Courthouse Square, getting the job done in the face of market volatility

25 August 2020

In 2004 Focus purchased 10 acres in Wheaton, IL from National Louis University which housed two historic buildings, the State’s Attorneys Building and a 100-year old Courthouse. Teams planned to renovate the historic buildings while converting the courthouse into 6 ultra-lux condominiumminium units and adding a community center and offices within the State’s Attorneys building. Additionally, they planned for three new condominiumminium buildings and 46 luxury townhomes built by Focus’ partner in the project – Airhart Construction. The vision was to create a new community centered around the historic buildings while emphasizing the unique architecture.

Together with Airhart, Focus ushered the project through a complicated zoning process and gained buy-in from the City of Wheaton for their shared vision for the Courthouse Square community. In 2005, construction teams began working, starting with the restoration and renovation of the two historic buildings as well as excavation on the first condominiumminium building. Construction moved quickly and sales on the condominiums moved at a healthy pace.

By 2008, the Focus construction team had completely renovated the courthouse and State’s Attorneys buildings, started closing sales in the first, seven-story condominium building, and were 50% sold on the second condominium building With construction completed through the underground foundation and parking garage on the second condominium building, the mortgage and credit markets began to crash, and Chicago saw it’s for-sale housing market dive into recession. With lenders pulling funds and homeowners defaulting on their mortgages across the country, Focus and Airhart had to adapt to the rapidly changing circumstances.

Reacting to changing markets

Due to the state of the housing market, several buyers were no longer able to move forward. Of all the buyers, about 10% either renegotiated the terms of their contract or defaulted on the purchase agreement entirely. At the onset, there was some uncertainty around the depth of the recession and its repercussions on the housing market. Over time, it became clear that recovery would take years and the Focus team began terminating any remaining contracts within the second, incomplete condominiumminium building.

Simultaneously, Focus negotiated several extensions with the construction lender and attempted to sell out the remaining units within the first condominiumminium building. Due to the state of the market, the sales team creatively applied concessions and discounts to the remaining unsold units, selling all of the condominiumminiums within 9 months. After selling out the Focus team began to consider alternate uses for the two incomplete condominiumminium parcels. Based on indications from the market, the team originally proposed repurposing the condominiumminium pads for rental senior housing, with the majority being independent living units and a small number of memory-care units. However, the newly formed condominiumminium association was opposed to this concept, which caused the Focus team to revise the project again, now proposing a six-story, 149-unit apartment building. Under this scenario, Focus could continue with the project under the original zoning, while avoiding for-sale housing which would be impossible to bring to market under current conditions.

Due to the impacts of a failing housing market on our banking system, and the delays incurred as a result of redesigning the development, Focus’ original construction could not be extended, and the team was faced with working with their lender to succesSFully exit the loan while simultaneously seeking new financing and equity for the revised development plan. Through collaborative negotiation with our lender, Focus never defaulted on the loan or lost control of the Courthouse Square site. Focus also succesSFully revised the planned development, received city approval and raised equity funding and a new construction loan based on the revised plan. By 2015, construction was underway on the new Courthouse Apartments.

Adapting through construction

When progress on the site stalled due to the economic crash, our construction team had already completed the second condominiumminium building’s underground parking garage and first story’s floor assembly. This garage was connected to the completed 50-unit condominiumminium building as the original intent was for all three planned condominiumminium buildings to be connected via an underground parking garage, with two entrances and exits. Now that the 2 remaining land parcels were to be developed as a single apartment building, the previously constructed foundation and underground parking garage would need to be separated from the condominium garage and the structure assessed for the apartment design. This involved not only creating a new wall between the two garages, but also separating all of the MEP systems as well. The Focus construction team worked closely with our structural engineer to assess any damage due to the foundation’s exposure to the elements, developed a repair plan and modified the foundation based on the apartment design.

Finally, in 2016 after only 14 months of construction, Focus completed their work on Courthouse Apartments and delivered a complete community to Wheaton.

Commitment builds value

One of Focus’ guiding principles is to build value, value for their investors and the community at large. In this case, the vision for the Courthouse Square community was developed and adapted as teams balanced all stakeholder’s competing priorities, economic changes, and a commitment to a solid investment return. As evidenced in Focus’ drive to finish the community, refinancing and redesigning the project multiple times, their commitment to build value paid off in 2018 when the sale of the apartment building set a record for the highest sale price for a suburban rental asset in the Chicagoland market.

By delivering the first luxury rental option in Wheaton, Focus gave Courthouse Square Apartments a competitive edge. As other luxury rental buildings came online after the recession, Courthouse Square consistently outpaced leasing efforts of these competitors and eventually sold for the highest price per unit in DuPage county at the time.

While not your typical real estate success story, the Courthouse Square project clearly demonstrates Focus’ dedication to its craft. The team remained committed to the Courthouse Square project for over a decade, even though the path to completion was complicated.

As the nation rides out the current economic upheaval due to the impacts of the Covid-19 pandemic, the Focus team remains rooted in creative thinking and a dedication to build value. Our firm’s previous experience and its commitment to these principals will drive success for future project and partners in the years ahead.

Reach out today to learn more about our work at Courthouse Square and the ways we approach real estate development.

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