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CHICAGO-Despite the economic downturn exacerbated by the Sept. 11 terrorist attacks on the US and a stricter pre-sale requirement instituted along the way, construction is expected to begin next week on The Heritage at Millennium Park, a 57-story, 356-unit condominium building with 100,000 sf of retail space at Wabash and Randolph streets. When demolition of existing East Loop retail and office buildings begins, it will allow the developers to keep close to a schedule they announced in much headier times in 2000.

Mesa Development LLC principal Richard A. Hanson is the first to admit that circumstances broke in Mesa Development’s favor. And although pre-sale requirements increased from 35%, sales recently hit 60% for units that won’t be available until 2004.

Hanson says he already took back about a dozen units from “multiple” – read investor – purchasers and there were cancellations after Sept. 11. “There was a lot of paranoia,” Hanson says. “But 90% of the buyers reaffirmed their contracts. Our traffic has slowed, but our sales didn’t change.”

Financing for the $250-million project was secured earlier this month. It had already included “a large chunk of equity” and a loan for land acquisition, Hanson says, as well as a mezzanine loan while a construction loan was being syndicated.

Although The Heritage at Millennium Park is the first new multifamily construction in the Loop in recent years, Hanson welcomes additional builders to the submarket, which is surrounded by pockets of new condominium and apartment building construction. Hanson knows that northwest of the Loop, for instance, 4,500 units are under construction in an area that could eventually see 10,000 new units.

“The condo market is incredibly strong,” Hanson says. “When people argue that you’re overdoing it, I answer back that nothing starts now until it’s 50% to 60% pre-sold.”

Fueled by demographics that includes older residents moving back to the city and increasing traffic congestion in the suburbs, Hanson expects the Downtown area to remain a multifamily boom town. He gives Mayor Richard M. Daley much of the credit for the new demographics, and defends the much-maligned Millennium Park project, which has become a source of controversy lately upon published reports of cost overruns. The park, being developed east of Michigan Avenue over railroad air rights, will include a band shell, restaurant and sculpture.

“I’ll bet you 10 buildings will be built around Millennium Park,” Hanson says.

Not that The Heritage at Millennium Park was a slam dunk. For starters, seven parcels had to acquired. “We were able to acquire five parcels before anyone knew what we were doing,” Hanson says. While declining to reveal the prices paid for the final two parcels, Hanson indicated they were the proverbial “arm and a leg” premium as a result of the seller’s knowledge of Mesa Development’s intentions.

The 100,000 sf of retail space will eventually be sold, Hanson says, and marketing of the space for lease will begin later this year. “We’ve had people calling us already in regards to the retail,” he adds.

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