Hartford Business Journal

6 HARTFORDBUSINESS.COM | AUGUST 21, 2023 DEAL WATCH slowing economy increased caution about new purchases. "As the economy slows down, obvi- ously – whether it's buying additional space, leasing additional space or buying additional equipment – people just put that on hold as we evaluate what the next 12 or so months look like in the country," Gorman said. "And so, I do think people have dialed back capital spending both in terms of real estate, but I would also say property, plant and equipment." KeyBank's nonperforming loan portfolio was essentially flat during the second quarter of this year, but the major Connecticut lender set aside significantly more money ($167 million vs. $45 million in the year-ago period) to cover loans that could go bad in the future. Gorman said KeyBank, with $195 billion in assets, has been "very proactive" in building reserves in the last three quarters. "We obviously feel we're very appropriately reserved," Gorman said. "We feel very good about our loan book. Having said that, because the economy is slowing down … we're at a point in the cycle where I think it's appropriate to build reserves." Opportunity among challenges Frank Amodio, managing broker of Farmington-based Amodio & Co., said sales volume might have slowed, but he is still getting calls for new assignments. Good companies will expand. Owners will look to sell. There are still opportunities in multifamily, self-storage, big-box retail and the industrial space, he said. "Just when I say things are slowing down, I get inundated with other work," Amodio said. "There's always opportunity in real estate, whether the market is good or bad." Veteran real estate professionals will remain busy, but will have to lean on reserves and get creative as deals take longer than usual to close, said Waterbury-based industrial broker Tom Hill III. "All the veterans are still very busy, but we are all learning how to overcome problems with the market, i.e. financing," Hill said. "To be in this business you have to have patience and be good at overcoming obstacles, which means permits, financing and lawyers that don't talk to each other." Hill said rising rates have lowered property values, a hard reality for some sellers to accept. With deals taking longer to close, Hill has branched out into real estate coaching, advisory work and even partnered on residential deals. He also recently spent six months on a temporary assignment as a morning talk show host on Waterbury-based WATR 1030 AM radio. Robert Gaucher, senior commer- cial specialist with O,R&L Commer- cial, said rising interest rates have slowed some deals and killed others. "It doesn't work unless owners are willing to drop the price, and owners are not yet ready to drop the price," Gaucher said. "Some can't because they don't yet have enough equity in the building." The office deal pipeline has fallen off due to employers' slackening demand for space and higher vacancy rates. There are still plenty of buyers looking for industrial space, but there's "no supply," he said. Rising rates and construction costs are also killing office deals. It's too costly for owners to outfit buildings for would-be tenants, Gaucher said. Slackening demand means lower lease rates that aren't keeping pace with maintenance costs, he said. "The people who make money are people with no mortgage, long-term owners," Gaucher said. "You can make money today. It's not easy. It's harder." Michael Goman is the co-founder and principal of East Hartford-based real estate consulting firm Goman+York Property Advisors. HBJ PHOTO | STEVE LASCHEVER Frank Amodio

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