Inside look Into the Commercial Real Estate Market with Jon Krebbs

Peak Market Watch host and CEO of Peak Financing Anton Mattli , accompanied by this weeks co-host John Martinez , will dive into what John is currently seeing in the market regarding cap rates, discounts from COVID-19, changes in the buying pool, impacts from the changes in lending, as well as why the San Antonio market is out performing many of other markets for his clients!

VIDEO TRANSCRIPTION

00:00
thank you for having me aunt tom yeah it
00:03
was
00:03
it’s a pleasure to have you on uh please
00:05
fill any gaps that have
00:07
uh uh missed to
00:11
in my introduction no i think you
00:14
you pretty much covered it um okay very
00:17
good
00:18
uh so uh you are very active in a number
00:22
of
00:22
markets in in texas as well as in in
00:25
oklahoma
00:27
uh so maybe why why don’t you just tell
00:29
us what some of the markets you are
00:31
active in and we can
00:33
dig in into some of them a little bit
00:35
deeper
00:37
sure i’ve got a big team behind me i
00:40
want to go ahead and
00:41
and get that out there that it’s it’s me
00:43
and um
00:44
you know about 12 or 13 other
00:47
uh you know fellas brokers that helped
00:51
me
00:51
and between us we’ve got um
00:54
about 12 or 13 deals in escrow right now
00:58
from houston austin
01:02
san antonio dallas fort worth
01:05
and up through oklahoma
01:09
a tertiary deal up there and a couple
01:11
deals under contract
01:12
and more and oklahoma city
01:15
yeah that’s that’s really uh a great
01:19
uh way of uh for for us to dive in a
01:23
little bit
01:25
it’s it’s it’s a very unique situation
01:28
we have here with you on john because in
01:30
most instances we
01:32
we talk to brokers that are focusing
01:35
just on a single market right and
01:38
they may not know much about the order
01:40
so i think we we need to
01:42
kind of take advantage of your knowledge
01:45
of multiple markets
01:47
and what you have seen between
01:51
these markets over the last six months
01:54
since we have been exposed to
01:57
uh to the fallout from corvit 19. so
02:00
maybe you can give us a little bit of a
02:02
flavor of what you have seen how
02:04
these markets have performed
02:07
in comparison to each other and what was
02:10
good what was part
02:11
with each of them okay yeah
02:17
you know i think probably
02:20
what i what i’m seeing across the these
02:23
markets
02:23
generally is that
02:26
rougher properties i’m talking about
02:29
older
02:30
c-class properties it really doesn’t
02:33
matter if i’m
02:33
in houston or if i’m in dfw or if i’m in
02:36
oklahoma city
02:37
those are the ones being hit the hardest
02:40
by
02:41
covet 19 as far as collections going
02:45
it seems like well located properties
02:49
with you know more affluent residents
02:52
are able to pay their
02:54
their rent and those have not been
02:56
impacted near as much as far as the
02:58
collections because
02:59
as you know in the finance business
03:01
we’re always looking at
03:02
you know or in us me and investment
03:04
sales you in
03:05
in finance looking at you know what is
03:08
the
03:08
net rental income you know what are
03:10
proceeds going to be
03:11
and how can we get that net rental
03:13
income up um
03:15
and what’s it been doing over the last
03:17
three months and what’s it gonna do next
03:19
month you know
03:20
that type stuff and i’ve really seen
03:22
those c-class ones get hit hardest
03:26
now you know every market has good
03:29
pockets every market is active like
03:31
like i mentioned we’ve got some deals
03:32
going on in each one
03:34
i think i’ve seen a higher kind of bid
03:37
ask spread between what sellers think
03:39
their property’s worth
03:41
are worth and what buyers willing to pay
03:42
in houston which seems to be
03:45
a little bit of a delta there um
03:49
it’s hard to shake folks loose in austin
03:52
it doesn’t seem like
03:53
there’s very much velocity there as far
03:55
as transactions but we do have
03:57
a deal under contract there and another
03:59
one we’re working on trying to get to
04:01
contract
04:02
austin is i was there the other the
04:04
other day actually went through austin
04:06
and san antonio
04:07
austin is you know getting very um
04:11
you know uh what i would call a lot of
04:14
tech
04:14
right there’s a lot of tech move in
04:16
there and it’s starting to look more and
04:17
more like
04:18
you know san francisco or or los angeles
04:21
there’s a lot of
04:22
you know um you know homeless population
04:26
and
04:27
and uh you know they’re just so we’ll
04:30
see how that kind of affects things
04:31
there but there’s still there’s a lot of
04:33
cranes
04:34
there’s a lot of high-rises being built
04:35
there um
04:37
you know a lot of high-end apartments
04:39
san antonio i think is
04:41
you know one of our favorite markets
04:42
we’ve got six deals under contract there
04:46
it’s held up the best out of all of them
04:48
as far as collections
04:50
even in those uh or in those c-class
04:53
properties that i mentioned you know
04:57
i think san antonio is you know
05:01
just a a solid you know you’re not going
05:03
to get a ton of appreciation there
05:05
um but it is a very strong market
05:08
excuse me one second um
05:12
and then oklahoma city you know is has
05:15
not
05:15
you know a lot of people are not very um
05:18
excited about it at least
05:20
they weren’t for a while it’s i’m seeing
05:22
it starting to pick up some
05:24
some steam with investors because you
05:25
can still the rents are still you know
05:27
in the five or six hundred dollar
05:29
range there so you can still pick up
05:30
stuff at an attractive basis
05:32
i’m selling some properties there for 30
05:34
35 40
05:36
000 per unit which as you know and
05:39
as we’ve seen in this last market cycle
05:41
in dfw
05:42
um those those have all really gone away
05:46
definitely yeah so so based on the deals
05:50
that you
05:51
you have been working on in oklahoma
05:53
city so you
05:54
you have not seen a significant
05:58
difference
05:59
in terms of collections compared to some
06:01
of the other markets
06:03
i thought that the oklahoma city we
06:05
would see a little bit of a
06:07
tougher environment in terms of uh
06:10
collections but that’s not what you have
06:12
seen well no if i if i said that i
06:15
i misspoke i hadn’t seen it in san
06:16
antonio san antonio has been
06:18
been the solid one oklahoma has
06:20
struggled because these
06:21
these couple that i’ve got going right
06:23
now are c-class
06:25
you know they’re in a little bit uh you
06:27
know poorer areas
06:29
and and they and their collections have
06:31
struggled their collections
06:33
in fact one of them’s in in moore which
06:35
is a you know
06:36
actually a pretty affluent suburb right
06:39
south of oklahoma city between norman
06:41
and oklahoma city
06:42
and somebody went over there and told
06:44
the residents
06:46
that they don’t have to pay rent and
06:47
they can’t be evicted you know spreading
06:49
misinformation
06:50
and uh you know it’s it is hurt the
06:53
property
06:54
um so yeah if i said that in my last
06:57
kind of
06:58
little rant monologue i misspoke
07:00
oklahoma this like i said the c-class
07:02
has has been hit has been hit hard okay
07:06
very good uh uh thanks for for that
07:08
feedback so san antonio was
07:10
kind of the of all of them then if i
07:12
understood you correctly
07:15
is the strongest one among among all of
07:18
them
07:20
that’s right and that’s where i’m seeing
07:21
the arm the most activity that we have
07:23
is in san antonio with these uh
07:26
you know b and c class properties that
07:28
are maintaining their occupancy they’re
07:30
maintaining their collections
07:32
and the the debt still available and
07:34
we’re doing uh
07:35
one right now that’s you know a loan
07:37
assumption yeah
07:38
um so yeah san antonio’s holding up well
07:44
okay very good uh have you seen
07:47
uh apart from obviously
07:51
uh buyers trying to push back on
07:54
on on prices right which is uh
07:57
kind of obvious within the current
07:59
environment
08:01
uh but have you still seen uh
08:04
uh a good flow of of of
08:07
buyers competing for for the properties
08:11
as as we know right until uh
08:15
kovi 19 hit it was not uncommon to have
08:18
a very strong flow of
08:20
of offers on every single deal
08:23
so what would you say have you seen now
08:27
since call with 19 hit in terms of of
08:30
buyer interest and
08:31
how much of an impact do you think that
08:33
has had on on the actual pricing
08:37
so yeah very early on i’d say you know
08:41
late march early april um a lot of the
08:44
buyers
08:45
were kind of waiting and and were on the
08:48
sidelines
08:49
they you know we we saw more
08:52
starting to come back and and get
08:54
comfortable with the
08:55
new normal and say june and uh yeah i
08:59
got i had multiple offers on the more
09:00
deal that we marketed we had multiple
09:02
offers on the
09:03
grand prairie property that we marketed
09:06
so
09:06
you know there there is still
09:09
significant
09:10
you know demand from investors um i
09:13
think it all depends a lot of it depends
09:15
anyway
09:16
on if it’s priced right if you know if
09:18
the if the
09:19
if the seller is realistic and the the
09:22
financing the financing works
09:24
and the whisper price is you know
09:27
somewhat reasonable then
09:29
um i think there’s there’s deals to be
09:32
made
09:32
yeah and you know then
09:36
you know like i was talking with him
09:38
just to give you a little you know
09:39
story i was talking with a with a guy
09:42
last week who
09:44
said oh well you know you guys gave me a
09:46
bov last year and
09:48
we’re selling it for i think it was 200
09:50
000 more than
09:52
what you quoted us and i said okay well
09:54
you know when to go under contract and
09:56
he said
09:56
in june and i looked back at my notes
09:58
well we given to the bov
10:00
you know last june and so you know i say
10:03
if you
10:04
if you if you if people are going to you
10:05
know list something for a year
10:08
you know maybe you know that’s one
10:10
strategy hang it up there at a very high
10:11
price and wait for that just right buyer
10:13
to come along
10:14
that’s not how we really that’s not how
10:16
we do it we are like hey
10:18
we’re gonna have a call for offers in 30
10:20
days
10:21
and this is the price when we can get
10:23
you right now
10:24
yeah um so it’s a little bit different
10:26
so i think to the extent that things are
10:27
priced
10:28
correctly there’s plenty of active
10:31
bidders
10:32
yeah okay that’s good to see i would say
10:35
that’s
10:35
only also what we have seen with some of
10:38
our clients
10:39
uh why john you have uh you have been
10:42
working on a
10:43
on a deal in kyleen
10:47
and so they came in still pretty
10:50
aggressive
10:51
right because they they felt that the
10:53
competition is
10:55
is strong enough that that they had to
10:58
come in with
10:59
with that yeah you know and uh
11:02
a bit of a smaller property class c a
11:04
little bit older
11:06
um but you know just it you know it was
11:10
a group that you know felt that it was
11:12
the right size property
11:13
with you know local based investors that
11:16
felt that it was going to
11:17
get them up and running and i think
11:19
you’re right john you know as
11:20
some of these investors are looking
11:21
across the larger metros where maybe the
11:24
demographics
11:25
benefit so had been benefiting the retro
11:28
story
11:29
um you know some of these smaller
11:30
secondary markets like a colleen
11:32
might have a little bit more stable rent
11:34
and get the cash flow
11:36
um but you know it is kind of up to the
11:38
investor to figure out that execution
11:40
risk of
11:40
being able to um you know manage the
11:43
operating side when
11:44
the rent lift may not be as strong and a
11:46
clean
11:47
you know and not getting too far off
11:49
topic in the secondary markets but
11:51
you know you know what do your investors
11:53
think about when you talk to folks that
11:55
when you’re
11:56
listing a property that’s in a secondary
11:58
market you know
11:59
how do you kind of um you know think
12:01
about positioning that opportunity for
12:03
investors versus when you’ve got
12:05
you know something a little bit stronger
12:06
market
12:09
it’s an education process of you know
12:11
and then you’ve got people who are just
12:13
closed-minded you know they’re not gonna
12:16
look at a deal in
12:18
colleen you know you mentioned colleen
12:19
we’ve sold a lot of properties there
12:21
they’re not gonna they’re not even
12:22
considerate even though you know
12:24
and they’ll look at waco you know but
12:27
you know you know colleen is bigger than
12:29
waco
12:30
you feel like there’s more um of an
12:32
economic story there it’s you know
12:34
closer to austin and
12:36
um you know and waco the markets you
12:39
know kind of struggled
12:41
um here recently um
12:44
but you know it’s just tell you know
12:46
things like that telling them about
12:48
you know why we like the market
12:51
and you know again attractive basis
12:54
because as you guys know when you know
12:57
when rents move
12:59
from say you know 550 to 650 or 650
13:03
750 it really starts to push up the
13:06
price because of the
13:08
you know economics of the you know
13:09
you’re kind of the expenses are
13:11
similar and all that stuff can just go
13:14
to leveraging
13:16
more debt you know less equity and
13:19
and have a higher you know price so for
13:21
investors that are looking for low bases
13:23
these tertiary markets are a good play
13:27
and then you know ones that are willing
13:29
to take a trip out there
13:30
and go look i’ve got a deal right now
13:32
that i’m selling in hollis oklahoma
13:35
5 000 people live there and these folks
13:38
drove out
13:39
from las vegas oh wow and
13:43
looked at the property and they’re about
13:45
to start a 1.5 million dollar renovation
13:48
on it
13:49
um here uh when we closed here in a
13:51
couple weeks so
13:53
you know that but that’s dedication
13:55
right they found
13:56
and they’re picking up the property for
13:59
right around 5 000 a unit because it’s
14:02
distressed
14:03
yeah very you know it was an old
14:05
property my client bought from hud
14:07
18 years ago so
14:11
you know they’re they’re buying that and
14:12
they’re going to fix it up nice
14:14
and you know they’re going to be
14:15
rewarded for that risk but certainly
14:17
um like you mentioned it’s riskier but
14:20
for folks that are willing to
14:21
get in there and you know he’s going
14:23
around talking to the city talking to
14:25
the business owners and getting a feel
14:26
for
14:27
the market and uh that eliminates some
14:30
of your risk just by your own
14:32
kind of you know business acumen and you
14:35
know
14:35
feeling passionate about a project yeah
14:38
very good
14:39
yeah that’s great uh have you seen
14:42
or on the seller side
14:46
some sellers that have have approached
14:48
to your prospective
14:50
sellers that have approached you where
14:52
you see
14:54
a more of a distressed situation
14:57
not just at the property right due to
15:00
collections but also from a
15:02
from a partnership perspective where
15:04
they
15:05
already had a little bit of a struggle
15:07
recovery 19 but now
15:10
they are in a in a tougher position
15:13
where they have to make
15:15
uh some form of a decision whether they
15:18
want to sell or
15:19
do something else so recapitalize or
15:22
whatever it might be
15:24
i have you know there are unfortunate
15:28
um you know projects that that
15:32
you know don’t go well it seems like
15:34
from what i’m saying
15:36
if they if they can you know get their
15:39
equity all
15:40
out some are willing to you know
15:43
go ahead and do that especially if
15:44
that’s a syndicator who realizes
15:46
they’re they’re kind of just working for
15:48
free at this point and there may not be
15:50
a big
15:51
you know payday for them at the end yeah
15:54
um and then uh you know we’ve got one
15:58
deal that was in forbearance that we
16:00
just put under contract in san antonio
16:02
and so that was a situation where you
16:05
know we found somebody to assume the
16:06
loan
16:07
um where you know they were getting
16:09
ready to they’d own the property for a
16:11
long time but they put a big loan on it
16:12
a couple years ago and i guess taking
16:14
some cash out
16:15
and they were either getting ready to
16:16
have a a capital call
16:19
you know or um or sell
16:22
yeah or sell basically and uh thankfully
16:25
we were able to find somebody to assume
16:27
the loan
16:28
um which is saving them a lot of money
16:31
on their you know yield maintenance
16:34
um but yeah does that i mean does that
16:36
answer your question i think yeah
16:38
sure there are partnerships like that
16:39
what what are you seeing out there i’m
16:41
curious
16:41
yeah i mean we’ve obviously been
16:43
monitoring
16:44
uh all these uh deals quite closely like
16:48
we also
16:49
have access to some loan data
16:53
and there is only an indication that
16:55
there are quite a number of deals that
16:59
that are not doing that well
17:02
but i think it’s still from my
17:04
perspective and john
17:06
correct me if i’m wrong but i think from
17:07
my perspective they are
17:09
uh they’re still a little bit in a in a
17:12
denial phase
17:14
where uh very often the sponsors
17:17
particularly in a syndication
17:18
environment that they are feeding that
17:20
monster
17:21
on a monthly basis because they they
17:24
don’t want to destroy their reputation
17:27
so naturally they hope that the
17:30
situation will improve
17:32
and then everything will be fine again
17:35
right so
17:36
so that’s what i would say we see quite
17:38
a number of deals
17:40
that have popped up more recently we
17:42
have always seen them but
17:44
there’s only more that that have shown
17:46
up now
17:47
yeah and i i’d add anton that and in
17:50
john maybe
17:51
you might see this with the investors
17:53
both on
17:54
you know people that are owning
17:56
properties now as well as
17:57
looking at properties on the buy side
17:59
but if you think back to the last cycle
18:02
you know i was wearing a different hat
18:04
at that time um
18:05
helping to advise dollars that were
18:07
being distressed
18:09
invest in different types of
18:11
securitizations
18:12
and you know everyone at the time was
18:13
trying to handicap what type of recovery
18:15
would we be seeing
18:17
and i think in this instance you know
18:18
from hindsight we can say
18:20
it did take a while to come out of that
18:22
um you know last downturn
18:24
uh you know back in 0809 you know going
18:27
forward
18:27
you know it’s kind of hard to know you
18:30
know are we
18:30
likely to see some type of firming in
18:32
the economy before in the year
18:34
end of year or are we really kind of
18:37
going to be you know
18:38
a ceiling put on the economy for some
18:40
window of time and then from there
18:42
maybe we have some left and i think that
18:44
it’s pretty challenging for many
18:46
investors to try to handicap
18:48
you know maybe i need to talk to john
18:50
because i feel that
18:51
you know my upside from here is only
18:53
going to
18:54
you know drag my return and i might need
18:57
to hand this off to someone else and
18:59
you know someone else might have the
19:00
capacity and a capitalization
19:02
to step into an opportunity possibly
19:04
like the property you’re talking about
19:06
in oklahoma where
19:07
they’ve got a longer term vision they’ve
19:08
got the capital and they have capacity
19:11
to see how things plan plan out or
19:13
rather play out
19:15
but as far as the shape of the recovery
19:16
i think that that’s got to affect a lot
19:18
of folks
19:18
both on the buying and selling side
19:22
yeah so on yeah
19:25
so uh uh obviously we i think we all
19:29
agree we have
19:30
seen a pickup in some of the distressed
19:33
or
19:34
close to being distressed situations for
19:36
for owners compared to recall with 19.
19:41
what have you seen sean on the on the
19:43
buying side
19:46
in terms of buyers struggling to raise
19:49
their equity
19:50
and or also getting getting the debt
19:53
in place that had a negative impact on
19:57
on some of the deals that you have been
19:59
working on
20:01
yeah i have two um
20:05
you know examples of that we were
20:06
working actually three so we
20:08
had a deal in grand prairie called
20:11
treetop
20:12
that i had under contracts at the early
20:14
part of this year
20:15
um you know the real reputable uh buyer
20:19
and when covid hit um
20:22
their you know equity partner was
20:25
um was going you know we’re not
20:27
comfortable at this
20:28
price anymore we’re not comfortable you
20:30
know with the deal really is
20:32
it you know because there was so much
20:34
uncertainty
20:35
same thing with a deal seven pines i’ve
20:38
got it back under contract
20:39
now in san antonio but
20:43
that was another one where you know um
20:47
you know very capable sponsor was in
20:49
there
20:50
and had a single check writer equity
20:53
you know partner and uh we extended a
20:56
few times trying to get them comfortable
20:58
but at the end of the day
20:59
their equity dried up and then another
21:01
one was a loan assumption
21:03
and that one got so close to getting
21:06
done
21:07
uh but again the equity partner pretty
21:10
much
21:10
last minute stepped away so it’s been
21:14
you know there’s been real effects from
21:16
uh from this pandemic on
21:18
yeah you know equity so
21:21
so all these three were driven by by
21:24
equity pulling out of the debt itself
21:29
that’s right yeah the debt uh you know
21:32
is held up pretty well
21:33
and you know you look at you mentioned
21:35
or we were talking before this
21:38
before we started here about you know
21:41
the um
21:42
he and i the additional reserves um
21:46
for these agency loans and
21:49
you know uh it seems like people are
21:53
are getting more you know used to the
21:55
idea of those
21:57
and that it and when you look at the
21:58
underwriting with them
22:00
you know it doesn’t affect the returns
22:03
that much is it when if they come back
22:06
you know relatively quickly and you
22:08
kind of structure it right with it with
22:11
your with your lps you know so
22:13
i i don’t think the debt has been the
22:15
issue um
22:17
as far as agency loans now right on my
22:20
on my bridge and some of my tougher
22:22
deals
22:23
um this one i have uh harvard clint
22:26
arbor vista in oklahoma city
22:29
um has been under contract for
22:32
four months and we just got the bank
22:35
when first
22:35
you know the mortgage broker shopped it
22:38
for a long time
22:39
you know this borrower was very
22:41
particular about these terms he wanted
22:43
finally found a bank willing to do it
22:44
and it took them several
22:46
meetings and several you know committees
22:49
to get it done so it’s just taking
22:50
longer
22:51
um more challenging for you guys to go
22:54
out and find on those
22:56
on those bridge or bank loan products
22:58
yeah that’s definitely the case
23:00
right uh i mean uh a lot of the bridge
23:04
line will stay
23:05
close shop right and the ones that are
23:09
still active they are
23:10
very pecky right they have they have
23:13
more deals than
23:15
than what they can fund so they they can
23:18
pick and choose
23:19
right so that’s unfortunately on the
23:22
when it comes to the heavy rehab
23:24
projects
23:26
uh that’s that’s really uh what a lot of
23:29
uh buyers face
23:33
uh also like in the past it was kind of
23:36
easy to get
23:37
to get bridge financing for management
23:39
place not really true
23:41
physical improvements to the property
23:44
but more because the management was
23:47
was not really professional
23:50
professionally run
23:51
these type of deals are really hard to
23:53
get
23:54
bridge financing in place because bridge
23:56
lenders do not believe that anyone can
23:58
come in
23:59
and turn it around just by changing
24:01
management
24:02
right so it depends a little bit on what
24:05
kind of
24:06
situation there is but it’s definitely
24:10
much harder yeah
24:14
yeah so uh maybe to
24:17
to close out what uh i know you don’t
24:19
have a crystal ball
24:22
nobody has it but but what’s what’s your
24:25
view
24:26
with uh with obviously uh
24:30
the federal
24:33
unemployment checks for six hundred
24:35
dollars they expired at the end of july
24:38
and some some states we know
24:41
have uh now have implemented
24:45
at least three hundred dollars and
24:48
but i think in texas uh texas is not
24:52
contributing the additional hundred
24:53
dollars so essentially we
24:55
are down to three hundred dollars from
24:57
the 600
24:59
so i think that from my perspective
25:02
should have
25:03
a negative impact on uh
25:06
on some of the the tenant’s ability to
25:09
to pay rent so short term i’m wondering
25:13
what your view is and then also what you
25:15
think is
25:17
your outlook looks like into 2021
25:22
you know i i don’t know i i don’t know
25:26
short term
25:27
um i don’t even really have a prediction
25:29
i think well i guess
25:30
maybe my go back to my original thesis
25:33
well-located deals with
25:36
residents who can work from home whose
25:39
jobs you know may not be as impacted
25:42
those deals are going to be fine and
25:45
then you know your tougher deals where
25:48
maybe the you have folks that might try
25:50
to take advantage of something like that
25:52
or
25:53
you know or just flat out can’t pay the
25:55
rent you know those collections are
25:57
gonna are gonna suffer
25:59
um you know with less money
26:02
there’s gonna be uh you know less
26:05
collections unfortunately
26:07
you know going looking beyond you know
26:11
this year we’ve got the election coming
26:12
up i’m i’ll be watching it with
26:15
you know um you know with interest to
26:19
see kind of how everything falls and um
26:22
it’ll certainly be interesting to watch
26:24
the upcoming debates
26:26
um but uh you know we we we’re in a
26:30
great country we’re in a great
26:32
you know time in you know human history
26:36
to
26:36
um human beings are resilient we seem to
26:39
work together relatively well
26:41
i think that uh you know from everybody
26:45
that i see
26:46
you know who’s out there just trying to
26:48
work together to
26:50
make deals happen you know keep food on
26:52
the table
26:53
and uh and keep and you know keep moving
26:57
forward and enjoying life
26:59
um i think 2021 will be a lot better
27:01
than 2020
27:03
yeah that’s that’s that’s my prediction
27:06
there
27:06
um we seem to have come
27:09
to the realization that we’re going to
27:11
live you know
27:12
coexist with this virus and if folks
27:16
will
27:17
you know do their part
27:20
to control the spread of it then the
27:23
economy can still function
27:25
even if it’s at a slightly lower level
27:27
uh rents can get paid
27:30
and investors can invest in guys who are
27:33
in the middle like me and you and john
27:35
can um can continue to make a living and
27:40
and help people navigate through
27:42
whatever challenges come
27:44
yeah yeah that’s all very good points uh
27:48
i think uh if if i can kind of can
27:52
summarize of what you have said
27:53
right now it’s more important than ever
27:56
to
27:57
uh to to pick the sub market
28:01
right that you really
28:04
understand what you’re getting into
28:06
right
28:08
not just looking at oh here here is a
28:11
good price on a per unit basis
28:14
or year and i have only 500 or 550
28:18
in rent but also recognizing
28:21
what the true upside is rather than what
28:25
what might look good on on paper right
28:29
yeah that’s that’s it that’s it yeah
28:32
the the the harder markets you know what
28:35
we saw
28:36
and john mentioned it you know the last
28:39
cycle we’re talking the great recession
28:41
you know what we saw there was most of
28:44
the deals
28:45
in the c-class were financed with cmbs
28:47
debt
28:48
and a lot of those went back to lenders
28:51
and those were that’s where the majority
28:53
of your distressed
28:54
properties came from it wasn’t from a
28:56
class or b class
28:58
it was from you know folks
29:01
that doubled up or went back to live
29:03
with their parents and
29:04
and just couldn’t pay the rent and so
29:08
people lowered their standards and the
29:09
property cycled down and and it’s the
29:12
same situation today
29:14
the the worst properties i feel like are
29:16
getting hit the hardest
29:18
yeah yeah so it’s a it’s very
29:20
interesting for you to say that
29:22
right because we uh
29:25
like john and i we we talk particularly
29:28
a lot of
29:28
indicators and uh
29:32
many of them always have an argument c
29:34
class
29:35
and d m c minus properties will always
29:37
be full because you have that
29:39
trickle-down effect people from a class
29:41
move to b
29:42
and from b to move to c and c minus
29:46
uh i share your view right because i
29:49
have been around long enough to to
29:51
experience the the past downturns
29:54
including uh
29:55
in 2000 from 2008 to 2011 when we really
30:00
have seen the toughest fallout
30:03
and i think that’s what what one
30:07
has to recognize that yes there might be
30:10
a move from a
30:11
to b and maybe b minus and maybe some
30:14
from b
30:15
to c plus but there is a big jump even
30:18
if you live in a b
30:19
class property today to move into a c
30:22
or a c minus property as well as
30:25
c minus sub market right so
30:28
and if my b class property is going to
30:30
offer me a concession
30:32
you know to stay then i’m not moving
30:35
down to c
30:36
you know i’ve effectively reduced my
30:39
rent you know by the i you know or they
30:43
offered me the same rate you know
30:45
yeah yeah yeah i think to a certain
30:48
extent that i’ve heard that argument too
30:49
that you know workforce housing i agree
30:51
that
30:52
you know affordable housing which means
30:55
not you know at the lowest level but for
30:58
teachers police officers you know
31:02
nurses that that is affordable housing
31:04
right and especially in major metros
31:06
in texas that that’s always going to be
31:09
a safe
31:10
uh a safe bet you know your properties
31:13
that are
31:14
have some amenities in it in a decent
31:16
neighborhood
31:17
that’s you know safe yeah um but it’s
31:20
it’s the it’s the rougher properties
31:22
that seem to get
31:23
hit the hardest yeah yeah i agree
31:26
uh really appreciated all your insight
31:30
uh john so how can
31:34
can viewers and listeners reach out to
31:37
you
31:39
um probably the best thing is my website
31:41
which is
31:42
www dot multifamily
31:46
grp dot com okay i got my
31:50
phone number and email there
31:53
very good and i know that you’re active
31:56
on on linkedin and the other social
31:58
media
31:58
right so it’s it’s it’s very easy to
32:02
reach out to everyone in
32:04
in today’s world right and with kobe 19
32:07
now everyone is so used to
32:10
communicating through various electronic
32:14
means so that’s great but we certainly
32:16
are looking forward to meet with you in
32:18
person
32:19
uh very soon again and uh
32:22
thanks again for uh for coming on john
32:26
thank you both for having me i
32:27
appreciate it thank you john thanks
32:30
antoin