David Moghavem (00:00.11)
Everyone, let's make this, avalanche of distress coming in. We've got a whole pool of money that will buy all the stress. That materialized. The debt funds have sat on their hands, twiddling their thumbs for a couple of years now. They're sitting with a ton of money and they're eager to try to act. If you're looking for yield investors, you're looking for yield, it's a great market. Those markets that were the bell of the ball, those markets aren't the bell of the ball. You write off a big city at your peril. You've got to be on your toes. You can't get complacent. It's kind of a herd mentality and equity. So that said,
these fans have a life. We see ourselves very much as an extension of our clients. We're out there with you fighting at Fight. We'll rename the pod People Flow Friday.
David Moghavem (00:59.392)
All right, boys. Henry, Ricky. Good morning. How are we doing? Great. Looking forward to some nice winter vacation time. Yes. This is the season right now. Last days of the year. I Ricky, I think you need to be here full time in between November and The winter months, dude. The winter months. Yeah, exactly. The winter months. New York's not too bad when it comes spring. Yeah. How was breakfast with Max?
It was great. two hours together, covered a lot of stuff, a lot of stuff to get done in the future. Very exciting. I like Max. He's a good guy. Yeah. Max walked in and he's like, had breakfast with Henry. It was amazing. It was 90 % non-real estate, 10 % business, but the 10 % is good business, which is great. you need, I think you also need to have a connection with someone, right? So it's good to have that connection because that connection solidifies and then you use that connection. You also have a lot of business chat.
but you want to kind of get to know the people you're dealing with. always. 100 % a relationship business. This business, with one of the last humanistic businesses where we're a commodity business, we do the same thing as a million other people do in the industry. It's that person to person connectivity that that feeding one has for the other that drives the business. So 100 % 100%. I think there's so many deals to go around. There's so many markets and you know, the pod is all about diving into deals, diving in.
to markets, talking shop, but end of the day, meeting face to face, talking to people. It's about who you're dealing with is just as important on what the opportunity is. It's about dealing with people you want to do business with and avoiding people you don't want to do business with. Life is too short to do business with people that make your life miserable. Amen. Amen. Guys, thanks for hopping on. There honestly doesn't need to be introduction. When I talk to people and I'm like, Hey, do you know Henry Gricker? Like, who doesn't know?
Henry and Ricky. Honestly, you don't even need a bio, but let's talk to me about what you do, your team, how you've been building your brand. Give us the high level overview. So British Born moved to New York in 2002, 2003. Initially came here for a three month internship and was meant to go back home and work at the family business. Came and never left. Did various different things. Was in private equity for many years.
David Moghavem (03:25.262)
After the crash of 2008, was very turned off from finance, lost a lot of money for investors. Like everyone did in the crash of 2008, were pretty still in high school, I think. And I wanted anything to do with anything financial, went into a completely different business, went into the nightlife and restaurant business, opened three nightclubs and a restaurant. Did that for many years, built a few very successful spots, very well known. And then in 2015, 16, my
wife wanted to have kids and she didn't want me coming home at four or five in the morning. She said it was time for a change. Tommy go see a gentleman called Anthony also at Canter Fitzgerald. Went to see him. said, I can't give you a job. I'll give you an internship. Gave me an internship at Canter. Started to learn the business. Started to develop my business, on the multifamily side. Started to build a good book of clients. Then in 2018, Anthony got transferred from
in Canter to Newmark because Howard Lutnick rolled all these different companies into Newmark, took Newmark Public. We went over from Canter to Newmark and I joined Newmark. And then we really started to take off working together with the investment sale brokers across the platform, introducing them to a lot of New York buyers who are losing faith in New York because of the Ducotne rent regulations. We started bringing them to markets such as Columbus, Florida, Atlanta, the Texas market. And that really started to drive our business.
became one of the most successful and most aggressive lenders on the multifamily side. Today, I think we've done over $15 billion of multifamily loans. We've been number one or number two on the multifamily side year over year. This year we'll close a little over $3 billion, even in the down market. We're very entrepreneurial, very aggressive for our clients. We don't believe it's ever about the deal. We believe it's about the relationship. And we look to find ways to drive revenue.
to our clients because we feel rather than just wait for clients to bring us deals, be an active source to bring opportunities, be it on the acquisition side, be it on the debt side, be it on the pref equity side, be it on the equity side, find weights to bring money to our clients and that way it drives money to us and the firm. Yeah, and just, guess, to piggyback on that, how much of your business right now is equity focused, pref equity focused versus debt focused? And talk about some of the programs that you guys have been able to get done.
David Moghavem (05:47.209)
So obviously the best game in town is Freddie Mac and Fannie Mae, right? They've got a ton of liquidity. They're there for the multifamily sponsors, good multifamily sponsors. So our core focus is obviously providing great agency execution. But in today's market, you have to be incredibly smart. We have a deal closing and Ricky, you can talk more about this deal. We have a deal closing tomorrow where Ricky was instrumental from the beginning. And what we did is just the craziness. We did the workout from the original Briggs Lowe with Firm.
Once we worked out the deal with the bridge lender, we brought in an agency loan plus a pref equity on top with a hybrid part of that pref and GB common equity. we're closing that deal tomorrow. from birth to death, we are here for them. The loan was in severe distress. We sat with the lender, figured out a plan with the lender, stopped all the problems they were having, then moved it away from that bad.
a bridge loan into a secure five year fixed agency loan. And then also because it didn't cover work with the prefect equity and equity provider to come cover the whole stack. And Ricky did that from nuts to bolts. Nice. Yeah, it's great. mean, it didn't cover on the press side too, which is why you kind of bring in the hybrid equity. A lot of groups doing that. think it's you're really seeing that for these deals in 21 where the debt's worth more than the asset. So in some cases when there's still a lot of value add to be done.
A lot of these equity groups could get a little creative there. Um, I mean, it's a great structure. There's a lot of groups doing it. And I think 22, 23, 21, 22, 23, all those loans that are going to be maturing the next two to three years, you'll see a ton of that. Yeah. And do you think these are going to be more acquisitions or recaps or a little bit of a mix of both? I think it's recaps. Yeah. Anything on the acquisition side, we're not really seeing much press unless it's, you know, maybe construction, but outside of that, um,
No, it's along the recaps. On the acquisition side, you've just got to be so fine. You've got to tread that line so brilliantly. It really is picking a needle out of the haystack. You know, you're on the acquisition side. You put a lot of work. You do a lot of work. Wasn't like it was two, three, four years ago where everything made sense. For sure. with where rates are, where cap rates are, where insurance costs are, you really need to do the homework. So you're seeing less on the acquisition side. It's more, it's very pinpoint on the acquisition side.
David Moghavem (08:06.807)
But on the recap, refi side, you've got to be very thought out. Yeah, definitely. I think it's been a very active year for you guys and it's been an active year in real estate, but not necessarily in acquisitions, right? There's so much liquidity still out there, but they're targeting more of these recap or rescue capital opportunities. And you're not really seeing it translate from a distress side all the way to a sale. There's options A and Y before you get to Z, which is a sale. We've seen the common denominator is that
banks and lenders are not eager to take back properties. In the worst case scenario where there's been bad boys and preff on top of preff, you see lenders take back, but most lenders are happy, happy to work with you and work with the borrower to find solutions rather than take back keys. Yeah, it's, it's interesting. If it's operationally distressed, the lenders don't want to take it back. If it's operationally performing, the lender's saying, okay, well it's the sponsor's
probably going to be managing better than the lender would be doing it. And so there's kind of both sides of it where the lender doesn't necessarily want to take it back for one reason or another. You have to show gross negligence and gross incompetence for a lender to want to come in and step in and take back the property. Yeah. And you're just not seeing that translate to sales. Another thing we're noticing on the acquisition side is when there is a distress deal for sale, it gets completely bid up because
people like to pay for the story. And it gets to a point where you'd rather buy a deal that stands on its own two feet at the same in-place cap than what that stabilized return on cost looks like. And the lenders know that, right? So you're not seeing a ton of notes, you're not seeing a ton of note sales, you're just not seeing, everyone expects this avalanche of distress coming in. We've got a whole pool of money, we're gonna buy all the stress that will be materialized. Exactly, there's so much money earmarked.
Right. For distressed. And that's why they want the store and they'll overpay for it because it's part of their mandate. Correct. Still feels like that opportunity is not there. I think what you guys did with Bridgewater, mean, that's the real opportunity. Yeah, Bridgewater was a good one. You've been on these marketed deals and they keep falling in and out of contract and you you stay consistent on where you are in price and your equity spoken for and that's really, you know, the deals that transact below whisper. Yeah. I mean, Bridgewater was an awesome deal we worked on together. One thing I loved about Bridgewater was
David Moghavem (10:27.253)
It was operationally performing really well, but it was a cap stack issue and it wasn't even property specific, but it was just more liquidity owner was in a bind. was peak fear during that time with October 7th and the treasuries were at 5%. And we were able to see through that a bit and see how the asset would be great long-term. And you guys were instrumental in
getting us through the Finch line with a great Freddie loan rate locking when there was a bond rally and helping us through the whole stack. thank you. Thank you guys again. You'll find me on the phone and Ricky can attest to screaming rate lock. Now, I got to find that window and many times we'll close the deal and we'll put the flyer and I'll say 513 all in rate and the guys will come and say, you'll see how did you get that done? Because we are watching for that kind of dip and then we're scrambling. We tee everything up to
take advantage of if there is a dick that you rate up at that moment. Yeah. Yeah. So we timed it perfectly on Bridgewater. We closed the deal a couple of months ago in Atlanta where we stuck the landing on the rate lock. It's great. It's such a good feeling. You can't bank on it as a business plan, obviously, but it does make a good deal. Great. Yeah. But you but in this market, you're going to see such crazy swings like, look, over the last three days, what have we seen? The 10 you got.
Ten years out of four or five right now. Yeah, so it's got 30 basis points. And the Fed lowered Treasury, but what they said was more impactful that they don't see rates coming down in the long term. So that spooked the market. there's always going to be these things. And then January, Trump will get into power. He'll say something like, I'm going to tell the Fed what to do and you'll see rates come down. So you've just got to be really, really geared to watching for those opportunities, those dips to take advantage. Yeah.
We're at an interesting point in time right now, December 19th, 18th. Yeah. 19th. And, the, the treasury's at four, four, four, five, five years at four, four. And so far is that four, four. And I think what you're starting to see is so far now starting to be lower than treasuries. Do you think that's going to translate to a different, type of program being led of like people either getting back to bridge or floating because of how things are switching from.
David Moghavem (12:48.301)
Treasury versus SOFR? Not yet. We need SOFR to come down a little bit more because still the delta between floating rate money and fixed rate money is still quite wide. The spread on a fixed rate deal with a buy down to be 105 to 120, 130, the floating rate lenders are still 200 plus over. So we need SOFR to come in more. And then you're also not seeing a lot of heavy value add deals getting done right now. The market for value add deals is kind of gone.
So what was the norm in 2020 was people buying these 80s vintage deals, getting the bridge loan loan that will fund 100 % of the capex, going and fixing the units up. That business has kind of died and everyone's kind of buying newer vintage and gambling on rent growth and kind of better operations. So we're going to need some very large shifts for us to go back to the 80s vintage value add heavy game for people to go back to floating rate debt funds or floating rate agency. So I don't think...
I think we'll still continue to see how it'd fixed. Would you agree with that? think on the lease up deals, you'll start seeing a lot more floaters being done. Yeah, like a lease up. Because CPHC's pull back on their near-stay programs and it's just getting harder and harder regarding sponsorship. And that capital is cheap. mean, 260 spreads on some of these deals. Because it's better quality product. And so they'll get a little more aggressive on Definitely aggressive on sizing, right? It's just such a liquid market.
yeah, the debt funds have sat on their hands, twiddling their thumbs for a couple of years now. They're sitting with a ton of money and they're eager to transact. Yeah. And it's a good play for a buyer giving that you'll probably get actual premium in stabilized cap than something stable because lease up risk, depending on the market is real, right? Like there's a lot of supply in a lot of these markets. Some a little bit, feeling a little bit more pain than others. There's concessions.
So I'm sure you're getting a stable, you should be getting a stabilized cap. That's better than if it was a hundred percent leased up. But think of someone built a hundred and seventy million dollar development, right? His construction costs are let's say eight, nine percent, right? And now he can go in and get a floating weight bridge loan for lease up and he's at two hundred over. So now he's 150 basis points, 200 basis points cheaper than his current debt. Why not get out your construction loan? Put on, get rid of all the PGs.
David Moghavem (15:13.149)
on this floating rate debt, give yourself a nice window to lease up without having to too aggressive with concessions. So that could be a big play as well in 2025. Yeah. So you think the floaters or the bridge is probably going to, it's going to stick more on this better quality stuff and it's going to be probably a while till people will ever take bridge debt on value add and banking on a return on costs and ignoring the in-place cap. I think everyone got very burnt by SOFA widening at such a pace, right?
And then the cost of cap rates going through the roof, which they never expected. know, were three years ago, so it was at 10 basis points. Then it went to five 30, right? All your cap was $60,000 and your cap went to $700,000. So that thing, I really scared a lot of people and there's PTSD in the market because of that. Yeah. That's a good question for you though. I mean, on the investor side is equity trying to do value add deals right now. And are you guys penciling that? No, I mean, the two deals we bought Orlando and Atlanta.
there's a value add component, but it's gravy, right? were good going in cap rates. Yeah, they were all exactly. They were all strong going in cap rates, positive leverage day one, well into positive leverage day one. and they can stand on its own two feet. Didn't need to bank on the market recovering. Didn't need a bank on rent growth. Your cash flowing worst case scenario and best case scenario, things improve. And that's the complete shift, right? During the
zero interest rate period. People were banking on a return on cost. were ignoring the in-place cap. You were looking at stabilized numbers. It was basically building, buying a vacant building almost and just saying, all right, who cares what the rents are in place? Right. Like what? They mean nothing. Everyone was looking at trade-out reports. Trade-out reports were so important. Now it's completely opposite. So I agree. think equity is looking for solid deals that are at good basis.
compared to peak values and also compared to replacement costs. And then yields that are very strong relative to borrowing costs. So if it's a newer vintage asset, maybe it's slightly negative leverage, with a path to positive leverage, and on maybe something older, it's positive leverage day one. And that's what, I think that's what makes this business so fun is its fluidity and how it changes and how what can be the cream of the crop one day is suddenly forgotten. even with markets, right? If you remember,
David Moghavem (17:35.213)
Three, two, three years ago, those markets that were the bell of the ball, today those markets aren't the bell of the ball. Like Austin was just untouchable. Today you've got a tremendous lot of overbuilt product in Austin, three months concessions, Nashville, you know, no one could say a bad word about Nashville. I'm not saying these markets are bad today, that the mindset is different, but then if you look at the Rust, the Rustbells, you look at the Midwest, those markets are very much in vogue. And Chicago is the contrarian of May, but no one overbuilt like crazy in those markets.
and you're getting really, really positive rent growth. So you've got to be on your toes. You can't get complacent and think, oh, I'm in Florida. I'm good. That's not the story. It's always where is the next opportunity? Where can I make money for my investors and my clients? Yeah. I mean, I'll put the question to you. Where are you guys bullish on heading into 2025 and where are your clients seeing success in? Do you want to take that? Columbus, Yeah, I've hearing that a lot. I think you're going to hear that a lot in the VC. But what's I guess, what's your take on that?
And Columbus, do you agree with that or is that kind of the sentiment? the fundamentals are so strong. got to tour and see it for yourself too. I I toured it and we were doing some deals there, just kind of waited. And finally, when I got there, you have Ohio State, you have Intel being built, you have a lot of good economic drivers there. And you look at the rep roll, we see a billion of those and there's positive trade-outs. So exactly what you're saying, if you're looking for yield and investors are looking for yield, it's a great market. Yeah. I I'm not.
As it weeds with Columbus, as we are in some of our other markets, one thing's here. That's, that's great. It's, it's always been steady. It hasn't had the supply glut that some of these other markets have had. And it's just chugging along. It's just chugging along. The cap rate compression. People did insane things in these sum belt markets. They bought stupid cap rates, right? And that never happened in Columbus. So you don't have that pain. was always a very
state steady market. Resilient. And slow and steady, literally, it's what your dad tells you when you're a kid, you never understand. Slow and steady wins the race. And now you see it as you get older. Markets that are just good, strong, markets with very good fundamentals. They are going to weather the storms and be through the test of time. Where these markets that just are boom and bust with a ton of land and easy to develop, those are going to be more challenging for you. Right, right. It is a key difference between
David Moghavem (19:55.021)
Trader markets and maker markets, right? Which markets are you going to quick flip out of? like, those aren't bad markets, right? But you just, you got to be careful with what you're buying. And then you have standalone markets. at what's going on in Miami, right? New York is always going to be the epicenter in the world. So those markets that just kind of stand alone, they'll also be there in the long run because they just have something that other cities don't have. Do you put LA in that category? know like, know, think put Miami in this category. That's nice. Miami's amazing.
Honestly, moving here. You write off a big city at your peril. I think you make a mistake of saying, San Francisco is dead. And you make that at your peril because San Francisco has the brain trust, right? Just so close to all these universities that put out all the tech and Silicon Valley. You do the same thing with LA. LA is the epicenter of entertainment, entertainment capital of the world. Can't write off these markets. Yeah, they're going through turbulent times. There's some political headwinds. There's other ideologies that could be.
air course problems, at the core, there's some really strong fundamentals there. We're a $5.2 billion deal in California right now in Los Angeles. Our team, it's called One Beverly Hills. It's a condo hotel retail development. It's a old Robinson's man. That's Oco and Kane and Alman. Yeah, exactly. On the corner of- Because that's the Hilton Hotel and the golf course. last undeveloped piece of land, 17 acres. It's a behemoth.
and that's going to break every record. And those guys are really, really smart. They know what they're doing and the lenders know what they're doing. So if someone's going to lend five and a quarter billion dollars, they're not running off LA. So don't write off these cities. Be cautious if you want to, but be very careful before you write off cities. that's true. That's true. That site, first of all, is one of the most incredible sites. Just growing up in LA, I would play soccer right across the street and I would dig and they were
demolishing the Robertson's Bay and the gas station that we would always get gas at. It's going to be one country now. It's going to transform the city, right? You know, the first Unmanned Members Only club redoing the Hilton, huge $700 million renovation where the Oscars are held. Then this unbelievable retail corridor with shops and restaurants and all surrounded by a 10 acre manmade garden with springs and brooks and valleys and all that. It's going to be sick.
David Moghavem (22:22.349)
Yeah. And I'll just go back to what Ricky was saying. Like the cap rates you're seeing in LA are really attractive. Like we were bidding on a deal in North Hollywood that was recent construction. We got outbid, but it was almost a six cap on our numbers for new construction. yes, you have the political, the regulatory, the, you you have ULA, you have some of these other California ballot initiatives and they just keep coming. And as a syndicator,
It can be hard to underwrite some of these. bad risks. can get crushed overnight with some crazy regulations that comes in that would swap into New York. When the rules are changing in front of you. So in New York. Yeah. But look at New York today. The highest, the highest rental costs in the country. You know, one bed. What are you paying for your one bedroom in New York City? $3,500. That's insanity. Yeah. When I first moved to New York, my rent was $800.
So you have incredibly strong rent growth in New York. With all the headwinds, you know that it's so hard to find an apartment in New York. It's literally like hand-to-hand combat. Every time a unit comes online, there's like 30, 40 people queuing outside to go see it. It's a broker fee war too. I have to get my broker 20 % just to move in. So would you guys say, I guess as a contrarian view, that you guys are probably bullish on some of these markets that people are writing off or that there's opportunity there? Our job is as an advisor.
is to know the markets, know everything that's going on with the market and then advise the client what we think is great. It's not our job to tell them where they shouldn't invest. It's our job to tell them where we think they should be investing. So we're never going to be down on any city or any, we're just going to do the homework. We're to look at the reports, understand what's coming online. We're going to take educated positions.
And we're not going to say, this is a good market. This is a bad market. You never know what's a good market until you do the work. So where would I tell you to invest right now? I would say, I love the midwifes. I the Midwest is having a moment of the sun. think these markets are severely undervalued and there's ton of demand for them. So we're incredibly bullish on that market. Am I sour on Dallas? No, because there's some pockets that you can make great money. I sour on Austin? No, there's always going to be deals. All I'll tell you today is as an acquisitions guy, do the homework.
David Moghavem (24:42.273)
Do the homework. Don't be aggressive in chasing a deal because your emotion through the works and understand that they in place rents, understand what's coming online, understand what your competitors are doing and then we'll help with you. We'll work with you. We'll help you understand the market better and altogether we'll take an educated position on what you should be doing. Definitely. Definitely. I'd add extra time and it's trying to do it. Creating a fund. Yeah. You're seeing so many sellers and so many
investment sales brokers not award deals because guys say they're syndicators. So I think if you create a fund and say the equity spoken for it gets past a lot of the question marks and it kind of opens up your flexibility on a business plan and what markets you can enter. That's you be very nimble, right? That's you be very aggressive, very nimble and move very, very quickly. Most of the deals that were awarded this year, the capital was raised and there because sellers understand with these huge fluctuations in treasuries.
a three month window where you award a deal and the deal doesn't get done and Treasuries have blown out 60, 70 base points, kills your chance of reselling in three months time. So they want to go with a shortage of clothes. So if you have the ability, I'm going to sign the PSA in two weeks, I'm going to go hard deposit in four weeks, that's going to make the seller much more comfortable, that's going to help you win business. Yeah. And I would say, know, pre-Rehek, you were seeing that all the time. It was like non-negotiable. You had to go hard day one. Are you still seeing a lot of that in this environment? You're not seeing as many positions as you were.
So the positions that you do see happening are going to the sure fire bullet are going to the ones that are just so, so ready to go have their money raised, have all their ducks in a row. a close. That's very important. That is the most important thing because we've seen guys get burnt with sell it with buyers that have just schlepped them down. it comes with reputation too, right? It's not just what you put pen to paper on a PSA. It's about, all right, what was the last deal you did? Did you retrade? Did you, did you not? Why not? And I think.
going in honest goes very far in this business. think people have retraded, obviously, spreads have blown out 90, 100 basis points, there has been the occasional retrading. think sellers understand that because they're also buyers who are doing the same thing. I think honesty and just saying, listen, I've got room for a 40 basis point swing. It goes over 40 basis. We're going to have to talk. Yeah, exactly. Very true. So going back to what you guys are saying of advising your clients.
David Moghavem (27:01.015)
What's some of the best advice you're giving your clients heading into 2025? I would say fund really. Like if you can get your equity lined up, the world becomes your oyster running acquisitions. And on the recaps, it's identifying what covers with pref, what covers without pref, understanding, you know, where values are and really getting creative and forward looking on, okay, how, how do we shift our business plan to exiting in a year or two, restructuring this on a five or seven year outlook? Definitely. I've been saying the same thing.
since day one, communication is key, right? You've just got to communicate with everybody, be it your investors, be it your lenders, be it your brokers. When things are bad, the guys that fail are those that bury their head in the sand, the guys that go into the fetal position in the corner, don't want to deal with the problems. You can't be like that. You've got to have courage. You've got to be brave. Life is full of ups and downs. There's peaks and valleys. Sometimes it's great and everyone's at the top of the world and sometimes you're at the bottom and you're like, how the hell did this happen to me?
Keep lines of communication over. that's, you know, on the acquisition side, let's say you're chasing a deal, things don't work out. Don't put an offer in and disappear, right? I can't stand guys that just disappear on you. Just keep communication open. Torture lenders, torture brokers, torture sellers, torture investors. If you do that, everything will be fine. Yeah, it's true. It goes back to what you're saying of like relationship business, right? It's not just about putting offers disappearing. It's about keeping the open mind.
having the relationship, staying in front of everyone. I think you do great at that. You're very communicative. You've chased deals from Hampton Avery and then the swing has happened, things have happened, your insurance has happened, you've never hidden from that. You've been always straight up and honest and I love that. That's the way to be. Say, hey, I love the deal, I want it to be here, my insurance came in at $2,400 a unit, that kills my cash flow, I can't do the deal right now. Can you help me with another insurance broker? Which we did. Say, talk to this guy or talk to this guy. So that is a critical factor and I think a lot of
younger people don't understand that they just disappear, they go into the fetal position and that kills them for the future because then the brokers and the lenders, they don't want to waste their time. Exactly. It's actually almost like everyone's working together in this environment to get a deal done. It's not even about competing. It's about like, hey, can we all work together to make a deal happen and get it done? being on just what we were saying before, being honest, staying like, this is how I'm underwriting the deal. This is what we have going on. This is our fund.
David Moghavem (29:26.541)
These are the returns we need to hit and like, is what it is. Let's get the deal done. Let's get the deal done. And you guys have been integral in helping us with We see ourselves very much as an extension of our clients. We don't see ourselves as your broker. We see ourselves as part of parcel with you. We're in the trenches with you. think that's what makes us, I think, God, so good, right? Because we're out there with you fighting that fight. We want you to win the deal obviously.
We also want you to make the right deal for your investors. So I think that vision of us as an extension of our clients makes us so successful. think guys that just think, it's one deal and gone. Anthony always says it's never about the deal. It's about the people. And I remember from my first day chasing deals. Don't chase the deal. Chase the people. Chase that shared unified vision. Yeah. Well, rename the pod People Flow Friday. Yeah. So I guess we're
We're starting to all plan for NMHC, right? we're our meetings. What's your expectation heading into NMHC? What do you think the sentiment's going to be? What's your thoughts going into it? think the last three national multi-housing conferences have been all the same. That everyone feels that we're on, we're taxiing. We're on the runway. We're taxiing. We're not getting faster. We're not getting up to take off. I think it's going be another year like that, right?
rates where they are. think everyone's very bullish with the new administration coming in and especially this kind of administration that is kind of a little revolutionary in their thinking and wanting to change things in a big way from Elon Musk coming into Vivek to all these different people coming into very varied cabinet. You've got hopefully Howard Ludnick, the Secretary of Commerce and he's a brilliant man and you've got some really good people. So I think there'll be a lot of a very bullish out roll. Obviously it very much depends on
where rates are and it happens with treasuries. So while everybody will be a little bit more optimistic with the new industry going in, I still feel that people will be very cautious and it's going to be another runway year. Yeah. think last year you had the optimism and then treasuries ran and it all got thrown out the window. So I think people this time around are a little bit more cautious. And I hope we don't have as many of I've got fun for distress.
David Moghavem (31:49.099)
meetings. We had so many of those meetings last year and the year before. My fund has already poised to jump in and they've been waiting for it to jump in for two years and nothing's materialized in a big way on that site. the bright side, you will see a lot of deal flow. mean, so many these investment sales brokers are just holding off on long chain deals as usual. And hopefully we see rates come down a bit in the new year. mean, it's blown up 40 basis points the past two weeks.
Yeah, maybe we tie something up now and get another bar interesting because in short, these brokers are having conversations with the seller, hey, we're going to launch, you know, this was our strike. It might come on the low end. Yeah. Hopefully you see rates come down and people actually hitting that low end. So, think a of optimism there. I think Trump coming in, it's clear that he wants lower rates and he's a bull in a giant shop. He's going to get his way, even though they're independent, right? Because he's, I think he's already threatened to fire Powell and Powell saying he's not going to go. So.
I think there'll be a meeting of the minds in some way and Trump seems to get his way, as so evident by Canada yesterday, allocating a huge amount of money for border security, of tariffs. So I think he's going to push very aggressively to have rates come in. see what happens. Yeah. What do you think is the sweet spot of where treasuries need to be or where rates need to be for deals to get done? Sub four.
Yeah, I agree with that. think when you saw that rally come in in August, September, that's where you started to see people get off the sidelines and people can refi. Yeah, we find let people refi their deals over their floating rate loans into fixed rate loans will create a lot of solidification within the market and people will be calm. Right. A lot of guys are thinking, OK, I want to keep growing my portfolio. I've got this this anchor on my neck. I've got this floating rate debt and need to get out of it.
How can I go from floating away debt into six and a half, 7 % debt? doesn't work for me. So sub four, get the refis done and then focus on acquisitions. I agree. I'm not, don't think we're too dull on the market. We love the market. We think there's a lot of opportunity, but we do see rates coming, obviously. Yeah. You guys obviously very active also on the equity side and you're talking to JV partners all the time. What you saw this year is a lot of them were on the sidelines or.
David Moghavem (34:05.741)
Like you said, going into recapping or rescue capital, what is it going to take to get some of these JV players off the sidelines a bit more and coming in similar to what we saw, uh, pre-rate hike or even pre COVID? It's not going be easy because all of these guys have taken severe losses, right? A lot of these guys who are super active in 2020, 21, 22, their equity is pretty much wiped down on those deals. So that's hurting and they're scared and they're going to want to partner with.
Excellent sponsors, guys who also have good amount of skin in the game. That 95.5, that's gone. I don't think that comes back for a very long time. You're talking about flowing dust. LP of 95.5 that kind of is done in my book. Because look, happened to the tides and all these other groups that just severely shit the bed. I think that's going to leave a long recovery time for the equity guys to right size and feel good about themselves. I think there was an honesty. Treasury has come down as well.
Yeah. Ricky, spent a lot of time talking with equity. Are they not telling you, what are they telling you? They're all very inactive, They're incredibly liquid. They're all still selling to, know, mint teams returns, some yielding costs upwards. I think they need to come down from that. And yeah, it's kind of a herd mentality on equity. So what drives that be interest rates? could be markets and growth. think Columbus is a market we discussed where you're seeing positive red growth.
But there's not much of a story in a lot of these markets and you're kind of seeing them be conservatives. That said, have, you know, these funds have a life. So. Yeah. And they have to deploy, right? They have to make, make investments because that's how they get paid. So they can't sit on hundreds of millions of dollars and not do anything. So they, again, they're going to pick their spots. They're going to be smart, but the buttoned up groups will be able to take advantage of it. And again, finding that needle and haste, I find that a great deal. It's going to generate excitement.
think you'll see them get more aggressive on recaps as opposed to after. For sure. think you're seeing that already and the JVs are still active, but it may be not necessarily in multifamily acquisitions, right? It's either on the multifamily side, it could be recaps or things like that, or they're just investing in different asset classes, industrial data centers. hear that over and over again, like buy this empty office in the middle of Los Angeles. Yeah. Good luck. Yeah.
David Moghavem (36:30.369)
asset plus is starting to feel a little bit dull to some of these JV, at least on the acquisition side, until some of the supply is absorbed and some of the fundamentals come back a bit. But it's also a great buying opportunity for those who don't need to rely on JV equity to buy a deal. As hence we come back to setting up a fund, having equity sitting there. So how's that gone for you guys? It's green. It's been great. locations. You guys are phenomenal too. Yeah.
I one LinkedIn post and got over some scrab in two hours. remember that. That was great. You're short like $3 million and you put a LinkedIn post and then boom, it all came flying in. Yeah. And I think part of that was also like the distressed angle. It adds time of the essence element to it, but it's been great. Thank God. We've done well for our investors throughout the inception of the company and we have a lot of...
Exactly. And we have a lot of repeat investors. It's not like we're just coming out of the limelight a couple of years ago in the peak of the market and started going on a buying spree that may or may not result in returns. we've gone through downturns as a company. So we have a lot of existing partners through that. Max also timed the market brilliantly in the extended California. And you started moving into the Al market, Denver market, Colorado market,
Portland market. you've got a guy at the head there that really knows what he's doing, which always inspires confidence. Yeah. Max and Mitch are on brilliant people, brilliant mentors. And one of the things I guess when I started almost 10 years ago at Tryon was a focus on untrended return on costs and untrended metrics. really is another way of saying protecting your downside, right? Don't bank on rent growth and
lowering your IT cap to make a deal work. And it was tough to internalize that when you're in a bull market for so long. And rents are growing. are going every year. When is this going to stop? But it's good learning. So now when things are down and you really understand how to make money in this market. That saved us. That saved us in a lot of our deals. So I think investors understand that too. And that's why they continue to invest with us on our deals.
David Moghavem (38:52.717)
Yes, there isn't as much liquidity as there was pre-rate hike where you can raise 20, $30 billion equity checks every other week, every other month. So it's definitely slowed down, but we still have our committed existing investors, LPs, whether it's institutions, foreign capital, family offices that trust us. And it goes again, back to what we said in the beginning. It's all about relationships. It's about who you're investing with.
Are there any deals you guys are looking at a recap and any creative structures? brought Max, I think a pretty creative recap structure on the DST side. I said he should be looking at some of the properties and seeing if they work for a DST. Obviously he wants to grow the management company, which I think is such a great thing to do. Right. That's just good revenue and smart and gives you another vertical, which you already have. If you have great regionals and great people working for you and they can, you've got three properties, but you could add three more properties under that same umbrella.
And that's just good cashflow for you. Why not do that? So management is a great way to drive and build your vertical. Yeah. And it's, it's from a qualitative perspective, right? It's, it's by no means are we making money from in-house management, but it's, we have our finger on the pulse. are hands on. And give it the capacity. Yeah. So why not? So it's being vertically integrated. Like it really does pay its dividends in other ways. It's not really from.
to just make money, it's to really just make sure that the business plan is executed correctly. That's a great soundbite for investors because investors are like, why would I invest with you and we're just going hand over the management to some third party firm and you're just going to asset manage. That's never a good soundbite, right? They want you in the weeds. They want you to know every blade of grass and that can only be done by self-management. Yeah. And we've embraced technology really well, AROM and pricing software and different ways to just make
the process is more efficient. Sometimes can be a learning curve at times, but in the long run, it pays its dividends. Just being efficient. do you guys choose the team? Like the actual boots and the ground management team? You know, we use recruiters. also, when we're buying deals, we're interviewing the staff and if the staff is good, we keep them. And honestly, even if a property might be mismanaged, it's not always the staff's fault. It's just about,
David Moghavem (41:20.349)
repositioning the property and the strategy better. And there's a lot of dedicated people who love their properties that they've been working at. So we've done a good job retaining staff as well. I find that when you these properties, especially us, we've toured so many properties. I was just in Denver a few weeks ago touring a property that was being bought by a client. And then you walk to the property and you have a manager that knows the answers. Everything is at the touch of his or her finger. That to me is very impressive. And then when you have a manager...
that doesn't know what hell's going on, doesn't have the answers, you say, I'll come back to you on that, they've lost the key to the pulse, right? They're not on it. So that's a very good way of knowing who you wanna keep one who you don't wanna keep one. Exactly, and it's not just a manager, it's maintenance staff and making sure that things are handled properly in the right way too. Reviews are so key, right? Because what do you do, before you move into apartment comments, you read the reviews. And if those reviews are bad, that kills you. That just kills you. So you, I've always said this to my clients,
Be on top of it. If a toilet is broken, go fix that toilet. Don't take three weeks to get it done. There's a leak. Take care of it. Be responsive. Multifamily, all property is a living, breathing organism. has to be fed, has to be loved, has to be nurtured, has to be looked after. And if you don't, it's going to run into disrepair and then no one's going to want to move into your property. No one wants to move into your property. You don't have any competition. You can't push rents. It's a disaster. The intangibles that's beyond the P &L and Remaral.
Yeah. Is really what drives a successful investment. A thousand percent. It goes beyond the numbers. Yeah. So you're in the service business. You're providing a product, right? So just buying it. Your job only starts when you bought it. So many people think I'm going to buy the property and I'm bullshit. Sorry. You can say bullshit. It's okay. Your job starts when you close. That's when your role starts. How your staff works, how you integrate with
your tenants, how you keep your tenants on the property. The turnover in some of these states are 50%. That means repainting, retenanting every year, 50 % of the units. If you can bring that down by a fraction, even that tiny fraction and be 40 % turnover, that's going to save you so much money. So keep your tenants happy, create a community within your buildings, foster relationships within your buildings and people will stay for longer. And I think Joe Lubeck does such a good job of that.
David Moghavem (43:37.869)
I think he's so good at that, right? American Handbook is so good. The Barbecue Group is so good. Some of these firms are so good at maintaining their tenants, creating a string in relationships within the buildings, be it camps for the kids, be it barbecues, be it activities, be it after school learning programs. All these little things really help create not just a bland apartment building, but a real community. And relationships are made.
Little kids become friends, parents become friends, school runs are established, and that makes it much harder for you to leave when your lease is up and you'll just renew and stay. Exactly. It ends up getting into the financials with the tension and everything, but it starts from the intangibles of the personal touch. And I would also add, like, you your client said you were just naming, when we're looking to buy a deal and or the seller, we're like, wow, that's going to be a good property to buy. We know it's...
There's not skeletons in the closet and that goes a long way too. Right. And from the other side of the coin, if there's a bad client, not your clients, but if there's a bad seller, you're like, okay, that rent roll is probably not real. Those P &Ls are probably not real. should probably- There's usually an upside, right? Because you know a bad seller, he's not done a good job. He's not kept his people happy. You can come in, clean that up, say under new management, put that everywhere, signage everywhere. On every website, it's new management taken over.
start responding to those reviews. Say, hey, we are the new management. We're so sorry to hear this. We're going to be here for you. You're going to have one of Yeah, there's upside there, right? And you see the new management coming in and start responding under those reviews saying, we are not, we are the new manager. We're here to help. Please contact me. You read that. These guys are on top of their game. I'm going to move into that building. Yeah. Well, you got to get paid for that upside, right? You got to make sure that you're making money on that upside. That's all you're saying. Maybe I got to pay a little less because this is going to be a lot more work. And one thing we're...
Yeah. Tryon is also return on headache, right? We need to make sure that not only did a good return on investment, but it's a good return on headache. Life is not easy. The bigger the headache, the bigger the reward.