By Thomas A. Corfman, Feb. 03, 2010
(Crain’s) — Derivatives trading executive turned real estate investor Donald Wilson Jr. has bought out of foreclosure a prime development site in Streeterville where developer Christopher Carley once proposed a 107-story tower including a Waldorf Astoria hotel.
In a two-step transaction, a venture managed by Mr. Wilson paid about $16 million to buy the unpaid loans on a parcel across the street from the Sheraton Chicago Hotel & Towers, 301 E. North Water St., according to property records and people familiar with the deal.
Then a venture managed by Mr. Carley handed over the deed to the property in lieu of foreclosure, property records show.
The value of the 68,000-square-foot parcel has declined about 58% since July 2007, when Mr. Carley bought it. The developer, chairman and CEO of Chicago-based Fordham Co., retains a minority stake in the property, sources say. He did not return a call requesting comment.
The deal is a vivid illustration of the plunging value of development sites as a result of the deep recession and banks’ tight-fisted attitude toward construction.
It is also an example of how a few opportunistic investors like Mr. Wilson are starting to gamble that the deeply discounted land prices will make it worth the wait until the downtown construction boom returns.
Real estate has become a growing sidelight for Mr. Wilson, founder and CEO of DRW Holdings LLC, a large, Chicago-based futures and options trading firm. Late last year, he was part of a group that acquired the historic Jerome Hotel in Colorado.
Mr. Wilson declines to comment. On the Streeterville land, he acquired loans that had a principal amount of $38.2 million, according to a foreclosure suit filed last year by a company controlled by St. Louis developer Fred Kummer.
Mr. Kummer, chairman and CEO of HBE Corp., confirms he sold the loans but declines to comment on the price. He made the loans as part of a sale of the site, lending Mr. Carley an amount about equal to the purchase price.
Mr. Kummer originally acquired the Carley site and a smaller parcel to the north in 2000, with plans to build a 1,600-room hotel. But those plans were scuttled by the 2001 recession and a City Council downzoning that cut the size of the proposed hotel in half.
“I would have loved to have built that big hotel, but frankly the world did not turn in that direction,” he says. “Politics in Chicago are pretty mean.”
In 2007, he sold the 34,000-square-foot north parcel to Houston apartment developer Hanover Co. The price was $28 million.
Property records show Mr. Kummer paid $46 million for the two parcels, which total about 102,000 square feet. He says the actual purchase price was $50 million.
But after the loan sale to Mr. Wilson’s venture, Mr. Kummer has received just $44 million. He declines to confirm that amount, but says he received less than he paid.
“It’s an incredible site,” he says wistfully.