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Ensuring A Smooth CAM Reconciliation Process

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At Caton Property Management, we understand the importance of attention to detail when it comes to managing commercial properties. As we wrap up the year-end financial reports and send them off to property owners, our focus shifts to another crucial aspect of property management: CAM reconciliation reports for tenants.

CAM (Common Area Maintenance) reconciliation is a vital process that ensures fairness and transparency in passing on operating expenses to tenants. It involves identifying qualifying expenses from the previous year and comparing them with what tenants have paid. Here’s how we ensure a smooth CAM reconciliation process:

1. Organization is Key: Before diving into CAM reconciliation, it’s essential to organize all relevant documents and data. This includes financial records, lease agreements, copies of invoices, and any other pertinent information.

2. Identify Qualifying Expenses: Operating expenses eligible for pass-through to tenants typically include common area maintenance, property insurance, and real estate taxes. However, it’s crucial to review lease agreements and lease abstracts to determine any exclusions or limitations on expenses tenants are responsible for.

3. Consult Experts if Needed: Sometimes, determining qualifying expenses can be challenging, especially if they’re not explicitly outlined in lease agreements. In such cases, consulting with accountants, referring to industry standards like BOMA (Building Owners and Managers Association) guidelines, or reaching out to local IREM (Institute of Real Estate Management) chapters for guidance can be helpful.

4. Calculate Tenant Proportionate Share: Once qualifying expenses are identified, calculate each tenant’s proportionate share based on their square footage and lease agreement. This involves comparing what tenants have paid throughout the prior year against what their proportionate share should have been according to what the actual expenses were. If the discrepancy is significant, the CAM charges to the tenants should be adjusted accordingly for the current year.

5. Communicate Results Clearly: Whether tenants owe additional payments or are due credits for overpayment, it’s crucial to communicate the results of CAM reconciliation clearly and promptly. Providing written communication ensures transparency and minimizes misunderstandings.

6. Maintain Documentation: Keep copies of all invoices and calculations related to CAM reconciliation readily available. This documentation serves as evidence in case tenants have questions or challenge the results.

real estate investing 101At Caton Property Management, we prioritize transparency and efficiency in every aspect of property management, including CAM reconciliation. By following these steps and maintaining open communication with owners and tenants, we ensure a fair and smooth process for all parties involved.

If you have any questions or need assistance with CAM reconciliation for your property, feel free to contact us. We’re here to help streamline the process and maximize the value of your investment property.

Property Management: Finalizing Year-End Reports

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As property managers, our responsibilities extend beyond overseeing day-to-day operations of our managed properties – we are entrusted with the crucial task of managing property finances effectively. Paramount in this regard is finalizing the prior year’s financial reports, which is critical for many reasons.

1. Accuracy and Completeness
Completing financial reports promptly allows for accurate reflection of the prior year’s property expenses. Property managers can then ensure that all expenses are accounted for, providing clients with a comprehensive overview of the financial performance of the asset.

2. Facilitating Tax Preparation
Timely financial reporting isn’t just about meeting internal deadlines; it’s also about assisting clients in fulfilling their tax obligations. Providing clients with accurate and detailed financial reports well in advance gives them the necessary time to collaborate with their tax accountants for timely filing.

3. Vendor Communication and Invoice Processing
Properly accounting for vendor invoices requires proactive communication with vendors to request any outstanding year-end invoices promptly. Additionally, property managers must process all invoices efficiently to include them in the year-end report.

4. Verification of Payments
For vendors who do not accept electronic payments, clearing outstanding payments ensures that financial reports accurately reflect the actual expenditure, avoiding discrepancies or misrepresentations.

Partner with Caton Property Management for Seamless Financial Oversight
real estate investing 101At Caton Property Management, we understand the significance of timely and accurate financial management for property owners and investors. Our team is committed to ensuring that your financial reports are finalized promptly, giving you the clarity and confidence you need to make informed decisions.

By partnering with Caton Property Management, you gain access to our expertise in vendor communication, invoice processing, and payment verification. We ensure that all aspects of financial oversight are handled with precision, allowing you to focus on what matters most – growing your investment portfolio and maximizing returns. Contact us today to learn more about how we can elevate your property management experience.

Beyond Mortgages: The Multifaceted Role of Appraisals

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When most people hear the word “appraisal,” their minds often jump to real estate transactions. While it’s true that property appraisals play a crucial role in mortgage lending, their significance extends far beyond that. Here are three lesser known but equally important areas where appraisals play a pivotal role: Estate Planning, Tax Appeal, and Divorce Proceedings.

Appraisals for Estate Planning

Estate planning involves making decisions about how one’s assets will be distributed after their passing. Appraisals become instrumental in this process, providing an accurate valuation of various assets including real estate. An accurate appraisal of a family home or commercial property can help determine its market value, facilitating fair distribution among beneficiaries and minimizing the risk of disputes.

Appraisals for Tax Appeal

Property owners often find themselves in situations where they believe their property has been overvalued for tax purposes. In such cases, property owners can appeal their tax assessments, and a professionally conducted appraisal becomes a powerful tool in presenting a compelling case. By providing evidence of the property’s current market value, owners may be successful in reducing their tax burden.

Appraisals for Divorce and Expert Testimony

Divorce proceedings often involve the equitable distribution of assets, a task that demands accurate valuation. These appraisals help ensure that both parties receive a fair share of the marital estate.

Moreover, appraisers can play a crucial role as expert witnesses in trials. Their testimony can carry significant weight in court, providing an unbiased and professional assessment of the value of real estate. This expert opinion is especially valuable when parties are unable to reach an agreement on their own.

Appraisals serve a crucial role in various aspects of our financial lives. Recognizing the broad spectrum of situations where appraisals are invaluable allows individuals to make informed decisions, safeguard their interests, and ensure fair and accurate valuations across a range of scenarios. In these moments, having a trustworthy partner to provide professional appraisal services can make all the difference.

At Cornerstone Realty Valuation Services, we understand the multifaceted role of appraisals in securing your financial well-being. Our team of experienced and certified appraisers is committed to delivering precise valuations whether you’re navigating the complexities of estate planning, seeking a fair tax assessment, or undergoing a divorce where asset distribution is at stake, our experts are here to support you. Contact us today at 630-513-6150 to explore how our expertise can be the cornerstone of your financial success and peace of mind.

New Year’s Property Management Checklist: A Guide for Success in 2024

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The start of a new year brings with it a myriad of responsibilities and tasks to ensure the smooth operation of investment properties. January is the perfect time to review and refresh your property management strategies for the upcoming year. Here is a comprehensive New Year’s Property Management Checklist to help you kick off 2024 on the right foot.

Rent Increases:

One of the crucial aspects of property management is ensuring that your rental income aligns with your property’s operating budget. Start the year by confirming that your property management software platform accurately reflects any rent increases dictated by the leases for all your tenants and residents. This ensures that your rental properties remain financially viable.

Lease Expirations:

Reviewing lease expirations is essential for effective property management. Take the time to examine all lease expirations for the entire year and research the current market conditions to ensure your renewal rates remain competitive. Initiate lease renewal negotiations well in advance. This proactive approach allows you ample time to market any upcoming vacancies, if necessary. Additionally, ensure there are no lingering lease renewals from the previous year, as month-to-month leases can increase vacancy exposure.

Sending 1099s to Vendors:

January marks the time to send out 1099 forms to all your vendors. It’s important to be aware of the deadline, usually set for January 31st for most 1099 forms to avoid heavy penalties. Research any changes in tax laws that may impact your reporting requirements. To streamline this process, ensure you have all your vendors’ tax ID and contact information readily available. Identify which vendors require a 1099 form, and plan ahead to avoid any last-minute hassles. Most property management software platforms in the industry can assist in the efficient generation and distribution of these forms.

Starting the year with a well-organized and comprehensive property management checklist sets the stage for a successful and efficient 2024. By addressing rent increases, lease expirations, and vendor 1099s, property managers navigate the complexities of investment properties. Embrace the opportunities that a new year brings and stay proactive in ensuring the continued success of your rental properties.

At Caton Property Management, we understand the challenges and intricacies of effective property management. Let us partner with you to streamline your processes and maximize the potential of your real estate investments. Our experienced team is committed to providing best-in-class services that ensure your properties are not only well-maintained but also thriving in the competitive real estate market.

Contact us today to explore how our expertise can contribute to the success of your investment in real estate. Here’s to a prosperous and well-managed year ahead!

Suburban Retail Outlook

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Retail Real Estate, Pre and Post Pandemic

Covid-19 Relief InformationDuring the pandemic, mandated shutdowns changed the steady growth of vibrant retail across the US into what felt like the final chapter in a cliff hanger, leaving readers with mostly questions and not enough answers. Not only did the shutdowns put future commercial real estate deals at risk, but existing leases also came into question as tenants and operators were thrown into survival mode.

Property owners and value-focused property managers recognized in order to maintain value of the assets themselves, it became even more important to attract and retain quality tenants at market rents. Personal guarantees and additional legalese in leases became another level of protection for owners and investors from swift economic changes beyond their control.

Critical Moment for Retail

Businesses and property owners who learned to pivot towards survival managed to maintain revenue and take hold of a larger share of the market through their ingenuity. Flexible approaches to products, packaging, delivery and service became the lifeline that allowed retail tenants to stay profitable and allowed landlords to continue to receiving rent payments.

For landlords, communication and management became the key. For those owners with the benefit of property management, leaning heavily on those established relationships lead to strategies for helping businesses moving forward with as much support from ownership as was sustainable.

2022 vs 2023 Retail Spending

covid 19 related real estate articles caton commercialAs shoppers adapted to their new covid-era reality, their shopping habits also began to change. During the pandemic, less access to leisure activities meant more expendable income. We saw increased spending on groceries, home improvement, craft supplies and luxury pet products. Now consumers are reigning in their freedom to spend as the rising cost of goods and the return to the office have now moved spending in a new direction.

Retail Shoppers Focus on Value

From Q3 2022 – Present, a 32% increase in grocery cost has eaten up the discretionary spending for many consumers. This means the shift to value grocers in February 2022 through today continues to compound and will increasingly put pressure on other types of retail. Persistent recession fears have caused an “hourglass consumption pattern” so that consumers have disengaged from higher-end retail to value buys and the desire to be seen as thrifty even if there is no need. Food prices are expected to grow more slowly in 2023 than in 2022 but still at above historical-average rates1, and discounters are riding high. Traffic is up regarding the number of visits to grocers, but the spend-per-visit is down as consumers are shopping more frequently to cherry pick promotions and value buys. Luxury spenders have shifted their dollars to experiences and international travel versus goods.

Other Impacts to Retail Spending

Middle-market travel and experience is becoming more localized and ‘Out and About Activities and Nightlife’ traffic is also up strongly in 2023, which again takes away share from soft good retail spending. Return to the office is another driver cutting into goods consumption due to several changes:

  • Increased Transportation Costs – car/fuel/public transportation
  • Day/Dependent/Parent care
  • Dog Sitters/Walkers
  • Lunch/Food
  • Clothing

As a result, shoppers can no longer spend as much on categories like fancy pet food, home improvements, alcohol, or lounge wear.

Suburban Markets Gaining Popularity

Another directional pivot we’re seeing particularly in the Chicagoland region is a move away from urban city centers towards the suburbs. Migration and suburbanization trends observed since the pandemic are closely tied to housing, as households seek inventory and affordability and, perhaps, have new priorities since the pandemic.2 As a result, suburban commercial real estate markets are much tighter than downtown real estate, and the gap continues to widen.

professional-apartment-property-managementMillennials are squarely in the family formation life stage (ages 27-42), and that means a stronger pull towards the suburbs for this population of avid consumers. The housing affordability index has fallen, and the Midwest is benefiting from the skyrocketing cost of living on the coasts. Millions of people moved during the pandemic, driven by the opportunity to work remotely, the desire for more space, and better affordability.3 60% of the net population migration of 2019 – 2022 went to tertiary markets, which have benefited, but there are signs of shifts as people have to go back to offices.

 Retail Remains Strong in Chicago Market

Lack of supply in the Midwest is continuing to drive demand. The Midwest has seen more than 1.5x absorption than what has been delivered. The spread between prime and subprime markets is widening, making appraisals especially critical when building a case for lending in subprime markets. The appraised value of commercial properties is based on the quality of the asset. The property’s business use and revenue are not part of the consideration for appraised value, therefore, the management of the property and how well it’s been maintained remain two important factors in retaining long-term property value.

Chicago led all us markets in retail consumption in 2023. Chicago is also in the top 10 of US markets for year over year restaurant sales increase (up more than 9% YOY 2023 vs 2022). According to World Business Chicago, Chicago has the versatility to adapt to a changing world… as the #1 destination for engineering, business, and tech graduates across the Midwest…4

caton commercial investment sales serviceCommercial real estate brokers, appraisers and property managers often become the lifeline between market changes and property owners. A trusted advisor consistently educates their clients on the evolving retail dynamics. While general news and media can sway property owners to believe whatever narrative suits the headlines, trusted advisors can seek to provide the most valuable thing of all, perspective.

Works cited:

  1. https://www.ers.usda.gov/data-products/food-price-outlook/summary-findings/#:~:text=Food%20prices%20are%20expected%20to,of%205.5%20to%206.1%20percent
  2. https://www.bizjournals.com/bizjournals/news/2022/08/31/population-housing-migration-suburbs-covid-19.html
  3. https://www.nar.realtor/blogs/economists-outlook/where-people-moved-in-2022
  4. https://worldbusinesschicago.com/why-chicago/

Illinois’ Quadrennial Reassessment: What You Need To Know

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In the State of Illinois, the law dictates that each property, other than farmland, must be viewed, inspected, and revalued once every four years (every three years in Cook County). Farmland is reassessed each year. This four-year cycle of assessments is referred to as the Quadrennial Reassessment. The year 2023 is presently in the fourth year of the cycle, and assessors across Illinois are in the process of reassessing properties.

The most obvious and direct impact of the quadrennial reassessment to property owners is the likelihood that taxes will increase. A property’s value is determined by many factors and can increase for several reasons, such as an overall improvement of the local neighborhood, increased sale prices of nearby properties, and inflation. While sale prices of comparable properties may be an indicator of value at the time of sale, economics shift and markets change, especially in the world of commercial real estate. Assessments also do not take into account demand for certain property types, industrial versus office, for example. Four years is a large gap in time, and what was a highly sought after 5,000 SF industrial office building with an acre of truck parking in 2020 might not retain the same market value in the fourth quarter of 2023.

The Difference Between an Assessor and an Appraiser

In comparing the two, a general rule would allow that a good assessor and a good appraiser will both use three approaches to value to determine a property’s value. The Cost Approach is performed by calculating the cost of replacing the improvements, subtracting all depreciation, and adding the land value. The Sales Comparison Approach (or Market Approach) is performed by calculating the value of property by analyzing the selling prices of comparable sales. The Income Approach is performed by calculating the present value of the property by analyzing the income from similar income-producing properties.

Here’s where the primary difference between an assessor an independent appraiser can potentially impact a property owner’s tax bill. Unlike an independent appraiser, who has the time to carefully analyze the various approaches to value before arriving at an estimate of value for one property, the assessor must estimate values within a relatively short period of time. The assessor is essentially a mass appraiser.

How an MAI Certified Appraiser Can Help

The highest level of appraisers earned the MAI designation and are experienced in the valuation and evaluation of residential, commercial, and industrial properties. In partnership with an experienced commercial real estate broker and attorney, they can also advise clients on real estate investment decisions. MAI appraisers have met rigorous requirements surrounding their education, testing, and experience and possess an elevated understanding of commercial property valuation laws.

Assessments apportion the tax burden among property owners so that the tax burden is fair and equitable among all property owners. This means that all property owners should be paying their fair share of taxes according to the value of their property. However, if you believe your property is not assessed correctly or your assessment is not equitable (fair) in relationship to other properties, you can and should request a reassessment of your property by your assessor for the next tax bill. Because the appeal process can be complicated and can require evidence to support your request, it is often more effective to involve the help of an expert appraiser to support or lead the process.

About Cornerstone Realty Valuation Services

St. Charles, IL – Cornerstone Realty Valuation Services is a full-service commercial real estate appraisal group specializing in standard and non-standard commercial property valuation — from industrial developments and multi-tenant office space, to airports, gas stations and farmland.

Our appraisal team consists of MAI-designated, certified appraisers, with an average of 35 years of experience. Working with property owners, their attorneys and local assessors, the appraisers at Cornerstone are committed to accurate, timely appraisals with their client’s best interest in mind.

Caton Commercial Real Estate Group Acquires St. Charles Appraisal Company

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Caton Commercial Real Estate Group completed the acquisition of Cornerstone Realty Advisors, Inc, a St. Charles based appraisal company, in a strategic move towards stabilizing revenues and providing comprehensive client support services. Cornerstone will act as the appraisal arm for Caton Commercial, operating as its own entity to maintain continuity with existing staff, operations, and long-standing relationships.

real estate investing 101Edward Kling MAI Certified General Appraiser founded RVG in 2000 and assembled RJ Schmit, Cornerstone, and RVG Appraisal into a single entity. Kling says, “Joining with Caton Commercial Real Estate Group gives our team the opportunity to scale while maintaining the quality of work our clients have come to expect. After 35 years in the appraisal industry, I’m thrilled at the chance to expand our client base within the established Caton framework.” The Cornerstone appraisal team functions in a valuation and advisory role to property owners, lenders, and attorneys, with areas of specialization in expert farmland appraisals and preliminary tax assessment analysis.

Caton COO, Amy Hall, commented “With the Quadrennial Reassessment taking place across Illinois, the timing of this acquisition was key. Property taxes are, and will continue to be, a critical component of the CRE transaction, so being able to offer third party valuation services was a strategic move towards meeting the market where it’s headed.” Caton has rebranded the new appraisal company to Cornerstone Realty Valuation Services.

Caton Property Management Hits Major Milestone

This move towards enhancing Caton’s capabilities to serve clients on the full spectrum of commercial real estate services comes as Caton Property Management hits a milestone at 1 million square feet managed. With an active Managing Director, two full time commercial property managers, a full-time bookkeeper and a dedicated client account administrator on staff, the group is looking to grow the team by adding a full-time commercial assistant property manager to support the growing portfolio of properties managed.

Caton Property Management manages Industrial, Retail, Office, and Multi-Family assets in the Chicago suburbs. In the three plus years since formalization of the division, they’ve experienced an astounding 150% portfolio growth year over year. Barbara Montes, Managing Director of Caton’s Property Management, attributes their success to the exceptional work of her team. “After 30 years of practicing property management, I truly believe that our team at Caton hits the sweet spot for owners who appreciate a more hands-on approach along with the sophistication of established management systems. We keep growing as a result of the hard work and diligence of our property managers and staff.”

About Caton

Since 1984, Caton Commercial Real Estate Group has represented the interests of landlords, tenants, investors and property owners in Chicago, its suburbs and beyond. Our strong community ties and relationships help foster our client-centric service model.

We lean on our corporate experience and professional networks in the local, national, and global real estate markets to find innovative solutions and opportunities that position our clients and strategic partners for success.

Appraisal Services: 630-513-6150
Brokerage & Property Management: 815-436-5700

State of the Market: A View From The Top

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TAKEAWAYS FROM THE 2023 Q2 RE JOURNALS PROPERTY MANAGEMENT SUMMIT

Learn more about current industry trends and why fiscal responsibility, creativity and retaining talent remain critical in the post-covid property management climate.

Perspective on Overall Operations

While the covid pandemic is mostly behind us, post covid challenges continue to be an issue, the most difficult of which is supply chain delays in getting materials. While many people associate materials delays with construction, things like elevator or HVAC repairs are being delayed and preventing updates to existing assets. Because of these delays to upgrades and maintenance, the importance of debt-equity structure will decide on how long the runway for owners can extend. Another basic yet significant challenge is having the funds needed to actually manage the property. In this environment, keeping operating expenses down is extremely important to long term sustainability. Owners may choose to sealcoat the parking lot instead of mill and pave, for example.

Lloyd Berry, SVP / Director of Property Management Director of Colliers Asset Recovery Team commented, “Watch every dollar that you spend and make sure it’s prioritized with the strategy of the company.”

What Tenants Want Today

After addressing supply chain challenges and operating expense cutbacks, staying in tune with what today’s existing tenants want is the next priority in property management. In contrast to the isolation many tenants experienced during covid, what they want most is a collaborative, interactive environment. In other words, they want to be around other people. Experiences are key, so property managers need to activate spaces and create opportunities for social engagement. Activating a space means being able to create and curate those opportunities and experiences, events and physical spaces where people can and do come together and connect, or just even be alone together around each other. This tenant need is just invaluable.

Other requests property managers are seeing more often are increased requests for rent abatement, shorter leases, and tenants who want to downsize or terminate their commercial leases without penalty. Kim Carr, Director of Property Management for Tawani Enterprises Inc, shared a solution some owners are using, which is to write a “good guy” clause into the lease where a tenant can terminate but also agrees to pay rent up until the day they leave.

What About Office?

When it comes specifically to the Office asset class, there’s a lingering question of whether or not landlords are experiencing a flight to the suburbs or to the city. The consensus is that corporate tenants are not moving in mass to either location. Instead, the flight we’re seeing is one to better quality. As more tenants are seeking Class A buildings, Class B and C buildings are struggling to maintain occupancy.
Heather Spearman, Managing Director, Property Management, JLL said, “It’s not either the city or the suburbs, but how much space a company needs in both.”

Other noticeable trends include a flight to convenience and warmer markets, a need for enhanced technology, and a work, live, play experience where the neighborhood is an extension of the office. Chicago’s West Loop Fulton Market neighborhood is a successful example of the work, live, play methodology.

Office Building Amenities in Demand

Office building owners and managers continue to develop creative ideas to increase tenant retention and increase occupancy. Some ideas include adding residential & hospitality to upper floors of office buildings and being more flexible with tenants’ financial condition. Trends show that certain amenities in the office sector have seen an increase in demand compared to pre-covid.
• Wellness Rooms for meditation, nursing mothers
• Dog friendly buildings
• Creative food service options, i.e. Food trucks or onsite cafeteria
• ESGs, Green Space, Honey from bees on the roof, Sustainability
• Outdoor space
• Daycare onsite
• Monthly, low cost or no cost events to bring tenants together

Personnel Challenges

Because Property Management has become even more critical in maintaining asset value, the hiring of experienced property managers and staff is a very real issue. In general, the nature of hiring has changed and employees move more often. With the increased demand for talent, competitive hiring has made retaining and recruiting talent more challenging. Firms are learning to be creative and competitive with both salary and benefits. When you have multi-generational offices, more experienced leaders need to mentor and help train & support the younger generation to build a healthy culture of growth within the company. While management staffing remains critical, experts agree that the biggest personnel challenge is finding qualified maintenance staff.

Internal Operations

Looking internally at revenue streams within the operating structure of a commercial real estate company, the industry shift suggests property management needs to be 50% of revenue, brokerage being the other half. Property Management costs are changing, and firms also need to adjust to keep up. As vacancy increases, firms are backing away from percentage of gross income and moving towards fixed fees. They will push for a minimum fee that’s not tied to rent under the real concern that they can’t continue to carry inflation and other increased costs on reduced fees.

property-manager-and-property-partnerWhy Good Management is Important Once Again

“Cash distributions to the investor is what keeps us all employed,” stated Kristina Grant, EQT Exeter, VP Asset Management. Strong landlords are winning good tenants, so maintaining assets and cementing relationships with clients is priority one. Owners who can afford to give more in the next three years will win in the long term 10-year leases.

By partnering with a property management team, owners can open the doors to tenant retention through technology designed to improve communications with tenants and solidify that income stream. Property management software is capable of texting tenants, online chat support, and dashboards where tenants can communicate directly with property management. These technologies add value on the back end with financial reporting and maintenance ticket request process. Good software and a team that applies it towards daily operations of a property is the solution for many property owners. Sophisticated investors are also looking into AI for market studies to help them understand which markets and asset types are likely to secure a higher ROI.

Final Thoughts

Owners and investors who intend to succeed in the current socio-economic climate need to delay capital projects and focus on keeping their team and tenants motivated.

WRITTEN BY: FATINA SAYEGH

Single Tenant Net Lease Investment

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When investing in commercial real estate, one of the best options available is a Single Tenant Net Lease (STNL) investment. An STNL investment is a commercial real estate investment that involves purchasing a property and leasing it to a single tenant on a long-term basis.

A Single Tenant Net Lease is a lease agreement in which a single tenant leases an entire property from the owner. The tenant is responsible for paying all the property-related expenses, including taxes, insurance, and maintenance. The landlord, in turn, receives a regular rental income without having to worry about any additional costs or responsibilities.

Anastasia Lozhkina a STNL Retail Investment Sales Advisor with Caton Commercial highlights why STNL properties are a smart investment below.

Consistent Income Stream: With an STNL investment, you can enjoy a consistent income stream for the entire lease term, which is typically 10-15 years or longer. This makes it an attractive option for investors who are looking for a predictable and steady source of income.

Low Risk: STNL properties are considered a low-risk investment because the tenant is responsible for all the property-related expenses, including maintenance, repairs, and property taxes. This means that as an investor, you don’t have to worry about unexpected expenses, making it an ideal option for those who are risk-averse.

High-Quality Tenants: These tenants are typically considered “investment-grade” tenants, meaning they have a credit rating of BBB- or higher. Examples of investment-grade tenants for STNL properties include national retail chains, grocery stores, banks, and large corporations. This makes STNL properties an attractive option for investors who are looking for quality tenants and minimal vacancy risk. In addition to investment-grade tenants, STNL investors may also consider healthcare tenants, such as hospitals, medical offices, and urgent care centers, as they are also typically considered stable and reliable.

Prime Location: STNL properties are usually located in prime locations, such as near hospitals and medical centers. This location advantage can help medical professionals diversify their investment portfolio while still having a strong connection to their profession.

There are a few cons to investing in STNL properties as outlined below.

Limited Appreciation Potential: The long-term lease agreements that come with STNL properties can limit the potential for property appreciation. This means that the value of the property may not increase significantly during the lease term.

High Initial Investment: STNL properties typically require a large initial investment, which can be a barrier to entry for some investors.

While STNL properties may have limited appreciation potential and require a high initial investment, the high-quality tenants and long-term lease agreements make it a worthwhile investment in the long run.  STNL properties are a smart investment opportunity for investors who are looking for a predictable and steady source of income with low risk.

Why Healthcare Real Estate Is Appealing To Investors

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The complex market dynamics of rising interest rates and elevated inflationary pressures have become a catalyst for investors to seek assets with stable and predictable revenue. Medical offices and specialty healthcare facilities which are typically in high demand and generate a steady stream of revenue have become a flight-to-safety for many forward-looking investment groups.

Healthcare tenants often sign long-term leases, providing stability and reducing the risk of vacancy. These trends can be extrapolated over time with an aging population and increasing demand for healthcare services that will drive up demand for healthcare real estate. Medical offices, in particular, stand out from traditional office space due to the demonstrated ability to maintain low vacancy rates, offering investors a high degree of stability in cycles of macroeconomic distress.

These factors make healthcare real estate an attractive option for many investors. However, this type of real estate can be inherently complex and require a high level of sophistication. A commercial real estate broker specializing in healthcare real estate can provide you with:

Market trends and conditions:  A healthcare real estate broker will have a deep understanding of current and emerging trends in the market, including demand, supply, and pricing.

Regulatory environment: Healthcare real estate is subject to a variety of regulations, including zoning, healthcare licensing, and safety requirements. A healthcare real estate expert will be familiar with these regulations and how they impact the market.

Healthcare providers: A real estate broker specializing in healthcare will have a strong understanding of the needs and goals of healthcare providers, including hospitals, clinics, and other healthcare organizations.

Investment and financing: Healthcare real estate requires significant capital to develop and operate, and a commercial real estate broker specializing in healthcare real estate will have an understanding of investment and financing options, including debt, equity, and public-private partnerships.

Development and construction: A healthcare real estate expert will understand the development and construction process for healthcare facilities, including site selection, zoning, design, and construction.

Operations and management: A real estate expert will have familiarity with the unique operations and management of healthcare real estate, including leasing, property management, and maintenance.

Zane McCartney. a commercial broker specializing in healthcare real estate, and Caton Commercial offer valuable insights and guidance to clients in today’s dynamic real estate market. We advise physician groups and private investors interested in buying, selling, or leasing commercial real estate. We also offer property management services to owners of medical offices, healthcare facilities, and outpatient properties.

Retail Portfolio Gains Value Through Addition of Property Management

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Commercial real estate (CRE) is an attractive investment because of its consistent returns, passive income, and growth potential. The commercial sector of real estate investing is becoming more and more popular as an alternative investment. However, while it has the potential to be profitable, the acquisition of commercial investments is only the first step to strategic profitability. Knowing when, what, and how to manage the assets in a commercial real estate is an essential component of success or failure.

A successful owner of five high-profile suburban Chicago retail centers reached out to Caton Property Management after struggling to achieve desired financial outcomes with his investment portfolio.

As part of the onboarding process, the property management team conducted an analysis of the financial records, reviewed tenant leases and performed visual inspections of each of the retail strip centers. They also began contacting existing tenants to help facilitate a smooth transition and to prepare the business owners to work with the management team directly. As part of this analysis Caton discovered that several tenants had not paid their CAM reconciliations for several years. Other issues were also discovered that had been negatively impacting the annual net operating income across the portfolio.

Within the first 120 days the property management team made an impressive collection effort netting over $70,000 in balances due from 2019, 2020, and 2021; reducing delinquencies within a very short period of time. Recognizing the opportunity to reinvest the unexpected funds back into the assets, the owner allocated the funds to several maintenance projects and exterior improvements.

Leasing vacancies is a natural next step after securing lost revenue and bringing maintenance up to date. In this case, Caton Property Management partnered with the brokerage division of the firm to lease the primary vacancy in the portfolio. With the combined power of marketing and relationships, Caton Commercial Real Estate broker, Rich Bowden, was able to attract and secure a long-term lease with national tenant within 60 days of listing the space for lease.

The value of commercial real estate is mostly dictated by three things, the location of the property, the physical building and how well it’s maintained, and the quality of the tenants occupying the spaces. After the critical first steps were taken to re-establish a relationship between this investor and his tenants the expectations for tenants has been reset. Caton Property Management continues to deliver comprehensive service with day-to-day tasks such as tenant relations, rent collection, CAM reconciliation, preparing a budget, capital improvement projects, invoice payment, maintenance, and monthly financial reporting.

Caton Property Management takes pride in finding effective solutions to their clients’ most challenging concerns as well optimizing investors’ property values.

Suburban Chicago Retail Outlook – Tenant Representation Takes The Driver’s Seat

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“Retail real estate has entered a phase in its cycle where tenants and their brokers are in the driver’s seat of many deals. With the suburban retail market comprising 69% of the overall retail market in the Chicago metro area, the conditions of suburban retail leasing are – and should be – front and center of the retail real estate market.” shares Amy Hall, COO of Caton Commercial Real Estate Group.

2022 has seen a resurgence of retail store openings nationwide. Retail growth in the Chicago Suburbs has been very strong in correlation with the urban to suburban shift in population in recent years. This retail growth trend is expected to continue in 2023, as more and more people venture back out to retail establishments to touch and feel the merchandise and enjoy the retail experience. Vacancy rates continue to drop as retailers meet this pent-up demand.

Suburban Chicago’s experience is consistent with the rest of the country. U.S. Total Retail Vacancy rates (National index markets only) fell to 4.4% in the second quarter of 2022, according to JLL’s US Retail Outlook Q2, 2022. This is the lowest level in 15 years. Brookfield Asset Management’s Mr. Kingston reported in a recent investors’ call that spending at its 132 U.S. malls is 31% above pre-pandemic levels (Cited from WSJ).

Visitor traffic within Chicago’s suburban retail market has increased 16.6% from the pre-pandemic peak, and leasing activity is up 36.3% year-over-year (YOY), reaching 4.1 MSF through mid-2022, according to Cushman & Wakefield’s Chicago Retail Market Overview September YTD. Despite super-regional mall departures, many big box retail stores closed leaving large vacancies in their wake. Yet strong lifestyle center demand has continued to absorb this space. . . The uses coming in to fill up this space are quite varied.

“As the cost of online advertising has increased, some retailers that started online are looking to real estate to acquire customers,” reported Kate King in “Retail Real Estate Enjoying Biggest Revival in Years,” WSJ, October 4, 2022. In the local suburban market, this is seen with e-commerce giant Wayfair, slated to open in Wilmette in 2023, filling space vacated by Carson’s in 2018.

Experiential retail, including indoor entertainment parks, gaming, and fitness centers, is also a growing market utilizing space left vacant from the departure of big-box retailers. FunCity is slated to open in the Northwestern suburbs, bringing bumper cars and trampolines to River Pointe Shopping Center in Algonquin.

Traditional big box retail has also joined the trend to smaller, more versatile concepts, with Bloomie’s opening in Skokie’s Old Orchard Mall to replace the 200,000 square foot Bloomingdale’s that closed at the end of October, and Market by Macy’s and Macy’s Backstage set to open in Evergreen Park in another space vacated by Carson’s.

Attracting and retaining the right tenant mix is paramount for continued growth and vibrant retail centers. The fundamentals of the leasing process are not enough. Success requires being able to think outside the (big) box to bring in those tenants who will help fill the general retail center space (small 1,000 to 5,000 square foot units) that makes up over half of the Chicago metro inventory.

“Strategy involves a plan, written or not, to create advantage,” according to Graham Kenny, “Strategic Planning Should Be a Strategic Exercise,” Harvard Business Review, 10-4-22. Kenny further explains that strategy is about positioning an organization (or retail center) relative to its competitors, distinguishing between operational and strategic plans while being fluid and able to adjust and change with insight.

While absorption rates are strong and retail shows continued positive growth, it remains critical to make sure that tenant representation is strategic, exercising strong leadership and direction.

State Of The Multifamily Market

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Bisnow held their Annual Multifamily Conference earlier this month covering such topics as residential and affordable housing finance, development, preparing for economic uncertainty, multifamily property management and more. Barbara Montes CPM, CAPS, Managing Director of Caton Property Management and Fatina Sayegh, Manager of Professional Services at Caton Commercial Real Estate attended the event and summarized the general market sentiment in one statement, “Multifamily is still a stable investment, it’s just not getting the same yields as the last ten years.”

If you are one of the many investors who appreciate the positive returns of the multifamily asset, here are a few additional insights from the event:

  • Compared to 2021, developers are being more prudent and conservative up front in the underwriting for multifamily acquisitions/new development.
  • Three strategies investors are applying to overcome rising rates and inflation are 1) negotiating extra time to lock in rates during due diligence, 2) creative deal structures, and 3) assuming full debt.
  • Resident retention is tied directly to resident satisfaction and is a critical component of investment success. Developers feel that professional property management is no longer a luxury but a necessity.
  • The Suburban market is strong as renters continue to head out of the city and into suburban apartments with less amenities but higher-quality living space.

One clear viewpoint across the board is that most investors feel that professional property management is the best way to stay competitive and retain residents. To learn more about how professional property management services can add value to your property, contact us.

The Advantages Of Hiring A Local Property Manager

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Whether looking to add members to your team or hiring a professional third-party commercial property management team to manage your property, there are clear advantages to hiring local.

professional-apartment-property-managementA local property manager knows the local politics and customs, the “lay of the land” so to speak. They have an established network and know how to get things done. Working through zoning changes and council meetings, understanding local ordinances and what permits are needed, who to recommend for repairs and construction, local suppliers, and vendors, are all in a day’s work for a professional management team, and can save valuable time and money. Being able to provide a realistic timeline and help set expectations based upon work they have done on similar projects in the area is fundamental. Their experience in the market is essential to a property’s success and in turn the investor’s success. Caton Commercial has delivered exceptional third-party commercial real estate services in the South, Southwest and West Suburbs for more than 40 years, having the opportunity to have worked on, and be steeped in knowledge of, all asset classes and sizes of transactions.

Knowing the community is also vital to preparing a property’s leasing strategy – where leasing is the lifeblood of most commercial properties. Having that first-hand knowledge of which retailers have the greatest opportunity to flourish by knowing historically what has been tried and thrived versus what has failed. Just because a concept has worked in one market does not mean that it will work in the community you are investing in, or vice versa. A professional also knows how to maintain solid tenant relationships, to ensure longevity of the income stream for the investor.

The local management team is established in the community, and people know their character, so it is easier to vet who you are hiring. Local reviews will give you confidence that the person you are working with provides quality work, and they will do what it takes to service your asset and maintain their excellent reputation. They are invested in the success of your business – your success is their success; relying on word-of-mouth referrals and repeat business is always key to achieving their own growth. This is their community, and the local professional has a higher level of accountability because it is not just a job, it is their home, too. “Caton Property Management manages each property from an owner’s perspective, keeping their best interest and investment goals in mind. While also considering how those choices impact the health of not only the property, but the community. It is a symbiotic relationship, healthy real estate supports the community, healthy communities support real estate, and these are communities that our team’s families live and work in.” says Amy Hall, Caton Chief Operating Officer.

When adding local third-party team members, or your own internal staff, staying local contributes to the financial well-being of the community you are investing in and strengthens the local economy. This is important at any time, but especially in tougher job markets or recessionary times. During the great depression, when Milton Hershey’s factory manager proudly told him how much labor he saved with a new machine that could do the work of several, Hershey told his manager to get rid of that machine and hire more workers. He preferred to contribute to the financial well-being of his community at a time when people were struggling.

The advantages of “we are all in this together” is never truer than when you make decisions to help keep the community strong by hiring local.

Managing A Diverse Real Estate Portfolio

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Owning property is every investor’s dream; yet the simple act of purchasing it, while complicated and requiring much analysis and consideration, is just the starting point. As one develops a diverse portfolio, management of these properties must be increasingly strategic to maximize profit. The investor must understand the scope of skills needed when selecting a seasoned professional and deciding who they are going to have manage their properties.

So, what goes into managing a property? On a broad scale, property management includes the day-to-day tasks needed to manage a property, including collecting rents, tenant relations, maintaining and keeping the property in good condition, and project/construction management as needed. However, the skills needed to handle these tasks depend on the type, and development stage, of the property. Is the property a health care facility or spec industrial warehouse; is it under construction or is it established; is it a fully leased or half vacant retail center; or perhaps it is a multi-unit condo association or a multi-family residential complex or mixed-use building? A very broad skill set is needed to understand how to best handle the vast difference between commercial property assets.

There are best practices that apply to all property management. These include managing expenses and understanding proper accounting, timely and clear communication, an efficient ongoing maintenance plan, ability to attract and keep quality tenants, a reliable network of service providers amongst the various trades, the ability to plan for capital improvement projects, understanding innovative advances in building technology and prioritization of building updates and upgrades.

Managing a diverse portfolio means excelling at best practices for multiple asset classes and property stages. The purpose of investing across multiple asset groups is that it conceptually allows for gains while protecting against the ups and downs of an individual asset class because the investor has diversified their portfolio. However, it increases the need for a property manager who is proficient at maximizing the profitability of the various asset types.  Adaptability is one of the greatest strengths of a quality property manager, and this comes with years of experience in analyzing and quickly assessing a situation, and then having the technical expertise to act. It also means understanding the differences in circumstances that may appear to be similar to something faced in the past but have very different solutions based upon the goals of the investor. When investing in a diverse portfolio, it is imperative to engage a professional team that is proficient in handling many scenarios.  A team that has refined their property management skills over years of commercial property management and deliver effective solutions with the investor’s goals in mind at all times.

Caton Commercial Expands Brokerage and Property Management Teams

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A Company To Watch – Caton Commercial Real Estate Group continues to build its presence as a leading commercial real estate brokerage and property management firm, adding several new members to the team. Five commercial brokers and two support staff members joined the brokerage company and Caton Property Management has added three new team members.

Commercial brokers, Fatina Sayegh, Payton Samuel, Russell Tillery, Monica Zawadka, and Mike Bauer, join Caton with various market and asset class focuses.

Fatina Sayegh is an experienced commercial broker serving industrial owners, tenants, and investors. Her main focus is the I-55 corridor with coverage throughout Will County and the Chicagoland industrial market. She is also bilingual in Arabic.

Payton Samuel is a commercial broker focused on retail properties in the west suburbs of Chicago and is handling the corporate disposition efforts of 7-Eleven.  She has been working in and around the commercial real estate industry since 2015.

Russell TilleryRussell Tillery is a commercial broker specializing in office and retail leasing, and multifamily and mixed-use property sales. He earned his graduate degree in Business Administration from the University of St. Francis in Joliet, IL.

Monica Zawadka is an experienced commercial broker specializing in serving and advising owners, operators, and investors in the leasing and sales of office space in Naperville and the surrounding suburbs. Originally from Poland, Monica is fluent in Polish.

Mike Bauer has been a commercial broker for more than 7 years. His areas of expertise include retail properties, the restaurant and bar industry, land development, small industrial, and business brokerage.

Caton teaches best practices and prepares new brokers to provide exemplary service to clients through their Broker Bootcamp program led by Matt Drane, VP of Broker of Development. In addition, the firm champions collaboration, cooperative brokerage, and the power of referrals, both inter-company and within the market to best serve clients.

Caton commercial brokers establish a competitive edge within the marketplace for clients through the full support of Caton’s platform which includes marketing, transaction coordination, administrative support, continued professional development and training, and more. In order to provide this robust platform, Caton has added two additional support team members to meet the needs of this growing brokerage: Kendra Rone and Evan McCarty.

Kendra Rone is the Executive Assistant to Partner and Senior Vice President, Christina Caton Kitchel. Kendra supports Christina in all aspects of her business to ensure key tasks and company initiatives are achieved.

Evan McCarty is a Real Estate Intern at Caton. He is on the path to becoming a full-time broker once he completes his degree in Finance at North Central College in Naperville, IL.

Caton Property Management has also expanded their team welcoming three new team members: Hannah Hoffman, Pat Campe, and Maura Fenlon.

Hannah Hoffman is the Administrative Coordinator for property management assisting with the financial reporting, collections, payables, and budgets for a portfolio of properties.

Pat Campe joined Caton Property Management as a Property Manager. He has years of experience managing all types of properties.

Maura Fenlon is the Property Management Accountant handling accounts payable/receivable, financial reporting, bank reconciliation, budgeting, and tenant communications.

Managing across all commercial asset classes, the Caton Property Management team strives to maximize the value of every client’s property, always keeping the owner’s investment goals in mind while handling tenant relations, financial reporting, property maintenance and repair, and more. With a depth and breadth of experience in the management of retail, multi-family, industrial, and associations, the firm delivers management tactics from an owner’s strategic perspective.

Caton Commercial Real Estate and Property Management continually seek new ways in which to better serve their clients, and communities, strengthening strong relationships within the marketplace. With offices in Naperville, Aurora, and Fulton Market the firm is committed to providing trusted advisory and intelligent solutions to clients while expanding its presence in the marketplace.

Why Speaking With A Property Manager Should Be A Part Of Any Investor’s Due Diligence

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The current economic climate can be difficult for investors to navigate. With soaring inflation, interest rates rising and the stock market changing day to day, many investors are wondering where they can find a stable place to put their money.

For some, the smart choice may be to invest in commercial real estate, historically a hedge against inflation. But while it seems like CRE is a smart investment, choosing which deals to back can be a complex, overwhelming decision for both new and seasoned investors.

Amy Hall, chief operating officer of Caton Commercial Real Estate Group, said CRE investors can make better-informed decisions by consulting with a property manager who has the experience and real estate expertise to guide them. Bisnow spoke with Hall and Barbara Montes, managing director of Caton Property Management, to learn more about CRE investing in 2022 and how property managers can help.

Bisnow: Why should an investor consult with a property manager?

Hall: Many investors do not have CRE property ownership experience and would have no way of knowing the different deferred maintenance items that may exist on a property, or the repairs and improvements needed that could cost them significant dollars post-purchase.

These are things a property manager can point out and evaluate. A property manager can also evaluate the potential value of an asset based on its position in the marketplace, the health of its leases and its future marketability.

Montes: A seasoned property manager can also assist the investor in requesting a variety of important documents that include crucial information for managing the property after the sale. Additionally, during the due diligence period, a property manager can assist the investor in reviewing leases to identify any questionable items for further clarification.

Bisnow: What sort of expertise can a property manager offer?

Hall: Commercial property managers are experts in the physical building and grounds, while other CRE professionals, such as brokers, often are not.

Montes: Managers also have extensive relationships with contractors that can provide quotes to repair any deficiencies identified during the due diligence period. This is valuable information for the investor to have in case the price of the property needs to be renegotiated.

Bisnow: What is the outlook for multifamily in 2022? 

Hall: Market-rate has been a very strong sector for several years but there are some headwinds that may disrupt it, such as the rising cost of construction and the fact that rental rates are not keeping pace with those costs, and of course, the impending interest rate increases. As the cost of both capital and construction continues to rise, I believe you may see fewer projects getting off the ground.

There is a significant demand for housing that is affordable and, we as an industry, have to figure out how to bridge that gap. Developers who are focused in the co/social living space, micro-units and those who are converting hotel assets into workforce housing are working to meet that challenge.

The stigma around “affordable” housing often must be overcome and a good property manager can make all of the difference in the public’s perception of these crucial assets. A strong management partner can provide the support needed to implement and provide quality, amenity-forward housing that is affordable for underserved communities, young adults, workforce individuals and families, and seniors.

Montes: 2021 was a very good year for some landlords of Class-A multifamily properties in highly desired markets. However, this might not be sustained during the latter part of 2022 as inflation keeps rising and renters will not be able to afford steep rent increases.

Affordable housing is in very high demand. Investors should seek the advice of a local property manager who is very well versed in local housing requirements and possible upcoming legal changes.

Bisnow: What impact did the pandemic have on investments in the multifamily and other sectors?

Hall: Urban multifamily properties were impacted by several factors including the eviction moratoriums, which made it impossible for landlords to evict tenants who were not paying. Secondly, there was a period of decline in demand. Secondary and tertiary markets across the country, however, saw an influx of demand. Today, we are seeing a rebound in multifamily demand in urban cores and some very strong transactions in the market.

Multitenant retail and urban office properties were also significantly impacted by the pandemic, but more negatively due to the shutdown of the economy and continued social distancing restrictions.

The office sector continues to face a wide-scale rightsizing, similar to what retail has experienced for nearly the past decade. Landlords are going to be faced with a continued environment of reworking leases, subletting and having to find replacements for tenants that may not live out their lease terms or do not renew at the end of those terms. The expertise of a trusted property management adviser can make the difference between a property surviving, or not, and continuing to thrive and appreciate.

Montes: Being that most of the multifamily sector fared better than retail and office during the pandemic, investors who previously never considered investing in multifamily assets are now willing to consider acquisitions in this sector. The management of multifamily assets is very different from any other type of asset and it is crucial for an investor to align themselves with an experienced property management adviser to assist in properly putting together a pro forma for the asset during due diligence.

The Growing Demand To Drive-Thru

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The drive-thru concept had its start in the 1930s but really began to take off in the 50s and continues to rise in popularity today. America’s love for convenience by car started with the banking industry and has grown over the years to include dropping off mail, picking up a prescription, or grabbing a bit to eat.

According to a June 2022 report by IBISWorld, you should have more drive-thru options as the number of fast-food restaurants in the United States has grown 0.6% per year on average since 2017. These venerable establishments deservedly have their very own National Drive-Thru Day on July 24th.

Societal demand for convenience has increased the demand for drive-thrus. As a result, the increased demand for commercial real estate supporting the establishments has thrived in recent years. CNN reported, “a consumer survey found about 52% of quick-service restaurant orders were placed in drive-thrus in August 2021, compared to about 42% in January 2020.”

Many fast-food chains are phasing out or downsizing dining areas to make room for more drive-thru lanes. Competition for drive-thru real estate has increased as more dine-in-only restaurants have also decided to try the drive-thru concept.

Existing commercial properties are seeing an increase in property value allowing for the possibility of collecting higher rent, up to 20% in some cases, on future commercial or ground leases. Local governments are easing restrictions on drive-thrus as they too see the need for these in-demand establishments.

Drive-thru popularity is a boost for commercial real estate and the restaurant industry. It’s clear there will not be a slow-down for fast food or the commercial real estate the establishments occupy anytime soon, making the real estate they occupy a great investment.

Future drive-thru trends like more lanes and AI ordering components are sure to make your meal runs and more a breeze.

Unreal Real Estate

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For those who always fancied themselves a pioneer striking out into the Wild West in search of gold and land, the metaverse may be your best bet to living that fantasy…until Mars opens up. The metaverse is the new frontier where people can use cryptocurrency to buy, sell, and rent virtual land. More than an online fad or game, the metaverse is making its way into the real-life real estate world.

In the simplest terms, the metaverse is comprised of multiple digital worlds. Each world has its unique cryptocurrency and a limited number of parcels for purchase. Metaverses coexist much like countries where you can teleport to visit each with their different technologies and functionalities.

Once you own a residential or commercial property, you can develop and keep it for enjoyment, lease it out, or use it as an event space. All these options have the potential to make a significant amount of money as more and more companies are buying into the virtual worlds to launch or promote their products or services. Like the real world, location is the key to a metaverse parcel as a business income generator. Developing a commercial property near a city will bring a higher rent than a suburban location and most likely attract companies who want to work with you.

As if the real-life real estate market isn’t crazy enough, land prices and availability in the metaverse are just as, well, surreal. Parcels in the metaverse are just as competitive, relatively speaking, in both price and supply. Each platform has only a limited number of properties which keeps the demand high. According to a recent CNBC report, “sales of real estate in the metaverse topped $500 million last year and could double this year, according to investors and analytics firms.”

Some feel the virtual platforms are nothing more than a scam, virtually plundering wallets by selling people intangible products. Others have jumped in, taking the risk on one of the final frontiers embracing the pioneer life, hopefully without the gunslingers and outlaws.

Maintaining Relevance When The Only Constant Is Change

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In a world where change is the only constant, remaining the leader in and through uncertain times takes strong personal character and perseverance. It takes vision. There are many ways to stay relevant: staying involved in the community, maintaining the role of a leader in the commercial real estate industry, and continually increasing knowledge and connections are powerful ways to do just that. These are all areas Caton Commercial excels at.

Attending national and global industry conventions is just one way Caton keeps at the forefront of new trends. Amy Hall (COO) recently joined over 22,000 industry professionals at ICSC 2022 Las Vegas (Innovating Commerce Serving Communities, formerly known as the International Council of Shopping Centers) in May. This two-day convention brings in key dealmakers and industry experts from all over the world to focus on connecting and learning. The convention itself takes place at the Las Vegas Convention Center and features attendees and exhibitors from the retail, owner, landlord, broker, development, municipality, and service sectors, all seeking new business opportunities and potential partnerships. There are key-note speakers and professional development workshops and general and micro-learning sessions, all designed to increase knowledge and help attendees explore new strategies in the ever-changing retail world, including new technology solutions and trailblazing techniques.

While industry leaders like Caton Commercial must always seek new ways to lead and grow, ICSC itself has also made a significant metamorphosis to stay relevant. As the retail market shifted, and the traditional shopping center adjusted to these changes, ICSC found they must take initiative to evolve and meet the needs and demands of their members and the industry and to continue to make a significant impact on commerce, communities, and culture. ICSC has expanded its scope beyond shopping centers and malls, and now encompasses all that today’s consumers require to live and thrive in their communities.

Networking and forming connections are other key components of the Las Vegas ICSC. Even though traveling halfway across the country to attend the convention or the numerous networking events in the evenings, it is quite common to meet with someone that does business one suburb away, but never finds the time to network locally. In the same conversation, one can meet someone who is in a related industry several states away. This irony of going out to Vegas to meet someone who does business next door is another reason why attending ICSC is so crucial to leaders in the commercial real estate industry.

While strengthening relationships, expanding knowledge of new industry trends, and, of course, looking for deals, Hall leans into Caton’s core values of cultivating intelligent solutions and trusted advisory, not only for clients but also for those coming up in the industry by finding time to mentor and coach others. Even as the show is winding down, at a time when most attendees begin to relax and decompress from an intensive two-day conference, Hall finds time to reach out and encourage an industry newcomer, offering to share her uber to the airport and connect with her on LinkedIn before promising to keep in touch back in Chicago. “It’s often not the big things, but the continual, everyday actions that sometimes prove most significant in helping others develop,” states Hall. “It is in our giving back that we reap the greatest benefits from our efforts, whether with our team, clients, or the next generation within our commercial real estate industry.”

As another ICSC convention wraps up, the Caton team is energized, and equipped with new ideas and new connections to continue to be the industry expert customers and clients rely on.

Upscale Mexican Taqueria Expands with Help of Expert Representation

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Eddie Palacios Staff photo

Eddie Palacios, Commercial Broker

Caton Commercial Real Estate senior broker, Eddie Palacios, began his career in commercial real estate twenty-three years ago. He quickly developed a unique approach to the business. Eddie walked into businesses and plied owners with questions to learn about their business models. He learned to better differentiate stagnant or stabilized businesses from the ones in growth mode, or with growth potential.

Tenant representation is akin to the role of an out-of-house real estate director. Developing this area of expertise, and taking this specialized approach to his brokerage business, has served Eddie well over the years. His understanding of business models helps him treat client businesses as if he were an owner and a partner. Clients know that he’s looking out for their best interests as he studies demographic models and competition maps as it relates to their business plans, ideal client and objectives in order to help them find the right location. He makes sure the economics of every deal work, even if at times that means talking clients out of deals that don’t work. His forthright nature has cultivated incredible loyalty from his clients. His Dunkin’ clients have been with him for fifteen years, 43 deals, and plenty of family get-togethers and weddings.

Temoc Morfin, Cilantro

Eddie was introduced to brothers Fernando and Temoc six years ago when they were operating the first Cilantro location and had a second site under contract. Their story is the American dream – a talented immigrant family who have dedicated their collective genius to growing a successful restaurant chain. The brothers lead the company, their sisters create recipes, and all thirteen family members work in the family business. Eddie helps them identify the right real estate so they can focus on operating their business – which has exploded.

LOCATION AND ADAPTATION
Oak Brook Mall ownership reached out to Eddie when they heard he was representing a new concept, Cilantro. He worked with the brothers to create a strong marketing plan and pitch deck, and mall ownership was interested.

The Oak Brook mall location has been a resounding success, one of several stars in their portfolio of thirteen locations throughout the city and suburbs. As the concept expanded into new locations, product consistency became a priority. Cilantro created a commissary kitchen and established routes for daily deliveries of freshly prepared ingredients for their upscale Mexican taqueria menu. Their dedication to quality spurred the creation of Cilantro Tortilla Factory.

The tortilla factory in Stone Park allows visitors to stop by and watch the tortilla-making process through windows into their state-of-the-art kitchen. Though originally outfitted with a conference room and corporate offices, they quickly realized the better use for the space was serving the visitors the great tortillas they were viewing as part of an exclusive “tortilla factory only” menu.

Eddie speaks of the family with great admiration. “They are always looking and planning ahead for opportunities to make their customers happy (and more full!). They are not afraid to try something different to make their product and brand better. That is the best description of an entrepreneur.”

During the pandemic, their foresight in creating a product line allowed Cilantro to grow their distribution arm when the physical restaurants were slow. The factory produced millions of tortillas for other restaurants. Their products are in 400 grocery stores now. The brand has become recognizable and they continue to work on different products and test new ideas.

Eddie frequently receives calls soliciting Cilantro for new locations. Some owners and industry professionals understand Cilantro’s business success. Others soon discover that Cilantro’s leadership is sophisticated and well-capitalized, with a highly diversified business model. Cilantro’s Mexican comfort food has transcended to areas like Lincoln Park (the store there in an old Chipotle has become a very successful neighborhood staple).

For Eddie, Cilantro is a shining example of how his services have helped a restaurant move into their full potential. He acknowledges that restaurants are a high risk, high reward business. As restaurant expansions came to an abrupt halt during COVID, Eddie’s pulse on the industry became even more important as he listened to success tactics presented by clients and industry leaders and shared the knowledge with all his clients. If there is one thing Eddie is certain of, it is that the future holds every opportunity for success – for Cilantro and all of us.

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Caton Commercial Real Estate Group uses its corporate experience and professional networks to find innovative solutions and opportunities that position clients for success. Strong community ties and relationships help foster a client-driven approach to business. Caton Commercial offers a full range of client services, including property disposition, investment sales, leasing, tenant representation, and property management.

The Industrial (R)Evolution of Aurora

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LOCATION LEADS THE WAY

Industrial property in Aurora, IL, located 35 miles west of Chicago, originally served the local population, businesses, and surrounding communities. However, when the Reagan Tollway opened an interchange on Rt. 31 and I-88, Aurora became more accessible and appealing to companies requiring industrial real estate. Development increased in 10–12-year intervals, as several more interchanges were created along I-88 in Aurora. Industrial users wanted to be near the tollway, especially if involved in distribution, for the cost benefit of trucking and moving their product. With increased tollway access, the market went from, heavy industrial, smaller machine shops and light manufacturing, to modern business parks with a mix of industrial, warehouse and office.

A CHANGING INVESTMENT ENVIRONMENT

In the 80’s and 90’s, institutional money began to pursue industrial as an asset class. Whereas office used to be the favorite, and then retail centers with large anchor tenants, the industrial market made strides because it was more stable and weathered economic recessions better. Because of this stability, institutional funds and pension funds favor investing in the product type.

About 10 years ago Amazon became a factor, building 700,000 to 1 million square foot buildings. These huge warehouses utilize a 50–60-acre site that previously might have accommodated several buildings. Not only did demand for large industrial land parcels increase, but the cost of money (due to low interest rates) fell to the point that developers could build a spec site with limited investment and extremely low cap rates upon sale. The demand to build these large buildings continues limiting land for smaller developments

THE PRICE OF DEVELOPMENT

As sites near highways became harder to find developers began looking 4 to 5 miles away from the tollway, or north to Geneva and south to Montgomery. Land pricing has adjusted to the supply and demand curve. Twenty years ago, we saw $3.50 PSF (per square foot) land pricing. Ten years ago, it had risen to $5.00 PSF. In recent years we saw $6.50 PSF pricing, but in the most recent transactions it has risen dramatically to $9.00-$10.00 PSF.

Meanwhile, the cost of construction has increased dramatically. While it used to be $75.00 PSF to build, $110 PSF is not uncommon now. The rental rate for a base investment is in the $9.00 to $14.00 PSF range for smaller square footages because of the lack of supply, large spec buildings are in the $5.50 -$7.00 PSF range based on specific buildout – peak pricing in any economic environment. The market will either have to adapt or pay for the additional freight.

LOOKING FORWARD

While the real estate market is certainly cyclical, industrial remains strong. This supply and demand curve has put pressure on cap rates; however, even with the changes tied to the recent interest rate increase, small to medium size investors prefer multi-tenant industrial. The demand for space has also led to creative adaptive reuse concepts in the marketplace. In the O’Hare submarket, we have seen developers buying sites and scrapping the current buildings, and replacing them with new industrial/warehouse distribution centers. Since 2017, Aurora has added 2 million square feet of industrial and has another 1.5 million under construction.

What started nearly 60 years ago continues to evolve today. Brian Dolan of the Dolan and Murphy Team at Caton Commercial Real Estate has over 45 years of experience focused on the Aurora market with expertise in industrial property. Brian delivers critical market expertise to ensure clients are equipped with the tools they need to make educated decisions about each property’s position in the overall marketplace.

A Culture of Collaboration In Commercial Real Estate

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For every company, especially within commercial real estate, a key determinant of success is an effective culture. Culture drives internal engagement, guides strategy, and impacts every facet of client experience.

According to the Society for Human Resource Management (SHRM), “An organization’s culture consists of beliefs and values established by leaders and then communicated throughout the company, ultimately shaping employee perceptions, behaviors and understanding. Organizational culture sets the context for everything an enterprise does.”

While there are several organizational structures that are utilized in the marketplace, companies that are intentional about culture quickly move to the forefront.

Best Practices and Real Estate Company Culture

Cultivating company culture requires an understanding of the industry’s best practices – not the most common practices.

Q: Why do clients hire a commercial broker instead of transacting on their own?

A. They understand that value is maximized by having the right representation from the right firm and the right broker.

At Caton Commercial, best practices can be distilled into two pinnacle statements:

1. Brokers are client-centered fiduciaries.

Caton brokers are dedicated to placing their client’s best interest above all else, providing excellence to every client, every time through trusted advisory and intelligent solutions. Brokers create a competitive edge within the marketplace for clients through the full support of Caton’s platform which includes marketing across all channels, transaction coordination, training, encouragement, and more. In addition to the regular course of inter-company communication, formal brokerage team meetings are held monthly in which brokers can share assignment needs with each other. Caton Commercial Real Estate champions collaboration, co-brokerage, and the power of referrals, both within the company and within the market.

In practice this plays out as the ‘best team on the field’ concept, where brokers refer deals that require specialization in another product type or geography to another internal team. According to Matthew E. Drane, Vice President Broker Development, “If you do what is right for the client, the business will come back around. If not, you’re just learning at the client’s expense.”

2. Brokers receive support and infrastructure to promote success.

For a broker to be client-centered, the entire company must be client-centered. Systems, processes, staffing, and resources are many of the ways in which the company works to ensure brokers are equipped with every tool possible to effectively serve their clients, and to focus on client and deal centric activities versus back-of-house administrative activities. The company also continuously creates opportunities for learning and skills development.

Teamwork goes far beyond the silo of an individual’s business when a company creates a culture of collaboration. Successes are celebrated. Ideas are shared; innovation is encouraged. For brokers who are new to the field, coaching and mentoring are provided, along with the opportunity to work with an established team. New brokerage team members – and Caton has hired four of them in the past four months – are attracted to experience, competency, integrity, and collaboration.

The Ripple Effect of a Collaborative Culture

As teams embrace the concepts of collaboration and client-centered fiduciary representation, the benefits to the company amplify and extend to the broader geographic and real estate community. Leadership roles are strengthened in organizations and associations. Cities and regions are impacted by the involvement of collaborative, service-oriented real estate professionals who are dedicated to making the surrounding business community the best it can be. For Caton Commercial Real Estate, their involvement has included NICAR, CAR, CCIM, ICSC, chambers of commerce, economic development departments, and many other community and charitable organizations.

Whether serving national or individual property owners and tenants, regional investors, municipalities, or international entrants to the Chicago market – Caton believes that collaboration is at the core of a winning culture.

Caton Completes The Retail Leasing of Central Park Place in Downtown Naperville

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Illinois-based Caton Commercial Real Estate Group has announced the completion of the retail leasing of Central Park Place in downtown Naperville. Gia Mia, a pizza bar chain specializing in chef-driven, farm-to-fork food concepts, has leased the historic Old Nichols Library that anchors the four-story development. The 4,433-square-foot space features soaring 18-foot ceilings, a restored fireplace, and a 1,412-square-foot raised patio for al fresco dining.

Caton Commercial Real Estate brokers Christina Caton Kitchel and Steve Caton, who managed the leasing of the retail space at Central Park Place, welcomed the Gia Mia team to the mixed-use development. In addition to the first-floor retail space, 17 luxury condos comprise the second and fourth floors of the building. Located on Washington Street, the development is on the main thoroughfare in the downtown area just steps away from North Central College and Wentz Concert Hall.

Gia Mia’s enticing menu includes Neapolitan style wood-fired pizzas, creative small plates, fresh pasta, antipasto, and hand-made mozzarella, among other signature items. The chain’s mixology bar concept includes specialty craft beers, as well as an exclusive wine list with flavors carefully chosen to complement its delicious food plates.

“Central Park Place is a showcase of high-end mixed-use development in a suburban environment, a combination of luxury living, shopping, dining and services,” said Amy J. Hall, COO of Caton Commercial Real Estate Group. “Caton has been honored to be involved in this project since its inception, and we are tremendously proud to have helped the owner and developer bring it to its full fruition.”

The signing of Gia Mia to Central Park Place is the newest addition to the list of notable businesses that are located within the development.

Sweetwaters Coffee & Tea, an Ann Arbor, Michigan-based coffeehouse, was the first retailer to sign a lease at Central Park Place. Sweetwaters is a coffeehouse that celebrates classic cafe fare alongside globally influenced coffees and teas in an environment that is both classic and friendly.

Following the signing of Sweetwaters, Kitchel and Caton secured an agreement with The NOW Massage, a Los Angeles-based, high-end massage therapy spa. Located on Washington Street and surrounded by a selection of local dining, shopping, and Riverwalk destinations, the spa’s chic and minimalist atmosphere is inspired by nature and provides the ultimate escape for next-level relaxation.

In December 2021, James and Sons Fine Jewelers featuring Rolex opened its Naperville location within the Central Park Place development as well. A family-owned and operated business that has served the Chicagoland area since 1964, shoppers can find the finest jewelry and watches in a “no-pressure” environment.

While the retail leasing for the development is complete, Caton Commercial Real Estate Group is still actively involved in the property management aspect of the project. Caton Property Management is led by Barbara Montes, who oversees the management of the retail and residential aspects of the property.

Caton Announces Matthew E. Drane As Vice President of Broker Development

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Caton Commercial Real Estate Group welcomes Matthew E. Drane as the new Vice President of Broker Development. Drane brings years of experience as a commercial real estate executive, broker, and investor. In his new role, Drane will lead Caton’s team of commercial real estate sales professionals.

Throughout his career, Drane has collaborated with hundreds of investment sales agents and loan originators nationwide. He has transacted over $400M of sales and has brokered or acquired (directly or indirectly) over 50 commercial assets. As an investor, he is actively acquiring and improving existing real estate, both commercial and residential, and is also purchasing mortgage notes and developing land (both urban and rural).

Prior to commercial real estate, Drane contributed to the growth of several organizations, including two Fortune 500 companies. Over the years, he has developed an impressive track record of closing multi-million dollar transactions and managing client relationships throughout the U.S., the Middle East, and Europe. Drane holds a B.S. from Miami University’s Richard T. Farmer Business School and an MBA from the University of Nebraska-Lincoln.

“We are beyond thrilled to add Matthew to the Caton team,” said Amy J. Hall, COO of Caton Commercial Real Estate Group. “His success in recruiting and team development brings tremendous value to our platform, and we feel his contributions will be integral to meeting our brokerage growth goals in 2022 and beyond.”

Drane will oversee production, recruiting, and the training and development of Caton’s commercial real estate brokerage across multiple office locations.

The Changing Landscape of Office Utilization

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As the new year approaches and we are again looking to put another complicated year behind us, landlords and tenants are looking for ways to entice employees back into the workplace.

Open spaces, tall ceilings, large windows, and updated ventilation systems are among the top requests from workers looking to venture back into the office. “Ventilation and filtration provided by heating, ventilating, and air-conditioning systems can reduce the airborne concentration of SARS-CoV-2 and the risk of transmission through the air,” according to the American Society of Heating, Refrigerating and Air Conditioning Engineers.

As an attempt to provide employees the flexibility of maintaining a remote-work lifestyle, some larger companies are opting to forgo the large central campuses for more satellite locations. Smaller locations sprinkled throughout decrease stressful travel time and allow employees to enjoy a more collaborative work environment while foregoing the often stressful hustle and bustle of a large corporate environment.

Collaboration is an essential part of any business, and offices will not be going away anytime soon. If anything, the past few years have taught us that employees can do the majority of their work virtually. The office space has become a hub for collaborations that are unable to be accomplished through a screen. There really is no substitute for being able to interact with co-workers or clients spontaneously. Ultimately, it’s up to the companies to provide a safe, welcoming environment.

MXU Development Breathes New Life Into Chicago’s Suburban Markets

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Mixed-Use developments are growing in popularity in the Chicago suburban market because they appeal to consumers as well as investors. The rise in demand, especially during the COVID-19 pandemic, was driven in part by consumer’s desire to spread out in more suburban environments.

But even before the pandemic arrived, mixed-use (MXU) projects were rising in prominence because they aligned with market and demographic shifts toward live, work, play environments. MXU projects that incorporated a variety of retail, entertainment, restaurant, or services appeal to those living or working at the same site from a convenience and time-saving perspective, and those amenities nearby enhance their daily quality-of-life experience.

While mixed-use projects are more complex to develop, they add a broader spectrum of uses and accommodate longer portions of a visitor’s day – often spanning from dawn to midnight because the entertainment and dining habits of people continue to adapt. Creating that perfect balance in a MXU project requires a developer with a skill set that can reimagine, reinvent, and activate an asset with the right mix of uses ranging from office, retail, multifamily or medical, and may now even include last-mile industrial pick-up or drop-off points.

The best mixed-use environments consider the journey of the customer, the desire of residents or the needs of workers. Mixed-use projects must also be authentic experiences that create a connection and emotional appeal for each audience. None of those objectives are simple or easy to achieve individually, and when combined it requires a development team that is well versed in breathing life into projects. The integration of multiple property types into a holistic plan is complicated because the overall success hinges on each use playing of the other, enhancing other components of the project and bringing individual parts together for the greater good of the community – all in the right location.

Suburban communities often seek lower densities in projects than is found in urban cores. But MXU projects must also enhance a community character with new uses and revenue opportunities. Suburban settings can deliver quality of life elements but need to offer dynamic uses that appeal to both existing residents while pulling younger ones seeking amenities, they are accustomed to finding in urban cores.

Redevelopment is a thread that connects a number of the larger-scale MXU projects underway in suburban Chicago.

One such example of a mega-mixed-use-redevelopment on Chicago’s South Side is Bronzville Lakefront, a $3.8 billion project by GRIT on the former location of the Michael Reese Hospital and Medical Center. The initial phase of the project encompasses 13 acres that will be transformed between 2021 and 2026 into a thriving life science community, a mixed-use commercial, office, retail, and community space with a new park. The MXU project is planned to include seven million square feet of commercial, institutional, and mixed-income housing upon build-out.

Centennial, a Texas developer, is redeveloping two regional malls, Fox Valley in Aurora, and Hawthorn Mall in Vernon Hills, with residential components. The former Motorola campus in Schaumburg is being reinvisioned as a mixed-use project known as Viridian, while New Jersey-based Somerset Development has done the same thing, albeit on a somewhat smaller scale, with the former AT&T campus in Hoffman Estates. That site is now an office/retail complex known as Bell Works Chicagoland. Hines has also been redeveloping a very small portion of the former McDonald’s corporate campus in Oak Brook, though the main campus hasn’t been sold for development yet.

Then there’s Cantera, a large mixed-use district in Warrenville, which has been under development in phases for several years. The 500-acre-plus site, formerly a quarry, is seeing new residential uses being added by McShane Construction, which recently completed a 364-unit apartment complex for a development client there.

Each of these MXU projects must factor in site zoning, market demographics, city entitlements, land assemblage, amenities, and a host of other considerations when collaboratively constructing a plan that encompasses the perfect mix of uses. If done well, a MXU development can appeal to a larger customer base across a wider area because they can pull from several nearby suburban areas. That all adds up to mixed-use developments breathing new life into sites across Chicago’s suburban markets.

Chicago Industrial Remains Resilient, Despite Pandemic

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Chicago has long been an established hub of commerce in the United States and plays an important role in the global supply chain. The industrial markets surrounding the Windy City make Chicago a key connection point for distribution and warehousing as companies seek to move goods throughout the country, a prominent position that was only further solidified during the COVID-19 pandemic.

The Chicagoland market houses a massive consumer base and a vital rail system that facilitates the movement of goods across established national logistics corridors flow through the suburban industrial markets. As a result, Chicago’s submarkets ranked high for industrial activity in 2021. There’s strong demand for suburban warehouse and distribution space that is driving robust growth and attracting capital from investors to the region.

Development

That insatiable appetite is fueling development, too. Chicago ranks as the No. 3 U.S. market for industrial deliveries in 2021 after Dallas and Phoenix, according to CommercialEdge. Researchers there found that Chicago industrial completions in 2021 are expected to total nearly 17 million square feet in 41 buildings.

Challenging suburban sites or overlooked infill locations are now hot commodities for developers seeking to meet demand. The suburban sites developers are pursuing allow companies to get closer to larger workforce resources, as well as are resulting in shrinking footprints for industrial buildings.

Market Stats

Overall, Chicago’s industrial markets reported mid-year 2021 vacancy rates in the low 5% range or lower depending on the report, and experienced roughly 10 million square feet of absorption, a nearly five-year high. Those tight conditions were reflected in the fact that no double-digit vacancy rates were reported across the region’s 21 submarkets.

New leasing activity in Q2 increased to roughly 14 million square feet, and rental rates increased as well. Some reports pegged increases in base rents of more than 10% since the start of COVID, which only served to continue attracting investors to industrial properties across the Chicagoland area. Those conditions are also driving construction activity, which rose to more than 32 million square feet across the Chicago region.

Amazon Effect

E-commerce was a significant driver of record industrial demand and growth starting in the early days of the pandemic, with Amazon leading the way. That growth in online shopping appears to be sustainable, too. Now that the economy is reopening, e-commerce is expanding at an even greater rate, to nearly double pre-COVID-19 levels, which is driving the industrial markets.

Amazon has two projects in Chicagoland that reflect a continued push into the region. Amazon is planning a new warehouse delivery station on Chicago’s Southwest Side on a recently acquired 70-acre Central Steel & Wire factory site. The Seattle-based e-commerce goliath also plans to build a 140,000-square-foot delivery station on 26 acres in the West Side’s West Humboldt Park neighborhood.

National Supply Chain

A trend to keep an eye on in the coming months is how Chicago’s industrial markets fare because of a massive goods backlog and delays being experienced at the nation’s two busiest ports of Los Angeles and Long Beach. That severe congested condition in the national supply chain could eventually be reflected in decreased volumes handled by Chicago’s intermodal terminals.

The Proptech Revolution

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Now more than ever commercial property tenants have raised their expectations around the technology provided by property owners and managers. The COVID-19 pandemic has propelled proptech into the forefront for many building owners, and those that aren’t getting on board with this trend may be missing an opportunity to appeal to wider array of tenants.

Property technologies from keyless entry to pre-programmed photosensitive lighting around buildings and parking lots not only provide convenience but added security. In addition, tenant and client portals are making processing rent payments and tenant/landlord communications easier and more efficient than ever.

Caton COO Amy J. Hall and Managing Director of Property Management Barbara Montes partnered with Bisnow to highlight the benefits of adopting proptech in commercial real estate property management.

Click here to read the full Bisnow article.

The 1031 Exchange

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Recently Caton Commercial Real Estate Group founder and CEO Bill Caton had the opportunity to address the importance of protecting the 1031 like kind exchange with the Naperville Area Chamber of Commerce.

What is a 1031 exchange? Under Section 1031 of the United States Internal Revenue Code a taxpayer may defer capital gains tax when the proceeds from the sale of one investment property are used to purchase another investment property. While opponents view this reinvestment benefit as a loophole, Bill points out that 80% of taxpayers do only one 1031 exchange, then dispose of the property in a taxable sale generating significant tax revenue for federal, county and city governments.

It is estimated that 30-35 people are involved in a commercial real estate transaction from attorneys, bankers, title companies, engineers, environmental groups and of course commercial real estate brokers. Ernst & Young estimated that the reinvestment through 1031 exchanges for 2021 will generate:

• More than 560,000 new jobs
• More than $27.5 billion in labor income
• $14 billion in Federal, State, and Local taxes, all of which adds
• $55 billion to Gross Domestic Product

Bill states, “The best way to attract private capital needed to improve and strengthen our communities and infrastructure is to keep Section 1031 unchanged.”

Watch the full video here: