Big names back Trump tower
Soros, Deutsche Bank said to be in on 90-story building
October 28, 2004 |By Thomas A. Corfman, Chicago Tribune staff reporter.
Donald Trump has lined up three New York hedge funds, including money from billionaire George Soros, to invest $160 million in his Chicago skyscraper, a key piece in perhaps the largest construction financing in the city’s history, according to real estate sources and public documents.
Despite reports about the project’s record-breaking sales, most of them from Trump himself, many Chicago real estate developers and lenders have expressed doubts about whether the 90-story tower would ever be built.
“It is such a huge project, and the prices he said he was getting were so outside the norm,” said Robert Glickman, president and chief executive of Chicago-based Corus Bank.
“It was reasonable to say, `Is this real?'” he said.
Much of the skepticism springs from Trump’s own hype. “Chicago developers are much less flamboyant,” said Glickman.
The massive financing, which sources say also will include a $650 million construction loan from Deutsche Bank, should quell those doubts.
Trump flies to Chicago Thursday morning for a ceremonial demolition of the former home of the Chicago Sun-Times, 401 N. Wabash Ave., which will be replaced by his 2.5 million-square-foot tower. The demolition is expected to begin for real in January.
On Wednesday Trump declined to comment on the financing, emphasizing instead the luxury project’s record-breaking sales.
The chief executive of New York-based Trump Organization said he has agreements to sell three-fourths of the 461 condominiums and 227 hotel-condo units for a combined $515 million.
“Nobody to my knowledge anywhere in the United States has ever sold more than $500 million worth of apartments prior to construction,” he said. “It’s a great tribute to Chicago, to the location and to a great design.
“And, I guess, to Trump, when you think of it,” he added.
The investor trio is led by Fortress Investment Group LLC, according to a financing statement filed Oct. 19 with the Cook County recorder’s office.
Fortress, which manages more than $10 billion in investments, is familiar with the downtown Chicago condominium market after providing a key $26 million loan on the River East mixed-use development last year.
The document does not identify the other participants, but a key member is Grove Capital LLP, according to sources familiar with the transaction.
The firm manages most of the multibillion-dollar real estate portfolio of the $13 billion Soros Fund Management, from which Grove Capital was spun off last month.
The third investor is Blackacre Institutional Capital Management LLC, the real estate arm of hedge fund Cerberus Capital Management LP, which manages assets totaling $14 billion.
Executives with the three hedge funds could not be reached for comment.
The $160 million investment is in the form of a mezzanine loan, a kind of second mortgage that typically charges a much higher interest rate than a first-mortgage construction loan.