From Abandoned Factories to Innovation Districts: Gary Pachucki’s $180M Chicago Vision

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Show Summary

In this episode of the Real Estate Pros podcast, host Q Edmonds interviews Gary Pachucki, who shares his journey in real estate, focusing on urban development and supporting younger entrepreneurs. Gary discusses the challenges of raising capital, the importance of relationships in the industry, and the innovative projects he’s working on in Chicago. He emphasizes the need for affordable lab space and housing for scientists, aiming to make a positive impact on underserved communities.

Resources and Links from this show:

• • • Investor Fuel Real Estate Mastermind
    • Investor Machine Real Estate Lead Generation
    • Mike on Facebook
    • Mike on Instagram
    • Mike on LinkedIn
    • Gary Pachucki’s Website
    • Gary Pachucki on Instagram
    • Gary Pachucki on LinkedIn
    • Gary Pachucki’s Email Address: [email protected]
    • Gary Pachucki’s Phone Number: (773) 727-4280

  Listen to the Audio Version of this Episode

  Investor Fuel Show Transcript:

  Gary Pachucki (00:01)
  You know, the big thing is raising capital because most of these projects are expensive. ⁓ The terminal, ⁓ there’s a website, go to the terminalchicago.com. You can see that project. That project had full developments, about 70 million. Our newest project in Pershing terminal, pershingterminal.com. That’s 180 million. So these are large scale projects and they require ⁓ large.

  either private offices, private equity, or institutional partners. And the challenge is kind of what we’re trying to solve. And that is our goal is to provide low cost operating space for these tenants and develop relationships with them as they grow. But the negative about that is we tend, we are doing this in ⁓ underserved, underdeveloped neighborhoods, ⁓ which makes it more difficult.

  because not all investors have vision.

  Quentin (02:34)
  Hello everyone. Welcome to the Real Estate Pros podcast. I am your host, Q Edmonds. And you know what I say, I’m excited to be here. I’m excited about my guests. Always excited when we get to get a fresh perspective. When we get to look at people through their lens of what it is that they do, what is their expertise. And today is no different. Like for me, some of the things that you talked about is so unique to my ears. Maybe you’ve heard.

  but so unique to my ears that I’m not gonna even try to describe what this gentleman do. I’m gonna let him do it himself. But what I do know is that, you know, what he’s doing is really, really helping people. It’s a part of service.

  Quentin (03:19)
  And I’m excited about our viewers getting to learn about what you do. so, Mr. Pachucki I’ll be honest with you, sir. I kind of want you just to take us into your world. Let us know what it is that you’re mainly focused on these days. Maybe if you want to give us an origin story of how you got into what you’re doing.

  But I really want you to break down to us what it is that you do so the viewers can have an understanding of what it is that you’re building.

  Gary Pachucki (03:45)
  Okay. Well, I can give you a little background how we got here. So as I mentioned, IBT has been in business for 25 years and for the first 15 of those years, we were conventional power center, institutional quality shopping centers between 150 and 500,000 square feet, mainly in the Midwest. And early in 2010, probably we got involved in an urban project

  which was much more complicated. And I really liked that. And we did ⁓ two more conventional strips that took us to 2017. But in those years, we started working on a large urban ⁓ mixed use project in what’s called the Fulton Market area. Most people in real estate know that in Chicago. And from that, we discovered that there was a number of ⁓

  you know, early stage entrepreneurs that ⁓ weren’t getting any love in those projects because they were smaller tenants, they had lower credit. And the other thing that they had is they had cost concerns and they also wanted to have a sense of social responsibility to the rent dollars they paid. So in 2017, we started looking for a project that could solve that problem, which we ultimately did.

  ⁓ in Humboldt Park, which is on the west side of Chicago. And we have a seven acre site ⁓ that was originally the home to a company called Pile National, who developed the steam powered headlight for rail cars in the late 1800s. And they operated here through ⁓ the late 90s. ⁓ So we found that site in 2018, took a year to put under contract. ⁓

  Quentin (05:21)
  Okay.

  Gary Pachucki (05:43)
  That took another year to start to capitalize it. Then of course, the pandemic came, shut everything down. But by the end of 2020, we were able to resurrect the project,

  we’re focusing on younger entrepreneurial companies, primarily tech companies. ⁓ And so A, we’re always looking for relationships with ⁓ universities, economic development associations and municipality. ⁓ So as we find these tests, because when people have these ideas and they want to stay

  in a location, in this case, ⁓ Chicago, that’s typically where they go to go through the economic development organizations, both the ones that are public as well as the ones that are private. ⁓ And then, you know, we find out sometimes directly from universities when these people are ready to move from what’s called, you know, bench space in a university lab. that’s how we, and then of course, just working with the brokerage community at large, which is key.

  So there’s a variety of things that we’re always trying to do. And the other point is doing this is hopefully to get that message out so people know that we’re out there doing this because we’re providing a different product type than most of the other conventional lab developers are.

  Quentin (07:51)
  Absolutely, absolutely. I appreciate that, understand that. Now, of course, you know, there’s times when things get real, times when you have to pivot fast. So what’s some of the adversities that you feel like you’ve been brushing up against that’s been kind of causing you maybe to have to ⁓ pause a little bit or even slowing you down a little bit?

  Gary Pachucki (08:13)
  You know, the big thing is raising capital because most of these projects are expensive. ⁓ The terminal, ⁓ there’s a website, go to the terminalchicago.com. You can see that project. That project had full developments, about 70 million. Our newest project in Pershing terminal, pershingterminal.com. That’s 180 million. So these are large scale projects and they require ⁓ large.

  either private offices, private equity, or institutional partners. And the challenge is kind of what we’re trying to solve. And that is our goal is to provide low cost operating space for these tenants and develop relationships with them as they grow. But the negative about that is we tend, we are doing this in ⁓ underserved, underdeveloped neighborhoods, ⁓ which makes it more difficult.

  because not all investors have vision.

  They usually like to invest in a project where there’s three other projects right across the street. And so we’re trying to solve for the entrepreneurs to provide them ⁓ attractive, cost-effective space. Plus we have a social component which says is we’re trying to impact neighborhoods so that we’re taking, know, in this case, a building that was underutilized, had a high crime component.

  And we’ve turned it to, you know, know, white lab coat space, you know, wet labs, dry labs, um, and you know, everything else. And so we’re trying to do good with these things socially as well as financially. And the economics for our projects are very, very strong. You know, our newest project has an IRR of 34 return on capital of about three. So they’re very attractive financially.

  that project we have some city support to help write down some of the cost. ⁓ But that is probably the biggest headway.

  Quentin (10:50)
  Absolutely. So, you’re looking for, ⁓ of course, like, you know, investors, talked about, you know, building relationships with the city. So I want to talk about relationships, like how important are relationships to what you’re doing? Like what has been the key to like growing your network and building relationships with, the industry and what you’re doing.

  Gary Pachucki (11:11)
  Yeah, relationships are really, really key. In real estate, real estate is one of the, probably the last businesses where it’s impossible to eliminate the human component because that’s how deals are made. That’s how you find opportunities. That’s how you capitalize them. That’s how you find tenants. ⁓ You know, and those relationships really need to be personal relationships.

  Years ago, I used to do industrial product and through a fluke circumstances, I reached out and I had contacted a broker that I hadn’t talked to in about 20 years. And although he’s really in a different sort of segment of industry, it turns out he comes in contact with a lot of the types of tenants that we want that he can’t serve. so, you know, that relationship and that

  possible avenue only comes from having a relationship with somebody from many many years ago and he has confidence in us and what we can do for his tenants and I have confidence in him for you know what he can do and what he’s going to bring us. So relationships are very very key in this business. Probably not likely to be reduced by AI anytime soon.

  Quentin (12:25)
  Absolutely,

  no. Yeah, absolutely correct. Listen, like while we have you here, if there any messaging that you want to get out to our listeners or our viewers of maybe how we can help or, you know, how can we can push maybe, you know, your initiative forward? Is there any messaging that you feel like you want to give out to the viewers where they can be of help to what it is that you’re doing?

  Gary Pachucki (12:47)
  Yeah,

  you know, we’re doing right now we’re focusing really on Chicago. We have two projects in Chicago, which will give us about a half a million square feet of, you know, lab advanced manufacturing. And then one of the other things we’re solving with the second problem is, as we’ve learned is that scientists are not typically highly paid. so housing is really key for them. And that’s ⁓ so we’re adding a housing component part of that. But

  We’d like to be able to find more opportunities like this because we think that we understand the process. We understand the tenants. So we love, you know, relationships with universities, know, ⁓ college towns, college cities. Chicago is work swap because it has the largest concentration of big 10 universities, ⁓ really in the nation and about a half a day’s drive. So you have that and in other communities where you have a strong university base that, you know, thinks that there could be something there, we’d love to be involved with them as well and see if we can help them solve some of that problem and keep some of those scientists in our community.

  Quentin (13:51)
  before we wrap, if someone wanted to reach out to you, connect with you, learn more about what you’re doing, what’s the best way that they can reach out to you,

  Gary Pachucki (13:59)
  They can email me at ⁓ [email protected]. They can call me directly, 773-727-428-0. Those are the best two ways. Or they can message me at that same address, the cell number, so they can message me or call me.

  Quentin (14:15)
  Missed me.

  Absolutely. So, Mr. Pachucki, I thank you, sir. I thank you for your time, your story. I thank you for your patience. I apologize we had so many technical difficulties, but I do know this is still going to be a very, very valuable episode. The information that you gave, I’m sure our viewers are really, really going to like to get involved and learn more about what you’re doing. And so I appreciate you so much for being here today,

  Gary Pachucki (14:27)
  Don’t worry.

  Yep, no worries.

  Quentin (14:43)
  All right, well, listen, you have a great one. Listen, y’all got the value. Y’all heard Mr. Gary Pachucki. He’s giving you his information. Please get in contact. And listen, go ahead and subscribe because we want to make sure that you continue to get these valuable content and get connected to the people that you can make a difference in your life and you can help make a difference in theirs. And so thank you again, Mr. Pachucki and to everyone else. We will see you in the next time.