We've had four banks go down.
A lot of people are kind of freaking out about the banking system.
You know, what is it that you see and does that does that bother you at all
with you know, with with the rising interest rates
that we're seeing, it just makes capital more expensive.
It's, you know, less competition in the space
is not a good thing for rebar, you know, not a good thing for the
for all of us who are trying to kind of maximize yield just harder,
you know, because less competition is higher spreads
and obviously the indexes have been have been running most of the year.
So I think overall it it's
it's not a good thing for deal volumes.
I think that's probably you know,
I think unless you have to finance you're probably not looking to finance
and unless you really see an opportunity to, you know, to buy something.
Right.
We're seeing, you know, most of the capital sitting on the sidelines.
So I don't know that it's like a game changer one way or the other,
but it's definitely kind of got more fuel to the fire already that,
you know, causing all these headaches that everyone's experience
or most people are experiencing right now as we kind of begin to enter into it.
So, yeah, yeah.
The I know the I mean, you have your finger on a lot of institutional capital.
When I say institutional, I say all the way up the chain.
I mean, talking about,
you know, private equity, institutional equity, family office,
you know, everything from Wall Street and all the way down to Main Street.
So what do you where do you see the money going right now?
Like, well, where is it headed and where is it?
Where is it running from?
That's actually interesting because we actually have
two different demand right now on equity and debt cap.
So on the equity capital space, we're still seeing demand for larger.
So that same
trend that you kind of saw in 2021 where everyone wanted to do bigger deals,
larger portfolios, that remains,
I think, a trend in the equity space.
People are lots of capital being Ray Bolger firms being raised
looking to take down big portfolios out
of, you know, multi families were really where my world is.
So that that's really the asset class still favored
and people are anxious to to attack it when those opportunities arise.
On on the debt side, we're seeing a bias actually towards smaller deals.
So, you know, most of the, you know,
light company businesses that we do with historically always been like
we know really they would do the deal if it was 40 million,
but they wanted it to be 60 million and better if it was 100 million.
And so
we're seeing for the first time some of those larger life insurance
companies that are, you know, had that
that that biased toward much larger deals kind of retreating saying
I actually really want to be doing $20,000,000.15 and $20 million bills
and we can do the larger but we're not we're not looking to do the much larger.
And so I think that that's been the big there's a disconnect there in terms
of matching that that the the debt capital with
with the actual capital just talked a little bit about the office market.
Most of that money, I think, sits up in the life pensions.
You know some of the you know, it's
not necessarily Main Street money, but it is really it's just managed,
you know, through their borrowing case and stuff.
But what do you see?
Is that going to disrupt?
Because Elon Musk came out
with a pretty bold statement and said that the commercial office
debt crisis is going to spill over to the single family crisis.
So I just want to get your feeling, do you feel like that
that's going to spill over into, you know, into the whole pool?
You know, that's a great question and not one that I I've thought a lot about.
I mean, we we we track what was me.
You know, I'm not in San Francisco added more I'm I'm now in Nevada
but you know San Francisco US market is kind of top of everyone's
mind the talk about stress yeah and so we just saw like a real
trophy asset you know trophy as a 325 California
you can it's all public information that the deal hasn't closed yet
but you know it last traded at $1,000 but and
but you know again it's not closed yet but the
the purchase price that's being whispered is 200 up
but so that that's a $300
million deal that's now a 60 million show And that that that's
I mean, that that's a lot of money that's a lot of everyone's taking pain in that.
So I think the opera story is going to unravel
in a way that, you know, I can't obviously I can't predict.
I don't see it.
But I mean, that's a lot of equity destruction and a lot of capital.
But, you know, a lot of capital is lost.
You would think that that means I would actually think it would be
the opposite, just thinking in terms of like capital flows in the real estate.
If it's not going into office, then you would think we would have more
in residential moving forward.
You know, what do you what are you looking at
as far as, you know, multifamily and rates and all those things are concerned
when basically money was went totally free.
Right? And so we had,
you know, at one point we had sub 70 basis point ten year treasury.
The argument that was like, well there's not
really a mat magical argument for why cap rate would expand.
I mean we,
we had introduced this new global risk factor in the form of and then but
but the money was still free and like when you just kind of
look at where you know, how do you make those yields work.
It was seem like cap rates had nothing to do but
but compress and that that is in fact what happened.
What's interesting now on the other side of that cycle
and treasuries are kind of running and short rates are running.
So the risk
free capital rate is, you know, 370 now.
So in that we would expect to see, you know, I don't know.
Can you tell?
I would think you want to see a 150 basis points
of spread for your cap rate on top of the risk free rate
in order to make that a low, we those that are trading are not trading at
those levels are trading at a much tighter cap rates than we would have expected.
So that that's been a big surprise.
I mean, my expectation is that that that will change and that we will start to see
a more rational kind of market clearing where or cap rates
widen more substantially than they have thus far.
But, you know, I didn't never believe in the three cap,
but it seems like the 475 cap deals that are happening right now
really should be five or five and a quarter.
So let's have can break that down in a translation for those that
don't understand what
well I think I think said simply what's happening
is from the buyer standpoint my cost of debt is more
so the irony is is that these assets are still good assets.
And I mean the the multifamily business is not in trouble.
You know, yes, rates have come down, but
we still have positive rent growth and yes, expenses are up.
But you know, so or so is income.
So the irony is, is that this asset class is still in great shape.
I cannot pay the same because my cash flows last, so I have to pay less.
And so that's actually driving cap rates up.
It's, you know, so there's a lag effect.
And so that's what I was talking about is as a buyer, we solve to cash flow,
we look at return and the return from the property, even it's the same property.
So it might be the same property
with the same rights, with the same people in it, with the same expenses.
What's very different is the debt.
So the so I'm excited to see you at Limitless Offer.
Those are you guys are coming a limitless that's limitless
WWE limitless Zappos.com
Clay play as always man I love you
appreciate everything You do appreciate your knowledge on all the stuff.
We're all just trying to figure it out.
So we'll see you in a couple of weeks and enjoy your day.
All right. I'll see it. Thanks God.