Key Take Aways from Chicago’s October 2023 Mastermind Group Meeting!
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Hart Passman, Elrod Freidman: Observation: today’s discussion created an interesting dynamic where finance reps are not as positive about the current landscape, but developers in the room are doing business. Tip: Loan-to-value needs are changing, and one source of money often overlooked is incentives from local governments. The opportunity still exists, although municipalities are not as “hungry” as they were 2-3 years ago.
Mike Spirovski, Northpoint Capital: Interest rates impact current and future applications. The refinance side is busier than acquisitions. If things remain the same, CRE will be in a tough spot in 2024. If rates rise, delinquencies will continue to rise, leading to a correction in the market. There is money to be invested, but it’s very selective.
Alissa Adler, Colliers: Starting to see deals transact. The unifying feature of deals is motivated buyers – willing to make the deal work.
Hunter Cannon, Colliers: Retail is a strong asset class; it is adaptable and continues to do well everywhere except downtown Chicago’s central business district. Encouraged by Google’s enthusiasm. There are fewer business failures in retail. The trend in large box retail is to have warehouse space on-site to fulfill online orders. Target is building larger buildings with dedicated space for warehouse fulfillment.
Jerry Brown, Siegel & Callahan, P.C.: City of Chicago is projecting a 538M budget shortfall. How will this translate to increased tax liability? 200M due to the ongoing migrant crisis. Mayor Johnson repealed legislation put in place by the previous administration that is contributing to the shortfall. Patrick Murphy was named Acting Planning and Development Commissioner. It is unclear why “acting” or if another person will be appointed. Expect an announcement about considerable changes to the Invest SW plan. Obama Center is expected to be completed in 2025, being managed by the Lakeside Alliance.
Lee Utke, Madison Marquette: Name change occurring soon! Biggest clients are Starbucks, Chipotle, Chick-fil-A, and medical office, to name a few. The market is still strong for repurposing. The challenge is acquiring properties. Higher interest rates and construction costs have impacted the final cost/rental rates. Can occupants perform at the higher rental rates, or will they exit early? Still seeing demand for smaller owner-occupiers.
Rhea Stephen, CoStar Group: Taking a dive into the data on deals this year, very slow. Longest drought of sales since the financial crisis. Approaching 15 months without a 1M+ deal. Single-tenant traditional office occupancy is not driving the market. More attention is being paid to lease exit clauses and longer-term leases.
Brenton Norman, Wintrust: There is deal flow on the finance side, although it requires more due diligence. Wintrust is happy other banks and investors are staying on the sidelines. Seeing activity in multi-family and some industrial – depending on guarantee.
Chris Metcalf, Wintrust: Wintrust is selectively active – looking for holistic relationships vs. transactional. Weighted average cost to equity is rising. Many borrowers are sitting on the sidelines because it doesn’t make sense to build right now. Many may qualify but aren’t willing or able to put forth the necessary equity.
Kathleen Brill, Cullinan Properties: Based in Peoria with a Burr Ridge office. Additional offices across the country. Growing in single-tenant healthcare, specifically government health. Focus on believing in the concept and longevity. It is expensive for healthcare to move, resulting in more certainty. They have a local large project at I55 & I80 – Rock Run. A new interchange access road is under construction. Hollywood Casino relocating to space. There is a desire for retail to be tied to multi-family.
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