CRE Markets Expectations for the rest of 2020 and 2021

On Today’s Peak Market Watch

We are excited to have Al Silva on as a guest speaker! Peak Market Watch host and CEO of Peak Financing Anton Mattli, accompanied by this week’s co-host Feras Moussa, will dive into what Al is currently seeing in volume this year vs. last year, changes in seller and buyer behavior, variances from submarket to submarket in terms of property performance and CRE Markets Expectations for the rest of 2020 and 2021.

VIDEO TRANSCRIPTION

00:00
uh al has personally completed
00:03
uh the marketing and sale of over 1.6
00:05
billion
00:06
in multifamily communities in the dallas
00:08
fort worth
00:09
area totaling more than 29 000 units
00:14
he has earned countless awards including
00:17
co-stars
00:18
power broker award and obviously within
00:21
uh marx and mili chap he has
00:24
received many achievement awards so
00:28
clearly al is one of the top performers
00:31
within
00:32
marcus and millichap welcome al
00:35
it’s a pleasure to have you on today uh
00:38
why don’t you give us a brief background
00:40
of your career
00:41
in multifamily brokerage
00:44
yeah sure thanks anton and ferris thank
00:46
you all both for having me on really
00:48
appreciate glad to have you on now
00:49
always excited to be a part of these
00:52
types of events especially with you guys
00:54
so uh thanks a lot no um yeah my name is
00:56
al silva i’ve been with marcus milica
00:59
since march 2004 right after college
01:02
graduation
01:03
uh nearly 17 years now which is really
01:05
hard to believe
01:06
uh it’s all i’ve ever done is broker
01:09
multi-family properties in the dallas
01:12
fort worth area
01:13
you know my team we have a specific
01:15
focus on bnc class multi-family
01:17
in dallas forth area we don’t go too far
01:21
outside of our lane
01:22
because there’s just so many properties
01:24
and so much going on and the market is
01:25
constantly changing
01:27
you know we uh we like to call ourselves
01:29
specialists
01:30
in that space in this specific msa so
01:33
that’s who we are
01:34
and uh once again thanks for for having
01:36
me yeah so for those of you listening i
01:38
mean you know
01:39
al’s definitely a powerhouse in the dfw
01:41
market i know it’s a hot market and so
01:43
a good source of knowledge and
01:45
information i try to be
01:47
yeah so i know always a pleasure talking
01:49
to you to kind of pick your brain so
01:51
so maybe with that said right for our
01:53
audience i mean maybe
01:54
just to go right into the elephant in
01:56
the room right you know
01:58
right now we’re obviously airing this
02:00
we’re doing this episode october
02:02
right it’d be good to just have a brief
02:04
recap and kind of how the year started
02:06
off
02:07
right and then lately what you’re
02:09
starting to see right in terms of just
02:11
let’s maybe start with deal flow and
02:13
then maybe the other part of the
02:14
equation i want to ask about is really
02:15
just offers right
02:16
what kind of pricing you’re seeing how
02:18
are offers being structured and has that
02:20
changed
02:21
well yeah and i think that’s that is the
02:23
elephant in the room you know that’s the
02:24
conversation we’re having uh
02:26
non-stop for the last six or seven
02:28
months but i can tell you that as far as
02:30
deal flow is concerned you know you look
02:32
back at
02:33
you know q4 2019 we had a record quarter
02:37
as a team in terms of sales volume uh
02:40
you know the market overall fundamentals
02:42
are really strong that all bled into
02:44
first quarter you know we had a
02:45
a record first quarter coming out of the
02:48
gate
02:48
things were going very very well uh
02:50
fundamentals
02:51
very strong again and uh deal volume
02:54
also very strong a record first quarter
02:56
and of course you know all of us had the
02:59
attitude of
03:00
there’s so much momentum in the market
03:01
especially in dfw especially in
03:03
multi-family
03:04
there’s really nothing on the horizon
03:06
that can stop us or even slow us down
03:08
a little bit you know that was kind of
03:09
the attitude and uh
03:12
you know nobody saw this coming out of
03:13
left field you know it just came out of
03:15
nowhere this
03:16
black swan global pandemic and it upset
03:20
you know the apple cart not just for
03:21
multi-family and dfw but you know just
03:23
the global economy in general
03:25
the biggest shock in i don’t know 80 90
03:28
years
03:28
and so you know to to be a part of that
03:31
was really
03:32
uh incredible uh not in a great way but
03:35
you know you learn
03:36
uh a little bit more every day and a
03:38
little bit more out of every experience
03:40
you know i was around during the
03:41
you know 2008-2009 crisis and
03:45
you know you expect it to be similar but
03:47
it’s very very different
03:48
uh and so the you know as you know
03:51
the environment overnight pretty much
03:53
changed uh nobody
03:54
really knew what to expect
03:57
nobody could even leave their houses so
04:00
you know the last thing people wanted to
04:01
do was talk about buying a 20 million
04:03
dollar
04:04
apartment deal you know and the last
04:05
thing uh lenders wanted to do
04:07
was uh was you know underwrite loans at
04:10
that point so
04:11
everybody took a major step back lenders
04:14
took a major step back
04:16
we had deals that were under contract at
04:19
the time with hard earnest money
04:21
we still had to negotiate renegotiations
04:24
of those deals we had a couple of deals
04:26
that we had recently awarded
04:28
as well uh where we hadn’t signed
04:31
contracts yet and those essentially were
04:33
put on pause
04:34
and put off to the side and so uh you
04:37
know as you know penny and freddie
04:38
put up these huge reserve requirements
04:40
uh you know for
04:42
principal interest taxes insurance
04:43
replacement reserve you name it you know
04:45
the kitchen sink reserves
04:47
uh that they required made deals almost
04:49
impossible to
04:50
to make sense uh and so all these things
04:52
were
04:53
upended uh overnight and what we found
04:56
was
04:57
everybody wanted to know how april
04:59
collections would come out everybody
05:00
wanted to know then how may collections
05:02
would come out
05:03
you heard predictions of 30 economic
05:05
vacancy across the board
05:07
nobody would be able to pay rent but
05:10
you know fortunately we had a lot of
05:12
stimulus programs
05:14
we had a lot of help from the government
05:17
in terms of unemployment benefits in
05:18
terms of stimulus
05:19
payments the ppp program all those
05:22
things
05:23
supported the market in uh during that
05:25
shock
05:26
period in terms of fundamentals and so
05:29
what happened was people started
05:31
realizing by mid-may late may hey people
05:34
are still paying their rent
05:35
even though there’s eviction moratoriums
05:37
even though uh 20 million people lost
05:39
their jobs
05:40
during this time frame uh amazingly
05:43
and i think everybody was very
05:45
pleasantly surprised that people
05:46
continued to pay their rent
05:48
it wasn’t just the fact that these folks
05:50
had money in their pocket it was the
05:51
fact that
05:52
the attitude amongst workforce housing
05:55
residents was hey
05:57
we’re going to pay our rent despite the
05:58
eviction moratorium it was almost a
06:00
point of pride
06:01
for folks to walk into these leasing
06:02
offices and pay their rent
06:04
so i can continue to go through the
06:06
narrative but
06:07
the market was upended in a significant
06:10
way
06:11
everybody had to adjust essentially
06:12
overnight and
06:14
you know we find ourselves uh moving uh
06:17
into another environment today yeah so
06:20
before you move on so a couple things
06:22
yeah and i totally agree
06:23
for us may june july were some of the
06:25
best collections we’ve ever had
06:26
so most of our assets so video on kind
06:29
of what
06:29
the future holds right we did see our
06:31
first dip a little bit last month right
06:34
and so we’ll kind of see what happens
06:35
right kind of moving forward but
06:38
i think that’s probably a good segue for
06:40
you know essentially that collection is
06:41
probably for people to want to sell so
06:43
before we get to this
06:44
back to kind of the current set of sales
06:46
going on
06:47
i wonder we want a little bit so for the
06:49
deals that were kind of
06:50
under contract right were you guys able
06:52
to close all those out with the current
06:54
sellers or did a few that
06:55
kind of sell buyers back off and new
06:58
buyers step in
06:59
or you know kind of what was that what
07:01
happened there right and then
07:03
on in terms of the renegotiations was
07:05
there a specific
07:06
you know were you seeing five percent
07:09
discounts or in general you were able to
07:10
hold firm because i know that
07:12
varies market to market i know for
07:13
talking to atlanta right kind of the
07:15
atlanta burgers that i do know there i
07:16
mean
07:16
they were seeing about a five to ten
07:18
percent renegotiation on some of these
07:20
deals
07:20
sure yeah and yeah i think you know what
07:23
we saw
07:24
happen you know we had as i mentioned a
07:26
couple deals that were under contract
07:28
not a couple we had three specifically
07:30
that were under contract with hard money
07:31
as we went past march 15th and we had
07:34
uh two more that we were negotiating uh
07:37
contracts on at the time
07:38
uh incredibly we you know we were very
07:40
fortunate that
07:41
out of those kind of five deals four out
07:44
of those five
07:45
kind of fit the fannie freddie box in
07:47
terms of
07:48
debt financing and so the ones that were
07:50
under contract
07:51
uh with hard money we managed to get
07:53
those across the finish line
07:54
a because the agencies were lending on
07:57
them and they would
07:58
still lend on them despite the pandemic
08:00
and despite all the uncertainty in the
08:01
market
08:02
uh the renegotiation it was very it was
08:04
probably some of the most creative
08:06
stuff we’ve ever come up with uh you
08:08
know necessity is the mother of
08:09
invention
08:10
right and so we ended up having the
08:12
seller
08:13
put up uh the significant portion
08:17
of the required reserves that fannie mae
08:20
had
08:20
you know they they required i think at
08:22
the time 18 months of principal interest
08:24
taxes insurance and replacement reserve
08:26
and so the seller put up a significant
08:29
portion of that
08:31
and put up several months of
08:36
a delinquency reserve basically six
08:38
months
08:39
and so what we did was we let the buyers
08:42
operate the property for six months
08:44
and at the end of that six month period
08:45
whatever delinquency
08:47
came in excess of the prior six-month
08:50
average
08:50
uh the seller would make up the
08:52
shortfall and at the end of that period
08:55
uh the seller would also or at the end
08:57
of the reserve period the seller would
08:59
also get their
09:00
uh deposit back so the seller at the end
09:02
of the day
09:03
collections have held up far better than
09:04
anybody anticipated so
09:06
at the end of the day it’s going to be a
09:07
win-win because the buyer didn’t have to
09:08
put up all these reserves
09:10
and the seller’s going to get all their
09:11
money back uh they’re not going to be
09:13
taking it how many sellers did you get
09:14
to agree to that one
09:16
it was unfortunately we had one seller
09:18
and two different buyers
09:19
if you have any more sellers that want
09:21
to do something like that you let me
09:22
know well
09:22
yeah well they were they got caught
09:25
selling i think
09:26
seven or eight deals across the country
09:28
at the time at the same time
09:30
and they had to work something like that
09:32
out on all of them
09:33
uh luckily you know we were able to make
09:35
it happen so you know it’s creative
09:37
deal making there and and the deals that
09:40
were
09:41
under negotiation uh we had to be very
09:44
careful
09:44
obviously we didn’t want to you know
09:46
push buyers
09:47
you put up your half million dollars
09:49
hard like you offered or the deal’s off
09:50
you know we
09:51
we kind of slow played it hey let’s take
09:53
a step back we know we’re not putting up
09:54
a bunch of hard money
09:56
uh let’s take a little 30-day pause and
09:58
see how capital markets
10:00
uh continue to evolve and slowly but
10:03
surely restrictions
10:04
loosened up reserve requirements uh
10:06
became less
10:08
uh stringent and we were able to put
10:10
those deals together as well and get
10:11
them across the finish line
10:13
that’s very good so you mentioned right
10:16
these were
10:17
deals that fit into the agency box
10:20
whether it was
10:21
fenian freddie fannie or freddie
10:24
how did it go with deals that that
10:27
didn’t fit into that box where
10:29
you potentially had to go with a bridge
10:31
loan or a bank loan or
10:32
or something similar right i mean i
10:35
think there’s
10:36
a huge dichotomy that that occurred in
10:38
the market
10:39
as a result even after people realized
10:42
that we weren’t going to have 30
10:43
economic vacancy even after the agencies
10:46
pulled back on the reserve requirements
10:47
it was a kind of a tale of two cities in
10:49
the market
10:50
between you know the fannie freddie box
10:53
deals which we were still able to
10:54
execute at the same price
10:56
there was no covet discount people ask
10:58
me where’s my covet discount
11:00
uh i said you know the discount is not
11:02
in the cap rate you’re getting or in the
11:04
dollars price per door you’re paying
11:06
uh what we’re saying the kova discount
11:08
is you know if you were buying a five
11:09
cap deal
11:10
in january you’re getting a four percent
11:13
loan you know now you’re buying a five
11:14
cap deal
11:15
in october and you’re getting a three
11:17
percent loan and so that spread
11:19
between uh the cap rate you’re getting
11:22
and the interest rate you’re paying on
11:23
the debt
11:24
you know that’s that’s significant uh
11:26
that spread is
11:27
you know the spread between the cap
11:28
rates that people are paying now even
11:30
though you hear
11:31
all the time they’re too low still uh
11:34
you know the spread between
11:36
the cap rates people are paying versus
11:38
the 10-year treasury
11:39
is the widest it’s been since 2012
11:42
which a lot of people you know wish they
11:44
had bought more in 2012 and that’s a
11:46
really good indicator
11:47
because cap rate is just a nominal thing
11:50
uh five cap
11:51
is not a big deal when when the ten
11:53
years four percent uh but it is a big
11:55
deal when the 10-year
11:56
65 basis points yeah absolutely
11:59
that’s a very good point uh have you
12:02
have you seen now with
12:04
uh over over the last
12:08
uh few months obviously initially
12:10
everyone
12:11
kind of paused a little bit including
12:14
buyers
12:16
what have you seen when it when it comes
12:19
to
12:20
earnest money as well as hard money
12:23
that that buyers are willing
12:27
to put up particularly for deals that
12:30
still fit into the
12:31
agency box and what about the ones that
12:35
that do not fit into that category
12:38
right well i forgot to to mention by the
12:41
way in my tale of two cities you know i
12:42
was talking about the fanny freddie box
12:44
on the other
12:45
side of the equation is the bridge deals
12:47
the heavy value add deals
12:49
what we saw was those deals essentially
12:51
froze
12:52
uh during this downturn you know the
12:54
bridge lenders
12:55
almost all went away because they relied
12:57
on the cmbs market
12:58
uh to to go and sell that debt into the
13:01
secondary market those markets are
13:03
essentially
13:04
have been frozen uh and so those deals
13:06
were all put on hold we had one deal in
13:08
particular
13:09
in dallas that was under loi that
13:12
uh we had to essentially pull and
13:15
and we recently we actually today just
13:17
rolled it back out
13:19
it’s a 100 unit deal in dallas that
13:20
requires bridge financing
13:22
because bridge lenders have started to
13:24
come back out they’re a lot pickier
13:26
about what deals and what sponsors
13:28
they’ll work with
13:29
you know the loan to value loan to cost
13:31
will be a little lower the interest rate
13:32
will be a little higher but what we’re
13:34
finding now
13:34
is that those programs are coming back
13:37
and so what was a dead segment of the
13:39
market
13:39
is starting to kind of re-emerge and
13:42
we’re excited about that because that’s
13:44
a big component
13:45
a big part of what’s been driving sales
13:47
in dfw in recent years is those heavy
13:49
value-added deals that require bridge
13:51
debt and so what we’ve seen
13:54
what we’ve been kind of subsisting on
13:55
the last six months has been
13:57
what we call kind of yield plus deals
13:59
you have to have a yield going in where
14:00
it makes sense walking in the door
14:02
you can’t bet the farm on 125 rent bump
14:05
in year one nobody’s underwriting rent
14:07
growth in year one right now so
14:09
that’s answered the other side of that
14:11
question uh that i neglected to before
14:13
but
14:14
as far as earnest money is concerned you
14:16
know i think that comes back to
14:19
the again the overall investor sentiment
14:21
in the market
14:22
uh before covet hit we were getting you
14:25
know a hundred thousand five hundred
14:26
thousand sometimes a million dollars in
14:28
hard money day one people knew
14:30
what they were getting into uh you had
14:32
to fight off 10 or 15 or 20 other buyers
14:34
and that was the only way to win
14:36
uh as we were going through the covid
14:39
process and
14:40
and having this uh this huge dislocation
14:43
in the market
14:44
it was not possible to get these huge
14:46
hard money deposits so
14:48
instead of putting deals under contract
14:50
with no money and doing due diligence
14:52
when you couldn’t even walk units
14:53
we put all those deals on pause i think
14:56
that was one of the smartest things we
14:57
have
14:57
we’ve ever done in 17 years was we
15:00
didn’t force the hand of the seller or
15:02
the buyer in that situation we said hey
15:03
let’s take a breather
15:04
and let’s wait for things to develop so
15:06
we all can talk about
15:08
what we see happening versus what we
15:10
speculate may happen
15:11
and so we were able to preserve those
15:14
deals but they didn’t have hard money
15:15
day one but by the time we signed those
15:17
contracts
15:18
uh you know earlier in the summer
15:20
mid-summer
15:21
you know there was enough data points in
15:23
the market versus
15:24
you know as far as rent collections go
15:26
as far as regulatory
15:28
issues as far as uh you know
15:32
the debt in terms of the reserves these
15:34
lenders were requiring
15:35
uh there was enough data on the table
15:37
where you could make an educated
15:39
decision
15:39
whether you were a seller or a buyer and
15:41
so we were able to get hard money not as
15:44
much as we were
15:45
in february but we were able to get hard
15:46
money on those deals up front
15:49
and we ended up rolling deals out in may
15:51
and june and july
15:53
in august and every deal we found
15:56
starting in may was what the hell are
15:58
you doing on the market you know there’s
16:00
why is your seller selling is he crazy
16:03
but we were able to get
16:04
you know uh i think 11 offers on the
16:08
first deal we rolled out in may
16:09
uh we started doing virtual tours uh we
16:12
did get some hard money not a big number
16:14
uh but we got hard money on that but we
16:16
found every deal we rolled out
16:17
there was more and more certainty in the
16:19
market and we were able to get more and
16:21
more hard money to the point now
16:24
we were putting a deal under contract
16:26
today with 400 000
16:27
hard day one uh we’ve had a similar
16:31
result
16:31
on several deals recently we had a deal
16:33
we had an exchange buyer last month we
16:35
awarded
16:36
called the destino in grand prairie
16:37
where that buyer was in exchange and put
16:39
up a million dollars hard
16:40
day one to win the deal so we’re back
16:44
to an environment where people are
16:46
willing to put up hard money because
16:47
they know where their debt’s coming from
16:49
they know where their
16:49
equity is coming from they have a
16:50
reasonable expectation of
16:53
what to expect in the next 12 months you
16:55
know understanding the acquisition side
16:56
i mean
16:56
i would actually argue we’re we’re to an
16:59
environment that is even
17:00
hotter than we were in january right i
17:02
mean it’s
17:03
it’s all the pent up demand lower
17:05
interest rates
17:06
and i guess the collections number i
17:08
mean it has been strong so it
17:10
on paper it all looks good right and so
17:12
i mean i just i’m seeing kind of
17:14
astronomical stories
17:15
astronomical situations and there’s
17:17
there’s a lot of demand and i think you
17:19
know
17:19
even on the buy side it’s taking me a
17:21
little bit to get my head around you
17:22
know really where are things now and
17:24
what are the real opportunities today
17:26
right right well i mean i think there’s
17:28
a couple of reasons for that i mean i
17:29
think
17:30
you know there’s fewer deals in the
17:31
market for sure than there were
17:33
in q1 maybe that’s beginning to change
17:35
now but over the last
17:37
you know six months there’s been far
17:38
fewer deals for sale than
17:40
you know buyers in the market the amount
17:41
of capital on the sidelines and so
17:44
uh there’s a lot more buyers per deal
17:47
available so that’s one reason for the
17:48
competition
17:49
another reason is where else are you
17:51
going to put your money uh where you’ve
17:53
got
17:54
you know you go to places like new york
17:56
and california and illinois where
17:57
the people and the capital are fleeing
17:59
these states because of regulatory
18:01
issues or because
18:03
of myriad other issues and that capital
18:06
is coming to places like texas places
18:08
like florida you know the sun belt
18:11
that’s number one is the capital flight
18:13
from other markets
18:14
the other component the third is capital
18:16
flight from other
18:18
uh product types so you know i tell
18:20
people all the time
18:21
you know i’m thankful to be in
18:23
multi-family versus
18:24
hospitality or office or retail think
18:27
about all the capital
18:30
hedging into other product types from
18:33
uh those product types so you’re seeing
18:34
new folks come into the marketplace
18:36
and you’re seeing new folks come in from
18:38
other product types competing for
18:40
multi-family assets where there’s
18:42
actually
18:42
a yield and so i think that’s the reason
18:45
why
18:46
you know you’re seeing you kind of
18:47
scratch your head why is there more
18:48
competition
18:49
i think the outlook is great for
18:50
multi-family right i think
18:52
over if anything it proved the thesis
18:55
right that
18:56
at the end of the day people need to
18:57
drink eat and
18:59
third but not least sleep right and you
19:01
know the government’s gonna support that
19:03
and i think you know on top of that too
19:04
it’s it’s very much
19:06
i mean the ten years useless right i
19:08
mean where else where there was really
19:09
no other
19:10
quasi-safe place to invest and so i
19:13
think the outlook is very good it’s just
19:14
kind of interesting to feel just what
19:15
happens in the gap right between
19:17
now and then kind of recovery so yeah
19:20
that’s definitely the case but also
19:22
when we look at the financing side right
19:25
we arrange financing not just for
19:26
multi-family but
19:27
for other commercial real estate cla
19:31
asset classes and it’s extremely hard to
19:35
get financing for retail for offices
19:37
obviously we do not even have to talk
19:39
about hospitality
19:42
but because of that even if someone
19:45
still wants to allocate
19:48
money into commercial real estate and
19:51
even if they’re like
19:52
retail and office buildings as a as a as
19:55
an
19:55
asset class the financing is extremely
19:58
hard to come by
19:59
right so with that there is obviously
20:03
more of an interest in multi-family as
20:05
you mentioned there is a
20:06
actual yield in place and we have seen
20:10
over the last few months that
20:11
these collections are are holding up
20:15
so the the confidence level is just so
20:17
much higher than
20:18
in every other asset class in commercial
20:21
real estate
20:23
other than maybe industrial and
20:24
warehousing right
20:26
right sure yeah and so since we’re
20:29
talking about
20:29
you know it’s called market watch right
20:32
for those that are new to dfw do you
20:33
mind just giving the lay of the land of
20:35
how would you give the map of how to
20:37
think about dfw right in terms of sub
20:38
markets and areas
20:40
well i mean it kind of spilled maybe it
20:42
would be good just for listeners sure
20:43
yeah i mean i think if
20:44
if especially if you’re new to the
20:46
market you know a lot of folks come into
20:47
the market new and saying hey
20:49
i want this specific deal size of this
20:52
specific vintage in this specific
20:54
submarket
20:55
you know because i read a co-star report
20:56
that looks really good you know and
20:58
and that’s all good and well right uh
21:01
but
21:02
the thing about dfw is it’s an extremely
21:05
as you mentioned paris it’s an extremely
21:06
uh competitive market uh it’s a very
21:09
dynamic market
21:10
there’s a lot going on there’s a lot to
21:12
get your head around the best what i
21:14
tell people the best way to come into
21:15
dfw as a new investor
21:17
is to cast as wide a net as possible
21:20
don’t throw anything to the side just
21:22
because it doesn’t fit this little box
21:24
underwrite everything tour as much as
21:26
you can
21:27
get your head around it it’s you look at
21:29
it as one big market instead of looking
21:31
at it as a bunch of different little sub
21:33
markets
21:34
and what you’ll find is as you’re
21:35
underwriting deals and as you’re touring
21:37
deals and as you’re seeing
21:39
how they go soup to nuts start to finish
21:41
how they shake out
21:43
you’re going to get a better sense in
21:44
real life of
21:46
what uh your risk tolerance is what some
21:48
markets you like and what you don’t like
21:51
some of the best deals i’ve sold to
21:52
people have been deals that have been
21:53
outside
21:54
their kind of their stated criteria uh
21:57
and so i’d say it’s important to cast a
21:59
wide net it’s one big market
22:01
a rising tide that we’re having here
22:02
we’ve had for the last 10
22:04
years is going to be here for another 10
22:06
years and so a rising tide is going to
22:08
lift all boats if the deal makes sense
22:10
you shouldn’t throw it away just because
22:11
it’s not in a specific sub-market i
22:13
can’t emphasize that
22:15
enough for people new to the market and
22:17
while you’re analyzing these deals
22:19
uh you’re going to be touring these
22:20
deals also you’re going to be developing
22:21
relationships with
22:22
different brokers and different uh
22:24
players in the market
22:26
as you do that and you’ll find yourself
22:29
better positioned
22:30
to take something down when you do find
22:32
it fit
22:34
awesome so maybe one more question
22:37
you know and i asked this i think i
22:38
asked you before dfw between dallas and
22:41
fort worth right
22:42
right pros and cons of each maybe i’ll
22:44
ask you a little differently
22:45
well you know i mean i like i said i
22:48
think it’s all
22:49
one big market uh i think you know when
22:51
i first moved to the fort worth office
22:53
when it opened in 2007 there was not a
22:56
lot of transaction volume in fort worth
22:57
it was seen as kind of a secondary
22:59
market
23:00
to dallas now but nobody on the national
23:02
landscape really knew much about fort
23:04
worth or tarrant county in general
23:05
but you look at all the demographic
23:07
trends that have driven dallas you know
23:09
job growth population growth
23:11
uh income growth you know whatever you
23:13
want to call it
23:14
uh dallas is a bigger county than
23:16
tarrant county is okay
23:17
but all of the gains that we’ve seen in
23:21
all those metrics
23:22
over the last 10 years have been matched
23:25
by tarrant county compared to dallas
23:27
county now
23:29
your your rents you know per month and
23:32
per square foot are going to be a little
23:33
bit lower
23:34
in tarrant county in general than they
23:36
are in dallas county
23:38
apples to apples but you know if you
23:40
look at rent growth
23:41
over the last 10 years and in the coming
23:43
10 years what you’ll find is on a
23:44
percentage basis
23:45
it’s pretty much the same thing uh
23:47
tarrant county folks you know like to
23:49
complain about property taxes rightfully
23:51
so
23:51
you know the property tax authorities
23:53
have been very aggressive uh in recent
23:55
years in tarrant county dallas county
23:57
you know it’s again had great growth
23:59
their taxing authorities have gotten a
24:00
little bit
24:01
uh crazy recently uh but yeah i mean
24:04
it’s you should go see bexar county bear
24:06
county in san antonio they’re the
24:08
they’re
24:09
there yeah exactly and so you know i
24:11
think
24:12
the economic drivers that are driving
24:14
dallas are the same economic drivers
24:16
that are driving
24:17
for fort worth and so uh they’re not the
24:19
same
24:20
place uh but i’d say the drivers are
24:23
similar
24:24
the stories are similar enough where you
24:26
should you know you should definitely
24:27
keep your
24:28
your head around both of them because
24:30
it’s one big market you can’t drive from
24:31
downtown fort worth
24:32
to downtown dallas and drive through a
24:34
field it doesn’t exist it’s it’s one big
24:36
city
24:38
especially because you guys have uh the
24:39
way you have the zoning it kind of helps
24:41
you know if it’s field is there by
24:43
design right
24:44
yeah you know it’s like it’s like it’s a
24:46
billboard
24:50
yeah so so what tips would you have for
24:54
uh for someone who uh wants to enter the
24:57
market
24:58
obviously someone who has already done a
25:00
number of deals and knows the brokers
25:01
the
25:02
changes are pretty good but other than
25:05
touring properties getting to know
25:07
brokers
25:09
uh what what tips would you be able to
25:12
give to
25:13
to new entrants into the market what
25:15
they what they should do
25:16
when it comes to negotiating offering
25:20
uh and ultimately having a chance at
25:23
winning a deal
25:25
sure i think you know a lot of folks uh
25:28
as i mentioned you know casting a wide
25:29
net
25:30
as possible is very important looking at
25:32
it as one big market
25:33
and drilling down as time goes on is
25:35
also important let that be a natural
25:37
progression instead of it being
25:38
something
25:39
uh you force upon yourself coming in the
25:41
door the relationships
25:43
are very important uh with the brokers
25:45
with the lenders with the management
25:46
companies with
25:47
you know uh myriad different folks
25:50
that are in the market you have to build
25:53
relationships with people
25:55
another thing to consider is you know i
25:58
know that it’s cobit and i know that uh
26:00
there are a lot of uncertainties in the
26:01
market but you’re not going to come in
26:03
here the market’s too efficient now
26:05
you’re not going to come in here and
26:06
steal anything you’re not going to get
26:08
a 10 discount or five percent discount
26:10
from where we were in february
26:12
uh that that deal just simply doesn’t
26:14
exist in dfw it certainly exists in
26:16
other markets
26:17
if you go into other areas of the
26:19
country that are experiencing distress
26:21
but dfw i think uh has has held up very
26:24
well
26:24
because we’re not experiencing distress
26:27
uh
26:28
you know i mentioned the tale of two
26:29
cities between uh
26:31
agency and bridge earlier you know
26:33
there’s another tale of two cities is
26:35
uh between good operators and bad
26:37
operators
26:38
uh the good operators have been seeing
26:41
operations continue to improve
26:42
here in dallas fort worth uh as a buyer
26:45
though
26:46
i’d say another tip to watch out for is
26:48
there’s always somebody’s throwing
26:50
something up somewhere
26:51
and so in dfw is no exception and so
26:55
there are folks in the coming months and
26:57
years
26:58
who are going to be reaching the end of
27:00
their interest only period and they
27:01
weren’t very strong operators maybe they
27:02
undercapitalized a little bit
27:04
and so it’s important to watch deals
27:07
that are underperforming
27:09
maybe you can go and and find an
27:11
opportunity that way there are always
27:12
opportunities but you’re just not going
27:14
to steal anything
27:17
very good point well yeah
27:20
so uh what do you think uh the end of uh
27:23
this year and then
27:24
looking forward into 2021 uh what’s
27:27
what’s your expectation
27:29
naturally we don’t know how the election
27:31
turn out
27:32
right talk about the elephant in the
27:35
room right
27:36
yeah so that that’s a big deal uh
27:40
you know because there are certain
27:42
implications to the election
27:43
like tax uh policy and regulatory policy
27:48
that could have direct impact on uh
27:51
owners of multi-family
27:53
everywhere not just ufw but what i would
27:55
say
27:57
when you’re just looking at dallas fort
27:58
worth and looking at multi-family no
28:00
matter what happens
28:01
you can take the best case scenario all
28:03
the way down to the worst case scenario
28:05
across the spectrum of possibility
28:09
dallas fort worth is going to still hold
28:12
up better
28:13
than than most other markets in the
28:15
united states and multi-family as a
28:17
product type is still going to hold up
28:18
better
28:19
uh than uh than other product types
28:22
like you said besides maybe industrial
28:25
because
28:26
people always need a place to live no
28:27
matter what the environment is and so
28:30
uh keeping that in mind is very
28:31
important you can’t buy
28:33
with the expectation of our interest
28:35
rate’s going to be a little higher a
28:36
year from now or not our cap rate’s
28:37
going to be a little higher
28:38
a year from now or not you have to look
28:40
at it with a five
28:42
seven ten year point of view that’s the
28:45
most important thing
28:46
in today’s environment if i’m looking at
28:48
something and it makes
28:49
reasonable sense today i can tell you
28:52
that five seven ten years down the road
28:54
it’s probably gonna you’re probably very
28:56
happy that you made that that move
28:58
and that’s the most important thing to
29:00
keep in mind is perspective
29:01
because nobody knows what’s happening in
29:03
the next 12 months i can tell you though
29:05
fundamentals in dfw are probably going
29:07
to hold up better than most other
29:08
markets
29:09
and the the amount of investor interest
29:12
in dfw
29:13
is not uh going to wane compared to
29:16
other markets
29:16
this is a generational story this is not
29:18
a cyclical story or coveted story
29:20
this is a generational story that we get
29:23
to be a part of here answer
29:27
yeah that’s that’s great uh i think
29:30
that’s a
29:30
really uh a good point uh uh
29:34
to to end our uh our discussion
29:37
right uh it’s it’s uh
29:41
you’re in a perfect environment here in
29:43
here in texas
29:44
uh as a on a long term basis
29:48
and uh you definitely being in
29:52
dallas fort worth you talked about uh
29:57
the wave that has lifted everyone right
30:00
but i
30:01
think it’s it’s only fair to say that
30:04
uh the trend is is going to continue
30:08
and even if we have uh uh some hiccup
30:12
and
30:12
uh some downturns as long as someone
30:14
plans for
30:16
for a longer hold five years plus to
30:18
seven years
30:19
plus uh they should do really well
30:22
i don’t think your message really
30:25
also is like yes a lot of
30:28
owners that were had luck in a way
30:32
to sell a property after one or two
30:34
years but that’s not
30:36
that’s not really the norm right so that
30:38
was a
30:39
uh kind of lucky that uh
30:42
everything came together in a in a
30:44
perfect fashion
30:46
but it’s it’s you made a very good point
30:48
in saying look if
30:50
if you are patient this is going to work
30:53
out
30:54
and when you buy it slightly
30:58
below or above the price then what you
31:01
originally anticipated it’s not the end
31:04
of the world
31:05
no yeah i i couldn’t agree more you know
31:08
it’s
31:09
you’re looking at it through the
31:10
perspective uh
31:12
you know the five plus year hold it’s
31:14
going to work out
31:15
pretty very very well uh so i just
31:18
encourage you to
31:20
you know remain patient there is a lot
31:22
of competition out there
31:23
remain patient don’t give up if you
31:25
don’t get your first two or three deals
31:27
that you bid on
31:28
uh you know you’re going to continue to
31:30
develop knowledge develop relationships
31:32
and what i found is uh some of my best
31:34
clients were ones that
31:36
it took four five seven tries before
31:38
they got something so
31:39
uh you have to stay persistent uh if as
31:42
long as you’re doing the right things
31:44
it’s gonna work out here yeah very good
31:46
so i
31:47
really appreciated al that you came on
31:49
uh sharing
31:50
all your knowledge and expertise