2. 2
Practical and entertaining education for
attorneys, accountants, business owners and
executives, and investors.

3. 3
Thank You To Our Sponsor

4. Disclaimer
The material in this webinar is for informational purposes only. It should not be considered
legal, financial or other professional advice. You should consult with an attorney or other
appropriate professional to determine what may be best for your individual needs. While
Financial Poise™ takes reasonable steps to ensure that information it publishes is accurate,
Financial Poise™ makes no guaranty in this regard.
4

5. Meet the Faculty
MODERATOR:
Tracy Treger, Principal- Syndicated Equities
PANELISTS:
Ingrid Carlino – CIBC
Kelly Greco – Polsinelli
Marty Sweeney – M&J Wilkow
5

6. About This Webinar
Investing in Commercial Property
Before taking the plunge into commercial real estate investing, one should have a clear
understanding of how to select the right location, preferred type and class of property, what
due diligence to do, how to secure financing, how to negotiate a deal, and how to manage the
property going forward as a commercial landlord. This Financial Poise panel explains the
process from looking for the investment, to contract, to closing, and beyond.
6

7. About This Series
Real Estate Investing 101
Real estate has always been a popular asset class for investment. After all, as the adage
says, “they’re not making more of it.” More and more investors are turning to real estate as an
investment class.
Investors considering making an investment in real estate have a variety of choices: retail,
office buildings, industrial, raw land, and, of course residential. This Financial Poise webinar
series covers several types of real estate classes that one may choose to invest in, explaining
where to look for opportunities; how to diligence them; possible funding solutions; and best
practice for execution.
Each Financial Poise Webinar is delivered in Plain English, understandable to investors, business owners, and
executives without much background in these areas, yet is of primary value to attorneys, accountants, and other
seasoned professionals. Each episode brings you into engaging, sometimes humorous, conversations designed to
entertain as it teaches. Each episode in the series is designed to be viewed independently of the other episodes so that
participants will enhance their knowledge of this area whether they attend one, some, or all episodes.
7

8. Episodes in this Series
#1: Affordable Housing/Community Improvement Investments
Premiere date: 3/31/22
#2: Investing in Residential & Multi-Family Real Estate
Premiere date: 4/28/22
#3: Investing in Commercial Property
Premiere date: 5/19/22
#4: Commercial Leases, Their Provisions and Pitfalls to Avoid
Premiere date: 6/30/22
8

9. Episode #3
Investing in Commercial Property
9

10. Why Choose Commercial Property for
Investment?
• Commercial properties encompass a wide variety of asset classes
• Commercial properties are often larger than individual residential properties, creating
economies of scale to operate
• Businesses can be easier to manage as tenants than individuals
• There are often economic incentives available for investments in commercial properties
10

11. Defining Commercial Property
• Multifamily (more than 5 units) – apartments, student housing, senior living, co-living
• Industrial – warehouse, manufacturing, “clean rooms”/laboratory space
• Offices – general offices, medical offices
• Retail – stand-alone, shopping centers, showrooms
• Hospitality – hotels, restaurants, sports/entertainment venues
• Other - parking, self-storage, government buildings, schools
• Mixed use – a combination of 2 or more of any of the above
• Land zoned for commercial
11

12. Sources of Equity
• Individuals
• Joint Venture Partners
• Institutions
• Broker Dealers
• Crowd Funding
12

13. What Can an Investor Expect From a Commercial
Property Investment?
• Stabilized properties (that are fully or mostly leased to a desirable tenant base) may start
generating cash flow to equity owners upon acquisition
• Pure development opportunities (includes ground-up, substantial lease-ups, or
repurposing/repositioning an existing building) may not generate cash flow for several
years, if at all, but have greater potential for upside/appreciation in value
• Value add” projects (upgrading certain aspects of a property while leaving others as-is) fall
somewhere in between
13

14. Investment Considerations
• Location is a paramount consideration
• The more tenants, the more management intensive the project may be
• Real estate investments carry risk – they are not insured by the government (i.e.,
FDIC/SIPC), and they may not perform the way you anticipate at the outset. It is important
to understand your risk tolerance, financial goals, investment time horizon, and potential
exit strategies BEFORE you invest
• Real estate investments are generally illiquid – you cannot always count on a profitable
sale when you want to exit
• Pass-through tax attributes, such as depreciation, may shelter some of your investment
income
14

15. Economic Due Diligence Tips
• Determine market rates and vacancies for similar properties in same area
• Determine the likelihood and cost of capital repairs/replacements during your projected
hold period
• Estimate operating costs
✓ Fixed expenses – obtain copy of seller’s insurance policy, property tax
bill, utility bills, management company fees
✓ Variable expenses – obtain property’s financial statements & compare
to actual invoices, rent rolls
• Get lender quotes to estimate the costs and benefits of using leverage
15

16. Important Economic Considerations
• Duration of existing leases, and likelihood of renewals
• Credit of tenants/Collections
• Financing terms
• Tax incentives
• Potential for appreciation
✓ Discounted price
✓ Value Add opportunity
✓ Rezoning/repurposing potential
✓ Improving demographics or other indicia of growing demand
✓ Likelihood of rent growth outpacing inflation/interest rates
16

17. Expenses to Consider
• Maintenance and repair, especially in a multitenant asset or where the tenant(s) do not
reimburse
• Insurance premiums
• Professional fees
• Management fees
• Mortgage interest
• Taxes
• Utilities
• Vacancy and turnover, including commissions for brokers or rental agents
17

18. Acquisition Costs
• Transfer taxes
• Title insurance
• Survey
• Loan fees (tax and insurance escrows)
• Third-party reports (environmental, property condition) and due diligence
• Professional fees
18

19. Key Contract Provisions
• Contingencies – inspections and attorney review
• Tax proration – make sure you understand local taxes, payment and reassessment dates
• Seller reps and warranties and need for post-closing escrow
• Required condition of title
• Default and remedies
19

20. Key Contract Provisions (cont’d)
• Amount of Earnest Money required, when paid, and who holds
• Proration of Rents
• Assignment of leases, security deposits, and contracts
• Tenant estoppels and SNDAs
• Timing, especially if tenant work is in process or expected
• Need to understand all provisions of leases in place and any surviving contracts
20

21. Title and Survey Considerations
• Boundary line issues – (Insured over by title?)
• covenants, conditions and restrictions of record – should be reviewed and understood
• Easements (must be reviewed and understood)
• Flood planes, drainage/retainage
• Liens - should be released at closing
• Tax status
• Wetlands and other undevelopable areas
• Zoning
21

22. How to Take Title
• Personally? In a trust? What if you have investment partners?
• LLC, Partnership or corporation
✓ Advantage is limitation of liability to assets of the entity
✓ Holding title personally is never recommended
✓ Lender issues with holding in an entity
• 1031 Exchange-compatible structures – Delaware Statutory Trust (DST), Tenancy in
Common (TIC), Land trusts in some states
22

23. Managing
• Deciding between self-managing vs property manager
• Factors include size of building, number of tenants, location, management experience,
and degree of tenant responsibility under a net lease
• Property managers generally provide owners with expertise in both securing tenants and
maintaining the property that owners may not have
• Downside - fees
23

24. Financing
• Commonly based on property’s ability to generate income as opposed to buyer’s credit
• Sometimes such investing is encouraged through favorable financing regs, incentives for
economic development like TIF, Opportunity Zone
• Leverage – pros and cons
✓ Amount of equity invested can change risk profile
✓ Leverage can improve cash-on-cash yields
✓ Borrower guaranties usually required, even if only carveouts
24

25. Cap Rates
• Pricing for commercial properties is generally determined by cap rate rather than appraised
value
• If you collect $1,000,000 in rents and other income (i.e., parking space rental) and pay
$600,000 in expenses (excluding major capital expenditures), your “Net Operating Income”
is $400,000
• Once you have the NOI, divide the price or value of the property into it. For example, if you
have $400,000 in NOI, and you paid $6.8 million for the property, the Cap Rate = 5.88%
• Cap rates do not take leverage or loan fees into account
25

26. Generating an Operating Proforma
• Revenue: Rent and other income (parking, utility/tax reimbursement, etc.)
• Operating Expenses: RE taxes, insurance, repairs & maintenance, landscaping, utilities,
property management fees, professional fees – note that many of these costs may be
reimbursed by the tenant(s) through CAM or pursuant to a net lease
• Net Operating Income: Revenue less Expenses (NOI: Purchase price creates a cap rate
value)
26

27. Generating an Operating Proforma (cont’d)
• Financing Expenses: Interest, principal, lender-held reserves
• Capital Expenses (roof, HVAC, parking lots, major repair, etc.)
• Reserves and Working Capital: cash on hand, may be supplemented with cash flow
• Cash Flow: NOI less financing costs and Capital Items – when created for a predicted
investment hold period, a DCR analysis can be completed.
27

28. Cash on Cash Return
• If you have a mortgage, your return isn't the money you collect in your NOI, it's what you
have left after making your mortgage payments
• To calculate your after-debt return, called a cash-on-cash return, you divide that net cash
flow by your down payment. If you put $2,040,000 down on a $6.8 million property (30%),
you would owe $4.76 million
• If your annual debt service was $238,000, and you took it out of the $400,000 NOI, you
would end up with a $162,000 annual cash-on-cash return
• When you relate the $162,000 to your $2,040,000 down payment, you would end up with
• a 7.94% cash on cash return
28

29. Indirect Investing
Investing in a fund/private placement with a syndicator/REIT
Advantages include:
• Property is professionally managed, no work on the part of the investor
• Investors’ liability typically limited to invested capital, no personal liability
• Favorable tax attributes of the investment may pass through
Disadvantages include:
• Often illiquid
• No investor control over major decisions
29

30. About the Faculty
30

31. About The Faculty
Tracy L. Treger - ttreger@syneq.com
Tracy Treger is Principal at Syndicated Equities. Tracy helps high net worth individuals and family offices to
profitably invest in real estate. She also assists investors in identifying appropriate replacement property to
complete tax-deferred exchanges under Section 1031 of the Internal Revenue Code. Drawing upon her 20
years of legal experience in the areas of real estate, bankruptcy and corporate restructuring, finance, and
commercial law, Tracy seeks out opportunities to improve the relationship between Syndicated Equities and
its investors, to cultivate new investors, and to identify new investment opportunities and align them with
investors’ goals. Tracy joined the Syndicated Equities team in 2013 after serving as vice president and
assistant general counsel for a private REIT, where she handled all legal aspects of the company’s daily
operations and its joint venture relationships in the U.S. and Mexico. Prior to working with the REIT, she was a
partner in two large Chicago-based law firms with national and international practices. Tracy holds a B.A. in
Psychology and an M.S. in Psychological Services from the University of Pennsylvania, and a J.D. from
Chicago Kent College of Law. She actively serves on both the National Commission and the Regional Board
of the Anti-Defamation League (ADL), and she is the Board Secretary of CREW Chicago, a global
organization for commercial real estate.
31

32. About The Faculty
Ingrid Carlino -Ingrid.Carlino@cibc.com
Ingrid Carlino is a Managing Director and Head of Underwriting & Portfolio Management of Loan
Syndications at CIBC, where she leads a team responsible for structuring, underwriting, distributing and
portfolio managing CIBC-agented, multi-bank credit facilities. Prior to joining CIBC, Ingrid was a
Principal at Wrightwood Financial where she originated and structured preferred equity investments to
best-in-class commercial real estate owners/operators. Ingrid also previously worked in credit and
portfolio management at GE Capital Real Estate where she managed a $1 billion troubled portfolio
through the real estate downturn. Her prior experience also includes commercial real estate lending at
Merrill Lynch Capital, Corus Bank and First American Bank. Ingrid earned a B.A. in Economics from
The University of Chicago.
Ingrid has been a member of CREW Chicago since 2005 and volunteers in numerous organizations
including Junior Achievement and her local church.
32

33. About The Faculty
Kelly Greco - kgreco@polsinelli.com
Kelly Greco represents commercial real estate developers, owners, and investors on acquisitions,
dispositions, financing, and leasing of commercial real estate projects. Kelly’s practice is
nationwide and includes working on retail developments, retail leasing, multifamily assets, student
housing, industrial assets, and cannabis acquisitions and leasing. In addition, Kelly works closely
with clients on structuring transactions and joint venture agreements.
33

34. About The Faculty
Marty Sweeney - msweeney@wilkow.com
Marty Sweeney is Senior Vice President of Acquisitions and Asset Management for M & J Wilkow, a Chicago-based
commercial real estate investment and management firm.
Mr. Sweeney joined M & J Wilkow in 1989 and is responsible for capital sourcing, acquisitions and dispositions as well as
asset management for an expansive portfolio of office and retail properties throughout the country. In his 32 years in the
commercial real estate industry, he has been responsible for $1.8 billion of property acquisitions representing 10 million
square feet of office and retail space spanning the country from San Francisco, Hawaii, New York, and down to Miami,
Florida with many stops in between.
In addition to leading these acquisitions, Mr. Sweeney also heads portfolio asset management, driving investor value
through repositioning and asset enhancement initiatives. Recent projects include the redevelopment of a vacant Macy’s
department store into 150,000sf of Class A high-tech lab and training space, as well as the conversion of a former Sear’s
Department store into 45,000sf of small shop retail space and 700 climate controlled enclosed self-storage units. Both
projects are 100% leased.
A member of the International Council of Shopping Centers (ICSC), Urban Land Institute (ULI), National Association of
Office and Industrial Properties (NAIOP), and the Chicago Real Estate Council (CREC), Mr. Sweeney is active in the
commercial real estate community. Mr. Sweeney received a BS in Finance from Illinois State University.
34

35. Questions or Comments?
If you have any questions about this webinar that you did not get to ask during the live
premiere, or if you are watching this webinar On Demand, please do not hesitate to email us
at info@financialpoise.com with any questions or comments you may have. Please include
the name of the webinar in your email and we will do our best to provide a timely response.
IMPORTANT NOTE: The material in this presentation is for general educational purposes
only. It has been prepared primarily for attorneys and accountants for use in the pursuit of
their continuing legal education and continuing professional education.
35

36. 36

37. About Financial Poise
37
Financial Poise™ has one mission: to provide
reliable plain English business, financial, and legal
education to individual investors, entrepreneurs,
business owners and executives.
Visit us at www.financialpoise.com
Our free weekly newsletter, Financial Poise
Weekly, updates you on new articles published
on our website and Upcoming Webinars you
may be interested in.
To join our email list, please visit:
https://www.financialpoise.com/subscribe/