Operating Strategy

Prelude Development intends to achieve its financial targets by broadening its existing operating strategy.  The company plans to continue its focus on mixed-use properties and increase sales by building more projects with a greater number of units.  Projects will also include retail and office space, which will provide increased cash flow through lease payments.

Market Development

Prelude Development targets its property acquisition in premier neighborhoods on the North side of Chicago and affluent Chicago suburbs.

The company has completed several successful developments in the Lakeview neighborhood.  Prelude Development also focuses on Lincoln Park, Lincoln Square, Wicker Park, Bucktown, and select suburbs.  Prelude Development plans to expand the target area to include the Loop and West Loop areas.  Those are all rapidly appreciating neighborhoods that have led a trend back to city living in Chicago.  Prelude Development expects property values and real estate sales to continue their increase as city living exerts a pull.  Families, singles, and senior couples are increasingly attracted to Chicago neighborhoods.  Preliminary U.S. Census 2000 data shows that the city of Chicago has reversed a long population decline.  Even though the state of Illinois lost population, the population of Chicago itself has increased over the last 10 years.

Risk Management

Prelude Development’s mixed-use strategy works to limit risk in two ways.  First, the company targets retail tenants for its projects up front.  Second, Prelude Development can rely on revenue from apartment rentals should condo sales fall short of expectations. 

When a project is in the planning stages, Prelude Development begins seeking retail tenants, with the goal of having all retail space leased upon project completion.  For properties in Chicago’s Lakeview neighborhood, for instance, Prelude Development secured a long-term lease from Blockbuster to occupy the property’s entire five thousand square foot retail space.  In a recession, that strategy ensures an income flow, as Prelude Development sets up retail leases so that it can lose half of a building’s retail tenants in a downturn and still have enough revenue to pay costs. 

Rental of condo units that Prelude Development either retains or cannot sell forms the other half of the company’s risk management strategy.  Chicago has a strong rental apartment market, and units in luxury condo buildings provide attractive rentals.  As with retail space, rental apartments provide consistent cash flow, even in a down market.