If you've scanned the Chicago skyline lately, you've probably noticed that the Hines tower at 300 North LaSalle is pretty close to done. Just about. Almost. But another Hines project a few blocks away at 414 West Lake is in jeopardy.
For months we though that the big shiny tower that Hines was planning to build along the Amtrak tracks next to the Riverbend Condominiums was cancelled. Now we learn from Crain's Chicago Business that it's not dead, it's just pining for the fjords.
The article says that Hines is having a hard time getting banks to lend it the half-billion dollars is needs to make the 52-story project a reality, even though it already has two anchor tenants lined up.
Of course, in these tough economic times banks are reluctant to lend money to anyone, so it's not necessarily Hines' fault. But it does illustrate why America is falling farther and farther behind in the skyscraper race. In pretty much every country in Asia and the Middle East, if you have a big company and want to build a skyscraper, you go out and build it, paying for it up front and reaping the rewards on the back end.
In America and Europe, companies borrow money to build skyscrapers, build them with someone else's money, then hope to make enough money on the back end to pay off the debt plus interest. So in essence, the developer (Hines, or whomever) hasn't built a skyscraper -- the bank has. But the developer takes the credit.
It's that kind of deeply engrained house of cards mentality that caused the current economic crisis. There's a mantra in American real estate which states, "Never build with your money, you build with someone else's." Such a thought shows that these companies have no pride in what they're doing, or faith that their projects will work since they just shift the risk onto the bank. It would be unthinkable to do such a thing in other cultures that value personal responsibility.
If your company doesn't have the money to build a skyscraper, then it's not all that big a company, is it? All those brochures with pictures of shiny buildings -- they all belong to someone else, don't they? So, what's the point of having your company at all? Why not just deal with the banks? Well, that's the way it seems to be going once again.
In the 40's and 50's and 60's, it was banks and insurance companies that built skyscrapers (the John Hancock Center , for example). Then it went to developers. Now the banks are getting back into the game -- cutting out the middle man.
That's why in ten years the ten tallest buildings in the world are not going to be in America. But real estate people will keep telling themselves that it's better to build with someone else's money.
How's that working out for you, Hines?