Aqua closings get the "yellow light" following Fannie Mae snag

It hasn’t put the brakes on closings, but it certainly changed from a green light to a yellow light. It’s not a red light, but without Fannie Mae approval and a stable of portfolio lenders that are easily obtainable, it has definitely slowed down the process.

– From a source close to Magellan Development regarding Fannie Mae‘s classification of Aqua’s 474 apartments as commercial property, which, along with its still-empty hotel component, raises the development’s non-residential-to-residential ratio above what Fannie Mae’s guidelines permit.

This has kept a lot of buyers away from the closing table in recent months. According to Redfin‘s MLS data and Cook County sales records, 11 homes have closed at Aqua since mid-September. Understand that this number represents the minimum homes that have sold — there is a lag of a few weeks in the Tribune’s Cook County records search, so it’s possible that units that were never listed on the MLS have closed since mid-October but have not made their way into the paper’s database.

In the meantime, Magellan is putting together a list of portfolio lenders who will be able to give buyers 80-percent loans. These lenders should be ready to go starting next week, meaning we should see an uptick in closings at the tower very soon.

Obviously, Magellan views Aqua’s apartments as residential units and plans to reapply for Fannie Mae approval, but the developer believes it has a better chance for reconsideration after it has resolved its hotel situation. No word yet on how much longer that will take.

We should tip our hat to the crew at the SkyscraperPage forum, who started discussing this issue earlier in the week.

Have you heard of any other developments that have had trouble with closings lately?

COMMENTS

WORDPRESS: 3
  • This didn’t really fit into the story above, but I’m sure someone out there would like to know: According to Appraisal Research Counselors’ latest benchmark report, 313 (or 66 percent) of Aqua’s apartments were leased between May and the end of October. Another 137 need to be leased for the tower to reach 95 percent, the point at which a building reaches “stabilized operations.”

  • Lee 10 years

    This is a really disappointing, anti-urban Fannie Mae policy. There’s little reason for policies like this favoring lending for single-use developments over mixed-use ones. Mixed-use development is essential for healthy, vibrant cities. And the recent economic drama seems to be showing that if anything single-use exurbs are actually the more risky investment for banks.

  • Lee,

    The policy is not wholly irrational.

    I can’t think of a single large mixed-use project in Chicago over the past 40 years (Hancock, Water Tower, One Mag Mile, 900 N. Michigan, Chicago Place, Trump, etc. etc.) that didn’t either get off to a very rocky start or suffer some later reverses, with negative impact on the residential component.

    Aqua’s a somewhat different case, however, since it’s entirely residential in one form or another.