YouSaid · the spoken record

Anthony Dilweg

lines on the record: 140
first: 2023-12-01
most recent: 2023-12-01
sittings or episodes: 1
sources: podcast

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“I'm not as well versed on what's up to speed now. Just what I've read and heard, but I'm not sure where rates are going to go on that. I've just heard more on the space that people that a lot of money went into her when they were reading pricing pressure, you know, cap reads compression that there's kind of this older product had a great opportunity to do some facelifts. I think that area is I've heard has turned sideways. I just read it before from Arbor Realty. I think they do their debt group. And, you know, I looked at all the multifamily they've done over the last three years and I'm like reading stories. I'm like, it just doesn't look good for some of that stuff. So I don't know the ultimate impact. I just know real estate is so interesting how it behaves. You know, it's when I grew up into it, the first, you know, SNO crisis was more the, you know, that caused back in the late 80s, then you had the tech.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“It feels like some markets are getting hit with some softening. I mean, rents have been high for so long. I think your newer product will certainly do well. I'm laughing about it because we've had land with a lot of our office building that we call crotch land, like crotch space. It was always the, hey, we're going to sell you this asset and he's got additional land. You can build the next tower, office tower. No one ever did it, but always try to say the value. Well, it's interesting I think we've sold 10 parcels in the last three years to multifamily developers on building right next to our office building. It's been interesting to see. And I've talked to those guys quite a bit.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“Rice, a fascinating you say about going from nine to ten, much less painful than three to four. It's the exact same thing in the bond world. If you bought a 30-year bond yielding 10% and interest rates went to 11%, you're fine. I mean, you're getting 10%. I mean, the yearly coupon of 10% may be can even use more than that entire thing. So it's not a ton of risk. But going from buying bonds at negative rates and now yields go up to 4%, that hurts. So, okay, so multifamily, it's tough because the official data, I mean, the most lagging of all in the inflation data, you know, shelter that goes into CPI in terms of rent, rents are no longer being raised at 20% as they were in 2021, right? And what are you seeing in the fundamentals of that space? And also you talk about the pipeline that's coming on, because I know a lot of new multifamily has been built over the past few years.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“I think that is people aren't talking about them much in my space. I'm hearing more chatter, but I'm seeing data. Well, I can't remember. I thought I saw something that, you know, distress office was leading, but multifamily was catching up pretty materially.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“Now, but the inflation has surge there. I think that debate's always been there's been more need for housing, but I think that you've got some operators in the space that were probably not as skilled and not as experienced and their cost, there's been probably a number of cost overruns. And then they look at their interest rates tripling or doubling if they don't caps in place. And they're going, wait a sec, I was hoping to get out of four and a half cap, and now it's a six cap. I do the math on that because you know when you go from a nine cap to 10 cap is not as punitive going than going from a three to a four. It's crazy. So those, that's when you price it for perfection and you have some glitches here and there, it flips it hard the other way.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, it's interesting, right? Because the sector has had an extraordinary run, your product has done extremely well in the context of guys probably, you know, merchant guys have certainly done well. I think that the deeper concern I have is like industrial, multifamilies, but was priced for perfection, like literally guys would go in there, buy a property, maybe it's a three-year yield, they fix it up, pump a bunch of money in, and then they think they're going to flip it out at a four and a half yield. And I'm like, there's a lot of B and C departments out there. There's a lot of aggressive folks going after that space, especially in the last two years. And if you look at it, you know, just the debt, you know, office is a slice, but multifamily is a bigger slice of the debt in the US. And I just with cost, you know, to run these properties gone up, you know, I know we're more disciplined.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, and depositors, you know, on top of that are getting higher yields. And I think the Fed is, yeah, I think they're doing some really interesting stuff behind the scenes. They're either orchestrating mergers, M&A stuff. I mean, they got to because you get that stuff out in the headlines. Listen, there's so much psychology to what we're talking about. And if you get people in the sentiment going the wrong way or behaviors shifting on you rapidly, I think we've gotten so complicated as a business community and how we structure financing and all the derivatives. You got to keep your head on a swivel, even more today with all the different variables. And, you know, it's just gotten intriguing, but a little more, it's gotten complicated too.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“In the real estate industry, you know, homeowners, they have the optionality, they can stay in the house as long as they want, which they will do as interest rates rise up. But if interest rates go down, they're going to prepay a ton. And so that banks are trying to short that optionality. So the fixed assets, we have tons of issues. But thank God, we have our floating rate loans. You know, as interest rates go up, we're going to be making more money. So our net interest margins will expand. They're not. They're shrinking. But okay, we have these floating rate assets to protect. Real estate developers who are borrowing the money are saying, actually, cut my interest rate or I'm going to give you the keys back. So, yeah, it sounds like a problem.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“Well, I'm much more interested in your thoughts than my thoughts, but I think that banks are saying, okay, interest rates went up. And we're a little bit out of this phase because maybe interest rates are going to start going down. I mean, the Fed's Waller, you know, Powell's trusted deputy said that basically no more hikes. The pause will be extended until early 2024. And the market is now pricing. I think exceptionally slim chances of more hikes and very, very likely that cuts are on the way as early as next year. So I think we're out of the world of maybe six months ago of banks now thinking about net interest margins and the way that I want to talk about them. But as interest rates were rising, banks say, okay, these fixed assets, these fixed rate loans, I made a, why did I make these mortgage at 3%? That's going to be, you know, the family is going to be there for 30 years. What did I do? Why did I buy all these mortgage-backed securities at fixed rates and treasuries and on the mortgage industry?”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“Yes, they were nine and a half and they were six and they said we'll take six. It's not great. So I look at these banks that are getting pressures from depositors. They get these treasuries or whatever they bought two or three years ago at 1% yield or half percent yield. You got real estate. I don't know. You tell me, I mean, how's the banking industry going to play out in the next two, you know, year or two, especially if a little bit of a lag, the rates they're, I don't know. What are your thoughts?”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“Ended up settling at six percent IO, they gave me a second on the property with additional dollars to cover the debt service for 18 months. And I can use the cash flow the way I need it like, oh, okay, interesting.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“So, yeah, so the short answer is yes, yes, yes. Long answer is complicated. There's a lot of like, even I look at our portfolio, you know, 750 million dollars in debt when the race start climbing. We've moved some of those properties since then. We had some of them hedged. We had rate caps in place not long. Some were for a year, some were two years. Sometimes you said the duration of the first three years of the loan. Some of the smaller banks, we had no hedges in place, but we, you know, we went from LIBOR to sofer and, you know, so it was priced off that, you know, 150 bipoor at the time. But some of those have gone up jack three acts, you know, and that's where we've gone to lenders who try to, like I had one lender, I was at nine and a half percent a community bank and I went to him and said, listen, I'm looking for a 12-month forbearance so we can create cash flow. They didn't like that. But you got to make the hard ask.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“Real estate investment trusts, I have actually been fairly impressed in one aspect of their handling their interest expense. They really did hedge a lot of it out and convert a lot of floating rate debt to fixed debt. So their interest expense is kind of capped and they have muted the impact of the Fed's much higher interest rate expense. How do private investors in the real estate business handle that huge interest expense? I mean, is it a shock of Yeah, the 10 year went from 2% to 5% and so the loan went from 4% to 7% is all of that realized or is some of it more fixed rate debt or is there also hedging in the private real estate space? Because again, as someone who's not in the industry, I can look at Reits and discover this, but the private industry, I kind of, it's, you know, I don't know. It's very opaque.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“Pretty beaten up. I mean, the question I have is, do you have a portfolio even at that low leverage that the rates just climb so high and you start losing so much erosion on your revenue and your yield, your dividends even cut? I mean, you know, they got some room to restructure there. I just don't know how that, and it's so slow moving. People forget about you after a year or two and they figure a way to restructure stuff.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“So she questioned right because all these reeds have been beaten up. I think they had like a bounce here recently. Some of the office reads, like 10 or 12%. They're still at 17, I think. I mean, if they were in 51, you know, most of those guys have 40% leverage, 35, 40% leverage. So I'm like. Some of retail investing is so interesting to me because it can get way ahead of it and be how it's going to react differently than we're going to be slower in the private space. But I think we can kind of see where the value is going. But I don't know, Jack, it's an interesting question. I feel like a lot of them have beaten up. I haven't been following some of the bigger reeds that closely for NATO and I guess, you know, Boston proper, some of those. But they're all.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“Back to rolling up your sleeves. You got to have the team to execute to repurpose and restructure, you know, scrape or redevelop or mix use all this product over here that in my world, that's like a wealth creation that we haven't seen in a long time because it's the destruction of a space going this way and leaving all this product behind that's just sitting in locations that could be if you can figure it out, crack that code. I don't know. That's where I think there's tremendous upset.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“That new demand, most of it wants something new, cool, and funky. And the supply side on that is only, maybe it's a half a billion square feet. But the demands a billion or a billion and a half. So there's a whole opportunity with the market shift that's going to leave behind quite a bit of real estate. Yeah, real deal talks about it. Connect CRE talks about all these groups talk about the groups that are kind of, this is like, you know, the obsolete product that you got to know what you're shifting to. So that's where I'm bullish. This newer product seems to have the fundamentals where people want to go because office is not going to wait. That's where people want to go. But all this other stuff that, you know, what's that going to be? I'm more, I'm interested. I think that's really interesting, the story where they're going. I'm interested what's left over because I think that stuff you can really, I think you'd have a lot of institutional bailing.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“All that communication, so it's being real, and you get, so you got to ask the right questions to get to the truth, right? So back to your comment about product, right? Supply. Since 2020, there's 136 million brand new office faith that's built in this country since 2020. That product, if built well, maybe it's got some ESG features to it, grain features, clean air. Maybe the newer side is clean air. That should do relatively well. You're going to try to tenant base. I want to be there. So it's fascinating to me is you got that. And then right now it's about, I don't know, anywhere from, it depends on the data source between another, like currently going on less than 50 million of new office space being built out of 5 billion. Well, if you have a flight to quality in this more creative product, let's say you and I are sitting there going, okay, wait a sec, we've had about four and a half billion of demand. Maybe that demand goes to two and a half billion. I don't know where it ends up in the next three and five years, but let's say.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“I think you're absolutely right that the banks, their issues have been mark to market losses. Well, they haven't taken the losses, but the losses exist on their bond portfolios and then depositors getting freaked out and they're being a bank run on paper. The commercial real estate, if you just are a bank analyst and you're looking at commercial real estate loans, it actually looks good. But you're on the front lines. There's some losses on the front lines, but those losses have not been reported back to headquarters. That's right. Official statistics that the general is looking at look good.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“I think if you look at those, you know, what do we have? 4,600 banks in the US, it's going to be very interesting with the FDIC and OCC and the Fed's doing right now negotiating. They can't have any more SVV signature bank. I mean, that's duration challenges, stuff like that. But there's a lot of small banks that are loaded up with real estate or having problems right now. And I'm negotiating with these lenders right now. I've got deals currently that I'm renegotiating. It's interesting what they're doing to try to get through this downturn. And, you know, I just think it's going to be fascinating. The opportunities, we're just very, that's where I am bullish, Jack. I am very bullish about where it's going, but it's going to take time to get there.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, it's the grind. It's the salt mines, right? So, you know, I think there's opportunity there. So these lenders who don't want to back, they end up that are not recourse, Jack, you're right. Most a lot of these are non-recourse debt. But there's a lot of community banks and regional banks that double down, triple down in real estate in the last two, three years because some of the big boys weren't filling that gap. And they jumped in.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“Their asset allocators are saying, I'm actually taking it out of my hedge fund sleeve and I'm putting it into the real estate sleeve and they have a lot of quantitative models, probably have pretty nice suits, but they don't know how to talk to tenants. They don't know how it actually, the game actually works.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“We've taken, you know, we've been very creative with our financial structures. You got a lot of guys in the space that are not really real estate guys. They're just finance guys that are arbitraging the space. And there's more than not. And just guys who know how to operate real estate, I think it's It's not as many people around like they used to be, and you know, people don't like to roll up their sleeves. It's a lot of hard work.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“Well, in this context, they don't want the keys back. They'd rather work a deal with you and you have to, this is very, you know, you got to be careful because the lender, you know, doesn't have the staff or the team to probably take over a bunch of office properties. So they have to go to the sponsor. In my experience, a lot of sponsors are pretty sharky. You know, they, you know, they'd love to get the property back so they work a relationship with the sponsor to manage the property. And that's not necessarily great either because you got the guy who probably wants to buy the debt back at some point for cheap. And if people are being honest, that's in the cards. Not saying there's guardrails along those, but you just don't have a lot of, I feel like there's a dearth of like real, like I grew up when there were like these guys were in the real estate business. They drank, slept. They operate real estate. I've also enjoyed the fact that we've now taken away.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“Aren't legally if it's non recourse debt, which may not be, I mean, that's an advantage of real estate investors who borrow against a bank. Like if I borrow money to buy stocks and the stocks declined by more than the value of my loan, hopefully the broker will do a margin call and get me out. But if they don't, I owe the bank money. Whereas in the real estate business, correct me if I'm wrong, a lot of these deals are done on non-recourse debt. So if you borrow, you know, if you buy a building for $100 million and you borrow $60 million and the value of the building goes to $40 million, so the equity is worth negative 20 million, you don't take that $20 million loss. You just say, hey, the bank, here are my keys, right? But you're saying in this case, the bank doesn't want to take the keys, don't they have to?”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“I've tried to get the keys back, and the bank's like, I don't want it, I do not want it. Let's work a deal. The deal terms aren't great, Jack.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“Going to be at least have to 50% residential. We like that model. We have Creative Single Story Office that's taken anything single-story and kind of funk it out, like the old warehouse product, flex space. You could take an old retail space. You take an industrial space, you know, drop, as I said, just drop in enough amenities to make it unique. It's direct access. You don't have lobbies. You don't have elevators. So we like that. And then scraping buildings we talked about earlier and then corporate campuses. We think that's unique. That feels like a pretty material upside, at least to guys like us. And then we're looking at being aggressive into third-party management for receivers. We think a lot of properties are going back to banks. We think banks are completely overwhelmed.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“We've got about 100 buildings in the South Seats. We're tracking with very inefficient floor plates for office, but actually work well for either converting to hospitality or residential. So we take a tower and make it mixed use. We're not in the camp that for these guys converting to multifamily 100% multiplayer. You got to get the building to empty out. You got all these rents in there. You got these buildings that have 20% vacancy and they have a tenant in there for another three years. And how do you get them out? And you got one at 50%. And, you know, you're not doing new leasing, but they're not empty buildings. So our model is more to look at repurposing floors and turning to mixed use. Won't be easy. It's a lot of work. I think it would be tremendous opportunities, but you want high walk scores, distress owners, lenders, and then really inefficient floor plans allows you to do really stuff, unique stuff for hospitality and residential because you're probably most of these buildings.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“The loan was $24 million and the offer on the loan, which is basically we're saying the offer of the building is worth eight or nine million bucks. Now, we would rep's, that's a repurposing building to mix use SDRs, funky like cigar bourbon bar on the top, open up the, because when you do this, you have now parking space, you have land available and the parking you can reclaim. We do like box car, retail, drop a brewery in, really kind of.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“Hit because your rent roll and the tenant base, but that's kind of like middle America. That's where a lot of your companies come from. So there's that side to it. So we think there, you know, if we can't work a deal with the lender and we'd like the asset, maybe we can, I made an offer on a deal recently. The debt was 24 million. I made a DPO offer at 9 million. The lender said, we get it. We actually think you're our best buyer. It's a national bank. We don't know if we want to take the hit or not, but let's take it to market to see what the market says and maybe we'll give you a shot.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“So, this is the provocative conversation, right? Because tons of tension and all that, right? So you're trying to play this out on two sides. One is we have a portfolio. We believe it's materially lower than most of the BOVs and appraisals are coming in at, but it's not a great time to be selling. Like I wouldn't be selling right now unless it's forced like a lender wants out and we would try to restructure and our investors, listen, our investors are pretty savvy and most of them they're being honest. I mean, we were we were probably 58% leveraged 56 to 58% leveraged before the downturn. And we've got deals right now that the lender and the mez are impaired and some materially impaired. It's gotten that bad. Now, you know, we're not Class A office guys. We are kind of B guys taking it to B plus and doing some really cool creative office product. So those are going to take a little bit more of a.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“It takes years for some of these trends to play out, as you know. I mean, the mall stuff's been, and you know, guys, you can make, there's guys, I'm reading stuff for the Wall Street Journal, but these guys are buying malls at 10 cents on the dollar and they're trying to throw all kinds and they're doing, selling out parcels. There's ways to real estate allows you a lot of different levers to pull to make some money.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“Are we going to start going down? So if the market rent and that's really loaded too because you have class A and you got all kinds of slices of class A and you got class B space and class C space. So you can cut and slice to make it look like the market's doing great and it's really not and vice versa. It's all the stuff we talk about when you get under the hood. So my point is, you know, if let's just say if you could try to simplify it, class A office rates in a submarket in Nashville and they were 28 or is 28 going to 26 or 25 in the next three three years. I make an argument that there's plenty of submarkets going that direction. And I don't see structurally things change because if you got, and this is not unique to me, if you got a base case where you have a billion to bill and a half square feet that may be obsolete, I'm not sure what that drags looks like. And the cap rates, if they go more to a sustained level to higher because of the”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“So, this is where this is good. We're dividing, we're slicing up the conversation here, but from the entrepreneur kind of private equity space, some of these things where you want to keep face race growing so you're going to prop it up and use these strategies, it's not unusual. It's not a mystery. You're given a lot of free rent and like TI. But the net effective rent, when you run it on a straight line back, it's going this way, right? The reeds now are about FFO, right? So it's cash flow. They're not going to try to get maybe the rates up as much. They're going to spend dollars where they can. But to me is if I was going to study REITs, I'd say, okay, let's talk about term and what's the transaction cost. Where are they going? And most leases have built in escalators, two and a half, three percent. So you're going to see stuff go up. My point is market rents, I think now.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“Much rent you actually receive, or is it, or is the sort of propping up different from the rent you receive? It's, oh, the rent we're receiving, the face value, we are receiving that rent. We're just also doing very generous things for our tenants as well.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“Because we've been really good at propping rates up that now we can't, it's going to collapse. There's too much pressure there, in my opinion.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“That's kind of like the last whatever they're saying is to drop that is going to really impact where you see the turnover on reds coming down. That's going to take some time. So one read here, public grade is highways properties. If you look at their inventory, 96 properties, 75 of those properties, mostly suburban were built probably 15, 20 years ago, they're in the crosshairs. I'm not saying they're going to zero. I'm not saying that. I'm just saying they've gone from 51 down to 17. And I know they're in the market doing things. And it's just, it's a tough for some of these reads because I start to see Becker's point is you're going to start seeing, I believe you're going to start seeing now the dip where things rents are coming down and CoSTAR's data showing forecast where you 10, 15% drops in some markets of rates. And we haven't seen that for years.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“Okay, so what we've done really well is to try to prop up the face rates. I'm going to call it propping up. So the way this was done was give a tenant extra tenant permit dollars, keep the rate higher, give extra free rent, keep the rates higher. Because by keeping the face rate going this way, you had a chance of proving that there was growth in the market and positive. And that's a trick of the trade. People doing that for years, but now it's gotten pretty much out of bounds on this. And now because of the inventory and tenant reps now are going, they're beating the crap out of Adam.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“Few things. One is historically that the office sectors is really anchored on long-term leases, 10, 15, 20-year leases. Depends if you feel like you have some leverage when you do shorter term leases, less transaction costs because you can capture the upside. That's a rare phenomenon. I've seen some of that because it's been in demand tenants want a little more flexibility there. I think that part of the challenge is you got those movement parts on the lease term. And then what was your second question?”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“Year lease locked in at 2019 rent levels because rents are coming down. Also, are rents coming down? It's tough to see and looking at the real estate investment trusts. They're not going down. Some are. It's tough to say. But our rents going down, I mean, they're definitely, the rate of increase has definitely gone down, right?”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“To talk about duration. You said you talked about waltz, weighted average lease term. I think that's really important. So in the bond world, you can invest in a bond for one day and you get very short-term interest rate or you can buy a bond for 30 years or an Austrian 100 year bond. And if you lock in a long-term rate at a low rate, that's bad and then just go up. If you lock it up at a high rate, interest rates go down, that's really good. I think maybe a similar analogy can be in the real estate world where in this bull market of real estate, pretty much a lot of your career is it was it a good thing to have short-term leases because then you can always roll it up. I got a new tenant up. I'm increasing the rent. I'm increasing the rent. And I have a 30 year lease that kind of is not great because I'm missing out on this huge three-decade bull run in real estate. But now is it the opposite where you would want to have a long-term lease? You'd want to have a 100.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“Suburban is tough, Jack. It's really tough right now because it doesn't have the amenities, doesn't have high walk scores, you know, doesn't have the cool, funky look to it. And people are like, you know, it's just boring. You know, I need something cool and unique and something that's provocative and ethos that really is compelling to attract tenants back to the office. So that's a challenge in itself.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“Correct. That's right. And how they're behaving. And we've had some of the national makes, we've gone to them and said, listen, we think this is going to be rough. Let's see, let's lower the rate to 5%, go from nine to five, and maybe crew some if the property cash flows, hey, let's roll the money back in and let's be super selective the next tenant we land, retaining tenants, spending money on the property through function or capex. Let's play if you want to ride it out, because right now I'm getting BOV's broker opinion of values, the brokerage community, they're all over the place. I got three lenders were taking properties to market, and we got one in Tampa that was probably worth about $40 million, $170,000, $170,000 square feet in Tampa. The loan amount is $21. It's with a duck fund. We got offers at $11 million. The buyer that did it, we went under contract, fell out after two weeks. They got scared. I mean, it's a bunch of cow.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“I think your comment's a good one about being realistic. It's just, you know, when do you start feeling that pain? And there's this, it's just so slow. It's like, you know, the first 10 minutes of the Titanic when they hit the iceberg. There's some guys who knew within 15 minutes, who know the ship and the structure goes, nah, we're doomed. You know, this ain't good. And the other people are moving for, you know, the playing music. So real estate has that dynamic and interesting comment. It's like there's so much non, you know, the transparency, the mystery behind it. It's a huge asset class. That's what makes it very intriguing. That's what I found interesting to it. But now there's been more transparency. But still, you know, people are, you know, they got to make there's some really a lot of tough decisions. And, you know, we're talking to national banks, regional banks and community banks. They're all behaving differently. We got three debt funds out of New York. They're behaving differently. It's amazing. They get their book. We got our book.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“Yes, yes. A lot of these buildings are trading have relatively higher vacancies, maybe in the 15, 20%. They have walt, which is weighted average lease term. That's a big term that's, you know, people look at what's your average. Look at your leases, when's your roll exposure? And it's so murky on knowing what how you see demand for office that do you put your absorbing 10,000 square feet next year? Are you putting zero for next two years or 100,000? Are you losing 10? And so all those are playing into it. So all these forecasts, we use a software called Argus and that's our industry standard for lease office. And you've got tons of variables in there. And it's so interesting to see the debates with lenders and investors on what people believe is going to happen. I'm just saying the guys on the front line, I'm not going to even use pessimism.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“The Fed pumps $9 trillion into the system and you had MMT and all this stuff going in. And look at household net worth. In 2000, it was $42 trillion. That's $154 trillion. There's a lot of wealth in this country when you have that kind of money slashing around the system. It distorts things. It distorted our industry. So to get that some of that out of the system with Palestine, I'm actually like, we got to get things corrected here. And we don't have a strong appetite for that. We like to bail ourselves out. And, you know, that's a problem. It's made my life more difficult as an operator.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“Yes, yes. And listen, you ask also, you know, we like to say, you know, are people, I like to, you're an optimist or a pessimist, and then you're going to read the market that way. And I know there's some adjustments and recalibration on some of those conversations. I mean, I would say I'm an offensive guy, played quarterback. I'm a bullish guy. I see opportunity. I recognize the value of a great defense. I recognize asymmetrical warfare. You got to know in De Brawl. And you're forecasting a lot. And at least in our space, you know, I think the guys who got ahead early, you know, well, early doesn't really mean anything. It's going to take some time to play out, which intriguing to me, which gets me very excited, is why I believe the opportunity is going to be on the other side of this. Because with this material dislocation, distortion, destruction, and listen, it didn't help.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“Absolutely. First of all, by the way, so thank you so much for saying those kind words. I had done a few episodes in commercial real estate. I'd say a fair number of them were somewhat bearish. So I was looking forward to this. Oh, I'm actually going to talk to someone on the ground and he's going to say, Jack, you know, the headlines are super negative, but they're actually, you know, they're cherry-picking bad data. Actually, the fundamentals are a lot better. You know, because you talk to institutional investors, they tend to be a little bit more rosy, but you're saying actually, no, the headlines don't are not bad enough. It's actually much worse than the headlines.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“You know, two thirds of the US banks, and you know, if you look at the U.S. banks, you know, mark their market, which all the treasuries they got from years ago, you mark that, you mark real estate, everything else, they're insolvent. I know there's ways around and workarounds and stuff like that, but no one's got to sell something. You're not going to take the hit.”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT
“Being created by structurally the demand components. And I had data there like VTS is a software used to track every tenant activity in our portfolio and new inbound traffic, whether it's inquiries, prospects, tours, LOIs proposals, doing leases. Their demand metrics, would they track a lot of buildings in the US? The demand is now hovering around 50% in some cities. It's like, I think Portland's like 21%. So all the demand that we saw pre-COVID has dropped materially. Plus people retain they're not sticking around as long and they're shrinking. You add all that up. It's a lot worse than the headlines. So I see that. So really, what's the lag effect? And we're slow and you put interest rates and it's a $20 trillion interest rate. If you're not marketing to market, I don't know. $24 and $25. And lenders, listen, being honest, if you marked”
2023-12-01 · Forward Guidance · Pain In Commercial Real Estate Will Be Worse Than In 2008 Great Financial Crisis, Argues Veteran Office Investor Anthony Dilweg · IDENTIFIED FROM THE TRANSCRIPT