We recently sat down with Chi Perrus, the President of Paragon Construction. We discussed how he got into the development business, early challenges he faced and why he works with us at Congressional Capital LLC.
Transcript:
Brian Athey: Good morning everybody I am here with Chi Perrus who is the President of Paragon Construction. Today we’re here to talk about Chi’s background and how he got into doing developments and general contracting projects that he is doing in DC today.
Chi Perrus: My background has been in commercial financing over the past 15 years I financed a ton of construction projects all over DC and the Baltimore area for small to mid sized developers. I decided to transition over to developing after working with great borrowers and developers and making cool projects.
BA: Chi was great at lending and its really awesome to see that you started your own thing and the success you’ve been having.
CP: Thank you. About 3-4 years ago I really got serious about making the transition. But I didn’t have the construction execution component, and that is when my partner Christian came in. We started with a few small flip projects. We eventually purchased a project by getting the money and equity from a lender who trusted us. We developed it and 3 months later we put it on the market and we received a contract within 4 days.
BA: That is one of the most important things, the first project if it is one of your most successful then it jumpstarts your business. I can’t tell you how many times these people come to me and say “I’m going to do this first project, the math is not very good, but I want to get started”. That is the wrong way to do it.
CP: The subsequent 2 projects did not go as well.
BA: What was hard about the next 2 projects, and what has been hard overall?
CP: I needed to surround myself with the right team. We dealt with the wrong architect that slowed the process down. There was another project where our marketing team was not equipped to sell that product which was a very high end project in Georgetown.
BA: Having a great team is really important. Team is everything, and now it sounds like you have the right construction partner.
CP: Another challenging component is the cash flow management. As a small developer, we need the cash to keep the projects going and keep ourself paid. I deal with a few banks for lending, and there has been some cases where it takes 3 weeks to receive money.
BA: What do you think is a fair amount of time for lender to process a draw?
CP: 3-5 business days
BA: We try to do it in 3 days that is always our goal. What have you enjoyed?
CP: I enjoy the entire development process. I enjoy finding the properties, underwriting the properties, working with the broker and lender. I really enjoy the whole process. It is like Christmas when I receive a contract.
BA: It is all about pricing. You have to price it right and you will get low interest rates and high demand like this, but if you over price it you won't. Why have you worked with us at Congressional Capital?
CP: A few reasons. When I thought about moving to the development side, Brian was one of the first people I called because of his experience within the market and understanding of development. Brian is a friend and a mentor of mine on the development side. I have sent you projects that I have been considering and you provide great insight.
BA: It is just as important to keep people away from bad projects as it is to make great projects. I really don’t want to see people I care about losing money on projects. It is better to keep people away from bad projects than to push money into all projects.
CP: Brian is brutally honest. There are a few parts of Brian's financing that is very beneficial. One is the draw process, Brian is very efficient at that process. In addition, structurally, Brian is the decision maker, so he doesn’t need to talk to anyone, he makes a decision there. He is very quick and very responsive.
BA: This isn’t a team of 25-30 sales people. We make quick decisions to try and help our borrowers make great projects.
Chi Perrus: Thank you we really appreciate that. You have been very integral in the success of the company and we look forward to working with you more in the future.