I Survived Real Estate 2020 National and Commercial Panel Pt 2

 

The Norris Group proudly presents it’s 13th annual, award-winning black-tie event, “I Survived Real Estate”. Industry experts join Bruce and Aaron Norris to discuss perplexing industry trends, head-scratching legislation, and opportunities emerging for real estate professionals headed into 2021. All proceeds from the event benefit Make-A-Wish and St. Jude Children’s Research Hospital.

This episode features Terry Burger of 7 Figure Flipping and Tom Wilson of Wilson Investment Properties.

Platinum Partners:

 

  • Norada Real Estate Investments
  • San Diego Creative Investors Association
  • The Outspoken Investor, Tony Alvarez
  • Think Realty Magazine
  • Wilson Investment Properties
  • Realty 411

Gold Sponsors:

 

  • 7 Figure Flipping
  • Inland Valley Association of Realtors
  • Keller Williams Corona Keystone CPA, Inc.
  • Las Brisas Escrow
  • Leivas Tax Wealth Management
  • NorCal REIA NSDREI
  • Pasadena FIBI
  • Real Wealth Network
  • In A Day Development
  • Spinnaker Loans
  • uDirect IRA

See below for full video and resources.

Episode Notes:

Narrator  Welcome to the Norris Group’s 13th annual I Survived Real Estate Gala. The Norris Group would like to thank the following Platinum Partners: Norada Real Estate Investments, San Diego Creative Investors Association, TheOutspoken Investor Tony Alvarez, Wilson Investment Properties, Think Realty Magazine, and Realty 411. We’d also like to thank our Gold Sponsors: 7 Figure Flipping, Inland Valley Association of Realtors, Keller Williams Corona, Keystone CPA, Inc., Las Brisas Escrow, Leivas Tax Wealth Management, In A Day Development, NorCalREIA, NSDREI, Pasadena FIBI, Real Wealth Network, SoCal Cash Flow, Spinnaker Loans, and uDirect IRA.

Aaron Norris  All right, Terry, welcome to the party. You’re filling in for Bill Allen. Terry Burger is with the Seven Figure Flipping, congratulations on a very good flip hacking live. It was very fun. You guys did a great job virtually. And it was very fascinating from an event planner to watch. You guys did a great job.

Terry Burger  Oh, thanks, Aaron. Appreciate it. I’m glad you were an honor that you were there. I’m Bill Allen, I’m not Bill Allen, I’m substituting here for Bill, fill in for him. He’s much better looking than I am, so, honored to be here with such an incredible panel. We represent about a, about 300 members that we, we teach them how to flip houses and that sort of thing. So, what I wanted to kind of talk about today and Bill asked me to talk about is kind of the boots on the ground, like what are house flippers thinking, right now. And so, we pulled our membership and I just kind of wanted to give you some thoughts and, and if you’re in that space right now, maybe some tips and tricks to kind of help you be a little bit more successful in there. What we’re seeing feedback from our members are we’re seeing, construction prices and delays. Some members have paused building new construction, you know, some house flippers are out there being investors, inspect builds and such. And with the, with the rise of prices on lumber, they kind of pause that. Some have, some haven’t. I’m currently building new construction right now. Because we got a great deal on a lot, you know, so, there’s some give and take there. There’s lots of delays on tile, cabinets, doors, windows, things, you know, they get manufactured at a factory that, due to COVID. If some of that stuff comes from China, you know, there’s a little bit more of a lockdown. We’ve had to wait on stoves and things of that nature for weeks. And of course, as a flipper, right, you’ve got a hot, this hot potato going on where the, the longer the delay, obviously the more interest carry you have to your investors. We’re finding that, contractors during this time are an incredibly high demand. And I’m sure that’s no surprise to anyone. And so, we’re trying to figure out how to teach our folks how to systemize and, and get really granular and be ready to rock and roll on their properties day one, materials in ordered and everything. There are going to be delays, so, we’re just trying to help people avoid some of those delays. From a lending and appraisal perspective, we’re seeing some really interesting things. So, loans, if you’ve tried to refinance your house or buy a house lately, you normally it would take you 21 to 30 days, 21 on the fast side and 30 days on the longer side, and those have been pushed to 45 to 60 days now. And, and you’ll have multiple delays in that process. So, I know for my company, we’ve had I would say 50% of the projects have had, have been delayed. So, we kind of instituted this thing where if, if the lender goes past 45 days, that buyer pays us our interest carry for those days that were delayed and that’s kind of how we’ve, how we’ve leveraged that. Appraisers are having a weird time, right? Because a lot of the properties are going above asking, because of the shortage. And most of the markets that I study, there’s two months or less of inventory. I know my home market of Atlanta and my county, there’s 1.7 months of inventory for all price ranges, and depending how granular you get in the price range, it actually goes below a month. And so, because of that, the appraisers are coming out, and they really just don’t know how to react to what I call the coastal phenomenon, right? Because, you know, when you’re in a in an interior market, and, and you’re back, I don’t know, 2004 or 567, you’re hearing how San Diego, you get 15 offers on a house. And it goes above asking, we never really saw that in the interior markets until this housing market. And we’re seeing lots and lots of that. So, the pros, though, right? There’s a lot of negatives that I put in there. But the pro is that, houses, for house flippers they’re selling for more than asking. So, when we run our numbers for you know, the little formula that we try to run everybody who runs that number, then they figure out what margin they need. And they’re typically getting a higher margin, which makes up for those delays and the extra interest carry and the extra loan delays and things of that nature, but for how long, right? We’re also finding that, that buying good deals, while they are out there, they, they are really left to the very skilled negotiators to try to get those, because sellers think their house is worth gold, because they’re watching the news and they’re listening. Some flippers in our group are selling they market their properties before they’re finished. Some don’t like to do that. But some do. And they’re actually getting them sold. And working with the buyer to pick paint colors and do those sorts of things a lot like new construction. We do feel like, because of the inventory shortage. And I really believe that inventory shortage we started 10 years ago, in the last recession, that we don’t have to go in and put brand new kitchens and anymore, because the housing market is so strong and hot right now and cabinets are delayed. Maybe you can go in and work with the cabinets that are there, you give them a quick coat of paint, make them look really nice. And you don’t have to go in and make it look like HGTV as much as you used to. What we’re focused on really is just trying to become exceptionally well organized to win. I think our group is concerned about being caught with inventory. I know I suffer from that as well. Like, I know that the banks are in charge the Feds in charge these low rates, and I hope they stay low. But we can’t continue to buy predicting elevated prices six months from now or four months from, now we’re still trying to stay very, very conservative. I tell my team all the time, I want to be here thriving after the next correction whenever that is. The general sentiment in our group is to avoid high end properties and focus on the sweet spot of these markets. And I believe personally, this is a personal thing for me. I believe the millennial monster is going to come out and save us in 2021. I used to tell a train agent and I used to tell agents all the time. When Jay Leno y’all remember Jay Leno, Jay Leno used to do this thing called Word on the Street. And he would go out and he would interview people. And he asked him who the President was and who the Speaker of the House was right? And, and we would make fun of these millennials, right that didn’t know the answer those questions. Those, are my customers. Those are the customers I want. Because what I found in the last recession was, people that had a nest egg to protect, that’s when they go in protection mode, hibernation mode, right. But the people who really don’t know about the political game and all of those sorts of things, those are the people that are out buying, those are the people that took advantage of the first-time homebuyer tax credits, for example, that were offered back in the last recession. So, that’s what I’m seeing. I, I do agree with Marco there was something here the shadow demand. I did a lot of research on millennials in the last week, week and a half. And it is interesting one, National Association of Realtors put out a study, one out of two transactions was a millennial. That’s a 2019-year-old, I guess to a 39-year-old right now. And, and so, I really feel like those numbers are boosting, they, those older millennials, they got the shaft back in the last recession, right? Because they couldn’t find jobs. You know, the joke was they all moved into their parent’s basement, and they get a bad rap for that. But honestly, those are the folks who went back to grad school, got an extra degree did something different until they could thrive out of that last recession. And now those people are thriving, and they’re out looking for real estate. And so, I really feel like they’re going to help push us into 2021 and have it continued to be successful. And it’s interesting. I ran a number last week that says if you took a 400-thousand-dollar house and a 3.25% interest rate amortized over 30 years and you put 5% down your payment somewhere around 1600 and $50 to 1675, something like that. And if you bought a house 20%, cheaper at 320, but the rate was five and a half, your payment was actually more. And so, I think you’re right, it’s marketed by on the payment, sometimes, I know that their income is dependent on housing prices and that sort of thing. However, it is really interesting to see what these rates are doing. So, that’s, that’s what I’ve got for you today. Aaron, and Bruce.

Aaron Norris  Great. I have some questions. And Dad does too.

Bruce Norris  Yeah, I think, you know, I think what’s interesting when you say people buy the payment, one of the things about owning a house is your payments fixed. And your rent isn’t, that’s a very big financial difference going out forward. Go out five years, all of a sudden, you’ve got somebody that’s got an equity position, put that house in Florida have the house go up five or 10% a year, and all sudden, you’re an entrepreneur with equity, you get an equity line, and all of a sudden, you start playing the game. And that’s the big difference about trying to, get and you already, you know, what’s interesting, we said, we had an $8,000 tax credit, or what’s really interesting about the human species in, this is in Moreno Valley, a house very specific house that I bought, and sold for 365 in 2005. And it sold in 2009, for 64 grand, I was the buyer at 64 grand and at that time, they were, all had to offer an $8,000 tax credit for somebody who did take it at an 80% discount. That’s an astonishing because you couldn’t get a buyer because it was emotionally a difficult market. So, you know, we have this big glut of young adults that are going to be asked to pay for a very big tax burden. I hope a lot more of them have a fixed house cost that starts with a 2% mortgage rate. To me, that would be very smart for America to do.

Terry Burger  And I like what you said about the no down payment. And if you add an assumable option to those mortgages, I mean, it would be a beautiful thing. Right?

Bruce Norris  Well, yeah. See, that’s I was gonna ask you, what do you, what do you think causes the next downturn? If you, if you will, with your experience? Do you see one coming?

Terry Burger  I don’t necessarily see one coming. But I do think that the banks and the Fed are definitely in charge. And if for some reason I you know, I tell people all the time, COVID-19 may not be our only problem ever, right? What would happen if some other events came in and hit us and we weren’t expecting it? So, I don’t know what that looks like. I can only imagine certain things. But I think that the market will stay strong. I think that the politicians are going to continue to help the housing market along. I’m not worried about this eviction crisis that you see on a lot of YouTube channels and stuff like that. I honestly think the eviction crisis would help the housing market. I honestly think the housing market actually is in crisis because of the low supply. Right?

Bruce Norris  Oh, it would help employment if you could have a builder, build another half a million-dollar units that would work pretty well.

Terry Burger  Oh, absolutely. Yeah.

Aaron Norris  You brought up a really interesting, you said something interesting about the sweet spot. And in the California Association of Realtors, they do a study every so often. And this last time they did it, they did a good job segmenting by generation. And what surprised me is that millennials came into the market, the median price that they were buying at was 400,000. But so was the boomers. So, by waiting and postponing what they were buying, what is your sweet spot? Because is it higher than you expected? The dollar amounts?

Terry Burger  I think it is now because I’ve been in real estate for so long. And you know, when you’ve been in real estate for so long, you look at a house it was $200,000 10 years ago, it’s 400 a day. You’re just like, wait, what, how did that happen? Right? But I don’t believe they’re going after the same product though. Aaron, you know, the boomers want master on mains and they want. They don’t necessarily want a yard and that sort of thing. Where the millennial generation are starting to raise families and have kids they want grass. They want a place for little Johnny to kick a soccer ball in the backyard. So, I think the product is different in here in my market of Atlanta, there’s a lot of 55 plus communities being built. And I don’t see them fighting over properties here unless they’re a ranch. If they’re a ranch, they fight over them.

Aaron Norris  Alright. iBuyers is your group worried at iBuyers at all?

Terry Burger  So.

Aaron Norris  The “We Buy easy houses” group?

Terry Burger  Yeah, so yeah, Zillow Offers, Opendoor those are big players in the major Metro markets. It’s caused, my company personally to only focus on new construction in Atlanta. So, we’re trying to find value, add lots things that we can do and build new construction. And then our secondary market Greenville, South Carolina There, we are flipping and we don’t have the iBuyer competition in those markets

Aaron Norris  What’s interesting, I’ve been following the data for years and the rehabs they’re doing here in California are hilarious. You’re lucky if you get paint and carpet. And now that the IPO for Opendoors come out, they’ve basically admitted they’re losing money on every deal. But, you look at the rehabs, they’re painting 1970s cabinets, and you’re lucky if you get the brush poles. It looks terrible.

Terry Burger  It does look terrible. Yeah, but they have no margin to work with. Right? And yeah, it’s it’s amazing to analyze their data.

Aaron Norris  But I do have investors that are flipping to them. So, I know a lot of your group focuses on the wholesaling. And so, taking down the problem children with people problems or property, problems de-junking them and flipping them to iBuyers is a way to work together.

Terry Burger  It is absolutely.

Aaron Norris  One other question, your group, are you seeing more pressure from real estate investors wanting to expand into other markets out of there, their home state?

Terry Burger  I have been in that group for five years and I have studied and asked and looked at everybody in the group, the smaller mid-level markets do great. That’s where you can really go in as a small business owner and be the Zillow Offers or be the Opendoor as opposed to trying to make that happen in a large Metro. And what I find is people in the larger metro areas are trying to find secondary markets where they can have better margins, or have a lower entry price. For example, I can in my area of Atlanta here, it’s very unusual for me to be in it of $200,000 purchase that needs fixed up, right? But I can go to another market such as Greenville, South Carolina or Memphis or Huntsville, Alabama. And I can find something for 70. But you know, 50, put 50 in it and have similar margins.

Aaron Norris  I figure houses that just so long ago. We visited there for a while just not anymore in California add a zero well. Thank you, Terry, and thank you for filling in such last minute. And it’s great to have that perspective you guys have, your members are all over the country and do a lot of houses a lot of flipping, a lot of wholesaling. So, please hang on. Well, I’m sure we’ll have some questions for you, Tom. We’re gonna bring you on. I was hoping to bring you on because you do some fundraising on very different asset classes, commercial, industrial, you’re sort of all over. And to get some insights into how people are feeling as you’re raising money if people are scared. pools, I don’t know if you can say much about even opportunity zones.

Tom Wilson  No, we’ve avoided opportunities zones for the most part, because these are largely development and longer term. And most of our investors want to have a way to have a shorter term lower risk, more stabilized situation. So we’ve kind of purposely not targeted that, although I know it’s worked well for some people. Okay, do you want me to give a presentation? Sure.

Aaron Norris  Go for it. Grab the screen. It’s all yours.

Tom Wilson  See if I can figure out how to do this.

Bruce Norris  Oh, that sounds like me.

Aaron Norris  There you go.

Tom Wilson  Let’s see. Is this working? Are we on? Yep, you’re good? Yeah. Okay. All right. My staff is left here. And they said, Oh, you can do it. Tom, you can do it. First of all, thanks so much for having me on and with such other honored guests. And I’ve been, I think 13 but I think I’ve been a sponsor for 12 years. And it’s, it’s so wonderful. Congratulations and crossing the million dollar mark. What a wonderful event. Yes, it is, has become the great ball for real estate investors and the wonderful charity that Aaron, you started in honor of your mom. And that will be. And Bruce and I are and you fall kind of bonded a bit since I went through a similar process. So, so nice to be participating again.

Aaron Norris  Thank you. Thanks. Let’s

Tom Wilson  and, and Aaron how wonderful full circle here with having the pleasure of having hosted your dad and Shawn there many years ago, to get introduced and then introduced to Doug and and now you working with Shawn it’s it’s really wonderful to see that growth. So my company was invested properties focused for many years on turnkey house business. It did very well we did several, several hundred not quite in the league of the top ones, but pretty good business. But we we saw increased competition for houses and I I was starting to invest more in commercial and when I say commercial, which of course includes multi fam the word commerce means you buy something for income, although many people think of commercial as non multi fan, but it’s both. So that’s why I kind of tend to both say both of those. But we we shifted over to that industry. And it’s done very well. So we’ve for us, we’ve done 23 syndications are currently managing a portfolio of about 330 millions, something like that. And I must say I feel very, very blessed that that we were running pretty stable. And I think that’s because of the conservative approach we took. We certainly had our problems of being beginning of pandemic, but we were able to negotiate with the tough tenants and we’ll talk a little bit more about that as we go along. But um, we don’t have a second big shut down. I think we’ll navigate through this. Okay, we’re pretty evenly divided between the major asset classes of office and retail and industrial multifamily. And we’re in most markets across major markets across the Sunbelt. And we do some development California, but for the most part, our clients or investor base is looking for more stabilized some value add, but wanting more of a solid predictable investment. So so that’s so I’ve been investing for routes make you feel a little better five decades now.

Bruce Norris  I feel young.

Tom Wilson  Thanks. So now, so now you don’t have to feel quite so bad. Talking to Doug Duncan recently. And by the way he he certainly professes that this was not a recession for which the pandemic was a tripwire that this is a unique event on its own. And he’s predicts a predicted few weeks ago, several months, several weeks ago, a partial, common Nike swoosh with a lot of W’s in it. And I think Yeah, so far, it looks like that’s how it’s how it’s turning out. So indeed, you know, it is a black swan event all on its own, for sure. You could argue with the last Black Swan event was I’m thinking it was really kind of 911 a lot of things that we were worried about haven’t happened. But this one caught us by surprise, maybe everybody except Bill Gates, feeling that he’s the one that said you should do it. The This is a very nice, very nice graph that my staff found, which is showing the how the pre and post pandemic numbers have affected the property values and all of these different sectors. So I’ll just point out, of course, you know, many of them are not, would not be surprises that we’ve got, course, malls. lodging we know about strip centers, ironically, was considered to be pretty low risk in the retail sector because it’s a service oriented industry compete doesn’t get Amazon’s right doesn’t compete with the internet, you can’t get your hair cut on the internet, you can’t drink a beer have, you know, on the internet, all of those things, and lo and behold, here we have a surprise that that tended to shut down service, as opposed to, you know, big box. So so that was a bit of a surprise. But we I think it’s the retail strip malls that we have held in there pretty well. We’ve, you know, most of those are back open again, and and coming back up in occupancy. Most of them have most of continued to pay we had some drop in occupancy, but none and financial outcome See, but not too badly. The and no surprise, it’s one of our favorite categories has been industrial and indeed industrial. actually went went up during this during this period of time. We have several weather in the manufacturing arena, and they are continuing to manufacture a lot. Let’s see here. We get to the next There we go. So this was a this was just published by emerging trends last month, where they interviewed 1400 and surveyed 1600 people in all different sectors across the country. So that’s something all of us as I think syndicators and turnkey operators and so forth in the investment business want to know, how interested are the our investors in writing checks again? To what degree are they still scared? and to what degree are they tired of the low yields of money sitting under the mattress and ready to get it deployed again? So if you know you’d put pick kind of the neutral ones, they are the bomb at Blue and the agree that that they’re confident and making long term decisions, you get about two thirds. Three quarters of the population is kind of at least thinking about writing checks again, which I think is pretty, pretty important. Of course. Of course whenever you get in tough economic times, the lenders are less optimistic and they tighten their their constraints on loans. And of course in the construction and development arena. We’re seeing a couple projects that are now delayed because we’re having difficulty finding lenders who are ready Do construction loans again, are there ltvs of drop, we even have one lender that gave a quote to one of our buyers of one of our properties. And they asked for a, a debt service coverage ratio of 2.0 with a 50% LTV. So that’s the worst I’ve ever heard. So, of course, you know, the the office trends, a lot of talk about the impact of, of COVID on office. And I think that’s a discussion that needs a lot more talk and, and rational thinking than the headlines, just like the headlines, you know, past few years was it all retail was gotta be scraped from the face of the earth. And, and, of course, that hasn’t happened. Here we are with Office, it turns out, if you look at this graph, you can see the absorption has has dropped down significantly over the past three, three quarters, four quarters, it’s been. So that’s a new trend of which, actually, it hasn’t gotten any worse during the actual pandemic. here’s a, here’s office rents. So very interestingly, now, the the rents have continued, these are national numbers, the rents have had a pretty steady climbing pretty much put a ruler through that line of continuing to, to go up, which I think would surprise some people. So my thought is, of course, you’ve got companies that say, we’re just going to stay at have people stay at home. But I, I feel very strongly that, you know, humans like to be with humans. And you’re now seeing more reports about the productivity and creativity has dropped. Yes, we’ll probably wind up with some hybrid. But I wouldn’t be surprised within two or three years, if we’ve got office occupancies that are back up close to where they were, they may even require more space, because if they are concerned about the, you know, the separation, then they need more space for the statement more employees. So we’ll see how that pans out. We’ve, we’re actually seeing we’ve remained quite stabilized in our office products that we have, don’t have a aren’t really having a serious problem. In fact, we’ve got two properties than which the occupancy has actually gone up during the, during the pandemic. Now, of course, it’s important which metros that are in or the metros that have ever migration where they’re escaping from cities. And so bigger cities and problems cities. Yes. So I’m going to talk for a moment about some counterintuitive paradigms. So I’ve already talked a bit about office, this is a property we have in North Miami. Well, we’ve, we’ve certainly seen how there’s a big migration down that way. This property has actually gone up in occupancy during the pandemic, and we’re talking not just physical but financial occupancy. Retail, again, as I mentioned, many people felt in the recent years that all retail is going to be scraped well, out of the 900 malls in the country, it’s still I think, pretty good probability a third of those are going to disappear. But a good another third, will, will do very well maybe even improve is their move toward more entertainment and service and that sort of thing. I think the most important, maybe one of the most important things I’ve learned over my five decades of investing is how you can not be very careful about broad brushing, any conclusions. And that each do each sub market in any Metro each product is stands on its own. And yes, it’s easy to get data. That’s aerial view of a MSA or have a certain asset general asset class, but every single deal is quite different. So our 19 properties that we’re currently responsible for managing our most challenging one, which I’ll show in a minute was retail and our best one is a retail. And here it is, this is the largest liquor store in the state of Kansas sales are up 60% so think single tenant 18 year lease, things are going just just fine. Thank you so so again, it’s it’s really really dangerous to broad brush any any conclusions about a general Metro or asset class. So here’s the one that’s actually been the biggest challenge. So this is a A large power center on Interstate 40 87,000 cars going by a day It has four anchors in it. And normally a National Credit tenants and it has a shadow strip beside it. It’s a it’s a $23 million property. And so normally you will buy a property like this because it’s got National Credit tenants that we checked out that had very, we’re doing very well with their own internet component, they’re actually expanding into more brick and mortar stores balance sheets are good. So you consider this to be normally the lowest risk kind of tenant you could get. National Credit tenants as a classification are the worst tenants right now on the COVID because they’re playing the 800 pound gorilla card and saying we can pay but we’re not go sue us. So we had five rounds of negotiations with a couple of these tenants who said they weren’t going to pay for a year, we got them back to 50% payment for three months and they’re back paying again. But so again, you know, things paradigms that normally you can count on and situation like this can be quite different loans, of course have quite different Cb cmbs is just about shut down commercial mortgage backed securities, which is a wall street money going for commercial, we have five or six of those, the attractiveness, they are the generally the the lowest debt service amount, because they’ll do 30 or am and best yield. They are non recourse but they are bears to work with or they’ve got folks in Wall Street who are deploying money, their their investors or the or their clients of the borrower as a pain. And it’s so they’re very difficult. It’s almost impossible to negotiate anything different than local banks. Couple we’ve needed to talk to and get some help for a while. They’re quite cooperative eldercare market? Well, we all know that, that everybody move their parents out of elder care. And that’s why the house death rates were and all that sort of thing, right? Is anybody think that’s gonna be long term? I don’t think after a year of being pent up with the parents and kids and this culture in this country, that I think once a little more time goes by, they’re all going to be anxious to get back into facility. So as a class C facility, what they’re going to be looking for, that’s the cheapest, probably not if they can afford it, probably Class A, there’s an artist’s rendition of the assisted assisted living facility elder care in Berkeley, that we’ve just finished and tied in the land. And we have it under contract to sell. And it’s at a profitable price. And it’s doing very well. Thank you. So again, you got a did we make adjustments to it to make it more COVID? friendly? Yes. And so they’re things that you can do to help mitigate whatever problems get thrown at you. normally think residential is the simplest to deal with, right? Well, we got the eviction issues, and what happens when they stop writing checks for the tenants? And how do you show a property? Since you can’t, it says it’s hard to have people go inside and they can only do it by virtual tours and so forth. So of our three multifamily properties that we have to which to large when there’s about we have about 1500 doors, I guess, and those three, and they are occupancy dropped a little bit physical, obviously very little financial occupancy a little bit, but they’re all running positive. They’re all doing well, but it certainly has been a challenge and it’s certainly had to deal with some things that we didn’t used to have to do. Frequently I’m asked to what single thing do you most attribute your your company’s success and your personal success? And I’d have to say by having outstanding partners, outstanding partners, outstanding relationships, and, you know, we follow Beth Clifford’s advice and we we hire and partner more on character than competence, although you need to have a need to have both. Certainly this COVID has introduced some new questions for us to things that we have to deal with. What’s the economic occupancy not just physical? We industrial properties have done very well. So what’s the what’s the reasonable cap rate on exit? We have three under contract. So right now what you’re doing well, in office, what who are the tenants? So are office buildings 10 To have a number of tenants that have income and tenants who are end clients, customers who have income that are largely dependent upon a government subsidy. So our guess is that government’s probably not going to stop printing money. So I think go, you’ll do okay. And again, retail discussed, discuss that about picking things that aren’t internet. Competing with, do I think the retail strip malls and service sectors, which normally was pretty low risk going to come back and do okay. Yes, I certainly do. And we’re already seeing that happen. Metro trends, I think, Mark, you talked about that a lot. Let’s Yes. So certainly, we’re seeing that. We’ve got a lot of migration coming from the some of the big centers like San Francisco, LA and Texas and New York, coming down to Florida and Texas. They’re certainly the two highest ones. GDP. My father used to say, Be careful sons that numbers, figures don’t lie, but liars figure. So do you all see the Wall Street Journal headline? What was it a little over a week ago, it said, GDP up 33%. I had a couple of people contact me. I was like, No, it can’t be. And of course, it was annualize it was how much recovery and nobody talked about if investment drops by 50%. If it comes back by 50, you’re not back to where you were and so forth. But it does, does look quite encouraging. I would say that, that certainly, this black swan event that happened certainly reinforced my values and the company’s values about how we select where we’re going to invest. Certainly you want for good returns, you gotta get low cap rates, you want metros that have high growth rates. That’s why most of our properties are in the Sunbelt. You want places that have that aren’t over regulated, have good business friendly policies? And we certainly, we we walk away from most things that are brought to us because we’re looking for when we model it and underwrite it, we’re looking for a very, very conservative approach to it. We had to say I look for a high return risk ratio. So that’s my slides. I have a few have any time when I asked any questions here and or Bruce some course glad to?

Bruce Norris  I don’t have many I have you answered what I was going to ask. So Aaron, do you have any?

Tom Wilson  Come on here and asked me a tough question.

Aaron you’re muted.

Bruce Norris  Error. You’re muted. Can I help you? Haha. busted.

Aaron Norris  Right back. Kathy is up next. I do have some questions. Maybe we’ll ask one. Industrial, I’m a little worried about industrial. I look at these Amazon buildings. And you know, they’re they’re only using about the first 15 feet up. And with robotics and advanced engineering and advanced logistics. I mean, are we still going to need to continue to build industrial if at some point these robotics are going to be able to go all three story’s high? At what point? Is it more beneficial for us to go up and industrial instead of out?

Tom Wilson  Are you mean to? To to add on to the building and height or build higher? Yeah,

Aaron Norris  yeah, to be more efficient, because robotics allow us not to be sort of, you know, their Kiva robots aren’t going to be able to reach the three story’s high, but we’re getting to the point and Amazon has really invested in a lot of very strange robotics. They’ve got that ostrich color look and one that they’ve got now it’s pretty interesting. At what point do we have to be worried about that?

 

Tom Wilson  Well, I think it’s has to do with dirt space, right? The reason California is prices are highest because the dirt so expensive, right? So I so I think it and you find and it’s not a neighborhood friendly kind of thing. So I think most industrial and distribution centers and all that maybe minus the last mile are built in areas that have cheaper dirt. So I think that probably reduces the pressure to go up in these. These industrial buildings with high bays and cranes and all that are quite expensive. So you start going up on that it’s not like just adding a second storey to residential house. The other the other thing I’ll throw out there is that the there’s actually more space Industrial that’s manufacturing that it is distribution. So there’s a tremendous of way more manufacturing than people realize in the US going on. And of course, part of what has allowed that to expand again, is, is the automation. So the automation now helps us compete with the cheaper places offshore. Now we’ve got a new reason to be a little concerned about our supply chain, not having control of it. So I, I think manufacturing is going to continue to grow. And that’s, you know, that’s a major sector of industrial and in fact, most of what our company owns and manages is actually manufacturing. I mean, these are serious manufacturers where they, they put in the equipment, and they build the building around it. And they are, they’re probably not going to move down the street next week. You raise the rents and I’m like, man, I see what you’re doing.

Aaron Norris   All right. Thanks, Tom. We’ll come back with some more questions as well. 

Joey Romero  Thank you for tuning into I Survived Real Estate 2020. To watch the full video in its entirety. Or to learn more about speakers and sponsors. Please go to isurvivedrealestate.com and be sure to tune in next week for more ice web real estate 2020 Thank you.

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