YouSaid · the spoken record

Nick Halaris

lines on the record: 98
first: 2023-03-30
most recent: 2023-03-30
sittings or episodes: 1
sources: podcast

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“Yeah, this is what Trump really didn't want to have his tax returns out because he's been playing this game for his entire career.”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“And then you couple that with the 1031 exchange, which is the other component of this whole scheme that is super favorable. Imagine that same building, right? And you own it for 30 years. Let's see you own it for the entire time of which you depreciate it Under normal tax law, you would have to, if you sold that building, you would have to recapture that depreciation as income, capital gains income. So eventually the bill comes due. But they had this other little thing that you got in the tax code called the 1031 Exchange, which allows you to avoid that completely by just buying another piece of real estate.”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“If you buy a property for $100, I wish those existed. You report $10 of depreciation over one year. You can deduct that from your income, and your income is real money, and depreciation is a real economic expense, but it is not like you're paying it from your bank account.”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“So, California has gotten smart about this. This is more for the federal. So under the federal rules, essentially, I think if you can justify that you work 1,600 hours a year in real estate, there's no limit to the amount of passive losses that you can use to deduct against your income. So let's say you're super high income earner in California and you qualify as, or any state actually, and you qualify as a real estate professional. You could theoretically shield your entire income from federal taxes by buying real estate and using the depreciation. So you buy a $10 million building, you depreciate it over 30 years, and that depreciation is a non-cash loss that you get to write against an actual cash income. So it's incredibly favorable tax treatment. It's why Biden was talking about reforming this stuff when he became president. It is very favorable to the holders of real estate.”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“It doesn't seem to make financial sense, but in a place like LA, that's a common thing. And I think it's a function of there are types of investors who are motivated in a different way and like real estate. And so the motivations that you could have besides earning a decent return, because like Don't seem like a great return complicated but they're somewhat predictable right like there's a ton of people who are investing in real estate in a place like LA for tax reasons So, if you happen to be one of the people like Donald Trump who can qualify as a real estate professional, there's no limit to the amount of deductions that you can put against your income. So there's a ton of deals where people just buy buildings just for the sake of getting additional depreciation.”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“How is that possible? So it's like if it would take you 50 years to get your money back, or not really because it compounds, but you know what I'm saying? 2% return on an investment every year for real estate. I mean, it's not a riskless business, right? I mean, hurricane happening, all sorts of stuff happens, right?”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, exactly. And in that decade leading up to COVID, they had gotten down into the like high fours in Atlanta. In LA, I think it was more like six or seven percent and then got down in a class A, like an A plus neighborhood, they got down into the three and even in the beach towns, like even some two caps were trading in the beach towns leading into COVID.”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, yeah, let's talk about multi because it'll kind of be easy for people to understand the evolution and understand the extent to which the previous decade that we've been talking about really changed things. So when I first started buying properties in Atlanta, it was like 2011. And cap rates were like double digit. Like it was like 10% or something. Now these were like in a sense distressed assets. So they were yielding 10% for a reason.”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“Right. And as you said, it's not specific to real estate. I mean, like oil fracking, people can report EBITDA and not include the amount that had to have to reinvest in drilling because every single day you're getting less oil than it used to be. So you constantly have to redeploy cash. So it's certainly not exclusive to real estate. Okay, so now we have a percentage of a sense of what a cap rate is. What were cap rates maybe in 2019, what were they in 2020? And where are they now? Your world, yeah.”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“Emergency price of the labor. So there's all these games that people play, which makes real estate investing interesting because you kind of have to be a detective. You got to say, okay, what is really going on with this building? And is it a true three cap and compare that to the market? It's a tricky one. There's no be-all end-all way to value these deals. You really have to look at all the different metrics to get it right.”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“Let's take a standard item like a roof. If you do a roof, you're allowed under current accounting rules to capitalize that. So if the roof cost you $50,000, you don't have to run that through your P&L. That becomes a capital investment in the deal. It flows through a different side of the financial statements. But there's a lot of gray areas. Like, let's say you had a plumbing emergency, and the plumbing emergency costs you $10,000 because you had to have emergency laborers come over like, what percentage of that plumbing emergency is an operating cost versus a capital? Some of it's legitimately capital, right? You replace a bunch of pipes as a result of that plumbing emergency. That's capital. That's a legit capital expense, but some of it's not like the cleanup of the water.”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“And then the other thing that happens in industry, which honestly, I don't think it's technically accounting fraud, but it feels like accounting fraud because you can play games with it. Like, let's say you were a person who wanted to sell a building. You could move things off an income statement and put them on the balance sheet and capitalize it. You say, oh, okay, well, I spent $20,000 last month. I'm going to capitalize it. And unless the buyer is savvy enough to go look at those transactions, look at all the financial statements. They're going to miss that. You're going to miss that big expense item”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“You're saying if you buy a property, if someone's trying to sell you a property and it has rusty pipes and every day that goes by, the pipes get rustier. That's not being, and they tell you it has a 7% cap. That's not being picked up.”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“And if you only focus on the operating side of a real estate ledger, for example, or you miss the CapEx. And so to really understand real estate, you have to get into the books and say, okay, they're presenting an income, a net operating income of $300,000, but like how much CapEx have they moved off onto the balance sheet or how much CapEx have they avoided doing? And then you can really get an understanding of what your cash flow is. If you buy a building that has a bunch of needs, your $300,000 could quickly go to zero, right? If you have like massive deferred maintenance or something like that.”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“Cap rates are tricky because it's like any of these finance formulas is like garbage in, garbage out, right? And when you're going to look at buying a deal, for example, and you're not savvy about the games that people play with these numbers, and you can really get yourself in a bad position. Games are common in other industries too. The best analogy I can give is like, There was a time when Warren Buffett was looking at buying these pipeline assets. And pipelines are kind of cool businesses in a sense because they have like real estate type dynamics where you just get paid fees for people to use your pipeline. But he opted against buying these pipelines essentially because he discovered that they weren't spending any money on CapEx.”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“Sure, yeah, it's a good interesting question. Yeah, like people talk about cap rates and cap rates is sort of one way to value a piece of real estate. It's essentially trying to look at on a static basis, like compare it to like another income producing asset, like a bond. So you say, okay, this multifamily building in LA has a three cap. And what a cap rate is essentially is it takes the operating income the net operating income so it essentially takes like, okay, rent minus all of your ordinary expenses. What kind of number does that produce? And then it divides it by the value of the property. That's how you get it. So it's basically the income divided by value produces the cap rate. So if you have to pay 10 million and the buildings producing 300,000 of net operating income, it's a three cap.”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“Despite some modest wage gains and despite low unemployment, people are actually just on a real basis. They're not making as much money. And multifamily rents went crazy during COVID. 20% year on year, like in the markets that I operate in, 20 year on year growth. You didn't have to do anything. It just put a new price on it. The market was accepting that price. And I think we're seeing the natural limits of the ability for that inflation to be passed along. Just because the people paying the bills don't have enough money to pay that. Or in the case of California and New York, they're going to regulate it out of existence. That's what's going on right now.”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“And the jurisdictions that experience that have been getting more aggressive with rent control. So like the politicians are looking at this and saying, well, wait a minute, why are rents going up so much? And that's probably a whole other conversation we don't want to talk about like why that there's a housing supply crunch in America, or maybe we do. But to answer this question, I really do think. The idea that real estate is going to be saved by the ability to pass along inflation to their customers is flawed at this moment in time. And I think that's true across almost every property type. It's definitely true in office. Who's raising rents in office? 0% chance, right? 20% vacancy rate are higher in most markets. And multi, you've got this weird conundrum, which you just mentioned, which is like.”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“Length earlier in this discussion to talk about the future, what happened in the previous decade was that real estate investors like bid these assets up so high that the underlying yields on them are so low. So like in a hot apartment market, for example, deals were trading at three caps. So like on paper, like if you buy that deal with no leverage, you're going to earn 3%. And okay, with zero interest rate, that maybe you do that. Maybe there's like a rational basis for making that decision. But man, Fed funds is at seven. You got negative leverage. Like if you don't have interest rate, you got negative leverage. And what the theory was, and the theory was sort of holding true up until just recently, I think, is that you could pass along inflation to your tenants. And in the big cities, over the last decade, it's crazy. It's like 100% something like that is the inflation.”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“It's a great point. I'm glad you brought this up because this is something I've been thinking about a lot. Before the banking crisis, my viewpoint on real estate. Was that it was headed for a reckoning because of borrowing cost. Essentially like the borrowing cost had moved so fast and Fed funds looked like it was on pace to go to like seven or something. Not that long ago, like less than a month ago. And so seven Fed funds is like an existential threat to commercial real estate in the US, especially if you take in, that's why I kind of went.”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“What degree is it that they may be making 5% more than they were in 2019, but rents have gone up a lot and rent is a big percentage of shelter as well as owner equivalent rent. And that is supposedly why people look to real estate as something that performs well in inflation, that an inflation hedge perhaps, because if inflation is going up, you can raise rents.”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“They're probably getting less hours at their place of employment, or maybe they got fired and they're in a job transition. Like there's something about that sort of micro data that suggests that the macro data that we're seeing on unemployment is going to go a different direction. And maybe that's just the beginning.”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, it doesn't, it's definitely a problem in the Atlanta and Southeast area, for example. Here in Southern California, we own a portfolio, mostly higher end stuff, but we have some exposure across the spectrum. And a lot of my friends do as well. Not seeing that here, not seeing massive delinquencies, not seeing a bunch of late payments, not seeing a huge lineup for evictions like you see in the southeast. I do think there is some geographic specificity to it. But the fact that you're seeing that in a really like a dynamic go-go market like Atlanta, which is grown by like a million people over the last decade, is worrisome if just thinking about the macro picture. Because what it tells me is like, okay, well, why would somebody be struggling to make their rent payment?”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“Well, we've been waiting and things are getting worse and worse. Office is not really recovering and the economy is deteriorating. So like Fundamentals, even in a conservative side of the market, which is what I play in multifamily, like fundamentals are potentially deteriorating there. I'm hearing news, like, for example, in Class C apartments in the American Southeast, where we have a portfolio kind of in and around Atlanta. There's a lot of problems. So this. Despite the headline unemployment numbers, it looks like people are really struggling financially And not being able to pay rent. So, like, I've heard several from several large property owners that they're seeing delinquency percentages in like the 30% range. And so that's like what you saw in the great financial crisis, which is pretty serious.”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“Know if the owners of them believe they still have those values, but unless they're forced into refinance situation or they're forced to sell for one reason or another, yeah, they're going to be probably okay. But it Wait and see period is coming to an end. I think that's the theme that people need to really understand Starting around mid year last year, the attitude among commercial real estate owners. The top, from the big players all the way down to the small, was like let's just wait this out.”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“I think it depends on the property type. So there's a large segment that that's probably a true statement. So if you looked at Class A or even probably Class B multifamily in the United States, those sectors look pretty strong from a fundamental standpoint, unless you are one of these owners who had a really bad capital structure and had a high leveraged Floating rate loan with no cap. I think that's probably an anomaly in multi. So, I do think that sector is okay. Office is in real trouble. I don't know how office gets through this period without some real damage. And that's why the short interest ratio, if you look at like SLG or Vormado, these stocks, the market's already figured out. These stocks are in real trouble.”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“So, on the financing side, things look pretty grim. But if the fundamentals are good, you can withstand a lot of grim financing stuff. If you invested in multifamily real estate all across the country, the unemployment rate is below 4%. So people are coming in. They can pay their rent. And if you're receiving that money and that money is still in excess of loan payments, everything should be fine. It might not be a bump or crop as profitable as some would have thought because interest expenses eating into the profit. But entities are still solvent. Where is that? Is that analysis a little too hopeful?”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“10 to 20 percent. This is happening as we speak, and there's no more like waiting around. And with a banking crisis, it's only up the ante because if the banks were healthy, you might get in an environment like we saw kind of late in the GFC where banks got smart after a while and said, okay, let's not force all these borrowers to foreclose because it's only making stuff worse for us. Let's grant some extensions. Let's do some loan modifications. Now that stuff looks to me like it's probably off the table Because the banks are suffering from so many other Liquidity issues and mark to market losses on their other holdings. I see them less likely to be able to find the liquidity that you would need to make that decision.”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“Environment is setting up to where if you have to transact to get a new loan, like let's say you have a balloon payment loan that's coming due, you're going to have significant headwinds to figure that out. And some of those are going to be existential. Like what we're seeing with these foreclosures is it's literally like for the equity holders, it's an existential moment in time. And the crazy thing about where we are now going into the banking crisis, something like, I think I read like there's real estate loan markets like $5 trillion, commercial real estate. Half of it is coming due in the next five years. A huge chunk of it is coming due in the next year”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“Commercial real estate is in serious trouble. It's literally like on the edge. And like everyone who's following the space kind of understands how serious it is, like when you look at office, for example, like office, there's been a bunch of high profile foreclosures, not just two, like in the multi-space where most people are hanging on, but offices are getting foreclosures on left and right, big institutional investors, like the owners of these two towers in LA just walked away from deals. Like Blackstone's walked away from some offices, I think. To make that decision, if you're one of those individuals who runs those funds, you really have no choice to get to that moment in time and it's a sign of trouble. And in multi and retail and industrial dynamics are kind of different for each one of those, but they have the same problem in the sense that the macro.”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, it's not like office where, yeah, you're looking at like 20%, or depending on the market, could be even higher than that. So it shows you how big of an impact the interest rates have on these deals because the owners of those presumably have Hundreds of millions of dollars in equity tied up in them, and they just couldn't get them, couldn't figure it out, couldn't find some way to save the deal, couldn't refinance it. And so they just walked away from it, which shows you how stressed out things were even before Silicon Valley Bank started all this new stuff.”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, low loan to value and like the odds that you would have. The nationwide vacancy rates like 4% or something. So, like.”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“Exactly. So you pay a big upfront price depending on the size of the deal. This could be millions of dollars if you're doing a big asset, like $100 million or $200 million asset. And then if rates do go sideways or not sideways, go the wrong way like they did recently, that position really helps. Where if you went in sort of unhedged, no cap with a floating right thing, you're in trouble. And we've seen actually already like pre-banking crisis. We saw some big institutional investors who had four or five hundred million dollar loans that didn't have a cap just walk away from the real estate. So there was this portfolio in San Francisco that was back thousands of units of multi and one in Brooklyn, I believe was the other one. And that was sort of, I think, late 2022 that these foreclosures happened, which is crazy because it's really, you know, these are conservative deals, multis ultimately conservative.”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“So in the multi sector, almost certainly, I would have to imagine there's like a healthy amount of the loans or a fixed rate because of Fannie and Freddie involvement and HUD and FHA. There's a whole suite of these government-sponsored loans that you can get access to. And then even in the bank, so the banks were active in this space, very active. But if you were a prudent investor in the let's say you're putting a deal together in 2022, early 2022, you can see the wins of a hiking cycle. You could buy these caps. So there's this whole industry of buying interest rate caps even on your loan that you originated that's floating and they have a cost to them and it just makes the deal slightly less lucrative for you.”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“So, IO is interest only. So unlike a mortgage, it's like a bullet bond. You pay it back at the end. So no recourse means all they can get is the building. They can't go after you if you don't want to.”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“Multi is probably less because you have the Phenomenon of the sort of government sponsor players. So after the GFC, Fanny and Freddie stayed in the business and they're a big player in the multifamily business and they offer like for investors like me like truly incredible products like interest, fixed rate interest. Loans 10 years, often with long periods of IO. And these loans are not even recourse. Or like if you go to a bank and they'll demand that you sign a sign for them personally.”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“I think it does vary kind of by sector. So if you look at multifamily, for example, it's a different percentage than it would be for offices.”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“Of mine in the industry that. Finance their deals with floating rate debt, and they look great. They're making cash flow every month. And in like two months, they went from making a significant amount of cash flow to being completely underwater because if you're paying two or three hundred percent more on that line item, it just blows up the economics of the deal. So it's very impactful. And it's sort of like the main risk. Like when you think about real estate, like there's real estate risk and there's interest rate risk. Those are the two big ones.”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“Interest that you pay on that leverage is a major cost item. I forget the numbers, but and it obviously depends on where interest rates are. But it's like one of the most important. Basically, that interest cost, real estate taxes, and insurance add up to like a huge percentage of the cost of owning a piece of real estate. And so depending on how you've structured your deal, if you have a floating rate debt instrument, for example, If the Fed raises four or five hundred basis points from zero, you're talking about like a massive increase, couple hundred percent increase in your biggest line item. And so, you know, had you structured anyone who structured deals like that in the days when interest rates were low, they got themselves in trouble real quick because of the pace at which the Fed was increasing rates. It's like all of a sudden you could have properties. Like I have some colleagues.”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, it's really just a function of sort of the mathematics of a deal structure. Like you mentioned, almost all the real estate deals in this country are put together with a significant percentage of debt. In the pre-GFC days, you could get like unlimited debt. Like there was no cap to the debt that you could get. But the banks and the lenders got smart after that Change things up, but in the pre COVID days, we were getting loans leverage in the 70, maybe if you had a really good asset, you could get like 80% leverage.”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“And then we get to a few weeks ago and the failure of Silicon Valley Bank. And real estate's already kind of in trouble because rates are headed in the wrong way. And now we have this sort of, not really a black swan, but this unexpected new element that emerged into the marketplace, which is making things even more uncertain.”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“market inflation's running out of control real estate is still doing just fine you know if you look at the first half of 2022 there's some massive transactions people sold you know people who sold in that sort of window before the fed raised four or five hundred basis points achieved some really like you know record setting valuations and then they started raising rates and the attitude in the real estate sector was like okay we'll just wait this out This will be a short-lived rate cycle. Let's just, you know, so transactions volume went down. People like me just kind of sat on the sidelines like, okay, this is not good for the market, obviously, because there's like this inverse relationship.”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“You had the combination of the pandemic and the shutdowns, but also these governments passing sort of very pro-tenant laws. And we were worried at Metro's Capital. We're like, man, how many people are going to use those programs and just stop paying rent? Fortunately, none of that worry came to fruition and we emerged from COVID even better. Real estate just went higher and higher for a whole bunch of factors, you know, probably because of, again, all the stimulus that went into it. Fast forward to 2022”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“It allows the values to climb higher and higher and higher, right? There's this global search for yield. Investors like myself are out there buying real estate assets, putting on insanely cheap leverage on top of them, trying to improve their rents, trying to raise the rents, you know, in the case of multifamily building. But this is true really across all property types. And so we went into the COVID era with like an incredible decade of real estate performance. Like literally some of the transactions that I was involved in, like were up like 500% or something on an absolute basis. So you put some leverage in there and like the returns are looking like a crypto 2019, 2020 crypto kind of thing. So real estate will stretch and it was stretched because of all these macro dynamics around the search for yield. And then we went into COVID. And honestly, when COVID hit, I was like, man, this is dangerous. Like this, this is going to be like the craziest thing I've ever dealt with because.”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“What this all goes back to, it kind of goes back to QE, which in previous conversations that U of I had, we've talked about the origin of quantitative easing and what was happening in the pre-COVID days and all that. But the reason why real estate is in kind of the next fault line is that the sort of stimulative Fed policy that we've been engaging in since the GFC. Was good for real estate in the sense that.”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“Is one of the most critical moments in the history of American real estate. Like real estate is emerging as sort of the major fault line for not only this banking crisis that we're in the middle of, but also kind of like the future of the economy. And things aren't looking that good. In most of the sector. Like there was a report yesterday, the US real estate is like the third most shorted sector in the market and the number one most shorted sector in the global equity market, something like 40% of the eyeshares like real estate index. People are scared about real estate, and probably rightfully so. A lot of things could go wrong from here, which would be bad for owners of real estate and developers of real estate like myself.”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“Exactly. Like our core business apartments, and those are usually bucketed with commercial. But sometimes people kind of leave it like it depends on what analysis you're reading, but they sometimes leave it out and they have a separate category for apartments. So you just have to be careful what you're looking at. But it is commercial real estate.”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT
“Thanks, Jack. It's great to be here. Everything is going good here in California. We have a sunny day, and at least today the banks are still functioning. Yes”
2023-03-30 · Forward Guidance · Commercial Real Estate Is In Serious Trouble | Nick Halaris · IDENTIFIED FROM THE TRANSCRIPT