All Forum Posts by: Brie Schmidt

I have a friend in a small town south of Des Moines looking to do a $500k project including a basement dig and rear addition.  Anyone have any developer or strong GC referrals?

 This is one of the interesting things about Chicago, each ward has an alderman and they have full zoning and building approval for their ward.  The previous mayor tried to strip them of this power and centralize things as one of their first priorities and it got struck down so fast it was never brought up again.  

So you will see certain parts of the city where they will never upzone a lot no matter what the circumstances.  You go to the one next door and you can get upzoned to the biggest density of you pay to play.  There was a whole case study done on an area called Uptown that had the same alderman for 24 years who was against any development or gentrification and how that neighborhood didn't progress while everything around it did.

So because of something we call aldermanic prerogative something like this can pass in just one ward.  Now this is a polit program with a sunset date of 2029 but at any point any other alderman can make it effective in their ward.  

They originally brought it to city counsel for a vote with less than 48 hours notice and made it effective that day (back in October) but luckily realized you can't implement something like this with oversight from the DOH and legal forms overnight.  

The original version was way worse, as they did not consult a single person with any real estate experience and at least made some modifications after talking to the realtor board. 

 @Russell Brazil ?

2-4 I'm less concerned as long as one unit is vacant before you deliver intent.  5+ though with a 90 day ROFR are screwed unless the offer concessions

Get this... The city will offer grant programs and special financing terms with 100% LTV to tenants who want to buy their building. The trade off is the building must remain affordable housing for 30 years.

I ran some scenarios using past sales assuming 3% increase in expenses and no increase in rents and by year 9 they are negative cash flow.  Year 11 they are losing $1k a month and the property is worth 80% of what they bought it for.  Good luck selling that with 19 more years of the restrictive covenant on it

 Went into effect today!  They actually amended it a few times after everyone flipped out so this version is actually way better than it was.  They obviously got no input from anyone with common business knowledge

@Jay Hinrichs - agree but the problems still exist for us:

We can't do 1031 exchanges anymore because the process will now take 4-6 months

We can't do owner occupied loans because we have to keep tenants for 6 months after the sale even if their lease expires

A distressed seller now needs to pay $60,000 or more if they sell to a developer

The Dept of Housing has to review and approve all the proof of compliance before we can close

Buyers wont spend thousands of dollars on DD till they know the deal is going forward which can be 30-90 days

 Yes, the problem in Chicago is we have so many mom and pop investors and no way to reach all of them except word of mouth.  This was passed in October and I would say at least 50% of investors, and agents, have no idea about it and the other 40% don't fully understand it

 Yes, it was copied off of DC and currently is just a pilot program.  We studied the DC impact and talked to lawyers and property owners and they told us some of the work arounds

Chicago just implemented the largest assault on property owner rights you have ever seen, if it’s not stopped, it could be implemented throughout Cook County and beyond.

The ordinance does two things: creates an opportunity for tenants to purchase their building when it is up for sale (a right of first refusal) in some Northwest side neighborhoods, and increases demolition surcharges by 400%

Here’s how the ordinance creates up to nine (9) months of delay in selling a building. Owners have to give their tenants:

• * Up to 60 days advance notice of their intention to sell;
• * Up to 90 days to decide whether or not they are interested in buying the building;
• * Complete financial information including rent rolls; and
• * Up to 120 additional days to find financing if they want to match the offer.

The ordinance applies to SFH, 2-4 units, mixed use and large apartment buildings—and even rented condos. It will depress sales prices, even if there is a buyer willing to go through the hassle of dealing with this ordinance. Clearly 1031 deals will be impossible. Owner occupied sales will be eliminated since a provision in the ordinance requires you to keep tenants for 6 months even if they are MTM or their lease expires.

Act now. Seriously, ACT NOW.

• * The fines are up to $1,000 a day for non-compliance and proof of compliance will need to be submitted and reviewed by the DOH and a certificate will be issued to the title company.
• * We may see mass evacuations of buildings because this ordinance is too difficult to deal with and it does not apply to vacant properties.
• * No buyer is going to spend thousands of dollars in due diligence on a deal that might not move forward.
• * The tenants have the right to sell the contract to a third party for a profit.

This ordinance will drive out small, local owners, replacing them with cash-rich, out-of-town corporate owners. This is a problem for all of us and we need your help right now. You need to tell your alderman, and the alderman of every building you own, what a terrible idea this is—even outside the ordinance zone.

Get informed! The NBOA has put together a page with more detailed info, updates and additional calls to action at nboachicago Make sure you sign up for their newsletter and stay up to date on how you can get involved.

Brie Schmidt, Designated Managing Broker of Second City Real Estate and Bob Floss, Owner of Floss Law have an extensive video on YouTube/ChicagoBrie. It includes a highlight video and reels you can share on social media.

Spread the word by sharing this on social media, with your friends and colleagues, and anyone you know who could be potentially impacted by this. This ordinance is awful and you need to help make sure it is stopped.

@Tom Shallcross @Mark Ainley @Crystal Smith @Lumi Ispas @Henry Lazerow @Sarita Scherpereel @Bob Floss II @John Warren @Jonathan Klemm

 That is what your agent should be doing for you, it really depends on the area and asset class.  You need to figure in taxes/insurance, vacancy, repair, utilities, and capex.