The planned Trump International Hotel and Tower along the Chicago River faces a complicated set of issues to be sure: a lack of project financing, a weak office market and an ever-widening scandal surrounding the Trump Organization's joint venture partner. All three obstacles have combined to raise questions about the viability of the planned mixed-use development. Yet even as the drama over the hotel and tower grows, the buying frenzy for the upscale condos continues.

The Trump Organization and Hollinger International — owner of the Chicago Sun-Times — are 50-50 partners in a $700 million development that combines 326 luxury condos, 174 hotel rooms and 350,000 sq. ft. of office space on the site of the newspaper's riverfront headquarters at 401 N. Wabash, on the north side of the Chicago River. The project will include a restaurant and retail component, health club and spa, as well as a riverfront park. The development is scheduled for delivery in 2007. The total amount invested in the project so far by both partners is almost $10 million, according to Charles Reiss, senior vice president at the Trump Organization.

But internal shake-ups at Hollinger International have raised red flags. Hollinger CEO Conrad Black and COO F. David Radler resigned amid allegations of financial malfeasance. Hollinger also is exploring a sale of its assets, including the Chicago Sun-Times newspaper.

Though both partners say the joint venture is on, there are lingering doubts, says one Chicago real estate veteran. “If the assets of Hollinger are for sale, it wouldn't surprise me if there was an ‘out clause’ in case the new buyer wasn't intrigued with the deal with Trump,” says John Goodman, executive vice president in the Chicago office of Studley, a national tenant representation firm.

Fueling the uncertainty is the fact that the developers haven't lined up financing for the project, though Reiss is confident that financing will be in place this spring. “Banks are coming to us,” he states boldly. Indeed, such widespread interest in the development could very well give the project an edge, according to at least one seasoned mortgage banker. “If they have legitimate pre-sales in excess of 50%, the project could be financed,” explains Steve Skok of Cohen Financial. “In addition, the sale of the Sun-Times may enhance liquidity, which would give construction lenders additional comfort.”

Still another concern is the weak office market. According to Studley, the fourth-quarter availability rate for Class-A space in the CBD registered 18.3%, including sublease space. Though negotiations with an anchor tenant are under way, no leases have been signed, according to Howard F. Meyer, senior vice president of U.S. Equities, which is handling the commercial leasing. He expects to announce a tenant in the first quarter of 2004. Though Meyer declined further comment, industry insiders predict a large law firm will take the space. The Sun-Times is not expected to be one of the tenants, says an industry source.

Still, the myriad concerns surrounding the project haven't put a damper on condo sales. More than 70% of the 326 luxury residences planned for the 90-story mixed-use tower have sold since September, says Trump's leasing director Tere Proctor. The condos start at roughly $500,000 for a one-bedroom. Four out of five of the penthouses — which cost up to $11 million — have already been snapped up. According to Proctor, who has worked in real estate for 25 years, it would take comparable luxury buildings at least a year to achieve this sales level.

More significant is the market share the proposed Trump tower has achieved. Trump has garnered 20% of the downtown market for new condominium construction in the third quarter of 2003, according to Gail Lissner of the Chicago-based Appraisal Research Counselors, a group that tracks residential real estate sales. “We've seen nothing like this since 1999 and 2000, she says. “It's a buying frenzy.”