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Ultra-Wealthy Are Souring on Chicago’s Most Elite Neighborhood

(Bloomberg) -- When Ken Griffin left Chicago, the billionaire listed several of his high-end properties in the Gold Coast, the city’s most exclusive neighborhood.

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Two years later and he’s sold one in Park Tower, a skyscraper on the Magnificent Mile, and one at the Waldorf Astoria at a loss of more than $3 million each. At No. 9 Walton, where he paid almost $59 million for four units in the biggest residential real estate deal in the city’s history, he put two apartments up for sale before pulling the listings.

Citadel’s founder is hardly alone in experiencing the downturn in one of Chicago’s most expensive neighborhoods. The family of billionaire Richard Driehaus, who died in 2021, also offloaded at least one of his Gold Coast homes for less than he paid. And Andrew Hall, co-founder of Chicago Trading Co., cut his asking price by 33% to sell his condo at $9.3 million in January.

The historic Gold Coast, featuring 100-year-old mansions, opulent condos and designer boutiques, has lost some of its most illustrious residents and appeal in recent years as the city’s high taxes and crime encouraged the wealthy to relocate. Those staying in Chicago are opting for more modern homes in trendier areas, leaving Gold Coast properties sitting on the market for months.

Now a plan to boost taxes on the sale of homes of $1 million or more could further depress deals in the neighborhood, whose residents include the billionaire Illinois Governor J.B. Pritzker. Known as the “mansion tax,” the measure will be on the ballot during the Illinois primary on Tuesday.

“When you’re looking specifically at an area like the Gold Coast, which is known to have up to $8 million, $10 million properties, it’s already a difficult climate,” said Shekar Jayaraman, founder of Jayaraman Law, a Chicago-based firm specializing in real estate. “I think it’s going to make it more difficult.”

Griffin’s Park Tower penthouse fetched $11.2 million. Listed as raw space, the 8,000-square-foot unit sold at a loss of $3.8 million last year. In 2022, his five-bedroom condo on the 37th floor of the Waldorf Astoria traded at a loss of $3.1 million. Another property on the 67th floor of Park Tower remains listed.

At No. 9 Walton, he listed one for $14 million and another for $12 million before pulling them off the market. Two others were never put up for sale. A spokesperson for Citadel declined to comment. Griffin’s real estate agent didn’t respond to multiple requests for comment.

The deals were struck before Mayor Brandon Johnson proposed raising the real estate transfer tax. During his 2023 campaign, the progressive Democrat said the tax, which would also apply to commercial real estate, would bring additional revenue of $100 million for the city’s homeless.

Mansion Tax

For properties selling for less than $1 million taxes would be reduced. But properties between $1 million and $1.5 million will incur a duty increase of $10 per every $500, and properties over that will face charges of $15 for every $500. A $5 million home, typical in the Gold Coast, would see its transfer-tax bill quadruple to $150,000

The tax has its supporters as Chicago deals with a surge in people needing shelter. More than 68,000 people were experiencing homelessness in Chicago in 2021. Over the last year and a half, more than 37,000 migrants have come to the city and surrounding suburbs, and last weekend the city started evicting some from shelters.

It’s unclear what impact the tax will have on property prices and whether it will generate the revenue that the mayor’s office expects. Los Angeles passed a similar measure increasing transfer taxes for properties over $5 million in 2022, but the measure only generated $142 million, a tiny fraction of the over $900 million it was expected to bring in.

Johnson’s administration pointed to an economic analysis of the measure by researchers at the University of Chicago. The findings, released in November, say the tax could bring about $160 million a year on average.

Another Challenge

But for those trying to sell properties in Chicago’s wealthier neighborhoods, it’s viewed as yet another challenge.

The Gold Coast currently has 113 homes on the market at $1 million or more, according to Zillow. Only Streeterville, directly south of the Gold Coast and along the famous Michigan Avenue shopping strip, has more.

In the broader area of the Near North Side, which includes the Gold Coast and Streeterville, homes over $1 million have spent an average 123 days on the market, almost double the average in the rest of the city, according to Chicago Association of Realtors data collected from 2021 to 2023.

In Lincoln Park — another wealthy neighborhood which counts billionaire Joe Mansueto, founder of Morningstar Inc. and owner of the Chicago Fire soccer club, as a resident — the average time on the market is 85 days.

Homes in the Gold Coast were already struggling due to the upkeep costs of the older ornate properties, and the growth of other neighborhoods. Jennifer Ames, a real estate agent with Engel & Volkers Chicago who has a listing in the area, said part of the challenge is that while the homes are beautiful, they require buyers to have a “curator mindset.”

“Think about like Downton Abbey, right? It’s super cool, really fun to watch, but nobody lives like that anymore,” she said.

To be sure, there are still major real estate transactions happening in the neighborhood. In January, the co-founder of Chicago Trading, sold his 9,000-square-foot 6-bedroom penthouse at 65 E. Goethe Street for $9.3 million, the priciest residential deal in Chicago this year. The deal was down from Hall’s asking price of $13.9 million.

There are also opportunities, according to Cory Robertson, who leads a development strategies team at Jameson Sotheby’s International Realty. His firm’s project at 1508 N. State Parkway will bring four luxury condos to the Gold Coast in a former single-family mansion. Three of the four units have already sold.

Near the tree-lined Astor Street, where Pritzker lives, a prospective buyer can have their pick of multi-million dollar mansions — all up for sale within blocks of the governor’s home.

But whomever buys those properties won’t be paying anywhere near the $14.5 million price-tag the heir to Hyatt hotel empire afforded.

“Our market isn’t supporting that,” Ames, who has a listing on Astor Street, said of ultra high prices. “I don’t think it will for a while.”

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