WE SPEAK WITH SEAN DOBSON CHAIRMAN AND CEO AND CIO OF
AMHERST HOLDINGS. I CANNOT IMAGINE THAT IS EASY.
>> IT IS TRICKY BUT WE ARE SOLVING PROBLEMS IN THE REAL
ESTATE MARKET. WE THINK WE ARE WELL-POSITIONED
TO TACKLE IT. ROMAINE: HOW DO YOU ASSESS WHAT REAL
VALUE IS?
YOU BUY SINGLE-FAMILY HOMES IN DIFFERENT MARKET AREAS CAN YOU
APPLY WHAT YOU KNOW ABOUT CALIFORNIA MARKET TO WHAT YOU
WOULD DO IN TEXAS OR CHICAGO?
>> AS YOU SAID IT IS LOCAL BUT WE BEEN AIRING THAT LOCAL MICRO
DADO -- MICRO DATA IN A UNIQUE WAY.
WE KNOW EVERYTHING ABOUT THE ASSET DESCRIPTIVE PERSPECTIVE
AND WE KNOW EVERYONE WHO HAS OWNED IT.
WE THINK ABOUT WHO HAS VALUED THE ASSET IN A CYCLICAL
FRAMEWORK. THIS IS HOW IT IS DIFFERENT TO
OTHER COMPETITORS. WHEN WE CAME TO THE WORLD 20
YEARS AGO WE WERE THINKING ABOUT THAT ASSET AS ANOTHER
INVESTMENT OPPORTUNITY -- ANOTHER OPPORTUNITY.
AND WHAT RETURN RISK STRATEGIES MAY HAVE AND HOW THAT COMPARES
TO WHAT YOU CAN INVEST IN. WE BUILT OUT THE ABILITY TO GO
AND IT EFFECT THAT STRATEGY BECAUSE IT WAS SUPER
COMPLICATED. WE ARE BUYING OFTEN TIMES ONE
HOME AT A TIME SO IT REQUIRES ONE OR MORE OF OUR TEAM MEMBERS
TO DO THE LAST MILE PEACE THAT ONLY A HUMAN CAN DO.
A PERSON SHOWS UP WITH A LOT OF DATA AND ANALYTICS. ROMAINE:
HOW MANY HOMES DO YOU HAVE IN YOUR PORTFOLIO ROUGHLY?
>> 50,000 ROUGHLY. ROMAINE: WITH THE STATE OF THE HOUSING
MARKET WHEN YOU LOOK AT THAT PORTFOLIO HOW MUCH WILL IT BE
WHEN -- IF WE LOOK AT AN ECONOMIC DOWNTURN?
>> THE FORECAST OF INFLATION IS INCREDIBLY COMPLICATED.
WE ARE NOT IN THE NEXT YEAR OR TWO BUSINESS WE ARE IN THE NEXT
10 YEAR BUSINESS. IN THE NEXT 10 YEARS WE FEEL
THERE WILL BE A STRONG DEMAND FOR OUR ASSETS.
THERE IS A GAP IN THERE FOR THOSE UNDER DEVELOPING REALIST
RATE -- REAL ESTATE. WE CAME IN AND FILLED THE GAP
TO ALLOW FAMILIES TO LIVE IN NEIGHBORHOODS THEY WANT TO LIVE
IN. ROMAINE: THE RENTAL MARKET IN CERTAIN
PARTS OF THIS COUNTRY HAVE GOTTEN CRAZY AS WELL.
IF YOU'RE UNFORTUNATE TO LIVE IN NEW YORK OR CALIFORNIA IT
MAY BE MORE COSTLY FOR YOU TO RENT THAN BY GIVEN THE HIGH
VALUATIONS. HOW DO YOU DECIDE HOW TO PICK
WHAT WILL BE IN YOUR PORTFOLIO WITH THE LONGER-TERM VIEW?
THE IDEA OF WHAT IS POPULAR NOW AND WHAT CONSUMERS NEED NOW IS
WHAT THEY WILL NEED 10 YEARS FROM NOW?
>> THIS IS WHAT A LOT OF THE TOP OF THE HOUSE IS WORKING ON.
WE HAVE A LOT OF SMART PEOPLE WORKING ON THIS.
PEOPLE WILL NEED ANOTHER WAY TO ACCESS THE HOME PRODUCT.
PEOPLE NEED MORE SPACE BECAUSE THEY ARE ADVANCING IN LIFE AND
HAVING FAMILIES AND THINGS THAT REQUIRE A NEIGHBORHOOD AND
SCHOOL. WE SEE ACCELERATION AND TRENDS.
IF YOU THINK ABOUT IT, WE HAVE ALL WATCHED SHOP FROM HOME AND
NOW WITH THE HIGH-SPEED INTERNET COMING TO THE DOORSTOP
-- TO DOORKNOB NOW WE HAVE HIGH ENTERTAINMENT AT HOME
HIGH-SPEED COMMUNICATION AT HOME, AIRBNB ALLOWS YOU TO
VACATION AT HOME AND PEOPLE ARE WORKING AT HOME.
SO ALL OF THAT AT HOMES IS THE HOME.
THERE SINGLE-FAMILY RESIDENTIAL IS PICKING UP THE OCCUPANCY
BEING CREATED ALL SPY OFFICE, RETAIL, DINING AND THOSE THINGS.
THAT IS A LONG TREND. ROMAINE: HOW MUCH EXPOSURE DO YOU HAVE
TWO COMMERCIAL REAL ESTATE RIGHT NOW?
>> WE HAVE $25 BILLION IN ASSETS.
AND WE HAVE -- A SMALL PORTION OF THAT WHERE WE ARE
RE-PURCHASING A BUILDING.
SOMEONE HAS TO BALANCE SHEET A PROJECT AND WE HAVE SEEN STRESS
IN THAT BUSINESS. ROMAINE: WHAT IS GOING ON THERE?
>> WE SEE STRESS ON WORK FROM HOME AND THE SLOW PACE OF
STABILIZATION OF WHAT THE NEW NORMAL LOOKS LIKE.
IT PUTS PRESSURE ON PROPERTY OWNERS BECAUSE THE OLD METHOD
OF ATTRACTING TENANTS AND HAVING LONG-TERM LEASES IS NOT
WORKING. ROMAINE: HOW VIABLE IS THAT TRANSITION?
BUT THERE -- WITH A CERTAIN OFFICE BUILDING YOU CANNOT
EASILY RETROFIT IT THE PLUMBING IS NOT THERE TO MAKE IT INTO AN
APARTMENT.
>> NO YOU CANNOT.
THOSE BUILDINGS ARE NOT REALLY DESIGNED TO GO FROM WORKING
THERE TO LIVING THERE. SO THE COMMERCIAL RESIDENTIAL
IS DIFFICULT BUT THE CONVERSION
TO LOWER DANCE USES IS NOT THAT COMPLICATED -- WHAT WE SEE IS
NOT A WHOLESALE CONVERSION FROM TYPE TO TYPE.
THIS IS NOT A FORECAST I WOULD PUT A LOT OF CAPITAL BEHIND
TODAY. WE THINK IT IS MORE LIKELY YOU
WILL SEE A SWITCH FROM RESIDENT LARGE TENANTS LONG LEASES TO
SMALLER TENANTS WITH FLEXIBLE LEASES. ROMAINE:
HOW DOES THAT AFFECT THE FUTURE OF BIG CITIES LIKE NEW YORK?
DO YOU THINK THE ATTRITION WE'VE SEEN OVER THE PAST FEW
YEARS IS BECAUSE OF THE PANDEMIC AND THAT THAT IS THE
NEW NORMAL OR DO YOU THINK THE BIG CITIES WILL RECLAIM THAT?
>> THE WAY I THINK ABOUT IT WITH REAL ESTATE WE SAVOR THE
-- ESSAY IT IS LOCATION, LOCATION, LOCATION AND NOW WE
SAY PRODUCT, PRODUCT, PRODUCT. WE SEE THE DOWNTREND IN THIS
MARKET BUT WHAT IS HAPPENING A LOT OF PEOPLE IN STATE AND
LOCAL GOVERNMENT UNDERSTAND THEY ARE COMPETING IN PLACES.
THE STANDARDS HAVE CHANGED TO GET BACK TO CLEAN SAFE PLACES
TO WORK BECAUSE THERE IS NOTHING LIKE THE ENERGY OF A
BIG CITY. WE DO NOT INVEST IN THE GATEWAY
OF THE UNITED STATES CURRENTLY WE STAY WHERE THERE IS
OBVIOUSLY MIGRATION IN THE SOUTHEAST. FLORIDA, TEXAS, AND
THE CAROLINAS. WE HAVE INVESTMENT IN THE WEST
WITH ARIZONA. THE TREND HAS ESTABLISHED FOR A
LONG TIME. THEY WILL CHANGE. ROMAINE:
IS IT EASY TO FIND INVESTMENT OPPORTUNITIES IN THE AREA YOU
WERE TALKING ABOUT INSTEAD OF THE GATEWAY CITIES?
>> YES.
THEY ARE ALLOCATING CAPITAL ON THE 10-15 YEAR HORIZON.
WHAT WE ARE HELPING THEM THINK ABOUT IS HOW THESE CITIES GROW
OVER TIME. WE ARE NOT SURE FOR OUR
STRATEGY THE GATEWAY CITIES ARE THE BEST FOR US TODAY BUT WE
HOPE THEY WILL BE IN THE FUTURE. ROMAINE:
YOU ARE ALSO INVOLVED IN SECURITIES.
YOU HAVE A PORTFOLIO. HAVE YOU SEEN STRESS THEY ARE?
>> MASSIVE. I HAVE BEEN TREATING MORTGAGE
BACKED SECURITIES FOR YEARS AND RELATIVE VALUE IN THE FIXED
INCOME MARKET IS AS GREAT AS IT EVER BEEN.
THE RELATIVE RETURN YOU GET FROM BUYING MORTGAGE-BACKED
SECURITY IS ABOUT AS WIDE AS IT HAS EVER BEEN.
THAT IS A TRICKY THING. THOSE ASSETS DO A LOT ON THE
BALANCE SHEET. SO WHEN YOU BUY A MORTGAGE-BACKED SECURITY ONE
WITH A VALUE MAY HAVE A RETURN OF 100 BASIS POINTS OVER THE
RATE. SO THE CAPITOL MOVING TODAY, WE
ARE IN A PERIOD OF TIME WHERE WE HAVE ACCESS FISCAL POLICY
THAT IS NOW BEING OFFSET BY REALLY AGGRESSIVE MONETARY
POLICY. IT HAS REALLY SHUT DOWN CAPITAL
FLOWS. YOU CAN SEE IT IN THE BALANCE
SHEET OF SECURITIES. THOSE ARE EARLY INDICATORS OF
THAT. ROMAINE: GREAT CONVERSATION.