About the Borrower
Private Money Immediately was approached in early 2016 asking for financing to help with the acquisition and redevelopment of two large (33 and 30 units), vacant multifamily buildings in South Chicago, which were being purchased directly from the city. We know from experience that if the redeveloper executes well, these projects can create massive amounts of equity with capitalization rates well above market levels. However, we also know that these projects come with risks.
RJB Development & Construction specializes in buying, redeveloping and managing multifamily buildings as part of its growing real estate portfolio. What makes RJB unique is the types of multifamily projects it buys, and the scope of redevelopment the company performs. RJB has completed projects in all types of Chicago neighborhoods, from upscale to basic. Some of its projects are acquired as abandoned buildings, often boarded up and in need of major repairs.
Risks including cost overruns, project management risk and building operation risk. These are the primary reasons why most bank lenders and private rental-financing companies choose not to lend on these types of projects until the properties are fully stabilized with seasoned rents. After a preliminary analysis, the Private Money Immediately team flew to Chicago to evaluate these projects and meet with the principals and project managers. RJB seemed to have all the right stuff: their team is well connected with the city, which can go a long way in Chicago; they have a proprietary system of analyzing and acquiring the right properties at the right prices; they are experienced redevelopers with a crew of experienced tradesmen; and they have experience managing the unique risks associated with redeveloping multifamily buildings in gentrifying areas.
“The biggest problem we ran into so far with these projects was the unexpected cost to replace both roofs and the underground sewer laterals for both buildings. During our initial inspection, we believed that these items could be repaired, but the city was adamant that the roof and underground sewer laterals had to be replaced. This added an additional $200,000 to our construction costs that was not included in our original loan with Private Money Immediately. We discussed the situation with Private Money Immediately, and their team was able to quickly cross collateralize three of our other properties and advance us the additional funds needed to finish the projects.”
“When we informed Private Money Immediately that our construction budget was not going to be enough to finish the project, their team worked quickly to evaluate our options and found a reasonable solution. We are back on track and expect to be finished on-time.”
President, RJB Development & Construction, Inc.
The projects are still in process, but we are now past the most difficult part. Our construction crews are starting the finish work, which has fewer surprises.
- Helping to redevelop a blighted neighborhood in south Chicago.
- One time upfront fee for due diligence and qualification.
- Private Money Immediately was able to quickly evaluate and solve $200,000 cost overrun.
- Currently estimate over $500,000 of equity being created through redevelopment.