Capri Capital’s New Secret Weapon

Economists are to commercial real estate as good bass lines are to hit songs: They keep us steady and on-course, and Capri Capital Partners just snagged one of the nation’s best.

Capri brought on Dr. Sam Chandan, whose résumé we’ll shorten so you don’t develop an inferiority complex (prez Chandan Economics, Wharton prof, national economist laureate of the Real Estate Lenders Association, etc), as a partner and chief strategy officer. Just back from over a week of hiking in Tibet, Sam gave us his Chicago outlook. The top story remains multifamily, where new development continues to be highly amenitized and focused on the urban core. While Chicago’s rent growth over the last couple quarters trailed national numbers, particularly in the CBD, that hasn’t deterred investors (just look at cap rates and debt yields), he says.

Chicago’s seeing broad improvements in pricing for urban assets, especially CBD office, which has surpassed pre-crisis, peak levels, Sam tells us. Logistics has also prompted increasing amounts of new industrial development, and investors are more serious about the asset class than in recent years. Sam attributes that to low yields in multifamily and a greater degree of investor risk tolerance. While Chicago historically hasn't been a top spot for foreign investors, their interest in the city could be greater than you think, he notes. (Data only tracks closings, not foreign buyers who made bids but lost.)

Sam says the state's fiscal challenges are not unique. Public finance issues will always be part of the equation when investors evaluate markets, but it's difficult to find data that shows it’s acting as an inhibitor to commercial real estate capital inflows here. Investors generally remain confident, he tells us. Midwest investors need to be careful over the next year, though, as interest rates begin to rise. Growth in property-level income will be key in offsetting higher underlying capital costs, he says.