well let me go back

a little bit into

the genesis and why section 15

became such a hot commodity

in the chicago and outlying suburban

real estate market so first of all

pre-pandemic

in order to get a site entitled meaning

to obtain all the municipal approvals

approvals from the department of

planning and development in the city of

chicago

all the pursuit costs and so on and so

forth the developer could be looking at

anywhere from 12 to 36 months

and significant expenditures in order to

just get a a given site approved if

you’re dealing with new construction

and

developers quickly figured out in the

market that it was cheaper

to buy an existing building

than it was to go and entitle

new land

and then put up a new building because

with the cost of construction

the burn the pursuit costs

buying an existing building costs less

money than putting up a new one

and so you have this situation where you

have all these condominium buildings

and the units in these buildings are

worth substantially more than most of

the unit owners have paid

and to a developer that’s looking to get

into the rental market and not the for

sale market

a section 15 deconversion was a

cost-effective way to get into the

market

at well below replacement costs so in

other words the cost to construct and do

everything else so

typically markets are

not stupid and they figure out

where

the cracks and the flaws and the

efficiencies are and that happened

pretty quickly

with section 15 in the state of illinois

so

it even pre-pandemic

this was going on there were a lot of

institutional real estate buyers that

wanted to aggregate

residential rental properties in this

market and they figured out that this

was the least expensive way to do it

now fast forward

into the pandemic and post

with all of the supply chain issues with

raw materials the cost of

concrete the cost of steel

the supply chain issues in getting all

of the fixtures necessary to even get

involved in new construction

it’s just become a hotter topic because

it’s extremely difficult

in today’s market for any real estate or

new construction

developer

to price out a given job

and none of the big construction

companies or general contractors that do

this work

will give guaranteed

price contracts or lump sum contracts

because of all the supply chain issues

and the unknowns

with respect to the cost of the raw

materials and and fixtures needed to go

into a new project and so

it’s extremely challenging to get a new

construction project

funded through a lender

and even

to put together a proforma with a

prospective budget

and so this all feeds into why

the deconversion of an existing building

makes sense