6/8/21 – Detroit Mastermind Group

Detroit June 2021- Key Takeaways

• Steve Sallen of Maddin Hauser asked Martin Lavelle of the Federal Reserve if he had a prediction on the inflation. Martin indicated that a new round of projections will be published next week on the new forecasts.
• David Dismondy of District Capital asked Martin if he could distinguish between a “real” inflation and a “temporary” inflation.
• Martin Lavelle said that he couldn’t, but that if we begin expecting 3 to 4% increase in inflation, that feeds into the reality of it. He is not sure of the end result of the inflation for the country. He did mention a Troy Regional Chamber survey that asked individuals what is their biggest barrier to returning to work. They listed health, child care, low pay, and none.
• Steve Sallen of Maddin Hauser checked in and reported that he is very, very busy mostly with acquisitions because of the low interest rates. Looking at his calendar, Steve said that the “drinking from the firehose” pace will probably continue through the entire summer.
• John Godwin of Marcus & Millichap said that the market is very strong. He wishes he had more industrial inventory, and that single tenants are his strongest player right now. He reports that the markets are frothy and wondered what is going to happen with all the malls.
• David Dismondy of District Capital is very busy with transactions, mostly from out-of-town investors. He reports that out-of-state guys want deals here in Michigan/Detroit and that full term interest only deals are popular now. He notices a focus on smaller strip centers.
• Matt Fenster of Etkin Real Estate Solutions reports that deals for leasing seems to be coming back. He believes that the majority of companies will repopulate offices. Office market has been soft, but medical offices are brisk. Health systems are active.
• Tom Barrett of State Bank reports that banks will be looking closely at the delinquent mortgages and lease payments by the end of the year. Bank leniency will begin to evaporate by then for all the offices and businesses that owe money. Banks are hopeful that by January of 2022, businesses will rectify their circumstances.
• Most borrowers will be given lots of opportunities to get back on track. Banks do not want to foreclose on properties.
• Phil Seaver of ATA National Title Group indicated that Traverse City has a huge number of new home owners from New York, Chicago and Pittsburgh who are parked in northern Michigan and working remotely. Phil has been very busy with work and says he has been having trouble getting documentation that he needs to finish deals. He has been having trouble getting judgments because of remote working conditions.
• Mike Sabrosky of Oliver/Hatcher Construction indicates that new deals are smaller, only 10,000 to 15,000 square feet. Industrial has been very active, but with the severe increase in the price of steel, many of his deals have been moth-balled. While labor has not been a problem for his company, the peaks and valleys of the projects with the starting and stopping has been rough. Steel is so pricey that Amazon has been going directly to the steel producers and directly buying everything they need for the next 18 months. Mike also indicated that there is a big wave of speculative investors.
• Nick Maloof of Associated Environmental Services is working on a lot of the same projects as the last meeting and indicates that everything is dragging out. Several of his clients received grants for job development, and can’t get people to work. If they can’t entice workers back into the workforce, they will lose the grant money.
• Todd Shelley of Professional Engineering Associates said that they have had some very strong work going on. He hasn’t had a break for 6 months and they have had mandatory Saturday work for the past 3 months. Steel is not the only material that is pricey. Other tools and materials are also very pricey.