YouSaid · the spoken record

Ian Formigle

lines on the record: 76
first: 2022-02-18
most recent: 2022-02-18
sittings or episodes: 1
sources: podcast

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“The rest of the day, and happy to chat online. So those are great ways to find and learn more about us for anyone who's interested.”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“Oh, yeah, Trey, as we always talk about the easiest way to learn more about us, what we're doing in deal flow is to go to the Crowd Street website. So www.crowdstreet.com, create an account. It's easy. You can start logging in. There's a wealth of information. The team that is behind generating the content on the website's doing a tremendous job. And there's a lot of education. That's where I say start. Start by educating yourself. There's a lot of nomenclature. There's stuff that we've talked about even in the course of this conversation. But we're happy to help break it down, get investors up the curve. So that's a great place. I have a book that's on Amazon. If anybody wants to check it out, I think it's called The Comprehensive Guide to Commercial Real Estate. So you can go look at that there. Also individually if anybody wants to reach out to me on LinkedIn, I'm the only Ian for Migley on that platform. So pretty easy to find. I love talking deals. You know me. I can talk deals.”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“Basis. And it's that capital that helps us win the deal. So if we go to that sponsor with a $30 million allocation, we say, okay, we're going to bring this deal to the marketplace. But on top of that, while we do, the first five or eight, now $10 million maybe could be known sources of capital that's discretionary at Craddock Street. That's instrumental in winning that deal. That helps us actually bring the remaining $25 million to $20 million of allocation to the marketplace. So what we talk about with fund investors and marketplace investors is that your partners, your partners in helping us achieve the best possible deal flow for the marketplace, but it always circles and runs through the marketplace. Like I said, it begins and ends as a marketplace.”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“Real estate private equity as we talk about a lot, it's finite. It's not like a stock. You can't just go keep buying it, right? In a case of a middle market deal, it's going to come with $20 or $30 million of total potential equity allocation. All that deal is going to offer. And what's important is that as we grow and scale our marketplace, the best sponsors out there, they have ample choices on how to capitalize their project, right? So they do want to see an element of certainty of execution in their capital solution. So they come and bring us a deal. It's got that $30 million of allocation, for example, and they'll look at the end of the day, the marketplace is a best efforts marketplace, right? It's a place where it can go. It'll subscribe investors will go into that project. But there's no absolute sense of certainty to it when we begin. It's based on the history and the track record of what we do in a marketplace. But now on top of that, we can layer on discretionary sources of capital, potentially on a one-off.”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“The point is that it's always based on the strength of the marketplace. That's the deal flow. That's why investors actually come to CrowdStreet in the first place. I'm biased, but I think we have the best deal flow in the country. And it was when we realized that we could do over 100 deals per year repeatedly that it dawned on us that we have the opportunity to create really interesting investment vehicles that just weren't eligible in other places because we're leveraging 250 plus relationships all over the country to then bring in over 100 deals trending to 150 deals probably or more this year and then that would give us the opportunity to then divide that capital and allocate it efficiently over such a robust number of opportunities that it would ultimately translate into an investment vehicle that looked unique and looked compelling. And so that's the strength of the advisory side of the business. And I think one last point really illustrates this as well is that when we look at a single deal, commercial.”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“Or the mandates within the privately managed account. It then runs through separate processes. One is an investment committee that I'm a member of, the other is through IWS advisors who canvass through the privately managed accounts. And then we review it for potential allocation from those sources of capital. And it's through this second lens, okay, now we're acting as fiduciaries, right? We've already approved the deal for the marketplace. Now we're going to look at if we're going to ask questions like, is this a good fit for this fund? Does it provide the diversification that we're looking for from a geographic standpoint, from an asset class standpoint, from a sponsorship standpoint, right? We have to, we are fiduciaries at the fund level, so we're going to make that decision. If there's five of the same type of deal that are coming through at the same time, and the fund is really going to only have the potential to allocate prudently to one or two of those, yeah, then we're going to choose between those one or two of those five deals.”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“This is a great question, Trey. And I think the answer to it sheds light on what I think is the core value proposition of our business. CrowdStreet begins and ends with our marketplace. It's the lifeblood of our business. So when we sought to launch the advisory side of our business in 2018, it was always centered around the idea that it would strengthen our marketplace while offering investors just an alternative path to investing through CrowdStreet. And so to take that from top to bottom, when we evaluate a deal at CrowdStreet, it begins as an evaluation for a marketplace offering first. It's after we go through that entire process. And if we approve that deal for the marketplace, it's at that point that we canvas it against our own discretionary sources of capital. It's from our funds and our privately managed accounts. And if it looks to be a fit for any of those fund mandates,”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“In, that's more of an intrametro migration trend. So now we're not really talking about in and out of the state as much as we are kind of talking. But overall, I do think that things will tend to normalize over the next few years. And I think even normalize to some degree for the Bay Area. And despite the headlines, we've already seen occupancy and rent bounce back in places like San Francisco. They're still great city. They got a ton of intellectual capital. And so I do see better days ahead for it and other markets that are like it. But we're going to have to, you know, it's going to take a little bit more, I think, towards the middle of the decade for that to feel normal again.”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“When you want to talk about net migratory trends, van lines, moving companies, they're great data set. So 2021 report by United Van Lines showed that the largest net outflows from state to state were Illinois, New York, Connecticut, and California, and the largest inflows, right? So who were the net beneficiaries? They were Vermont, Florida, the Carolinas, Tennessee, and Idaho. A bunch of other states too, but those are some of the ones that stood out. And Trey, I think just to finish this thought, there's definitely continued migration out of major metros right now. Fewer people are going into some of these dense areas. It's starting to change, though. I mean, we are starting to see some urban renaissance. We are actually bullish on multifamily, for example, located more towards the urban core. I think we saw, you know, there's a little bit of the tide went out. Tides, I think, is starting to come back.”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“Trip reverse direction. So you did know, and you saw you saw that people were moving out of California and they were going to places like Phoenix. They were going to Texas and they were going to Idaho and the like. But the number one destination for people leaving San Francisco has actually been it has been Austin, Texas. There was a website that's called MoveBuddha and they track some of this data and they noted that. You know, again, just pulling it back a little bit, it just goes back to the bigger picture of the reshuffling of the U.S. urban geography since the pandemic. This is going to continue on for years, I think, absolutely. We're always on the move. It'll trend down over time, but there's maybe a little bit of bump right now. And so one data source similar to the U-Haul story that you referenced a minute ago that I look at every year. I love to read the United Van Line study. It comes out at the beginning of year. So they just published the 2021 report. And it tracks you. I think it's great to look at.”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“Prominent in the Bay Area. Let's unpack that a little bit more. We looked at a report that was produced by the California Policy Lab that showed that in 2020, that was the first time that population actually declined in California. And you did see the Bay Area seeing the biggest drop, and that was due to consistent negative net migration in state. The numbers show that compared to pre-pandemic levels, about roughly about 45% fewer people moved into the Bay Area from out of state. And there has been this consistent trend for the last two decades of fewer people moving into California. I do remember we've discussed previously and we did talk about that whole, you know, the U-Haul phenomenon you discussed. I remember at one point during the pandemic, it was eight times more expensive to rent a U-aul from San Francisco to Phoenix than the reverse trip.”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“Trey, I think from our vantage point, we're still seeing those kinds of trends in the migration in the United States is still in place. And it's still occurring from a net drag on places like California. In addition, say New York and LA, still some net negative migration, and it's generally speaking going to some secondary markets and other smaller cities around the United States. I think when you bowl it up, people are still out there rethinking where they want to live. And there is this, you know, given that there is some continued momentum around remote work, as we've discussed, with this more flexibility to do so, like that's factoring into some of the migratory patterns. And I feel like that we need to remind ourselves that these migratory patterns, they were in place before COVID. It's just that they were accelerated through the pandemic. And within places like California, they are more.”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“Bad policy decisions one way or the other, whatever it is. That's the part where I think that if it's not well coordinated, there can be some risk. We've seen some examples around the country when mines are not on the same page. I think everybody just loses. So to me, that's the part when we look around the country, I'd say that it does start to factor into the equation a little bit for markets that we want to see municipalities that do seem to get a sense of how to get stuff done and how to come together and reach consensus to make decisions. Absent consensus, nothing gets done. And when nothing gets done, markets suffer. And that's particularly true in the commercial real estate industry.”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I mean, my perspective on those types of things is, again, I think that will show up in moderation. The other thing that I think in terms of, like, if you want to run three or four years down the road, I mean, with the amount of liquidity that we've injected into the economy, I do feel that we are relatively speaking in these zero lower bound type of environment, right? Interest rates can't go up too high. Nothing can get too out of bounds too fast because at the end of the day, we wouldn't be able to afford to service our own national debt. So I think that there's restraint that will always be brought and there will be moderation. Where I see the more risk is just kind of in the way differing municipalities approach different decisions. We've got a lot of tough decisions to make around the country in terms of how to invest in infrastructure, how to deal with budget deficits and so forth, right? It's the disagreement leading to potentially”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“I think we're a little bit disconnected from the strength of our economy and our political system. It's not great right now. It's too polarized. It doesn't work together to get stuff done. And so I think that would be the thing that could derail us. And so that's probably the one thing. It's something that is completely outside of our control. So for the most part, but that's what I would say as a perspective is hopefully it doesn't play into diminishing markets, but it's probably the one thing that might kind of set us back a bit.”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I mean, look, my overall perspective on inflation is that I think it does abate over the Interest rates kind of move up in lockstep. I don't see it as something posing a major threat to it. If it gets out of control, that's in the wheels fall off. That's where there's some risk. Roughly speaking, look, we all kind of think there's three to four rate bumps coming in the next year, 25 basis points each. If the tenured treasury is sitting at two and a half percent this time next year, that's probably overall a good thing for the industry. Rates have been probably too low for too long. If we think about risks, I mean, to be totally honest, probably the risk that I see is as kind of the outlier that could come back is political risk, to be totally honest. Like I think our economy is strong. What we look at, we're looking at roughly 4% GDP growth this year. We continue to be the market where the world wants to invest in. So I think from a macroeconomic perspective, trending down to microeconomics and market rate driven perspective, I think there's a really good runway here.”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“That we begin to view retail more in the perspective of something that feels a bit like last mile distribution. Maybe it's last half mile distribution, right? And if we begin to realize that this retail outlet is just as kind of differentiated form of delivering goods to a location, will it really continue to trade at a $250 or maybe 300 basis point discount to industrial? I don't think so. And that's why I think that there's hidden value in retail right now.”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“I think it is fascinating to think about it. It's just the optics, right? So from a cap rate perspective, the retail sector is valued on a cap rate basis, kind of like a dinosaur industry with little hope of growth. And what I mean by that is that while a good multi-family property or a good industrial property, as we've talked about just a minute ago, while that's a 3.5% cap rate deal, if it's stabilized, an equivalently good retail center in a same location is going to be valued around a 6% cap rate. And that's a big spread, right? That's 250 basis points of spread. And if retail continues to grow, its percentage of sales that are driven by e-commerce, but in a brick and mortar intertwined kind of hybrid environment. And if retail continues to grow its percentages of sales in brick and mortar locations that are driven by its e-commerce platforms, isn't it possible in the years ahead?”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“A stick around in a center going ahead. So then you take that environment and it layer onto it, look at some data that was recently published by the IHL. That discusses how national retailers expect to open more stores in 2022 for the first time since then they will close since 2017. And that's not surprising to me because today in 2022 we see more and more retailers intertwine their online business with their brick and mortar business. And then second, right, according to CBRE, we can look back at Q3 of 2021 and we saw that all retail asset classes experienced positive absorption and that reduced the overall retail availability to a 10-year low of 5.9% in Q3 from the previous 6.2% in Q2. So really the point there is that the fundamentals are coming back. And the final point about retail here.”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“Shopping centers was about 2.4x, right? 2.4 times the debt coverage ratio that you needed in net operating income. Then you take this hit on 33% of your collections. Well, what you're left with is a debt coverage ratio that's about 1.5. That's enough to pay your mortgage. You have funds to conduct tenant improvements. And you even have some reserve cash flow. And that was in April of 2020, like the worst time in our memories of what it would be like to own a retail property. So now fast forward today. That stress has burned off. In addition, it's also you absolutely have a scenario where the pandemic served as a bit of a forcing function. Some of those eggs, you know, those weaker retailers, they did exit some of the centers around the United States. So overall, really what that means is now the tenants that are in place, they just came through like one of the worst retail periods in our history. So they're strong. They're relatively strong. And they're probably like.”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“Is when we headed into the pandemic, we saw occupancy levels in our retail portfolio that were high. The weighted average lease terms were in excess of five years. And what that translated to was that the assets in the portfolio had really robust debt coverage ratios. And as you know, like one of the things that if there's one way to lose money in real estate, it's not being able to pay your mortgage. If you can pay your mortgage, you can kind of always see yourself through to the other side of a bad time in a cycle and eke out either a good, okay, some sort of return. It's when you can't pay your mortgages when you might have to give the keys back at the bottom. So pandemic hits, we saw, you know, we heard that news out there collection ratios dropped to roughly 67% nationwide. But what we saw was that good assets. So when we looked into our portfolio, if you had a well-leased property, your debt coverage ratio going into the pandemic for these fallacious”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“If you buy something online and you pick it up in a store, it counts as an online sale. But you went to that store, right? And you went to that shopping center. So what that tells me is that fundamentally online sales in this nation will tend to be overstated relative to reality while brick and mortar sales will tend to be understated. And there's actually probably reason behind that because Well, brick and mortar, it's not a great emerging story. It's a been there story. And online is the emerging story. So we even want the story to kind of go in the direction, right? The narrative wants to overstate the online story. Not to say that online's not growing because it is, but I think there's definitely a little bit of nuance here that's worth delving into. And so what part of me moderately bullish on retail right now even traces back to what we saw within our portfolio during the depths of the pandemic. And so what I mean by that.”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“This is the interesting one because I feel like retail has just been overly beaten up in the press. Headlines drive perspective. And I think in this case, that perspective is somewhat disjointed with reality. I like the retail sector in 2022. I think it's been overlooked since the beginning of the pandemic because of all that negative press that's out there. I think what's been happening in retail can be summed up during an interview. There was a, I like to watch the Walker webcast. I'm a fan of Willie Walker. Recently he had a guest on by the name of Frank Sepetas. What Frank points out is during the interview, he points to some Department of Commerce data. And what he also mentions is that how there is this liberal methodology that's applied when quantifying online sales. And so the story that he pointed out was, for example,”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“I mean, that was obviously largely thanks and part to the summertime surgeon travel. To me, this puts some winds in the sail of the hospitality sector. Expectations of continued recovery. And I personally think that by the time we hit towards end of 23 into 24, that's now new record-breaking year for the market. So as long as we can find deals that are kind of well thought out in terms of navigating some of the remaining uncertainty, then I think you've got a great story for great returns in the years ahead.”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“Trend of what are called work cations, right? So you work for a period of time, you recreate for a period of time. And I think that's something that's in an increasingly remote work environment. I think that's something that actually has momentum this year. So for that reason, we ranked the Colorado Mountain region as our number seven market for 2022. I do think that mountain towns are great places to kind of blend this work in recreating. So I think you're going to see some continued demand for those types of spaces. And overall, you can see all the rankings on which markets we like and where we like them and how we like them in our 2022 best places to invest report, which is available on the CrowdStreet marketplace. So I think to sum it up, Trey, like the fuel that drove this first phase of the recovery in the hospitality sector in 2021 was, I think,”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“Some recovery in 2021. I don't think any of us were really expecting to see record Revar on a monthly basis hit that year. I think a lot of us were thinking it was going to be 23, and some people even thought 24. So it's important to note that the market did start to bounce back. So I think that's what makes us reasonably bullish on the hospitality sector in 22. But it's also fair to say that, look, it should expect some volatility to remain in the sector until we really get post-pandemic. So now if you are able to kind of take a deal and bake some level of uncertainty into it for this year and buttress it with some things like excess operating reserves, I think you have a pretty good deal and those are the kind of deals that we kind of look for in the marketplace. So we like it first and foremost in Charleston. We're most bullish on that marketplace. We see a lot of momentum coming to it. We already saw it last year and continuing this year. And we're also leaning into this growing.”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“So, for example, we track occupancy in daily rate numbers that are provided by STR. So STR being the nation's leading data source for the hotel industry. So when you look at the STR Revar reports, now RevPAR actually stands for its revenue per available room. That's the product of average daily rate in occupancy. You'd find that the hospitality sector, right, it hit its high pre-pandemic high back in July of 2019. It was just under $100 at $99.48. It then got completely wiped out during the pandemic. It bottomed in April 20 at this brutal number of fifteen dollars sixty one cents. And then it started to perk up a little bit. And then back in July of 2021, which was a surprise to I think everybody, was that it set a new monthly all-time high of $99.95. And that was double of what it was a year before. So I think we were all expected.”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“Hospitality industry has been fascinating to watch since the pandemic. As we know, it was just brutally hit. It did bounce back pretty strongly in 2021. And for 22, we definitely see continued recovery for the sector. But with the acknowledgement of there's a possibility of some bumps along the way. And when I talk about 2021, right, we do what is now known is that we marked the beginning of the recovery for the sector. And that's important for the sector going forward because you do need a base to build off of. And also what was interesting even in 2021 was if I rewind to last year, you know, we were moderately bullish on some resurgence in the space. Assets were trading at lower levels than they were relative to 2019 pricing, but we were optimistic that things were going to start to look a little bit better for the space. What was surprising was we had performance in July of 2021 that set a new record.”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“Particularly as we see them lease up fast in multiple markets. I mean, in essence, you put up the walls. As soon as the walls are up, the tenants start to show up. And by the time the project's done, you might have it fully leased. You probably have it at least half leased. I mean, the rate of absorption has still been pretty astounding. And also, I think, you know, because of that speed, in years past, we would normally underwrite these projects to sell within three years, but in actuality, they're selling in two years or less. So there's just, again, there's just like high speed kind of velocity that's in the space that I think speaks to some opportunity that's there. And there's just so much purchasing demand in the market for these. And that's what's driving that kind of those stabilized prices that we're seeing, even though that the buildings are maybe still in lease up. And, you know, the final thing about industrial is we know the U.S. continues to need a lot more of it than it currently has. And so to the extent that we can reliably deliver industrial real estate to the markets that we like in the short to...”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“I'd say it has similarities to the multi-family story, right? We have the same rapid asset appreciation that we've seen, the same compressing cap rates we are now solidly into like mid three caps. As I mentioned, if it's in the inland empire of California, it's a three cap absolutely dealt. So for us, what that means is it's hard to find existing assets that make a lot of sense to us. It's possible, but they're rare. Similar to multifamily, because of that massive rent growth that is at the same time with decreasing cap rates, we're seeing this outsized spread come in development. So similarly, I'd say when we think about industrial development last cycle, we were looking at spreads of 125 to maybe 150 basis points, and that made sense to do an industrial development. We've seen that bump out now to about 200 basis points. So in general, I'd say that makes us favor ground up industrial projects.”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“Well, suited for it. Because if you think about an apartment complex that was built in 2005, it's still got good bones. It's got high quality construction. It now has higher ceiling heights than the stuff that was built in the 70s and 80s. So you can take that property. And if you renovate it, it can actually live very, very close to being to new. And we've actually seen that in multiple markets. Renovated 2005 vintage property with an really sharp interior renovation that's going to give you a new kitchen, new bathrooms, new flooring and fixtures and the like. And you can get very, very close to new Class A rents. You do still need to trade at a discount, but that discount is actually lower than what you would otherwise think. So that's kind of how we view the multifamily sector today.”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“Really like this strategy. We were then more pivoting a little bit more towards development at that time. But now fast forward to today, 2022. Again, with that massive rent growth that we just saw in all these markets, you can once again now take a $10,000 investment into a unit upgrade and you can actually yield more than $165 per monthly rent because of how much how fast rents have just spiked in a lot of markets. And now you have some of these assets that are just kind of like left behind, but they could catch up if they were renovated. We definitely do expect rent growth to moderate over the next few years, which again, to us to suggest that it's possible that the value add play that has kind of come back to the market, it might be gone by 25 or 26. But we like it for today and we're definitely leaning into it. And when we think about vintage of asset class that really suits his strategy, in 2022, it's an early 2000 vintage property that is really...”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“In Dallas, Fort Worth is a really good example of that. In one way that we evaluated them was very specific to looking at the return on cost of an investment into a unit renovation and what that would translate to in additional rent. And the metric that we used to see as possible was a 20% return on cost. So to quantify that, really what that means is for every $10,000 that you would invest into improving the unit, you wanted to see about a roughly $165 per month increase in rent. And in 2015 and 2016, absolutely that type of investment yielding that additional rent was achievable. Then what we saw was that later in the cycle, that return on cost tended to taproose, tapering down to the low teens. And by the time it hit the low teens, we were, I think we were kind of a little bit bloom was off the rose a little bit kind of, so to speak, when it came to like, do we?”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“So, I think that while there's still some supply on the horizon, yes, multifamily is being built around the country. We're seeing it in cranes wherever we go. But overall, we like ground up multifamily development because of this excess spread. And we're pursuing projects right now in many growth markets. The other thing that's also worth noting in multifamily that I think has now popped back up and returned as a strategy and is a little bit different is a strategy that we saw kind of taper in 2018 and 2019 is value-added acquisitions. So the business model for a value added acquisition, it's pretty straightforward. You buy a property, you think that it's well located, it's got what we would say good bones, but it's getting tired. And therefore, it's unable to achieve the rents that it otherwise could if it were renovated. Back in 2015 and 2016, we really like this strategy. We were leaning into it in a lot of places, I'd say Atlanta.”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“With reasonably trended rents, a project around a 6% stabilized yield on cost. And historically, what we've sought for these types of ground up multifamily properties is about $150 basis point spread between what we would stabilize at and then compressing down to what we would sell it at. So if we were stabilizing at 6% as we talk about, we would want to see that asset traded a four and a half cap at exit. Well, the good news is that today, if you're building it, it's not a four and a half cap. It's actually a three and a half cap. So really what that means is that spread between the yield on cost and the exit cap is now not 150 basis points, but it can be 250 basis points depending upon the deal and the location and so forth. So it's totally fair to say that we do expect cap rates to moderate and increase to some degree over the next three years, but not dramatic.”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“Right now, first, for anyone who follows our marketplace, you will see that we tend to favor Ground Up multifamily developments. And that strategy definitely carries into 2022. We've seen tremendous rent growth in the space. What that tremendous rent growth has translated into is massive appreciation for this asset class. For the most part, that rent growth has actually outpaced increased construction costs, even though they were up 12% last year. So whenever we evaluated ground up multifamily project, we ultimately drive the analysis to the unlevered yield on cost. We believe the asset can stabilize that by year three. That's once it's built and leased up. So again, unlevernt on cost, take the net operating income of the property, you divide that by the cost of the project to build it. That is your unlevered stabilized yield on cost. So what we are seeing right now is even in today's environment, we think we can stabilize”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, well, multifamily is ubiquitous. It's now, I'd say, kind of like the most widely understood and invested in asset class. So it's here to stay. And it's totally true that pricing's really popped up on these in the last couple years. And now we have record low cap rates. But overall, I would say that we still like multifamily and industrial sectors. I definitely feel that there's ways to continue to profit from them in 22 and beyond. But they are certainly not on sale. And they would kind of fall into the bucket, I think, though, right now of kind of like you get what you pay for. So with that said, you know, there's no doubt that they are substantially more expensive. They are. And I do think that it is wise to think about your approach to each sector. You know, these two sectors a little bit differently than you did in years past. And so I guess what I mean by that is when for multifamily, I think right now we see two strategies as most viable.”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“See cannabis industrial real estate in a given location traded the exact same cap rate as any other use. And so to me, this really means that, again, cannabis properties, they present what I would say, kind of a land grab opportunity, right? Get them where you can, watch that cap rate compression occur over time. And then one day they will look and feel and trade just like any other form of real estate. So those are the three, I think, niches that really stand out to us and we're pursuing all of those on the marketplace right now.”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“Like very solid financials, and you have a weighted average lease term of over eight years. And we're buying that property. And if we were to swap out those tenants with just conventional industrial tenants that could be like literally right down the street, if you swap those tenants in, that deal now trades at a 3% cap rate. So I totally get that cannabis is still an emerging industry. But to me, a 500 basis point spread in the same type of building, in the same location just simply because of who that tenant is right now, it's too much. I think that spread compresses in the future. And to me, what we're starting to get evidence of that is three years ago, four years ago, couldn't really get a bank loan on cannabis industrial facilities. You can today. So as the cannabis sector gains more and more acceptance over the next five years, call it, I think that you will definitely see those spreads taper dramatically probably. And it's totally possible that we could go a decade down the road.”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“People in companies want them to be located proximate to where they're going to deploy their goods and services. So I think, but if you can find them, there's demand for them and we're going to continue to do them for as long as that opportunity lasts. And I think the third thing that we are really leaning into as a niche is cannabis facilities. And I totally understand and acknowledge that this sector is still somewhat controversial, but facts are facts. This is a type of real estate that is becoming more and more mainstream across the country as states continue to legalize the recreational use of cannabis products. And so to give you an example of a type of opportunity within space that I think is really representative of what we see is the opportunity going forward is you can take we're about to participate in a cannabis industrial facility that's located in the inland empire of California. So in this case, the property is 100% leased. It's leased to two tenants, both of whom have”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“Down some gravel, fence it in. You might possibly erect like a simple storage structure on it, but not even necessarily. It's really parking for stuff. Then you take that and you lease it on terms that can range from three to ten years to companies that are going to store trailers, vehicles, containers on it, essentially groups and companies that are looking to solve their supply chain problems. What I love about this strategy is that you can rent them, which is really just land to companies with good credit. And what equates to about an 8 to 10% yield on cost. And to me, that's a short-term phenomenon that's essentially too much yield. I think that compresses over time. So I kind of think this is like a get it while it last type of deal. And so we're going to pretty much, we're looking all over for them. We're doing them wherever possible. The trick is assembling them because, you know, it's harder, it's hard to find them because they are, they tend to be infilled.”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“Thing here, which just is kind of like a feel-good part of it, is that it's a type of real estate that benefits humanity, right? We love the idea of being able to go into a deal, fund the construction of a space that will attract life sciences companies that are then going to go on and do research that might one day create real cures and treatments. So I think overall you can definitely expect us to continue to lean into life sciences. We're going to be doing this stuff probably for years. So from there, number two. industrial storage facilities. I think just as an overall like today opportunity, this is probably my favorite niche. And what you're seeing in the industrial services facilities, it really just to start off with it, like what are they? Well, these are basically yards. They're storage yards. You can imagine like an infill property location in a metro, maybe two to 10 acres in size.”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“Tend to cluster around specific areas. So we see opportunities near bustling urban environments, especially, I'd say, in areas where you've got type talent. You've got a lot of intellectual capital amassed. And you've got the presence of top research universities. So what does that look like around the country? Well, number one, Boston Metro, right? It's the number one kind of like, I think, intellectual capital of the world when it comes to life sciences. From there, you're going to see San Francisco, Raleigh Durham is an emerging, I think, cluster that's really interesting as well as New York. Another interesting point here is that you've got a market where supply is very limited, vacancies are extremely tight, and there's a record rising rents and there's some development. So there's some opportunity, I think, to participate in the space. And it's that super low vacancy is what gives us confidence in going into new builds. And, you know, I think the final.”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“Aging cohort live happier, healthier, longer lives, right? So that money is now propelling life sciences sector along this exponential trajectory path. And then I think the anecdotal like kicker here for us was we saw what happened during the pandemic to say, hey, when you dump a bunch of money into mRNA, you can get COVID-19 vaccines faster than we ever thought possible before. So I think we have this added spotlight to what's possible when you focus money and in efforts on treatments. So the speed at which vaccines were rolled out, right? It's just a testament, I think, to the success that's possible in this field. And investors, real estate investors, and private equity investors, VC investors, they're all taking note and they're all kind of doubling down. So now to the question, right, when we think about, okay, so where do we like? Where do we like for this niche asset class? Well, one relatively unique aspect of life science.”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“Right, what's widely known that we all get is that we have an aging population, so oh, what? Over the next decade, the 65 and older population will increase by more than 30%. That the fact that the 65 and older population on average spends three times the amount of money on healthcare as younger cohorts. So then we take that and we add on top of that the fact that we have this trend in data that's proving out that baby boomers, they're wanting to live healthier, more active and longer lives, they're demanding more solutions to help them do that. So in essence, we have this major demographic movement that's underway and it needs R&D real estate to support it. So now when we look back at 2020 and say, oh, well, we saw $70 billion of private and public capital poured into life science related companies in the United States. That's not a surprise. That's a 93% increase over the previous record that we saw in 2018. So again, VCs and private equity, they follow the demographics and the demographics are saying spend money on figuring out how to help this.”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, this is so these kind of niche asset classes has been something that we've been paying attention to on our marketplace for years. We've been hugely into them. They actually have been outperformers on the marketplace, so they kind of actually do perform while they're interesting. And so I think right now, I'd say there's like three types of deals that we really particularly like. So I'm just happy to jump into them. So first, life sciences. Life sciences is a sector that we continue just to see tremendous growth in. We're huge fans of it at Crowd Street, absolutely. And Trey, I'd say that what got us excited about life sciences when we were really digging in and getting behind 2019, we were really studying the space. I'd say it's kind of early heading into the pandemic was when we got really excited about the space, just kind of coincidentally. And it was the demographics and what was occurring in the space that really stood out. So just dive into that part about.”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“We saw the pent up demand leading to outsized rent growth, absolutely. In 22, we're seeing it moderate, but still, I think, above long-term trends, I think we'd say we roughly think it's 5% at a national level. It'll taper down to 2% to 3% as the decade ensues. But it's that wage growth that gives you some confidence that we can continue to see some run because basically like, right, again, the goalposts are moving on what people can afford.”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“Income, yes, affordable 30%, possibly. Yes. When you get into urban metros, you get into the biggest markets like New York and San Francisco, you see that go up to above 40%. You always have to put it into the context of kind of like what in this location of the country on average, what are people spending to live, then now you can start pivoting to wage growth. So if we see in times like today, when we're seeing wage growth occur, well, if you know these people in this location are making more money tomorrow than they are today, they're going to kind of look at their own monthly budget. I mean, yes, everybody wants to have more discretionary income for fun stuff, but if the rents are going up and you want to live in a nice place, then you're willing to pay, you know, that same percentage of your income. So wage growth is what gives you confidence in the continuation.”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“Growth. Now you're taking a deal. You have a confidence in what you can charge today. You can get more confidence by doing some additional analysis and saying, hey, look, if I improve units and I make them nice, I make them as nice as a property down the block that just is renting another unit next door to me for $200 more than me. Can I get that rent if I make my unit look nice? If you can get to that analysis, maybe yes. But then from there, you got to get to that demographics. Now we're going to get into that level of the wage growth because what you can know today is, hey, within my one mile radius, my three mile radius, my five mile radius, like what are the incomes in this location? And as we know, like paying rent, it tracks relatively to a percentage of what you earn, right? You can't spend all your money on rent. You can only spend up to a certain part. And it's going to range. So when we think about affordability, affordability is 25% of your...”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT
“Well, okay, so yeah, the answer is I think it all blends together, but it does start. It probably starts a little bit more with the rent growth because when you go in and buy a multifamily property, you're looking at the demographics in place. You're looking at what the asset is doing, how it's performing, and also when markets really run, you're going to look at, and we literally will do this in a deal that we look at today if it's an existing asset. What was the rent achieved on a unit type today and six months ago? And if that unit type just rented for just called a hundred dollars more per month today than it did six months ago, then what we have confidence in is not necessarily that it's going to rent for $200 more tomorrow, but that the six month ago lease really is $100 behind the market because you have proof points positive in your deal today of what is achievable on a unit by unit basis. So what you do then is that Trey to your point on when you think about weight.”
2022-02-18 · We Study Billionaires · TIP423: Real Estate Update w/ Ian Formigle · IDENTIFIED FROM THE TRANSCRIPT