Key Take Aways from Chicago’s March 2023 Mastermind Group Meeting!
-
• Dan Brennan, Laurie & Brennan, LLP: The transactional side of their practice has been consistently busy. Does a lot with affordable housing developers (started about 3-years ago) so that market has been steady and some of the work they do with contractors remains busy (despite recent headlines). However, all that said, industry challenges still exist e.g., material availability, volatile prices, etc.
• Rhea Stephen, CoStar Group: The “Missing Middle Market” (a presentation Rhea is giving at the University of Chicago) addresses the affordable housing market – which is an interesting area because that market is so unique in its pricing and investment opportunities.
• Corey Walz, Walz Capital, LLC: Seeing an artificial slowdown in products hitting the market. Motivated sellers are ready to go to market, but brokers are pausing to see where things will go with other products they have in the market. After being in this arena for over ten years, they have never seen a broker not actively taking something into the market because they are worried about their other products diluting in value.
• Alissa Adler, Colliers International: Hasn’t been this busy in a long time. As a broker, they are giving advice to people that this is not the right time to sell. Seeing a lot of buyers whereby their loans are coming due and are asking Alissa if they sell it before they have to give the “keys back.” In most cases, they can probably get the lender out of the deal, but the seller may not see any equity and most sellers are okay with that plan to get the property off their books. Calling this period in the market as the “GBR” (Great Basis Reset).
• Hart Passman, Elrod Friedman: Hart shared two notable news items. The Chicago election: Mayor Lightfoot backed the Southwest Initiative and with her now exiting as Mayor, not sure if the two potential candidates will be as enthusiastic about this program and will be worth watching. The other notable news is the legislation proposed for the Chicago Bears plan in Arlington Heights. The new bill essentially eliminates TIFs as we know them. TIFs can last as long as 23 years with extensions of up to 12 years. The new bill would cap TIFs at two years and no more extensions. Friday, March 10, is the deadline for all bills to get out of committee so, again, worth watching.
• Lauren Zangl, ECS Midwest, LLC: They are doing more lunch and learns locally about due diligence, remediation, air quality, etc. Because everything is slowing down, their numbers in the Midwest have leveled out so catching up with a disaster that was from two years ago.
• Matt Berry, The John Buck Company: There are some signs of daylight! They have stabilized assets in Chicago; even with all the challenges (e.g., outside factors that put them in a position to sell under value or bring money to the table to refinance a loan). There is a strong renewed interest by capital sources for these assets (even compared to June/July/August of last year) so they can run a more competitive process and see things improve (even as debt has become slightly more expensive). Having cash buyers come into the market helps significantly too. Lenders do not hold the cards right now; and cash flow is everything. Lastly, trade outs still remain very strong even with increases in prices.
• Manny Regalado, KW Commercial: COVID impacted all markets including his area (multi-family space) but they are seeing both landlords and purchasers becoming more comfortable not in the fact that interest rates are where they wish to be, but that they understand where they need to be and be realistic with their numbers and stabilizing spreadsheets. Getting a lot of multi-family investors who wish to look at industrial properties.
• Jeannie Burke, First American Exchange: Seeing some leveling off, but not a ton. Have seen a lot of nontraditional replacement property transactions. Also seeing more deconversion deals but that area is starting to slow down. The biggest challenge for their clients now is with reverse and/or improvement exchanges. They are both special types of exchanges. With a reverse exchange, you buy before you sell. With an improvement exchange, you use your exchange funds to buy the replacement property. In either situation, there are very unique challenges that are addressed on a case-by-case basis with their clients.
• Joe Stein, McCaffrey Interests: Doing most of their work outside of Chicago (for obvious reasons). Joe spends a lot of time analyzing the market trends and they are finally seeing things returning to normal in areas like supply chain and the trade labor markets. The huge spikes over the last few years are starting to flatten out. Thought is by Q3 of this year, things should be very stabilized.
• Jared Placek, Manhard Consulting: Most developers he is talking to are looking at 2024 for construction of larger pieces that take time to package and are not in any hurry. TIFs are really the only thing that attract big development projects so if TIF goes away, the bigger projects could very well go away too. Leasing out “big box” spaces remains a challenge (especially with less players in this arena), but he has seen developers in the medical office markets scooping up these larger spaces.
• Jane Shifrin, American Community Bank & Trust: There is a lot of debt out there for what they do. Heard from three major banks in the Chicago area that said they do not need to lend any more money this year, but their bank is ready and willing. The challenge is valuations and how the appraisals affect them. The whole topic of interest rates is also interesting. There is a core group of smaller lenders who provide a fixed rate balance sheet loan but there is a lot of pressure because of the interest rate challenges and competition from other banks.
Recent Comments