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Speaker 1: Fewer Federal Reserve officials expecting the Central Bank to raise

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Speaker 1: interest rates more than once this year. What does this

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Speaker 1: mean for real estate? Well, let's find out from ours

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Speaker 1: So to Dania, he is the chief credit officer for

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Speaker 1: realty Shares, joining us from San Francisco. Thank you for

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Speaker 1: being with us. Tell us first, the relationship that exists.

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Speaker 1: I was looking at the fixed rate, the thirty year

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Speaker 1: fixed rate mortgage three point six percent right now? Is

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Speaker 1: that about as low as it's ever gonna go? Or

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Speaker 1: can you see rates for mortgages decline even more? Um,

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Speaker 1: potentially they can, thanks for having me on. Potentially, I

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Speaker 1: think they can decline a little bit more. But uh,

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Speaker 1: we're near historic lows, so it's hard to imagine that rates,

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Speaker 1: uh we would go that much lower. So uh, the

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Speaker 1: housing market, the commercial real estate market. Would you say

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Speaker 1: then that, yes, the Fed is being very dubn They're

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Speaker 1: not going to start drawing out liquidity, but not so

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Speaker 1: affected by what looks like it could be a bit

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Speaker 1: of a shift that the Fed is uh wondering when

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Speaker 1: it's going to raise weights again. And it could only

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Speaker 1: do one rate hike this year, which isn't much of

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Speaker 1: a tightening cycle, is it exactly. I think most of

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Speaker 1: us now expect that potentially they will there will be

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Speaker 1: one more tightening UH this year, UH, most likely after

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Speaker 1: the election. But what does that mean for the housing market,

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Speaker 1: residential real estate and commercial real estate and construction and

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Speaker 1: all these things. I think we remain in the in

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Speaker 1: the status quo. We've seen a little bit of softening

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Speaker 1: in the commercial space. The single family space has been

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Speaker 1: quite robust, and we would expect that to continue that

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Speaker 1: way for at least through the summer until in the

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Speaker 1: fall it goes through its UH, the cyclical season will

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Speaker 1: slow down. A Rosha as the chief credit officer at

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Speaker 1: realty Shares, which is an online market place for real

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Speaker 1: estate investing, you connect the institutional investors to real estate

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Speaker 1: investment opportunities. Tell us about the rate of return that

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Speaker 1: investors want in order to participate in funding some of

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Speaker 1: these real estate investments. So typically for us, we're seeing

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Speaker 1: investors demand depending on the type of product that we

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Speaker 1: put in front of them. But for firstly, in that

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Speaker 1: we do rehabilitation loans for single family loans single family properties,

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Speaker 1: and they're looking at returns typically nine to eleven percent range.

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Speaker 1: And then we have preferred equity and JV equity positions,

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Speaker 1: and those are typically in the mid teens to high

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Speaker 1: teams UH. You know, in a recent blog posting from

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Speaker 1: the Reality Shares blog, you note that when it comes

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Speaker 1: to the FED and bond market rates that the important

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Speaker 1: relationship is how real estate returns compared to long term

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Speaker 1: interest rates, and you cite um a JP Morgan estimate

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Speaker 1: that the tenure treasury yield could rise to four point

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Speaker 1: five to five over the next five years. But you

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Speaker 1: know a lot of people out there in the bond

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Speaker 1: market now who are betting it will be potentially much

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Speaker 1: longer than that. Before the trade the tenure note moves

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Speaker 1: up anywhere close to that, And in fact, right now

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Speaker 1: this rally could continue. He could see yields even lower.

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Speaker 1: Particularly there's so many negative bond yields around the world

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Speaker 1: driving global investors to get a little yield in the US.

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Speaker 1: What does that mean for real estate? That's exactly right.

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Speaker 1: I think we expect also that the ten year yield

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Speaker 1: will move up slower than UH than the study you

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Speaker 1: mentioned UM, and I think that will mean that investors

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Speaker 1: will continue hunting for yield and gravitating towards platforms like

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Speaker 1: our realty shares where they can potentially get some higher yield. Well,

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Speaker 1: with higher yield, don't you also get higher risk. I

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Speaker 1: note that you are a former City Mortgage head of

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Speaker 1: Risk policy and Controls, also executive for risk management at

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Speaker 1: Ally Financial, and former Fannie Made director of risk. Someone's

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Speaker 1: taking on risk because this doesn't last forever. Trees do

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Speaker 1: not grow to the sky. That's right. And we find

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Speaker 1: that some of the some of our most popular investments

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Speaker 1: are in the shorter uh duration type of investments. For example,

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Speaker 1: are one year rehab loans UH. And I think that

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Speaker 1: time horizon is short enough that investors can understand and

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Speaker 1: dimension the risk they're facing when when they participate in

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Speaker 1: those activities. And then, uh, you know, some of our

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Speaker 1: longer term deals, uh, there is some additional risk, but

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Speaker 1: we try to underwrite them as very prudentially brutently so

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Speaker 1: that that risk is carefully articulated and our investors know

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Speaker 1: what they're getting into. Yeah. Well, so when you look

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Speaker 1: at real estate investing right now, and you look at

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Speaker 1: the kind of product you have, big reads. More broadly, uh,

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Speaker 1: they're are parts of the country, New York City, San Francisco,

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Speaker 1: even Seattle now a lot of places where prices have

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Speaker 1: shot way high, and they've shot up on commercial as

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Speaker 1: well as residential real estate. In fact, I was reading

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Speaker 1: some work from Bloomberg Intelligence showing how over the past

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Speaker 1: six months or so, a lot of the big reads

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Speaker 1: that hold New York commercial properties have been selling that

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Speaker 1: to buy cheaper properties in other parts of the country.

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Speaker 1: I guess what I want to ask you is, how

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Speaker 1: do you assess this risk if something's gotten really hot,

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Speaker 1: is doesn't isn't that a risk in itself that you

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Speaker 1: might buy it something that's too close to the top

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Speaker 1: for a particular market. I think that's something that we

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Speaker 1: constantly think about and when we talk at our Credit

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Speaker 1: committee when we're assessing different deals that we're putting on

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Speaker 1: our platform, and we discussed that thoroughly. But one of

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Speaker 1: our part of the market that we're active is primarily

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Speaker 1: actually in those secondary markets where the real estate prices,

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Speaker 1: especially on the commercial side, haven't gone up as much

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Speaker 1: and cap rates haven't declined as such, and so uh

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Speaker 1: some of that risk is mitigated. We think as cap

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Speaker 1: rates uh start increasing over the long term for some

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Speaker 1: of these commercial deals, uh uh, there will be some

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Speaker 1: cap rate compression as uh, the cap rates in the

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Speaker 1: secondary markets didn't really participate as much in the upside

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Speaker 1: and therefore won't go uh sorry, you won't decline, won't

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Speaker 1: increase as much as values decline for some of the

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Speaker 1: A class properties and in some of the markets where

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Speaker 1: real estate prices have run up most well, if you've

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Speaker 1: got A class investors, the cost of money might be

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Speaker 1: relatively inexpensive, but you might have to put up more

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Speaker 1: equity than you did in the past. Tell us about

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Speaker 1: the equity piece of investing in real estate today, Well, um,

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Speaker 1: where we participate in is is the niche where there's

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Speaker 1: very little institutional money. Um and uh so in our space,

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Speaker 1: I think the value that we bring to our investors

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Speaker 1: and to our sponsors is significant and uh we can

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Speaker 1: help them significantly on on that equity piece, on the

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Speaker 1: smaller transactions that we put on our platform. Rush you

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Speaker 1: began your current Fannie May, uh, you worked your way

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Speaker 1: up to director of the Risk Policy Group. When you

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Speaker 1: look at the presidential campaign right now, not too much

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Speaker 1: focus on Fannie May there maybe eventually, though, what would

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Speaker 1: you like to see? What do you think should happen

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Speaker 1: with Fannie Me and Freddie mc next well, there are

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Speaker 1: several proposals out there, both from members of Congress and

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Speaker 1: various groups. Uh. Um. The I think the ultimate endgame

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Speaker 1: and f h f A has been walking the agencies

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Speaker 1: towards it is too um to try to get out

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Speaker 1: of this conservatorship situation where a lot of the obligation

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Speaker 1: of federal government is still ambiguous. Um. But you know,

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Speaker 1: the agencies are walking towards a common securization platform, and

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Speaker 1: they're working aggressive of lead towards offloading a lot of

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Speaker 1: the credit risk. And so I think any solution will

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Speaker 1: be sort of along those lines, where the agencies will

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Speaker 1: be a utility that provides a service to banking sector

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Speaker 1: and mortgage companies, and as much as possible the credit

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Speaker 1: risk is offloaded to private sector participants in their various

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Speaker 1: proposals out there that do that to some degree or another.

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Speaker 1: Arsa Didinia thank you so much for joining us today.

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Speaker 1: He's chief credit officer Realty Shares, based in San Francisco,