This month, luxury-condo developer Christopher Charley was extended a nearly $53 million loan by Cores Bank of Chicago to refinance a 50-story condo tower that opened this year and whose units were selling slowly. Some real-estate observers said Mr. Charley wanted to refinance in order to buy more time with Cores and another lender that provided the construction loan. In December, a development group behind Sky bridge, a condominium project in the West Loop designed by Chicago architect Ralph Johnson of Perkins & Will, avoided foreclosure by securing new financing after the development's original construction loans came due. The two-year-old condo project is more than 20% unsold.
Lenders step in when sales don't go as well as planned or promised. "If they're not able to qualify for when the project is completed, the bank could call the loan and demand payment," says Patrick Duress, vice president with Citibank Commercial Banking Group. Mr. Nerdy warns that Chicago may be a harbinger of things to come in other markets. In Miami, "we haven't seen too many bad deals," but the amount of speculators, or investors buying units to flip or sell quickly, concerns him. "The story is Chicago this week, but Miami is not far behind," he says