1 00:00:11,039 --> 00:00:14,600 Speaker 1: Hello, and welcome to another episode of the Odd Lots podcast. 2 00:00:14,640 --> 00:00:19,200 Speaker 1: I'm Joe Wisenthalved, and I'm Tracy Alliwait. Tracy. One of 3 00:00:19,239 --> 00:00:23,759 Speaker 1: the really interesting things about this crisis is that the 4 00:00:23,840 --> 00:00:28,000 Speaker 1: real estate market hasn't exactly behaved as one might expect 5 00:00:28,080 --> 00:00:31,960 Speaker 1: during a typical downturn. We have sort of depression levels 6 00:00:32,000 --> 00:00:36,080 Speaker 1: of unemployment, a major plunge in economic activity, and yet 7 00:00:36,159 --> 00:00:38,839 Speaker 1: not all aspects of the real estate market have have 8 00:00:38,920 --> 00:00:43,280 Speaker 1: done badly. Yeah, I guess it depends on what you're 9 00:00:43,280 --> 00:00:47,560 Speaker 1: looking at, right, So housing or residential housing has been 10 00:00:47,600 --> 00:00:52,160 Speaker 1: surprisingly resilient. Uh. You know, some of the stimulus has 11 00:00:52,200 --> 00:00:54,800 Speaker 1: helped people actually stay in their homes, keep up with 12 00:00:54,840 --> 00:00:57,600 Speaker 1: the mortgage payments. In some places we're actually seeing a 13 00:00:57,640 --> 00:01:01,600 Speaker 1: housing boom. But if you look at the other half 14 00:01:01,920 --> 00:01:04,560 Speaker 1: of real estate, which would be commercial real estate, there 15 00:01:04,600 --> 00:01:08,720 Speaker 1: are a lot of concerns out there, right, So if 16 00:01:08,760 --> 00:01:12,840 Speaker 1: you're a retail landlord New York City, you have a 17 00:01:12,840 --> 00:01:17,039 Speaker 1: lot of ground level tenants, that's probably trouble. On the 18 00:01:17,080 --> 00:01:19,160 Speaker 1: other hand, if you want to sell your house in 19 00:01:19,280 --> 00:01:22,120 Speaker 1: the suburbs, this is an amazing time to do it. 20 00:01:22,560 --> 00:01:25,720 Speaker 1: And of course it's further complicated because there's been all 21 00:01:25,800 --> 00:01:32,720 Speaker 1: these uh, temporary moratoriums on evictions for certain types of renters. 22 00:01:33,240 --> 00:01:35,680 Speaker 1: There's also been the stimulus, which has allowed people who 23 00:01:35,720 --> 00:01:39,360 Speaker 1: haven't had jobs to maintain a good degree of their income, 24 00:01:39,400 --> 00:01:41,920 Speaker 1: and so that allows people to pay rent. Lots of 25 00:01:42,200 --> 00:01:46,760 Speaker 1: lots of just weird, moving parts, unpredictable nature, things you 26 00:01:46,800 --> 00:01:51,160 Speaker 1: wouldn't just expect to see during a typical downturn. Yeah, 27 00:01:51,200 --> 00:01:54,080 Speaker 1: I mean, moving parts is the right way to describe it. 28 00:01:54,120 --> 00:01:56,680 Speaker 1: Because one of the interesting things about the real estate 29 00:01:56,720 --> 00:02:01,000 Speaker 1: market is all of these things are interconnected, and if 30 00:02:01,040 --> 00:02:04,920 Speaker 1: one person gets debt relief or some sort of moratorium 31 00:02:04,960 --> 00:02:08,200 Speaker 1: on paying their rent, it means that a landlord out 32 00:02:08,200 --> 00:02:11,120 Speaker 1: there is missing out on some sort of income, and 33 00:02:11,160 --> 00:02:14,079 Speaker 1: that can have knock on effects for things like the banks. 34 00:02:14,080 --> 00:02:17,280 Speaker 1: So it's not that easy to say, well, everyone's not 35 00:02:17,320 --> 00:02:19,400 Speaker 1: going to pay their rent or their mortgage for the 36 00:02:19,440 --> 00:02:23,680 Speaker 1: next few months. That leads to strains in other parts 37 00:02:23,840 --> 00:02:27,840 Speaker 1: of the system. Yeah, exactly right. So it's in theory 38 00:02:27,919 --> 00:02:33,200 Speaker 1: it's great to have temporary halts to moratoria, to evictions 39 00:02:33,520 --> 00:02:36,359 Speaker 1: and to foreclosures, and that's actually arguably been a big 40 00:02:36,400 --> 00:02:39,680 Speaker 1: part of why the recovery hasn't been slower. Why that 41 00:02:39,720 --> 00:02:42,120 Speaker 1: we have had this economic recovery because people who are 42 00:02:42,120 --> 00:02:45,240 Speaker 1: out of a job have had more spending money. But 43 00:02:45,320 --> 00:02:49,560 Speaker 1: it creates all kinds of issues, and obviously, long term 44 00:02:49,600 --> 00:02:54,600 Speaker 1: what we need is genuine economic recovery and jobs and incomes. 45 00:02:54,680 --> 00:02:58,160 Speaker 1: So today we're going to break down what's going on 46 00:02:58,240 --> 00:03:00,600 Speaker 1: in the real estate market with someone who really has 47 00:03:00,639 --> 00:03:03,959 Speaker 1: a great view on all these moving parts. Right, let's 48 00:03:04,000 --> 00:03:06,519 Speaker 1: do it alright, So I want to bring in our 49 00:03:06,560 --> 00:03:10,000 Speaker 1: guests for today. He's Ivan Kaufman. He's the CEO and 50 00:03:10,160 --> 00:03:14,239 Speaker 1: chairman of the Arbor Realty Trust. It's a publicly traded 51 00:03:14,400 --> 00:03:17,359 Speaker 1: read on the New York Stock Exchange with one point 52 00:03:17,440 --> 00:03:20,840 Speaker 1: four billion dollar market cap, and there are all different 53 00:03:20,840 --> 00:03:23,160 Speaker 1: areas of the real estate market. So I then I 54 00:03:23,200 --> 00:03:25,520 Speaker 1: want to bring you in. Thanks for joining us to 55 00:03:25,600 --> 00:03:28,880 Speaker 1: get us started. Why don't you describe the different areas 56 00:03:28,919 --> 00:03:32,800 Speaker 1: that Arbor Realty plays in? Sure? Well, first let me 57 00:03:32,840 --> 00:03:36,160 Speaker 1: give you a little overview of Auber Realty Trust, where 58 00:03:36,240 --> 00:03:41,360 Speaker 1: a mortgage read with a primary focus on multi family assets. 59 00:03:41,400 --> 00:03:44,560 Speaker 1: We originate loans for sale to Fannie Me and Freddie 60 00:03:44,600 --> 00:03:48,880 Speaker 1: Mack on the multi family side, and we provide bridge lending, 61 00:03:49,160 --> 00:03:51,480 Speaker 1: and we have about a five billion dollar balance sheet 62 00:03:52,080 --> 00:03:56,360 Speaker 1: and very fortunately of the business we do is in 63 00:03:56,360 --> 00:03:59,960 Speaker 1: the multi family sector. And as everybody has been reading, 64 00:04:00,080 --> 00:04:04,360 Speaker 1: the multifamily sector has really outperformed almost to all other 65 00:04:04,400 --> 00:04:08,720 Speaker 1: asset classes. And uh, that's really a result of a 66 00:04:08,760 --> 00:04:11,160 Speaker 1: lot of factors. Of course, the Cares Act, which will 67 00:04:11,200 --> 00:04:14,840 Speaker 1: touch upon later on, and the supplemental payments have allowed 68 00:04:15,560 --> 00:04:18,240 Speaker 1: the renters to continue to make their payments. And the 69 00:04:18,320 --> 00:04:21,479 Speaker 1: positive domino aspect of that is when they make their payments, 70 00:04:22,080 --> 00:04:25,960 Speaker 1: people make their mortgage payments and and the system works. 71 00:04:26,000 --> 00:04:28,960 Speaker 1: So that's been a very very positive aspect of what's 72 00:04:28,960 --> 00:04:32,039 Speaker 1: taken place on the multi family side. With respect to 73 00:04:32,720 --> 00:04:36,200 Speaker 1: other asset class participations, um, you know, we'll we'll get 74 00:04:36,240 --> 00:04:39,479 Speaker 1: into that a little bit later, but you know, the 75 00:04:39,560 --> 00:04:43,960 Speaker 1: office market, the retail market, industrial hospitality, those are other 76 00:04:44,000 --> 00:04:48,599 Speaker 1: asset classes which we participate in, but to a lesser degree. Well, 77 00:04:48,640 --> 00:04:51,520 Speaker 1: can you give us some color on how that sector 78 00:04:51,640 --> 00:04:54,920 Speaker 1: has actually been doing over the past few months. I 79 00:04:55,040 --> 00:04:58,160 Speaker 1: know you're primarily invested in multifamily, but what have you 80 00:04:58,240 --> 00:05:03,039 Speaker 1: observed in retail and commercial real estate in the particularly 81 00:05:03,240 --> 00:05:08,479 Speaker 1: troubled sectors. So just in terms of of total perspective, 82 00:05:08,800 --> 00:05:12,719 Speaker 1: the commercial real estate market is about a fourteen trillion 83 00:05:12,720 --> 00:05:17,160 Speaker 1: dollar market and the you know, I look at his 84 00:05:17,440 --> 00:05:20,599 Speaker 1: winners and losers, right and you know, looking at the 85 00:05:20,640 --> 00:05:24,200 Speaker 1: pandemic in the recession. Uh, there are winners and losers, 86 00:05:24,200 --> 00:05:28,239 Speaker 1: and the market has been on the winning side, meaning 87 00:05:28,320 --> 00:05:32,520 Speaker 1: multi family, single family, rental, and industrial. So those have 88 00:05:32,640 --> 00:05:36,600 Speaker 1: been the real positive asset classes. Uh. And that takes 89 00:05:36,680 --> 00:05:39,840 Speaker 1: up about six and a half trillion dollars. The other 90 00:05:39,960 --> 00:05:44,880 Speaker 1: asset classes, which everybody understands, it's going through a real struggle. Um. 91 00:05:45,120 --> 00:05:47,520 Speaker 1: And some of those asset classes were going through a 92 00:05:47,560 --> 00:05:53,039 Speaker 1: struggle you know pre pre COVID or retail and hospitality, 93 00:05:53,440 --> 00:05:57,400 Speaker 1: they're suffering dramatically. As we know, the leisure and travel 94 00:05:57,440 --> 00:06:01,279 Speaker 1: business doesn't really exist. It's to take a while to recover. 95 00:06:02,080 --> 00:06:06,360 Speaker 1: That industry is suffering and will take anywhere between six 96 00:06:06,440 --> 00:06:09,000 Speaker 1: or twelve months to get back on its feet. Some 97 00:06:09,120 --> 00:06:11,960 Speaker 1: of the government programs have helped those operators at least 98 00:06:12,240 --> 00:06:16,760 Speaker 1: maintain some of their staffing. Then you have the retail sector, 99 00:06:16,839 --> 00:06:20,560 Speaker 1: which is going through a total dislocation, was suffering and 100 00:06:20,680 --> 00:06:23,560 Speaker 1: not sure how that will get reshuffled, but it will 101 00:06:23,680 --> 00:06:26,960 Speaker 1: have an adjustment and then the most talked about markets. 102 00:06:27,040 --> 00:06:29,560 Speaker 1: Of course, there's the office market. And there are a 103 00:06:29,560 --> 00:06:32,760 Speaker 1: lot of opinions on the office market because you take 104 00:06:32,800 --> 00:06:35,320 Speaker 1: a look at the urban markets which are definitely going 105 00:06:35,400 --> 00:06:37,719 Speaker 1: to suffer to some degree, and then you have the 106 00:06:37,760 --> 00:06:41,400 Speaker 1: suburban office market which is starting to boom, and everybody's 107 00:06:41,400 --> 00:06:45,039 Speaker 1: going to focus on you know what his behavior look like. Um, 108 00:06:45,080 --> 00:06:47,839 Speaker 1: you know post COVID is there could be more remote 109 00:06:47,839 --> 00:06:50,240 Speaker 1: working are people that be living in the suburbs, and 110 00:06:50,960 --> 00:06:55,039 Speaker 1: our business is going to be opening up satellite offices. 111 00:06:55,480 --> 00:06:58,520 Speaker 1: But I don't think the impact on the office market 112 00:06:58,560 --> 00:07:01,599 Speaker 1: will be as dramatic as many say in these urban areas. 113 00:07:01,640 --> 00:07:04,960 Speaker 1: I think there's still a lot of demand in in 114 00:07:04,960 --> 00:07:07,360 Speaker 1: in these urban areas. It will suffer, but not to 115 00:07:07,520 --> 00:07:11,640 Speaker 1: degree that people are speaking about. So when everyone talks 116 00:07:11,640 --> 00:07:14,560 Speaker 1: about some new work from home future and everyone living 117 00:07:14,560 --> 00:07:18,000 Speaker 1: in the suburbs and nobody wanting to commute, your sense 118 00:07:18,080 --> 00:07:22,120 Speaker 1: is that that's just over extrapolation. From the moment, I 119 00:07:22,120 --> 00:07:25,800 Speaker 1: think they're gonna be a lot of behavior changes in 120 00:07:25,920 --> 00:07:28,320 Speaker 1: terms of patterns. Um, they're gonna be a lot of 121 00:07:28,360 --> 00:07:31,480 Speaker 1: people who moved to the suburbs and they commute to 122 00:07:31,920 --> 00:07:34,960 Speaker 1: the city maybe twice a week or three times a week, 123 00:07:35,000 --> 00:07:38,720 Speaker 1: and they, you know, work remotely. UM, so you're gonna 124 00:07:38,720 --> 00:07:41,360 Speaker 1: have some of that. You're going to have, you know, 125 00:07:41,640 --> 00:07:46,160 Speaker 1: some of the suburban office expand their footprint, but totally 126 00:07:46,240 --> 00:07:50,760 Speaker 1: we're working remotely from home. I don't think that effectively works. 127 00:07:50,960 --> 00:07:52,920 Speaker 1: I think it's going to be more of a variable 128 00:07:53,000 --> 00:07:55,920 Speaker 1: setup where it will be a mixed bag, and then 129 00:07:55,960 --> 00:07:59,800 Speaker 1: you have the offsetting factor is in these urban areas 130 00:07:59,800 --> 00:08:02,240 Speaker 1: where I think you're gonna have to change the density. 131 00:08:02,600 --> 00:08:06,160 Speaker 1: So even with a reduced footprint of workforce, you're gonna 132 00:08:06,200 --> 00:08:08,680 Speaker 1: have to have a lodge of footprint per individual. So 133 00:08:08,720 --> 00:08:11,720 Speaker 1: there'll be some level of offsets. Uh. So maybe there'll 134 00:08:11,760 --> 00:08:14,880 Speaker 1: be some shrinkage, but not to the degree that people 135 00:08:14,920 --> 00:08:18,880 Speaker 1: are speaking about. UM. I wanted to dig into some 136 00:08:18,920 --> 00:08:23,000 Speaker 1: technicalities of the real estate market. So I was reading 137 00:08:23,040 --> 00:08:25,080 Speaker 1: I think it was Morgan Stanley and they had a 138 00:08:25,120 --> 00:08:30,560 Speaker 1: transaction volumes uh down by I think it was year 139 00:08:30,600 --> 00:08:33,760 Speaker 1: on year in June. UM that was the last estimate 140 00:08:33,800 --> 00:08:38,200 Speaker 1: I saw. But if transactions have fallen off a cliff, 141 00:08:38,679 --> 00:08:43,320 Speaker 1: what is price discovery like right now? That's a tough one. 142 00:08:43,520 --> 00:08:46,800 Speaker 1: I mean, there are no transactions being done in in 143 00:08:46,800 --> 00:08:50,760 Speaker 1: in the retail market, in the hospitality market, and certainly 144 00:08:50,760 --> 00:08:55,360 Speaker 1: the office market is almost a standstill price The discovery 145 00:08:55,400 --> 00:08:59,200 Speaker 1: will come out in the next sixty days. That's also 146 00:09:00,040 --> 00:09:03,439 Speaker 1: is impacted to a large degree. But the lack of liquidity, 147 00:09:03,600 --> 00:09:06,880 Speaker 1: you know, when the crisis hit in mid March and April, 148 00:09:07,000 --> 00:09:11,520 Speaker 1: the markets were fully dislocated except for the multi family sector, 149 00:09:11,840 --> 00:09:16,640 Speaker 1: there was absolutely zero liquidity. So as liquidity returns to 150 00:09:16,679 --> 00:09:20,680 Speaker 1: the market and as transactions begin to get in place 151 00:09:20,760 --> 00:09:25,080 Speaker 1: and people understand or start to calculate what the impact 152 00:09:25,120 --> 00:09:29,360 Speaker 1: on retail leases are, in office leases and the hospitality 153 00:09:29,400 --> 00:09:32,199 Speaker 1: you'll see some level of price discovery. But I think 154 00:09:32,240 --> 00:09:36,040 Speaker 1: we're probably, you know, sixty days off before you start 155 00:09:36,040 --> 00:09:38,880 Speaker 1: to see a flow or the beginning fall of transactions. 156 00:09:39,640 --> 00:09:41,800 Speaker 1: Is there some when you say sixty days that there's 157 00:09:41,840 --> 00:09:45,120 Speaker 1: some specific date or catalyst you have in mind or 158 00:09:45,160 --> 00:09:48,280 Speaker 1: is that just your sense of the timing of the market. Well, 159 00:09:48,360 --> 00:09:51,920 Speaker 1: the first is liquidity was gone. It's it's it's returning 160 00:09:51,960 --> 00:09:55,240 Speaker 1: to the system. So you need liquidity to begin to 161 00:09:55,280 --> 00:09:59,560 Speaker 1: have transactions, and that's starting to normalize. So that was 162 00:09:59,600 --> 00:10:03,320 Speaker 1: the first step. The second step is getting a handle 163 00:10:03,400 --> 00:10:07,200 Speaker 1: on you know, the return to employment the eye of 164 00:10:07,800 --> 00:10:11,160 Speaker 1: is COVID going to dislocate employment for another three months, 165 00:10:11,200 --> 00:10:14,280 Speaker 1: six months, nine months, twelve months, And as we're getting 166 00:10:14,280 --> 00:10:15,959 Speaker 1: to see the light at the end of the tunnel, 167 00:10:16,400 --> 00:10:18,959 Speaker 1: and if it's nine months down the road, people will 168 00:10:18,960 --> 00:10:22,520 Speaker 1: start to understand, will predict what the behavior will be, 169 00:10:23,280 --> 00:10:26,200 Speaker 1: We'll we'll we'll travel, come back and to what degree, 170 00:10:26,400 --> 00:10:28,880 Speaker 1: and then they'll start to do transactions based on having 171 00:10:28,880 --> 00:10:32,920 Speaker 1: good data. I don't think it's that far off. So 172 00:10:33,040 --> 00:10:35,439 Speaker 1: in in the intro we sort of described the real 173 00:10:35,559 --> 00:10:39,440 Speaker 1: estate market as a machine with many moving parts, and 174 00:10:39,720 --> 00:10:43,439 Speaker 1: if one of the one of the cogs gets clogged 175 00:10:43,480 --> 00:10:46,120 Speaker 1: up or stops working, that ends up having an impact 176 00:10:46,160 --> 00:10:49,120 Speaker 1: on another part of the system. Can you walk us 177 00:10:49,160 --> 00:10:56,280 Speaker 1: through what exactly happens when tenants start to roll off? Sure? 178 00:10:56,440 --> 00:11:00,959 Speaker 1: So let's let's talk about that aspect of the domino effect. 179 00:11:01,080 --> 00:11:05,160 Speaker 1: Right If if the CARES Act wasn't in place, and 180 00:11:05,640 --> 00:11:11,520 Speaker 1: UH people who were renting individual units couldn't pay UH 181 00:11:11,559 --> 00:11:14,920 Speaker 1: their rent, and then the landlords couldn't pay their mortgage, 182 00:11:15,400 --> 00:11:19,079 Speaker 1: the domino effect would be a large number of defaults, 183 00:11:19,920 --> 00:11:22,840 Speaker 1: and on top of that, there'd be no liquidity in 184 00:11:22,920 --> 00:11:26,320 Speaker 1: the market. To continue to buy transactions, and then the 185 00:11:26,360 --> 00:11:30,400 Speaker 1: securitization market would come to a halt. So you you 186 00:11:30,640 --> 00:11:34,280 Speaker 1: from from not paying your rent would actually cause a 187 00:11:34,320 --> 00:11:37,760 Speaker 1: season of the system for quite a while until there 188 00:11:37,840 --> 00:11:40,160 Speaker 1: was an understanding when people would get back to work. 189 00:11:40,800 --> 00:11:44,559 Speaker 1: So what the Cares Act did and hopefully, uh, they'll 190 00:11:44,600 --> 00:11:47,640 Speaker 1: get it renewed to some level, it allowed the system 191 00:11:47,679 --> 00:11:50,280 Speaker 1: to continue to work. And what some of the other 192 00:11:50,360 --> 00:11:53,760 Speaker 1: government programs did, it allowed people to be able to 193 00:11:53,840 --> 00:11:56,880 Speaker 1: keep their people employed and and be able to pay 194 00:11:56,920 --> 00:12:00,480 Speaker 1: their mortgage payments. Once all of that stops, then the 195 00:12:00,640 --> 00:12:04,320 Speaker 1: entire market comes to a standstill. And then getting back 196 00:12:04,360 --> 00:12:08,400 Speaker 1: to your discussion of price discovery, there's no price discovery 197 00:12:08,440 --> 00:12:11,560 Speaker 1: for a long time because there are no transactions, because 198 00:12:11,600 --> 00:12:15,280 Speaker 1: there's no concept of where the bottom is. And that's 199 00:12:15,280 --> 00:12:19,760 Speaker 1: really what's happened now. The price discovery comes when there's 200 00:12:19,800 --> 00:12:22,400 Speaker 1: a feeling where the bottom is. People really have a 201 00:12:22,440 --> 00:12:25,520 Speaker 1: good sense that we're bouncing off the bottom, and then 202 00:12:25,559 --> 00:12:45,240 Speaker 1: you begin to see price discovery. I want to get 203 00:12:45,520 --> 00:12:48,800 Speaker 1: more into the residential in a second, but sticking on 204 00:12:48,880 --> 00:12:51,679 Speaker 1: commercial for for a moment, you know, I read all 205 00:12:51,720 --> 00:12:54,959 Speaker 1: these stories. Bloomberg has written a lot of them about 206 00:12:55,240 --> 00:12:57,880 Speaker 1: some of these commercial areas of New York City just 207 00:12:57,960 --> 00:13:01,960 Speaker 1: obviously brutal restaurant if they're opened up barely hanging in 208 00:13:01,960 --> 00:13:07,520 Speaker 1: there might not survive. Popular tourist areas for shopping obviously 209 00:13:07,559 --> 00:13:11,720 Speaker 1: almost gone, with no imminent prospect of that returning. From 210 00:13:11,760 --> 00:13:15,640 Speaker 1: the perspective of a landlord, how do they think about 211 00:13:15,720 --> 00:13:19,840 Speaker 1: the problem? Because you could theoretically evict a commercial tenant, 212 00:13:19,880 --> 00:13:22,440 Speaker 1: but who's going to who's going to replace them? That 213 00:13:22,480 --> 00:13:24,840 Speaker 1: would be better or that would be in any position 214 00:13:24,960 --> 00:13:28,800 Speaker 1: to pay rent? How did they think about the sort 215 00:13:28,840 --> 00:13:34,520 Speaker 1: of tension of working out something with a struggling commercial tenant. 216 00:13:35,800 --> 00:13:39,319 Speaker 1: I think everybody has to approach it, and they've been 217 00:13:39,320 --> 00:13:44,280 Speaker 1: approaching with pure common sense. Right, we're in a dislocated period. Uh, 218 00:13:44,320 --> 00:13:46,880 Speaker 1: there's going to be a return to some normalcy over 219 00:13:46,920 --> 00:13:49,559 Speaker 1: a period of time, and people will look at the 220 00:13:49,559 --> 00:13:52,199 Speaker 1: strength of the tenant, how they've been impacted, and their 221 00:13:52,200 --> 00:13:57,080 Speaker 1: ability to pay. In many circumstances, UH, they'll allow the 222 00:13:57,240 --> 00:14:01,520 Speaker 1: tenant to defer their obligation as if if in fact, 223 00:14:01,559 --> 00:14:05,960 Speaker 1: they are truly impacted by this dislocation. At the same time, 224 00:14:06,440 --> 00:14:09,200 Speaker 1: the owner of the building will turn around, UH, to 225 00:14:09,480 --> 00:14:12,320 Speaker 1: the lender such as us and said, look, we have 226 00:14:12,400 --> 00:14:15,679 Speaker 1: an issue, We've been impacted. How can you help us? 227 00:14:15,720 --> 00:14:17,560 Speaker 1: Can you allow us at the first some of our 228 00:14:17,640 --> 00:14:21,400 Speaker 1: payment and in certain circumstances when they've proven that they've 229 00:14:21,400 --> 00:14:25,280 Speaker 1: been impacted, will allow them to defer that payment. So 230 00:14:25,360 --> 00:14:29,680 Speaker 1: that's how that system works. But the real area that 231 00:14:29,800 --> 00:14:32,840 Speaker 1: you're asking is what does the new world look like? 232 00:14:33,080 --> 00:14:35,320 Speaker 1: What a new lease is going to be signed at? 233 00:14:35,880 --> 00:14:39,320 Speaker 1: And there are enough tenants to take over the old 234 00:14:39,360 --> 00:14:43,600 Speaker 1: tenants space, and as a building that was nine percent 235 00:14:43,720 --> 00:14:46,760 Speaker 1: occupied going to be eighty five percent occupied, and the 236 00:14:46,920 --> 00:14:49,760 Speaker 1: lease rate is going to be lower. In certain areas 237 00:14:49,800 --> 00:14:51,880 Speaker 1: that will be the case, and there'll be an adjustment 238 00:14:51,880 --> 00:14:54,520 Speaker 1: of value, and uh, there will be some level of 239 00:14:54,560 --> 00:14:58,120 Speaker 1: defaults or or re equitization of some of the projects. 240 00:14:58,560 --> 00:15:00,680 Speaker 1: So in a year from now, we'll all turn around 241 00:15:00,680 --> 00:15:04,520 Speaker 1: and take a look at how has this pandemic changed, 242 00:15:04,880 --> 00:15:07,680 Speaker 1: you know, the behavior patterns in some of the urban areas, 243 00:15:07,680 --> 00:15:12,280 Speaker 1: and what's the long term impact of office leases and occupancies. 244 00:15:13,040 --> 00:15:16,160 Speaker 1: Our restaurants going to return, and our restaurant's gonna be 245 00:15:16,200 --> 00:15:18,400 Speaker 1: able to open up and how long will that take? 246 00:15:18,480 --> 00:15:21,480 Speaker 1: So there will be some hurt to some degree and 247 00:15:21,520 --> 00:15:25,480 Speaker 1: there will be adjustments and value. So if we look 248 00:15:25,520 --> 00:15:29,840 Speaker 1: at the long term development of residential real estate, now, 249 00:15:30,320 --> 00:15:34,280 Speaker 1: I know you're invested primarily and multi family and multi 250 00:15:34,280 --> 00:15:39,120 Speaker 1: family performed perhaps surprisingly well this summer. Do you think 251 00:15:39,240 --> 00:15:43,840 Speaker 1: there might be a transition from multi family to single 252 00:15:43,920 --> 00:15:48,440 Speaker 1: family because of the coronavirus crisis. It's happening right now. 253 00:15:48,640 --> 00:15:52,440 Speaker 1: It was already beginning to happen. And you know, pre COVID, 254 00:15:53,120 --> 00:15:57,080 Speaker 1: the trends were a migration out of the urban areas 255 00:15:57,560 --> 00:16:01,960 Speaker 1: and it was household formation US specifically with the millennials, 256 00:16:02,040 --> 00:16:06,160 Speaker 1: and that trend that already started and now it's being accelerated. 257 00:16:06,920 --> 00:16:11,760 Speaker 1: You have an enormous boom for for home sales. There's 258 00:16:11,800 --> 00:16:15,600 Speaker 1: home appreciation, there's a lack of inventory um and I 259 00:16:15,640 --> 00:16:18,760 Speaker 1: think the home builders are going to do great. And 260 00:16:18,840 --> 00:16:23,720 Speaker 1: even on the single family rental pool, you're seeing occupancies 261 00:16:23,800 --> 00:16:27,720 Speaker 1: at the highest level on single family rentals. People are 262 00:16:28,160 --> 00:16:31,920 Speaker 1: leaving the urban areas. It's a density issue, it's a 263 00:16:31,960 --> 00:16:36,160 Speaker 1: household formation issue. And the real question becomes is once 264 00:16:36,200 --> 00:16:38,840 Speaker 1: people move out of the urban areas and they have 265 00:16:39,000 --> 00:16:43,080 Speaker 1: families and they settled in their communities, do they stay there. 266 00:16:43,880 --> 00:16:46,200 Speaker 1: My view is most of the people once they move 267 00:16:46,280 --> 00:16:48,280 Speaker 1: out of the cities and they settle down with their 268 00:16:48,320 --> 00:16:51,480 Speaker 1: families and not returning UH to the urban areas. So 269 00:16:51,560 --> 00:16:55,320 Speaker 1: you'll continue to see a decline in these urban areas 270 00:16:55,400 --> 00:16:58,840 Speaker 1: and an increase in the suburban areas. And clearly the 271 00:16:58,880 --> 00:17:02,240 Speaker 1: winners are you know, the people who are selling their homes, 272 00:17:02,920 --> 00:17:07,880 Speaker 1: the realtors in these UH suburban areas UM and those communities. 273 00:17:08,960 --> 00:17:12,520 Speaker 1: What does it mean from an urban specific perspective if 274 00:17:12,520 --> 00:17:17,720 Speaker 1: there is a secular shift away from multi family so UM, 275 00:17:18,200 --> 00:17:20,639 Speaker 1: we're we're actually very, very active and one of the 276 00:17:20,720 --> 00:17:25,679 Speaker 1: leading providers of what's called UH communities that are built 277 00:17:25,720 --> 00:17:29,480 Speaker 1: for rent, single family built to rent communities, and we're 278 00:17:29,520 --> 00:17:32,960 Speaker 1: one of the most prolific lenders in that space. And 279 00:17:33,040 --> 00:17:36,280 Speaker 1: i'd say about ten years ago that space barely existed 280 00:17:36,800 --> 00:17:40,200 Speaker 1: and right now it makes up for close to for 281 00:17:40,200 --> 00:17:44,160 Speaker 1: forty five percent of all new housing starts where communities 282 00:17:44,200 --> 00:17:48,840 Speaker 1: are being built specifically for for renting. So we'll be 283 00:17:48,880 --> 00:17:52,600 Speaker 1: active in that market on the multi family side. Fortunately, 284 00:17:53,280 --> 00:17:57,040 Speaker 1: our realty Trust is not as active in the urban areas. 285 00:17:57,480 --> 00:18:00,399 Speaker 1: Most of what we do is workforce housing throughout the 286 00:18:00,480 --> 00:18:05,879 Speaker 1: United States, and that workforce housing and those communities have 287 00:18:06,920 --> 00:18:11,640 Speaker 1: the right amenities and the right density configurations, and we're 288 00:18:11,680 --> 00:18:15,040 Speaker 1: not as impact And in fact, as of now, our 289 00:18:15,160 --> 00:18:18,960 Speaker 1: occupancies and economic collections were only down like one one 290 00:18:19,000 --> 00:18:23,119 Speaker 1: and a half percent, and we have zero delinquencies and 291 00:18:23,320 --> 00:18:27,160 Speaker 1: only a handful of people asking full fullbearance, so that 292 00:18:27,200 --> 00:18:30,879 Speaker 1: that is tracked extremely well. But the big question is 293 00:18:30,880 --> 00:18:33,720 Speaker 1: going to be what happens with the CARES Act and 294 00:18:33,760 --> 00:18:36,120 Speaker 1: how long does it take for the virus to recede 295 00:18:36,119 --> 00:18:40,520 Speaker 1: and get under control. Aside from the cares Act and 296 00:18:40,560 --> 00:18:43,199 Speaker 1: what happens with the virus, is there anything else that 297 00:18:43,280 --> 00:18:47,640 Speaker 1: could maybe um cushion some of the blow to prices here, 298 00:18:47,720 --> 00:18:50,160 Speaker 1: Like for instance, we used to talk about a lot 299 00:18:50,200 --> 00:18:54,040 Speaker 1: about dry powder on the sidelines. What's your sense of 300 00:18:54,080 --> 00:18:57,439 Speaker 1: that could investors come in and maybe lift up the market. 301 00:18:59,760 --> 00:19:02,280 Speaker 1: I think there is a lot of liquidity in the market. 302 00:19:02,400 --> 00:19:05,040 Speaker 1: There's a lot of money sitting on the sidelines, and 303 00:19:05,400 --> 00:19:08,520 Speaker 1: people are waiting, and they're waiting for that price discovery 304 00:19:08,560 --> 00:19:11,600 Speaker 1: that usked about earlier. If there is some level of 305 00:19:11,640 --> 00:19:15,200 Speaker 1: price discovery, you'll see a lot of transactions and you'll 306 00:19:15,240 --> 00:19:19,400 Speaker 1: see very quickly that liquidity returned to the market and 307 00:19:19,400 --> 00:19:22,840 Speaker 1: and boost up pricing in our sector, in the multi 308 00:19:22,840 --> 00:19:27,200 Speaker 1: family sector. It's quite fascinating because there are for many 309 00:19:27,240 --> 00:19:31,320 Speaker 1: people not a lot of investable asset classes, so people 310 00:19:31,359 --> 00:19:34,800 Speaker 1: have to put their money in certain places, and the 311 00:19:34,880 --> 00:19:39,359 Speaker 1: multi family sector is the most attractive asset class right now. 312 00:19:39,840 --> 00:19:43,159 Speaker 1: And by the way, historically the multi family asset class 313 00:19:43,200 --> 00:19:45,680 Speaker 1: has been the most resilient even when a falls or 314 00:19:45,840 --> 00:19:50,040 Speaker 1: covers very quickly. So my prediction is that you'll actually 315 00:19:50,119 --> 00:19:54,600 Speaker 1: see what we call cap right compression. People will put 316 00:19:54,640 --> 00:19:57,560 Speaker 1: one to put more money into the multi family sector, 317 00:19:58,160 --> 00:20:02,240 Speaker 1: driving prices up, cap rates down um and that will 318 00:20:02,280 --> 00:20:05,520 Speaker 1: offset a little bit of the decline in potential rents 319 00:20:05,560 --> 00:20:10,080 Speaker 1: and occupancies. So I think the multi family asset class, 320 00:20:10,119 --> 00:20:13,800 Speaker 1: because of those factors, will be an outperformer. How surprised 321 00:20:13,800 --> 00:20:18,639 Speaker 1: are you by the lack of requests for forbearance and 322 00:20:18,680 --> 00:20:21,880 Speaker 1: how much do you attribute that to the expanded unemployment 323 00:20:21,920 --> 00:20:25,560 Speaker 1: insurance in the carest So it's it's interesting. We we 324 00:20:25,680 --> 00:20:29,160 Speaker 1: were all in mid March and April is I'm sure 325 00:20:29,240 --> 00:20:33,280 Speaker 1: you are sitting in a period of fear right and 326 00:20:33,320 --> 00:20:37,159 Speaker 1: the unknown and we're not sitting there right now. But 327 00:20:37,280 --> 00:20:40,480 Speaker 1: there was so much fear, so much unknown, and how 328 00:20:40,520 --> 00:20:45,879 Speaker 1: long would this dislocation be. We've never seen unemployment levels 329 00:20:45,960 --> 00:20:50,280 Speaker 1: like this, what was close to twenty million people on unemployment, 330 00:20:50,560 --> 00:20:55,080 Speaker 1: unemployment rated fourteen fift and the question was how are 331 00:20:55,160 --> 00:20:57,040 Speaker 1: people going to pay their rent? And if they can't 332 00:20:57,040 --> 00:20:59,440 Speaker 1: pay their rent, how are they going to pay their mortgages? 333 00:20:59,480 --> 00:21:02,560 Speaker 1: And we were preparing for the worst and the Cares 334 00:21:02,600 --> 00:21:05,280 Speaker 1: Act came along. It was a little you know, delayed 335 00:21:05,320 --> 00:21:08,199 Speaker 1: in getting there, and it was clear that the CARES 336 00:21:08,200 --> 00:21:13,520 Speaker 1: that gave people UH the adequate ability UH to pay 337 00:21:13,560 --> 00:21:16,359 Speaker 1: their rent and to pay their mortgages. And that was 338 00:21:16,640 --> 00:21:19,840 Speaker 1: very important to keep the system going. And that's one 339 00:21:19,880 --> 00:21:23,960 Speaker 1: of the reasons why UH we had very little you know, 340 00:21:24,080 --> 00:21:27,760 Speaker 1: fuebearance requests which people were paying their rent. So that 341 00:21:27,840 --> 00:21:32,359 Speaker 1: was an amazing accomplishment given where things were. It was 342 00:21:32,480 --> 00:21:36,520 Speaker 1: fear and confusion, and now there's some level of clarity. 343 00:21:37,000 --> 00:21:40,159 Speaker 1: And as soon as they passed, the next level of 344 00:21:40,200 --> 00:21:43,480 Speaker 1: the Cares Act will have a high degree of clarity 345 00:21:43,520 --> 00:21:46,040 Speaker 1: in terms of, you know, what the delinquent seas and 346 00:21:46,080 --> 00:21:48,679 Speaker 1: fuebearance requests will be. So we're all sitting and waiting 347 00:21:49,119 --> 00:21:54,080 Speaker 1: what happens if we don't get another stimulus agreement, something 348 00:21:54,119 --> 00:21:58,440 Speaker 1: like the Cares Act or the Whope Act something like that. Well, 349 00:21:58,480 --> 00:22:02,320 Speaker 1: we we well, I think there will be some you know, 350 00:22:02,359 --> 00:22:06,440 Speaker 1: there will be a stimulus program. The question is at 351 00:22:06,440 --> 00:22:09,520 Speaker 1: what level. And you know, one of the data points 352 00:22:09,600 --> 00:22:14,720 Speaker 1: I was looking at was, you know, se of the 353 00:22:14,760 --> 00:22:17,199 Speaker 1: money that was coming in on the Care's Act was 354 00:22:17,280 --> 00:22:22,159 Speaker 1: being spent on you know, housing, you know, retail and food. 355 00:22:22,760 --> 00:22:27,679 Speaker 1: So if that is reduced, you'll see, uh, increased delinquencies. 356 00:22:28,200 --> 00:22:31,960 Speaker 1: You'll see you know, retail sales going down, and you'll 357 00:22:31,960 --> 00:22:34,600 Speaker 1: see the domino effect of what happens when people don't 358 00:22:34,640 --> 00:22:38,320 Speaker 1: have income. And that's why providing you know, money to 359 00:22:38,400 --> 00:22:41,639 Speaker 1: people to pay their bills keeps the system going. So 360 00:22:41,680 --> 00:22:43,680 Speaker 1: we're all waiting and they have to come to the 361 00:22:43,800 --> 00:22:48,080 Speaker 1: right level to keep the system flowing. And this this location, 362 00:22:48,160 --> 00:22:51,240 Speaker 1: you have to have some level of empathy for many people. 363 00:22:51,280 --> 00:22:53,640 Speaker 1: They didn't do anything wrong, right, they're just sitting there. 364 00:22:54,119 --> 00:22:57,359 Speaker 1: They can't leave their homes, and uh, for the system 365 00:22:57,400 --> 00:22:59,919 Speaker 1: to keep flowing, they has to have some level of 366 00:23:00,000 --> 00:23:03,199 Speaker 1: replacement of that income until until they're able to go 367 00:23:03,240 --> 00:23:21,240 Speaker 1: back to work. They're just backing up for a second 368 00:23:21,320 --> 00:23:27,280 Speaker 1: thinking about multi family and renters. So arbor provides financing 369 00:23:27,760 --> 00:23:33,440 Speaker 1: for the developers of multi family units. Do you see 370 00:23:33,720 --> 00:23:36,600 Speaker 1: that slowing down the development of these units if there 371 00:23:36,720 --> 00:23:40,480 Speaker 1: is this transition towards more people wanting to heavy yard 372 00:23:40,600 --> 00:23:44,600 Speaker 1: and detached single family home or is there enough sort 373 00:23:44,640 --> 00:23:47,760 Speaker 1: of secular demand for that as well that regardless of 374 00:23:47,760 --> 00:23:51,160 Speaker 1: those trends, multi family would just continue to grow as 375 00:23:51,240 --> 00:23:54,359 Speaker 1: a sort of share of overall housing. I think there'll 376 00:23:54,359 --> 00:23:58,359 Speaker 1: be a pause. I think people are gonna think twice 377 00:23:58,400 --> 00:24:03,280 Speaker 1: about starting new development in specific areas. They'll go to 378 00:24:03,359 --> 00:24:08,760 Speaker 1: areas where there's positive growth and maybe start housing building 379 00:24:08,840 --> 00:24:12,399 Speaker 1: units there. But this boom period of ten years that 380 00:24:12,480 --> 00:24:15,760 Speaker 1: we just went through where there was a lot of 381 00:24:15,880 --> 00:24:18,159 Speaker 1: units being added, I think there's going to be a 382 00:24:18,240 --> 00:24:22,399 Speaker 1: considerable slow down in new multi family starts. And I 383 00:24:22,400 --> 00:24:25,720 Speaker 1: think the banks are going to be very cautious um 384 00:24:25,760 --> 00:24:29,360 Speaker 1: about doing construction lending right now when there's a decline 385 00:24:29,359 --> 00:24:34,280 Speaker 1: in occupancy and rents in this sector. So it will 386 00:24:34,320 --> 00:24:37,240 Speaker 1: slow down. It could slow down for twelve to twenty 387 00:24:37,280 --> 00:24:39,200 Speaker 1: four months as people get a look at the data. 388 00:24:39,680 --> 00:24:42,840 Speaker 1: But the forecasts are you know, decline, you know, flat 389 00:24:42,840 --> 00:24:46,080 Speaker 1: to declining rents in a lot of markets, um, and 390 00:24:46,240 --> 00:24:49,199 Speaker 1: you know, slow growth and occupancy, and I think what 391 00:24:49,800 --> 00:24:51,919 Speaker 1: is being experienced right now with a lot of the 392 00:24:51,960 --> 00:24:57,960 Speaker 1: new projects, police operates are significantly significantly slower now than 393 00:24:58,000 --> 00:25:01,919 Speaker 1: they were a year ago, probably by about you know, 394 00:25:01,960 --> 00:25:05,080 Speaker 1: I asked about this on the commercial side, but I'm 395 00:25:05,119 --> 00:25:08,640 Speaker 1: also sort of curious about this on the residential side, 396 00:25:08,680 --> 00:25:12,840 Speaker 1: which is evictions. Lots of interest in this question of 397 00:25:12,880 --> 00:25:16,280 Speaker 1: whether we're going to have a tidal wave of evictions 398 00:25:16,320 --> 00:25:19,960 Speaker 1: either are some of these moratoriums whereof or if the 399 00:25:20,000 --> 00:25:23,880 Speaker 1: next stimulus bill doesn't replace people's income to the same degree. 400 00:25:24,200 --> 00:25:27,760 Speaker 1: But I also kind of wonder if, um, you know, 401 00:25:27,800 --> 00:25:30,040 Speaker 1: some of the calculus that you mentioned with respect to 402 00:25:30,080 --> 00:25:34,480 Speaker 1: commercial also applies to residential in terms of what good 403 00:25:34,560 --> 00:25:38,000 Speaker 1: does it do to evict tenants if there aren't a 404 00:25:38,080 --> 00:25:40,760 Speaker 1: wave of people trying to come in. So I'm curious 405 00:25:40,800 --> 00:25:43,200 Speaker 1: what you think because I read stories every day the 406 00:25:43,240 --> 00:25:45,800 Speaker 1: eviction wave is coming, The eviction wave is coming after 407 00:25:45,800 --> 00:25:48,159 Speaker 1: this deadline. I'm curious if you do see an eviction 408 00:25:48,240 --> 00:25:51,240 Speaker 1: wave coming at all. Well, I think that when you 409 00:25:51,320 --> 00:25:55,680 Speaker 1: don't have evictions for three, six, nine months, uh, there'll 410 00:25:55,720 --> 00:25:57,520 Speaker 1: be a little bit of a catch up and a 411 00:25:57,560 --> 00:26:00,800 Speaker 1: little bit of a wave. But what we're really seeing 412 00:26:01,040 --> 00:26:05,720 Speaker 1: is landlords UM and owners be very reasonable and try 413 00:26:05,760 --> 00:26:08,480 Speaker 1: and work things out with their tenants. So if a 414 00:26:08,560 --> 00:26:11,680 Speaker 1: tenant has been impacted, they'll work with them, they'll give 415 00:26:11,720 --> 00:26:14,960 Speaker 1: them the leeway, they'll be reasonable. UM and you've seen 416 00:26:15,359 --> 00:26:19,640 Speaker 1: more of that flexibility than I've ever seen before. So 417 00:26:19,760 --> 00:26:23,840 Speaker 1: that'll slow down that wave. And you know, if there 418 00:26:23,920 --> 00:26:28,919 Speaker 1: isn't demand for new apartments, then the landlords will exhibit 419 00:26:28,960 --> 00:26:32,280 Speaker 1: a high level of flexibility. The wave will be only 420 00:26:32,320 --> 00:26:34,560 Speaker 1: because you couldn't evict for six or nine months and 421 00:26:34,600 --> 00:26:39,160 Speaker 1: they's pent up. Once that backlog gets reduced, I don't 422 00:26:39,240 --> 00:26:42,000 Speaker 1: think it will be an overwhelming issue, but I think 423 00:26:42,040 --> 00:26:46,120 Speaker 1: there is a great level of sensitivity and UH landlords 424 00:26:46,119 --> 00:26:49,040 Speaker 1: are being somewhat flexible and reasonable to try and manage 425 00:26:49,040 --> 00:26:53,000 Speaker 1: that that through the system. UM. We haven't talked that 426 00:26:53,080 --> 00:26:57,520 Speaker 1: much about the business model of reads themselves. If you 427 00:26:57,600 --> 00:26:59,639 Speaker 1: look at a lot of the publicly listed ones such 428 00:26:59,680 --> 00:27:03,320 Speaker 1: as your self, they got hit pretty hard in March 429 00:27:03,560 --> 00:27:05,879 Speaker 1: and a lot of them have yet to recover. What 430 00:27:06,000 --> 00:27:10,720 Speaker 1: can you as a red due to offset the pressures 431 00:27:10,720 --> 00:27:14,200 Speaker 1: and the challenges of the current climate. So the first 432 00:27:14,240 --> 00:27:17,800 Speaker 1: thing that you have to do is run your business 433 00:27:18,000 --> 00:27:22,240 Speaker 1: as we have, with an eye that recessions do occur 434 00:27:23,040 --> 00:27:26,240 Speaker 1: and you have to be prepared for them. And this 435 00:27:26,359 --> 00:27:32,080 Speaker 1: dislocation that we're in is a recession. Certainly COVID is 436 00:27:32,359 --> 00:27:36,640 Speaker 1: an unusual event. But we had a tenuable run and 437 00:27:36,800 --> 00:27:42,560 Speaker 1: companies like ourselves, you know, had adequate liquidity, had less 438 00:27:42,680 --> 00:27:47,520 Speaker 1: use of leverage, and having been too many cycles, understood 439 00:27:47,560 --> 00:27:50,320 Speaker 1: what we were in the cycle and really prepared for it. 440 00:27:50,920 --> 00:27:53,360 Speaker 1: That's why we're the best performing rate. That's why we've 441 00:27:53,359 --> 00:27:56,000 Speaker 1: had the best quarter we've ever had, and that's why 442 00:27:56,080 --> 00:27:59,040 Speaker 1: we didn't have the kind of issues of the rates have. 443 00:28:00,040 --> 00:28:04,200 Speaker 1: Once your intercession um, once you're over leveraged, it's very 444 00:28:04,240 --> 00:28:10,680 Speaker 1: hard to maneuver UM. So this recession is another dislocation 445 00:28:11,600 --> 00:28:14,720 Speaker 1: we had, as we all know, the you know, great 446 00:28:14,720 --> 00:28:19,800 Speaker 1: Financial crisis, which was in many ways for companies like ourselves, 447 00:28:20,280 --> 00:28:24,080 Speaker 1: even worse than this one because it was much more severe. 448 00:28:24,720 --> 00:28:27,919 Speaker 1: And every cycle you have to be somewhat prepared to 449 00:28:27,960 --> 00:28:32,000 Speaker 1: be able to operate. And you know, my answer too 450 00:28:32,000 --> 00:28:35,439 Speaker 1: many people is why are we doing so well and 451 00:28:35,480 --> 00:28:38,680 Speaker 1: why is your company out performing? Uh, it's very simple. 452 00:28:39,440 --> 00:28:42,560 Speaker 1: We've operated many cycles. You can't use liquid or to 453 00:28:42,680 --> 00:28:45,120 Speaker 1: drive your returns, and you have to be able to 454 00:28:45,120 --> 00:28:48,800 Speaker 1: have a solid balance sheet and the right asset classes. 455 00:28:49,480 --> 00:28:53,360 Speaker 1: Once you've made the mistakes and you enter into a recession, 456 00:28:53,720 --> 00:28:57,160 Speaker 1: it's very hard to correct those mistakes. I wanna you know, 457 00:28:57,240 --> 00:29:00,840 Speaker 1: you mentioned that one of the areas that SOW is 458 00:29:00,960 --> 00:29:05,240 Speaker 1: on the rise our single family houses, housing communities that 459 00:29:05,280 --> 00:29:09,040 Speaker 1: are built with the express purpose of serving renters. Are 460 00:29:09,040 --> 00:29:13,120 Speaker 1: there any other growth areas that you think look particularly 461 00:29:13,120 --> 00:29:16,800 Speaker 1: interesting right now? You know, clearly the single family rental 462 00:29:17,560 --> 00:29:21,360 Speaker 1: market is booming. You're starting to see some of the 463 00:29:21,600 --> 00:29:26,640 Speaker 1: suburban you know, office parks starting to increase their occupancy. 464 00:29:26,880 --> 00:29:30,080 Speaker 1: Um that has you know, that has been you know, 465 00:29:30,200 --> 00:29:34,440 Speaker 1: extremely extremely beneficial. And industrial, As you all know, the 466 00:29:34,520 --> 00:29:39,640 Speaker 1: industrial sector is performing extremely well because people you know, 467 00:29:39,680 --> 00:29:42,760 Speaker 1: are using Amazon, they need places to start. So those 468 00:29:42,760 --> 00:29:48,360 Speaker 1: are the sectors which are are really outperforming. And right 469 00:29:48,400 --> 00:29:52,280 Speaker 1: now on the single family market, home prices are up, 470 00:29:52,320 --> 00:29:56,240 Speaker 1: inventories are down, home builders are building quite a bit. 471 00:29:56,960 --> 00:30:01,320 Speaker 1: So those are the sectors that are really beneficial. Ivan, 472 00:30:01,400 --> 00:30:04,360 Speaker 1: thank you very much for joining us. A really great 473 00:30:04,640 --> 00:30:07,560 Speaker 1: overview of the said all the different moving parts and 474 00:30:07,760 --> 00:30:10,760 Speaker 1: interesting unexpected things happening in the real estate market. I 475 00:30:11,400 --> 00:30:14,320 Speaker 1: thank you, Joe, thank you. Tracy. Enjoyed to talk. Thanks 476 00:30:14,320 --> 00:30:27,040 Speaker 1: I And that was really great, Tracy. I thought there 477 00:30:27,080 --> 00:30:29,960 Speaker 1: was a lot of interesting stuff there, just to start with, 478 00:30:30,160 --> 00:30:33,080 Speaker 1: you know, the impact of the CARES Act really you know, initially, 479 00:30:33,160 --> 00:30:37,000 Speaker 1: I think perhaps it was underappreciated, just the degree to 480 00:30:37,120 --> 00:30:40,640 Speaker 1: which it helped replace lost incomes as everyone was looking 481 00:30:40,640 --> 00:30:45,880 Speaker 1: at insane numbers like twenty million dollar, twenty million people unemployed. 482 00:30:46,160 --> 00:30:48,920 Speaker 1: But thinking about that just from a real estate perspective, 483 00:30:49,000 --> 00:30:53,320 Speaker 1: and how few requests they've still seen for forbearance is 484 00:30:53,320 --> 00:30:56,680 Speaker 1: pretty extraordinary. Yeah. I think I saw an estimate maybe 485 00:30:56,720 --> 00:30:59,360 Speaker 1: a week ago from JP Morgan talking about how without 486 00:30:59,440 --> 00:31:02,920 Speaker 1: the CARES a certain type of residential mortgage would have 487 00:31:02,920 --> 00:31:08,080 Speaker 1: been seventy percent um something like that, or sorry, the 488 00:31:08,120 --> 00:31:10,960 Speaker 1: default rate for that type of mortgage would have been seventy, 489 00:31:11,680 --> 00:31:15,240 Speaker 1: which is a lot, right, So yeah, you definitely get 490 00:31:15,240 --> 00:31:17,840 Speaker 1: a sense of what the CARES Act has meant for 491 00:31:17,880 --> 00:31:19,800 Speaker 1: the real estate market. The other thing that makes me 492 00:31:19,840 --> 00:31:24,400 Speaker 1: think about is how the coronavirus crisis is creating all 493 00:31:24,400 --> 00:31:27,840 Speaker 1: these different winners and losers in a variety of markets. 494 00:31:27,880 --> 00:31:32,200 Speaker 1: So even if commercial real estate is doing terribly, retail 495 00:31:32,440 --> 00:31:35,200 Speaker 1: real estate like malls and things like that is doing 496 00:31:35,240 --> 00:31:38,440 Speaker 1: really badly. You still have some areas of the market 497 00:31:38,760 --> 00:31:41,960 Speaker 1: that are outperforming, such as multi family, and now you 498 00:31:42,040 --> 00:31:45,720 Speaker 1: have some people getting excited about single family as well. Yeah, 499 00:31:45,840 --> 00:31:48,600 Speaker 1: it'll be really interesting to see. Also than the flip side. 500 00:31:48,640 --> 00:31:52,040 Speaker 1: You know, you think about what's doing extremely poorly cities, 501 00:31:52,840 --> 00:31:59,160 Speaker 1: touristy areas, retail hotels obviously totally clever, Like what is 502 00:31:59,240 --> 00:32:01,640 Speaker 1: going to become of those spaces. I mean, I guess 503 00:32:01,640 --> 00:32:03,960 Speaker 1: in theory, we could have a vaccine in a few 504 00:32:04,000 --> 00:32:07,200 Speaker 1: months and then everything just returns to normal. But you 505 00:32:07,240 --> 00:32:10,040 Speaker 1: have to figure that there is this big structural ship 506 00:32:10,040 --> 00:32:12,120 Speaker 1: where a lot of people are moving out of the cities. 507 00:32:12,960 --> 00:32:16,560 Speaker 1: Somehow that is going to change the complexion of what 508 00:32:16,680 --> 00:32:19,640 Speaker 1: cities look like, even when the virus is less of 509 00:32:19,680 --> 00:32:22,920 Speaker 1: an issue directly, right, And I mean in a lot 510 00:32:22,920 --> 00:32:26,680 Speaker 1: of ways, coronavirus has accelerated trends that were already in 511 00:32:26,880 --> 00:32:30,320 Speaker 1: play in real estate. We had malls under pressure forever. 512 00:32:30,480 --> 00:32:32,600 Speaker 1: We have lots of people trying to think of ways 513 00:32:32,640 --> 00:32:36,200 Speaker 1: to revive malls, make them more interesting, make them into 514 00:32:36,280 --> 00:32:39,680 Speaker 1: attractions that people want to go to. So yeah, it 515 00:32:39,720 --> 00:32:42,720 Speaker 1: feels like coronavirus is sort of putting all of this 516 00:32:42,920 --> 00:32:46,719 Speaker 1: into into fast forward. It's interesting if you look at 517 00:32:46,840 --> 00:32:52,240 Speaker 1: lists of the big companies that have declared bankruptcy. Of course, 518 00:32:52,400 --> 00:32:56,640 Speaker 1: there's been extraordinary number of bankruptcyes um over overall, but 519 00:32:56,680 --> 00:32:59,000 Speaker 1: if you look at the list of the names, I guess, 520 00:32:59,800 --> 00:33:01,360 Speaker 1: I I don't want to say silver lining, but I 521 00:33:01,400 --> 00:33:04,320 Speaker 1: guess one good thing is these are all companies that 522 00:33:04,360 --> 00:33:07,320 Speaker 1: were really trouble going into this. There are not too 523 00:33:07,320 --> 00:33:10,720 Speaker 1: many examples that I've seen of companies that were really 524 00:33:10,760 --> 00:33:15,040 Speaker 1: thriving in the pre coronavirus era that have now just 525 00:33:15,200 --> 00:33:18,760 Speaker 1: been completely wiped out. Most of the prominent bankruptcies were 526 00:33:18,760 --> 00:33:22,320 Speaker 1: companies that were sort of structurally or secondarily in trouble 527 00:33:22,400 --> 00:33:25,640 Speaker 1: long before coronavirus, and then coronavirus came along and sort 528 00:33:25,640 --> 00:33:29,600 Speaker 1: of delivered the delivered the final blow, so to speak. Yeah, 529 00:33:29,640 --> 00:33:32,760 Speaker 1: and we've also had some maybe surprising examples of people 530 00:33:32,840 --> 00:33:36,200 Speaker 1: adapting to the coronavirus crisis as well and rolling out 531 00:33:36,240 --> 00:33:39,800 Speaker 1: new products, new ways of doing business um, which is 532 00:33:39,800 --> 00:33:43,280 Speaker 1: also helping. So yeah, winners and losers is the theme 533 00:33:43,400 --> 00:33:48,120 Speaker 1: for today. Very good thing. Okay, this has been another 534 00:33:48,200 --> 00:33:51,600 Speaker 1: episode of the all Thoughts Podcast. I'm Tracy Alloway. You 535 00:33:51,640 --> 00:33:55,000 Speaker 1: can follow me on Twitter at Tracy Alloway and I'm 536 00:33:55,080 --> 00:33:57,400 Speaker 1: Joe was Wasn't All? You can follow me on Twitter 537 00:33:57,520 --> 00:34:01,280 Speaker 1: at The Stalwart. Follow our producer Laura Carlson. She's at 538 00:34:01,480 --> 00:34:05,080 Speaker 1: Laura M. Carlson. Follow the Bloomberg head of podcast, Francesca 539 00:34:05,160 --> 00:34:08,759 Speaker 1: Levi at Francesco Today, and check out all of our 540 00:34:08,800 --> 00:34:13,120 Speaker 1: podcasts at Bloomberg under the handle at podcasts. Thanks for listening.