.S.

Las Vegas is really an economy in and of itself with the gaming and hospitality industry. It has it’s own economic industry with its own cycles. We have about 10,000 hotel rooms coming onto the market in the next 12-18 months, and with that comes the jobs. CityCenter alone is going to add 12,000 new jobs to the local market when we open in November of 2009. We’re hiring people to start in August of 2009 so we’re not that far away. And all that will create momentum in the market and a shift. It changes the psyche if nothing else. I would say middle of 2008 for the low-rise single-family home market, certainly the rental market. And then for us at CityCenter, while our pace is off and we’ve got more work to do than we had last year, all the clients are there and we’re going to outperform the market again this year.

Do you think that there is something that could happen that would help with the recovery?
I think you can try and stimulate things. The interest rates being lower helps the situation. The issue for the general real estate market is the financing side of things. If the banks aren’t recovered in their own mind and the lenders aren’t ready to loan money in a way that’s more realistic, yet, still freely [then a change won’t occur]. It seems like they’ve overcorrected, and that too has to be corrected. I’d say by the end of the first quarter we’ll see that figured out once and for all. I think that by the end of March or beginning of April things will settle down. The Spring market should recover things all over the U.S.

How is Las Vegas different from the rest of the country?
The downside is that we’re at the top of the list for a couple of not so good things, meaning foreclosures. This is due to the run up on the supply side. There is a lot of speculation in the market here, more so than in other places, like Chicago, which is a much more mature and diverse real estate market. Las Vegas is still a small town relatively speaking. We’re oversupplied because of abruptness of the change of the direction of the momentum of the market.

On the good side, the economy within Las Vegas isn’t necessarily tied to the overall economy; other than people wanting to come and get away from it all. In fact, in down times Las Vegas tends to buck that trend and do a little bit better than other markets. We have a little bit of a different economic engine here than the rest of the U.S. economy. And our dips are lower than other places.

For CityCenter specifically, we’ve gone through our launches; we’ve launched four buildings in the last year. We’ve sold over 1.6 billion dollars of real estate in the last 12 months since we’ve been open. We’ve sold 1,340 units and we’re 50 percent sold out in 1/3 of the time. We can say that CityCenter specifically has enjoyed a tremendous run, although we expect to do less volume in 2008, which is normal because we’re no longer launching. We’re still going to dominate the market.

Why is CityCenter a good fit for Las Vegas?
I think Las Vegas historically has been a place of innovation. It’s a progressive place people come to stake their claim and really drive ideas. CityCenter is one of those initiatives that’s on a colossal scale. It’s a significant development in a number of different ways. The first is a collaboration of the architects that we’ve engaged. There are eight of the world’s best architects that have been brought together to really change the face of the city. Up until now Las Vegas has taken the identity of buildings from other places. Bellagio from northern Italy, Luxor from Egypt or Paris from Paris. It’s been mimicking these great places and given people a vicarious thrill.

CityCenter is meant to be an authentic architectural wonder masterfully planned by one of the world’s best urban planners. And then in addition to the collaboration of these great architectural minds, we’re targeting LEED certification so we have an eye on sustainability. It’s a forward-thinking place. Those two things seem to appeal to buyers a lot. They like the design, the authenticity of it and they like the fact that we have a mind toward making a smaller footprint on the world, even though we’re building a big development.

What percentage of CityCenter revenue comes from Realtor participation?
About 25 percent of our revenue and 30 percent of our sales come from Realtors. In terms of units, it’s 30 percent, but for revenue it’s 25 percent. The interesting statistic that I think is the most compelling to agents is that we paid out almost 12 million dollars in 12 months of commissions. We’re on a million-dollar-a-month pace in commissions to third-party brokers and referral fees. It’s pretty amazing. Only a small percentage of our buyers to date are actually from Chicago. It’s only about 5 percent of our buyers that are coming out of the Chicago area, actually, Illinois in general. But most are from the greater Chicago area.

Where do most of you buyers come from?
California is the dominant contributor. We also have a significant chunk of buyers from international locations. So for any of your readers that have relationships with international buyers, there’s a neat fit there. Especially with the U.S. dollar being what it is and so many people looking to take their money into the stock market. The pendulum is going to swing back. People have been trying to divest of their real estate now that it has hit that low. It’s a good time to buy with the stock market being so volatile, and I think people are redistributing some of their wealth. We’re starting to see that now and as people come back from New Years’ vacations and such we’re starting to pick up.

What are your co-op commissions?
We pay a full 3 percent to a third-party co-broke, co-op broker. And for the condo hotel Vdara, which is our bread and butter and most successful of our buildings, we pay 75 percent of that up front. With the initial deposits within six months the balance is on closing. I say we’ve paid out almost 12 million dollars. We’ve paid it out, it’s not just that it’s earned and we’re waiting for it to close in November 2009; it’s been distributed to the Realtors. The Realtors are paid almost immediately. As you know in the condo world it’s usually a 2 to 3 year wait. And today with sales being down all over America it’s good to have a cash flow.

What else should our readers know about CityCenter?
Chicago and Las Vegas have a natural connection. There are a lot of customers in your neighborhood and I’m sure your readers frequent Las Vegas. There’s a very direct and easy access. With a three-hour flight, it’s a short getaway. We’d like to see more activity and we encourage Realtors to participate. We’re affiliated with Coldwell banker and Realogy in terms of our brokerage relationship. We’re a supporter of Realtors and committed to the Realtor relationship. We look forward to the support of your readers.

Phoenix
Sun City
Jacque Petroulakis, Public Affairs, Pulte Homes & the Communities of Del Webb Southwest Area

What is your take on the Phoenix market?
Metropolitan Phoenix continues to be one of the fastest-growing regions in the nation, consistently recognized for strong job growth, an entrepreneurial environment and as a top destination for relocation and second-home buyers.

While we continue to face a difficult housing environment nationwide, the Phoenix market continues to be a top choice for business, innovation, jobs, leisure and relocation.

How is the Phoenix market different from the rest of the country?
Phoenix is known as a hotspot for young professionals, while also boasting renowned communities that are some of the best places for baby boomers and retirees to live. Clearly, the great weather, golf courses, abundant resorts and world-class restaurants are a great distinction and inducement. Meanwhile, the Southwest location has made Greater Phoenix a choice business and innovation hub with international access for a myriad of companies from aerospace, to high-tech, to bioscience.

Why is Sun City is a good fit for the Phoenix market specifically?
Traditionally, Del Webb has debuted a Sun City community about once every 10 years in the Phoenix market. However two such active adult communities recently opened at about the same time in the Valley of the Sun. As the birthplace of the first Sun City community in 1960, these Del Webb communities have evolved over the years to meet the needs and interests of active adults.

Sun City Festival, in Phoenix’ West Valley, and Sun City Anthem at Merrill Ranch, in the East Valley, are both large-scale active adult communities that offer the unparalleled resort-style living that Pulte’s Del Webb communities are known for in Phoenix.

These communities feature many options for staying physically fit, exploring new interests, making friends and continuing education; a great complement to the dynamic Phoenix market. The two new communities continue a legacy of building not only a great place to live, but fabulous amenities as well.

Targeting the 76 million baby boomers coming of age over the next 10 years, Sun City Active Adult communities are some of the best selling master-planned developments in the country.

What is your company’s history with Phoenix?
Del Webb built its first Sun City community in Phoenix in 1960, and more than 100,000 people came to see this new concept in active adult living during the grand opening weekend. Still today, the Phoenix market and those visiting have embraced our Sun City communities, now operating under the Pulte Homes family of brands.

Just as Phoenix is known for its beautiful resorts, its Sun City communities are known for their beauty and unsurpassed amenities. People who live in the Phoenix area enjoy the myriad of activities – indoor and outdoor – at their disposal.

What percentage of your projects have Realtor participation?
50% to 60 %

What are your co-op commissions?
3%

We’d like to thank all of the developers who contributed to our special, 100th issue cover story. Even though our focus is on Chicago, it is important to remember that local clients won’t always remain local, and therefore knowing what is going on in the rest of the country will help you in the long run. We’ll be sure to update you on up-and-coming markets throughout the U.S. in the future. C.A.

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