8/5/21 Chicago Mastermind Group Meeting

Key Take Aways from Chicago’s August 2021 Mastermind Group Meeting!

• Corey Waltz: Walz Capital LLC focuses on medical office real estate investments across the U.S. ($2-$25M in size). They are seeing a lot of action on the medical office side; an interesting time to get capital out of their real estate holdings because some of their clauses are expiring because of the Affordable Care Act. Corey is also doing some domain work with the county (vs. against the county) to get more money for the industry. Bottom line, a lot of opportunity for deal flow in this arena.
• Hart Passman: Elrod Friedman LLP does a lot of zoning and development work. He noted that there is still not a lot of land use and title work going on in the area. His sense is that whether it is Chicago’s recent challenges or the pandemic, there is still hesitation to put money into a deal. As such, there is not a lot going on in the development world. Hart did reference that a new TIF in a suburban area has a developer looking to assemble the land that could be very exciting. The municipality likes the concept, and the developer has already found a way to get contracts for 60-70% of the property.
• AJ Jacobs: WE O’Neil focuses on bigger construction projects as a general contractor. The hot topic for the past several months continues to be escalations. He shared that his Oak Brook Commons deal got a great discount because they priced in January of 2020 and went firm on their numbers in May 2020 so as a result they saved about 15% on their construction costs.
• Jim Dash: Carlson Dash is a general business practice law firm who also have a concentration in construction and design. Along those lines, his firm is seeing a general uptick in claims by condo owner associations and HOAs over construction of buildings (some high rises; some not) that were built pre-pandemic so not affiliated with COVID. However, it was noted that the uptick could certainly be correlated to the recent condominium collapsing in Florida. Regardless, they are being sought out for more consultation and/or potential lawsuits for what are perceived to be defects in the construction or design of the project (and some are high-profile properties too).
• Ryan Morris: Bellwether Enterprise is a national commercial and multifamily banking firm who have 31 offices around the country. Ryan has seen multi-family financing go through three stages already in the first seven months of this year: When the year started, there were a lot of COVID escrows that were a carryover from 2020. In May, they were told to get rid of the COVID escrows and, as a result, reduced spreads. This spring, they have seen a flood of requests, but they need to manage and allocate what they get from the government each year – particularly in the next four to five months. As such, spreads have increased 10-20 basis points over the last two to three weeks. The next 45-60 days will be interesting to watch.
• Ben Skelton: Cyclone Energy Group specializes in high performance (i.e., energy performance) buildings (high-rises, multi-family offices, industrial). Ben noted that the developments going up now are focusing on a WELL Building Certification as it has escalated since COVID hit and many ordinances are making the certification a part of their development policy. Property management, asset management and well-being are taking the offices in the city by storm. Ben concluded stating that in the next 12 months the state will be adopting new energy codes that will be more stringent and change the way some of the economics look when building a new property.
• Anthony Mulé: Valbridge Property Advisors is a commercial real estate and appraisal valuation firm in the city. Due to the pandemic, they have really seen a bifurcation in the valuation side and the fundamentals of how properties are being used. The drive-through model is becoming more popular however, the shopping center vacancies are at 30-40 percent. These shopping center owners need to get their inside space utilized. Fortunately, the number of delinquencies and foreclosures have not hit the big numbers that everyone thought would happen. Since the pandemic impacted everyone (not just one industry like in 2008), the lenders have played nice in the sandbox, and we just have not seen those foreclosures just yet.
• Dave Feinberg: Chicago Community Loan Fund has been around for 30-years and provides loans to small scale developers to support housing, commercial and economic development, social enterprises, and community facilities. Currently, they are working with the Chicago Rebuild Program. They have enrolled about 30 developers in the program; goal is 50 in the next two years. The program’s goal is to invest $6 million to acquire and rehab 50 vacant homes in Garfield Park, Humboldt Park and Englewood through a partnership that will also provide transitional jobs and training opportunities for at-risk youth and ex-offenders. They are also doing a lot of thinking about what helps build capacity for the smaller developers. Much of it these days is technology based. Since many of their developers are small scale, they are trying to identify a way to create that bridge for them to grow and compete.