Spring and Silverton Capital Updates

Thanks guys for being back. Uh, I would love to hear from you guys, what have you guys been talking about, thinking about this week, the last few weeks. You guys have a great newsletter where you're talking about a lot of market insights. Uh, one of them, I think this was the most recent one, was on Doug, the Department of Government Efficiency and how that. Affects, uh, things that you guys are thinking about and your perspectives.

So talk to me, Josh, I'll start with you a little bit about what you and Patrick have been talking about this week, last week. Uh, what are some things that you're thinking about and you, you've mentioned even talking to some banks and getting quotes on some, some services and products. So tell me a little bit about what's been going on in your world.

Uh, and a LX and Silverton, uh, which is a private lending arm of a LX and, uh, and catch all our listeners up so that we can, uh, get back into this year. Full speed ahead.

Um, and yields come in, which is just really beneficial for anybody, uh, in, in real estate that needs to borrow money, you know, people that, that wanna get mortgages included. So we're excited about, about some of those things. I think we're still in a wait and see. Unfortunately, there's a lot of policy that is. Not real clear yet.

I, I, you know, I, I think there's, there's optimism around it, but then you've got a lot of people that just aren't sure how some of these things are gonna play out. Um, you know, tariffs being one of the, one of the bigger ones, uh, immigration policy. There's still, I mean, we're starting to see, but there's still a lot of things that are, are yet to be seen. So, so we're still excited. I think 2025 is great. Living in DFW makes everything better.

Um, it's just been such a strong market for so long and we, we don't see that changing.

Uh, we're, we had to look at refinancing some of our portfolio and. Patrick and I got, got, uh, we, we looked at a term sheet this morning and, and it was good. I think, man, this is. This is nice. Like for years, you know, you had, if you had to get something, you know, you're trying to put out, put something out for debt, you, you know, brace for the worst. But, uh, now we're starting to see, um, spreads come in you, we've got yields that are falling.

Um, you know, and as long as they're falling for the right reasons, you know, inflation's. Coming down, they're gonna issue less debt, things like that. We're not, you know, if it falls because we're in a tough spot economically, we're looking, looking at a recession or something, that's not always great, right? But, um, it looks like they're falling for the right reasons, for the time being. Um, at least we, we, we, we hope, we think, and, uh, so debt's getting, you know, more affordable.

So, and mortgage rates are coming down. Anybody that's looking for a house right now knows that, um, if they're actively looking, they're, they're excited about what, what rates are doing the last several days. So, I mean, that's what we're seeing. We're, we're, we're seeing like kind of some, some green shoots here.

Like there could, there could be some good opportunities, uh, to find property and to develop it and to flip it, you know, you mentioned our private, we're always looking for people that wanna flip property, see if we can't come alongside 'em and, and finance those deals. Um, so things are looking good. Things are looking good. They looking, looking better than where we've been and we'll just, we're hopeful that. It's gonna just keep, keep moving up.

On, uh, tra leasing traffic at the beginning of the year. And it's ama I mean, and it's all weather. I think you're also coming off a very expensive end of the year, right? You got Christmas, um, and other things. The holiday season is expensive for everybody, but, and then you get into the, the beginning of the year and everyone's kind of recovering, but you're also dealing with that cold weather. Patrick, you wanna talk about that kind of what you learned.

The properties that we've had, that we've had for multiple years, and able to compare them to past January to see how the leasing compared. And what was surprising to find is that it was pretty static. Every January is fairly slow. We all know that that's a slow leasing season for the reasons that Josh is. Uh, listed out.

And I think the, the one other piece of that that isn't necessarily like consumer behavior driven is that what my suspicion is, and we'll see how this plays out, is the fourth quarter leasing was so strong beyond what anyone expected. So did that kind of eat into early first quarter, 2025 lease demand, almost kind of like a prepaid demand. Where a lot of it happened in a flurry at the end of the year, and there's kind of a little gap and we'll pick up momentum again.

Um, hopefully here, uh, in February, traffic is starting to pick up across our properties. And so, uh, but yeah, I mean, just to, um, thankful that we've got the internal data that we can kind of track to support what we're seeing, which is, which is a great place to be.

And so anyway, somebody told me that totally unrelated, totally different industry. I. Um, but it, I'm glad to to see that that might be the case for you guys and especially for real estate in North Texas in general. Um, so yeah, I'm, I'm encouraged to hear that. 'cause I, I want business to pick up. I want things to be, you know, more exciting. I want people to buy and sell homes and all that and just feel, I think, like, have a positive sentiment.

That's what I, I'm really excited about and I think, uh, hopefully the spring will will lead to that. So, uh, tell me a little bit more, uh, what else you guys are thinking about in the next, you know, couple of weeks or, um, you know, I know you've got more writing coming, uh, um, and there's different articles that you guys are, are thinking through.

Josh, you mentioned one in the Wall Street Journal that was talking about, um, sentiment, I believe, and then I saw another one that was about, um, credit card delinquencies. That they're rising a bit, but mostly for subprime, um, borrowers and cardholders. So yeah. Tell me a little bit more about some of your perspectives, some of the things you guys are, are talking about and seeing data on your side.

Uh, I don't know if that's, you know, necessarily something to necessarily something to be overly concerned about yet. Um, I think, I think we'll just have to kind of wait and see how that plays out. Uh, it does look like inflation is, I know we had a hot, a hot reading here recently on the CPI.

We'll get the PCE on Friday and see I, I think based on where the PPI was, and then they can, they can pull a lot of, make a lot of inferences from, for, from it, uh, as far as where the p c's gonna land. And it looks like it's gonna be favorable. So we're hoping to get some good news on Friday. That inflation, I think there's thinking is gonna be right around two and a half. Uh, both on, I think both just at the, at the normal reading and at the core. Is that right, Patrick?

I think two, 2.5 or 2.6. Both are coming in right there. Which, uh, I don't remember where, was it last month? It was, it was above that two eight maybe. So, I mean, making. Making like some really good progress there. Um, and that's what we need, right? We need everyone just to take a, take a breath and just kind of, hopefully we, we, and that doesn't mean prices are coming down, right? That just means they're not accelerating as fast as they were.

So, but, so it still puts a lot of pressure and stress on, um, you know, some of the lower, the lower income group that we really, that for our economy to be successful, we really need them. Um, to be spending and to be producing.

And, and a lot of times I think they are producing, but like we said, they're, that the, you know, if the wages aren't keeping up with the, the rate of price increases and that can be a problem when you're, when you're operating, when your economy is, you know, based is, is consumer driven. And 70% of GDP is based on. Consumer spending.

You know, we, we, we need consumers to, to be strong and, and you know, the Trump administration that they, they know that, like they've got brilliant people surrounding them. I think they're trying to drive, drive policy. Like that's one reason, like the tax cuts, right? They're, they're, they're trying to, to put more money back into the private sector and hopefully I. That, that, uh, increases, uh, production and, and allows, uh, private business owners to increase wages, you know, there.

So maybe you can fight on one end, you're fighting inflation by on the supply side, and then you're also, um, increasing demand by putting more money in people's pockets. So there's, there's things that they're doing right that, um, I, I think that they're hoping will, will really help the situation. But it, it is something to keep an eye out, eye on. I, again, like, I think it's also, you gotta be mindful of. These things play out differently in different markets.

Um, here in DFW where we are an expanding economy, there's a lot more opportunity. Um, you know, in other places that maybe are more stagnant. I think it, it becomes a, a, a more of a concern, right? If you, if there's just already there's limited opportunity and then, you know, you start to, people start to peel back, then that's where you really, those, those places could really get hurt. But, um, here we are. We are, I think.

Seeing that, uh, like, we'll, we'll see if this, this, uh, the tenant slow down or the, the home, like people, uh, looking for homes and stuff like that, that if that continues, that's more seasonal. Um, and if that picks up in the spring, then it'll kind of be like, ah, that was, you know, we thought that could be a factor, but turned out it wasn't. It's just time will tell. Um, but we are, we're certainly keeping an eye on that, you know, um, how, how are consumers spending?

How are, how are tenants feeling? Are people out optimistically looking for homes? Things like that.

A lot of our properties are kind of on the middle to lower end of the income spectrum, and, um, there's been, uh, a noticeable increase, not necessarily in rent that goes unpaid and never is collected, but definitely in tenants paying more, slowly, needing, requesting more time during the month to hit another paycheck, to be able to pay rent. And, um, for a while with those last couple months we're kind of head scratching, like, why are we seeing this?

But all the data says that that's not there. So it was good to get that article last week kind of confirmed that what, what we're feeling and seeing on the ground is what's starting to show up in the numbers.

But yeah, I mean I'm, I'm sure, especially on the lower income side and people are working multiple jobs, have kids and you know, they're just trying to make ends meet and if things keep rising, that causes a real problem. So, yeah, I'm hope, I'm hoping that, uh, the way you guys are, are kind of talking about what this ring may be shaping up, that it'll kind of turn a corner and feel a lot more positive for a lot more people.

So I, I think, you know, looking out into the future that's really optimistic in, um, in the single family home world.

Um, and that affects everybody on the price, all the way down to the, to the end user. Un until, you know, but we are seeing though, that, that people are like that. It is becoming, it's moving more into a buyer's market. Um, so people are pushing back a little bit more on prices. Uh, we're seeing more houses that are, that are existing homes that are put on market, are sitting longer. Um, we're seeing prices.

I think that the, the median price is still going up, but, uh, we're seeing, uh, a lot of times more people at listing have to, having to reduce their price. They're having to sit longer. Um, they're much more open to, to negotiation. I. Buyers are becoming more powerful in the process.

Whereas for years, you know, sellers kind of, they called the shots, um, because for, for a while, you know, price, we, we had, we still had the, the shortage and then you had such, um, attractive financing that you had so many people wanting to buy and, and, and not enough homes. And, and so sellers could kind of, you know, dictate terms. We're seeing that change.

Um, but we are seeing like there's, people are set up, there's so many people in the business and develop development, um, communities that are set up to build and develop, and they're gonna continue to do so. And as long as we have a shortage, I mean, they've got, they've got reason to do it. We, we, we do, we would like to see a little bit of a. Uh, we would like to see improvement right on, on, on interest rates for them, especially on, uh, on development costs.

But, uh, we, we think that's coming. Um, but like Patrick said, we, we, we work with builders and developers all the time, and we're, we're working with one now. I mean, people are, people need lots. They, they want lots. They're, they're optimistic about being able to sell, um, sell the, sell their product, whether it's to, you know, a, a build to suit or if it's a spec. I mean, either way they're, they're seeing that it, it makes sense for them to continue, um, you know, building.

So, um, as long as we've got the shortage, I mean, I think we're, you know, we're gonna be, activity's gonna be up. It just, it just may mean that we don't see quite as high price appreciation for the, for the end product and it, and we go into a more normal cycle where it takes 45 to 60 days to sell a home. You know, we're used to being, it, it to taking, you know, 30 to 45 days for a long time. And, and a couple years ago it was faster than that. You could sell a home, you know, maybe 30 days.

It's like, whoa, what's wrong with the house? But that, you know, people forget in a normal market it's 45 days, 60 days to, to sell a home. And we're probably just moving more into, into into that, that space, what it's always been.

Uh, because we've talked a lot over the last several weeks and months about Silverton Capital, which is a, the, the private ending, uh, lending arm that you guys have, um, have worked together on for, uh, developers, builders, flippers. And I wanted to just read a, a, a section of, um, some of the website and the kind of the new message and the way that you guys are. Kind of presenting Silverton.

'cause I think it's a, a really beautiful kind of passion that you guys have for this market to do something about the shortage and the housing supply, especially in the, the North Texas area. So I just wanted to read this really quick. Um, so the, the, on the headline of the site, we say Get capital that backs your build. Silverton Capital is a Texas-based real estate lender that has a passion for what you're building. We are borrowers who became lenders.

If you're developing, building or flipping and want a team that's stood in your boots, let's get to work. And so, and then you've got this, this great section about that entrepreneurial spirit of what it takes to, to be. A broker, banker, developer, you say the big dreams, the sleepless nights, the go-getter attitudes, the taking ground to grow and develop themselves and their teams to make a difference.

We know the entrepreneurial spirit required to develop, buy, sell, and flip homes, which often comes at a great personal expense. As borrowers, we're using our capital and expertise to revitalize the housing stock. Now we've become lenders who specialize in networking, underwriting, and loan service to improve Texas one home at a time. We care about the housing shortage affecting those who live in those who want to live in our great state. It's a problem we know we can help solve.

But more than that, we're passionate about the people on the ground. The builders driving nails and climbing roofs and repairing leaking pipes at 6:00 AM on a Saturday. The ones bearing risk with their hard-earned dollars to purchase or develop tracks of land, the flippers, working nights and weekends beyond their day jobs to make a better life for themselves and their families. We want to help them get there. That's why we join with our borrowers to help them succeed.

In addition to investing capital, we help guide, direct, and support our builders to ensure we have successful projects and investments. We open up our database and networks to make introductions and connect to others in the area. In other words, we are their team they can depend on to get the job done. We are silvered in capital. The team real estate workers can build on. So I just love that kind of image that you guys are painting.

And I, and I'd love for y'all to talk real briefly about Silverton and what you guys are, are hoping to, um, you know, where that passion came from and, and the mission behind Silverton, but then what you guys are hoping to accomplish with that, uh, venture. You know, in the coming weeks and months, I.

When you're, um, especially before you really know anything about it, just in theory sounds great and it did for me and it is alluring. But then, then you, you get into it and you realize it's, got its highs and lows, right? I mean, it's, it's a balance. And there's, uh, there's days that you show up to the office and, uh, you, you know.

You're excited and you're pumped up and you're passionate and you're, you're ready to go and you're just really feeling great about what you're doing and, and what you're, and, and you know the prospects. And there's days when you just, you really, you show up to the office and you have no idea what to do, or you have no idea where what you need is gonna come from, come from where it's gonna come from. And you, and you, you honestly, I mean, as a grown man, you, you, you break down.

You like, you want to cry, like you. I, I have no answers. Um, but you have, but one thing you have to maintain is that resiliency. You like, you have to, to know that you are called into the position that, that, that you're in, that there's purpose in it, that there's a plan in it. That the suffering that you endure is more about growth and development and that you will get through.

And then you get through and you, and then you celebrate and you have another victory, and you forget all that this is the best and this is all I wanna do. And now I'm thinking about growth again and development again, and where can we take this thing? And then, and then inevitably you come to another struggle and you're back on, for me, you're back on your knees, uh, you know, praying. Like, I, God, I, I believe you called me here right now. I have no idea what to do with this.

And, uh, so having, you know, experienced that, um. I feel a connection to others that, that are experiencing that too. And I know that it's all entrepreneurs, no matter how successful they are, they've gone through it. Um, at some point, uh, maybe long ago or maybe recently, or maybe they've gone through it several times. You talked to a lot of successful people that, you know, went up and down for years. Um, but the entrepreneurs that we're closest to are in the real estate world, right?

We're we're talking about flippers and developers and home builders and brokers. I mean, you real estate agents are entrepreneurs. I don't know if people understand that they work for themselves. Um, but that's who mortgage brokers. I mean, most of the people that we deal with, uh, work for, they, they run their own book of business. Now, they may not have their own entity, whatever, you know, but they're, they're kind of working for themselves.

And so we, we, we have an appreciation for what the people around us and the people in our sphere are, are dealing with and going through. And we want, and we've come to really appreciate it, right? We to, I mean, we have, but we've come to really, um, respect them, I guess is what I'm meant. Say respect and admire them for it. And, uh, and we want to, we want to be a part of helping other people succeed. So, um, when I, like, when I, when I look, go buy a house and I, and I see these guys.

That and 'cause we've been there, but are taking the risk to go out and, and look at an old, dilapidated house and thinking, I'm gonna put my personal credit on the line. I'm gonna put my personal finances on the line. Um, I'm gonna put my time on the line and I'm gonna go out and I'm gonna demo this and, and rebuild this home.

Um. You know, that to us is, is something special that that's a certain type of, of guy or girl that with, with a character and a work ethic and, um, just a determination and a resiliency that, that we just so appreciate and want to be a part of. Those are the people that we wanna build community with. Um, so we want them to know like, Hey, yeah, we we're, we're running a, a lending business.

We wanna come, we wanna come alongside you, and we wanna help you get your project done practically right? You need funds, we have funds. Let's, let's work together. Let's help you get it done. Um, we grow both our businesses in the process, but in addition to that. Uh, we want to be here for you, uh, to help you with, um, the challenges that you're gonna face, whether it's onsite or, you know, job challenges, or if it's just like, I'm going through a rough time.

I'm going through a struggle, been there, so you know, we, we can come alongside you and help you get through that. Help guide through that to the best of our ability. Um, but really we just wanna be a part of the community and we want to serve. We feel like this is where we're called to serve and help. There's a housing shortage, so we know people need, need homes too. We want to be a part of that solution.

Um, we know that there's many ways to solve that can fix, fix homes, or you can develop new. We'd like to be a part of both. Um, but we want to, we want to get in partnership with the people that are gonna be on the ground actually delivering the product. And we know that from us, kind of on a transactional guidance, um, capital like financing side, that's where we fit in. That's where our, our God-given skills are.

Um, and we have so much appreciation for the people that, that have skills on the operational side. And we wanna find those people and we wanna help 'em and work with them, and we wanna promote that entrepreneurial spirit. Um, and also just be a support and a guide and pr provide prac practical support and solutions when they need it. A lot of times they won't, right? A lot.

A lot of times these people are way further than, than we are, and, and they don't, they don't need our help, but we want them to still know that we're there. We're not just your typical lender that's gonna show up at closing and then, you know, and then at at payoff and make sure you're paying every month. We'd like to be involved a little bit more than that, and, and that's what we're trying to build.

I'm excited about Silverton Capital and what you guys are working on with a LX, uh, in general. And so we are restarting this podcast back up for 2025, so we will be with you every week. Um, please subscribe to the newsletter@alxrealestate.com and look forward to Josh and Patrick's, uh, insights Weekly, and then our podcast weekly. And, uh, we'll keep moving. So Josh, Patrick, thank you so much both for being here, and I'm excited to talk to you guys again. We'll see you soon.