Thursday, August 7, 2008

Magellan's Lakeshore East: Halfway Home

Third of Three Parts

At the halfway mark, having spent nearly $2 billion, $800 million of it on the construction of condos and townhomes, how does Magellan’s President David Carlins feel about the Lakeshore East project he once opposed?

Sales: Total sales volume of the 1,182 closed condos is more than $1 billion. One result, according to Crain’s: Magellan has become one of Chicago’s Top 5 Largest Homebuilders.

Marketing: David’s biggest challenge and frustration is the difficulty of getting the word out. "Despite having spent more than $20 million on advertising and marketing," he says, "we still encounter many people who have never heard of Lakeshore East. If we could get everyone to spend just three minutes in our park, to see the views and the neighborhood, we'd have sold out four more buildings.”

Construction: No major construction problems to date, according to David. All buildings have come in on time and on budget. The biggest problem, as with most development projects, is that it takes too long to correct items on the punch list.

Community Relations: One thing David is proudest of is neighborhood relationships. For this, he hired a full-time community-relations person, Vanessa Casciano. Among other achievements, she created the Magellan Rewards program, which offers homeowners exclusive discounts and offerings from over 100 vendors.

Recognition: Among the awards earned by the community:
* A highly esteemed international “Oscar” for its Master Plan Design from the International Real Estate Federation.
* 2007 Development of the Year by the Greater North Michigan Avenue Association
* The only U.S. winner of a 2008 FIABCI Prix d’ Excellence award that honors international property development excellence.

Cautions: Historically, 1% of Magellan’s buyers fail to close. On this project, because of the slower economy, the failure rate is 3%. As he tries to line up financing for the next building, David is not certain, given today’s economy, that Magellan could have obtained the $403-million loan for Aqua.

Looking back on the first half, David, who was promoted to president in December 2006, says that another key to success has been the ability to adapt to changing circumstances.

The prime example of adaptability is the solution Magellan found for one of its main challenges: How to develop the huge property fast enough. “If you plan to build 16 high-rises and each takes a minimum of 1.5 years, it would take 24 years to complete the project,” David explains. “No one can afford to hold the land that long. Fortunately, we discovered that we could build, and sell, three buildings at once, to three different markets: rental, high-end condos, medium-priced condos.

A second example: Originally, Aqua was going to be all office space. It’s now condo, five-star hotel (an extension of the Fairmont across Columbus), rental, townhome and retail, with only one office: Magellan’s own. (Update: A Crain's article on Aug. 8 reported that the Fairmont may delay its purchase of 15 floors of the Aqua.)

A third example: Beginning with 340 on the Park, an effort is being made to make all buildings LEED-certified, which means they meet strict environmental standards.

Looking down on the award-winning park from a window in his office at 303 E. Wacker, David can’t help but admire what someone poetically described as the “six acres of serenity.”

As the only park in Chicago privately developed for public use, it features ornamental gardens, a cascading fountain, two grand staircases entering from Randolph, walking paths, a play area, a dog park and foliage.

One feature of the plan for the park is missing: the school. “It turns out, no one really wants a school in our park,” says David. “We’re working with the city to locate it elsewhere."

What do residents like most about Lakeshore East? According to David: “The convenient location and the diversity of the population.”

What do they like least? "What I hope they like least," he says, "is the lack of retail, because we are addressing that problem now. Because so few people live here, it's been difficult to attract retailers. Residents would like more, including a dog walker.”

(To find out from owners what they like and don’t like about their community, we e-mailed the president of each of the four condo associations, asking for a telephone interview. Not one accepted our offer.)

Says David: "One resident complained that living here isn't like living in the city; it's more like living in the suburbs. In my mind, and I believe in the minds of many residents, offering suburban life in the city is a wonderful thing."

Among the owners and soon-to-be residents moving to Lakeshore East from the suburbs: Sales Director Leila Zammatta, who is moving from Glenview to a three-bedroom parkhome, and David and his wife, moving from Glencoe.

What’s next? “We’re always working on multiple paths,” David says. “Right now, my biggest challenge is to line up financing for New Wacker Tower, which will house 300 condos and, at its base, up to 200 hotel rooms. To preserve the views from other buildings, we are combining into one building what were originally three buildings. We hope to begin sales in the Fall of 2009.”

After the tower, work is scheduled to begin on Sites I, J, K & L (3 or 4 buildings) with 1,200 units. Then Site A with 300 units (one hotel has already expressed interest) and Site O with 300 units.

Assuming plans don’t change, that means at least five more high-rises, for a total of 12, with 1,800 more units, for a total of nearly 5,000 homes, for roughly 7,500 residents.

What’s on the horizon after Lakeshore East? “We’re not projected to complete our community until 2018,” says David. “So, as far as I’m concerned, we have no projects on the horizon."

Part 1 of this series
Part 2 of this series

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