Monday, September 22, 2008

Trump dumping retail?

Eddie Baeb reports that Donald Trump has hired a broker to market/sell the four floors of retail at Trump Tower Chicago.

How is this done? Vertical subdivision. You subdivide the building into smaller parts, each of which then technically becomes a separate property. You then have an agreement between the various owners spelling out how matters are dealt with among them. This happens all the time and given the structure of the building it may already be in place. It also makes sense from a property tax standpoint.

Trump claims he probably won't do a retail deal but he is testing the waters. I'm sure the broker will just love to hear that.

I don't always agree with them, but in this case I do concur with Dan McLean, Larry Freed and David Stone. By selling the retail prior to the initial lease-up, you do lose control over tenant mix, and that could be really important in a trophy building. (It does make great restaurant space.) I see that as a little off, and I agree that it seems out of character. Now, I don't know where the building stands with loans and sales and all that, so I won't speculate on whether this is a cash-raising necessity. So keep your ears to the ground and let's see this one play out. It could be much ado about nothing, or it could be an interesting play for someone -- but who?

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