Multifamily developers with sizable proposed projects outside of downtown Chicago are likely to have a increasingly difficult time obtaining construction financing.
Take Chicago-based JCF Real Estate for example. The developer recently hired CBRE to sell a 3.5-acre development site near O’Hare International Airport, which has been approved for a 394-unit development since mid-2012, according to Crain’s Chicago Business.
The primary reasons cited for the project being delayed: an inability to secure roughly $35 million in construction financing and difficulty cementing a joint venture agreement with another developer.
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During a time of possible multifamily overbuilding within a specific submarket, financiers and joint venture-focused developers typically prefer to lend/team with a local real estate firm that possesses experience and local knowledge, which would seem to describe JCF.
The fact that the project was unable to obtain financing or a joint venture development partner should be a warning to other developers with similar proposed projects.
The move to sell the site also comes after JCF filed for Chapter 11 bankruptcy protection earlier this month. According to Chicago Business, the firm expects to generate enough cash from the sale of this site to pay off roughly $15 million in overdue debt.
Insurer Athene Annuity & Life filed a $14.9 million foreclosure suit against the property in November. By filing for bankruptcy protection, JCF blocks the foreclosure suit and buys itself more time to sell the site.
The 394-unit projects calls for the demolition of 12 single-story office buildings, that are part of the JCF-owned InterPark Corporate Center, prior to construction of the approved multifamily property. Six additional office buildings will remain untouched and managed by JCF moving forward.
Lenders choice: downtown Chicago
When it comes to financing multifamily construction in the Chicago metro, developers with downtown high-rise projects are having the easiest time.
According to CoStar, four Chicago neighborhoods have multiple proposed projects, mainly multifamily, lined up for this year. These neighborhoods include South Loop, The Loop, River North and Fulton Market.
Based on the city’s pipeline, an estimated 6,700 rental units will come online this year, with another 4,500 apartments slated to be delivered in downtown alone during 2017.
Of note, CBRE’s Chicago office is also listing a 4.9-acre development site adjacent to McCormick Place. The full block site is approved for a mid- or high-rise project that encompasses up to 1.1 million square feet.
