Bill Caton is the founder of Caton Commercial Real Estate Group, based in Naperville, Illinois. The group comprises about 25 agents specializing exclusively in commercial real estate. They have expertise across various asset classes, providing comprehensive support for any issues that arise. In addition to brokerage services, the company operates a property management division managing significant assets. Caton Commercial conducts business nationwide and serves international clients, offering a wide range of services including appraisal support to bolster their operations. Bill shares his extensive experience in construction, focusing on single-family and multi-family development projects. He discusses the benefits for construction owners, builders, GCs, framers, and subs, as well as real estate agents. Key topics include utility capacity issues, budget challenges, and impactful projects in medical and industrial areas.
Bill Caton is the founder of Caton Commercial Real Estate Group, based in Naperville, Illinois. The group comprises about 25 agents specializing exclusively in commercial real estate. They have expertise across various asset classes, providing comprehensive support for any issues that arise. In addition to brokerage services, the company operates a property management division managing significant assets. Caton Commercial conducts business nationwide and serves international clients, offering a wide range of services including appraisal support to bolster their operations. Bill shares his extensive experience in construction, focusing on single-family and multi-family development projects. He discusses the benefits for construction owners, builders, GCs, framers, and subs, as well as real estate agents. Key topics include utility capacity issues, budget challenges, and impactful projects in medical and industrial areas.
Takeaways:
Bill Caton applies his experience to construction topics.
Construction owners and builders can benefit from this information.
Late discoveries in projects often cause hiccups.
Utility capacity issues are common challenges.
Budget is a critical issue in any project.
Understanding the best deals is essential in the industry.
Impactful projects include medical and veterinarian clinics.
Industrial and QSR projects are also significant.
Confusion can arise in project planning.
Real estate agents can also benefit from this knowledge.
Chapters:
Introduction to Bill Caton's Experience
Challenges in Construction Projects
Budget and Utility Issues
Industry Insights and Best Deals
Impactful Projects in Medical and Industrial Areas
Conclusion and Real Estate Benefits
Connect with Jeff:
Contact: (307) 372-9052 O. (630) 973-6481 D.
Website: www.merchantcommodites.co
Email: Theconstructioncowboyshow@gmail.com
Email: Jeff@merchantcommodities.co
LinkedIn: https://www.linkedin.com/in/jeff-williams-merchant-commodities/
Facebook:
https://www.facebook.com/profile.php?id=61559698873942
Jeff Williams:
Welcome folks to the Cowboy Construction Cowboy Show and thanks to our sponsor Merchant Commodities, a wholesale supplier of building materials nationwide. I've got a great show today and one of my dear dear friends and tremendous professional in the industry. Special guest is Mr. Bill Caton. He's the founder of Caton Commercial Real Estate Group located in Naperville, Indiana.
Jeff Williams:
Illinois, sorry, and with a background of service industry spans more than 40 years. So Bill specializes in commercial development, farmland sales, 1031 exchanges, and commercial industrial leasing and sales. He's past president of the board member of the Northern Illinois Commercial Association of Realtors and is on the NICAR Board of Directors and Charter Chairman of NICAR's Commercial Global Business Council. Bill is part of the Illinois Realtors where he has served as Chairman of the Commercial Committee and IR Global Committee and a member of the Global Working Group and Public Policy and Government Affairs Member Involvement Group.
Jeff Williams:
And a major investor in the Realtors Political Involvement Committee and a commercial committee member of the NRA. Bill will apply his experience today on the topic of construction in single-family homes and multi-family development projects and how construction owners and builders and GCs, framers and subs, can benefit from this information, including other followers and other real estate agents.
Jeff Williams:
Glad to have you on, Bill, and tell the listeners and our followers a little bit more about you and your background and your business.
Bill Caton:
Well first thank you, Jeff, for having me and for that great introduction.
Bill Caton:
And Mr. Williams has said, okay, is in Naperville, Illinois. We have about 25 agents that do only commercial work. We have experts in just about every asset class that's there, which affords me an expert to help me with any issues that I have in asset classes.
Bill Caton:
In addition to our brokerage, we have a property management company that now has about close to 1.5, 1.7 million square feet, mostly in retail and office.
Bill Caton:
In addition to our location in Napier-Gurvel, Illinois, we do business throughout the United States and also have international clients. I attend MIPM, which is the largest commercial venue in Europe, in France, every March. And we have several international clients and investors that work with us.
Bill Caton:
Personally, I married my bride 56 years ago this weekend, so we had a great weekend of celebration. I have two children, both of them are my partners in business. My daughter now has taken away one huge hats, okay, and she is now the CEO and managing broker of our company. And our son is a developer and investment broker alongside of me that gives me great counsel. Personally, I like hunting and traveling the United States in our RV.
Jeff Williams:
Bill, tell you what, you've got a well-balanced life, I can say that. And to celebrate that anniversary for those many years, I can say one thing, somebody's had to get along pretty good to get along that far. So congratulations.
Bill Caton:
Rock them and it goes very very fast.
Jeff Williams:
I know personally you've got a great family and I've met them all and it's just a delight. And your wife, she's just a jewel. So I can add to that also. So let's start and begin with a question. I've got a series of questions throughout, but I'm going to mainly ask the question and let you kind of elaborate on it. But in the construction, again, you being commercial real estate, and starting off for the many years you've been in the business, but more so, I'm more interested in your experience in development and the things you've had to go through and the things that you know and experience that you can share with the followers. A lot of this kind of information applies across any business that anyone's listening to. It doesn't have to be just construction, but again, this show's kind of geared that way, but you'll pick up from Bill some great great golden nuggets. So, first question is what construction issues tend to derail deals the latest in the progress or your progress? Words, what do you see that is kind of an average derailment deal, you know, in lot of these kind of things?
Bill Caton:
Yes, I've experienced a lot of these, not only in our own projects, but also clients of ours over the last 42 years that we've been doing this. Late discoveries are always the hiccup, Specifically, utility capacity issues, electric, gas, water, other infrastructure things that come on. And of course, the jurisdictional surprises.
Bill Caton:
Working with cities, fire marshals, storm water, revised codes. Codes are constantly being changed or new people come into the government, okay, or their office and they apply the restrictions differently.
Bill Caton:
Permits, okay, getting your permits sequencing down between your civil engineer, your building, and your trading permits. These are always issues. Working with landlords or working with investors that are vague and do not have specific definitions of what they want to get done.
Bill Caton:
And of course those things that plague every construction project and that's change orders. When do they come? How often do they come? And more importantly, who handles them? And gets them done. So those are just some of the ones that I find that are, you know, give you heartburn whenever you're doing your projects.
Jeff Williams:
In relation to a closing of a property or in other words, at what stage do you usually kind of try to come into these kind of projects? And I know on your own that's from start to finish, but on other projects that you're brought in on, how do you try to facilitate those pain points in the closing timelines and the commissions and all that kind of thing as part of that derailment strategy?
Bill Caton:
Yes, great question. I view my position in any project, whether I'm part of the project or whether I'm just a broker, as a communication network. I got to make sure that everybody along the line is communicating and responsive to one another in their timelines. So it's clear communication, expectations that need to be met. And if they're not, then it's a matter of going back and reinforcing the issue with that particular person.
Jeff Williams:
Okay, so moving on to another question. When you're underwriting a deal, what assumptions do you have to make to build out over the renovation cost, but more so just assumptions that you have to assume or plan for?
Bill Caton:
Well, whenever you're working with any project, the budget is the issue, okay? And you need to be very conservative when you're doing it. And the market that we're in today with all kinds of uncertainty, assuming escalations in your pricing is a must. Pricing is not static. You need to be constantly updating it if there's any delays in your timeline, going out and getting new bids, and competitively looking at those bids.
Bill Caton:
Assuming assumptions also include longer lead times, especially for MAPs and specialty equipment. During the supply chain, we know all of us had problems with HVACs or electrical conduit boxes. Knowing the market and predicting those things. Garage doors, okay, in some of our industrial projects. We had a hard time getting those in others.
Bill Caton:
Older buildings that we work on, always assume that there's going to be hidden conditions. There's going to be a roof issue that didn't see or electrical spies. We have a project in Homewood where we were beating the winter this fall. We wanted to get our asphalt in and our concrete work done before it turned cold. And in that rush, we didn't check the parking lot lights.
Jeff Williams:
Yep.
Bill Caton:
The poles, the electric was not connected anymore or was disconnected. So now in the spring we're going to have to tear up asphalt and repair that. So having those foresights ahead of time. FF &E and soft costs, having owners contingencies, the new buyers and first time buyers, to almost always underestimate the cost of the FF &E and the soft cost. Course value engineering is assumed, but it's not something that you can always count on closing a gap in your budget.
Jeff Williams:
So, with contractors and owners is kind of a sidebar question, but what are the, conversations with many different developers and builders and GCs and things. What are a couple of the red flags in a conversation that always have a tendency to repeat itself and jump out at you that that cause you to take a step back and say is this something I really want to get involved in and I know a lot of developers and followers and people that are listening you know again they're all running their business they're trying to figure out you know how so many times we want to engage in everything that we get and we want to get so excited about it and move forward in it but sometimes it's the hidden secrets behind it and they're just not a good deal.
Jeff Williams:
And they can just drag you out and drain you. And so I guess my point to that is you've got many years of experience of that, and do you have any points or tips that can kind of help guide that along? So two-part little question. One, what are the red marks, the red zones, the red flashing lights? And then secondly, what's a couple points to help avoid that?
Bill Caton:
I think anybody that's in this industry has kind of understood the fact that the best deal that you've ever done is sometimes the deal that you don't do. And that is apparent early on if we have high expectations from one person that we know can't be met or the deal looks a little bit too thin or any of those inconsistencies between the parties that you're dealing with. Because a successful deal requires communication. When it comes down to friction in things that we can't control such as electrical and power upgrades. We mentioned that earlier in the supply chain. Sizing of HVAC and codes changing in the areas.
Bill Caton:
If you work from city to city, you start learning which cities have peculiarities or things that they won't give on, or make it difficult. They've got reputations. Investor confidence, okay? Investors gotta be confident in their numbers and in their, not only their numbers, but also in their capital stack.
Bill Caton:
And if you control all this and make this work smoothly, this adds to your broker's credibility in the project. And the broker is kind of like the wedding planner. He may not produce the flowers, but he may have better make sure that they're there blooming at the right time.
Jeff Williams:
Yeah.
Jeff Williams:
Yep, absolutely. So next question is, which trades or scopes cause the most friction between the buyers, sellers, and tenants? And I know that's a broad perspective, but again, does affect all the folks, the buyers, the sellers, the tenants in the transaction. And it depends upon if it's a multifamily or single family. And so I know those are a lot of variables in that, but again, what causes the most friction between those parties and who you're on the construction side? Or I should say versus the construction side.
Bill Caton:
Yeah.
Bill Caton:
Friction in any project is what you're trying to eliminate, but you know that it's always gonna be there. The civil work, okay, that you work on. We've got a project now where the original bids on the detention area were around 500,000, right? And that was just creating that. But this is along an interstate, and then we found out last minute that we have to tie into their stormwater system.
Bill Caton:
And because of that increased underground work, the project is almost $900,000. So almost doubled because of that.
Bill Caton:
Fire protection, safety, life safety equipment, all of this adds sprinkler systems. Some of the areas that we're in, they're now requiring sprinkler systems in any building, almost 5,000 square feet and up. And they may change that depending upon the use inside the building. So those are some of the areas. Specialty equipment.
Bill Caton:
You know, that needed for whatever a veterinarian practice that we're dealing with right now is having difficulty. So, volatile pricing and long lead times to those things.
Bill Caton:
Inconsistency between the landlord tenant and the CE assumptions. That's when that occurs that's your first red flag that this might not be a project that is going to you know actually get completed.
Jeff Williams:
Do you find the bigger developers and bigger GCs are easier to work with than smaller operations or say an individual owner developer? What do you find is easier? I say that easier is most of the time bigger is more demanding but more proficient and yet I find a little bit of both.
Jeff Williams:
From your experience, my experience doesn't matter. It's yours.
Bill Caton:
Yes. So great question in that I find it both ways. In other words, I have smaller construction developers that I love to work with because they're very professional, they're very consistent. They've got great connections to their subs. One of my best friends is a industrial builder.
Bill Caton:
I would do any project for him because he has control and command of his subs. He pays his subs right away whenever they're done with the work, whether he's got his draw or not. And so he gets them to his projects before they go anywhere else. The same time, I have large companies that we work with that have multiple layers of responsibility and...
Bill Caton:
It's difficult sometimes to get through those layers. And then others, because they have a great system of checks and balances, I can pretty much turn the project over and know that it's gonna get done. It all is dependent upon the culture of the contractor. And if they have the right culture and they have the...
Bill Caton:
Success ratio, okay, then those are the ones that more likely I'm going to work.
Jeff Williams:
Well, I know that...
Jeff Williams:
You're very involved in every project you get involved in personally, whether it be for a client or your own project. But you also have a fantastic staff and a group of people there at the company. I know that I don't know how many people you have at your office. I see the ones that are mainly there. But I know you've got a great number of people that help you in a lot of different ways. And you've got your own appraisal company and some of the other things you have to support Caden Commercial. And so I know there's great value they're working with you. A, you know, often in construction timelines impact lease negotiations or tenant concessions. Sometimes, again, that comes back to in there, there's always that split between when development gets done and finished and then those units are being leased and rented and can you speak to that just a little bit and...
Jeff Williams:
And how that impacts that process.
Bill Caton:
But it's very impactful, especially in the medical area and veterinarian clinics, which we're working with now, industrial and the QSRs, the national tenants that are coming through. They have very specific formulas that have to be met. And delays often.
Jeff Williams:
So can you describe QSRs? What does that stand for?
Bill Caton:
QSRs are quick service restaurants, your coffee shops, your ice cream places. Drive up windows, they're 1,500, 2,000 square feet or even smaller than that. But they're usually on maybe a core, a half acre to an acre.
Jeff Williams:
Okay, okay. I just want to clarify that for the followers.
Bill Caton:
Delays in this area cause renovatements to occur or you have to increase your TI allowances and phased or sometimes the national tenants will have fines written into their agreements that if you don't deliver on certain days.
Bill Caton:
Tenants now negotiate very aggressively on their delivery dates and are getting more aggressive. We're working with a national daycare right now and they will only take occupancy in July. All right, now we have one particular case where...
Bill Caton:
That was not possible because of governmental problems. Then the only other time they will accept it is in November. And that's because of their registration timelines. Construction can be slowed down because of credit approvals. A lot of capital stack issues today with the uncertainty in the market.
Bill Caton:
Deals fall apart and timelines aren't aligned. Whenever the tenants operations can't be delivered and you can't deliver the space in the time that they want. So there's a lot of coordination, a lot of...
Bill Caton:
Hand holding, okay, each project to get it done.
Jeff Williams:
Okay. Outstanding. Bill, you know, is just full of information and knowledge and experience and if anybody's doing a project of any kind, they should reach out to you and get a hold of you. So, what questions do sophisticated investors ask you about construction that newer buyers don't?
Bill Caton:
Yes. So they want to know things like what items are most likely to exceed the budget and why. What contingencies are you going to do for that? Where have we seen inspectors slow down a project recently? What areas, what cities, what towns are hard to work with?
Bill Caton:
Experienced that in our veterinarian clinic. We were supposed to get the CO in July and we just received it here in December because of inspection problems and changing of personnel. Personnel with different levels that had different expectations. They want to know what's realistic. They don't want optimism. They want to know delivery time specifically and what's going to impede that or stop that down.
Bill Caton:
What items should we stress test? Another project, five acres. The project is, it's a good project, but it's gonna have to come off solidly in order to perform. So we need to know what the market is like in that area, because it's a little bit green. So that requires some additional work.
Bill Caton:
Who's controlling the GC and who's handling the change orders and how's that gonna get handled? And finally, the risk factors. What are the risks that we can retain and what are risks that we can transfer by contract to our subs or other liabilities that we can get rid of? So what are our risks and how do we...
Jeff Williams:
Okay.
Bill Caton:
Limit them in the project, okay? Because they're coming up, every project has its problems, okay? If it didn't, we wouldn't be in this business, Because somebody else would be able to take care of it for us.
Jeff Williams:
Well, it's a crazy dance dealing with all the different...
Jeff Williams:
Elements of a project and construction is one of the hardest businesses to manage from every aspect. I don't think there's anything that you haven't touched. We'll start to wrap up here a little bit, getting closer to the end of our time. I to give a little bit time for you to share some information about the company and for his contact. If you could eliminate one construction related unknown from every deal, what would that be Bill?
Jeff Williams:
Well, that's a loaded question from a cowboy.
Bill Caton:
Confusion, in other words, the idea. True, true clarity, okay, on timing and cost of projects, No estimates, yes, No estimates, okay. Everything has to be current bids, okay, and upgraded. Specifically, utility delivery in our area dealing with, you know,
Jeff Williams:
Transparency, okay.
Bill Caton:
Commonwealth Edison, IDOT, those are unknowns out of our year control. Final permit conditions, know, what's it like to get your CO in that area? And real GC, how much control does the GC have over his subs? How can he get them there when they need to be at the project and timely?
Bill Caton:
All of this protects your closing, your lease economics, your investor confidence, and finally your broker credibility.
Jeff Williams:
You know, I've got a couple other shows that I've done personally and with others that address that same question and that same concern about GCs being able to manage their crews and their subs. And I find that getting them on time and communication is a big issue also with that. So yeah, absolutely. Any last? Yeah.
Bill Caton:
Is your labor force in your market? Yeah.
Jeff Williams:
Exactly. and as you well know, it's changed over the years, right? So any last thoughts you'd like to share with our followers?
Bill Caton:
Yes, I would say that construction is no longer a downstream issue. It's a front-end underwriting variable. You need to know upfront what things are coming at you. The best deals today are structured around certainty and not optimism and not a hope and a prayer. Brokers who understand construction risk create better outcomes for everybody.
Bill Caton:
Alignment saves time, money, and relationships later. Strong deals don't fail because of pricing. They fail on execution and the execution of risks. Construction insights is now a competitive advantage. I mentioned my friend Rick, okay, who is an industrial broker. That's how he sets himself apart in the market. The goal isn't perfection.
Bill Caton:
It's predictability. Everybody likes predictability. Thank you for having me today. I appreciate the opportunity.
Jeff Williams:
You're welcome. Do you want to share a website or an email or a phone number while you're online here so somebody if they want to get in touch with you?
Bill Caton:
Yes, you can certainly just Google Caton Commercial Real Estate Group. We're out of Naperville, Illinois. And if you want to get a hold of me personally, my best number is my cell, which is 815-370-1236. So again, I appreciate the opportunity, Jeff, for having me on.
Bill Caton:
And I hope everybody has a very profitable and productive 2026.
Jeff Williams:
Bill, thanks for being on the show. Again, this is Caton Commercial Real Estate Group and being on the Construction Cowboys Show. And happy trails, to our followers until we meet again. So bye for now.