May 19, 2016
Soledad Hernandez, a managing broker at Del Sol Realty, has recently lost two of her potential housing sales due to new real estate investors’ involvement in Pilsen. Hernandez claims that large investment firms are trying to buy available lands, only to develop and sell them at higher prices.
“We were hijacked by new investors that are not even here,” Hernandez said. “They will solicit and harass real estate firms in the neighborhood.”
Baum Development released its plan to transform a vacant five-story building into an apartment with 111 rental units and 70 parking spaces, and New York-based Property Markets Group announced plans to construct a 500-unit apartment on a vacant lot in 2015. Crain’s Chicago Business predicts the firms will successfully attract new residents into their properties with better housing qualities.
But operating a couple of properties may not satisfy new investors’ interests. In fact, the firms even attempted to purchase properties of original real estate brokers, luring them with unprecedentedly lucrative offers for average-quality housings.
“They keep sending emails and letters asking to sell our properties,” Hernandez said. “They have made offers with ridiculously high prices over and over. I guess they want to reduce competition and saturate the market with their goods.”
Hernandez said properties have always been sellable and sales have been more than enough to maintain her business, but pressures from new investors have been posing her a potential threat.
Rick Garza, owner of International Real Estate in Pilsen, faces similar pressure under the same phenomenon. Having jumped into the real estate business in 1983, Garza has worked his way up from a novice agent to a successful real estate broker with a $500,000 office, six housing properties and two staff members. Despite his continued success, Garza is uncertain of his business’ future.
“[Pilsen] used to be my country in enemy territory,” Garza said. “[Investors] mail me asking if I’m ready to sell every week. They want this land.”
Garza points out that gentrification is the primary cause of increase in new investors trying to purchase Pilsen properties. Byron Sigcho, Executive Director of the Pilsen Alliance, defines gentrification as a catastrophe that forces “residents who created the neighborhood to struggle staying in the neighborhood.” Then comes the question: How did gentrification start?
It all began with The Pilsen Tax Increment Financing Redevelopment Project and Plan, which the former Chicago mayor Richard M. Daley introduced in 1998 to enhance business environment for private investors and business owners. The plan sought to create “an environment which will preserve or enhance the value of properties within and adjacent to [Pilsen].”
28 years have passed since the plan was introduced, and statistics show huge success based on its objective. Median monthly rent more than doubled, and asking price of homes for sale skyrocketed despite 2008 national housing crisis. The traditional low-income neighborhood has shown potential to become one of the wealthier sides of Chicago. East of Pilsen, where gentrification started to spread, reported $63,015 in 2013 for median household income, which is far above the city’s median. Numbers tell that Pilsen’s real estate market never looked better.
However, Jim Halusck, a former real estate broker and a 70-year-resident of Pilsen, says that the plan was never made for “founding real estate brokers [of Pilsen].”
“I have seen many real estate offices and properties being handed over to big investment firms,” Halusck said. “They were definitely not of their ages to retire. I’d only assume they were tricked into selling what can cost more in the future.”
Between 2000 and 2010, Pilsen saw 9.6 percent decrease in total housing units, according to Census Tract. A few housing units were demolished, and at the same time, new investors were constructing condominiums and gigantic housing units. New investors jumped into the market with enough resources to renovate houses and put them on sale, while original Mexican-American brokers never had a chance to prepare, Halusck said.
There has been a long history of huge companies driving out small brokers in the real estate business, and Pilsen’s original real estate brokers may be the next target to be harassed. In light of gentrification, big real estate agencies are planting their roots into the neighborhood for unstoppable financial absorption.
“Some brokers may know what is going to happen and what to prepare for,” Halusck said. “[In the future], remaining small brokers will soon be left with two options: bleed out to survive or leave.”