Unlocking REIT Potential with Bill Chen: Navigating Multifamily and Office Market Dynamics

Ladies and gentlemen, welcome to the business Brew. I'm your host, Bill Brewster. This episode features Bill Chen.

I guess the way I think about this, this is probably the last REIT episode I'm going to do. For a while, at least. As it pertains to multifamily and whatnot, but Bill was on in October of last year, he started to get pretty vocal about his perception of the opportunity in Reit's. I would say like call it 12 months ago. And he's sort of the one that planted the seed in my mind that these are maybe better investment vehicles for a portfolio then I may be appreciated in the beginning.

And I've gotten no Bill pretty well. And we were in New York. He walked me around while he was showing me how he does due diligence on real estate and we had a little walking tour of Manhattan. It was nice, stopped, got some good Korean barbecue, and you know, we just spent some time and talked about how he thinks about things. So I think Bill is a really good guy that is worthy of highlighting for a number of reasons. I think he's a real asset

specialist. I think that's really his bread and butter. And I think he's trying to spread the message for the right reasons. And if you like what he has to say and you're open to some active allocations, he's somebody that I would consider. So that's my thoughts on Bill and the reason for this episode. I think we're probably going to go dark on the REIT theory for a

little while. I wouldn't mind talking about some other kinds of Reit's, but this will be the end of the multifamily sort of pitch, for lack of a better term. And I hope you all enjoy. As always, none of this is financial advice. Everything in this program is for entertainment purposes only. Consult your financial advisor before making investment decisions and do your own due

diligence. Right, ladies and gentlemen, joined with a man who has been mentioned a couple times in passing on the pod and joined and has been on the pod actually. And we did a space together. This is the first like formal podcast, I guess that we're doing. But Bill Chen, lover of all things real estate and very good Korean food in New York. Well, glad to be on Bill. And that was a hell lot of fun, walking around checking up one of those assets and getting

Korean food with you. Yes, I I landed on Monday and got to the hotel that I was staying at and then met you at what, By Penn Station. Then we took a little walk. What did we do? We did. Like 4 miles. Or so, 3 1/2, maybe three, I don't know. It's the fish. We definitely did. We we definitely did. 3 miles

that that that night. I mean, you figure you start from Penn Station, go over Hussing Yards and then head up to Times Square and head over to 5th Ave. go down to Park Ave. and see JP Morgan's new headquarter and then and then went walked out to create K Town and get cream food. I mean that's I wouldn't be surprised if that loop was something like 4-5 miles. Yeah, yeah, it was fun. I I enjoyed, I enjoyed walking the city with you. I enjoyed looking at at the Vornado stuff, which will or

Vornado we'll get. We'll get into that as the conversation goes. Couldn't help but think that the

middle of Manhattan is full of a lot of office that hopefully can become data centers or something someday, because I'm not sure how many of those older offices are going to be repurposed, but we'll see. Well, we know, we know two of them, right? JP Morgan's new million plus square foot headquarters on Park Ave.? That's different. I'm thinking like between, I don't know, call it like 30th to 46th, then then between like, I

don't know, 5th and 8th. They're just like a lot of buildings that that I was looking at that don't have great frontage and like they're in I, I don't know, we'll see, who knows, but it seems as though you need fewer square feet than you used to. I don't, I don't think that's any ground breaking. You know, I don't, I don't know, this isn't a unique thought, I don't think.

But a few times in real estate, I'm old enough to remember when millennials weren't going to have kids and I'm old enough to remember the death of malls. And, and my general assumption or I guess operating hypothesis is I, I believe office is going to be a lot like malls in the future where you know, the Class A is going to be OK and then everything else is going to get,

you know, in some trouble. That said, I don't know if, if you have a lot of Class A that's been delivered, I'm not sure that that the building owners will be able to extract the rents. You may just have tenants hopping back and forth. Yeah, I think, I think I, I think John will agree with, you know, most of what you lay out. I think, I think it's going to be very difficult. I think, I think the indoor mall is not, not so much the grocery

shopping centers, the outdoors. I think if you look at the trends in the indoor malls, what you have clearly seen is companies like Simon Property and to sort of set Mace Ridge, they really stand out. They tend to own the Class A location, they have the Class A properties and they're still relevant that, you know, they've added, they invested in food courts and different amenities and they generally done a good job and they they're still relevant today.

And what if you look at the B and CS? And then it is just say absolute nightmare for those owners because, you know, with the advent of e-commerce, they just can't attract the tenants. Occupancies fall and then you have to spiral the death malls, right? And I think that you you'll probably see a similar trend in office where the Class A as as you and I walked around New York City and we looked at some pornado's buildings, you know, PEM 1 pen two and the post office.

That's least the matter. I mean, those are gorgeous buildings. They have do or many they recently invested capital in them and they have really good long term tenants that strategically located in public transportation hubs. So if you take train and you get off it and you're right there, right, You're not taking another, you're not walking two avenues over.

But I think where the problem assets are going to be the mid block, say as we walk in up to Times Square on a wall in between, you know, 34th and 42nd, you see a bunch of these mid block where the frontage, the windows are only on on one side. And then you're literally sandwiched between two other buildings. That's a generally older building. I mean, those are probably going to go the way of the debt.

You know, the debt malls, right? There's a guy on YouTube who will go into that malls and and and he takes videos of him and, and it's. It's kind of. Creepy. It's literally like it feels like what a the start that the sight of a horror of a, of a, you know, a Horror Story. And I think that, you know, a lot of those BC offices are probably going to suffer the same fate. And I've been trying to think about, you know, what do you do to them? Are they natural self storage conversions?

Are they, you know, we I kind of joke when we say that they're great for indoor mushroom farming in a very high cost area like New York City, which, you know, clearly a joke, right? Yeah. You know, are they potentially the sensory deprivation, you know, facilities.

We don't know no one, no one. I actively discussed this topic with people on Twitter and no one has a clue to be able to repurpose them in a cost efficient way that's going to generate a real, you know, a reasonable return for the developers. So I don't think anyone has a solution for them. And then on the other side, if you have a building that's kind of a skinny rectangle with exposure of four sides, I mean that's a project that's got relatively easier to convert into residential.

Yeah, Yeah. Well, yeah. You want people to have some sort of light in what they're, I don't know, maybe, maybe people need to revisit whatever Charlie Munger wrote about how he was doing the student dorms. Maybe, maybe there's a an answer that Charlie has left us a clue on because it's it would have, it's going to have to be a creative solution. They do not appear to me to be buildings that have an easy solution, so we'll see.

I have been thinking about the the prospect of everyone talks about the high cost of high cost of higher education and you think about the lack of student housing in the city and men and and you know, throw Monger in there and his design for the dorm room in California. And obviously they got a lot of pushback from architects for having lack of windows on the inside and and you know, obviously that got that didn't get the green light to be approved.

But I think that if someone was listening and and want to kind of build a, you know, take down a million square foot office building in New York City and then kind of turn the into your space into what your hall was like kind of stadium style. Did the exterior is as kind of dorm rooms with no exposure. And then just kind of have a bunch of activity centers and, you know, cubicles for starting on the interior.

Like that's something that I didn't kind of like you're playing around with in my head in recent times. But no one's, no one's move. Yeah. I mean, the issue is there's just so many square feet, right? Like that could work for a building. I don't know about every building, right? So that's true. We'll see.

What is your level of concern with how much risk sits on on bank balance sheets as a result of lending to these office facilities or office buildings? So I think I think it's important to take a step back and I'll give a long winded answer to that and take to that. I think let's start. With the shape that the banks are in today versus you know they what they were than the GFC and. I was. I was at the center of the GSCGFCI was a city doing real estate investment banking.

And one thing that's clearly very different today is the bank balance sheets are level 30 times, which was very common at the time, right. I know most of the equity capital was over 10% of the book today. So I think that's a very important differentiation to make. And if you look at listen to some of the Aries calls of the bank, you know, most of them have kind of come out and stated that, you know, told you what

their office exposures are. And you know, to varying degrees like there's nothing in the big banks. You know, I'm talking about the systemically important, like your, your, your city, your JP Morgan, Bank of America, No one's. Really, I have not heard of any of them saying that they have very large. Exposure to office and I think you'll probably find more of that risk among the regionals on the smaller banks.

So I think, I think it's important to understand that today's environment is very different than the GFC because I do hear this chatter a lot, right people, people say, oh, this is going to be the repeat of GFC. You know, again, the banks are going to be stressed. I think the banks are in very different shape today of due to leverage ratio. But I think the Fed has also learned that you can't let a systemically important bank fail kind of what with what happened to Lehman, right?

Lehman was an experiment. They let Lehman fail and and then the Fed kind of have to come in and then check all that liquidity. And then if you look at their that the feds response to First Republic, you know, they clearly did not want a regional bank to fail. They acted very quickly. And then I thought that might have been the beginning of a, you know, kind of liquidity tightening up and liquidity going away and the regulators active very, very quickly to stop the contagion from

happening. So I know I didn't directly address your office question yet, but I think, you know, it's, it's important to, to have a framework to understand the, the shape of the bank, their, you know, balance sheet and kind of shape they're in. So I'm not aware of any large office exposure more on the systemically important, but doesn't mean that they don't exist.

I think a lot of that lending, I think a lot of it exists at the regional bank, you know, at the regional banks and the regional banks, you know if one or few of them fail probably would not create a systemic shock to the system. So that's kind of, you know, I'm generally better at analyzing individual reads and companies then you know what, what's going

on on the bank balance sheet. But I think a lot of that risk have also been offloaded to CMBS have been offloaded to some of the debt funds that's been set out to take place of, you know, what the banks do. And so the, the, the kind of compound answer is, is I know it's not a big risk for the systemic important banks. It's out there somewhere, but you know, I it's hard for me to quantify it.

Yeah. I mean then I think that the general concern is just that this office exposure is going to take down banks willingness and and already has to lend, right. So, so is there a worry that it becomes systemic and, and from talking to you, I think the generally your view is that the capitalization of the banks is much better and overall we're unlikely to be headed for another GFC, right? I think so. I mean, I, I believe very strongly that we're not heading towards another GFC.

And, and so like, one, the, the bank's capital ratios, their balance sheets. And secondly, you know, you think about the GFC and there were a ton of subprime loans at the time where, where the, the borrowers could, we could not afford them, right? I mean, that was a very, very different game. This feels like a story from the big shore. I was working on a gym and that, and there was like one me head saying to another me and he's like, I bought a house and I flip it three days later for a

$50,000 game. And, and the, you know, the other me head goes, wait, how does that work? And the first guy goes, I don't know. It just does like I'm just keep doing it.

Yeah, Well, I think we've seen not the same thing, but we've seen some of that behavior recently, but not, not what am I trying to say here without saying it directly, I guess that there, there seems to be pockets of people's willingness maybe to go into small syndicated deals that they find on social media where it seems like maybe they don't know how it works, but it works for now. And but I it's not a it's not a

systemic issue, I don't think. And particularly on the systemic side, like particularly in what we directly invest in, which is a lot of big, you know, all the public traded Reeds and C corps. If you look at their balance sheet and the evolution of the balance sheets over time, we've looked at some of the top names like your apartment reads, your warehouse reads like Prologis. At one point Prologis than the GFC couldn't cover the interest payment, right? Get one below 1.1 times today.

Prologis coverage ratio I believe is somewhere like in that 910 times and then most of the big large capital type family reads could cover their fixed cost of 6 to 8 times. I meant were and then by comparison you will get some of the private syndicate deals. Most of the time the bank will only underwrite it if you could cover 1.25 times. So the coverage ratio is night and day, right? To borrow this overuse analogy with Buffett and margin safety,

right? If you think about a truck driving over a bridge on the private side, the bank space, we're saying, OK, if you got a truck that's 10,000 lbs, like as long as the bridge can handle 12,500 lbs like you're fine, you we'll give you that loan. But on the public read a lot of large cap public reads like you know. You could drive a truck that's 80,000, you know 60,000 lbs. Over the bridge could handle a. Truck that's that's sixty

£80,000. So it's a very different landscape and also like if you look at the capital market transaction of large cap multifamily you know mid American can them both issue hundreds of $1,000,000 of debt unsecured bonds that are 10 year fixed rate at between 4.9 and 5% earlier this year so. The capital markets. Is wide open for a lot of these rates, which is very different.

You know, I lived through their GFC and you have general growth properties, right, Bill Ackman's famous investment, but one of his greatest investment was General Growth bought a another mall company and issue $5 billion.

If I remember correctly. Five bill knows unsecured debt and and that loan came due in a big chunky bullet and it came due in 2009 and the capital markets was not open and you and and all of a sudden like you didn't they didn't have any issue servicing that, you know, the the interest payment on that loan, but because it came due at a time capital market was just absolutely not open, jungle had to file for bankruptcy.

And and that is. You know, I think one of the key difference is that we, we were just at Mary early in June and all the Reit's that we met with none of them, you know, they, they could tell us exactly within like a 50% basis coin. If they went to the marketing issue debt today, you know what, what would it cost? And it's generally between 5 to 10 years fixed rate. It's unsecured. They don't need to mortgage any of the assets. So the capital markets are wide open.

So, so you and I both follow a lot of their private syndicate deals. A lot of them use floating rate, that very short term maturity and a lot of them are kind of have to deal with lenders right now. But on the public reset, we're not seeing any really any side

of the stress. What people, what the CEO's are more concerned about is actually some of the companies we've met with are are too small and they'll worry about like how how do they grow into this scale to be in a public traded company? So they're public now, but they are subscale and the public company costs are sort of eating up the some of the benefits that that they otherwise would. They're they're too small to get the benefits and the costs are too high.

Well, Yep, that may be changing in the not too distant future. We'll see. I think it'd probably be good for America if it does. OK, I, I want to go back real quick because we started the conversation with Vornado or Vornado. And you know, I've, I've heard you pitch this idea on this week in Intelligent investing with Elliot and John. And I don't know what your like level of confidence is relative to when you bought it or

whatever. But but for purposes of how you go about your business, you mind walking through like why we did that walking tour and how you looked at at the capital structure and where you thought the opportunity was when you put the position on? Yeah, absolutely.

So generally when we look at a new investment and what we're trying to do is there are multiple ways that we try to underwrite investment. And. We really believe, I know everyone stresses data and we rely heavily on data, but one of the things that we do that's a little bit different than public market is, is we, we think like private owners, right. We think, OK, if I'm going to own this position, but I'm going to own this company, I need to

put boots on the ground. And that could be in New York City, that could be down in Miami. We we need to see the asset. We need to get a feel for the location yourself. We need to get a feel for the people around in and what some in our business call vibes, right? Like, you know what, what's a vibe in the neighborhood? And the Vines gives me a lot of. Feedback and data like it is you know it is this an area where a. White collar professional who's making, you know, $250,000, like

would he be happy living here? Like that's that's an assessment that we take very, very seriously. So boots on the ground, any time that we could put boots on the ground, we're going to. I mean, you know, I've flown over the US, been down to Miami and spent time in Hawaii, been spent time in taxes Vegas, you know, sometimes multiple days,

right? Multiple days waiting up to a week for a single conflict to get a feel for and interesting, you know, in real estate you have sometimes an area is on the edge of becoming the up and coming neighborhood. And we want to understand that, hey, are we in the direction of this trend or are we retrieving away from that?

And is there some sort of natural geographic barrier where if all the demand is, is coming to this one area and you have a natural barrier such as a mountain range or a river or an ocean that that you'd naturally just can't bring on new supply, right? So that's a really important part of the process. And then obviously, like we spend a lot of time looking at the primary data sources, the QS and the KS annual reports and and the supplementals.

One of the biggest advantage of reinvesting is company provide you with incredible, incredible amount of detail in the supplementals. I mean, the supplementals a lot of times could be fourty 50 pages and you could get occupancy data. You know, rent and and Yahoo tenants is on individual asset. You know when? When. You kind of think about. Buffett and Seth Corn and talk about bottoms up analysis,

right, asset by asset analysis. This is one of the best asset class to do that and we spent a lot of time looking at the supplementals looking at and we track trends over time on specific properties. And you know, what's really unique about the Pornado analysis is you, I think a lot of times what people get wrong is they'll look at Fornado from a consolidated leverage perspective, right?

They'll look at the consolidated then and they'll say, Oh my God, this $10 billion of debt, you know, there's too much then. And if you look at the even that ratio, it's over lever by REIT mafia standards. And what we do is we'll look at the unsecured debt. So if you own the prefer or the common that's got that's got to be more junior to the unsecured debt, right and the secured debt which actually would actually sound like that more senior. To the unsecured, the common

prefer. But in real estate there's a very unique quirk where a mortgage has only has collateralized by a single asset. Very often it's only collateralized by the single asset that the mortgage has a claim on. So it could be one single building. And as we were walking around New York City, a prime example is one of the buildings on Park Ave., which is has a $400 million debt on and it's it's an older tire looking office building. It doesn't look like much.

But Fornado actually has an agreement with Citadel to build their future headquarters there. And at any given time, you know, Fornado could put that building back to you Citadel for $900 million. So what looked like an older building actually has a that's a non recourse mortgage, right, where they could kind of they give the keys back to the bank if it goes really South and they're not liable for for any more of that any more than $400 million on that.

But they also have a put option to citadel. So one way, one way to visualize a lot of this is that for NATO has the silos, right, All the debt, a lot of the debt are non requisite, a couple properties where they guarantee the debt on, but that's that's the exception rather than norm. So you kind of think of it as there's all the silo with white equity capital in them and you can you can let some of them should teach with the fault, right.

You know when they do own some of those lower quality BNC office where it like ideally what you want is you want a bunch of dead that are 9095 or even 100% loan to value and you can just tell the. Bancake. We don't. We don't want that. And and that, that goes away, right, That that goes away and, and it doesn't really cost you much.

So I think anytime you will get a read that has a combination of unsecured debt, preferred common and mortgages that are non recourse to the common shareholder, you really need to do a silo analysis, capital structure analysis and identify where the silos are and if there's any optionality and you should equate the faulty on certain portion of the property. Actually, you know, if you look at my there's, you know.

Got that book The Distressed Analysis but I have Steven G Moore in a vac there with a chess board. I mean, that book was very educational and helped me understand how in a bankruptcy liquidation, how you go about liquidating a coffee. That has various different type of den and then the mortgage then and how the process of like how the water floor actually flows in a corporation.

Yeah. And I think that the question that I guess I would pose to you is, you know, why are you able to add value in real estate analysis over some sort of market cap weighted ETF of Reit's, right? If I wanted REIT exposure, why should I not just go out and buy some random ETF that's got a bunch of Reit's in it? Like where is the opportunity for you to add value? And I think it's on the back of some of this analysis. But I'm curious to hear you talk about it.

I think a lot of it is on the back of some of this analysis. I think that the so on the ETF and our mutual friend Hunter actually does a great service on. Kind of, you know. One of the. Biggest ETFs out there is the Vanguard Real Estate, ATV and Q. And it's Mark cap weight is. So what they do like today, we believe that the best opportunities are actually in multifamily and shopping centers. And and Hunter's been very vocal about this.

You know, his opinion is that multi families actually the largest real estate asset class. But because you know, the ETF use a market cap weighted so data center reads and warehouse reads Prologis is roughly like $100 billion market cap warehouse read actually dominates that that index. And then by comparison you got mid America and you know a Bombay and then and Camden they're all in that 10 to $20

billion. And then there are other multifamily reads that are in that one to $5 billion market cap range that I think that there is a tremendous amount of value in those multifamily reads. And also in other class asset classes where where I mean generally I think the I think the index one it's overweighted to data centers and warehouses and I think there are a ton of values on multifamily. And then kind of we get to do a

lot of sharpshooting, right. You know, today's environment, it's kind of a kit in a candy shop dynamic for me where we could, we can have a dozen names in the portfolio. It wouldn't always like this in the ZERP world since 2013, every year we may be able to find one or two really good real estate investment and we tend to run fairly concentrated and some of our positions have been as high as you know, 2325% at. Cost, because that's how much work we do.

And that's, that's a cuddle conviction that we built, right? And I think it is that level underwriting where you walk the building, you form an opinion, you form an opinion, you analyze every single project the company has allocated capital to. You come up with a project level, you know, IR that's fully loaded for interests and SG and A you have an opinion on the long term structural, you know, trends within that asset class. So we get to be sharp shooters rather than just having a broad

index. And I think that, you know, we have a very short opinion that multifamily rates are going to outperform because of the high absolute cap rates that you get. Again, that and they're incredibly, you know, solid balance sheet today, which is way better than anything that you can find in the private side. And and that's kind of partially confirmed by a lot of Reese CE OS. Collecting to buy back multifamily reach shares rather than go out and do private

deals. So I think, I think an index kind of will weight you more towards, you know, data centers and more houses when the most obvious bargain is. Actually on the multifamily side. And then there's always a man Bill. There's always a quirky company here or there, right? There is, there is a company where maybe you go talk to ACEO

and he's just been tired. Like, you know, he like the odds of that conflict being taken out, you know, going private is very high and and you know, there's no MMPI in that dynamic, but like you just have a general sense that a this this could very likely be an acquisition target or is a lot of times you could kind of identify it was an ex couple that that blocks all made by right. Like you kind of see that.

OK, blacks home recently did the air community deal and you know, if you have a high enough calf rate, decent, you know, asset quality, blacks owned KKR. You know, there's a lot of private equity dry powder that may want to roll up a lot of these companies. And it's also like bringing this up another really interesting point, which is it blacks some is supposedly the smartest real estate guy, but then they're there are some holy guards every 15% IRS with their LP's.

But but to do that, they're buying a portfolio, you know one of our portfolio companies and and and paying very nice premium for it like. What it's just interesting to to go through. That thought experiment and we had a couple companies get bought out by Black Soul in the past. It's just a really. Interesting thought experiment to to think about.

I mean, when you're talking about the multifamily opportunity, I mean, if I if I guess that one of the things that I get a little hung up on when I think about this as an idea is I mean, what do you think a random cap rate is right now for like a mid American or or Camden? Where do you think they're actually trading like 6 1/2 six? Yeah, 6636. Four is, is, I mean we, we actually just calculated the cap rate last night and yeah, I mean, we, we got, we got mid market at six three.

We got Camden, the six, four right, Avon, Avon Bays 5 three. So the coastals are in the low to mid fives. The some bills are generally around like, you know, 6/3 to 6/5. And we're not seeing any. Sorts of transaction reflect those cap rates on the private side right now. So if I go back like let's say 2015 to 2019, right, that's a fairly normalized period. So over over five years the funds from operations per share right, diluted increased from five $5.69 to $6.55.

So like under a dollar over five years on an FFO per share basis, right. So that's, I mean simple math, it's not going to be 4%, but roughly of growth. I get my dividends back, right, which it's, you know, not not exactly tax advantage, but that's fine. So like versus the 10 year or something, right, the spread, the spread doesn't seem very wide and the absolute return doesn't seem very high for something that is growing fairly

slow on a per share basis. So what am I missing if that's what I tell you, right, If that's, if that's kind of how I look at this at first glance, plus there's a lot of supply coming onto the market like why is this an opportunity right now versus isn't it kind of fairly priced, I guess would be the the, the question? Sure. I mean, I think, I think anytime you look at real estate you want to the cap rate analysis probably one of the most important analysis. That you should do and the

analysis. You just walk through in terms of, you know, if I buy this, what like I pay X dollars per share the FFO, what's the FFO multiple, which is kind of approximate to to AP multiple, right? And and what is the expected growth of that over time? I think that's one of the most fundamental one, one of the most critical analysis that anyone should do, right. The second, second part of it will be what is the, the dollar per unit, dollar per square foot.

You know every asset class has, you know, a a specific metric, right? Of. Deals being done in the market and also replacement cost, right. And I think that if you look at mid market and Camden and I've asked the Camden President at Navy this year, you know what, what do they think to replicate this portfolio? What would it cost? And the answer is somewhere in the 300 thirty $340,000 in Camden right now trading probably around what, two 3240 per year per door? Per door?

Yeah, per door. So why does that even matter, right? And I think the answer goes into supply reaction, but one like it's generally good idea to buy below replacement cost, you know that offers you protection. But you know, another thing to look at. Is the supply reaction in today's environment, I think one could kind of get into this faulty analysis where in 2021 the 10 year yield was below 1%, right?

And then so you go out and buy a multi family in the sun bell that have very good near term rent growth at say 3 1/2 four percent cap rate. And you say, whoa, look at that spread. That's a that's a three, you know, 200 and 72300 and you know, 20 basis point spread,

right? That's that's a really nice healthy spread, except that in that kind of environment, the developers had every incentive to to put a shovel in the ground and and develop and build new supply, right, which is exactly what happened in the sun Bill. And you have this, you know, right now, currently one of the biggest deliveries in history going back, you know, a few decades.

And in today's environment, the data that we see from can what Camden has has, you know, shared in their earnings calls. And also just like being on Twitter and talking to a lot of real estate developer like no one could justify, no one could justify putting a shovel in the ground today. And this is due to high construction costs is high, high construction loan cost. And also the banks are not willing to go up to 60% loan to value, you know, whatever the.

Previous metric is. That loan to value has probably come down by 1015%. All right. So the project IR is like it used to be that you could develop to from a ground up perspective, you could develop to a 6% unlevered yield and you could sell that property at a four and a quarter 4 1/2 percent cap rate and you could get a really nice 2025% IR older four year holding period.

Today we run that calculation probably 1000 different times here at Ryzome and but you know, we think that you're settling in at six, seven 8% lever IR it by taking on a ton of risk, right. So the LP's obviously saying. Well, why would I take? On that risk when the 10 year is 4344 right now and that that's not enough spread to justify the risk.

So, so I think, I think that, you know, we have a shrunk opinion that if you buy in at a six, four cap rate today, you the the, all the supply that's being delivered right now, which which was one of the big, really big fear is that that's going to cause rent to decline. That's being absorbed very, very rapidly right now with very little impact to, to actual rent. You know, it's not causing rent declines or if there are, it's, it's very minimal, right?

It's one or two percent and that's been rapidly been absorbed by the market. But what's going to happen looking now and next year? Remember, it takes like, you know, I think a lot of times like the actual guy with the Bloomberg Terminal with the talking hands, I think you could just snap a finger and then all of a sudden like things just get built like like all these multifamily building just like appear magically overnight doesn't work like that.

And it's probably going to take you two to four years to bring the supply on. So we're kind of real excited getting in at a six, four cap rate. And I mean it's been the last time we talked it was probably about you know 77475 for most of these reads. So it's come down, the prices come up. But I think that what you're going to run into is that in 2020, 2025 and beyond, you got to have a three-year period where a lot of these multi family reads to probably push

rent fairly aggressively. And that will last for a three-year time period. And you know, if I learned one thing about Wall Street and you know, reinvesting in the public markets is that a lot of times they don't function like a private real estate owner. And they don't think in these like, you know, I'm the owner. Like what do I, what are my returns if I hold this for 5-10 years?

They think well, you know, you got the supply like I don't want it, I don't want to own this when there is a lot of supply being like I don't want them to own it when the rent comps are negative. I wanted to own it when the rent comes up positive. So I think that one way of thinking about what why we're really excited we've done this math a kazoo in different times is that I think that if you look at Blackstone's recent cop, right, if you believe Blackstone

is one of the smartest, you know, real estate administrators out there and KKR's recent transaction from Lennar, like what we have is cap rates in the low 5 to, you know, kind of like 5859. And then if you adjust for increased property taxes and you know after the deal. You know, Blackstone's deal was probably. Done at anywhere between like a 5 two to like a 5-6 cap rate, right? So I think. There's a lot of room for cap rate compression to like a natural market cap rate and like.

If you can't use what the Blackstone cap rate as as a comp, like I don't know, I mean that's a $10 billion transaction on the older property and that's coming from a vehicle within Blackstone where they're targeting 15% IRS, that's not meant to be a 8-9 percent IR vehicle, so. You kind of have. To like think right, kind of have to think a little bit about there's a $10 deal done at like a MIT 5 cap rate, low timber, 5 cap rate after you adjust for a

lot of the insurance. And property taxes. And then the PKR deal I believe is what I've been hearing is that that's done at A at a low 5 cap rate, right. So you take those data points and we're in a higher interest rate environment. You know, we're in an environment, interest rate environment where at some point the Fed probably cuts, you know, with we're not really baking that in, but you know. It's just like it's.

It's a. Nice setup when you could buy at a relatively high absolute cap rate. You're buying below replacement cost. You're buying in a period where the market clearly cannot justify delivering new supply into the market. You're seeing it on data. You're seeing it anecdotally through conversations I've had. With, you know. Real Estate GPS on Twitter. And I think it's just a really good setup because your returns come from the yield that you

receive. And also, like, I think somehow people push back on, oh, you know, the yield is a low 4%. Like I can get 5. Percent just owning one year treasuries. Like, why would I elect to do that? Well, first of all, they're not paying everything now. They're really only paying 2/3 of the free cash flow out to shareholders and retaining 1/3 of it for either share buybacks or higher return projects where they can get over 10% IRS. And.

In the long run, treasuries don't have Treasuries don't have inflation protection, but I think owning a portfolio high calling multifamily do have inflation protection in the long run if you. Look at if you. Use replacement costs as a proxy for kind of long term price appreciation. There's only like replacement calls have only gone One Direction.

It's it's gone up, right. I mean, the cost to bill multifamily, really any sorts of real estate has really gone up in One Direction and for as long as as I I could remember, yeah. Well, and I think it's unlikely to come down right that. So that's that's where I can get my head around this idea is from a potentially inflation protected perspective combined with supply a couple years out remaining somewhat tight if all else stays as it does, which everything never stays as it

does, right. But that's the first thing that intrigued me to this idea. And then you know, you and I have gotten to know each other better and I still am quite

intrigued by it. Why do some of these companies back out their SG and A when they're citing their cap rate? And why is that valid or not valid? I think, I think it's very valid and it's actually one of the largest source of return for us in the past decade. Which is we? Will buy into a company that's

sucks scale and there's a real. Cost of being public, right, We've estimated that at the minimum you probably need being just being public cost you a lease, you know two $3,000,000 between your order fees and various fees like NASDAQ fees and whatnot. And then as you scale up a little bit, you know you could have a billion dollar company that's going to run you a lease like seven, $8 million of SGNA

right now. What's really interesting is that real estate on the private side is a very it's not like a NVIDIA, right? Like there's only one-of-a-kind in the entire world or that graphite company that Brookfield that that Monish Papri owns right? Like like it's it's not A1A single unique asset. There is a very large pool of buyer who could buy that that portfolio of assets and just take it private and eliminate.

They won't eliminate hard percent of the the public company SGNA, but they, they can eliminate a good chunk or you can have a larger platform by that company and then they they already have an existing SGNA certain cost structure. So, so I think I think that's real important, right?

And and that's actually one of the the biggest source of excess return for us and also want a big source of frustration because a lot of times I'll talk with somebody and they say, well, you're accountably that $35 million of NOI. Yes, like we are saying it's growing, but the SG and a $7,000,000 like a lot of that SG and A is being eaten away.

And my argument is, well, you could, you could sell that portfolio tomorrow and, and you know, you probably take that SG and a down to $300,000 or someone has a bigger platform to just fold them in. And you don't need to take that $7,000,000 and put the 20 time multiple 5% cap rate on it. And, and those are the situations where we historically have generated a lot of our excess return from. And, and inevitably what they, what happens is that they grow into scale or they get bought out.

And then in every time that it's been bought out, if the experience had demonstrated that the virus don't care like about your existing public Conway as she and a like they're just going to, you know, run it with their own cost structure. So that makes sense to me on the small ones. On the big ones, though, there's no real exit, right? They are sort of the final exit liquidity. And. So backing that out on the bigger ones, I think is a little bit more fast and loose in my in

my view, right? It's. Interesting in that if. You manage it yourself, right? All our costs will go in I, I own a piece of property on private side and you know, any time like we got an issue like I can go deal with it. And so I am my own SVNA and I don't experience any of that SCNA because I'm the one dealing with the headaches right, of owning that property.

But you know, a fair argument is that if you calculate the implicit management fee on that SGNA like relative to block some KKR, you actually find a lot of times like that, that public company SGNA is actually a lot lower than giving your money to a block some more KKR or any interview big or Brookfield,

right? Because we've done a lot of math on that where I think that the public company because she and a probably runs 30-40 basis point like at scale at like a Camden America, they run at 30-40 basis points off the total asset value. Go through those lens, you're you're getting a really, really good deal right now. Like if you want to own these assets and you want to imagine themselves, yeah, like yo-yo, like a lot of SGNA will go away.

But if you are going to delegate it to somebody like you're, you're paying in one form or another. So, but you know, the way that the assets trade, they're going to trade at the asset, you know, NOI level, they're not going to incorporate because it's kind of like why in a lot of private equity deals like you use like AEB EBITDA, like you don't use the existing debt, right? Because like you're going to capitalize and however you're going to capitalize it.

Yeah, yeah, that, that makes sense to me. I guess again, like with Camden and and Mid America, they're so well run that it wouldn't make sense for me to run one of those buildings on my own. And they already have the scale. So yeah, I just, I just kind of wonder, you know, I'm trying to figure out what I think like the true cap rate is. These are just some of the issues that I've come up with, you know, against as I've, as I've been doing the work right.

So I feel like asking, asking on behalf of the listener makes some sense as well, you know? Yeah, Yeah, yeah. No, I mean, you know, these assets are not going to manage themselves, right. And then I, I would make the argument that and, and I think you bring up a good point. I think this is a very important discussion to have.

Which is if you think about, I know that on the value after hour on one of the episodes, Jake said something along the line that he's thankful for the public markets where you could buy fractional shares of a company with a cocoa button and very low transaction costs, right, like if. You if you take a step back. And, and kind of think about like the, the luxury of, oh, you know, buying real estate has a

real barrier to entry, right? You know, there is an absolute white, there's got to buy the whole cow, right? You can't buy like a pound of ground beef. And a lot of times I think people are, don't get that exposure because they don't have $200,000 sitting around to buy like a condo unit or, or you know, our house, right? And the a lot of that public SDNA that, that all that order calls like the filings and having all that back office, middle office. Staff.

To be able to prepare all the materials and comply with all the regulations. What that does is that it allows guys like you and I to buy a share of Mid America, which trades $140.00 for probably about a penny and interactive. Brokers, right, like if you think about. What that I mean we're talking about less than one basis point in transaction cost for to buy real estate and any sorts of real estate transaction probably doesn't happen for less than 2%

at the asset level. So the incredible amount of savings that you get by having, you know, public and liquidity, I think it way makes up for like any of those SGNA cost. And then there's a dynamic of, you know, if you if you gave money to a private roses indicator, there's a very heavy GP promote and it's very eye opening what some of those promotes could be once you get above like a certain hurdle.

For the most part, yes, you know, the REAP management teams, I get stock options and equity comps, but it is nowhere on on the scale of I want some of those private GPS. You know, I've seen promote as high as 50% once it goes over like a potential percent hurdle and I don't see anything like that. So between liquidity and some of the promote component, I think I think you know, a lot of investors wind up coming out with a really good deal.

And then the liquidity is interesting because again, this goes into like Buffett, you know, he says missile market is there to surf you. You can kind of and I find this like really unique dynamic right now where where people particularly institutions are are like the purposely paying a premium not to get. That mark to market which which is a very unique. Dynamic, right?

It's like there's a certain allocation needs and by allocating a certain amount of their capital into a illiquid strategy that in real estate where the, your blast on your KKRS could kind of tell you, you know what that mark is, They don't have to technically to deal with like a technical drawdown that you see on the screen that we deal with.

And I think that that's a really interesting development in the market that used to be, you know, they've seen that at Yale coined the term liquidity premium. If anything, there's like a bit of a liquidity discount today by having the potential to have a drawdown your portfolio like you know a lot of the long institutions have kind of shown the public re asset class. Which kind of you know, if you. Asked me, well, Bill, like why does this opportunity exist?

I think, I think that is one of the big reason why this optor exists is that is that, you know, people don't want to get off the market. Yeah. And meanwhile, the privates, even though they're more levered, are outperforming on the mark. And if you ask KKR, they're projected to outperform in the future too, which is a bit like asking a Barber for a haircut.

But. Yeah. I mean, I, I get it. I, I think if, you know, there's a ton of incentives that that would make people choose the behavior that they're choosing in aggregate, we'll see if it's smart behavior. I don't know. And it's going to take a really long time for it to. Play out right like if you got locked up capital for 10 years and the day of reckoning isn't is until 10 years later and you kind of now I will, but that's not.

Even when the day of reckoning is because then you get into, well, that was just one vintage. So then you've got more years and then you know, you've, you've pretty much got, I don't know it, it could be like I, I think the, the highest probability if there is a subpar outcome would just be like 10 to 15 years of kind of crappy returns. I mean, I don't know, like it seems unlikely to me that there would be some run for the exits, but it does seem possible to me that. I think you.

Might have mentioned that one of the challenges that some of those PE strategy is facing is that because of higher interest rates, the earlier vintages are not able to get exit right and a lot of the PE investors like for them to kind of real. Yeah, they need, they want the distribution. To the next vehicle they want capital return from the previous one yeah. So we are seeing some log jam

there. It's incredible to have 10 year lock up capital and and and kind of just be able to mark market to how you want it. Yeah.

Yeah, Yeah, well, if if you haven't for 10 years something went wrong, but you probably only want it on average like six to seven years and then have another fund and then but the 10 year option or the OR the contractual 10 year agreement is a very nice agreement to have, right, Yes, if you're waiting 10 years, your IRR is probably aren't what you hoped they were.

Yeah, but. Well, I mean, I think the other side of it is on the public side, you get to one of the real challenges for a private buyer today is that there's just no deal flow, right, like you can have. A billion dollars of dry powder, but the only. Source of actual like if you track the deal transaction, most asset classes are down called 60 to 80% from their from their peak transaction in 21 is kind of like my general sense of what's happened so. You could be.

Sitting on a ton of dry powder, but the seller is not going to sell unless they they have some sort of debt maturity. They can't service the mortgage anymore and the for sellers, I didn't that really have not been a ton of force selling in the market. I think like if the fact keeps a rate where it is today and you get to a certain point where your three-year fixed mortgage, you know, comes due or five year at like, you know, at some point there probably will be more

transaction. And that's where on the public side, you know, I'm, I'm like a kid in candy shop because you know, they're already trading a lot of these, a lot of these companies, a lot of multifamily reads, a lot of the grocery anchor shopping centers, some of the smaller companies that we have not discussed. There is a ton of bargains out

there right now. That and and the amount of capital you could put to work is probably fifty $100 million a day, which is, and, and it just click a button, right? And, and that's incredible. Luxury to have. Because you know, I've talked to you a lot of family offices talked to a lot. I know what's in visuals and, and they say, oh, you know, I was talking with the real estate GP and they showed us a deal and, and guess what? I think it's a good deal but like I can't get the.

Allocation I want right and it's a $10 million raise, $20 million raise and. You, you go through the process of like creating liquidity to write a $2,000,000 check and they'd only write half a million, right? Like that's, that's a real issue. And I think what's really, really unique about the public side right now at this moment is that you could click a button and and deploy at scale fifty $100 million to work in a day.

And and that's a very, very unique advantage and you're buying it a. Most asset classes like like we're just finding a ton of situation where we're buying something. At a 6 1/2 to you know call it 10% cap rate across different asset asset classes. I mean, actually we just bought something at like a 12% cap rate. It's a little.

Bit on the smaller side. And so you're buying it at a high absolute cap rate, usually getting like at least like a 4% dividend yield you're getting and, and they're they're not paying out all the cash flow. You are, it would deploy that capital at scale. You are. Oh man, I just had a little. You had a senior moment. That's OK, at least. It's not a presidential. Debate. It's just a podcast.

Yeah, yeah, yeah, yeah, yeah. You know what I was getting to is like the buying and at a deep discount to replacement value, right, You're buying it. A lot of times we're buying it

at like. Half a replacement value and then if you look at. Any of the developments in the pipeline of new supply that may compete with you in a lot of instances, like in today's environment 2024, you may have a multifamily dynamic of some bill where that supply is being delivered, but there's no new supply in the pipeline for the next like three years, right? And and it's kind of like

grocery and go shopping centers. So you're among the coast, you're just not seeing anything being built right and and to be able to buy something at half a replacement cost with like no threat in the supply with at like a good golden cap rate and then man, and then that's it's a great setup. Yeah, you wonder how long the lack of housing starts will continue. Yeah, yeah. Eventually something's got to change.

I think we're not. I don't know, it could be could be a situation where we just are structurally short housing unless the shortage doesn't actually exist, but I I think that it it does exist. Oh, I mean, I think the shortage definitely exists. Like if you look at, if you look at home starts. You know I've been wrong in the past and will be again. One thing I can't. Quite wrap my head around this is if rates drop, like, you know, what's the impact on like home builders, right?

Because it absolutely surprised me. And I wrote about this in my application to our investors like a couple years ago. I'm like, hey, higher rates mean that people probably won't buy, probably going to be really bad for home building. But I don't think I anticipated. I mean, it's a really obvious now that everyone had 3% mortgages and rates shoot up in a mortgage ratio, shoot up to 70% and all wants to sell their houses. There's no inventory. Right.

So if mortgage go down to 4%, does that mean a bunch of people who weren't willing to sell or and now the the existing home inventory is going to go up a whole? Bunch and then. That's going to create supply for the market like I I don't know I'm. Yes, I think, I think that's likely to happen. I don't know how much it should, right. Yeah. But yeah, yeah, I think, I think one of the things that that I failed to see was what a competitive advantage the mortgage rate by down was for

the builders. So at least the big ones, right, It's basically a cost to capital advantage that they're passing on to keep inventory. Building yeah, I think just the lack of supply and how much that impacts the ability to like when you when you squeeze supply so tight and there's just like

nothing on the market. I mean, this is this is like a, you know, Speaking of somebody who was at the heart of the GFC and and watch like, you know, everything kind of happened with the the me hands and and the overbuilding the industry was building probably at peso one half million homes. And he kind of accumulated oversupply in single family homes leading up to the GFC. And to kind of see that and and kind of see like almost anything that could go wrong, like they

go wrong for home builders. And then to kind of see them emerge out of GFC kind of becoming really disciplined, becoming changing their business models where they're more a land

light. Everyone kind of have adopted some variation of the NBR asset light model and a lot of these home builders wind up being 1020 baggers and then to kind of see rising rates not hurt them actually help them like that that that was that goes into the bucket of I like never would I have like thought about being able to happen. Yeah. Yeah. Yeah, I mean, I missed it, so I also did not think So what

about, you know, grocery, grocery anchored shopping centers Has you intrigued these days? Thinking a lot of has to do with like capital cycle, right? There's Barbara body is like probably the best at it, right? And I've watched post GFC, the rise of e-commerce and as a value messer, like I'm sure like everyone's been familiar with, like the saga at JC Kennedy, at Sears, at Macy's. And you watch that space, physical retail. And there's this narrative that Amazon was going to kill

everybody. And Amazon did try to go into the grocery business. Remember the day when Amazon announced that they got into a grocery business? All the big grocery chains, their stocks like dropped by 20%, right? And everyone bought into this narrative that Amazon was going to kill the grocery store. They're going to kill anything that's retail related. All right? And I'm look, you know, not guilty as charged. Like we, we bought into that narrative, right? There is a grocery ink shopping

center read that. I respect people. He and I were talking on the phone four or five years ago and he was pounding the table. He's like, Bill, this is just. Not happening like it's not happening. This is not happening and I didn't quite believe him. You know, like my fault, right? Which might have been like a actually a good. Decision to be naive but what we have observed over time is that people love being able to get

into the car and pull up right. Americans just love that convenience of like being able to to drive into the shop and center. It's outdoor you pull in you park and over time, even as some of those concepts have failed right. You have the version so far retelification of medicine. So it's it's a lot more common to see what the MRI outpatients some sort of service they've taken over a lot of the. Urgent care is.

Urgent care, great example. Urgent care they taken over spaces use on some of the bigger boxes. You kind of see this is more on the standalone category, like your Dicks, like you know, if there's a box that weren't vacant. What I'm seeing is there's enough of this. There's a vacant space in a well located. Grocery shopping center. And then all of a sudden like some a different concept comes in and takes it over. You have kind of boutique fitness emerge as a trend, right?

Your Pilates, your, your CrossFit it's etcetera, etcetera and your Chinese takeout like your your. Your piece of shop, you're trying to take out your Taco. Stores like those are not going away. Your haircut. Your hair salons like those are not going away. Like Amazon can't give you a haircut. Amazon can't give you good pizza, right? So and I've just seen enough of the data and enough of the evidence.

And then I think Amazon decided to buy whole food was like the white flag where they said, OK, like we can't like the unique economic of delivering fresh grocery. And I'm someone who does a lot of shopping myself, right? Like I go to grocery store, I pick out my own steak. Like, look at the marvelization. They look to pick up my own. Produce and I'm one of those people. It's very hard. It's very hard to get people to

change that purchasing habit. But I will actually say that the bigger reason is just that it is, it's not like shipping a book from an Amazon warehouse to your house, right? When you when you ship grocery, a lot of times it's very heavy, very bulky. And and you need to. Keep it at a certain temperature, it spoils very easily. It's just the unit economic of grocery delivery just doesn't work like and naturally makes sense for you to go to grocery store, buy your own grocery.

And so we've seen enough of it. And as a response, there's a really nice chart out there that it post GFC, there's already been like like 1% or one half percent like new supply addition per year. So grocery shopping center has been very, very underbuilt despite all the staff that Mark is the most over retail. Country in the world, I think we have 1015 years of very under supply of grocery anchor

shopping centers. And then if you get more a little bit more specific in like the coastal areas there one there just not a ton of land left for you to there's just no land for you to build a 150,000 square foot grocery anchor shop is there with like parking and whatnot, right? I mean, you can make an argument some of it will be better repurpose as like mix use with like multifamily on top of it.

So there's no land and then the from a NIMBY dynamic in that in my backyard, it's just really hard to build anything in the coast, right? So we really like that asset class and it took like this isn't this is an asset class where our views have changed over the years, right? I tracked some of these names and I tracked them for 10 years, like never really having a position, meaningful position at

any given time. But like now we're kind of saying, OK, the valuation, the cap rates are attractive, different views attractive. But also we just don't see new supply in the horizon and we're buying them at some cases at 50% though replacement value and you absolutely cannot get that on the private market. And we're like that, that that kid and candy shop. Like, you know, excited.

Yeah, I mean it, it seems to me. I mean the question I guess that that I would have or do you have is, you know, like somebody pitched at the CFA Society in New York, they pitched DOC which is health Peak, I believe it is sure hand DOC yeah, Health peak

properties. So everything real estate related seems to have gotten sort of sold off here as as rates went up and now recently, I'm not sure that the correlation I, I'm not sure that the correlation is quite as tight as as I as I think maybe it is. I think it's probably not quite as correlated as I suspect it is

rates in real estate that is. But I guess the question is like, is this just one big rates bet at the end of the day? Or do you see multiple ways to win here that that don't require rates coming down and cap rates to compress? I think that's a. Great question and I think that's a question that we should ask very keenly and have a very honest discussion on. I think the answer is interest rate is a very important component of you know forward

returns. We have a certain interest rate opinion, but let's just leave that out of the discussion. So if you look at, if you look at the expected underwritten return in the next like few years, I think that if you assume that interest rate stays where they are, right And these companies never get any sorts of cap rate compression, but you never get any sorts of appreciation due to interest

rates alone. What's interesting today is that because of the lack of new supply, because of lack of the threat of new supply in most of these situations, we couldn't kind of assume that like they're going to have very healthy rent

growth going forward. So if you're getting in AD make a number like a 7% cap rate with the help of a little bit of leverage you could use generally get to you like 7, you know, six and a half 7% that's available to shareholders, to equity holders and because the lack of new supply and that gets like worse over time, right? I think you could generally in a bare case scenario get to low teens IR 4 IRS is like generally what we're on the writing to you, right.

And again, like that, that dynamic of not having any supply and over time as population grows around in there, yeah, that they increasingly have more pricing power and the ability to raise rent and in a lot of these investments like a lot of this. Grocery anchor shopping centers. It's not just, oh, we're buying in at a 7 cap, at A-75 cap, at a cap, it's also the fact that they're trading below replacement value, but they're also trading below market rent, right?

There's a lot like you know, we've looked at our portfolio recently where the market rent is 1820% higher than in place rent. So if you will get a grocery anchor shopping center. Like every time that lease grows, that five year lease rose the annual escalation and rent maybe two 2 1/2% to 3%. But every time that lease renews, you get an extra 8% pick up, right? So on a portfolio level, like you can actually grow now, Ray com about 3 1/2 four percent, 4 1/2 percent.

I mean, you know. That's that's not a bad setup, right? That's that's a pretty good setup and you get this extra margin of safety because you're you're that much below market and what happens? Is if you randomly have some sort of vacancy, you actually could have an opportunity to get a new tenant who's going to pay sometimes like double, triple the in place rent in some extreme cases. I don't believe this is just a pure interest rate bet right now.

I think there's like another meaningful discussion on well, if you buy some of those public reads, add a 6 1/2 percent cap rate and the private market transaction are showing you a 5 1/2 percent cap rate. And I know our mutual firm Moses Kane says he doesn't write to cap rate compression. But like if you got someone like a block zone writing a $10 billion check and they're paying A55, right and you're buying in a six four, like should you bake in some sort of cap rate

compression there? And that deals being done in today's interest rate environment, right? That's a very sophisticated investor in arm's length transaction. In the better case, if you just say there's no cap rate compression, there's an interest rate does not move lower. Like can I get a 10 to 12% return? I think the answer is yes.

Like, I think I think the answer is that you could get a 10 to 12% return on the low end of potential future outcomes and on kind of like the better case where if it's just traced to where the private transactions are being done at, right, There's one source of actual return and these like 100 basis points are very, very meaningful, right? I mean, I think that for the non real estate audience, a 5% cap rate is a twenty time multiple, right? A 4% cap rate is a 25 time multiple.

These cap rates sound very innocuous, but in reality, the multiple contraction and expansion are enormous, right? The other aspect is the optionality, the optionality that a lot of these retail because of the balance sheets,

right? Like you know, here you got Camden, you know I'm sitting there and they re asking the president, you know what your capital allocation strategies is. We don't have any plans to do any deals like we're going to buy back our shares because we're trading at a mid 6 cap rate and then using any excess cash flow to buy back shares. They're probably on target buy back 2% of the shares outstanding per, you know, for 2024 and that's going to create a tremendous amount of value

going forward. So I think a lot of these. Benefits and a lot of these better balance sheet and better structural positions probably won't show up right. They won't be. People won't be made aware until a couple years down the road because they could pick up distress assets. If distress assets come on to the market, they could buy back shares and buy buy their own

shares at a. 6 1/2 cap. They in any environment where capital is very, very restrictive, I think that the incumbent large cap public reeds actually it means supply won't get bill. They're positioning within the ecosystem. I should get stronger over time And they just have a tremendous amount of anti fragile

characteristics, right? Like most of them are under six times and that that to you, even though we mentioned a lot of them to cover their fixed payment 6 to 8 times, tremendous large margin safety and they some of them are even forget about like leveraging up to buy back some shares. And then question you like, well, what kind of loan to value ratio you taking it from? I mean we're not talking about like going from 65% to 75% to buyback shares, right?

We're talking about like going from, in the case of Camden, I mean there are four times net debt to EBIT. Honestly you probably talked about like 20 times long to you know 2020% loan to value to maybe going up to 25% loan to value, like it's a non factor, right? Like you're not increasing the risk by that much. So I don't think this is just purely an interest rate, but now do I think that is the fact. Cut interest rate like what will they absolutely benefit from that?

Yes, because there is a. Function of people being able to part that capital in the two year treasury and and they earn like mid fours to low fives in, in the very short end treasury curve, right. I think the moment they cut that, a lot of that capital could potentially flow into the reeds like we don't need that. We don't need that to happen to earn a 10 to 12%, I think, I think the interest rate there,

right. But just like the large cap multifamily reeds trading to what Blackstone is paying for, for these transactions probably get you to like a 15% IR. And then if there's any sorts of interest rate compression and interest rate being caught and further cap rate compression, then you kind of get into that high teens, potentially low 20s depending on the on the company. And we're seeing that kind of consistently across our portfolio. And this is like A1. Year 2 year for our is unlike a

four year time frame. And generally I think I think like we're we're seeing a lot of between the dividends and total share price return. Like you get a double in a lot of these public reads over like a four year time frame while investing at caught by 20 to 40% loan to value. And if you go up the risk curve like if you go, if you. Start. Buying some REITs that has over 50% loan to value like you you, you just start, you know, getting into why the .5 plus percent IOR for estimated IR

returns. So I think interest rate plays a big role, but it's not the only factor that tries future. Returns I. Mean that makes sense and especially as we've talked, I mean the difference between A7 cap and a six cap is a smaller percentage than the difference between a four and a three or even A3 and A2, right or.

Yeah, yeah. I mean, it's, it's kind of crazy because like, you know, a four is a 25A3 is 33 and then let's go from like a five to three, which is a 20 month or 233 month while you add leverage to it. I mean, that's incredible,

right? And like a lot of this copyright math is very intuitive to me. And I was very skeptical in a zerp world where I, we really were only able to make one or two really meaningful real estate investment from 20, 2013 till net A2 probably like 2022. And because we were, we were

terrified, right? We were terrified. Hey, like at the market, our, our valley multifamily 4 and a quarter cap rate. What if that goes to five, right? Like what if that goes to 5 1/2, which is exactly what has happened. Like, I mean, there's people out there that talk what they're like, well, multifamily Capra should go to 9. And I'm like, I will probably sell everything in. Like like at that. Point I'm just going to sell everything I own and just buy multifamily.

Got a nightcap, right? Like the real world on a piece of paper, you may say as a value answer, the 10 year yield is a four three and I need a 400 basis point spread for me to like buy that. But like in the real world, man, like when you see when you hear the real estate GPS and the developers just kind of lamenting that they can't get any deals to pencil right. And this is not just a

multifamily, This isn't self storage. This this isn't self storage. This is in grocery shopping center. Obviously, no one's got any appetite to develop any office right now. Except for Ken Griffin. That's Citadel, you know. Well, it's new. Headquarters. Yeah, It's gold headquarters in New York. Gold headquarters in Miami. There was just absolutely no appetite for any sorts of groundnut development deals.

Today. And this is the kind of environment that we love to play in. I meant this is a kid in a candy shop. Like it feels like shooting fish in a barrel. And, you know, we're, we're really excited. So how are you playing in that environment? And the real question I'm asking is, is there a a vehicle that you are introducing or anything like that, if you're allowed to

announce such a thing, I don't know. I'll say this like if people are interested, they could. They could reach out, you know, it's. Probably a smart way to do it. Yeah, yeah. I mean, you know, I think, I think if people are interested, they certainly reach out here in New York and people could find me on LinkedIn, people could find me on Twitter anonymously under this of neutral men this. Is the unveil right doing it on your podcast, Bill? The Howard Marks of Reitz.

Yes, yes, a a a write a typewritten memo under the. Style of how Marx with typewritten errors and everything I. Quite like it. I like the way it looks. Well, I appreciate that. Yeah. It's been a hit among like the the middle-aged dad, you know, finance. That would be me. That's me as well actually. Then a couple typewriters in the back. Here you can see. I mean, when did we first talk

about the idea? It was probably like October, you and I, and then you were on Andrew Walker's podcast and sort of getting a little bit louder about it probably about 12 months ago, right? Right around.

I mean, we've been as we've been anticipating this up to reset and we, we had a lot of dialogue with our LP saying if these reads start trading above a six cap and this is probably 18 months ago, like we would look to you deploy a lot of capital,

right. And I think where I've been very publicly vocal about is probably right on time when I did podcasts with Andrew and the podcast with you and Twitter Spaces. And so that was probably October from a timing perspective, like we almost nailed the bottom. Yeah. Well, yes, I some of that's a function of just recording at the right time, but yeah. I've been this game long enough and I've been humble enough by

the public markets. When you think that, oh, this is the bottom, like, you know, in October last year, my analyst who was a very bright, you know, panelists and very into real estate and I was just like updating the comp rates when mid America and when Cam that went to like 82 bucks. We're just looking at you. We're like, how do we lose money? Like what we we added, we bought more, but like, well, I shouldn't. We just like buy this and go to beach like you know it.

It's I've been humble enough by the public markets to understand that if you're calling the bottom like you may, you may as well just like try to like find a bowl or something like that.

Yeah, yeah. Well, I mean, so the other side of that is you've been very vocal about this opportunity. So how do you balance sort of being humbled by the markets and then also. Staying, I don't want to say aggressive, but being able to play offense when you see it. Oh, I mean, I think, I think actually it's being able to. So I think I think like there is a slight nuance in that, right?

Like you could be humble by the market and then we're not going to be able to call at the bottom right and just accept the fact, like just accept the fact that we could easily buy this and then just have the shares go down 2030% on you, right? I mean, that's like the view play in the public markets. Like you just have to accept that. And and that, that is what happened to us last year.

We were buying mid American Camden kind of like in, in that low to mid 6. And then we saw it like trade almost up to 8% cap rate like down probably 2025% at one point. And I think having the right investor base would understand your analysis, which trusted your analysis, your process like having that patient best of base. And, and also just like, just like maniacally thinking, mentally thinking that, hey, Buffett talked about this, this like Mr. Market and and like you

own these assets. Like where I said, I'm literally doing the math. I'm thinking Hey I own X number of apartments distribute. Across a sum though.

And if anything, I find it very easy for me to just get myself into that mental state and say, Hey, like, if it stays down here, every different check that I get, I'm going to go buy more shares and and I get to own more apartment units, right? I mean, maybe it's because like mentally I'm built that way And also. It's a lot easier to do.

To apply that kind of psychology to real estate and and a non terminal asset class like departments where you say hey, but when the price goes like the more units I'm going to buy and if anything. Like you may. Even want to like go, you know, one O 5 growth leverage, you know gross leverage 11 growth leverage, right? Like it just it just. It's a lot. Easier because I know at the end of the day, people need a place to live on buying way below replacement costs.

Like all the things that we've been like, like talking about on this podcast. And it's very different like when you own something like one-of-a-kind asset and like there's maybe two buyers could buy that asset. Like in this asset class, like I know blocks own could buy, KKR could buy and Brookfield could buy and there's family offices who could buy and there's not one bid for these assets, like there's hundreds of bids for these assets. And that gives me a tremendous amount.

And you know I having the. Experience like have owning some some residential units and and you know, my family owns probably 50-60 units in New York City and I own some myself. And when you like own these assets yourself for 1020 years, like you are saying, hey, in the long run, rent goes out. People need a place to live. In the worst case, maybe your occupancy. Like we, we, we looked.

At the GFC data, right like when unemployment went from 4% to 10% and what happened to occupancy rates and some of those some go multi family apartments like I mean? The occupancy rates like. Maybe 1-2 percent. They had a little bit of rent declines and I didn't get hit

that hard, right? It's just, I mean, these are incredibly Brazilian assets, very, very relevant, right? No, earlier you said we thought that we were all going to live in cities wherever and like never, never do this, we'll never do that. And just seems like a lot of these asset cause of time was like people need a place.

To live, yeah. Yeah. The other thing that'll be interesting to see is whether or not home prices of sort of, I guess whether or not this step change results in, in something that sticks. Because if the price increases the last two years do stick, it is possible that we have more of a renting society, which at least for longer, right? And I don't know if that's, I'm not sure that's good or bad. I mean, I, you know, I see some of these communities that that are being put together, they

seem, they seem quite nice. I mean, you know, I don't, they're going to cut some corners, right. Naturally, there's a, the owner is not going to put as much into a rental property as as someone would improve it otherwise if it were their own. But I'm I'm not sure that's necessarily a misallocation of resources. It's just perhaps a less of a luxury good.

Yeah, I mean, it's, it's, it's super interesting to see what's been happening on the and I think you've told us specifically about like the built for rent, right.

So a couple comments. One is the need for people to rent because they can't afford single family homes. Like you're seeing that a lot of that data in the large cap multifamily reads like. They have incredible. Data on, you know, what is the tenant move out ratio due to first time home purchases and and that has been as high as 20% at some point in in the past two decades.

And there some of them are down to 10% because people just can't afford to buy their first home with mortgage rates being this high and and single family homes being this expensive, right. So you definitely have that dynamic would definitely seen that in the rental. And then to what you you know what you said about some of these communities, what happened? Like if you have a society like our friend Hunter talks about the Brazil, Brazil ization of like America, right? And.

It doesn't have impacts, I mean. You know, like being a typical middle-aged dad, right? Like I recently bought some hydrangeas from Costco and I plant a little, get a little planter. I I like grew some herbs myself, right? Like did you? Use Scott's Miracle Grow. Actually, I haven't used any fertilizer. Supposedly you can't.

There you have. You can't use nitrogen fertilizers and hydrangeas because it caused them to grow too fast and then the the stems become brittle and the flowers are large and heavy, so it become true. But yeah, yeah, I mean. Look at us, you know, 22 middle age guys, you know, talking about. Yeah, that's right. But that's. Right. But I, I. Do agree with the sentiment that when you.

Own you are going to plant the hydrangea and and plant the herb garden and and it has two vibes and feel of a neighborhood language and that's what you got. You have a longer time horizon, which allows you to invest more in your community right versus license was built to rent. I mean, if you're here, you're not here next year. Like, you know what, what does that deal? And people care, right? Kind of a joke is like that. Who's at maniacal about the the Walling in the Midwest or the

South, right? If you're renting. You've got really invest in that. I think probably not going to have really important implications to neighborhoods in the future. Yeah, yeah. On the other hand, like the developer of the neighborhood has a strong incentive to keep the neighborhood looking nice and somewhere that people do want to rent. So I don't know.

I mean, I, I think generally the idea that owners take better care of their neighborhoods is something that makes intuitive sense to me and I think is borne out in the data. But I'm not sure that we've had the, the build the rent at the same scale as we're, we have now. So maybe things change a little bit over time. Yeah, I think, I think the, if you think about the built to rent business model, it really has not been around.

Yeah, no, I mean the concept of like renting a single family home is kind of largely foreign until probably 10 years ago.

And I remember doing the GFC we that the family home that we grew up in this in the suburbs of Long Island, we we've all most family member having with the Queens at that point. And we so the only tenant that we could really find is a group of young people who work as way staff in the restaurant, right? Like that's like the natural logical rental base and man, like we have to sell that than the GFC as a family because that like that was the only tenant base.

Why fast food today? There's a lot of teachers, there's a lot of people with normal W2 wages that are very responsible adults who need to rent a single family home in my hometown along Island. And we have to sell that because like that that Tena base was just partying every day and additional improper and neighbors are calling us every single day of like partying and drunk driving, which like really illustrates like the emerges over the course of 15 years of

that asset class. Yeah, well, I hear you say that it reduces my willingness or desire to own direct real estate. Well, again, this goes back to Chase comment about about this like this. You know, he thanks for for fracture ownership and my family owns some stuff on the private side and I've kind of really cut my teeth like knowing how to lease, how to that tenants and and also just like getting random phone calls on like when a Blizzard rose rose through New York, right.

Like the route #1 the real estate ownership is that things only break in extreme. Get the shit right. Like right now, it's not like we have a couple 80° days. Your AC is going to fail like right now, right and the heats not working. It's it's not when it's like 70° outside. I mean, it's not when it's like 60° outside. Well. It's not when the most strain is on the system, right?

Yeah, exactly. It's the most straying and literally like I've had experiences where we get a call from a tenant, there's like a foot smell on the ground and and I got to go. I got to go. Fix it right, because you can't let people not have heat. And literally like the reason why they failed is that it's really cold outside and there's a pigeon like hanging out by the chimney opening and they get carbon monoxide poisoning and they fall all the way down to the chimney and like the furnace

can operate. Like these are real life stories, right? So going to like, not wanting to own real estate directly and managing it like, I have a ton of black horror stories. Or imagine like it's midnight and your tenant doesn't have heat and you take a part like the chimney above, like the boiler, and there's like that pigeon staring. Yeah, yeah.

No, thank you. Yeah. And versus like I'm at the read and I'm asking the president of like a $10 billion multifamily read, I'm like, you're going to buy back shares and he's like, we don't have any other plans. Like there's nothing else that's going to yield like a higher return. And I'm like. Great. You know keep on that shares if anything you should live up and buy back share like these are very different. What do you call return on brain

damage by capital allocation positions? You mentioned the REIT mafia. What is the REIT mafia when you talk about it? Yeah. So the REIT mafia super interesting. I think there are these REIT investors kind of like think about your Nuveen's and that are like dedicated reinvestors and they kind of dictate a certain set of boundaries that public public traded reads like need to follow by, right.

Like a very well known one is the net debt to EBITDA ratio can't be a higher than six times EBITDA, right. And any read that goes above it kind of gets like penalized and then you get like Colin Steer is like another name in that.

And generally there are dedicated specialists who follow reads and they typically won't get involved with a lot of companies that we invest in such as they probably don't want to step in front of this supply delivery of in the Sunbelt on the multifamily side until they could kind of see clarification. And and I don't want to like go out anybody in particular.

But if there is like most of the investors who allocate capital and they have their own benchmarks, like our benchmark is like we want to, you know, generate attractive returns for our investors over a three-year time horizon in the arm. So just give us a support us to give us the luxury to do that to look at things on a three-year time horizon.

And I think this is kind of why you're able to buy a multi family read at a mid sevens cap rate late last year when we did our first recording is that people just what like these rape mafias, basically, you say like we are not going to own that regardless of the cap rate because we can't, we have no visibility into what this new wave of supply is going to do, right? As a question like what, why are we so lucky to get this opportunity to buy and add this

real attractive price? And a lot of has to do with like the Reed Mafia and how they dictate. And a lot of times they return the measure on like a certain benchmark that they follow. And a lot of it is very short term. Oriented. So if you take, you know. Again, this goes back to like

the owners, right? Like if you take the owners and we say, hey, I'm actually able to buy multifamily reeds and multi family buildings that are 6 1/2 percent cap rate a whole 100 basis point better than like what Blossom KKR is dealing like because that sound like a good idea. Yeah, that probably sound like a good idea. But why is it optimally available?

Because until there's more clarity on the absorption of multifamily supply, which which like kind of starting to see that happening, like now we're starting to see some of the Southside research coverage talk about there's been really short absorption with all despite all this new supply that a lot of rebar fear start get more comfortable with investing in some of the multifamily and if you want. Well, what they may say is this is the early absorption.

Let's see how all of the supply comes on, right? Yeah. I mean, I think when they report Q2, they generally will provide some commentary on how July and and August the one that report later, they'll provide some color. And so we get to see it at the

end of the day. Like we kind of look at it like like like with sometimes a bargain just so extreme that you kind of say, OK, like if you buy another 64 cap rate, like let's say in the worst case scenario the NY drops by another 10%, like you knocked off another, you know, call like, you know, 64 goes to do math. Right. 5/8 like it's buying a 5/8. I'm really depressed through like, you know, why I figure like, is that really like the

worst thing in the world, right? You know, you definitely got to like lose your principal like on private syndicate deals, right? And I think I think a lot of times and you jump on, you know, more recently like we, we talked with every CEO and he just absolutely frustrated because if you listen to some questions that were being asked on the earnings call, it's like he said, hey, you know, we got something new vacancies and we could like lease that up and and get like double, triple the

rent. And the REIT mafias are like, well, what's your FFO? And I'm going to be next

quarter, right? You get really frustrated. You get really frustrated from running a public company like that where it's always a next quarter. And I think where we've earned some built some goodwill and reputation in the industry is that like when we jump on a call with a CEO like we'll tell them right away, like we will get things on a three-year time horizon. Like you're never going to hear me. Like what do you like how do I think about your NOI, FFL for

next quarter? We're not trying to be quarters, right. And and I think that if you think about Joe Greenblatt talks about time arbitrage like one of the remaining advantages that you may. Have in public market it's like I mean. We're literally practicing that, right? And you know, the read mafia is like operate a certain way and we operate in a way that's that's like counter. Now. I think that what's really

important is that. You. Can't just own stuff that's actually going to be discarded by the Reed Mafia. I think your best returns going to be things where you can walk out 2-3 years and say there will be a moment of inflection or there's a moment where the complexity goes away and the Reed Mafia could actually own this. And those are going to be the ones where you're going to generate some of your best returns because you go from NASA class that's orphan.

You go from a country or what, you know, multifamily NASA class, that's somebody multifamily that's orphan where they're just like that's untouchable to like they want to own that. Like a great example of this is if you look at the multifamily wreath coastal versus sun milk when COVID first happened, none of them wanted any of their coastal exposure. Like it's just like, you know, narrative like New York City, that fire coastal, the coast is

there forever. And this year, just like three years later, you know, the Reed Mafia was all about something. Yeah, it's outperforming now. They like it. Oh, now they love it. Now like if anything like we're we're getting, you know, outside research, no saying why like some belt is too dangerous like hideout or on the coastal

because the trends, right. And again, we've been humble enough in the public markets to know that sometimes like on the short term, those things due to like they are relevant, right, because the price are set by people who care about next quarter or next two quarters. But like, you know, for us, like we just try to generate the best risk suggested returns over a 3-4 year holding period. And we just think about do we

have one? Like you know, a couple things we think about is the asset quality, right? The valuation that we're getting at the people running business of the people that we could sleep well at night knowing they're running that business. And most of the time we invested in companies where we know we can't do as good of a job, like they're way better operators than we ever could be. And then what's their historical capital allocation like? Have they done a good job allocating capital, right?

And if we check a bunch of these boxes like we're very happy just owning something, cutting down and then and reinvesting that for like a 3-4 year holding purely, you kind of think of like that's, that's the lowest you don't have on the private side, right? Like you usually can't take your distribution and say, hey, let me get more ownership in this. In a way, it's kind of using the Miss Market analogy.

If you're in a private deal with 100 investors, it's almost like there's a few of them, which is like, I don't like this anymore. You could buy me out at like, you know, 60% of them. And so I'm like, I'll take my distribution, I'll buy you. That's literally what's happening, right? And that's a lot more concrete. Like sometimes I think when you apply to operating businesses, it gets a little harder to

visualize. But like you could, I think it's a lot easier to visualize like 100 people on the multifamily deal and they're just a bunch of which is like an Adam and I don't want to know it today. So yeah, I'm at the Reed mafias have, you know, a lot of times like they dictate in the short term how a Reed will trade and and then sometimes like it

happens really quickly, right? Either the operating metrics like Inflect and also like they want to know it like as you can see from the multifamily pivot to COSO right now. And no, we met with a Reed that had like Minnesota exposure and some Midwest exposure, which is like kind of like the wasteland of historically of Reed exposure, right? It's like, why would you want like that kind of geographic exposure? But there's not a ton of supply in those markets and that's kind of.

What's that? I mean, that's why, right, It's supply constricted because it's not a demand driven story. It's not a demand driven story, but I think it's getting a bit this year because on the supply side, like you kind of own it knowing that there's no threat of supply. But that's in the long run what I want to own, like no offense to that particular rate, but in the long run like.

Do I want to buy into the Sunbelt exposure where there's net migration like where a lot of jobs are being created in a lot of some of those states? Do I want that exposure versus in the long run being in a Midwest? So I get no offense to the Midwest people, but I think if I get in the at a good price, I probably want exposure to that migration growth and some though. Yeah, I guess the the only, the only concern is that it gets

overbuilt, right. But theoretically, the population migration should sort of grow you out of that temporary pocket. Well, I mean, I think, I think like any market, right, there's a saying that, you know, they're not making any more land. Yeah, but that, that doesn't, I mean, yes, but also there's, there's plenty of land in the US that people don't want to live on.

Well, so let me do. You like push back on that and and if you look at my analyst and that we've looked at some of the before after picture of cities like Miami and Austin and and Houston, and like when you look at a satellite image that there was a very long time period where you just keep pushing outward, right, You just keep going out and there. Those get to a point where like you have enough density there. Then like what's kind of cool is still like all the amenities are

in the middle and core, right? So you keep like building more supply and push out, but like what's been built in the middle, right, You actually get like densified over time. So if you have an asset there in like a mature neighborhood like that usually gives you pretty good protection against because you know, even though we all think things are going to change, like a lot of times they kind of stay the same right from the people want to live where there's nice restaurants, where

there's nice amenities. We kind of like you don't have good childcare, the schools, etcetera, etcetera. And I think the bottom of the places, if you look at the map over like a 10/20 year time period like when they first built, it may not be a lot of population density surrounding it, but over time it gets denser and and the location itself has a tremendous. Value, yeah, that I buy especially close to the city centers.

I'm just saying like, you know, as you go farther away, it's if it were more desirable inherently, it's where the city

would have been built in the 1st place, right. But yeah. So. Well, we'll see how it all turns out. Man. I appreciate you sharing your thoughts again, and I wish you good luck on your business ventures. I know this is an idea that you believe in a lot. And you know, I hope, I hope that works for you. Yeah, thank you. Thank you for the kind word and thank you.

You know, I had a ton of fun, like getting to know you and getting to discuss a lot of these read ideas with you and you know, I think I think like we're in a very unique time period and I'm. Kind of excited. It's wild how strong the S&P is trading, how strong tech generally is trading. Maybe it's justified, maybe it's not. I don't know. I don't need to know. Yeah, I think, I think the.

Way that I think about all of that is that sometimes like you just got to put blinders on, right? I usually got to think like, what are we really deal with? What are we trying to do? All right, we're trying to chop off the left tail. We're probably not going to capture the right tail like investing in a asset class like real estate, unless you have a general growth setup or you got into this like weird forced bankruptcy and then you could

buy it out of bankruptcy. Like generally you're not going to get like these NVIDIA right tail, like outcome, right, But by chopping off the left tail and you kind of you kind of bring like people who are listening, like I'm kind of my hands like, you know, like coming in right. So like on on the left side, like on your downside. The tails are not as as. Wide, yeah, your tails are not as wide, but you're still getting and are on the right.

Like we think a lot of these are still starting out at like a 10% IR over like four year holding period is like a bear case if like you don't get any sorts of capital. And then on the high end you could get like .5% IRS. And then you are willing to go more optimistic into all the hairier situations with some of the more lever balance sheets on public reads. I mean they do exist out there. Like you could get into like the 34 years and IRS. I think you know, that's that's the result.

But then that then you are in in those so life situations you do have the left tail, right? But for the most part, I think that it is not to be here at Ty between then 12 and 25. Like there's a really nice range in there. And I think ultimately the returns are going to be somewhat determined by fat policy and interest rates and whether

market like compress it or not. But but I think if you start out between dividends and just like natural rent growth and then a wide growth like you can get to you at 1012% cap 10 tenths of a percent IR in the low end with like notable. Multiple expansion window calibrate pressure like that's not a not a bad place, you know, it's hard, you know, so we're we're kind of really excited about that well. Good deal man. Well, I will have you back on.

Over time, we will revisit how the thesis is going and you know, again, I appreciate you sharing. Yeah, man, it's been my pleasure. It's been a lot of fun. All right, cool. Well, until next time, take care of yourself.