Rich Chicago Residents Are Losing Their Shirts on Real Estate.

Yes, it's true that homes in Steamboat Springs, Co (where we spend half the year) have doubled in price in 4 short years...while Chicago gets kicked in the tuchus.

I wonder if the high tax, lousy weather, high crime, over-regulation thing is part of the problem?

It’s Not Just Ken Griffin. Rich Chicago Residents Are Losing Their Shirts on Real Estate.

Wealthy homeowners in the Windy City are selling at a loss—and looking for someone to blame

In and around downtown Chicago, condos are selling at a loss.

By Katherine Clarke, WSJ

Dec. 6, 2024 9:00 pm ET

For nearly a decade, billionaire hedge-fund magnate Ken Griffin and Illinois Gov. JB Pritzker have been locked in a highly public feud. So it came as no surprise when Griffin, after selling a portion of his Chicago penthouse for a dramatic 44% loss last month, was quick to take a shot at Pritzker, blaming “failed political leadership in Illinois” for rising crime and declining luxury real-estate values in the Windy City.

The saga took a bizarre turn, however, when the mystery buyer of Griffin’s 9 West Walton Street penthouse turned out to be none other than Pritzker himself.

The two men haven’t revealed how the deal came together, but the sale highlights a broader issue in the Chicago real-estate market: High-end sellers are losing money, and looking for someone to blame.

Chicago’s luxury real-estate market has seen a precipitous drop in recent years. In the third quarter, there were 28 Chicago home sales of $4 million or more, plummeting 28% from 39 in the same period of 2021, according to data from BrokerMetrics. The median price of those sales was $4.625 million, down from $5 million in 2021’s third quarter.

Luxury condos in Chicago’s downtown and Gold Coast neighborhoods have been particularly hard-hit, local real-estate agents said. The median price of Chicago condos above $1 million dropped 9.1% in the third quarter from the third quarter of 2021, according to a recent report by brokerage @properties.

By comparison, Chicago single-family homes, as well as prices in suburbs such as Evanston and Naperville, haven’t seen those types of declines. The median price of Chicago single-family homes above $1 million in Chicago rose 14% in the third quarter from the same period of 2021. But older homes that need work are lingering on the market, agents said.

Griffin took a 44% loss on two units at 9 West Walton Street. Photo: JDL Development

Real-estate agents say the beginnings of the downturn stem from 2020, when Chicago was in lockdown at the peak of the pandemic. Following protests related to the killing of George Floyd, the city saw unrest and a dramatic spike in violent crime. There were violent clashes between police and protesters throughout that summer, and mass looting caused stores in the downtown area to be boarded up.

While other major cities like New York and San Francisco have rebounded from periods of strife in the wake of Floyd’s killing, Chicago has seen its overall crime rate remain high. Overall crime in the city has climbed 36% year-to-date compared with the same period 2020, thanks in large part to major spikes in theft and carjackings, although murders in Chicago have declined by 26%, according to statistics from the Chicago Police Department.

Griffin purchased four units at 9 West Walton Street, intending to combine them.

The spike in crime—along with higher interest rates—has hurt the market downtown.

“The high-end downtown luxury market has definitely taken a big hit,” said Nancy Tassone of Jameson Sotheby’s International Realty, who worked on the Griffin purchase and sale. “Once [the social unrest] happened, we couldn’t recover from it.”

Chicago developer Jim Letchinger said his friends in the suburbs still ask him, “‘Are you OK downtown?’”

Starting in 2020, fear of crime downtown scared away one of the luxury market’s deepest buyer pools: empty-nesters moving from the Chicago suburbs to Florida, but keeping a place in Chicago as a pied-à-terre, said Compass real-estate agent Jeff Lowe. It has been hard to lure those buyers back.

“People used to sell their giant mansions out there and then they would buy an apartment in the city and a place in Arizona or Florida,” he said. “What happened during the pandemic was they started skipping the downtown part.”

Crime has also caused tension between local politicians and some of the state’s wealthiest residents. Griffin cited crime as a determining factor when he announced that his hedge fund, Citadel, would relocate from Chicago to Miami in 2022, saying that, among other incidents, one of his colleagues was robbed at gunpoint while getting a coffee. Citadel was one of a number of major corporations, including Boeing, Caterpillar and Tyson Foods, to relocate from the Chicago area around that time. Pritzker didn’t respond to requests for comment.

But real-estate industry insiders say Griffin can’t blame everything on crime, since the record $58.75 million he paid for his 9 West Walton Street penthouse was far higher than anything Chicago had seen before. In 2017 Griffin agreed to buy four units atop the under-construction high rise, asking Letchinger, the developer, to effectively rethink the top of the tower, giving it higher ceilings, taller windows and even a private rooftop pool overlooking the city. Griffin’s plan was to combine the four units into a sprawling penthouse, for which he was willing to pay more than double the previous home sale record for the Windy City.

“He overpaid,” said real-estate agent Jennifer Ames of Engel & Völkers Chicago, a top agent who wasn’t involved in the transaction.

Years later, Griffin is selling off the pieces of the still-unfinished trophy penthouse, including selling two of the four floors to Pritzker.

There are very few Chicago buyers capable of paying that kind of money for a home, Letchinger said. “It’s unlikely he would have found anybody to pay him anything close to what he spent,” he said. While such buyers are common in New York or Palm Beach, Fla., “we don’t see them in Chicago very often.”

The quadruplex would likely have sold for an even greater loss had Griffin built it out, Letchinger added. “He just wanted to sell. And quite frankly, if he sold for $5 million or $10 million less or more, it doesn’t make any difference to him.”

Roughly 35% of the units at One Chicago remain unsold. Photo:

The developer has rented out some units at One Chicago. Photo: Brent Borchardt/VHT Studios

The home likely makes sense for Pritzker because it was built with security in mind and has private elevator access, said Lowe, who wasn’t involved in the deal. “It’s interesting, because they politically hate each other,” he said.

Griffin’s highly visible selloff will only worsen the perception of the values across the market, local agents said.

The Condo Slump

Just north of Chicago’s central business core, the city’s tree-lined Gold Coast neighborhood has long been home to some of its wealthiest citizens, as well as its upscale boutiques and finest restaurants, said local agent Susan Miner of Premier Relocation and Real Estate Services. The area includes some of Chicago’s most important historic mansions as well as more modern condo buildings like 9 West Walton.

Recently, however, the owners of Gold Coast condos have been cutting their losses. A three-bedroom residence at 9 West Walton recently had its price cut to $4.975 million, inching below the $4.986 million the seller paid in 2019, property records show. Another unit, a roughly 4,400-square-foot four bedroom, recently went into contract with an asking price of $6.495 million; its seller paid $6.95 million in 2019. Griffin recently relisted another of his four units for $8.5 million, far less than the $12.13 million he paid in 2017, records show.

High-end buildings in and around Chicago’s downtown are seeing a similar phenomenon. In November, a condo at the Four Seasons Hotel Chicago sold for $1.025 million, 43% less than the $1.8 million the seller paid for it in 2000, and even less than the $1.61 million the developer sold it for in 1989, records show. And at the St. Regis Chicago, a seller is listing a high-floor unit for $7.995 million after buying it for $8.47 million in 2021, records show.

At the St. Regis Chicago, one seller is asking $7.995 million for a unit after paying $8.47 million in 2021.

Developers of some of Chicago’s newest high-rises have also struggled with slower sales than they originally projected. At the recently completed Tribune Tower Residences, developers CIM Group and the Golub Group have cut prices on units by up to 30%, Zillow shows. A three-bedroom apartment is currently listed for $3.225 million, down from its original $4.555 million ask in 2022, according to Zillow.

While a spokesperson for the developer said that price cut was more dramatic than others in the building, CIM co-founder Shaul Kuba said the company has adjusted pricing on certain units to meet demand. A second residential building CIM had planned for the Tribune site has been put on pause because “the time now is not right,” Kuba said, citing the market and the wider economy. At projects across the county, “buyers today are very sensitive to crime and safety,” he added.

At Letchinger’s latest condo project, One Chicago, roughly 35% of the building’s 77 units remain unsold after five years of sales. “It started with a bang,” Letchinger said. “We had 19 or 20 sales in the first four or five weeks. Then, we didn’t see anybody for a year and a half. There was a point in time where we didn’t know if we’d ever sell another condo.”

Tribune Tower Residences launched sales in 2019 and is more than 80% sold.

Letchinger has cut some prices at the building by as much as 20% and rented out some units.

Part of the problem, said Ames, is that Chicago has never attracted the international buyers that have propped up condo markets in cities like New York and Miami. Moreover, she said, Midwest buyers tend to shy away from ostentatious spending. “Our market is not flashy. It’s not like Beverly Hills.”

Agents and developers say condo sales have picked up in the last few months. Letchinger said he has sold 18 units at One Chicago in the last four months, for instance.

“I think we’re starting to find the bottom,” said Lowe. “Prices have come down enough that I think people are seeing real value.”

The Single-Family Divide

Just over a decade ago, Richard and Michaela Parrillo reportedly spent roughly $65 million building a lavish, European-inspired chateau-style house in the high-end Lincoln Park neighborhood. In August, after roughly eight years on the market and numerous price cuts, the house sold for just $15.25 million. It’s Chicago’s second largest sale of the year, after the Griffin deal.

The Parrillo home wasn’t for everyone. It had an entryway inlaid with precision-cut marble from the French Pyrenees, a bronze and 22-karat gold staircase and a wine cellar with 14-foot ceilings modeled after the Great Stables of Versailles.

Bill Rudnick sold his Chicago home for the same amount he paid in 2011.

Rudnick and his wife spent six figures upgrading the home. Photo: VHT Studios

“Somebody could gold plate their whole place, and it doesn’t mean that someone’s gonna pay for it,” said Ames. The Parrillos couldn’t be reached for comment.

While the sale of Parrillo residence was a unique situation, the sellers’ woes weren’t. There are fewer single-family homes than condos for sale on the Gold Coast, which has helped prop up their values. Still, houses that need work or have quirky features are languishing on the market, agents said.

Prices have been cut on single-family homes along the Gold Coast.

Real-estate agent Suzanne Gignilliat of @Properties recently dropped the price on two of her older listings on the Gold Coast. An 1800s townhouse on North State Parkway is now asking $4.395 million, well below the $5.78 million the seller paid in 2011, for instance. And a row house from the same period on North Dearborn Parkway is asking $3.995 million, having gradually dropped its price from $5.195 million over the past few years. The seller paid $3.95 million in 2005, records show.

Bill Rudnick and Lisa Walker lost money recently when they sold their four-bedroom 19th-century row house on the Gold Coast after deciding to relocate to West Palm Beach, Fla, according to Rudnick, 60, an executive at a wealth and asset-management firm. He and his wife, an executive recruiter, listed the house for $2.19 million in 2021 and ultimately sold in August for just $1.65 million, the same amount they paid about 15 years prior, despite having poured six figures into renovating the property over the years, Rudnick said.

A Lincoln Park house recently sold for $6.25 million, just shy of its original $6.9 million asking price. Photo: Showingtime+

The seven-bedroom Lincoln Park home was built around 2008. Photo: Showingtime+

He attributed the loss to there being a “taint” to the area that was hard to overcome. Ultimately, however, he was sanguine about the loss. “Just because you put money into it doesn’t mean it’s worth more,” he said. “We loved the house and we enjoyed the money we put into it.”

There are bright spots in the market, particularly when it comes to move-in ready, new-construction houses, local agents said. A seven-bedroom house in East Lincoln Park sold in October for $14.25 million, just shy of its $15 million asking price. It had been on the market for only a month. A circa-2008 townhouse nearby sold that same month for $6.25 million, slightly under its original $6.9 million asking price, according to Zillow.