Detroit November 2022 Key Take Aways
PHIL SEAVER – ATA National Title Group – Went over the important difference between the due dates that are prorated and the due dates in arrears. The mortgage policy is written by the same underwriter as the owners’ policy. It is a 25% rate for the mortgage policy. So as a buyer, you want to match up title companies. It’s something to look out for if you’re the buyer, to make sure that the mortgage policy and the order’s policy are written by the same underwriter, so you get the 25% rate on the mortgage policy.
DAVID DISMONDY – District Capital – David is quick to point out that given today’s rates, nobody wants to go and do a 12-month wait now. So, in any deal they’re doing now they all want to know what’s the shortest they can get. With the pricing, there’s a disconnect between a seller and a buyer. He is seeing some smaller auction deals that people are buying that aren’t really sophisticated so they’re getting themselves into a little bit of a pickle where their deposit goes hard day one and then hoping they can kind of get an extension so we can give them a loan to get the deal closed.
MATT FENSTER – Etkin Real Estate Solutions – On the healthcare side, leasing has actually been pretty active, pretty brisk. Some tenants are expanding, which is in stark contrast to what is seen on the office side, which is just a lot of sublease space, not much direct activity.
NICK MALOOF – Associated Environmental Services – Nick reports that they have been seeing a slowdown in the last six weeks with clients putting the brakes on projects or putting them on the back burner. They’re not killing them, but they’re mothballing them due to high construction costs and high-interest rates.
MICHAEL MITRO – Royal Oak Realty Trust – Michael’s company is a private realty with $650 million in assets. They buy mostly industrial and what they are seeing is cap rates moving up, but not at the same kind of degree as the cost of capital we see today.
SCOTT ELLIOTT – Signature Associates – Last Friday we closed on the Ashley News building in Ann Arbor – 117,000 square foot Class A office building right (which was put on the market right when COVID hit). It will be converted to 126 apartments. Right across the street from this landmark, a big student housing developer just opened a 10-story project and They are getting $2400 a month for a studio.
BILLY MORRISON – Steelcase – Office product is slow. They just reduced overhead and eliminated 180 positions across the country. That is 20% of the staff and equates to is $20 million in savings. Dealer network orders are slowing up right now going into 2023. Corporate clients are just kind of pushing back and pushing things off not really wanting to do anything. Steelcase is looking at revitalizing its strategy, going kind of small, quick to market, and acquiring some different brands. The legal industry is going to be a big one for them.
TOM BARRETT – The State Bank – Community banking has been in continued chaos, with talk of another rate increase. Higher interest rates and the smaller underwriting box for most banks has made it tough to get deals one. The economy has clearly slowed down and the banks are at the forefront of that.
DON RICKLER – Gensler – Most of his clients are in the world of commercial rental property or they own their property. There are kind of two sides to the story. If somebody’s leasing space, the owner of the property is doing everything they can to keep them, so we’re seeing an increase in amenities and spending anything that that customer thinks they need to get people back. However, most clients are reducing their footprint by around 50%. We’re starting to see the repositioning of what would have been a Class A or Class B office spaces into innovation space.
ANDREW PETROVICH – Deloitte – Andrew sits within the audit and providing assurance over their public disclosures on ESG or non-financial information. We also support companies to assess climate risks. Whether it’s through decertification, rising sea levels, more extreme and frequent advisory events, as well as the transition risks which come from typical policy changes that can affect tax structures. The big topic they are dealing with is the proposed SEC rulemaking agenda. There have been several proposals put forth for enhanced climate disclosures. We are looking for like a final rule to be announced likely in Q1 of 2023.
ANTHONY RICCIUTI – NORR – What Anthony finds ironic from an economic standpoint is I’ve led the retail group since 2002. I am a registered architect in both Canada and the US, and I found that in 2008, we were able to grow retail substantially because of the type of recession. The Great Recession that occurred at that point in time were capital clients with capital, but we do a lot of work with CVS pharmacy and then companies like Dollar General were the type of client that was being really fed at that point in time.
DAVID HART – Maddin Hauser – We have been litigating over many lakefront properties here because somebody’s got two feet of frontage on your dock. The default activity occurs in the down-cycle stuff, and we’re all bracing for it. And Tom talked a little bit about residential.
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