1 00:00:00,160 --> 00:00:02,320 Ladies and gentlemen, welcome to the business Brew. 2 00:00:02,320 --> 00:00:05,840 I'm your host, Bill Brewster. This episode features Bill Chen. 3 00:00:05,880 --> 00:00:08,520 I guess the way I think about this, this is probably the last 4 00:00:08,520 --> 00:00:10,640 REIT episode I'm going to do. For a while, at least. 5 00:00:10,640 --> 00:00:14,280 As it pertains to multifamily and whatnot, but Bill was on in 6 00:00:14,280 --> 00:00:19,600 October of last year, he started to get pretty vocal about his 7 00:00:19,600 --> 00:00:22,000 perception of the opportunity in Reit's. 8 00:00:22,160 --> 00:00:24,520 I would say like call it 12 months ago. 9 00:00:24,720 --> 00:00:28,400 And he's sort of the one that planted the seed in my mind that 10 00:00:28,520 --> 00:00:31,200 these are maybe better investment vehicles for a 11 00:00:31,200 --> 00:00:34,760 portfolio then I may be appreciated in the beginning. 12 00:00:35,400 --> 00:00:37,640 And I've gotten no Bill pretty well. 13 00:00:37,880 --> 00:00:40,760 And we were in New York. He walked me around while he was 14 00:00:40,760 --> 00:00:44,680 showing me how he does due diligence on real estate and we 15 00:00:44,680 --> 00:00:46,360 had a little walking tour of Manhattan. 16 00:00:46,360 --> 00:00:50,640 It was nice, stopped, got some good Korean barbecue, and you 17 00:00:50,640 --> 00:00:53,360 know, we just spent some time and talked about how he thinks 18 00:00:53,360 --> 00:00:56,240 about things. So I think Bill is a really good 19 00:00:56,240 --> 00:01:00,080 guy that is worthy of highlighting for a number of 20 00:01:00,080 --> 00:01:02,480 reasons. I think he's a real asset 21 00:01:02,480 --> 00:01:05,120 specialist. I think that's really his bread 22 00:01:05,120 --> 00:01:07,680 and butter. And I think he's trying to 23 00:01:07,680 --> 00:01:09,720 spread the message for the right reasons. 24 00:01:09,720 --> 00:01:13,360 And if you like what he has to say and you're open to some 25 00:01:13,360 --> 00:01:16,360 active allocations, he's somebody that I would consider. 26 00:01:16,360 --> 00:01:20,560 So that's my thoughts on Bill and the reason for this episode. 27 00:01:20,560 --> 00:01:22,960 I think we're probably going to go dark on the REIT theory for a 28 00:01:22,960 --> 00:01:24,760 little while. I wouldn't mind talking about 29 00:01:24,760 --> 00:01:27,640 some other kinds of Reit's, but this will be the end of the 30 00:01:27,640 --> 00:01:30,400 multifamily sort of pitch, for lack of a better term. 31 00:01:30,600 --> 00:01:34,120 And I hope you all enjoy. As always, none of this is 32 00:01:34,120 --> 00:01:36,680 financial advice. Everything in this program is 33 00:01:36,680 --> 00:01:40,240 for entertainment purposes only. Consult your financial advisor 34 00:01:40,240 --> 00:01:43,360 before making investment decisions and do your own due 35 00:01:43,360 --> 00:02:05,680 diligence. Right, ladies and gentlemen, 36 00:02:05,800 --> 00:02:09,320 joined with a man who has been mentioned a couple times in 37 00:02:09,320 --> 00:02:12,680 passing on the pod and joined and has been on the pod 38 00:02:12,680 --> 00:02:14,760 actually. And we did a space together. 39 00:02:14,760 --> 00:02:18,360 This is the first like formal podcast, I guess that we're 40 00:02:18,360 --> 00:02:22,040 doing. But Bill Chen, lover of all 41 00:02:22,040 --> 00:02:26,600 things real estate and very good Korean food in New York. 42 00:02:27,560 --> 00:02:31,240 Well, glad to be on Bill. And that was a hell lot of fun, 43 00:02:31,240 --> 00:02:33,880 walking around checking up one of those assets and getting 44 00:02:33,880 --> 00:02:38,560 Korean food with you. Yes, I I landed on Monday and 45 00:02:38,560 --> 00:02:41,040 got to the hotel that I was staying at and then met you at 46 00:02:41,040 --> 00:02:43,240 what, By Penn Station. Then we took a little walk. 47 00:02:44,120 --> 00:02:45,080 What did we do? We did. 48 00:02:45,080 --> 00:02:48,000 Like 4 miles. Or so, 3 1/2, maybe three, I 49 00:02:48,000 --> 00:02:49,880 don't know. It's the fish. 50 00:02:50,040 --> 00:02:53,760 We definitely did. We we definitely did. 3 miles 51 00:02:53,760 --> 00:02:56,840 that that that night. I mean, you figure you start 52 00:02:56,840 --> 00:03:00,360 from Penn Station, go over Hussing Yards and then head up 53 00:03:00,360 --> 00:03:04,160 to Times Square and head over to 5th Ave. go down to Park Ave. 54 00:03:04,160 --> 00:03:07,040 and see JP Morgan's new headquarter and then and then 55 00:03:07,040 --> 00:03:09,920 went walked out to create K Town and get cream food. 56 00:03:09,920 --> 00:03:13,080 I mean that's I wouldn't be surprised if that loop was 57 00:03:13,120 --> 00:03:16,040 something like 4-5 miles. Yeah, yeah, it was fun. 58 00:03:16,520 --> 00:03:21,080 I I enjoyed, I enjoyed walking the city with you. 59 00:03:21,080 --> 00:03:24,600 I enjoyed looking at at the Vornado stuff, which will or 60 00:03:24,600 --> 00:03:26,920 Vornado we'll get. We'll get into that as the 61 00:03:26,920 --> 00:03:29,520 conversation goes. Couldn't help but think that the 62 00:03:29,520 --> 00:03:33,080 middle of Manhattan is full of a lot of office that hopefully can 63 00:03:33,080 --> 00:03:36,440 become data centers or something someday, because I'm not sure 64 00:03:37,000 --> 00:03:40,080 how many of those older offices are going to be repurposed, but 65 00:03:40,080 --> 00:03:43,240 we'll see. Well, we know, we know two of 66 00:03:43,280 --> 00:03:47,040 them, right? JP Morgan's new million plus 67 00:03:47,040 --> 00:03:50,240 square foot headquarters on Park Ave.? 68 00:03:50,280 --> 00:03:54,560 That's different. I'm thinking like between, I 69 00:03:54,560 --> 00:04:00,600 don't know, call it like 30th to 46th, then then between like, I 70 00:04:00,600 --> 00:04:03,720 don't know, 5th and 8th. They're just like a lot of 71 00:04:03,720 --> 00:04:06,800 buildings that that I was looking at that don't have great 72 00:04:06,800 --> 00:04:10,880 frontage and like they're in I, I don't know, we'll see, who 73 00:04:10,880 --> 00:04:13,920 knows, but it seems as though you need fewer square feet than 74 00:04:13,920 --> 00:04:16,120 you used to. I don't, I don't think that's 75 00:04:16,120 --> 00:04:18,040 any ground breaking. You know, I don't, I don't know, 76 00:04:18,040 --> 00:04:20,720 this isn't a unique thought, I don't think. 77 00:04:20,720 --> 00:04:26,360 But a few times in real estate, I'm old enough to remember when 78 00:04:26,360 --> 00:04:29,800 millennials weren't going to have kids and I'm old enough to 79 00:04:29,800 --> 00:04:36,000 remember the death of malls. And, and my general assumption 80 00:04:36,520 --> 00:04:41,840 or I guess operating hypothesis is I, I believe office is going 81 00:04:41,840 --> 00:04:46,320 to be a lot like malls in the future where you know, the Class 82 00:04:46,400 --> 00:04:49,160 A is going to be OK and then everything else is going to get, 83 00:04:49,440 --> 00:04:53,880 you know, in some trouble. That said, I don't know if, if 84 00:04:53,880 --> 00:04:56,840 you have a lot of Class A that's been delivered, I'm not sure 85 00:04:56,840 --> 00:05:00,320 that that the building owners will be able to extract the 86 00:05:00,320 --> 00:05:01,680 rents. You may just have tenants 87 00:05:01,680 --> 00:05:05,680 hopping back and forth. Yeah, I think, I think I, I 88 00:05:05,680 --> 00:05:08,480 think John will agree with, you know, most of what you lay out. 89 00:05:08,480 --> 00:05:10,720 I think, I think it's going to be very difficult. 90 00:05:10,720 --> 00:05:13,880 I think, I think the indoor mall is not, not so much the grocery 91 00:05:13,880 --> 00:05:16,600 shopping centers, the outdoors. I think if you look at the 92 00:05:16,600 --> 00:05:19,960 trends in the indoor malls, what you have clearly seen is 93 00:05:19,960 --> 00:05:23,520 companies like Simon Property and to sort of set Mace Ridge, 94 00:05:23,840 --> 00:05:26,320 they really stand out. They tend to own the Class A 95 00:05:26,320 --> 00:05:30,440 location, they have the Class A properties and they're still 96 00:05:30,440 --> 00:05:33,400 relevant that, you know, they've added, they invested in food 97 00:05:33,400 --> 00:05:36,080 courts and different amenities and they generally done a good 98 00:05:36,080 --> 00:05:38,480 job and they they're still relevant today. 99 00:05:38,480 --> 00:05:40,640 And what if you look at the B and CS? 100 00:05:40,640 --> 00:05:45,040 And then it is just say absolute nightmare for those owners 101 00:05:45,040 --> 00:05:48,720 because, you know, with the advent of e-commerce, they just 102 00:05:48,920 --> 00:05:51,960 can't attract the tenants. Occupancies fall and then you 103 00:05:51,960 --> 00:05:53,800 have to spiral the death malls, right? 104 00:05:53,800 --> 00:05:57,640 And I think that you you'll probably see a similar trend in 105 00:05:57,640 --> 00:06:00,800 office where the Class A as as you and I walked around New York 106 00:06:00,800 --> 00:06:03,400 City and we looked at some pornado's buildings, you know, 107 00:06:03,400 --> 00:06:06,800 PEM 1 pen two and the post office. 108 00:06:06,800 --> 00:06:09,160 That's least the matter. I mean, those are gorgeous 109 00:06:09,160 --> 00:06:10,960 buildings. They have do or many they 110 00:06:10,960 --> 00:06:14,560 recently invested capital in them and they have really good 111 00:06:14,560 --> 00:06:18,480 long term tenants that strategically located in public 112 00:06:18,480 --> 00:06:21,480 transportation hubs. So if you take train and you get 113 00:06:21,480 --> 00:06:24,480 off it and you're right there, right, You're not taking 114 00:06:24,480 --> 00:06:26,880 another, you're not walking two avenues over. 115 00:06:27,400 --> 00:06:30,120 But I think where the problem assets are going to be the mid 116 00:06:30,120 --> 00:06:33,800 block, say as we walk in up to Times Square on a wall in 117 00:06:33,960 --> 00:06:37,280 between, you know, 34th and 42nd, you see a bunch of these 118 00:06:37,280 --> 00:06:42,160 mid block where the frontage, the windows are only on on one 119 00:06:42,160 --> 00:06:43,440 side. And then you're literally 120 00:06:43,440 --> 00:06:45,080 sandwiched between two other buildings. 121 00:06:45,080 --> 00:06:46,760 That's a generally older building. 122 00:06:46,760 --> 00:06:50,480 I mean, those are probably going to go the way of the debt. 123 00:06:50,600 --> 00:06:55,080 You know, the debt malls, right? There's a guy on YouTube who 124 00:06:55,640 --> 00:07:01,320 will go into that malls and and and he takes videos of him and, 125 00:07:01,320 --> 00:07:02,400 and it's. It's kind of. 126 00:07:02,400 --> 00:07:04,320 Creepy. It's literally like it feels 127 00:07:04,320 --> 00:07:08,920 like what a the start that the sight of a horror of a, of a, 128 00:07:09,080 --> 00:07:12,360 you know, a Horror Story. And I think that, you know, a 129 00:07:12,360 --> 00:07:15,720 lot of those BC offices are probably going to suffer the 130 00:07:15,720 --> 00:07:18,800 same fate. And I've been trying to think 131 00:07:18,800 --> 00:07:20,080 about, you know, what do you do to them? 132 00:07:20,080 --> 00:07:22,520 Are they natural self storage conversions? 133 00:07:22,520 --> 00:07:26,120 Are they, you know, we I kind of joke when we say that they're 134 00:07:26,120 --> 00:07:29,880 great for indoor mushroom farming in a very high cost area 135 00:07:29,880 --> 00:07:33,040 like New York City, which, you know, clearly a joke, right? 136 00:07:33,800 --> 00:07:38,280 Yeah. You know, are they potentially 137 00:07:38,280 --> 00:07:42,000 the sensory deprivation, you know, facilities. 138 00:07:42,000 --> 00:07:46,360 We don't know no one, no one. I actively discussed this topic 139 00:07:46,360 --> 00:07:51,520 with people on Twitter and no one has a clue to be able to 140 00:07:51,520 --> 00:07:56,200 repurpose them in a cost efficient way that's going to 141 00:07:56,200 --> 00:08:00,480 generate a real, you know, a reasonable return for the 142 00:08:00,480 --> 00:08:03,320 developers. So I don't think anyone has a 143 00:08:03,320 --> 00:08:06,240 solution for them. And then on the other side, if 144 00:08:06,240 --> 00:08:10,760 you have a building that's kind of a skinny rectangle with 145 00:08:10,760 --> 00:08:14,320 exposure of four sides, I mean that's a project that's got 146 00:08:14,320 --> 00:08:17,440 relatively easier to convert into residential. 147 00:08:17,440 --> 00:08:19,280 Yeah, Yeah. Well, yeah. 148 00:08:19,280 --> 00:08:22,120 You want people to have some sort of light in what they're, I 149 00:08:23,440 --> 00:08:27,160 don't know, maybe, maybe people need to revisit whatever Charlie 150 00:08:27,160 --> 00:08:30,080 Munger wrote about how he was doing the student dorms. 151 00:08:30,080 --> 00:08:33,600 Maybe, maybe there's a an answer that Charlie has left us a clue 152 00:08:33,600 --> 00:08:37,600 on because it's it would have, it's going to have to be a 153 00:08:37,600 --> 00:08:40,000 creative solution. They do not appear to me to be 154 00:08:40,000 --> 00:08:43,360 buildings that have an easy solution, so we'll see. 155 00:08:43,480 --> 00:08:48,720 I have been thinking about the the prospect of everyone talks 156 00:08:48,720 --> 00:08:53,600 about the high cost of high cost of higher education and you 157 00:08:53,600 --> 00:08:57,640 think about the lack of student housing in the city and men and 158 00:08:57,640 --> 00:09:00,440 and you know, throw Monger in there and his design for the 159 00:09:00,440 --> 00:09:02,880 dorm room in California. And obviously they got a lot of 160 00:09:02,880 --> 00:09:06,600 pushback from architects for having lack of windows on the 161 00:09:06,600 --> 00:09:09,600 inside and and you know, obviously that got that didn't 162 00:09:09,600 --> 00:09:11,320 get the green light to be approved. 163 00:09:11,320 --> 00:09:15,560 But I think that if someone was listening and and want to kind 164 00:09:15,560 --> 00:09:18,720 of build a, you know, take down a million square foot office 165 00:09:18,720 --> 00:09:21,320 building in New York City and then kind of turn the into your 166 00:09:21,320 --> 00:09:24,000 space into what your hall was like kind of stadium style. 167 00:09:24,000 --> 00:09:28,800 Did the exterior is as kind of dorm rooms with no exposure. 168 00:09:28,800 --> 00:09:31,640 And then just kind of have a bunch of activity centers and, 169 00:09:31,640 --> 00:09:33,600 you know, cubicles for starting on the interior. 170 00:09:33,600 --> 00:09:36,240 Like that's something that I didn't kind of like you're 171 00:09:36,240 --> 00:09:38,560 playing around with in my head in recent times. 172 00:09:38,560 --> 00:09:40,080 But no one's, no one's move. Yeah. 173 00:09:40,080 --> 00:09:42,680 I mean, the issue is there's just so many square feet, right? 174 00:09:42,800 --> 00:09:44,280 Like that could work for a building. 175 00:09:44,320 --> 00:09:45,880 I don't know about every building, right? 176 00:09:45,880 --> 00:09:47,640 So that's true. We'll see. 177 00:09:48,480 --> 00:09:54,760 What is your level of concern with how much risk sits on on 178 00:09:54,800 --> 00:10:00,760 bank balance sheets as a result of lending to these office 179 00:10:00,760 --> 00:10:06,360 facilities or office buildings? So I think I think it's 180 00:10:06,360 --> 00:10:11,080 important to take a step back and I'll give a long winded 181 00:10:11,120 --> 00:10:14,320 answer to that and take to that. I think let's start. 182 00:10:14,320 --> 00:10:18,920 With the shape that the banks are in today versus you know 183 00:10:18,920 --> 00:10:21,360 they what they were than the GFC and. 184 00:10:21,360 --> 00:10:24,680 I was. I was at the center of the 185 00:10:24,680 --> 00:10:28,320 GSCGFCI was a city doing real estate investment banking. 186 00:10:28,880 --> 00:10:33,160 And one thing that's clearly very different today is the bank 187 00:10:33,160 --> 00:10:36,000 balance sheets are level 30 times, which was very common at 188 00:10:36,000 --> 00:10:37,800 the time, right. I know most of the equity 189 00:10:37,800 --> 00:10:40,160 capital was over 10% of the book today. 190 00:10:40,640 --> 00:10:43,920 So I think that's a very important differentiation to 191 00:10:43,920 --> 00:10:47,160 make. And if you look at listen to 192 00:10:47,160 --> 00:10:49,440 some of the Aries calls of the bank, you know, most of them 193 00:10:49,440 --> 00:10:53,040 have kind of come out and stated that, you know, told you what 194 00:10:53,040 --> 00:10:56,520 their office exposures are. And you know, to varying degrees 195 00:10:56,520 --> 00:10:59,200 like there's nothing in the big banks. 196 00:10:59,200 --> 00:11:01,240 You know, I'm talking about the systemically important, like 197 00:11:01,240 --> 00:11:05,280 your, your, your city, your JP Morgan, Bank of America, No 198 00:11:05,280 --> 00:11:07,440 one's. Really, I have not heard of any 199 00:11:07,440 --> 00:11:09,240 of them saying that they have very large. 200 00:11:09,240 --> 00:11:12,320 Exposure to office and I think you'll probably find more of 201 00:11:12,320 --> 00:11:15,400 that risk among the regionals on the smaller banks. 202 00:11:15,880 --> 00:11:18,200 So I think, I think it's important to understand that 203 00:11:18,200 --> 00:11:21,280 today's environment is very different than the GFC because I 204 00:11:21,280 --> 00:11:23,680 do hear this chatter a lot, right people, people say, oh, 205 00:11:23,680 --> 00:11:25,360 this is going to be the repeat of GFC. 206 00:11:25,360 --> 00:11:27,040 You know, again, the banks are going to be stressed. 207 00:11:27,480 --> 00:11:30,200 I think the banks are in very different shape today of due to 208 00:11:30,200 --> 00:11:32,560 leverage ratio. But I think the Fed has also 209 00:11:32,560 --> 00:11:36,960 learned that you can't let a systemically important bank fail 210 00:11:37,200 --> 00:11:39,080 kind of what with what happened to Lehman, right? 211 00:11:39,080 --> 00:11:42,560 Lehman was an experiment. They let Lehman fail and and 212 00:11:42,560 --> 00:11:44,920 then the Fed kind of have to come in and then check all that 213 00:11:44,920 --> 00:11:46,640 liquidity. And then if you look at their 214 00:11:47,040 --> 00:11:50,800 that the feds response to First Republic, you know, they clearly 215 00:11:51,160 --> 00:11:54,040 did not want a regional bank to fail. 216 00:11:54,040 --> 00:11:57,080 They acted very quickly. And then I thought that might 217 00:11:57,080 --> 00:12:01,720 have been the beginning of a, you know, kind of liquidity 218 00:12:01,720 --> 00:12:05,760 tightening up and liquidity going away and the regulators 219 00:12:05,760 --> 00:12:09,240 active very, very quickly to stop the contagion from 220 00:12:09,240 --> 00:12:12,160 happening. So I know I didn't directly 221 00:12:12,160 --> 00:12:15,600 address your office question yet, but I think, you know, 222 00:12:15,600 --> 00:12:19,400 it's, it's important to, to have a framework to understand the, 223 00:12:19,520 --> 00:12:22,960 the shape of the bank, their, you know, balance sheet and kind 224 00:12:22,960 --> 00:12:27,600 of shape they're in. So I'm not aware of any large 225 00:12:27,600 --> 00:12:29,800 office exposure more on the systemically important, but 226 00:12:29,800 --> 00:12:31,400 doesn't mean that they don't exist. 227 00:12:31,400 --> 00:12:35,000 I think a lot of that lending, I think a lot of it exists at the 228 00:12:35,000 --> 00:12:38,080 regional bank, you know, at the regional banks and the regional 229 00:12:38,080 --> 00:12:42,080 banks, you know if one or few of them fail probably would not 230 00:12:42,080 --> 00:12:44,360 create a systemic shock to the system. 231 00:12:44,760 --> 00:12:49,960 So that's kind of, you know, I'm generally better at analyzing 232 00:12:49,960 --> 00:12:53,520 individual reads and companies then you know what, what's going 233 00:12:53,520 --> 00:12:56,320 on on the bank balance sheet. But I think a lot of that risk 234 00:12:56,320 --> 00:13:00,840 have also been offloaded to CMBS have been offloaded to some of 235 00:13:00,840 --> 00:13:04,200 the debt funds that's been set out to take place of, you know, 236 00:13:04,200 --> 00:13:07,320 what the banks do. And so the, the, the kind of 237 00:13:07,320 --> 00:13:11,840 compound answer is, is I know it's not a big risk for the 238 00:13:12,240 --> 00:13:15,160 systemic important banks. It's out there somewhere, but 239 00:13:15,160 --> 00:13:17,200 you know, I it's hard for me to quantify it. 240 00:13:18,080 --> 00:13:19,440 Yeah. I mean then I think that the 241 00:13:19,440 --> 00:13:25,040 general concern is just that this office exposure is going to 242 00:13:25,040 --> 00:13:30,240 take down banks willingness and and already has to lend, right. 243 00:13:30,240 --> 00:13:36,400 So, so is there a worry that it becomes systemic and, and from 244 00:13:36,400 --> 00:13:41,800 talking to you, I think the generally your view is that the 245 00:13:41,800 --> 00:13:46,560 capitalization of the banks is much better and overall we're 246 00:13:46,560 --> 00:13:49,720 unlikely to be headed for another GFC, right? 247 00:13:50,000 --> 00:13:51,960 I think so. I mean, I, I believe very 248 00:13:51,960 --> 00:13:55,640 strongly that we're not heading towards another GFC. 249 00:13:55,640 --> 00:13:59,840 And, and so like, one, the, the bank's capital ratios, their 250 00:13:59,840 --> 00:14:01,600 balance sheets. And secondly, you know, you 251 00:14:01,600 --> 00:14:06,600 think about the GFC and there were a ton of subprime loans at 252 00:14:06,600 --> 00:14:09,720 the time where, where the, the borrowers could, we could not 253 00:14:09,720 --> 00:14:11,880 afford them, right? I mean, that was a very, very 254 00:14:11,880 --> 00:14:13,560 different game. This feels like a story from the 255 00:14:13,560 --> 00:14:15,200 big shore. I was working on a gym and that, 256 00:14:15,200 --> 00:14:17,760 and there was like one me head saying to another me and he's 257 00:14:17,760 --> 00:14:20,520 like, I bought a house and I flip it three days later for a 258 00:14:20,520 --> 00:14:23,000 $50,000 game. And, and the, you know, the 259 00:14:23,000 --> 00:14:26,280 other me head goes, wait, how does that work? 260 00:14:26,320 --> 00:14:28,240 And the first guy goes, I don't know. 261 00:14:28,240 --> 00:14:30,080 It just does like I'm just keep doing it. 262 00:14:31,480 --> 00:14:36,480 Yeah, Well, I think we've seen not the same thing, but we've 263 00:14:36,480 --> 00:14:41,240 seen some of that behavior recently, but not, not what am I 264 00:14:41,240 --> 00:14:44,600 trying to say here without saying it directly, I guess that 265 00:14:44,600 --> 00:14:48,280 there, there seems to be pockets of people's willingness maybe to 266 00:14:48,280 --> 00:14:52,400 go into small syndicated deals that they find on social media 267 00:14:52,400 --> 00:14:55,720 where it seems like maybe they don't know how it works, but it 268 00:14:55,720 --> 00:14:58,560 works for now. And but I it's not a it's not a 269 00:14:58,560 --> 00:15:02,880 systemic issue, I don't think. And particularly on the systemic 270 00:15:02,880 --> 00:15:06,560 side, like particularly in what we directly invest in, which is 271 00:15:06,560 --> 00:15:09,800 a lot of big, you know, all the public traded Reeds and C corps. 272 00:15:10,160 --> 00:15:13,200 If you look at their balance sheet and the evolution of the 273 00:15:13,200 --> 00:15:17,320 balance sheets over time, we've looked at some of the top names 274 00:15:17,320 --> 00:15:21,120 like your apartment reads, your warehouse reads like Prologis. 275 00:15:21,240 --> 00:15:24,600 At one point Prologis than the GFC couldn't cover the interest 276 00:15:24,600 --> 00:15:27,400 payment, right? Get one below 1.1 times today. 277 00:15:27,400 --> 00:15:32,520 Prologis coverage ratio I believe is somewhere like in 278 00:15:32,520 --> 00:15:36,040 that 910 times and then most of the big large capital type 279 00:15:36,040 --> 00:15:39,840 family reads could cover their fixed cost of 6 to 8 times. 280 00:15:39,840 --> 00:15:43,320 I meant were and then by comparison you will get some of 281 00:15:43,400 --> 00:15:46,840 the private syndicate deals. Most of the time the bank will 282 00:15:46,840 --> 00:15:51,240 only underwrite it if you could cover 1.25 times. 283 00:15:51,240 --> 00:15:53,840 So the coverage ratio is night and day, right? 284 00:15:53,840 --> 00:15:58,920 To borrow this overuse analogy with Buffett and margin safety, 285 00:15:58,920 --> 00:16:00,600 right? If you think about a truck 286 00:16:00,600 --> 00:16:03,240 driving over a bridge on the private side, the bank space, 287 00:16:03,240 --> 00:16:06,080 we're saying, OK, if you got a truck that's 10,000 lbs, like as 288 00:16:06,160 --> 00:16:09,680 long as the bridge can handle 12,500 lbs like you're fine, you 289 00:16:09,680 --> 00:16:12,760 we'll give you that loan. But on the public read a lot of 290 00:16:12,760 --> 00:16:14,120 large cap public reads like you know. 291 00:16:14,640 --> 00:16:18,320 You could drive a truck that's 80,000, you know 60,000 lbs. 292 00:16:18,320 --> 00:16:21,040 Over the bridge could handle a. Truck that's that's sixty 293 00:16:21,040 --> 00:16:23,600 £80,000. So it's a very different 294 00:16:23,600 --> 00:16:27,520 landscape and also like if you look at the capital market 295 00:16:27,520 --> 00:16:30,840 transaction of large cap multifamily you know mid 296 00:16:30,840 --> 00:16:33,840 American can them both issue hundreds of $1,000,000 of debt 297 00:16:33,880 --> 00:16:39,880 unsecured bonds that are 10 year fixed rate at between 4.9 and 5% 298 00:16:39,880 --> 00:16:42,120 earlier this year so. The capital markets. 299 00:16:42,120 --> 00:16:45,440 Is wide open for a lot of these rates, which is very different. 300 00:16:45,440 --> 00:16:49,720 You know, I lived through their GFC and you have general growth 301 00:16:49,840 --> 00:16:53,080 properties, right, Bill Ackman's famous investment, but one of 302 00:16:53,080 --> 00:16:58,040 his greatest investment was General Growth bought a another 303 00:16:58,040 --> 00:17:01,160 mall company and issue $5 billion. 304 00:17:01,160 --> 00:17:03,720 If I remember correctly. Five bill knows unsecured debt 305 00:17:03,720 --> 00:17:09,000 and and that loan came due in a big chunky bullet and it came 306 00:17:09,000 --> 00:17:13,520 due in 2009 and the capital markets was not open and you and 307 00:17:13,520 --> 00:17:15,720 and all of a sudden like you didn't they didn't have any 308 00:17:15,720 --> 00:17:19,800 issue servicing that, you know, the the interest payment on that 309 00:17:19,800 --> 00:17:22,960 loan, but because it came due at a time capital market was just 310 00:17:22,960 --> 00:17:26,040 absolutely not open, jungle had to file for bankruptcy. 311 00:17:26,400 --> 00:17:29,160 And and that is. You know, I think one of the key 312 00:17:29,160 --> 00:17:33,840 difference is that we, we were just at Mary early in June and 313 00:17:33,840 --> 00:17:36,560 all the Reit's that we met with none of them, you know, they, 314 00:17:36,560 --> 00:17:40,160 they could tell us exactly within like a 50% basis coin. 315 00:17:40,160 --> 00:17:43,800 If they went to the marketing issue debt today, you know what, 316 00:17:43,800 --> 00:17:46,760 what would it cost? And it's generally between 5 to 317 00:17:46,760 --> 00:17:49,520 10 years fixed rate. It's unsecured. 318 00:17:49,720 --> 00:17:51,440 They don't need to mortgage any of the assets. 319 00:17:51,440 --> 00:17:53,480 So the capital markets are wide open. 320 00:17:53,480 --> 00:17:56,720 So, so you and I both follow a lot of their private syndicate 321 00:17:56,720 --> 00:17:59,320 deals. A lot of them use floating rate, 322 00:17:59,320 --> 00:18:03,040 that very short term maturity and a lot of them are kind of 323 00:18:03,040 --> 00:18:04,600 have to deal with lenders right now. 324 00:18:04,600 --> 00:18:07,560 But on the public reset, we're not seeing any really any side 325 00:18:07,560 --> 00:18:10,120 of the stress. What people, what the CEO's are 326 00:18:10,120 --> 00:18:15,240 more concerned about is actually some of the companies we've met 327 00:18:15,240 --> 00:18:18,120 with are are too small and they'll worry about like how how 328 00:18:18,120 --> 00:18:22,000 do they grow into this scale to be in a public traded company? 329 00:18:22,320 --> 00:18:26,600 So they're public now, but they are subscale and the public 330 00:18:26,600 --> 00:18:31,400 company costs are sort of eating up the some of the benefits that 331 00:18:32,200 --> 00:18:34,560 that they otherwise would. They're they're too small to get 332 00:18:34,560 --> 00:18:36,840 the benefits and the costs are too high. 333 00:18:37,480 --> 00:18:40,520 Well, Yep, that may be changing in the not too distant future. 334 00:18:40,520 --> 00:18:42,000 We'll see. I think it'd probably be good 335 00:18:42,000 --> 00:18:45,800 for America if it does. OK, I, I want to go back real 336 00:18:45,800 --> 00:18:49,000 quick because we started the conversation with Vornado or 337 00:18:49,000 --> 00:18:52,520 Vornado. And you know, I've, I've heard 338 00:18:52,520 --> 00:18:57,640 you pitch this idea on this week in Intelligent investing with 339 00:18:57,640 --> 00:19:01,440 Elliot and John. And I don't know what your like 340 00:19:01,440 --> 00:19:04,000 level of confidence is relative to when you bought it or 341 00:19:04,000 --> 00:19:06,880 whatever. But but for purposes of how you 342 00:19:06,880 --> 00:19:12,760 go about your business, you mind walking through like why we did 343 00:19:12,760 --> 00:19:17,680 that walking tour and how you looked at at the capital 344 00:19:17,680 --> 00:19:23,640 structure and where you thought the opportunity was when you put 345 00:19:23,640 --> 00:19:26,200 the position on? Yeah, absolutely. 346 00:19:26,240 --> 00:19:29,760 So generally when we look at a new investment and what we're 347 00:19:29,760 --> 00:19:33,600 trying to do is there are multiple ways that we try to 348 00:19:33,800 --> 00:19:35,480 underwrite investment. And. 349 00:19:35,560 --> 00:19:39,400 We really believe, I know everyone stresses data and we 350 00:19:39,400 --> 00:19:42,440 rely heavily on data, but one of the things that we do that's a 351 00:19:42,440 --> 00:19:45,320 little bit different than public market is, is we, we think like 352 00:19:45,320 --> 00:19:47,760 private owners, right. We think, OK, if I'm going to 353 00:19:47,760 --> 00:19:50,320 own this position, but I'm going to own this company, I need to 354 00:19:50,320 --> 00:19:52,960 put boots on the ground. And that could be in New York 355 00:19:52,960 --> 00:19:54,640 City, that could be down in Miami. 356 00:19:55,120 --> 00:19:59,520 We we need to see the asset. We need to get a feel for the 357 00:19:59,520 --> 00:20:02,360 location yourself. We need to get a feel for the 358 00:20:02,360 --> 00:20:06,480 people around in and what some in our business call vibes, 359 00:20:06,560 --> 00:20:07,800 right? Like, you know what, what's a 360 00:20:07,800 --> 00:20:11,640 vibe in the neighborhood? And the Vines gives me a lot of. 361 00:20:12,440 --> 00:20:16,440 Feedback and data like it is you know it is this an area where a. 362 00:20:17,120 --> 00:20:21,320 White collar professional who's making, you know, $250,000, like 363 00:20:21,320 --> 00:20:25,240 would he be happy living here? Like that's that's an assessment 364 00:20:25,240 --> 00:20:27,520 that we take very, very seriously. 365 00:20:27,840 --> 00:20:30,400 So boots on the ground, any time that we could put boots on the 366 00:20:30,400 --> 00:20:32,720 ground, we're going to. I mean, you know, I've flown 367 00:20:32,720 --> 00:20:36,680 over the US, been down to Miami and spent time in Hawaii, been 368 00:20:37,000 --> 00:20:40,920 spent time in taxes Vegas, you know, sometimes multiple days, 369 00:20:40,920 --> 00:20:42,320 right? Multiple days waiting up to a 370 00:20:42,320 --> 00:20:46,760 week for a single conflict to get a feel for and interesting, 371 00:20:46,920 --> 00:20:52,040 you know, in real estate you have sometimes an area is on the 372 00:20:52,160 --> 00:20:55,200 edge of becoming the up and coming neighborhood. 373 00:20:55,360 --> 00:20:59,640 And we want to understand that, hey, are we in the direction of 374 00:20:59,640 --> 00:21:02,960 this trend or are we retrieving away from that? 375 00:21:02,960 --> 00:21:06,720 And is there some sort of natural geographic barrier where 376 00:21:06,960 --> 00:21:11,080 if all the demand is, is coming to this one area and you have a 377 00:21:11,080 --> 00:21:15,480 natural barrier such as a mountain range or a river or an 378 00:21:15,480 --> 00:21:19,240 ocean that that you'd naturally just can't bring on new supply, 379 00:21:19,320 --> 00:21:21,240 right? So that's a really important 380 00:21:21,240 --> 00:21:24,240 part of the process. And then obviously, like we 381 00:21:24,240 --> 00:21:27,800 spend a lot of time looking at the primary data sources, the QS 382 00:21:27,800 --> 00:21:30,840 and the KS annual reports and and the supplementals. 383 00:21:30,840 --> 00:21:34,320 One of the biggest advantage of reinvesting is company provide 384 00:21:34,320 --> 00:21:38,240 you with incredible, incredible amount of detail in the 385 00:21:38,240 --> 00:21:40,080 supplementals. I mean, the supplementals a lot 386 00:21:40,080 --> 00:21:43,080 of times could be fourty 50 pages and you could get 387 00:21:43,400 --> 00:21:46,480 occupancy data. You know, rent and and Yahoo 388 00:21:46,520 --> 00:21:49,440 tenants is on individual asset. You know when? 389 00:21:49,440 --> 00:21:50,920 When. You kind of think about. 390 00:21:50,920 --> 00:21:55,040 Buffett and Seth Corn and talk about bottoms up analysis, 391 00:21:55,040 --> 00:21:58,480 right, asset by asset analysis. This is one of the best asset 392 00:21:58,480 --> 00:22:02,480 class to do that and we spent a lot of time looking at the 393 00:22:02,480 --> 00:22:07,480 supplementals looking at and we track trends over time on 394 00:22:07,480 --> 00:22:11,440 specific properties. And you know, what's really 395 00:22:11,440 --> 00:22:15,640 unique about the Pornado analysis is you, I think a lot 396 00:22:15,640 --> 00:22:19,800 of times what people get wrong is they'll look at Fornado from 397 00:22:19,800 --> 00:22:22,440 a consolidated leverage perspective, right? 398 00:22:22,440 --> 00:22:26,000 They'll look at the consolidated then and they'll say, Oh my God, 399 00:22:26,000 --> 00:22:28,480 this $10 billion of debt, you know, there's too much then. 400 00:22:28,480 --> 00:22:32,880 And if you look at the even that ratio, it's over lever by REIT 401 00:22:32,880 --> 00:22:37,440 mafia standards. And what we do is we'll look at 402 00:22:37,440 --> 00:22:40,360 the unsecured debt. So if you own the prefer or the 403 00:22:40,360 --> 00:22:43,880 common that's got that's got to be more junior to the unsecured 404 00:22:43,880 --> 00:22:49,080 debt, right and the secured debt which actually would actually 405 00:22:49,080 --> 00:22:52,600 sound like that more senior. To the unsecured, the common 406 00:22:52,600 --> 00:22:54,600 prefer. But in real estate there's a 407 00:22:54,760 --> 00:22:58,640 very unique quirk where a mortgage has only has 408 00:22:59,120 --> 00:23:01,120 collateralized by a single asset. 409 00:23:01,120 --> 00:23:03,240 Very often it's only collateralized by the single 410 00:23:03,240 --> 00:23:05,600 asset that the mortgage has a claim on. 411 00:23:05,960 --> 00:23:08,200 So it could be one single building. 412 00:23:08,520 --> 00:23:12,680 And as we were walking around New York City, a prime example 413 00:23:12,680 --> 00:23:17,440 is one of the buildings on Park Ave., which is has a $400 414 00:23:17,440 --> 00:23:21,960 million debt on and it's it's an older tire looking office 415 00:23:21,960 --> 00:23:23,640 building. It doesn't look like much. 416 00:23:23,960 --> 00:23:27,800 But Fornado actually has an agreement with Citadel to build 417 00:23:27,800 --> 00:23:31,080 their future headquarters there. And at any given time, you know, 418 00:23:31,080 --> 00:23:34,680 Fornado could put that building back to you Citadel for $900 419 00:23:34,680 --> 00:23:37,360 million. So what looked like an older 420 00:23:37,360 --> 00:23:42,240 building actually has a that's a non recourse mortgage, right, 421 00:23:42,240 --> 00:23:45,120 where they could kind of they give the keys back to the bank 422 00:23:45,120 --> 00:23:48,720 if it goes really South and they're not liable for for any 423 00:23:48,720 --> 00:23:51,680 more of that any more than $400 million on that. 424 00:23:51,680 --> 00:23:54,280 But they also have a put option to citadel. 425 00:23:54,560 --> 00:23:59,760 So one way, one way to visualize a lot of this is that for NATO 426 00:23:59,760 --> 00:24:03,880 has the silos, right, All the debt, a lot of the debt are non 427 00:24:03,880 --> 00:24:06,280 requisite, a couple properties where they guarantee the debt 428 00:24:06,280 --> 00:24:08,880 on, but that's that's the exception rather than norm. 429 00:24:09,200 --> 00:24:12,560 So you kind of think of it as there's all the silo with white 430 00:24:12,600 --> 00:24:17,240 equity capital in them and you can you can let some of them 431 00:24:17,240 --> 00:24:18,560 should teach with the fault, right. 432 00:24:18,560 --> 00:24:21,840 You know when they do own some of those lower quality BNC 433 00:24:21,840 --> 00:24:25,720 office where it like ideally what you want is you want a 434 00:24:25,720 --> 00:24:30,600 bunch of dead that are 9095 or even 100% loan to value and you 435 00:24:30,600 --> 00:24:31,600 can just tell the. Bancake. 436 00:24:31,600 --> 00:24:32,800 We don't. We don't want that. 437 00:24:32,800 --> 00:24:36,760 And and that, that goes away, right, That that goes away and, 438 00:24:36,760 --> 00:24:38,760 and it doesn't really cost you much. 439 00:24:39,200 --> 00:24:43,240 So I think anytime you will get a read that has a combination of 440 00:24:43,360 --> 00:24:47,400 unsecured debt, preferred common and mortgages that are non 441 00:24:47,400 --> 00:24:50,040 recourse to the common shareholder, you really need to 442 00:24:50,040 --> 00:24:54,400 do a silo analysis, capital structure analysis and identify 443 00:24:54,400 --> 00:24:58,480 where the silos are and if there's any optionality and you 444 00:24:58,480 --> 00:25:03,000 should equate the faulty on certain portion of the property. 445 00:25:03,000 --> 00:25:05,200 Actually, you know, if you look at my there's, you know. 446 00:25:05,200 --> 00:25:09,480 Got that book The Distressed Analysis but I have Steven G 447 00:25:09,480 --> 00:25:12,400 Moore in a vac there with a chess board. 448 00:25:12,520 --> 00:25:15,280 I mean, that book was very educational and helped me 449 00:25:15,280 --> 00:25:20,160 understand how in a bankruptcy liquidation, how you go about 450 00:25:20,240 --> 00:25:23,880 liquidating a coffee. That has various different type 451 00:25:23,880 --> 00:25:27,400 of den and then the mortgage then and how the process of like 452 00:25:27,440 --> 00:25:30,240 how the water floor actually flows in a corporation. 453 00:25:30,240 --> 00:25:33,200 Yeah. And I think that the question 454 00:25:33,320 --> 00:25:39,040 that I guess I would pose to you is, you know, why are you able 455 00:25:39,040 --> 00:25:43,520 to add value in real estate analysis over some sort of 456 00:25:43,520 --> 00:25:46,720 market cap weighted ETF of Reit's, right? 457 00:25:46,720 --> 00:25:52,560 If I wanted REIT exposure, why should I not just go out and buy 458 00:25:52,560 --> 00:25:55,280 some random ETF that's got a bunch of Reit's in it? 459 00:25:55,280 --> 00:25:58,400 Like where is the opportunity for you to add value? 460 00:25:58,400 --> 00:26:01,360 And I think it's on the back of some of this analysis. 461 00:26:01,360 --> 00:26:03,040 But I'm curious to hear you talk about it. 462 00:26:04,560 --> 00:26:09,560 I think a lot of it is on the back of some of this analysis. 463 00:26:09,600 --> 00:26:15,600 I think that the so on the ETF and our mutual friend Hunter 464 00:26:15,600 --> 00:26:18,040 actually does a great service on. 465 00:26:18,120 --> 00:26:19,240 Kind of, you know. One of the. 466 00:26:19,240 --> 00:26:22,960 Biggest ETFs out there is the Vanguard Real Estate, ATV and Q. 467 00:26:23,520 --> 00:26:27,960 And it's Mark cap weight is. So what they do like today, we 468 00:26:27,960 --> 00:26:31,160 believe that the best opportunities are actually in 469 00:26:31,160 --> 00:26:33,960 multifamily and shopping centers. 470 00:26:33,960 --> 00:26:36,320 And and Hunter's been very vocal about this. 471 00:26:36,360 --> 00:26:40,600 You know, his opinion is that multi families actually the 472 00:26:40,600 --> 00:26:45,000 largest real estate asset class. But because you know, the ETF 473 00:26:45,000 --> 00:26:50,080 use a market cap weighted so data center reads and warehouse 474 00:26:50,080 --> 00:26:53,000 reads Prologis is roughly like $100 billion market cap 475 00:26:53,000 --> 00:26:56,680 warehouse read actually dominates that that index. 476 00:26:56,680 --> 00:27:00,600 And then by comparison you got mid America and you know a 477 00:27:00,640 --> 00:27:04,200 Bombay and then and Camden they're all in that 10 to $20 478 00:27:04,200 --> 00:27:05,800 billion. And then there are other 479 00:27:05,800 --> 00:27:09,840 multifamily reads that are in that one to $5 billion market 480 00:27:09,840 --> 00:27:13,520 cap range that I think that there is a tremendous amount of 481 00:27:13,520 --> 00:27:16,280 value in those multifamily reads. 482 00:27:16,320 --> 00:27:19,920 And also in other class asset classes where where I mean 483 00:27:19,920 --> 00:27:24,720 generally I think the I think the index one it's overweighted 484 00:27:24,720 --> 00:27:28,240 to data centers and warehouses and I think there are a ton of 485 00:27:28,240 --> 00:27:32,200 values on multifamily. And then kind of we get to do a 486 00:27:32,200 --> 00:27:35,240 lot of sharpshooting, right. You know, today's environment, 487 00:27:35,240 --> 00:27:39,800 it's kind of a kit in a candy shop dynamic for me where we 488 00:27:39,800 --> 00:27:42,280 could, we can have a dozen names in the portfolio. 489 00:27:42,280 --> 00:27:46,040 It wouldn't always like this in the ZERP world since 2013, every 490 00:27:46,040 --> 00:27:49,640 year we may be able to find one or two really good real estate 491 00:27:49,640 --> 00:27:52,840 investment and we tend to run fairly concentrated and some of 492 00:27:52,840 --> 00:27:56,400 our positions have been as high as you know, 2325% at. 493 00:27:56,400 --> 00:27:58,800 Cost, because that's how much work we do. 494 00:27:58,800 --> 00:28:01,360 And that's, that's a cuddle conviction that we built, right? 495 00:28:01,800 --> 00:28:06,840 And I think it is that level underwriting where you walk the 496 00:28:06,840 --> 00:28:10,520 building, you form an opinion, you form an opinion, you analyze 497 00:28:10,640 --> 00:28:14,120 every single project the company has allocated capital to. 498 00:28:14,120 --> 00:28:17,200 You come up with a project level, you know, IR that's fully 499 00:28:17,200 --> 00:28:21,280 loaded for interests and SG and A you have an opinion on the 500 00:28:21,280 --> 00:28:24,560 long term structural, you know, trends within that asset class. 501 00:28:24,880 --> 00:28:28,400 So we get to be sharp shooters rather than just having a broad 502 00:28:28,400 --> 00:28:30,600 index. And I think that, you know, we 503 00:28:30,600 --> 00:28:33,920 have a very short opinion that multifamily rates are going to 504 00:28:33,920 --> 00:28:37,400 outperform because of the high absolute cap rates that you get. 505 00:28:37,400 --> 00:28:40,840 Again, that and they're incredibly, you know, solid 506 00:28:40,840 --> 00:28:44,400 balance sheet today, which is way better than anything that 507 00:28:44,400 --> 00:28:46,160 you can find in the private side. 508 00:28:46,160 --> 00:28:49,200 And and that's kind of partially confirmed by a lot of Reese CE 509 00:28:49,360 --> 00:28:51,440 OS. Collecting to buy back 510 00:28:51,440 --> 00:28:54,480 multifamily reach shares rather than go out and do private 511 00:28:54,480 --> 00:28:57,120 deals. So I think, I think an index 512 00:28:57,440 --> 00:29:01,600 kind of will weight you more towards, you know, data centers 513 00:29:01,600 --> 00:29:05,120 and more houses when the most obvious bargain is. 514 00:29:05,120 --> 00:29:06,840 Actually on the multifamily side. 515 00:29:06,840 --> 00:29:08,680 And then there's always a man Bill. 516 00:29:08,680 --> 00:29:12,600 There's always a quirky company here or there, right? 517 00:29:12,600 --> 00:29:18,000 There is, there is a company where maybe you go talk to ACEO 518 00:29:18,000 --> 00:29:21,280 and he's just been tired. Like, you know, he like the odds 519 00:29:21,280 --> 00:29:24,800 of that conflict being taken out, you know, going private is 520 00:29:24,800 --> 00:29:30,560 very high and and you know, there's no MMPI in that dynamic, 521 00:29:30,560 --> 00:29:33,840 but like you just have a general sense that a this this could 522 00:29:33,840 --> 00:29:38,160 very likely be an acquisition target or is a lot of times you 523 00:29:38,160 --> 00:29:42,680 could kind of identify it was an ex couple that that blocks all 524 00:29:42,680 --> 00:29:45,360 made by right. Like you kind of see that. 525 00:29:45,400 --> 00:29:49,800 OK, blacks home recently did the air community deal and you know, 526 00:29:49,800 --> 00:29:53,280 if you have a high enough calf rate, decent, you know, asset 527 00:29:53,280 --> 00:29:56,640 quality, blacks owned KKR. You know, there's a lot of 528 00:29:56,640 --> 00:30:00,920 private equity dry powder that may want to roll up a lot of 529 00:30:00,920 --> 00:30:03,080 these companies. And it's also like bringing this 530 00:30:03,240 --> 00:30:06,760 up another really interesting point, which is it blacks some 531 00:30:06,760 --> 00:30:09,520 is supposedly the smartest real estate guy, but then they're 532 00:30:10,680 --> 00:30:14,600 there are some holy guards every 15% IRS with their LP's. 533 00:30:14,600 --> 00:30:18,640 But but to do that, they're buying a portfolio, you know one 534 00:30:18,640 --> 00:30:22,800 of our portfolio companies and and and paying very nice premium 535 00:30:22,800 --> 00:30:25,520 for it like. What it's just interesting to to 536 00:30:25,520 --> 00:30:27,480 go through. That thought experiment and we 537 00:30:27,480 --> 00:30:29,800 had a couple companies get bought out by Black Soul in the 538 00:30:29,800 --> 00:30:31,960 past. It's just a really. 539 00:30:31,960 --> 00:30:34,000 Interesting thought experiment to to think about. 540 00:30:35,000 --> 00:30:37,520 I mean, when you're talking about the multifamily 541 00:30:37,520 --> 00:30:41,920 opportunity, I mean, if I if I guess that one of the things 542 00:30:41,920 --> 00:30:46,520 that I get a little hung up on when I think about this as an 543 00:30:46,520 --> 00:30:52,040 idea is I mean, what do you think a random cap rate is right 544 00:30:52,040 --> 00:30:54,640 now for like a mid American or or Camden? 545 00:30:54,640 --> 00:30:57,600 Where do you think they're actually trading like 6 1/2 six? 546 00:30:58,240 --> 00:31:01,400 Yeah, 6636. Four is, is, I mean we, we 547 00:31:01,400 --> 00:31:04,680 actually just calculated the cap rate last night and yeah, I 548 00:31:04,680 --> 00:31:07,920 mean, we, we got, we got mid market at six three. 549 00:31:07,920 --> 00:31:12,160 We got Camden, the six, four right, Avon, Avon Bays 5 three. 550 00:31:12,160 --> 00:31:14,800 So the coastals are in the low to mid fives. 551 00:31:14,800 --> 00:31:19,360 The some bills are generally around like, you know, 6/3 to 552 00:31:19,360 --> 00:31:22,280 6/5. And we're not seeing any. 553 00:31:22,280 --> 00:31:25,600 Sorts of transaction reflect those cap rates on the private 554 00:31:25,600 --> 00:31:29,120 side right now. So if I go back like let's say 555 00:31:29,120 --> 00:31:34,440 2015 to 2019, right, that's a fairly normalized period. 556 00:31:35,000 --> 00:31:40,360 So over over five years the funds from operations per share 557 00:31:40,560 --> 00:31:47,760 right, diluted increased from five $5.69 to $6.55. 558 00:31:47,760 --> 00:31:54,280 So like under a dollar over five years on an FFO per share basis, 559 00:31:54,280 --> 00:31:56,760 right. So that's, I mean simple math, 560 00:31:56,760 --> 00:32:00,200 it's not going to be 4%, but roughly of growth. 561 00:32:00,800 --> 00:32:06,760 I get my dividends back, right, which it's, you know, not not 562 00:32:06,760 --> 00:32:08,600 exactly tax advantage, but that's fine. 563 00:32:09,000 --> 00:32:12,880 So like versus the 10 year or something, right, the spread, 564 00:32:13,480 --> 00:32:17,960 the spread doesn't seem very wide and the absolute return 565 00:32:17,960 --> 00:32:22,080 doesn't seem very high for something that is growing fairly 566 00:32:22,080 --> 00:32:25,680 slow on a per share basis. So what am I missing if that's 567 00:32:25,680 --> 00:32:27,920 what I tell you, right, If that's, if that's kind of how I 568 00:32:27,920 --> 00:32:32,000 look at this at first glance, plus there's a lot of supply 569 00:32:32,000 --> 00:32:35,520 coming onto the market like why is this an opportunity right now 570 00:32:35,520 --> 00:32:39,320 versus isn't it kind of fairly priced, I guess would be the 571 00:32:40,280 --> 00:32:41,720 the, the question? Sure. 572 00:32:41,760 --> 00:32:45,240 I mean, I think, I think anytime you look at real estate you want 573 00:32:45,280 --> 00:32:48,480 to the cap rate analysis probably one of the most 574 00:32:48,480 --> 00:32:51,600 important analysis. That you should do and the 575 00:32:51,600 --> 00:32:53,360 analysis. You just walk through in terms 576 00:32:53,360 --> 00:32:56,440 of, you know, if I buy this, what like I pay X dollars per 577 00:32:56,440 --> 00:32:59,680 share the FFO, what's the FFO multiple, which is kind of 578 00:32:59,680 --> 00:33:02,040 approximate to to AP multiple, right? 579 00:33:02,080 --> 00:33:05,200 And and what is the expected growth of that over time? 580 00:33:05,560 --> 00:33:07,920 I think that's one of the most fundamental one, one of the most 581 00:33:07,920 --> 00:33:10,360 critical analysis that anyone should do, right. 582 00:33:11,040 --> 00:33:15,280 The second, second part of it will be what is the, the dollar 583 00:33:15,280 --> 00:33:17,280 per unit, dollar per square foot. 584 00:33:17,320 --> 00:33:21,560 You know every asset class has, you know, a a specific metric, 585 00:33:21,560 --> 00:33:22,760 right? Of. 586 00:33:23,000 --> 00:33:26,000 Deals being done in the market and also replacement cost, 587 00:33:26,160 --> 00:33:28,360 right. And I think that if you look at 588 00:33:28,360 --> 00:33:32,640 mid market and Camden and I've asked the Camden President at 589 00:33:32,640 --> 00:33:36,560 Navy this year, you know what, what do they think to replicate 590 00:33:36,560 --> 00:33:37,960 this portfolio? What would it cost? 591 00:33:38,280 --> 00:33:43,160 And the answer is somewhere in the 300 thirty $340,000 in 592 00:33:43,160 --> 00:33:46,280 Camden right now trading probably around what, two 3240 593 00:33:46,280 --> 00:33:49,240 per year per door? Per door? 594 00:33:49,280 --> 00:33:52,880 Yeah, per door. So why does that even matter, 595 00:33:52,960 --> 00:33:55,600 right? And I think the answer goes into 596 00:33:55,600 --> 00:34:00,960 supply reaction, but one like it's generally good idea to buy 597 00:34:00,960 --> 00:34:04,600 below replacement cost, you know that offers you protection. 598 00:34:04,960 --> 00:34:06,680 But you know, another thing to look at. 599 00:34:06,680 --> 00:34:10,560 Is the supply reaction in today's environment, I think one 600 00:34:10,560 --> 00:34:15,000 could kind of get into this faulty analysis where in 2021 601 00:34:15,000 --> 00:34:17,520 the 10 year yield was below 1%, right? 602 00:34:17,520 --> 00:34:20,800 And then so you go out and buy a multi family in the sun bell 603 00:34:20,960 --> 00:34:25,360 that have very good near term rent growth at say 3 1/2 four 604 00:34:25,360 --> 00:34:27,320 percent cap rate. And you say, whoa, look at that 605 00:34:27,320 --> 00:34:29,120 spread. That's a that's a three, you 606 00:34:29,120 --> 00:34:33,280 know, 200 and 72300 and you know, 20 basis point spread, 607 00:34:33,280 --> 00:34:35,360 right? That's that's a really nice 608 00:34:35,360 --> 00:34:39,600 healthy spread, except that in that kind of environment, the 609 00:34:39,600 --> 00:34:43,840 developers had every incentive to to put a shovel in the ground 610 00:34:43,840 --> 00:34:47,000 and and develop and build new supply, right, which is exactly 611 00:34:47,000 --> 00:34:49,760 what happened in the sun Bill. And you have this, you know, 612 00:34:49,760 --> 00:34:52,480 right now, currently one of the biggest deliveries in history 613 00:34:52,880 --> 00:34:54,560 going back, you know, a few decades. 614 00:34:55,000 --> 00:34:58,720 And in today's environment, the data that we see from can what 615 00:34:58,720 --> 00:35:02,000 Camden has has, you know, shared in their earnings calls. 616 00:35:02,000 --> 00:35:05,040 And also just like being on Twitter and talking to a lot of 617 00:35:05,040 --> 00:35:08,320 real estate developer like no one could justify, no one could 618 00:35:08,320 --> 00:35:10,760 justify putting a shovel in the ground today. 619 00:35:10,760 --> 00:35:13,680 And this is due to high construction costs is high, high 620 00:35:13,680 --> 00:35:16,720 construction loan cost. And also the banks are not 621 00:35:16,720 --> 00:35:20,200 willing to go up to 60% loan to value, you know, whatever the. 622 00:35:20,200 --> 00:35:23,160 Previous metric is. That loan to value has probably 623 00:35:23,160 --> 00:35:26,400 come down by 1015%. All right. 624 00:35:26,400 --> 00:35:29,920 So the project IR is like it used to be that you could 625 00:35:29,920 --> 00:35:33,160 develop to from a ground up perspective, you could develop 626 00:35:33,160 --> 00:35:37,360 to a 6% unlevered yield and you could sell that property at a 627 00:35:37,360 --> 00:35:40,400 four and a quarter 4 1/2 percent cap rate and you could get a 628 00:35:40,400 --> 00:35:44,240 really nice 2025% IR older four year holding period. 629 00:35:44,520 --> 00:35:48,560 Today we run that calculation probably 1000 different times 630 00:35:48,560 --> 00:35:52,960 here at Ryzome and but you know, we think that you're settling in 631 00:35:53,520 --> 00:35:58,560 at six, seven 8% lever IR it by taking on a ton of risk, right. 632 00:35:58,560 --> 00:36:01,840 So the LP's obviously saying. Well, why would I take? 633 00:36:01,840 --> 00:36:07,560 On that risk when the 10 year is 4344 right now and that that's 634 00:36:07,560 --> 00:36:09,240 not enough spread to justify the risk. 635 00:36:09,600 --> 00:36:12,600 So, so I think, I think that, you know, we have a shrunk 636 00:36:12,600 --> 00:36:18,000 opinion that if you buy in at a six, four cap rate today, you 637 00:36:18,360 --> 00:36:20,720 the the, all the supply that's being delivered right now, which 638 00:36:20,720 --> 00:36:23,640 which was one of the big, really big fear is that that's going to 639 00:36:23,640 --> 00:36:26,920 cause rent to decline. That's being absorbed very, very 640 00:36:26,920 --> 00:36:30,720 rapidly right now with very little impact to, to actual 641 00:36:30,720 --> 00:36:33,320 rent. You know, it's not causing rent 642 00:36:33,320 --> 00:36:36,040 declines or if there are, it's, it's very minimal, right? 643 00:36:36,040 --> 00:36:38,720 It's one or two percent and that's been rapidly been 644 00:36:39,040 --> 00:36:41,480 absorbed by the market. But what's going to happen 645 00:36:41,480 --> 00:36:44,920 looking now and next year? Remember, it takes like, you 646 00:36:44,920 --> 00:36:48,000 know, I think a lot of times like the actual guy with the 647 00:36:48,000 --> 00:36:50,440 Bloomberg Terminal with the talking hands, I think you could 648 00:36:50,440 --> 00:36:53,360 just snap a finger and then all of a sudden like things just get 649 00:36:53,360 --> 00:36:55,880 built like like all these multifamily building just like 650 00:36:55,880 --> 00:36:58,840 appear magically overnight doesn't work like that. 651 00:36:58,840 --> 00:37:03,360 And it's probably going to take you two to four years to bring 652 00:37:03,360 --> 00:37:06,000 the supply on. So we're kind of real excited 653 00:37:06,000 --> 00:37:08,000 getting in at a six, four cap rate. 654 00:37:08,320 --> 00:37:11,800 And I mean it's been the last time we talked it was probably 655 00:37:11,800 --> 00:37:15,920 about you know 77475 for most of these reads. 656 00:37:15,920 --> 00:37:17,760 So it's come down, the prices come up. 657 00:37:18,160 --> 00:37:21,480 But I think that what you're going to run into is that in 658 00:37:21,480 --> 00:37:25,120 2020, 2025 and beyond, you got to have a three-year period 659 00:37:25,640 --> 00:37:28,600 where a lot of these multi family reads to probably push 660 00:37:28,600 --> 00:37:31,840 rent fairly aggressively. And that will last for a 661 00:37:31,840 --> 00:37:34,480 three-year time period. And you know, if I learned one 662 00:37:34,480 --> 00:37:38,360 thing about Wall Street and you know, reinvesting in the public 663 00:37:38,360 --> 00:37:41,720 markets is that a lot of times they don't function like a 664 00:37:41,720 --> 00:37:44,720 private real estate owner. And they don't think in these 665 00:37:44,720 --> 00:37:47,840 like, you know, I'm the owner. Like what do I, what are my 666 00:37:47,840 --> 00:37:49,920 returns if I hold this for 5-10 years? 667 00:37:49,920 --> 00:37:53,120 They think well, you know, you got the supply like I don't want 668 00:37:53,120 --> 00:37:55,640 it, I don't want to own this when there is a lot of supply 669 00:37:55,640 --> 00:37:58,440 being like I don't want them to own it when the rent comps are 670 00:37:58,440 --> 00:38:00,360 negative. I wanted to own it when the rent 671 00:38:00,360 --> 00:38:03,960 comes up positive. So I think that one way of 672 00:38:03,960 --> 00:38:06,480 thinking about what why we're really excited we've done this 673 00:38:06,480 --> 00:38:11,400 math a kazoo in different times is that I think that if you look 674 00:38:11,400 --> 00:38:15,160 at Blackstone's recent cop, right, if you believe Blackstone 675 00:38:15,160 --> 00:38:17,440 is one of the smartest, you know, real estate administrators 676 00:38:17,440 --> 00:38:21,280 out there and KKR's recent transaction from Lennar, like 677 00:38:21,280 --> 00:38:26,840 what we have is cap rates in the low 5 to, you know, kind of like 678 00:38:26,840 --> 00:38:30,040 5859. And then if you adjust for 679 00:38:30,440 --> 00:38:34,000 increased property taxes and you know after the deal. 680 00:38:34,360 --> 00:38:35,960 You know, Blackstone's deal was probably. 681 00:38:35,960 --> 00:38:39,920 Done at anywhere between like a 5 two to like a 5-6 cap rate, 682 00:38:39,920 --> 00:38:41,080 right? So I think. 683 00:38:41,080 --> 00:38:44,360 There's a lot of room for cap rate compression to like a 684 00:38:44,360 --> 00:38:48,800 natural market cap rate and like. 685 00:38:48,960 --> 00:38:52,800 If you can't use what the Blackstone cap rate as as a 686 00:38:52,800 --> 00:38:56,280 comp, like I don't know, I mean that's a $10 billion transaction 687 00:38:56,600 --> 00:39:00,320 on the older property and that's coming from a vehicle within 688 00:39:00,320 --> 00:39:04,600 Blackstone where they're targeting 15% IRS, that's not 689 00:39:04,600 --> 00:39:09,880 meant to be a 8-9 percent IR vehicle, so. 690 00:39:09,880 --> 00:39:11,920 You kind of have. To like think right, kind of 691 00:39:11,920 --> 00:39:16,360 have to think a little bit about there's a $10 deal done at like 692 00:39:16,360 --> 00:39:20,640 a MIT 5 cap rate, low timber, 5 cap rate after you adjust for a 693 00:39:20,640 --> 00:39:22,680 lot of the insurance. And property taxes. 694 00:39:23,160 --> 00:39:26,720 And then the PKR deal I believe is what I've been hearing is 695 00:39:26,720 --> 00:39:29,600 that that's done at A at a low 5 cap rate, right. 696 00:39:29,840 --> 00:39:33,440 So you take those data points and we're in a higher interest 697 00:39:33,440 --> 00:39:35,040 rate environment. You know, we're in an 698 00:39:35,440 --> 00:39:38,560 environment, interest rate environment where at some point 699 00:39:38,560 --> 00:39:41,200 the Fed probably cuts, you know, with we're not really baking 700 00:39:41,200 --> 00:39:43,520 that in, but you know. It's just like it's. 701 00:39:43,520 --> 00:39:46,440 It's a. Nice setup when you could buy at 702 00:39:46,440 --> 00:39:48,680 a relatively high absolute cap rate. 703 00:39:48,880 --> 00:39:50,480 You're buying below replacement cost. 704 00:39:50,600 --> 00:39:53,160 You're buying in a period where the market clearly cannot 705 00:39:53,160 --> 00:39:56,400 justify delivering new supply into the market. 706 00:39:56,600 --> 00:39:59,560 You're seeing it on data. You're seeing it anecdotally 707 00:39:59,560 --> 00:40:01,760 through conversations I've had. With, you know. 708 00:40:02,280 --> 00:40:05,720 Real Estate GPS on Twitter. And I think it's just a really 709 00:40:05,720 --> 00:40:08,920 good setup because your returns come from the yield that you 710 00:40:08,920 --> 00:40:11,440 receive. And also, like, I think somehow 711 00:40:11,600 --> 00:40:15,320 people push back on, oh, you know, the yield is a low 4%. 712 00:40:15,320 --> 00:40:18,560 Like I can get 5. Percent just owning one year 713 00:40:18,560 --> 00:40:20,520 treasuries. Like, why would I elect to do 714 00:40:20,520 --> 00:40:22,200 that? Well, first of all, they're not 715 00:40:22,200 --> 00:40:25,240 paying everything now. They're really only paying 2/3 716 00:40:25,240 --> 00:40:28,280 of the free cash flow out to shareholders and retaining 1/3 717 00:40:28,320 --> 00:40:32,600 of it for either share buybacks or higher return projects where 718 00:40:32,600 --> 00:40:36,360 they can get over 10% IRS. And. 719 00:40:37,440 --> 00:40:40,720 In the long run, treasuries don't have Treasuries don't have 720 00:40:40,800 --> 00:40:44,040 inflation protection, but I think owning a portfolio high 721 00:40:44,040 --> 00:40:47,280 calling multifamily do have inflation protection in the long 722 00:40:47,280 --> 00:40:49,040 run if you. Look at if you. 723 00:40:49,040 --> 00:40:53,240 Use replacement costs as a proxy for kind of long term price 724 00:40:53,240 --> 00:40:56,000 appreciation. There's only like replacement 725 00:40:56,000 --> 00:40:58,000 calls have only gone One Direction. 726 00:40:58,000 --> 00:41:01,040 It's it's gone up, right. I mean, the cost to bill 727 00:41:01,360 --> 00:41:04,400 multifamily, really any sorts of real estate has really gone up 728 00:41:04,400 --> 00:41:08,920 in One Direction and for as long as as I I could remember, yeah. 729 00:41:09,800 --> 00:41:12,400 Well, and I think it's unlikely to come down right that. 730 00:41:12,640 --> 00:41:18,600 So that's that's where I can get my head around this idea is from 731 00:41:18,600 --> 00:41:23,000 a potentially inflation protected perspective combined 732 00:41:23,000 --> 00:41:28,800 with supply a couple years out remaining somewhat tight if all 733 00:41:28,800 --> 00:41:32,720 else stays as it does, which everything never stays as it 734 00:41:32,720 --> 00:41:35,640 does, right. But that's the first thing that 735 00:41:35,640 --> 00:41:39,080 intrigued me to this idea. And then you know, you and I 736 00:41:39,080 --> 00:41:45,080 have gotten to know each other better and I still am quite 737 00:41:45,080 --> 00:41:48,080 intrigued by it. Why do some of these companies 738 00:41:48,080 --> 00:41:51,320 back out their SG and A when they're citing their cap rate? 739 00:41:51,320 --> 00:41:53,280 And why is that valid or not valid? 740 00:41:55,080 --> 00:41:57,480 I think, I think it's very valid and it's actually one of the 741 00:41:57,480 --> 00:42:00,720 largest source of return for us in the past decade. 742 00:42:01,160 --> 00:42:03,400 Which is we? Will buy into a company that's 743 00:42:03,400 --> 00:42:07,800 sucks scale and there's a real. Cost of being public, right, 744 00:42:07,800 --> 00:42:12,120 We've estimated that at the minimum you probably need being 745 00:42:12,120 --> 00:42:15,800 just being public cost you a lease, you know two $3,000,000 746 00:42:15,800 --> 00:42:18,720 between your order fees and various fees like NASDAQ fees 747 00:42:18,720 --> 00:42:21,200 and whatnot. And then as you scale up a 748 00:42:21,200 --> 00:42:24,440 little bit, you know you could have a billion dollar company 749 00:42:24,440 --> 00:42:27,640 that's going to run you a lease like seven, $8 million of SGNA 750 00:42:27,640 --> 00:42:29,760 right now. What's really interesting is 751 00:42:29,760 --> 00:42:34,040 that real estate on the private side is a very it's not like a 752 00:42:34,040 --> 00:42:37,760 NVIDIA, right? Like there's only one-of-a-kind 753 00:42:37,760 --> 00:42:42,120 in the entire world or that graphite company that Brookfield 754 00:42:42,120 --> 00:42:44,160 that that Monish Papri owns right? 755 00:42:44,160 --> 00:42:48,920 Like like it's it's not A1A single unique asset. 756 00:42:48,920 --> 00:42:54,280 There is a very large pool of buyer who could buy that that 757 00:42:54,920 --> 00:42:58,720 portfolio of assets and just take it private and eliminate. 758 00:42:58,920 --> 00:43:01,720 They won't eliminate hard percent of the the public 759 00:43:01,720 --> 00:43:05,960 company SGNA, but they, they can eliminate a good chunk or you 760 00:43:05,960 --> 00:43:10,120 can have a larger platform by that company and then they they 761 00:43:10,120 --> 00:43:13,560 already have an existing SGNA certain cost structure. 762 00:43:14,440 --> 00:43:16,760 So, so I think I think that's real important, right? 763 00:43:16,760 --> 00:43:21,440 And and that's actually one of the the biggest source of excess 764 00:43:21,440 --> 00:43:24,800 return for us and also want a big source of frustration 765 00:43:24,800 --> 00:43:27,800 because a lot of times I'll talk with somebody and they say, 766 00:43:27,800 --> 00:43:31,200 well, you're accountably that $35 million of NOI. 767 00:43:31,480 --> 00:43:34,400 Yes, like we are saying it's growing, but the SG and a 768 00:43:34,400 --> 00:43:38,080 $7,000,000 like a lot of that SG and A is being eaten away. 769 00:43:38,640 --> 00:43:41,960 And my argument is, well, you could, you could sell that 770 00:43:41,960 --> 00:43:45,600 portfolio tomorrow and, and you know, you probably take that SG 771 00:43:45,600 --> 00:43:49,960 and a down to $300,000 or someone has a bigger platform to 772 00:43:49,960 --> 00:43:52,840 just fold them in. And you don't need to take that 773 00:43:52,840 --> 00:43:57,080 $7,000,000 and put the 20 time multiple 5% cap rate on it. 774 00:43:57,600 --> 00:44:01,960 And, and those are the situations where we historically 775 00:44:01,960 --> 00:44:04,360 have generated a lot of our excess return from. 776 00:44:04,560 --> 00:44:08,000 And, and inevitably what they, what happens is that they grow 777 00:44:08,000 --> 00:44:11,000 into scale or they get bought out. 778 00:44:11,040 --> 00:44:13,440 And then in every time that it's been bought out, if the 779 00:44:13,440 --> 00:44:17,720 experience had demonstrated that the virus don't care like about 780 00:44:17,720 --> 00:44:21,120 your existing public Conway as she and a like they're just 781 00:44:21,120 --> 00:44:23,240 going to, you know, run it with their own cost structure. 782 00:44:24,200 --> 00:44:25,920 So that makes sense to me on the small ones. 783 00:44:25,920 --> 00:44:28,120 On the big ones, though, there's no real exit, right? 784 00:44:28,120 --> 00:44:31,000 They are sort of the final exit liquidity. 785 00:44:31,000 --> 00:44:33,600 And. So backing that out on the 786 00:44:33,600 --> 00:44:38,840 bigger ones, I think is a little bit more fast and loose in my in 787 00:44:38,840 --> 00:44:40,880 my view, right? It's. 788 00:44:41,160 --> 00:44:45,360 Interesting in that if. You manage it yourself, right? 789 00:44:45,600 --> 00:44:48,440 All our costs will go in I, I own a piece of property on 790 00:44:48,440 --> 00:44:52,680 private side and you know, any time like we got an issue like I 791 00:44:52,680 --> 00:44:57,880 can go deal with it. And so I am my own SVNA and I 792 00:44:57,880 --> 00:45:00,840 don't experience any of that SCNA because I'm the one dealing 793 00:45:00,840 --> 00:45:03,600 with the headaches right, of owning that property. 794 00:45:03,600 --> 00:45:08,680 But you know, a fair argument is that if you calculate the 795 00:45:08,720 --> 00:45:15,600 implicit management fee on that SGNA like relative to block some 796 00:45:15,640 --> 00:45:18,920 KKR, you actually find a lot of times like that, that public 797 00:45:18,920 --> 00:45:23,320 company SGNA is actually a lot lower than giving your money to 798 00:45:23,360 --> 00:45:26,680 a block some more KKR or any interview big or Brookfield, 799 00:45:26,680 --> 00:45:29,520 right? Because we've done a lot of math 800 00:45:29,520 --> 00:45:33,640 on that where I think that the public company because she and a 801 00:45:33,640 --> 00:45:38,760 probably runs 30-40 basis point like at scale at like a Camden 802 00:45:38,800 --> 00:45:44,720 America, they run at 30-40 basis points off the total asset 803 00:45:44,720 --> 00:45:46,760 value. Go through those lens, you're 804 00:45:46,760 --> 00:45:50,440 you're getting a really, really good deal right now. 805 00:45:50,440 --> 00:45:53,040 Like if you want to own these assets and you want to imagine 806 00:45:53,040 --> 00:45:56,280 themselves, yeah, like yo-yo, like a lot of SGNA will go away. 807 00:45:56,600 --> 00:45:59,480 But if you are going to delegate it to somebody like you're, 808 00:45:59,480 --> 00:46:01,160 you're paying in one form or another. 809 00:46:01,160 --> 00:46:05,080 So, but you know, the way that the assets trade, they're going 810 00:46:05,080 --> 00:46:08,720 to trade at the asset, you know, NOI level, they're not going to 811 00:46:08,720 --> 00:46:13,160 incorporate because it's kind of like why in a lot of private 812 00:46:13,160 --> 00:46:17,240 equity deals like you use like AEB EBITDA, like you don't use 813 00:46:17,240 --> 00:46:19,800 the existing debt, right? Because like you're going to 814 00:46:19,800 --> 00:46:21,920 capitalize and however you're going to capitalize it. 815 00:46:22,760 --> 00:46:24,920 Yeah, yeah, that, that makes sense to me. 816 00:46:25,240 --> 00:46:29,000 I guess again, like with Camden and and Mid America, they're so 817 00:46:29,000 --> 00:46:32,440 well run that it wouldn't make sense for me to run one of those 818 00:46:32,440 --> 00:46:35,720 buildings on my own. And they already have the scale. 819 00:46:35,720 --> 00:46:40,800 So yeah, I just, I just kind of wonder, you know, I'm trying to 820 00:46:40,800 --> 00:46:43,320 figure out what I think like the true cap rate is. 821 00:46:43,880 --> 00:46:46,160 These are just some of the issues that I've come up with, 822 00:46:46,200 --> 00:46:49,840 you know, against as I've, as I've been doing the work right. 823 00:46:49,840 --> 00:46:54,880 So I feel like asking, asking on behalf of the listener makes 824 00:46:54,880 --> 00:46:58,720 some sense as well, you know? Yeah, Yeah, yeah. 825 00:46:58,720 --> 00:47:01,800 No, I mean, you know, these assets are not going to manage 826 00:47:01,800 --> 00:47:03,920 themselves, right. And then I, I would make the 827 00:47:03,920 --> 00:47:06,920 argument that and, and I think you bring up a good point. 828 00:47:06,920 --> 00:47:09,440 I think this is a very important discussion to have. 829 00:47:10,040 --> 00:47:14,400 Which is if you think about, I know that on the value after 830 00:47:14,400 --> 00:47:18,240 hour on one of the episodes, Jake said something along the 831 00:47:18,240 --> 00:47:21,880 line that he's thankful for the public markets where you could 832 00:47:21,880 --> 00:47:25,560 buy fractional shares of a company with a cocoa button and 833 00:47:25,560 --> 00:47:27,560 very low transaction costs, right, like if. 834 00:47:27,560 --> 00:47:30,120 You if you take a step back. And, and kind of think about 835 00:47:30,120 --> 00:47:36,680 like the, the luxury of, oh, you know, buying real estate has a 836 00:47:36,680 --> 00:47:41,160 real barrier to entry, right? You know, there is an absolute 837 00:47:41,160 --> 00:47:43,120 white, there's got to buy the whole cow, right? 838 00:47:43,120 --> 00:47:45,520 You can't buy like a pound of ground beef. 839 00:47:45,960 --> 00:47:49,560 And a lot of times I think people are, don't get that 840 00:47:49,560 --> 00:47:53,200 exposure because they don't have $200,000 sitting around to buy 841 00:47:53,200 --> 00:47:56,640 like a condo unit or, or you know, our house, right? 842 00:47:57,120 --> 00:48:01,680 And the a lot of that public SDNA that, that all that order 843 00:48:01,680 --> 00:48:05,480 calls like the filings and having all that back office, 844 00:48:05,480 --> 00:48:06,560 middle office. Staff. 845 00:48:06,760 --> 00:48:10,160 To be able to prepare all the materials and comply with all 846 00:48:10,160 --> 00:48:14,680 the regulations. What that does is that it allows 847 00:48:14,680 --> 00:48:19,720 guys like you and I to buy a share of Mid America, which 848 00:48:19,720 --> 00:48:22,800 trades $140.00 for probably about a penny and interactive. 849 00:48:22,800 --> 00:48:24,600 Brokers, right, like if you think about. 850 00:48:25,200 --> 00:48:28,440 What that I mean we're talking about less than one basis point 851 00:48:28,440 --> 00:48:33,280 in transaction cost for to buy real estate and any sorts of 852 00:48:33,280 --> 00:48:37,680 real estate transaction probably doesn't happen for less than 2% 853 00:48:37,720 --> 00:48:40,840 at the asset level. So the incredible amount of 854 00:48:40,840 --> 00:48:46,080 savings that you get by having, you know, public and liquidity, 855 00:48:46,480 --> 00:48:51,920 I think it way makes up for like any of those SGNA cost. 856 00:48:51,960 --> 00:48:55,840 And then there's a dynamic of, you know, if you if you gave 857 00:48:55,840 --> 00:48:59,160 money to a private roses indicator, there's a very heavy 858 00:48:59,160 --> 00:49:02,800 GP promote and it's very eye opening what some of those 859 00:49:02,840 --> 00:49:05,560 promotes could be once you get above like a certain hurdle. 860 00:49:05,880 --> 00:49:08,280 For the most part, yes, you know, the REAP management teams, 861 00:49:08,280 --> 00:49:13,080 I get stock options and equity comps, but it is nowhere on on 862 00:49:13,080 --> 00:49:15,760 the scale of I want some of those private GPS. 863 00:49:16,360 --> 00:49:19,680 You know, I've seen promote as high as 50% once it goes over 864 00:49:19,680 --> 00:49:23,080 like a potential percent hurdle and I don't see anything like 865 00:49:23,080 --> 00:49:25,920 that. So between liquidity and some of 866 00:49:25,920 --> 00:49:28,360 the promote component, I think I think you know, a lot of 867 00:49:28,360 --> 00:49:31,520 investors wind up coming out with a really good deal. 868 00:49:31,520 --> 00:49:35,880 And then the liquidity is interesting because again, this 869 00:49:35,880 --> 00:49:39,280 goes into like Buffett, you know, he says missile market is 870 00:49:39,280 --> 00:49:42,000 there to surf you. You can kind of and I find this 871 00:49:42,000 --> 00:49:45,880 like really unique dynamic right now where where people 872 00:49:45,880 --> 00:49:50,280 particularly institutions are are like the purposely paying a 873 00:49:50,280 --> 00:49:54,080 premium not to get. That mark to market which which 874 00:49:54,080 --> 00:49:55,920 is a very unique. Dynamic, right? 875 00:49:56,240 --> 00:50:01,360 It's like there's a certain allocation needs and by 876 00:50:01,360 --> 00:50:05,320 allocating a certain amount of their capital into a illiquid 877 00:50:05,320 --> 00:50:09,320 strategy that in real estate where the, your blast on your 878 00:50:09,320 --> 00:50:12,520 KKRS could kind of tell you, you know what that mark is, They 879 00:50:12,520 --> 00:50:15,000 don't have to technically to deal with like a technical 880 00:50:15,000 --> 00:50:17,960 drawdown that you see on the screen that we deal with. 881 00:50:17,960 --> 00:50:23,080 And I think that that's a really interesting development in the 882 00:50:23,080 --> 00:50:27,160 market that used to be, you know, they've seen that at Yale 883 00:50:27,280 --> 00:50:29,520 coined the term liquidity premium. 884 00:50:29,920 --> 00:50:33,560 If anything, there's like a bit of a liquidity discount today by 885 00:50:33,600 --> 00:50:37,520 having the potential to have a drawdown your portfolio like you 886 00:50:37,520 --> 00:50:40,720 know a lot of the long institutions have kind of shown 887 00:50:40,720 --> 00:50:44,440 the public re asset class. Which kind of you know, if you. 888 00:50:44,440 --> 00:50:47,400 Asked me, well, Bill, like why does this opportunity exist? 889 00:50:47,400 --> 00:50:50,400 I think, I think that is one of the big reason why this optor 890 00:50:50,400 --> 00:50:53,840 exists is that is that, you know, people don't want to get 891 00:50:53,840 --> 00:50:54,840 off the market. Yeah. 892 00:50:54,920 --> 00:50:56,960 And meanwhile, the privates, even though they're more 893 00:50:56,960 --> 00:50:59,160 levered, are outperforming on the mark. 894 00:50:59,320 --> 00:51:02,280 And if you ask KKR, they're projected to outperform in the 895 00:51:02,280 --> 00:51:06,520 future too, which is a bit like asking a Barber for a haircut. 896 00:51:06,520 --> 00:51:08,760 But. Yeah. 897 00:51:08,920 --> 00:51:12,680 I mean, I, I get it. I, I think if, you know, there's 898 00:51:12,680 --> 00:51:17,360 a ton of incentives that that would make people choose the 899 00:51:17,360 --> 00:51:21,240 behavior that they're choosing in aggregate, we'll see if it's 900 00:51:21,240 --> 00:51:22,520 smart behavior. I don't know. 901 00:51:22,880 --> 00:51:25,760 And it's going to take a really long time for it to. 902 00:51:25,760 --> 00:51:29,320 Play out right like if you got locked up capital for 10 years 903 00:51:29,320 --> 00:51:33,120 and the day of reckoning isn't is until 10 years later and you 904 00:51:33,120 --> 00:51:35,800 kind of now I will, but that's not. 905 00:51:35,840 --> 00:51:38,360 Even when the day of reckoning is because then you get into, 906 00:51:38,360 --> 00:51:42,160 well, that was just one vintage. So then you've got more years 907 00:51:42,160 --> 00:51:46,200 and then you know, you've, you've pretty much got, I don't 908 00:51:46,200 --> 00:51:49,720 know it, it could be like I, I think the, the highest 909 00:51:49,720 --> 00:51:57,040 probability if there is a subpar outcome would just be like 10 to 910 00:51:57,040 --> 00:51:59,520 15 years of kind of crappy returns. 911 00:52:00,760 --> 00:52:07,280 I mean, I don't know, like it seems unlikely to me that there 912 00:52:07,280 --> 00:52:13,520 would be some run for the exits, but it does seem possible to me 913 00:52:13,520 --> 00:52:17,600 that. I think you. 914 00:52:17,680 --> 00:52:21,200 Might have mentioned that one of the challenges that some of 915 00:52:21,200 --> 00:52:24,960 those PE strategy is facing is that because of higher interest 916 00:52:24,960 --> 00:52:29,480 rates, the earlier vintages are not able to get exit right and a 917 00:52:29,480 --> 00:52:33,600 lot of the PE investors like for them to kind of real. 918 00:52:33,640 --> 00:52:36,000 Yeah, they need, they want the distribution. 919 00:52:36,080 --> 00:52:39,120 To the next vehicle they want capital return from the previous 920 00:52:39,120 --> 00:52:42,080 one yeah. So we are seeing some log jam 921 00:52:42,080 --> 00:52:44,160 there. It's incredible to have 10 year 922 00:52:44,160 --> 00:52:48,680 lock up capital and and and kind of just be able to mark market 923 00:52:48,680 --> 00:52:49,640 to how you want it. Yeah. 924 00:52:50,000 --> 00:52:53,400 Yeah, Yeah, well, if if you haven't for 10 years something 925 00:52:53,400 --> 00:52:57,280 went wrong, but you probably only want it on average like six 926 00:52:57,280 --> 00:53:00,240 to seven years and then have another fund and then but the 10 927 00:53:00,240 --> 00:53:03,640 year option or the OR the contractual 10 year agreement is 928 00:53:03,640 --> 00:53:07,840 a very nice agreement to have, right, Yes, if you're waiting 10 929 00:53:07,840 --> 00:53:10,320 years, your IRR is probably aren't what you hoped they were. 930 00:53:11,160 --> 00:53:14,520 Yeah, but. Well, I mean, I think the other 931 00:53:14,520 --> 00:53:18,920 side of it is on the public side, you get to one of the real 932 00:53:18,920 --> 00:53:22,400 challenges for a private buyer today is that there's just no 933 00:53:22,400 --> 00:53:24,560 deal flow, right, like you can have. 934 00:53:24,960 --> 00:53:27,720 A billion dollars of dry powder, but the only. 935 00:53:27,720 --> 00:53:33,000 Source of actual like if you track the deal transaction, most 936 00:53:33,000 --> 00:53:38,520 asset classes are down called 60 to 80% from their from their 937 00:53:38,520 --> 00:53:42,320 peak transaction in 21 is kind of like my general sense of 938 00:53:42,320 --> 00:53:44,240 what's happened so. You could be. 939 00:53:44,240 --> 00:53:47,960 Sitting on a ton of dry powder, but the seller is not going to 940 00:53:47,960 --> 00:53:51,920 sell unless they they have some sort of debt maturity. 941 00:53:51,920 --> 00:53:55,440 They can't service the mortgage anymore and the for sellers, I 942 00:53:55,440 --> 00:53:58,840 didn't that really have not been a ton of force selling in the 943 00:53:58,840 --> 00:54:01,600 market. I think like if the fact keeps a 944 00:54:01,600 --> 00:54:06,000 rate where it is today and you get to a certain point where 945 00:54:06,000 --> 00:54:10,200 your three-year fixed mortgage, you know, comes due or five year 946 00:54:10,360 --> 00:54:12,400 at like, you know, at some point there probably will be more 947 00:54:12,400 --> 00:54:15,320 transaction. And that's where on the public 948 00:54:15,320 --> 00:54:19,000 side, you know, I'm, I'm like a kid in candy shop because you 949 00:54:19,000 --> 00:54:21,360 know, they're already trading a lot of these, a lot of these 950 00:54:21,360 --> 00:54:23,960 companies, a lot of multifamily reads, a lot of the grocery 951 00:54:23,960 --> 00:54:27,480 anchor shopping centers, some of the smaller companies that we 952 00:54:27,480 --> 00:54:30,320 have not discussed. There is a ton of bargains out 953 00:54:30,320 --> 00:54:32,880 there right now. That and and the amount of 954 00:54:32,880 --> 00:54:36,360 capital you could put to work is probably fifty $100 million a 955 00:54:36,360 --> 00:54:40,040 day, which is, and, and it just click a button, right? 956 00:54:40,040 --> 00:54:42,200 And, and that's incredible. Luxury to have. 957 00:54:42,200 --> 00:54:47,440 Because you know, I've talked to you a lot of family offices 958 00:54:47,440 --> 00:54:49,720 talked to a lot. I know what's in visuals and, 959 00:54:49,720 --> 00:54:51,800 and they say, oh, you know, I was talking with the real estate 960 00:54:51,800 --> 00:54:55,000 GP and they showed us a deal and, and guess what? 961 00:54:55,040 --> 00:54:57,000 I think it's a good deal but like I can't get the. 962 00:54:57,000 --> 00:55:00,960 Allocation I want right and it's a $10 million raise, $20 million 963 00:55:00,960 --> 00:55:03,520 raise and. You, you go through the process 964 00:55:03,520 --> 00:55:06,720 of like creating liquidity to write a $2,000,000 check and 965 00:55:06,720 --> 00:55:08,640 they'd only write half a million, right? 966 00:55:08,640 --> 00:55:10,280 Like that's, that's a real issue. 967 00:55:10,360 --> 00:55:13,240 And I think what's really, really unique about the public 968 00:55:13,240 --> 00:55:16,480 side right now at this moment is that you could click a button 969 00:55:16,480 --> 00:55:21,320 and and deploy at scale fifty $100 million to work in a day. 970 00:55:21,320 --> 00:55:24,320 And and that's a very, very unique advantage and you're 971 00:55:24,320 --> 00:55:28,120 buying it a. Most asset classes like like 972 00:55:28,120 --> 00:55:31,520 we're just finding a ton of situation where we're buying 973 00:55:31,520 --> 00:55:36,000 something. At a 6 1/2 to you know call it 974 00:55:36,000 --> 00:55:39,120 10% cap rate across different asset asset classes. 975 00:55:39,120 --> 00:55:42,200 I mean, actually we just bought something at like a 12% cap 976 00:55:42,200 --> 00:55:43,640 rate. It's a little. 977 00:55:43,640 --> 00:55:47,400 Bit on the smaller side. And so you're buying it at a 978 00:55:47,400 --> 00:55:50,360 high absolute cap rate, usually getting like at least like a 4% 979 00:55:50,360 --> 00:55:53,320 dividend yield you're getting and, and they're they're not 980 00:55:53,320 --> 00:55:57,120 paying out all the cash flow. You are, it would deploy that 981 00:55:57,120 --> 00:55:59,800 capital at scale. You are. 982 00:55:59,840 --> 00:56:03,360 Oh man, I just had a little. You had a senior moment. 983 00:56:03,360 --> 00:56:05,720 That's OK, at least. It's not a presidential. 984 00:56:05,720 --> 00:56:07,160 Debate. It's just a podcast. 985 00:56:07,840 --> 00:56:10,920 Yeah, yeah, yeah, yeah, yeah. You know what I was getting to 986 00:56:10,960 --> 00:56:14,200 is like the buying and at a deep discount to replacement value, 987 00:56:14,320 --> 00:56:16,520 right, You're buying it. A lot of times we're buying it 988 00:56:16,520 --> 00:56:18,280 at like. Half a replacement value and 989 00:56:18,280 --> 00:56:21,640 then if you look at. Any of the developments in the 990 00:56:21,640 --> 00:56:24,840 pipeline of new supply that may compete with you in a lot of 991 00:56:24,840 --> 00:56:28,720 instances, like in today's environment 2024, you may have a 992 00:56:28,720 --> 00:56:31,920 multifamily dynamic of some bill where that supply is being 993 00:56:31,920 --> 00:56:35,040 delivered, but there's no new supply in the pipeline for the 994 00:56:35,040 --> 00:56:38,520 next like three years, right? And and it's kind of like 995 00:56:38,520 --> 00:56:41,480 grocery and go shopping centers. So you're among the coast, 996 00:56:41,640 --> 00:56:45,440 you're just not seeing anything being built right and and to be 997 00:56:45,440 --> 00:56:48,960 able to buy something at half a replacement cost with like no 998 00:56:48,960 --> 00:56:53,720 threat in the supply with at like a good golden cap rate and 999 00:56:53,720 --> 00:56:56,320 then man, and then that's it's a great setup. 1000 00:56:57,280 --> 00:57:01,400 Yeah, you wonder how long the lack of housing starts will 1001 00:57:01,400 --> 00:57:03,840 continue. Yeah, yeah. 1002 00:57:04,120 --> 00:57:05,760 Eventually something's got to change. 1003 00:57:05,760 --> 00:57:08,760 I think we're not. I don't know, it could be could 1004 00:57:08,760 --> 00:57:11,920 be a situation where we just are structurally short housing 1005 00:57:12,920 --> 00:57:16,480 unless the shortage doesn't actually exist, but I I think 1006 00:57:16,480 --> 00:57:19,560 that it it does exist. Oh, I mean, I think the shortage 1007 00:57:19,680 --> 00:57:22,480 definitely exists. Like if you look at, if you look 1008 00:57:22,480 --> 00:57:26,880 at home starts. You know I've been wrong in the 1009 00:57:26,880 --> 00:57:30,720 past and will be again. One thing I can't. 1010 00:57:30,840 --> 00:57:36,080 Quite wrap my head around this is if rates drop, like, you 1011 00:57:36,080 --> 00:57:39,160 know, what's the impact on like home builders, right? 1012 00:57:39,480 --> 00:57:43,400 Because it absolutely surprised me. 1013 00:57:43,400 --> 00:57:46,880 And I wrote about this in my application to our investors 1014 00:57:46,880 --> 00:57:49,640 like a couple years ago. I'm like, hey, higher rates mean 1015 00:57:49,640 --> 00:57:52,880 that people probably won't buy, probably going to be really bad 1016 00:57:52,880 --> 00:57:56,480 for home building. But I don't think I anticipated. 1017 00:57:56,480 --> 00:58:00,480 I mean, it's a really obvious now that everyone had 3% 1018 00:58:00,480 --> 00:58:03,920 mortgages and rates shoot up in a mortgage ratio, shoot up to 1019 00:58:03,920 --> 00:58:06,000 70% and all wants to sell their houses. 1020 00:58:06,000 --> 00:58:07,360 There's no inventory. Right. 1021 00:58:07,800 --> 00:58:11,480 So if mortgage go down to 4%, does that mean a bunch of people 1022 00:58:11,480 --> 00:58:15,280 who weren't willing to sell or and now the the existing home 1023 00:58:15,280 --> 00:58:16,640 inventory is going to go up a whole? 1024 00:58:16,640 --> 00:58:19,440 Bunch and then. That's going to create supply 1025 00:58:19,440 --> 00:58:20,960 for the market like I I don't know I'm. 1026 00:58:20,960 --> 00:58:24,520 Yes, I think, I think that's likely to happen. 1027 00:58:26,680 --> 00:58:28,360 I don't know how much it should, right. 1028 00:58:28,640 --> 00:58:31,520 Yeah. But yeah, yeah, I think, I think 1029 00:58:31,520 --> 00:58:35,280 one of the things that that I failed to see was what a 1030 00:58:35,400 --> 00:58:38,080 competitive advantage the mortgage rate by down was for 1031 00:58:38,080 --> 00:58:43,280 the builders. So at least the big ones, right, 1032 00:58:44,480 --> 00:58:47,560 It's basically a cost to capital advantage that they're passing 1033 00:58:47,560 --> 00:58:51,600 on to keep inventory. Building yeah, I think just the 1034 00:58:51,600 --> 00:58:57,280 lack of supply and how much that impacts the ability to like when 1035 00:58:57,280 --> 00:59:00,640 you when you squeeze supply so tight and there's just like 1036 00:59:00,640 --> 00:59:04,280 nothing on the market. I mean, this is this is like a, 1037 00:59:04,320 --> 00:59:08,360 you know, Speaking of somebody who was at the heart of the GFC 1038 00:59:08,360 --> 00:59:11,440 and and watch like, you know, everything kind of happened with 1039 00:59:11,440 --> 00:59:14,640 the the me hands and and the overbuilding the industry was 1040 00:59:14,640 --> 00:59:17,960 building probably at peso one half million homes. 1041 00:59:17,960 --> 00:59:21,360 And he kind of accumulated oversupply in single family 1042 00:59:21,360 --> 00:59:25,520 homes leading up to the GFC. And to kind of see that and and 1043 00:59:25,520 --> 00:59:29,400 kind of see like almost anything that could go wrong, like they 1044 00:59:29,400 --> 00:59:31,960 go wrong for home builders. And then to kind of see them 1045 00:59:31,960 --> 00:59:36,760 emerge out of GFC kind of becoming really disciplined, 1046 00:59:36,760 --> 00:59:41,640 becoming changing their business models where they're more a land 1047 00:59:41,640 --> 00:59:43,600 light. Everyone kind of have adopted 1048 00:59:43,600 --> 00:59:47,680 some variation of the NBR asset light model and a lot of these 1049 00:59:47,680 --> 00:59:51,040 home builders wind up being 1020 baggers and then to kind of see 1050 00:59:51,320 --> 00:59:55,760 rising rates not hurt them actually help them like that 1051 00:59:55,760 --> 01:00:00,080 that that was that goes into the bucket of I like never would I 1052 01:00:00,080 --> 01:00:02,040 have like thought about being able to happen. 1053 01:00:02,040 --> 01:00:03,760 Yeah. Yeah. 1054 01:00:04,960 --> 01:00:11,800 Yeah, I mean, I missed it, so I also did not think So what 1055 01:00:11,800 --> 01:00:15,800 about, you know, grocery, grocery anchored shopping 1056 01:00:15,800 --> 01:00:18,160 centers Has you intrigued these days? 1057 01:00:19,760 --> 01:00:23,520 Thinking a lot of has to do with like capital cycle, right? 1058 01:00:23,520 --> 01:00:27,480 There's Barbara body is like probably the best at it, right? 1059 01:00:27,560 --> 01:00:32,760 And I've watched post GFC, the rise of e-commerce and as a 1060 01:00:32,760 --> 01:00:36,520 value messer, like I'm sure like everyone's been familiar with, 1061 01:00:36,520 --> 01:00:40,720 like the saga at JC Kennedy, at Sears, at Macy's. 1062 01:00:40,720 --> 01:00:45,000 And you watch that space, physical retail. 1063 01:00:45,840 --> 01:00:50,000 And there's this narrative that Amazon was going to kill 1064 01:00:50,000 --> 01:00:52,840 everybody. And Amazon did try to go into 1065 01:00:52,840 --> 01:00:55,880 the grocery business. Remember the day when Amazon 1066 01:00:55,880 --> 01:00:57,600 announced that they got into a grocery business? 1067 01:00:57,600 --> 01:01:00,320 All the big grocery chains, their stocks like dropped by 1068 01:01:00,320 --> 01:01:04,520 20%, right? And everyone bought into this 1069 01:01:04,520 --> 01:01:07,520 narrative that Amazon was going to kill the grocery store. 1070 01:01:07,520 --> 01:01:10,600 They're going to kill anything that's retail related. 1071 01:01:10,600 --> 01:01:14,240 All right? And I'm look, you know, not 1072 01:01:14,240 --> 01:01:16,200 guilty as charged. Like we, we bought into that 1073 01:01:16,200 --> 01:01:18,560 narrative, right? There is a grocery ink shopping 1074 01:01:18,560 --> 01:01:20,880 center read that. I respect people. 1075 01:01:20,880 --> 01:01:24,000 He and I were talking on the phone four or five years ago and 1076 01:01:24,000 --> 01:01:26,120 he was pounding the table. He's like, Bill, this is just. 1077 01:01:26,120 --> 01:01:28,440 Not happening like it's not happening. 1078 01:01:28,440 --> 01:01:31,680 This is not happening and I didn't quite believe him. 1079 01:01:31,680 --> 01:01:34,920 You know, like my fault, right? Which might have been like a 1080 01:01:35,080 --> 01:01:38,480 actually a good. Decision to be naive but what we 1081 01:01:38,480 --> 01:01:44,200 have observed over time is that people love being able to get 1082 01:01:44,200 --> 01:01:47,520 into the car and pull up right. Americans just love that 1083 01:01:47,520 --> 01:01:50,760 convenience of like being able to to drive into the shop and 1084 01:01:50,760 --> 01:01:52,200 center. It's outdoor you pull in you 1085 01:01:52,200 --> 01:01:57,440 park and over time, even as some of those concepts have failed 1086 01:01:57,760 --> 01:02:00,000 right. You have the version so far 1087 01:02:00,280 --> 01:02:04,440 retelification of medicine. So it's it's a lot more common 1088 01:02:04,440 --> 01:02:08,320 to see what the MRI outpatients some sort of service they've 1089 01:02:08,320 --> 01:02:11,920 taken over a lot of the. Urgent care is. 1090 01:02:12,560 --> 01:02:16,160 Urgent care, great example. Urgent care they taken over 1091 01:02:16,160 --> 01:02:18,800 spaces use on some of the bigger boxes. 1092 01:02:18,800 --> 01:02:22,440 You kind of see this is more on the standalone category, like 1093 01:02:22,440 --> 01:02:25,280 your Dicks, like you know, if there's a box that weren't 1094 01:02:25,280 --> 01:02:27,920 vacant. What I'm seeing is there's 1095 01:02:27,920 --> 01:02:31,960 enough of this. There's a vacant space in a well 1096 01:02:31,960 --> 01:02:33,800 located. Grocery shopping center. 1097 01:02:33,800 --> 01:02:36,480 And then all of a sudden like some a different concept comes 1098 01:02:36,480 --> 01:02:38,720 in and takes it over. You have kind of boutique 1099 01:02:38,720 --> 01:02:41,040 fitness emerge as a trend, right? 1100 01:02:41,080 --> 01:02:44,200 Your Pilates, your, your CrossFit it's etcetera, etcetera 1101 01:02:44,520 --> 01:02:47,240 and your Chinese takeout like your your. 1102 01:02:47,760 --> 01:02:49,800 Your piece of shop, you're trying to take out your Taco. 1103 01:02:49,800 --> 01:02:52,080 Stores like those are not going away. 1104 01:02:52,080 --> 01:02:54,280 Your haircut. Your hair salons like those are 1105 01:02:54,280 --> 01:02:56,520 not going away. Like Amazon can't give you a 1106 01:02:56,520 --> 01:02:58,680 haircut. Amazon can't give you good 1107 01:02:58,680 --> 01:03:02,040 pizza, right? So and I've just seen enough of 1108 01:03:02,040 --> 01:03:05,360 the data and enough of the evidence. 1109 01:03:05,360 --> 01:03:09,600 And then I think Amazon decided to buy whole food was like the 1110 01:03:09,640 --> 01:03:12,560 white flag where they said, OK, like we can't like the unique 1111 01:03:12,560 --> 01:03:15,000 economic of delivering fresh grocery. 1112 01:03:15,000 --> 01:03:17,560 And I'm someone who does a lot of shopping myself, right? 1113 01:03:17,560 --> 01:03:20,360 Like I go to grocery store, I pick out my own steak. 1114 01:03:20,360 --> 01:03:22,800 Like, look at the marvelization. They look to pick up my own. 1115 01:03:24,080 --> 01:03:26,240 Produce and I'm one of those people. 1116 01:03:26,240 --> 01:03:29,080 It's very hard. It's very hard to get people to 1117 01:03:29,080 --> 01:03:32,800 change that purchasing habit. But I will actually say that the 1118 01:03:32,800 --> 01:03:37,080 bigger reason is just that it is, it's not like shipping a 1119 01:03:37,080 --> 01:03:39,720 book from an Amazon warehouse to your house, right? 1120 01:03:39,720 --> 01:03:42,320 When you when you ship grocery, a lot of times it's very heavy, 1121 01:03:42,520 --> 01:03:45,200 very bulky. And and you need to. 1122 01:03:45,200 --> 01:03:47,600 Keep it at a certain temperature, it spoils very 1123 01:03:47,600 --> 01:03:50,200 easily. It's just the unit economic of 1124 01:03:50,200 --> 01:03:52,840 grocery delivery just doesn't work like and naturally makes 1125 01:03:52,840 --> 01:03:55,040 sense for you to go to grocery store, buy your own grocery. 1126 01:03:55,480 --> 01:03:58,440 And so we've seen enough of it. And as a response, there's a 1127 01:03:58,440 --> 01:04:01,440 really nice chart out there that it post GFC, there's already 1128 01:04:01,440 --> 01:04:05,760 been like like 1% or one half percent like new supply addition 1129 01:04:05,760 --> 01:04:08,120 per year. So grocery shopping center has 1130 01:04:08,120 --> 01:04:11,400 been very, very underbuilt despite all the staff that Mark 1131 01:04:11,400 --> 01:04:15,080 is the most over retail. Country in the world, I think we 1132 01:04:15,080 --> 01:04:19,160 have 1015 years of very under supply of grocery anchor 1133 01:04:19,160 --> 01:04:21,360 shopping centers. And then if you get more a 1134 01:04:21,360 --> 01:04:25,520 little bit more specific in like the coastal areas there one 1135 01:04:25,520 --> 01:04:29,880 there just not a ton of land left for you to there's just no 1136 01:04:29,880 --> 01:04:34,640 land for you to build a 150,000 square foot grocery anchor shop 1137 01:04:34,640 --> 01:04:37,280 is there with like parking and whatnot, right? 1138 01:04:37,280 --> 01:04:39,640 I mean, you can make an argument some of it will be better 1139 01:04:39,880 --> 01:04:43,320 repurpose as like mix use with like multifamily on top of it. 1140 01:04:43,680 --> 01:04:48,280 So there's no land and then the from a NIMBY dynamic in that in 1141 01:04:48,280 --> 01:04:51,840 my backyard, it's just really hard to build anything in the 1142 01:04:51,840 --> 01:04:54,960 coast, right? So we really like that asset 1143 01:04:54,960 --> 01:04:59,320 class and it took like this isn't this is an asset class 1144 01:04:59,320 --> 01:05:02,400 where our views have changed over the years, right? 1145 01:05:02,400 --> 01:05:05,800 I tracked some of these names and I tracked them for 10 years, 1146 01:05:05,800 --> 01:05:08,960 like never really having a position, meaningful position at 1147 01:05:08,960 --> 01:05:11,040 any given time. But like now we're kind of 1148 01:05:11,040 --> 01:05:13,960 saying, OK, the valuation, the cap rates are attractive, 1149 01:05:14,360 --> 01:05:17,640 different views attractive. But also we just don't see new 1150 01:05:17,640 --> 01:05:22,160 supply in the horizon and we're buying them at some cases at 50% 1151 01:05:22,160 --> 01:05:26,560 though replacement value and you absolutely cannot get that on 1152 01:05:26,560 --> 01:05:29,360 the private market. And we're like that, that that 1153 01:05:29,360 --> 01:05:32,160 kid and candy shop. Like, you know, excited. 1154 01:05:32,360 --> 01:05:36,440 Yeah, I mean it, it seems to me. I mean the question I guess that 1155 01:05:36,600 --> 01:05:42,240 that I would have or do you have is, you know, like somebody 1156 01:05:42,240 --> 01:05:47,760 pitched at the CFA Society in New York, they pitched DOC which 1157 01:05:47,760 --> 01:05:53,240 is health Peak, I believe it is sure hand DOC yeah, Health peak 1158 01:05:53,240 --> 01:05:57,160 properties. So everything real estate 1159 01:05:57,160 --> 01:06:03,800 related seems to have gotten sort of sold off here as as 1160 01:06:03,800 --> 01:06:07,160 rates went up and now recently, I'm not sure that the 1161 01:06:07,160 --> 01:06:10,200 correlation I, I'm not sure that the correlation is quite as 1162 01:06:10,200 --> 01:06:13,520 tight as as I as I think maybe it is. 1163 01:06:13,520 --> 01:06:17,320 I think it's probably not quite as correlated as I suspect it is 1164 01:06:17,800 --> 01:06:20,720 rates in real estate that is. But I guess the question is 1165 01:06:20,720 --> 01:06:23,760 like, is this just one big rates bet at the end of the day? 1166 01:06:24,640 --> 01:06:30,200 Or do you see multiple ways to win here that that don't require 1167 01:06:30,200 --> 01:06:34,120 rates coming down and cap rates to compress? 1168 01:06:34,840 --> 01:06:37,400 I think that's a. Great question and I think 1169 01:06:37,400 --> 01:06:43,120 that's a question that we should ask very keenly and have a very 1170 01:06:43,120 --> 01:06:47,160 honest discussion on. I think the answer is interest 1171 01:06:47,160 --> 01:06:50,760 rate is a very important component of you know forward 1172 01:06:50,760 --> 01:06:52,920 returns. We have a certain interest rate 1173 01:06:52,960 --> 01:06:55,560 opinion, but let's just leave that out of the discussion. 1174 01:06:55,840 --> 01:07:00,560 So if you look at, if you look at the expected underwritten 1175 01:07:00,560 --> 01:07:06,320 return in the next like few years, I think that if you 1176 01:07:07,280 --> 01:07:11,760 assume that interest rate stays where they are, right And these 1177 01:07:11,760 --> 01:07:16,200 companies never get any sorts of cap rate compression, but you 1178 01:07:16,200 --> 01:07:18,480 never get any sorts of appreciation due to interest 1179 01:07:18,480 --> 01:07:21,160 rates alone. What's interesting today is that 1180 01:07:21,160 --> 01:07:24,480 because of the lack of new supply, because of lack of the 1181 01:07:24,480 --> 01:07:29,000 threat of new supply in most of these situations, we couldn't 1182 01:07:29,000 --> 01:07:31,880 kind of assume that like they're going to have very healthy rent 1183 01:07:31,880 --> 01:07:35,480 growth going forward. So if you're getting in AD make 1184 01:07:35,480 --> 01:07:39,200 a number like a 7% cap rate with the help of a little bit of 1185 01:07:39,200 --> 01:07:44,440 leverage you could use generally get to you like 7, you know, six 1186 01:07:44,440 --> 01:07:47,920 and a half 7% that's available to shareholders, to equity 1187 01:07:47,920 --> 01:07:52,600 holders and because the lack of new supply and that gets like 1188 01:07:52,600 --> 01:07:55,600 worse over time, right? I think you could generally in a 1189 01:07:55,640 --> 01:08:02,040 bare case scenario get to low teens IR 4 IRS is like generally 1190 01:08:02,040 --> 01:08:03,840 what we're on the writing to you, right. 1191 01:08:04,440 --> 01:08:09,040 And again, like that, that dynamic of not having any supply 1192 01:08:09,080 --> 01:08:12,960 and over time as population grows around in there, yeah, 1193 01:08:13,280 --> 01:08:16,240 that they increasingly have more pricing power and the ability to 1194 01:08:16,240 --> 01:08:19,880 raise rent and in a lot of these investments like a lot of this. 1195 01:08:19,880 --> 01:08:23,080 Grocery anchor shopping centers. It's not just, oh, we're buying 1196 01:08:23,080 --> 01:08:27,279 in at a 7 cap, at A-75 cap, at a cap, it's also the fact that 1197 01:08:27,279 --> 01:08:29,439 they're trading below replacement value, but they're 1198 01:08:29,439 --> 01:08:31,760 also trading below market rent, right? 1199 01:08:31,760 --> 01:08:33,920 There's a lot like you know, we've looked at our portfolio 1200 01:08:33,920 --> 01:08:38,760 recently where the market rent is 1820% higher than in place 1201 01:08:38,760 --> 01:08:40,479 rent. So if you will get a grocery 1202 01:08:40,479 --> 01:08:42,800 anchor shopping center. Like every time that lease 1203 01:08:42,800 --> 01:08:46,920 grows, that five year lease rose the annual escalation and rent 1204 01:08:46,920 --> 01:08:50,600 maybe two 2 1/2% to 3%. But every time that lease 1205 01:08:50,680 --> 01:08:54,479 renews, you get an extra 8% pick up, right? 1206 01:08:54,840 --> 01:08:57,960 So on a portfolio level, like you can actually grow now, Ray 1207 01:08:57,960 --> 01:09:01,720 com about 3 1/2 four percent, 4 1/2 percent. 1208 01:09:01,720 --> 01:09:04,640 I mean, you know. That's that's not a bad setup, 1209 01:09:04,640 --> 01:09:06,160 right? That's that's a pretty good 1210 01:09:06,160 --> 01:09:09,439 setup and you get this extra margin of safety because you're 1211 01:09:09,439 --> 01:09:12,520 you're that much below market and what happens? 1212 01:09:12,520 --> 01:09:16,640 Is if you randomly have some sort of vacancy, you actually 1213 01:09:16,640 --> 01:09:19,960 could have an opportunity to get a new tenant who's going to pay 1214 01:09:19,960 --> 01:09:23,560 sometimes like double, triple the in place rent in some 1215 01:09:23,560 --> 01:09:26,279 extreme cases. I don't believe this is just a 1216 01:09:26,319 --> 01:09:29,080 pure interest rate bet right now. 1217 01:09:29,080 --> 01:09:32,600 I think there's like another meaningful discussion on well, 1218 01:09:32,600 --> 01:09:36,520 if you buy some of those public reads, add a 6 1/2 percent cap 1219 01:09:36,520 --> 01:09:41,359 rate and the private market transaction are showing you a 5 1220 01:09:41,359 --> 01:09:44,399 1/2 percent cap rate. And I know our mutual firm Moses 1221 01:09:44,399 --> 01:09:47,080 Kane says he doesn't write to cap rate compression. 1222 01:09:47,080 --> 01:09:52,000 But like if you got someone like a block zone writing a $10 1223 01:09:52,000 --> 01:09:55,880 billion check and they're paying A55, right and you're buying in 1224 01:09:55,880 --> 01:10:00,000 a six four, like should you bake in some sort of cap rate 1225 01:10:00,000 --> 01:10:02,440 compression there? And that deals being done in 1226 01:10:02,440 --> 01:10:04,480 today's interest rate environment, right? 1227 01:10:04,480 --> 01:10:07,920 That's a very sophisticated investor in arm's length 1228 01:10:07,920 --> 01:10:11,400 transaction. In the better case, if you just 1229 01:10:11,440 --> 01:10:14,520 say there's no cap rate compression, there's an interest 1230 01:10:14,520 --> 01:10:18,600 rate does not move lower. Like can I get a 10 to 12% 1231 01:10:18,600 --> 01:10:21,560 return? I think the answer is yes. 1232 01:10:21,560 --> 01:10:24,320 Like, I think I think the answer is that you could get a 10 to 1233 01:10:24,320 --> 01:10:30,320 12% return on the low end of potential future outcomes and on 1234 01:10:30,400 --> 01:10:34,960 kind of like the better case where if it's just traced to 1235 01:10:34,960 --> 01:10:38,280 where the private transactions are being done at, right, 1236 01:10:38,280 --> 01:10:41,960 There's one source of actual return and these like 100 basis 1237 01:10:41,960 --> 01:10:44,280 points are very, very meaningful, right? 1238 01:10:44,280 --> 01:10:48,240 I mean, I think that for the non real estate audience, a 5% cap 1239 01:10:48,240 --> 01:10:49,800 rate is a twenty time multiple, right? 1240 01:10:49,800 --> 01:10:52,360 A 4% cap rate is a 25 time multiple. 1241 01:10:52,360 --> 01:10:56,840 These cap rates sound very innocuous, but in reality, the 1242 01:10:56,880 --> 01:11:00,280 multiple contraction and expansion are enormous, right? 1243 01:11:00,640 --> 01:11:04,440 The other aspect is the optionality, the optionality 1244 01:11:04,440 --> 01:11:06,680 that a lot of these retail because of the balance sheets, 1245 01:11:06,720 --> 01:11:08,080 right? Like you know, here you got 1246 01:11:08,080 --> 01:11:11,080 Camden, you know I'm sitting there and they re asking the 1247 01:11:11,080 --> 01:11:13,800 president, you know what your capital allocation strategies 1248 01:11:13,800 --> 01:11:15,120 is. We don't have any plans to do 1249 01:11:15,120 --> 01:11:17,400 any deals like we're going to buy back our shares because 1250 01:11:17,400 --> 01:11:21,320 we're trading at a mid 6 cap rate and then using any excess 1251 01:11:21,320 --> 01:11:23,960 cash flow to buy back shares. They're probably on target buy 1252 01:11:23,960 --> 01:11:27,080 back 2% of the shares outstanding per, you know, for 1253 01:11:27,080 --> 01:11:30,600 2024 and that's going to create a tremendous amount of value 1254 01:11:30,600 --> 01:11:33,880 going forward. So I think a lot of these. 1255 01:11:33,880 --> 01:11:37,280 Benefits and a lot of these better balance sheet and better 1256 01:11:37,280 --> 01:11:42,440 structural positions probably won't show up right. 1257 01:11:42,680 --> 01:11:46,280 They won't be. People won't be made aware until 1258 01:11:46,320 --> 01:11:48,760 a couple years down the road because they could pick up 1259 01:11:48,760 --> 01:11:51,600 distress assets. If distress assets come on to 1260 01:11:51,600 --> 01:11:54,640 the market, they could buy back shares and buy buy their own 1261 01:11:54,640 --> 01:11:58,320 shares at a. 6 1/2 cap. They in any environment where 1262 01:11:58,320 --> 01:12:02,720 capital is very, very restrictive, I think that the 1263 01:12:02,720 --> 01:12:06,280 incumbent large cap public reeds actually it means supply won't 1264 01:12:06,280 --> 01:12:08,440 get bill. They're positioning within the 1265 01:12:08,480 --> 01:12:10,720 ecosystem. I should get stronger over time 1266 01:12:11,160 --> 01:12:14,040 And they just have a tremendous amount of anti fragile 1267 01:12:14,040 --> 01:12:17,000 characteristics, right? Like most of them are under six 1268 01:12:17,000 --> 01:12:20,080 times and that that to you, even though we mentioned a lot of 1269 01:12:20,080 --> 01:12:23,360 them to cover their fixed payment 6 to 8 times, tremendous 1270 01:12:23,360 --> 01:12:26,640 large margin safety and they some of them are even forget 1271 01:12:26,640 --> 01:12:29,240 about like leveraging up to buy back some shares. 1272 01:12:29,240 --> 01:12:32,560 And then question you like, well, what kind of loan to value 1273 01:12:32,560 --> 01:12:35,280 ratio you taking it from? I mean we're not talking about 1274 01:12:35,280 --> 01:12:39,640 like going from 65% to 75% to buyback shares, right? 1275 01:12:39,640 --> 01:12:42,720 We're talking about like going from, in the case of Camden, I 1276 01:12:42,720 --> 01:12:45,480 mean there are four times net debt to EBIT. 1277 01:12:45,480 --> 01:12:48,040 Honestly you probably talked about like 20 times long to you 1278 01:12:48,440 --> 01:12:52,000 know 2020% loan to value to maybe going up to 25% loan to 1279 01:12:52,000 --> 01:12:53,720 value, like it's a non factor, right? 1280 01:12:53,720 --> 01:12:56,560 Like you're not increasing the risk by that much. 1281 01:12:56,920 --> 01:13:00,240 So I don't think this is just purely an interest rate, but now 1282 01:13:00,240 --> 01:13:03,360 do I think that is the fact. Cut interest rate like what will 1283 01:13:03,360 --> 01:13:05,960 they absolutely benefit from that? 1284 01:13:05,960 --> 01:13:09,960 Yes, because there is a. Function of people being able to 1285 01:13:09,960 --> 01:13:15,040 part that capital in the two year treasury and and they earn 1286 01:13:15,040 --> 01:13:19,240 like mid fours to low fives in, in the very short end treasury 1287 01:13:19,240 --> 01:13:21,120 curve, right. I think the moment they cut 1288 01:13:21,120 --> 01:13:23,480 that, a lot of that capital could potentially flow into the 1289 01:13:23,480 --> 01:13:27,520 reeds like we don't need that. We don't need that to happen to 1290 01:13:27,520 --> 01:13:31,640 earn a 10 to 12%, I think, I think the interest rate there, 1291 01:13:31,760 --> 01:13:34,000 right. But just like the large cap 1292 01:13:34,000 --> 01:13:39,200 multifamily reeds trading to what Blackstone is paying for, 1293 01:13:39,200 --> 01:13:44,280 for these transactions probably get you to like a 15% IR. 1294 01:13:44,560 --> 01:13:47,240 And then if there's any sorts of interest rate compression and 1295 01:13:47,240 --> 01:13:50,320 interest rate being caught and further cap rate compression, 1296 01:13:50,320 --> 01:13:53,960 then you kind of get into that high teens, potentially low 20s 1297 01:13:54,200 --> 01:13:58,520 depending on the on the company. And we're seeing that kind of 1298 01:13:58,520 --> 01:14:01,360 consistently across our portfolio. 1299 01:14:01,840 --> 01:14:05,480 And this is like A1. Year 2 year for our is unlike a 1300 01:14:05,480 --> 01:14:08,280 four year time frame. And generally I think I think 1301 01:14:08,280 --> 01:14:12,200 like we're we're seeing a lot of between the dividends and total 1302 01:14:12,200 --> 01:14:15,160 share price return. Like you get a double in a lot 1303 01:14:15,160 --> 01:14:19,120 of these public reads over like a four year time frame while 1304 01:14:19,120 --> 01:14:22,960 investing at caught by 20 to 40% loan to value. 1305 01:14:23,240 --> 01:14:26,400 And if you go up the risk curve like if you go, if you. 1306 01:14:26,400 --> 01:14:29,320 Start. Buying some REITs that has over 1307 01:14:29,320 --> 01:14:32,680 50% loan to value like you you, you just start, you know, 1308 01:14:32,680 --> 01:14:37,440 getting into why the .5 plus percent IOR for estimated IR 1309 01:14:37,480 --> 01:14:40,400 returns. So I think interest rate plays a 1310 01:14:40,400 --> 01:14:44,680 big role, but it's not the only factor that tries future. 1311 01:14:44,680 --> 01:14:47,480 Returns I. Mean that makes sense and 1312 01:14:47,840 --> 01:14:53,640 especially as we've talked, I mean the difference between A7 1313 01:14:53,760 --> 01:14:58,520 cap and a six cap is a smaller percentage than the difference 1314 01:14:58,520 --> 01:15:02,680 between a four and a three or even A3 and A2, right or. 1315 01:15:03,640 --> 01:15:06,800 Yeah, yeah. I mean, it's, it's kind of crazy 1316 01:15:06,800 --> 01:15:12,160 because like, you know, a four is a 25A3 is 33 and then let's 1317 01:15:12,160 --> 01:15:16,760 go from like a five to three, which is a 20 month or 233 month 1318 01:15:16,760 --> 01:15:19,840 while you add leverage to it. I mean, that's incredible, 1319 01:15:19,880 --> 01:15:21,960 right? And like a lot of this copyright 1320 01:15:21,960 --> 01:15:27,040 math is very intuitive to me. And I was very skeptical in a 1321 01:15:27,040 --> 01:15:32,760 zerp world where I, we really were only able to make one or 1322 01:15:32,760 --> 01:15:37,080 two really meaningful real estate investment from 20, 2013 1323 01:15:37,080 --> 01:15:41,600 till net A2 probably like 2022. And because we were, we were 1324 01:15:41,600 --> 01:15:43,120 terrified, right? We were terrified. 1325 01:15:43,120 --> 01:15:46,400 Hey, like at the market, our, our valley multifamily 4 and a 1326 01:15:46,400 --> 01:15:49,200 quarter cap rate. What if that goes to five, 1327 01:15:49,320 --> 01:15:51,800 right? Like what if that goes to 5 1/2, 1328 01:15:51,800 --> 01:15:53,440 which is exactly what has happened. 1329 01:15:53,440 --> 01:15:55,520 Like, I mean, there's people out there that talk what they're 1330 01:15:55,520 --> 01:15:58,240 like, well, multifamily Capra should go to 9. 1331 01:15:58,240 --> 01:16:01,120 And I'm like, I will probably sell everything in. 1332 01:16:04,560 --> 01:16:07,000 Like like at that. Point I'm just going to sell 1333 01:16:07,040 --> 01:16:09,160 everything I own and just buy multifamily. 1334 01:16:09,160 --> 01:16:12,640 Got a nightcap, right? Like the real world on a piece 1335 01:16:12,640 --> 01:16:17,360 of paper, you may say as a value answer, the 10 year yield is a 1336 01:16:17,360 --> 01:16:21,240 four three and I need a 400 basis point spread for me to 1337 01:16:21,240 --> 01:16:24,640 like buy that. But like in the real world, man, 1338 01:16:24,640 --> 01:16:28,520 like when you see when you hear the real estate GPS and the 1339 01:16:28,520 --> 01:16:31,760 developers just kind of lamenting that they can't get 1340 01:16:31,760 --> 01:16:34,400 any deals to pencil right. And this is not just a 1341 01:16:34,400 --> 01:16:36,640 multifamily, This isn't self storage. 1342 01:16:36,640 --> 01:16:39,440 This this isn't self storage. This is in grocery shopping 1343 01:16:39,440 --> 01:16:41,440 center. Obviously, no one's got any 1344 01:16:41,440 --> 01:16:43,480 appetite to develop any office right now. 1345 01:16:43,920 --> 01:16:46,760 Except for Ken Griffin. That's Citadel, you know. 1346 01:16:46,760 --> 01:16:48,360 Well, it's new. Headquarters. 1347 01:16:48,960 --> 01:16:50,920 Yeah, It's gold headquarters in New York. 1348 01:16:50,920 --> 01:16:53,960 Gold headquarters in Miami. There was just absolutely no 1349 01:16:54,040 --> 01:16:57,280 appetite for any sorts of groundnut development deals. 1350 01:16:57,280 --> 01:16:59,520 Today. And this is the kind of 1351 01:16:59,520 --> 01:17:01,000 environment that we love to play in. 1352 01:17:01,040 --> 01:17:03,080 I meant this is a kid in a candy shop. 1353 01:17:03,080 --> 01:17:05,080 Like it feels like shooting fish in a barrel. 1354 01:17:05,600 --> 01:17:07,720 And, you know, we're, we're really excited. 1355 01:17:08,080 --> 01:17:10,400 So how are you playing in that environment? 1356 01:17:10,720 --> 01:17:15,120 And the real question I'm asking is, is there a a vehicle that 1357 01:17:15,120 --> 01:17:21,120 you are introducing or anything like that, if you're allowed to 1358 01:17:21,120 --> 01:17:22,520 announce such a thing, I don't know. 1359 01:17:23,400 --> 01:17:26,080 I'll say this like if people are interested, they could. 1360 01:17:26,080 --> 01:17:27,640 They could reach out, you know, it's. 1361 01:17:27,840 --> 01:17:31,280 Probably a smart way to do it. Yeah, yeah. 1362 01:17:31,480 --> 01:17:33,840 I mean, you know, I think, I think if people are interested, 1363 01:17:34,120 --> 01:17:38,320 they certainly reach out here in New York and people could find 1364 01:17:38,320 --> 01:17:41,360 me on LinkedIn, people could find me on Twitter anonymously 1365 01:17:41,360 --> 01:17:44,720 under this of neutral men this. Is the unveil right doing it on 1366 01:17:44,720 --> 01:17:48,080 your podcast, Bill? The Howard Marks of Reitz. 1367 01:17:49,160 --> 01:17:53,720 Yes, yes, a a a write a typewritten memo under the. 1368 01:17:53,720 --> 01:17:56,760 Style of how Marx with typewritten errors and 1369 01:17:56,760 --> 01:17:58,200 everything I. Quite like it. 1370 01:17:58,200 --> 01:18:01,320 I like the way it looks. Well, I appreciate that. 1371 01:18:01,480 --> 01:18:03,680 Yeah. It's been a hit among like the 1372 01:18:04,040 --> 01:18:06,240 the middle-aged dad, you know, finance. 1373 01:18:06,240 --> 01:18:10,160 That would be me. That's me as well actually. 1374 01:18:10,400 --> 01:18:12,000 Then a couple typewriters in the back. 1375 01:18:12,000 --> 01:18:14,640 Here you can see. I mean, when did we first talk 1376 01:18:14,640 --> 01:18:17,120 about the idea? It was probably like October, 1377 01:18:17,560 --> 01:18:21,400 you and I, and then you were on Andrew Walker's podcast and sort 1378 01:18:21,400 --> 01:18:24,200 of getting a little bit louder about it probably about 12 1379 01:18:24,200 --> 01:18:26,520 months ago, right? Right around. 1380 01:18:26,520 --> 01:18:31,560 I mean, we've been as we've been anticipating this up to reset 1381 01:18:31,600 --> 01:18:35,280 and we, we had a lot of dialogue with our LP saying if these 1382 01:18:35,280 --> 01:18:39,000 reads start trading above a six cap and this is probably 18 1383 01:18:39,000 --> 01:18:42,920 months ago, like we would look to you deploy a lot of capital, 1384 01:18:42,920 --> 01:18:45,640 right. And I think where I've been very 1385 01:18:45,640 --> 01:18:49,480 publicly vocal about is probably right on time when I did 1386 01:18:49,480 --> 01:18:51,800 podcasts with Andrew and the podcast with you and Twitter 1387 01:18:51,800 --> 01:18:54,760 Spaces. And so that was probably October 1388 01:18:54,760 --> 01:18:57,480 from a timing perspective, like we almost nailed the bottom. 1389 01:18:57,480 --> 01:19:01,280 Yeah. Well, yes, I some of that's a 1390 01:19:01,280 --> 01:19:05,680 function of just recording at the right time, but yeah. 1391 01:19:05,800 --> 01:19:10,040 I've been this game long enough and I've been humble enough by 1392 01:19:10,040 --> 01:19:14,240 the public markets. When you think that, oh, this is 1393 01:19:14,240 --> 01:19:17,760 the bottom, like, you know, in October last year, my analyst 1394 01:19:17,800 --> 01:19:22,240 who was a very bright, you know, panelists and very into real 1395 01:19:22,240 --> 01:19:25,880 estate and I was just like updating the comp rates when mid 1396 01:19:25,880 --> 01:19:29,440 America and when Cam that went to like 82 bucks. 1397 01:19:30,000 --> 01:19:32,440 We're just looking at you. We're like, how do we lose 1398 01:19:32,440 --> 01:19:34,520 money? Like what we we added, we bought 1399 01:19:34,520 --> 01:19:36,600 more, but like, well, I shouldn't. 1400 01:19:36,600 --> 01:19:39,880 We just like buy this and go to beach like you know it. 1401 01:19:39,880 --> 01:19:45,000 It's I've been humble enough by the public markets to understand 1402 01:19:45,000 --> 01:19:47,480 that if you're calling the bottom like you may, you may as 1403 01:19:47,480 --> 01:19:51,520 well just like try to like find a bowl or something like that. 1404 01:19:52,360 --> 01:19:56,400 Yeah, yeah. Well, I mean, so the other side 1405 01:19:56,400 --> 01:20:00,360 of that is you've been very vocal about this opportunity. 1406 01:20:00,360 --> 01:20:05,720 So how do you balance sort of being humbled by the markets and 1407 01:20:05,720 --> 01:20:08,440 then also. Staying, I don't want to say 1408 01:20:08,440 --> 01:20:11,600 aggressive, but being able to play offense when you see it. 1409 01:20:12,600 --> 01:20:16,320 Oh, I mean, I think, I think actually it's being able to. 1410 01:20:17,480 --> 01:20:21,520 So I think I think like there is a slight nuance in that, right? 1411 01:20:21,520 --> 01:20:25,320 Like you could be humble by the market and then we're not going 1412 01:20:25,320 --> 01:20:29,480 to be able to call at the bottom right and just accept the fact, 1413 01:20:29,520 --> 01:20:33,480 like just accept the fact that we could easily buy this and 1414 01:20:33,480 --> 01:20:36,960 then just have the shares go down 2030% on you, right? 1415 01:20:36,960 --> 01:20:39,080 I mean, that's like the view play in the public markets. 1416 01:20:39,080 --> 01:20:40,360 Like you just have to accept that. 1417 01:20:40,360 --> 01:20:43,880 And and that, that is what happened to us last year. 1418 01:20:43,880 --> 01:20:47,880 We were buying mid American Camden kind of like in, in that 1419 01:20:47,880 --> 01:20:51,160 low to mid 6. And then we saw it like trade 1420 01:20:51,160 --> 01:20:55,440 almost up to 8% cap rate like down probably 2025% at one 1421 01:20:55,440 --> 01:20:58,200 point. And I think having the right 1422 01:20:58,200 --> 01:21:02,040 investor base would understand your analysis, which trusted 1423 01:21:02,040 --> 01:21:04,760 your analysis, your process like having that patient best of 1424 01:21:04,760 --> 01:21:07,360 base. And, and also just like, just 1425 01:21:07,360 --> 01:21:11,240 like maniacally thinking, mentally thinking that, hey, 1426 01:21:11,240 --> 01:21:15,080 Buffett talked about this, this like Mr. Market and and like you 1427 01:21:15,080 --> 01:21:17,880 own these assets. Like where I said, I'm literally 1428 01:21:17,880 --> 01:21:21,600 doing the math. I'm thinking Hey I own X number 1429 01:21:21,600 --> 01:21:24,240 of apartments distribute. Across a sum though. 1430 01:21:24,840 --> 01:21:29,480 And if anything, I find it very easy for me to just get myself 1431 01:21:29,480 --> 01:21:33,000 into that mental state and say, Hey, like, if it stays down 1432 01:21:33,000 --> 01:21:36,240 here, every different check that I get, I'm going to go buy more 1433 01:21:36,240 --> 01:21:39,320 shares and and I get to own more apartment units, right? 1434 01:21:39,560 --> 01:21:43,560 I mean, maybe it's because like mentally I'm built that way And 1435 01:21:43,560 --> 01:21:46,440 also. It's a lot easier to do. 1436 01:21:47,000 --> 01:21:52,200 To apply that kind of psychology to real estate and and a non 1437 01:21:52,200 --> 01:21:55,160 terminal asset class like departments where you say hey, 1438 01:21:55,160 --> 01:21:57,680 but when the price goes like the more units I'm going to buy and 1439 01:21:57,680 --> 01:21:58,680 if anything. Like you may. 1440 01:21:58,680 --> 01:22:03,560 Even want to like go, you know, one O 5 growth leverage, you 1441 01:22:03,560 --> 01:22:05,760 know gross leverage 11 growth leverage, right? 1442 01:22:05,760 --> 01:22:08,680 Like it just it just. It's a lot. 1443 01:22:08,720 --> 01:22:12,200 Easier because I know at the end of the day, people need a place 1444 01:22:12,200 --> 01:22:15,920 to live on buying way below replacement costs. 1445 01:22:15,920 --> 01:22:19,560 Like all the things that we've been like, like talking about on 1446 01:22:19,560 --> 01:22:22,800 this podcast. And it's very different like 1447 01:22:22,800 --> 01:22:28,480 when you own something like one-of-a-kind asset and like 1448 01:22:28,480 --> 01:22:30,880 there's maybe two buyers could buy that asset. 1449 01:22:30,880 --> 01:22:34,920 Like in this asset class, like I know blocks own could buy, KKR 1450 01:22:34,920 --> 01:22:38,280 could buy and Brookfield could buy and there's family offices 1451 01:22:38,280 --> 01:22:41,880 who could buy and there's not one bid for these assets, like 1452 01:22:41,880 --> 01:22:43,760 there's hundreds of bids for these assets. 1453 01:22:43,760 --> 01:22:45,440 And that gives me a tremendous amount. 1454 01:22:45,440 --> 01:22:48,280 And you know I having the. Experience like have owning some 1455 01:22:48,800 --> 01:22:52,320 some residential units and and you know, my family owns 1456 01:22:52,360 --> 01:22:56,360 probably 50-60 units in New York City and I own some myself. 1457 01:22:56,360 --> 01:23:00,640 And when you like own these assets yourself for 1020 years, 1458 01:23:00,640 --> 01:23:03,320 like you are saying, hey, in the long run, rent goes out. 1459 01:23:03,320 --> 01:23:06,600 People need a place to live. In the worst case, maybe your 1460 01:23:06,600 --> 01:23:08,600 occupancy. Like we, we, we looked. 1461 01:23:08,600 --> 01:23:13,360 At the GFC data, right like when unemployment went from 4% to 10% 1462 01:23:13,360 --> 01:23:15,920 and what happened to occupancy rates and some of those some go 1463 01:23:15,920 --> 01:23:17,800 multi family apartments like I mean? 1464 01:23:18,600 --> 01:23:21,640 The occupancy rates like. Maybe 1-2 percent. 1465 01:23:21,640 --> 01:23:24,520 They had a little bit of rent declines and I didn't get hit 1466 01:23:24,680 --> 01:23:27,320 that hard, right? It's just, I mean, these are 1467 01:23:27,320 --> 01:23:31,480 incredibly Brazilian assets, very, very relevant, right? 1468 01:23:32,160 --> 01:23:35,960 No, earlier you said we thought that we were all going to live 1469 01:23:35,960 --> 01:23:38,920 in cities wherever and like never, never do this, we'll 1470 01:23:38,920 --> 01:23:40,880 never do that. And just seems like a lot of 1471 01:23:40,880 --> 01:23:43,480 these asset cause of time was like people need a place. 1472 01:23:43,480 --> 01:23:45,000 To live, yeah. Yeah. 1473 01:23:45,000 --> 01:23:49,160 The other thing that'll be interesting to see is whether or 1474 01:23:49,160 --> 01:23:52,760 not home prices of sort of, I guess whether or not this step 1475 01:23:52,760 --> 01:23:56,400 change results in, in something that sticks. 1476 01:23:56,400 --> 01:24:03,080 Because if the price increases the last two years do stick, it 1477 01:24:03,080 --> 01:24:07,080 is possible that we have more of a renting society, which at 1478 01:24:07,160 --> 01:24:11,200 least for longer, right? And I don't know if that's, I'm 1479 01:24:11,200 --> 01:24:13,880 not sure that's good or bad. I mean, I, you know, I see some 1480 01:24:13,880 --> 01:24:18,680 of these communities that that are being put together, they 1481 01:24:18,680 --> 01:24:21,640 seem, they seem quite nice. I mean, you know, I don't, 1482 01:24:22,080 --> 01:24:23,680 they're going to cut some corners, right. 1483 01:24:23,680 --> 01:24:28,640 Naturally, there's a, the owner is not going to put as much into 1484 01:24:28,640 --> 01:24:32,720 a rental property as as someone would improve it otherwise if it 1485 01:24:32,720 --> 01:24:34,640 were their own. But I'm I'm not sure that's 1486 01:24:34,640 --> 01:24:37,760 necessarily a misallocation of resources. 1487 01:24:37,760 --> 01:24:40,280 It's just perhaps a less of a luxury good. 1488 01:24:42,080 --> 01:24:44,720 Yeah, I mean, it's, it's, it's super interesting to see what's 1489 01:24:44,720 --> 01:24:47,360 been happening on the and I think you've told us 1490 01:24:47,360 --> 01:24:51,280 specifically about like the built for rent, right. 1491 01:24:51,360 --> 01:24:54,600 So a couple comments. One is the need for people to 1492 01:24:54,600 --> 01:24:56,800 rent because they can't afford single family homes. 1493 01:24:56,800 --> 01:24:59,760 Like you're seeing that a lot of that data in the large cap 1494 01:24:59,760 --> 01:25:02,000 multifamily reads like. They have incredible. 1495 01:25:02,000 --> 01:25:06,400 Data on, you know, what is the tenant move out ratio due to 1496 01:25:06,400 --> 01:25:10,040 first time home purchases and and that has been as high as 20% 1497 01:25:10,040 --> 01:25:12,520 at some point in in the past two decades. 1498 01:25:12,520 --> 01:25:17,320 And there some of them are down to 10% because people just can't 1499 01:25:17,320 --> 01:25:20,240 afford to buy their first home with mortgage rates being this 1500 01:25:20,240 --> 01:25:23,360 high and and single family homes being this expensive, right. 1501 01:25:23,800 --> 01:25:26,520 So you definitely have that dynamic would definitely seen 1502 01:25:26,520 --> 01:25:29,720 that in the rental. And then to what you you know 1503 01:25:29,720 --> 01:25:31,800 what you said about some of these communities, what 1504 01:25:31,800 --> 01:25:33,880 happened? Like if you have a society like 1505 01:25:33,920 --> 01:25:37,040 our friend Hunter talks about the Brazil, Brazil ization of 1506 01:25:37,040 --> 01:25:40,080 like America, right? And. 1507 01:25:40,120 --> 01:25:43,840 It doesn't have impacts, I mean. You know, like being a typical 1508 01:25:43,840 --> 01:25:46,200 middle-aged dad, right? Like I recently bought some 1509 01:25:46,200 --> 01:25:49,600 hydrangeas from Costco and I plant a little, get a little 1510 01:25:49,600 --> 01:25:52,560 planter. I I like grew some herbs myself, 1511 01:25:52,560 --> 01:25:53,640 right? Like did you? 1512 01:25:54,000 --> 01:25:57,000 Use Scott's Miracle Grow. Actually, I haven't used any 1513 01:25:57,000 --> 01:25:58,840 fertilizer. Supposedly you can't. 1514 01:25:59,120 --> 01:26:00,560 There you have. You can't use nitrogen 1515 01:26:00,560 --> 01:26:03,480 fertilizers and hydrangeas because it caused them to grow 1516 01:26:03,480 --> 01:26:07,160 too fast and then the the stems become brittle and the flowers 1517 01:26:07,160 --> 01:26:09,240 are large and heavy, so it become true. 1518 01:26:09,240 --> 01:26:14,320 But yeah, yeah, I mean. Look at us, you know, 22 middle 1519 01:26:14,320 --> 01:26:15,480 age guys, you know, talking about. 1520 01:26:15,480 --> 01:26:17,160 Yeah, that's right. But that's. 1521 01:26:18,040 --> 01:26:20,520 Right. But I, I. 1522 01:26:20,520 --> 01:26:22,640 Do agree with the sentiment that when you. 1523 01:26:22,720 --> 01:26:28,120 Own you are going to plant the hydrangea and and plant the herb 1524 01:26:28,120 --> 01:26:32,400 garden and and it has two vibes and feel of a neighborhood 1525 01:26:32,400 --> 01:26:33,480 language and that's what you got. 1526 01:26:33,480 --> 01:26:37,440 You have a longer time horizon, which allows you to invest more 1527 01:26:37,440 --> 01:26:40,280 in your community right versus license was built to rent. 1528 01:26:40,320 --> 01:26:43,120 I mean, if you're here, you're not here next year. 1529 01:26:43,120 --> 01:26:45,440 Like, you know what, what does that deal? 1530 01:26:45,440 --> 01:26:49,520 And people care, right? Kind of a joke is like that. 1531 01:26:49,520 --> 01:26:53,480 Who's at maniacal about the the Walling in the Midwest or the 1532 01:26:53,480 --> 01:26:55,400 South, right? If you're renting. 1533 01:26:55,480 --> 01:26:57,680 You've got really invest in that. 1534 01:26:58,360 --> 01:27:02,720 I think probably not going to have really important 1535 01:27:02,720 --> 01:27:05,480 implications to neighborhoods in the future. 1536 01:27:05,560 --> 01:27:09,280 Yeah, yeah. On the other hand, like the 1537 01:27:09,280 --> 01:27:12,760 developer of the neighborhood has a strong incentive to keep 1538 01:27:12,760 --> 01:27:15,280 the neighborhood looking nice and somewhere that people do 1539 01:27:15,280 --> 01:27:18,240 want to rent. So I don't know. 1540 01:27:18,600 --> 01:27:22,240 I mean, I, I think generally the idea that owners take better 1541 01:27:22,240 --> 01:27:25,880 care of their neighborhoods is something that makes intuitive 1542 01:27:25,880 --> 01:27:28,160 sense to me and I think is borne out in the data. 1543 01:27:28,160 --> 01:27:31,760 But I'm not sure that we've had the, the build the rent at the 1544 01:27:31,760 --> 01:27:34,360 same scale as we're, we have now. 1545 01:27:34,360 --> 01:27:37,280 So maybe things change a little bit over time. 1546 01:27:37,800 --> 01:27:42,320 Yeah, I think, I think the, if you think about the built to 1547 01:27:42,320 --> 01:27:46,040 rent business model, it really has not been around. 1548 01:27:46,160 --> 01:27:49,520 Yeah, no, I mean the concept of like renting a single family 1549 01:27:49,520 --> 01:27:55,040 home is kind of largely foreign until probably 10 years ago. 1550 01:27:55,560 --> 01:27:59,160 And I remember doing the GFC we that the family home that we 1551 01:27:59,160 --> 01:28:03,560 grew up in this in the suburbs of Long Island, we we've all 1552 01:28:03,560 --> 01:28:06,040 most family member having with the Queens at that point. 1553 01:28:06,040 --> 01:28:10,680 And we so the only tenant that we could really find is a group 1554 01:28:10,680 --> 01:28:14,760 of young people who work as way staff in the restaurant, right? 1555 01:28:14,800 --> 01:28:19,920 Like that's like the natural logical rental base and man, 1556 01:28:19,920 --> 01:28:24,160 like we have to sell that than the GFC as a family because that 1557 01:28:24,160 --> 01:28:26,160 like that was the only tenant base. 1558 01:28:26,160 --> 01:28:28,680 Why fast food today? There's a lot of teachers, 1559 01:28:28,680 --> 01:28:32,800 there's a lot of people with normal W2 wages that are very 1560 01:28:32,800 --> 01:28:37,160 responsible adults who need to rent a single family home in my 1561 01:28:37,160 --> 01:28:40,200 hometown along Island. And we have to sell that because 1562 01:28:40,200 --> 01:28:44,760 like that that Tena base was just partying every day and 1563 01:28:44,760 --> 01:28:46,840 additional improper and neighbors are calling us every 1564 01:28:46,840 --> 01:28:50,920 single day of like partying and drunk driving, which like really 1565 01:28:51,000 --> 01:28:54,600 illustrates like the emerges over the course of 15 years of 1566 01:28:54,600 --> 01:28:58,720 that asset class. Yeah, well, I hear you say that 1567 01:28:58,880 --> 01:29:02,480 it reduces my willingness or desire to own direct real 1568 01:29:02,480 --> 01:29:08,560 estate. Well, again, this goes back to 1569 01:29:09,040 --> 01:29:11,880 Chase comment about about this like this. 1570 01:29:11,880 --> 01:29:15,040 You know, he thanks for for fracture ownership and my family 1571 01:29:15,040 --> 01:29:18,520 owns some stuff on the private side and I've kind of really cut 1572 01:29:18,520 --> 01:29:23,600 my teeth like knowing how to lease, how to that tenants and 1573 01:29:23,600 --> 01:29:26,560 and also just like getting random phone calls on like when 1574 01:29:26,560 --> 01:29:28,880 a Blizzard rose rose through New York, right. 1575 01:29:28,880 --> 01:29:32,480 Like the route #1 the real estate ownership is that things 1576 01:29:32,480 --> 01:29:35,000 only break in extreme. Get the shit right. 1577 01:29:35,000 --> 01:29:37,840 Like right now, it's not like we have a couple 80° days. 1578 01:29:37,840 --> 01:29:41,280 Your AC is going to fail like right now, right and the heats 1579 01:29:41,280 --> 01:29:43,920 not working. It's it's not when it's like 70° 1580 01:29:43,920 --> 01:29:45,800 outside. I mean, it's not when it's like 1581 01:29:46,120 --> 01:29:47,080 60° outside. Well. 1582 01:29:47,080 --> 01:29:49,480 It's not when the most strain is on the system, right? 1583 01:29:50,120 --> 01:29:51,840 Yeah, exactly. It's the most straying and 1584 01:29:51,840 --> 01:29:54,200 literally like I've had experiences where we get a call 1585 01:29:54,200 --> 01:29:56,640 from a tenant, there's like a foot smell on the ground and and 1586 01:29:56,640 --> 01:29:57,760 I got to go. I got to go. 1587 01:29:57,760 --> 01:30:00,200 Fix it right, because you can't let people not have heat. 1588 01:30:00,760 --> 01:30:04,040 And literally like the reason why they failed is that it's 1589 01:30:04,080 --> 01:30:06,640 really cold outside and there's a pigeon like hanging out by the 1590 01:30:06,640 --> 01:30:09,960 chimney opening and they get carbon monoxide poisoning and 1591 01:30:09,960 --> 01:30:13,440 they fall all the way down to the chimney and like the furnace 1592 01:30:13,440 --> 01:30:15,760 can operate. Like these are real life 1593 01:30:15,760 --> 01:30:18,360 stories, right? So going to like, not wanting to 1594 01:30:18,400 --> 01:30:22,600 own real estate directly and managing it like, I have a ton 1595 01:30:22,600 --> 01:30:26,000 of black horror stories. Or imagine like it's midnight 1596 01:30:26,000 --> 01:30:28,680 and your tenant doesn't have heat and you take a part like 1597 01:30:28,680 --> 01:30:31,440 the chimney above, like the boiler, and there's like that 1598 01:30:31,440 --> 01:30:34,760 pigeon staring. Yeah, yeah. 1599 01:30:34,760 --> 01:30:36,840 No, thank you. Yeah. 1600 01:30:36,840 --> 01:30:40,960 And versus like I'm at the read and I'm asking the president of 1601 01:30:40,960 --> 01:30:44,080 like a $10 billion multifamily read, I'm like, you're going to 1602 01:30:44,080 --> 01:30:46,480 buy back shares and he's like, we don't have any other plans. 1603 01:30:46,480 --> 01:30:48,760 Like there's nothing else that's going to yield like a higher 1604 01:30:48,760 --> 01:30:49,680 return. And I'm like. 1605 01:30:49,680 --> 01:30:51,920 Great. You know keep on that shares if 1606 01:30:51,920 --> 01:30:54,160 anything you should live up and buy back share like these are 1607 01:30:54,160 --> 01:30:58,680 very different. What do you call return on brain 1608 01:30:58,680 --> 01:31:00,960 damage by capital allocation positions? 1609 01:31:01,000 --> 01:31:04,640 You mentioned the REIT mafia. What is the REIT mafia when you 1610 01:31:04,640 --> 01:31:05,840 talk about it? Yeah. 1611 01:31:05,840 --> 01:31:09,360 So the REIT mafia super interesting. 1612 01:31:09,360 --> 01:31:13,840 I think there are these REIT investors kind of like think 1613 01:31:13,840 --> 01:31:18,240 about your Nuveen's and that are like dedicated reinvestors and 1614 01:31:18,240 --> 01:31:23,600 they kind of dictate a certain set of boundaries that public 1615 01:31:23,600 --> 01:31:26,280 public traded reads like need to follow by, right. 1616 01:31:26,280 --> 01:31:30,040 Like a very well known one is the net debt to EBITDA ratio 1617 01:31:30,040 --> 01:31:33,120 can't be a higher than six times EBITDA, right. 1618 01:31:33,160 --> 01:31:38,520 And any read that goes above it kind of gets like penalized and 1619 01:31:38,520 --> 01:31:42,280 then you get like Colin Steer is like another name in that. 1620 01:31:42,720 --> 01:31:45,760 And generally there are dedicated specialists who follow 1621 01:31:45,760 --> 01:31:50,600 reads and they typically won't get involved with a lot of 1622 01:31:50,600 --> 01:31:54,600 companies that we invest in such as they probably don't want to 1623 01:31:54,600 --> 01:31:59,080 step in front of this supply delivery of in the Sunbelt on 1624 01:31:59,080 --> 01:32:02,760 the multifamily side until they could kind of see clarification. 1625 01:32:02,760 --> 01:32:05,880 And and I don't want to like go out anybody in particular. 1626 01:32:06,240 --> 01:32:10,080 But if there is like most of the investors who allocate capital 1627 01:32:10,080 --> 01:32:13,480 and they have their own benchmarks, like our benchmark 1628 01:32:13,480 --> 01:32:17,320 is like we want to, you know, generate attractive returns for 1629 01:32:17,320 --> 01:32:20,520 our investors over a three-year time horizon in the arm. 1630 01:32:20,520 --> 01:32:24,000 So just give us a support us to give us the luxury to do that to 1631 01:32:24,000 --> 01:32:26,320 look at things on a three-year time horizon. 1632 01:32:26,400 --> 01:32:31,160 And I think this is kind of why you're able to buy a multi 1633 01:32:31,160 --> 01:32:35,440 family read at a mid sevens cap rate late last year when we did 1634 01:32:35,440 --> 01:32:39,640 our first recording is that people just what like these rape 1635 01:32:39,640 --> 01:32:42,880 mafias, basically, you say like we are not going to own that 1636 01:32:42,880 --> 01:32:46,040 regardless of the cap rate because we can't, we have no 1637 01:32:46,080 --> 01:32:50,440 visibility into what this new wave of supply is going to do, 1638 01:32:50,560 --> 01:32:53,480 right? As a question like what, why are 1639 01:32:53,480 --> 01:32:57,600 we so lucky to get this opportunity to buy and add this 1640 01:32:57,600 --> 01:33:00,560 real attractive price? And a lot of has to do with like 1641 01:33:00,560 --> 01:33:02,600 the Reed Mafia and how they dictate. 1642 01:33:02,600 --> 01:33:05,120 And a lot of times they return the measure on like a certain 1643 01:33:05,120 --> 01:33:08,840 benchmark that they follow. And a lot of it is very short 1644 01:33:08,840 --> 01:33:09,760 term. Oriented. 1645 01:33:10,240 --> 01:33:12,920 So if you take, you know. Again, this goes back to like 1646 01:33:12,920 --> 01:33:14,960 the owners, right? Like if you take the owners and 1647 01:33:14,960 --> 01:33:18,880 we say, hey, I'm actually able to buy multifamily reeds and 1648 01:33:19,040 --> 01:33:22,600 multi family buildings that are 6 1/2 percent cap rate a whole 1649 01:33:22,760 --> 01:33:26,760 100 basis point better than like what Blossom KKR is dealing like 1650 01:33:26,760 --> 01:33:28,160 because that sound like a good idea. 1651 01:33:28,160 --> 01:33:29,440 Yeah, that probably sound like a good idea. 1652 01:33:29,440 --> 01:33:31,920 But why is it optimally available? 1653 01:33:31,920 --> 01:33:37,600 Because until there's more clarity on the absorption of 1654 01:33:37,600 --> 01:33:42,240 multifamily supply, which which like kind of starting to see 1655 01:33:42,240 --> 01:33:44,720 that happening, like now we're starting to see some of the 1656 01:33:44,720 --> 01:33:48,160 Southside research coverage talk about there's been really short 1657 01:33:48,160 --> 01:33:52,040 absorption with all despite all this new supply that a lot of 1658 01:33:52,040 --> 01:33:55,320 rebar fear start get more comfortable with investing in 1659 01:33:55,320 --> 01:33:57,520 some of the multifamily and if you want. 1660 01:33:57,520 --> 01:34:01,240 Well, what they may say is this is the early absorption. 1661 01:34:01,240 --> 01:34:03,400 Let's see how all of the supply comes on, right? 1662 01:34:03,440 --> 01:34:05,080 Yeah. I mean, I think when they report 1663 01:34:05,080 --> 01:34:09,040 Q2, they generally will provide some commentary on how July and 1664 01:34:09,040 --> 01:34:12,200 and August the one that report later, they'll provide some 1665 01:34:12,200 --> 01:34:14,680 color. And so we get to see it at the 1666 01:34:14,720 --> 01:34:17,760 end of the day. Like we kind of look at it like 1667 01:34:17,760 --> 01:34:22,560 like like with sometimes a bargain just so extreme that you 1668 01:34:22,560 --> 01:34:26,920 kind of say, OK, like if you buy another 64 cap rate, like let's 1669 01:34:26,920 --> 01:34:31,480 say in the worst case scenario the NY drops by another 10%, 1670 01:34:31,480 --> 01:34:35,720 like you knocked off another, you know, call like, you know, 1671 01:34:35,720 --> 01:34:40,560 64 goes to do math. Right. 5/8 like it's buying a 1672 01:34:40,560 --> 01:34:42,720 5/8. I'm really depressed through 1673 01:34:42,720 --> 01:34:45,720 like, you know, why I figure like, is that really like the 1674 01:34:45,720 --> 01:34:48,680 worst thing in the world, right? You know, you definitely got to 1675 01:34:48,680 --> 01:34:53,080 like lose your principal like on private syndicate deals, right? 1676 01:34:53,160 --> 01:34:56,880 And I think I think a lot of times and you jump on, you know, 1677 01:34:56,880 --> 01:35:00,720 more recently like we, we talked with every CEO and he just 1678 01:35:00,800 --> 01:35:03,480 absolutely frustrated because if you listen to some questions 1679 01:35:03,480 --> 01:35:06,160 that were being asked on the earnings call, it's like he 1680 01:35:06,160 --> 01:35:08,480 said, hey, you know, we got something new vacancies and we 1681 01:35:08,480 --> 01:35:11,280 could like lease that up and and get like double, triple the 1682 01:35:11,280 --> 01:35:13,960 rent. And the REIT mafias are like, 1683 01:35:13,960 --> 01:35:16,360 well, what's your FFO? And I'm going to be next 1684 01:35:16,360 --> 01:35:19,200 quarter, right? You get really frustrated. 1685 01:35:19,200 --> 01:35:21,520 You get really frustrated from running a public company like 1686 01:35:21,520 --> 01:35:23,960 that where it's always a next quarter. 1687 01:35:24,040 --> 01:35:28,280 And I think where we've earned some built some goodwill and 1688 01:35:28,280 --> 01:35:31,600 reputation in the industry is that like when we jump on a call 1689 01:35:31,600 --> 01:35:34,240 with a CEO like we'll tell them right away, like we will get 1690 01:35:34,240 --> 01:35:35,600 things on a three-year time horizon. 1691 01:35:35,640 --> 01:35:37,840 Like you're never going to hear me. 1692 01:35:37,840 --> 01:35:41,120 Like what do you like how do I think about your NOI, FFL for 1693 01:35:41,120 --> 01:35:42,720 next quarter? We're not trying to be quarters, 1694 01:35:42,840 --> 01:35:45,120 right. And and I think that if you 1695 01:35:45,120 --> 01:35:48,720 think about Joe Greenblatt talks about time arbitrage like one of 1696 01:35:48,720 --> 01:35:50,720 the remaining advantages that you may. 1697 01:35:50,720 --> 01:35:52,800 Have in public market it's like I mean. 1698 01:35:53,040 --> 01:35:55,400 We're literally practicing that, right? 1699 01:35:55,400 --> 01:35:59,600 And you know, the read mafia is like operate a certain way and 1700 01:35:59,600 --> 01:36:02,520 we operate in a way that's that's like counter. 1701 01:36:02,520 --> 01:36:04,320 Now. I think that what's really 1702 01:36:04,320 --> 01:36:06,440 important is that. You. 1703 01:36:06,440 --> 01:36:11,160 Can't just own stuff that's actually going to be discarded 1704 01:36:11,160 --> 01:36:13,800 by the Reed Mafia. I think your best returns going 1705 01:36:13,800 --> 01:36:17,520 to be things where you can walk out 2-3 years and say there will 1706 01:36:17,520 --> 01:36:20,800 be a moment of inflection or there's a moment where the 1707 01:36:20,800 --> 01:36:25,440 complexity goes away and the Reed Mafia could actually own 1708 01:36:25,440 --> 01:36:27,120 this. And those are going to be the 1709 01:36:27,120 --> 01:36:29,480 ones where you're going to generate some of your best 1710 01:36:29,480 --> 01:36:32,920 returns because you go from NASA class that's orphan. 1711 01:36:32,960 --> 01:36:35,760 You go from a country or what, you know, multifamily NASA 1712 01:36:35,760 --> 01:36:37,920 class, that's somebody multifamily that's orphan where 1713 01:36:37,920 --> 01:36:41,320 they're just like that's untouchable to like they want to 1714 01:36:41,320 --> 01:36:43,760 own that. Like a great example of this is 1715 01:36:43,760 --> 01:36:48,880 if you look at the multifamily wreath coastal versus sun milk 1716 01:36:48,880 --> 01:36:52,040 when COVID first happened, none of them wanted any of their 1717 01:36:52,040 --> 01:36:54,400 coastal exposure. Like it's just like, you know, 1718 01:36:54,400 --> 01:36:57,360 narrative like New York City, that fire coastal, the coast is 1719 01:36:57,360 --> 01:36:59,760 there forever. And this year, just like three 1720 01:36:59,760 --> 01:37:03,080 years later, you know, the Reed Mafia was all about something. 1721 01:37:03,120 --> 01:37:05,080 Yeah, it's outperforming now. They like it. 1722 01:37:05,120 --> 01:37:07,880 Oh, now they love it. Now like if anything like we're 1723 01:37:07,880 --> 01:37:11,600 we're getting, you know, outside research, no saying why like 1724 01:37:11,640 --> 01:37:15,400 some belt is too dangerous like hideout or on the coastal 1725 01:37:15,400 --> 01:37:18,760 because the trends, right. And again, we've been humble 1726 01:37:18,880 --> 01:37:21,720 enough in the public markets to know that sometimes like on the 1727 01:37:21,720 --> 01:37:25,520 short term, those things due to like they are relevant, right, 1728 01:37:25,520 --> 01:37:28,680 because the price are set by people who care about next 1729 01:37:28,680 --> 01:37:31,920 quarter or next two quarters. But like, you know, for us, like 1730 01:37:31,920 --> 01:37:36,200 we just try to generate the best risk suggested returns over a 1731 01:37:36,360 --> 01:37:41,080 3-4 year holding period. And we just think about do we 1732 01:37:41,080 --> 01:37:44,000 have one? Like you know, a couple things 1733 01:37:44,000 --> 01:37:47,600 we think about is the asset quality, right? 1734 01:37:47,600 --> 01:37:50,360 The valuation that we're getting at the people running business 1735 01:37:50,360 --> 01:37:52,480 of the people that we could sleep well at night knowing 1736 01:37:52,480 --> 01:37:55,120 they're running that business. And most of the time we invested 1737 01:37:55,120 --> 01:37:58,560 in companies where we know we can't do as good of a job, like 1738 01:37:58,600 --> 01:38:01,480 they're way better operators than we ever could be. 1739 01:38:02,080 --> 01:38:04,400 And then what's their historical capital allocation like? 1740 01:38:04,400 --> 01:38:07,040 Have they done a good job allocating capital, right? 1741 01:38:07,040 --> 01:38:12,120 And if we check a bunch of these boxes like we're very happy just 1742 01:38:12,120 --> 01:38:15,280 owning something, cutting down and then and reinvesting that 1743 01:38:15,280 --> 01:38:18,200 for like a 3-4 year holding purely, you kind of think of 1744 01:38:18,200 --> 01:38:20,280 like that's, that's the lowest you don't have on the private 1745 01:38:20,280 --> 01:38:23,720 side, right? Like you usually can't take your 1746 01:38:23,720 --> 01:38:27,840 distribution and say, hey, let me get more ownership in this. 1747 01:38:27,840 --> 01:38:31,400 In a way, it's kind of using the Miss Market analogy. 1748 01:38:32,000 --> 01:38:36,360 If you're in a private deal with 100 investors, it's almost like 1749 01:38:36,360 --> 01:38:39,120 there's a few of them, which is like, I don't like this anymore. 1750 01:38:39,120 --> 01:38:42,480 You could buy me out at like, you know, 60% of them. 1751 01:38:42,640 --> 01:38:45,280 And so I'm like, I'll take my distribution, I'll buy you. 1752 01:38:46,000 --> 01:38:47,640 That's literally what's happening, right? 1753 01:38:48,800 --> 01:38:51,480 And that's a lot more concrete. Like sometimes I think when you 1754 01:38:51,480 --> 01:38:54,640 apply to operating businesses, it gets a little harder to 1755 01:38:54,640 --> 01:38:57,000 visualize. But like you could, I think it's 1756 01:38:57,000 --> 01:39:00,840 a lot easier to visualize like 100 people on the multifamily 1757 01:39:00,840 --> 01:39:04,880 deal and they're just a bunch of which is like an Adam and I 1758 01:39:04,880 --> 01:39:07,720 don't want to know it today. So yeah, I'm at the Reed mafias 1759 01:39:07,720 --> 01:39:11,000 have, you know, a lot of times like they dictate in the short 1760 01:39:11,000 --> 01:39:15,280 term how a Reed will trade and and then sometimes like it 1761 01:39:15,680 --> 01:39:19,440 happens really quickly, right? Either the operating metrics 1762 01:39:19,440 --> 01:39:23,520 like Inflect and also like they want to know it like as you can 1763 01:39:23,520 --> 01:39:26,840 see from the multifamily pivot to COSO right now. 1764 01:39:27,280 --> 01:39:33,320 And no, we met with a Reed that had like Minnesota exposure and 1765 01:39:33,320 --> 01:39:36,600 some Midwest exposure, which is like kind of like the wasteland 1766 01:39:36,600 --> 01:39:38,800 of historically of Reed exposure, right? 1767 01:39:38,800 --> 01:39:41,960 It's like, why would you want like that kind of geographic 1768 01:39:42,040 --> 01:39:44,360 exposure? But there's not a ton of supply 1769 01:39:44,360 --> 01:39:46,320 in those markets and that's kind of. 1770 01:39:46,520 --> 01:39:48,080 What's that? I mean, that's why, right, It's 1771 01:39:48,080 --> 01:39:50,920 supply constricted because it's not a demand driven story. 1772 01:39:50,920 --> 01:39:53,320 It's not a demand driven story, but I think it's getting a bit 1773 01:39:53,320 --> 01:39:56,480 this year because on the supply side, like you kind of own it 1774 01:39:56,480 --> 01:39:58,480 knowing that there's no threat of supply. 1775 01:39:58,480 --> 01:40:02,320 But that's in the long run what I want to own, like no offense 1776 01:40:02,320 --> 01:40:04,520 to that particular rate, but in the long run like. 1777 01:40:05,200 --> 01:40:08,800 Do I want to buy into the Sunbelt exposure where there's 1778 01:40:08,840 --> 01:40:13,120 net migration like where a lot of jobs are being created in a 1779 01:40:13,120 --> 01:40:16,640 lot of some of those states? Do I want that exposure versus 1780 01:40:16,640 --> 01:40:19,960 in the long run being in a Midwest? 1781 01:40:19,960 --> 01:40:22,960 So I get no offense to the Midwest people, but I think if I 1782 01:40:22,960 --> 01:40:27,880 get in the at a good price, I probably want exposure to that 1783 01:40:27,880 --> 01:40:29,720 migration growth and some though. 1784 01:40:29,720 --> 01:40:33,040 Yeah, I guess the the only, the only concern is that it gets 1785 01:40:33,040 --> 01:40:35,240 overbuilt, right. But theoretically, the 1786 01:40:35,240 --> 01:40:40,960 population migration should sort of grow you out of that 1787 01:40:40,960 --> 01:40:44,160 temporary pocket. Well, I mean, I think, I think 1788 01:40:44,160 --> 01:40:46,880 like any market, right, there's a saying that, you know, they're 1789 01:40:46,880 --> 01:40:49,560 not making any more land. Yeah, but that, that doesn't, I 1790 01:40:49,560 --> 01:40:54,040 mean, yes, but also there's, there's plenty of land in the US 1791 01:40:54,040 --> 01:40:55,240 that people don't want to live on. 1792 01:40:56,000 --> 01:40:58,240 Well, so let me do. You like push back on that and 1793 01:40:58,400 --> 01:41:02,120 and if you look at my analyst and that we've looked at some of 1794 01:41:02,120 --> 01:41:06,840 the before after picture of cities like Miami and Austin and 1795 01:41:06,840 --> 01:41:11,000 and Houston, and like when you look at a satellite image that 1796 01:41:11,000 --> 01:41:13,920 there was a very long time period where you just keep 1797 01:41:13,920 --> 01:41:17,760 pushing outward, right, You just keep going out and there. 1798 01:41:17,760 --> 01:41:21,240 Those get to a point where like you have enough density there. 1799 01:41:21,400 --> 01:41:25,320 Then like what's kind of cool is still like all the amenities are 1800 01:41:25,320 --> 01:41:27,920 in the middle and core, right? So you keep like building more 1801 01:41:27,920 --> 01:41:31,360 supply and push out, but like what's been built in the middle, 1802 01:41:31,480 --> 01:41:34,080 right, You actually get like densified over time. 1803 01:41:34,080 --> 01:41:39,080 So if you have an asset there in like a mature neighborhood like 1804 01:41:39,080 --> 01:41:43,360 that usually gives you pretty good protection against because 1805 01:41:43,400 --> 01:41:47,400 you know, even though we all think things are going to 1806 01:41:47,400 --> 01:41:49,800 change, like a lot of times they kind of stay the same right from 1807 01:41:49,800 --> 01:41:52,440 the people want to live where there's nice restaurants, where 1808 01:41:52,440 --> 01:41:55,440 there's nice amenities. We kind of like you don't have 1809 01:41:55,440 --> 01:41:57,680 good childcare, the schools, etcetera, etcetera. 1810 01:41:57,680 --> 01:42:02,360 And I think the bottom of the places, if you look at the map 1811 01:42:02,440 --> 01:42:05,080 over like a 10/20 year time period like when they first 1812 01:42:05,080 --> 01:42:08,680 built, it may not be a lot of population density surrounding 1813 01:42:08,680 --> 01:42:12,800 it, but over time it gets denser and and the location itself has 1814 01:42:12,800 --> 01:42:14,520 a tremendous. Value, yeah, that I buy 1815 01:42:14,560 --> 01:42:16,320 especially close to the city centers. 1816 01:42:16,320 --> 01:42:19,840 I'm just saying like, you know, as you go farther away, it's if 1817 01:42:19,840 --> 01:42:22,120 it were more desirable inherently, it's where the city 1818 01:42:22,120 --> 01:42:24,560 would have been built in the 1st place, right. 1819 01:42:25,960 --> 01:42:27,480 But yeah. So. 1820 01:42:27,880 --> 01:42:29,280 Well, we'll see how it all turns out. 1821 01:42:29,280 --> 01:42:31,160 Man. I appreciate you sharing your 1822 01:42:31,160 --> 01:42:34,480 thoughts again, and I wish you good luck on your business 1823 01:42:34,480 --> 01:42:36,880 ventures. I know this is an idea that you 1824 01:42:36,880 --> 01:42:39,840 believe in a lot. And you know, I hope, I hope 1825 01:42:39,840 --> 01:42:41,960 that works for you. Yeah, thank you. 1826 01:42:41,960 --> 01:42:43,600 Thank you for the kind word and thank you. 1827 01:42:43,640 --> 01:42:46,680 You know, I had a ton of fun, like getting to know you and 1828 01:42:46,680 --> 01:42:50,840 getting to discuss a lot of these read ideas with you and 1829 01:42:51,480 --> 01:42:54,400 you know, I think I think like we're in a very unique time 1830 01:42:54,400 --> 01:42:56,400 period and I'm. Kind of excited. 1831 01:42:56,400 --> 01:43:00,680 It's wild how strong the S&P is trading, how strong tech 1832 01:43:00,680 --> 01:43:03,920 generally is trading. Maybe it's justified, maybe it's 1833 01:43:03,920 --> 01:43:04,960 not. I don't know. 1834 01:43:05,760 --> 01:43:08,880 I don't need to know. Yeah, I think, I think the. 1835 01:43:08,880 --> 01:43:12,400 Way that I think about all of that is that sometimes like you 1836 01:43:12,400 --> 01:43:14,200 just got to put blinders on, right? 1837 01:43:14,280 --> 01:43:18,240 I usually got to think like, what are we really deal with? 1838 01:43:18,280 --> 01:43:21,160 What are we trying to do? All right, we're trying to chop 1839 01:43:21,160 --> 01:43:24,040 off the left tail. We're probably not going to 1840 01:43:24,040 --> 01:43:27,640 capture the right tail like investing in a asset class like 1841 01:43:27,640 --> 01:43:32,560 real estate, unless you have a general growth setup or you got 1842 01:43:32,560 --> 01:43:35,240 into this like weird forced bankruptcy and then you could 1843 01:43:35,240 --> 01:43:37,680 buy it out of bankruptcy. Like generally you're not going 1844 01:43:37,680 --> 01:43:41,720 to get like these NVIDIA right tail, like outcome, right, But 1845 01:43:41,720 --> 01:43:44,760 by chopping off the left tail and you kind of you kind of 1846 01:43:44,760 --> 01:43:47,520 bring like people who are listening, like I'm kind of my 1847 01:43:47,520 --> 01:43:49,960 hands like, you know, like coming in right. 1848 01:43:49,960 --> 01:43:52,640 So like on on the left side, like on your downside. 1849 01:43:52,640 --> 01:43:55,000 The tails are not as as. Wide, yeah, your tails are not 1850 01:43:55,000 --> 01:43:58,480 as wide, but you're still getting and are on the right. 1851 01:43:58,560 --> 01:44:02,560 Like we think a lot of these are still starting out at like a 10% 1852 01:44:02,560 --> 01:44:06,240 IR over like four year holding period is like a bear case if 1853 01:44:06,240 --> 01:44:07,960 like you don't get any sorts of capital. 1854 01:44:07,960 --> 01:44:12,400 And then on the high end you could get like .5% IRS. 1855 01:44:12,440 --> 01:44:17,280 And then you are willing to go more optimistic into all the 1856 01:44:17,280 --> 01:44:20,880 hairier situations with some of the more lever balance sheets on 1857 01:44:20,880 --> 01:44:23,200 public reads. I mean they do exist out there. 1858 01:44:23,680 --> 01:44:26,680 Like you could get into like the 34 years and IRS. 1859 01:44:26,680 --> 01:44:28,440 I think you know, that's that's the result. 1860 01:44:28,440 --> 01:44:32,520 But then that then you are in in those so life situations you do 1861 01:44:32,520 --> 01:44:36,000 have the left tail, right? But for the most part, I think 1862 01:44:36,000 --> 01:44:40,840 that it is not to be here at Ty between then 12 and 25. 1863 01:44:40,840 --> 01:44:43,520 Like there's a really nice range in there. 1864 01:44:43,880 --> 01:44:46,600 And I think ultimately the returns are going to be somewhat 1865 01:44:46,600 --> 01:44:50,040 determined by fat policy and interest rates and whether 1866 01:44:50,080 --> 01:44:54,600 market like compress it or not. But but I think if you start out 1867 01:44:54,600 --> 01:44:58,120 between dividends and just like natural rent growth and then a 1868 01:44:58,120 --> 01:45:02,480 wide growth like you can get to you at 1012% cap 10 tenths of a 1869 01:45:02,480 --> 01:45:05,600 percent IR in the low end with like notable. 1870 01:45:06,200 --> 01:45:09,280 Multiple expansion window calibrate pressure like that's 1871 01:45:09,880 --> 01:45:13,800 not a not a bad place, you know, it's hard, you know, so we're 1872 01:45:13,800 --> 01:45:15,320 we're kind of really excited about that well. 1873 01:45:15,400 --> 01:45:18,040 Good deal man. Well, I will have you back on. 1874 01:45:18,040 --> 01:45:22,600 Over time, we will revisit how the thesis is going and you 1875 01:45:22,600 --> 01:45:24,240 know, again, I appreciate you sharing. 1876 01:45:24,240 --> 01:45:25,880 Yeah, man, it's been my pleasure. 1877 01:45:25,880 --> 01:45:27,560 It's been a lot of fun. All right, cool. 1878 01:45:27,920 --> 01:45:29,920 Well, until next time, take care of yourself.