Right before the auction, we still had sales, but the absorption in the city today is so small. The average absorption is probably one unit or a half a unit per month. When you have an inventory close to 100 units, you don’t want to sit with that for 10 years.
We were obviously expecting reductions, but we were also expecting to get good prices, because we feel we have a good quality building. The units are beautiful, the finishes are beautiful, the lobby is beautiful. It’s not a low-end building. Plus the building is already 60 percent occupied — it isn’t a ghost building. Sometimes when you go to an auction and a building’s only 10 percent occupied, it doesn’t give off good karma. Our building has great karma. The people who live there are very happy. We had a nice meeting with the people who live there, and they understood what we had to do and why. Of course there were some bad reactions, some good reactions, but I think everyone’s happy now that we did it.
We feel that from everybody who bought units yesterday, probably not even 5 percent were investors. Almost everybody who bought a unit plans to live in the building. What happens when future residents buy units is that they will pay more than investors, because they really do want to live in the building. They won’t mind paying $5,000 or $10,000 more, because they actually want to be there.
The people who bought into the building yesterday got some great deals. Yeah, maybe we were selling some of the units over $100,000 more six months ago or a year ago, but you know, that was six months ago or a year ago, and this is now. They’ve established the market. And it’s also important that nobody stole a unit — that’s good for the people who bought their homes a year and a half ago and already live in the building. They didn’t get hurt, and that matters, too.
We were auctioning off 40 units, but we ended up selling 46. Even this morning, we’ve probably gotten 20 phone calls from people who didn’t win units due to a $1,000 or $2,000 difference, and they want to come back and buy something from what we have left. I think looking ahead into the next month, we’re going to have a lot of overflow and a lot more activity.
– Jacob Bletnitsky, principal and CEO of Russland Capital Group, developer of Michigan Avenue Tower II at 1400 S Michigan Ave.