Chicago’s Vista Tower — Dalian Wanda and Magellan’s US$1 bil skyscraper

/ The Edge Property |

July 11, 2016 8:00 AM SGT

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Towards end-May, one of Chicago’s tallest skyscrapers, the 93-storey Vista Tower, was showcased in Singapore as part of an international road show that included Doha, Hong Kong and Kuala Lumpur. The US$1 billion ($1.3 billion) mixed-use project is a joint venture between US-based developer Magellan Development Group and Chinese property giant Dalian Wanda Group in a 10:90 split.

According to JLL, the marketing agent for Vista Tower, “there was a healthy flow of traffic” during the one-day preview in Singapore in May, with several units under negotiation. It was soft-launched in 3Q2015, and the grand launch was held in March, following the opening of its sales gallery in Chicago.

“Sales have been brisk,” says Sean Linnane, executive vice-president of Magellan Development, who was in Singapore for the preview before heading to Hong Kong. So far, about 99 units in the project have been sold, generating more than US$250 million worth of sales since its launch.

The Chicago skyline with future landmark Vista Tower

Source: Magellan Development

While there was interest from international buyers, most of the sales were from local buyers in Chicago, says Magellan’s Linnane. “The Chicago market is deeper than we expected.” Some were upgrading to the new downtown address, while others were downsizing from houses, he adds.

Vista Tower marked a series of firsts for both partners: It was Dalian Wanda’s first Wanda Vista hotel and real estate investment in the US. Two years ago, Dalian Wanda announced its second development project in the US with a Wanda Vista hotel: in Beverly Hills, Los Angeles. For Magellan Development, it is the first project to be launched overseas and the first collaboration with Dalian Wanda, which is controlled by Wang Jianlin, one of China’s richest men, with a net worth of US$32.9 billion, according to Forbes’ World’s Billionaires list. Dalian Wanda started as a commercial property developer in China, building shopping malls and hotels across the country. It has since expanded into a global property player with commercial and mixed-use developments, entertainment as well as the world’s biggest cinema operator.

Meanwhile, Magellan has developed more than US$2.5 billion worth of residential, commercial and other mixed-use developments since its inception in 1996. Its biggest project is Lakeshore East, the 28-acre master-planned mixed-use community centre in Downtown Chicago. When the entire development is completed, there will be 4,950 residences, 2.2 million sq ft of commercial space, 1,500 hotel rooms and up to 770,000 sq ft of retail space. Forty per cent of the site will be dedicated to open spaces, including a six-acre park. Ten developments have been completed, and five more are being planned. The Vista is the latest site to be launched at Lakeshore East.

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Landmark opportunity

The representatives from Magellan and Dalian Wanda first met in early 2013, after Dalian Wanda paid US$2.6 billion for AMC Entertainment Inc, which made the group one of the world’s biggest cinema chain operators. At that time, Dalian Wanda was in the US speaking to investment bankers about taking AMC Entertainment public, which it did with a Nasdaq listing in December 2013.

“We met them in Chicago in the middle of a blizzard,” recounts Magellan’s Linnane. “Here we were trying to sell a Chicago development to a company whose primary purpose wasn’t to buy real estate in Chicago. Even though they [Dalian Wanda] were looking for real estate investments in the US at that time, like most overseas buyers, they were looking at the coast — at New York and Los Angeles.”

Magellan succeeded in securing Dalian Wanda’s interest as co-developer of Vista Tower. When completed in 2020, Vista Tower will contain a 191-key, five-star Wanda Vista Hotel on the first 12 floors and the 405-unit Vista Residences spanning the 13th to 93rd floors. Soaring 1,200ft in height, it will be one of the tallest towers in Chicago and have unobstructed views of the Chicago River and Lake Michigan.

The architect for Vista Tower is Jeanne Gang, who also designed another landmark tower at Lakeshore East: Aqua Tower, which was completed in 2009 and won international acclaim. Aqua Tower is 81 storeys tall and also mixed-use, with 262 condominiums, 474 apartments and 332 hotel rooms.

Studio Gang Architects has designed Vista Tower as a three-tiered wave structure, and it will be a future landmark in Lakeshore East, says executive vice-president Brian Gordon. “The Vista is going to be the tallest building in the world designed by a female architect. It will be the third-tallest tower in Chicago, and among the 20 tallest in the world.”

Ghost of Chicago Spire lingers

The last time a skyscraper from Chicago was launched in Singapore as part of a global marketing blitz was the now-defunct 150-floor, 2,000 ft-high Chicago Spire, which claimed to be the tallest tower in the Western Hemisphere. The ambitious 1,193-unit skyscraper was the brainchild of real estate developer Garrett Kelleher and his company, Shelbourne, which has since filed for bankruptcy.

Chicago Spire was marketed globally from Dublin to Singapore in early 2008. Despite strong sales, the project stalled as it struggled to get funding in the wake of the global financial crisis, following the collapse of Lehman Brothers investment bank.

Until recently, the development site was a massive hole of 110ft wide and 76ft deep over the past eight years. “It was like a giant swimming pool,” says Gordon. Chicago developer Related Midwest took control of the development site in November 2014. Two months ago, it turned the site into a landscaped berm to spare neighbours from having to continue looking at the massive hole.

(From left) Gordon, Kirschbraun and Linnane were in Singapore for the launch of Vista Tower

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Prices — half those of New York

Eight years ago, Chicago Spire was marketed at US$800 to US$1,000 psf. “Prior to the recession, the top of the market for condos in Downtown Chicago was US$800 psf,” says Thomas Kirschbraun, JLL’s managing director of capital markets group in the US. “The Vista is entering the market at US$1,000 psf.”

The average price at The Vista is therefore half of that in New York City, where prices range from US$2,000 to US$3,000 psf, notes Kirschbraun. Units at The Vista are priced from US$1 million for a 1,000 sq ft one-bedroom apartment to US$17.1 million for a penthouse on the 92nd and 93rd floors.

Price growth in New York’s housing market has been stagnating since 4Q2015, especially with an oversupply in the luxury residential segment. “It’s absolutely not going to be a concern in Chicago because so little has been built since the recession,” says JLL’s Kirschbraun.

At the peak in 2007, close to 4,000 residential units were completed in Chicago. This was followed by 3,407 units in 2008 and 3,190 units in 2009, according to JLL. Supply of completed residential units plunged to just 462 units in 2010, with nothing in the pipeline for the next two years. From 2013 to 2017, annual new supply is estimated to range from 100 to 150 units, with only a blip of 410 units coming up in 2019 (see chart).

With so little new supply, pent-up demand has built up over the last five years. “Buyers have been sitting on the sidelines and waiting to enter the market,” says Magellan’s Linnane.

Chart

‘Global city’

Chicago was voted one of the cities with the greatest growth potential in a survey of 6,000 respondents in Hong Kong, Singapore, South Africa, the UK and United Arab Emirates conducted by international property investment group IP Global in early 2016. Among the US markets, Chicago has the most investment opportunities with low barriers to entry, coupled with high yields, says Sing Mei Sha, director and head of Southeast Asia, IP Global.

According to IP Global, Chicago is also where 31 Fortune 500 companies have their headquarters, along with five major financial exchanges. McDonald’s recently confirmed that it was moving its global and US headquarters as well as training centre, Hamburger University, to the West Loop near Chicago’s Downtown.

It is also where some of the top universities in the US are located, including Northwestern University, University of Chicago and the School of the Art Institute of Chicago, one of the top ranking art and design schools. “Chicago is really enjoying a growing reputation as a global city,” says Linnane.

This article appeared in the The Edge Property pullout of Issue 736 (July 11, 2016) of The Edge Singapore.

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