Commercial Real Estate morning News Show
Leaders in the commercial real estate industry discuss the latest news and provide insights that you will get nowhere else!
Commercial Real Estate morning News Show
Commercial Real Estate Morning News Show - Multifamily Edition Jan 2, 2025
Stay in the Mix 'til 26 with us as we launch into the multifamily real estate landscape of 2025, featuring industry veteran Mike Brewer. Mike, who has transitioned from corporate America to spearheading a multifamily media network, sheds light on amplifying diverse voices in real estate, especially through women-led podcasts. Prepare to uncover how AI is poised to revolutionize the multifamily sector, promising to streamline operations and reshape organizational structures, setting a new benchmark for the industry.
Join the dynamic dialogue with Jason Hull and Guillermo as we unravel the complexities of real estate finance. Jason brings his extensive knowledge of capital markets, offering insights into the potential privatization of Fannie Mae and Freddie Mac. Guillermo, the CEO of a leading AI maintenance software company, lends his expertise on centralized maintenance solutions. Together, they paint a speculative picture of the financial landscape, exploring the impact of debt funds and the delicate balance they maintain against traditional banks.
As we explore multifamily real estate's promising trends, the conversation shifts to the nuances of tenant retention strategies and the rising popularity of office-to-multifamily conversions. Uncover the driving forces behind the resurgence of condo developments and the pivotal role of AI in transforming the real estate sector. With insights into managing operating expenses and the future of automation, we envision a future where AI-driven solutions redefine the resident experience, paving the way for a seamless transition into 2026.
We're live. Oh no, whoa, we're live now.
Speaker 2:And it's New Year.
Speaker 1:And it's New Year, it's the day after. Happy New Year everybody.
Speaker 2:Yeah, Happy New Year.
Speaker 1:Happy New Year. This was the last year was survive till 25. It is now 25. We've made it Right.
Speaker 2:Right.
Speaker 1:The new theme, mike. It's stay in the mix until 26.
Speaker 2:Oh right, stay in the mix until 26. So a little bit of potentially thriving in 25, or setting the stage for thriving.
Speaker 1:Yeah, I don't know if we're going to thrive in 25. I don't know. It would be interesting, but there's a lot of mixed news out today about Multinaut. Before we get into the news, Mike, why don't you introduce yourself to everybody who's watching our show? Trump watches every religiously, by the way so we should say hi.
Speaker 2:So my name is Mike Brewer. I've been around the industry for roughly 30 years, mostly on the operations side of multifamily business, all different asset types all across the country, from Oregon to Washington to San Francisco to St Louis to Atlanta here, most recently to the day I think January 9th was my last day in the corporate America started a multifamily media network. So a media business really set in place to bring podcasters and different voices out to the multifamily space. So we have 20 podcasters in our network and really our mission is to build up future leaders in the multifamily space through those voices is to build up future leaders in the multifamily space through those voices.
Speaker 1:That is super awesome. I'm so and you have like Shelly Robinson. Hopefully she'll join today. Yeah, you have some really cool. I've seen some of the folks and no offense, mike, but we need more women podcast talking about real estate.
Speaker 3:I agree.
Speaker 1:You know, I'm so, so sorry, I'm so sick of the dudes we talk about real estate. I'm so sorry, I'm so sick of the dudes we talk about real estate all the time. It's like do this, do that, and no fault to them. They're hustling, they're doing their thing, they're putting it out there. But we do need more women voices. So I'm glad you bet Shelly at least, and I know who else is on your network.
Speaker 2:Yeah, we have Mary. So, sticking to the women's side, or woman's side, we have Mary Gwen from Apartment Dynamics, we have Janet Rosseth, who's up in Minnesota, and we have Lisey Daniels. We also have Vanessa Grayson. So I think we have six and we have somebody that's launching. I can't tell you yet, but we have somebody that's launching. I can't, I can't tell you yet, but we have someone launching this month.
Speaker 1:Yeah, yeah, yeah, for sure. No, that's great, so awesome. All right, we have oh Lord, have mercy. All right, we're going to get get in the I'm trying to get somebody on the show and I'm trying to multitask. So let's go through the first story, mike, and you can start talking while I multitask, while the other guests are trying to figure out how to get on the show. Outlook, all right. So the first one let's talk about. So let's talk about themes for 2025. What, what do you see? I mean, last year, there was a big talk around centralization of operations and a lot of different things.
Speaker 2:What do you think in 2025, the themes are going to be yeah, I hesitate to say AI, because I think at some point people are just going to get really allergic to the term AI.
Speaker 2:But I think AI started to make its way into the broader ecosphere November 22, I think it was when OpenAI came on, but I think artificial intelligence has been around for a very long time. I think that in 2026, it's going to make its way into the real estate space in a real way and the multifamily space in a real way. I think that's going to come in the way of agents, or what they call an agentic workforce, and so I think you're going to start to see AI embedded in even a bunch of the technology that you use today, but also technology that might make its way into the space in the future, and mostly it'll be centered around the idea of being able to centralize operations or automate operations, and I think the traditional hierarchy that you see that governs multifamily is at risk. I think the idea of having flatter organizations is going to be a real thing, but I think in 25, you're going to see the stage set for that and then I think in 26, you'll start to see that really play itself out.
Speaker 1:Awesome, and we have Jason Holt in the house.
Speaker 2:Hey Jason.
Speaker 1:Hey Jason, All right, you can unmute your mic now. Hey buddy, how are?
Speaker 4:you hey morning. How are you guys doing today?
Speaker 1:Sorry, I was a couple minutes late, it's all right.
Speaker 4:Happy new year. You sound like you had a fun time on new year's eve. No, I was actually. We actually went to the rose bowl yesterday. I was a little bit late, so I'm on the west coast a little bit. I was a little bit behind, so sorry about the timing. I didn't realize it was. I forgot it was seven o'clock my time so I haven't had my coffee yet, but I'll be happy to return.
Speaker 1:All right, all right. This is so awesome. You were at the rose bowl. Of course you were jason I know that was like the beat down, the beat down of all beat downs. Oh was it.
Speaker 4:I didn't even get to watch it because I was like not interested. But who won um ohio state was when I took my dad, so it was a lot of fun. He's a big ohio state guy group, you know it was. We had.
Speaker 1:We had a good time, it was good all right, and gear mo's in the house too. Look at this, we got a full house.
Speaker 3:Good morning everybody.
Speaker 1:Good morning.
Speaker 3:All right, you caught me post-workout deep into a jigsaw puzzle. I'm glad you came to me because I was in the throes of trying to match up the foliage of a bird in a winter setting. That sounds challenging. Happy New Year's, everybody. Happy.
Speaker 1:New.
Speaker 3:Year, very cool.
Speaker 1:All right, so, jason, introduce yourself, buddy.
Speaker 4:Introduce yourself. Yeah, yeah, so real quick. So, jason Hall, I do a lot of capital markets activities through Fannie Freddie. I do a lot of HUD, do some construction loans, do pretty much all capital markets to help people execute their business plan in the let's just call it anything that has to do with the residential space. Don't do single family homes. We do a lot of build for rent, other activities like that, so anything that kind of goes on in that world. Also do a lot of work in land game as well, helps the folks on the equity side, so always kind of in the mix on the be on the equity side. So always kind of in the mix on on the real estate world, help my clients kind of execute their business plan and mostly everything, like I said before, has to do with anything that's in the residential apartment. You know, senior housing, living, the living space, let's call it that right yeah, and it's very scruffy, and so that's why he's not on camera.
Speaker 1:We're just glad to have Jason here, because I always like to have a lender in the house, and we have a really cool story that came out at 630 this morning that we're going to go over, but we'll let Guillermo introduce himself.
Speaker 3:Hey, buddy, how are you Good to see you. Happy New Year everybody. I wish everybody the best in 2025. I am in calgary, alberta. I'm the ceo at ircx. We're a tele maintenance solution. Helps companies centralize maintenance in one day. Um, that's kind of that's the long and short of it. My background 25 years centralizing major industry. I've grabbed above ground mining, below ground mining, nuclear transportation, all sorts of stuff and um and kind of bringing that background into solving problems multifamily, single family. So you know, pretty excited to have this conversation and obviously, uh, it's been an incredible year for these kind of bringing that background into solving problems multifamily, single family. So you know, pretty excited to have this conversation and obviously it's been an incredible year for these kinds of conversations, and so this is always fun to mix in the news the news with the, with the sales applications, right.
Speaker 1:Yeah, yeah, yeah, for sure. So all right. So first story. I'm so glad Jason is here. This came out and we'll kind of go through it. But this came out at six. We'll kind of go through it.
Speaker 1:But this came out at 6.30 this morning where Bill Ackman, who runs a hedge fund called Pershing Square speculated on X that Fannie Mae and Freddie Mac could come out of conservatorship in the first two years of the Trump administration. They're going to take them private. What is that going to do, Jason, if anything happens, if they take Fannie Mae and Freddie Mac private? Have you even read this story? He's probably like Amy.
Speaker 3:Can they I?
Speaker 1:have not.
Speaker 4:Can you Listen? I have not read that story. People talk about it all the time. Yeah, they were. It was that in that. It was like that, I think back in the day.
Speaker 4:But who knows? I mean I don't think that's really going to happen. At the end of the day, fannie and Freddie solve a problem for affordability in America and they also solve a problem with kind of clearing the market where the banks are not there, right, but I don't see them coming out. They might come out of a service that they might not. I mean I don't know if that really is going to make that big of a difference. I mean they do operate to make a profit today, so it's not like they just do. They don't execute under the Fannie Freddie platforms because they want to lose money, right, so they still make money. So it's not like they're losing money to make loans. And I think that's what you might be getting at saying that okay, if they're losing money, then they'll do, then they'll execute their business a little bit differently. I don't think if it came out of conservatorship.
Speaker 1:I don't know if it would make that much of a difference, but I don't think it's going to happen. Yeah.
Speaker 4:Yeah.
Speaker 1:I mean. So what protects it? I mean in its state that it's now, does it allow it to do the loans that it does, or it doesn't matter?
Speaker 4:Look at, the loans are executed anyways, right, like the loans are executed in in the you know it's called the financial markets right? They're securitized packages. People buy them. They buy the A pieces and B pieces. Look, if you look at Fannie Mae, they're sold to individual investors. I mean, they're executed in the capital market total today already. So what would be the biggest? How is it going to change the execution of the platform? It's not going to change that much. I mean, maybe they, maybe they don't have to make more profit than they made today, but they still make a profit.
Speaker 1:Well, if they, if they go private, then you're then is are are they gonna ipo? Are that, is it gonna be?
Speaker 4:something that, um, your guess is as good as mine. But I would just say that I think that I think people talk about it all the time. I think that at the end of the day there's, you know, there's obviously more to it than what. I know that maybe the folks of the day there's, you know there's obviously more to it than what, than what. I know that maybe the folks, maybe folks on the phone, have a little, or the folks will show a little bit more idea about it. But I look at it as it's already executing in the capital market space. It's already, you know, they do execute their platform for a profit. I mean, they don't give. We're not giving away loans at 450 right now, or giving away loans at the market rate of what makes the most sense, right, what can be executed on Right Now I got you Interesting.
Speaker 3:I'm curious. These kind of conversations come up every election and it's like what's the problem they're trying to solve by taking them private? Because they solve a problem right now in the market and they were established a long, long time ago and they're very effective at solving the problem around affordability and first mortgages and all that stuff. Um, I don't know. I also find it interesting that that, uh, bill ackerman's saying it, because, like, how does an activist investor like this would not be a good target for him, right? Because then to turn around freddie and fannie would be count contrary to the objectives of those institutions. And thirdly, this needs Congress approval to become private. Congress has been pretty busy with other things in the first year that I just don't see that they're going to make time for this kind of like, all the whipping that would have to happen to be able to get this through.
Speaker 3:Congress would.
Speaker 4:just I, just I mean I think you're point to correct you. I think it's like it's already working. It's not like something that's usually broken.
Speaker 2:Right yeah, right Right.
Speaker 4:I agree, I don't even know why people bring it up all the time. You know, obviously it's just. It's odd to me that people focus on that when there's like a million other places to focus yeah. It sounds boring, I agree, you get a jigsaw puzzle.
Speaker 2:Yeah, a really hard one I mean, yeah, I don't know.
Speaker 1:I don't know. I mean I talked to a friend of mine who is I can't say his name because he would give it away but he's at a very large lending a law firm that does focus on finance, and he told me that he was like Amy we are so freaking busy he goes. I had to work through Christmas and there's so many transactions happening and I'm sure Jason's like doing most of the loans but he's like there's so many transactions happening right now because and I think it's because people were teed up or they were waiting or whatever what they were waiting for is starting to happen. So when he starts to get busy, we're not seeing that in the news right. So we'll start seeing, like next quarter we'll see all these transactions that started to happen. So I think it's a good time.
Speaker 1:I mean, the Fed dropped the rate again for the third consecutive. That was on the 18th. They gave us a Christmas present. They dropped the rate. Everybody was expecting the drop the rate, so there was no big bump afterwards, but still it was three consecutive times that they met, that they dropped the rate. Now no one knows what they're going to do next year. Is you know anybody want to crystal ball that one. Do you think they keep dropping the rates, mike? Do you think they keep dropping it? I don't know.
Speaker 2:I have no idea.
Speaker 1:Yeah, I know, I don't know.
Speaker 3:So here's my, here's my Guillermo's opinion. Guillermo, Guillermo, the ex-consultant, by the way, does so good, there's not been one acronym that I've heard yet or a two by two?
Speaker 3:Oh yes, exactly, I'm pretty good this year. I do have to do my goal setting for the year, though, but here that um the the purpose of lowering interest rates right to stimulate the economy, and the buffett against that is a buffer, against that is um is inflation, and so what I think we're going to see is he's got to get I. I think that we are going to want to see interest rates drop in 2025, but to do that, inflation's got to be curbed, and to do that, we've got to get the price of oil between 55 and 75 bucks. So if we get a stable price of oil between 55 and, say, 65 which which I mean where I come from that's not great news, but let's say between like it's hovers around 65 bucks a barrel yep uh, if it hovers around there nice and stable, maybe even dipping between 1665, that'll bring down inflation enough that will be okay to be able to lower interest rates.
Speaker 3:I mean, every administration wants to lower administrations, but the buffer is against inflation and so inflation has been a problem. It's affordability of just even your basic groceries is out of hand. So the price of energy inputs is affecting that inflation and the easiest thing to do is lower the price of oil by raising production or helping it out other places, and then we can get inflation down a little bit, then you can lower interest rates. So how's that for an answer?
Speaker 1:I don't know, mike yeah.
Speaker 2:I like that as an answer. It's not on the same topic, but maybe it is the same topic. I'm interested maybe in Jason's opinion, you know, as it relates to commitments or loans that are coming to you. I don't know what the number is, but I've heard it's very big and there has been the propensity by lending institutions to sort of kick the can down the road, as they say. Institutions sort of kick the can down the road, as they say, um, but at some point you have to stop kicking the can down the road and you have to come to the realization that those loans are not going to perform. And what happens then? Or what? When does that happen and what happens then?
Speaker 4:if you want my opinion on that one, I think the easiest way to look at this is like so I went through the downturn in 2007 to 12, right, just like most people on this phone did.
Speaker 4:And you had to. You had to get rid of loans, you had to mark the market, you had to sell those because it was all you know, it was all through the banks, and the banks have regulations that that force them into executing a plan or selling these loans. Today, most all the loans that are held that are in default or have some kind of issues are with the debt funds. Like there's trillions and trillions of dollars for the debt funds, but if you look at the banks, they're in pretty good shape. Um, if you look at fanny freddy, they're in really good shape and the debt funds are raising new money to basically put out more loans and they're not regulated by anybody, so they can kick the can as long as they possibly want. And so what we're saying is we're not seeing a lot of defaults. We're not seeing a lot of defaults through these debt funds, because if you see that if the debt funds default or put something in foreclosure, what also happens is that their credit facilities force them to buy these loans back. So it's kind of like this.
Speaker 4:And then here's the other kicker too, is that if you're in default and somebody forecloses on you, then you cannot get a Fannie and Freddie loan. Most of these debt funds see Fannie and Freddie as the exit. So if they put people in default, a default close on them, then that individual operator cannot get a Fannie and Freddie loan. Then, at the same time, the debt funds want to get that off their books. I would say that the only deals that you're seeing that somebody is foreclosing somebody out or pushing somebody out the door or something that is not a good operator um, a lot of the other deals that are good operators that are more getting hit by maybe you know, cap rates going up a little bit or industry is going up a little bit. The debt funds and the um are working with them right, like. So you're not seeing a lot of foreclosures. You're seeing they can't get kicked down the road because you know, quite frankly, there's, you know, some of the a lot of folks that have these loans are allowed to do that.
Speaker 1:They're loans. They're not regulated by anybody that's making them do that besides their investors. That is super insightful. Then they can also, if there's some sort of private credit or bridge debt, that private lender, they'll be happy to sell that to them to help them get further down the road. But where Freddie or Fannie wouldn't allow you to do that, right, I mean they get a little heartburn over any sort of second position or third position on a debt but a debt fund, they might not care, or they might, right, I don't know, Jason, you tell me, buddy.
Speaker 4:No, I think you nailed that. I mean, I don't know, jason, you tell me, buddy. No, I think I think you're you're nailed out. I mean, I think there's people can make their own decisions in that world.
Speaker 3:They're not regulated by anything but their investors and their own returns yeah, I mean jason, I mean I look at your take on this. It's, I mean, it's my understanding the last thing a bank wants to be is in the building business, right, and so, like, they'll do whatever it takes to. Not, they want to be bankersers, not builders. So here's what I've heard and I and I you know I need you to correct me on this because I don't know course, correct or however influences up this opinion is like, if there's an eye lower interest rates, which makes the paper good in like Q3, right, can we just slap a little bit of a variable with a push out on the amortization period to try and make the payments paper and then we'll deal with it in q3? Is that like, is that kind of an approach to solving the problem in the short term?
Speaker 4:I think that's the approach to solving the problem with some sort of definitely. But if you look at the banking world you know we don't. There's not a lot of issues in the banking world, right? So a lot of the issues are with the debt funds, which has has mostly like two to three year paper. So amortization is not really going to solve the payment issues, it's more of like just extending the loans, right yeah, it's just about cash flow in the short term.
Speaker 4:Right, exactly, but it's also sometimes that is also dependent on that. Did they execute the business plan? Is the business plan behind? Are they on target? Is it more expensive? Is it not more expensive? Things like that Right. Are they on target? Is it more expensive? Is it not more expensive? Things like that right? Like you know, I had a call with we had a call with a really good, some good friends of ours the other day. We're working on some refinances for them and they're five to $10 million short on a bunch of loans and they've executed a business plan of just like concession to strong in the marketplace, right. So they're just, you know, they numbers on, they're hitting their numbers on rates on rents, but they're not hitting their numbers on concessions and so they're just waiting for the market to kind of catch up. But they'll get there and just take a little bit more time.
Speaker 1:So yeah, so which makes you know, and I think most people might be hitting their numbers on occupancy and numbers on rents, but the expense side is just eating their lunch. I mean, it's just, there's no way you could have planned for 4X on an insurance premium, right? There's no way you could have planned for your all of the everything else, your payroll, your repairs and maintenance and everything else to kind of go to 3X or 4X. I don't think anybody. Now we knew the interest rates are going to rise, but just I don't and I don't buy that inflation is at 2%. No one feels 2%, no one is feeling that Do you want broccoli lately?
Speaker 2:Or eggs.
Speaker 1:Who is saying it's 2%? I don't understand it. Every day I feel 20 to 30 times.
Speaker 3:I was just like, oh my God, this is awful we had to cut the celery out of times when it was just like, oh my God, this is awful Like maybe we're going to go back.
Speaker 1:We had to cut the celery out of our Caesars, it's austerity.
Speaker 2:Oh my.
Speaker 1:Lord have mercy.
Speaker 1:That is crazy town, I don't know, All right, let's go to the next story, which this will be good for multifamily. So the next story we're talking about how renters are staying longer, and this was really good. So this last decade versus the decade before, on every age group, the only one is the Gen Zers. They're like hopping every year or whatever it might be, but the big numbers are staying longer. Everybody's staying longer, all those age groups. It upticked. So this is good news for the multifamily industry. You can rent one time and they're going to hang out for five to seven years and we're not used to doing those turns as often. That'd be really cool. But how does that change? The strategy? I mean your CapEx when you go at acquire now is going to be okay. We need to improve. We need to do more capital improvements, because we're not going to get to where there's not going to be as many turns, so we're not going to be able to get through those value add deals. That'll change, don't you think, mike?
Speaker 2:Yeah, yeah, I think I definitely think it would, unless you're you're one of those risk takers and you sort of force the vacancy to do your renovations, yeah, but if you're getting the rent bumps without doing the renovations, then you know what's the incentive to do that Right. Look, I think that's obviously the price of housing I think is driving this sort of uptick in staying longer. People just can't afford to buy homes. Especially younger generations can't afford to buy homes, and I mean as an operator, I love it. I think that, to the extent that we can hang on to people, what I sort of juxtapose that against is the point that you just made about expenses rising, and where you're cutting on the expense side of multifamily is potentially putting the resident experience at risk or even the team member experience at risk, and so you've got to hedge for that in a way. You can't let that diminish and maybe offset this opportunity to keep people longer term.
Speaker 3:For sure, mike, I sure like a question for you like who's? Like you know you talked about any interest in, uh, interest in insurance, right, all below the line expenses that have gone up so high. Like who's? I mean, who's in charge of managing, generally speaking, like the ny operating piece? Okay, that's easy, right, that's the operators. But like, generally speaking, on an inch, because you're seeing gray star offer insurance, you know rebates and packages etc. Like what, who is responsible for that part of the p? L? Like, because, like, we've all been focused on noi for whatever a lifetime, but then like, and that's your revenue less your operating expenses, less you're kind of like the other stuff. And then there's, then there's your noi number, and then you've got insurance, and then you've got taxes, and then you've got all that stuff Taxes have gone up, insurance has gone up, interest has gone up, everything is below the line. So, like, is it the I mean beyond the asset managers? Like, who's got who has power to to manage and negotiate that stuff on a quarter by quarter basis?
Speaker 2:I think risk managers sometimes it's risk managers and asset managers so risk managers on the insurance side and then asset managers, certainly on the tax side, appealing as often as you can those are kind of non-negotiables and fixed expenses, right, I hate to correct you, Guillermo, but insurance and taxes isn't below the line.
Speaker 4:Mortgage is below the line. Yeah, yeah, insurance and taxes are operating expenses.
Speaker 2:But to your point, they're a little less controllable.
Speaker 1:They're less controllable, but it's still. That's why everybody's getting hurt is because they had no idea the insurance was going to go where the or the.
Speaker 1:You know the taxes that was, that was a that's been going up and everybody could kind of mitigate but the but the insurance was the big. You know that we didn't have any, it was killing deals and all the other things that we had no idea that that was going to happen. But also below the line you have. I mean you, you, you can only offset depreciation, amortization so much and that was like the big thing back in the day was like that's why multifamily investing was so cool is because I got a negative tax return every year just from from. You know those paper losses and all that other stuff and the bonus depreciation and all that other stuff.
Speaker 1:And now I'm getting losses because we're really not making any damn money. You know we're getting like. You know I get a negative K1. That's really low and I'm not getting into distributions. You know that. You know it's it's kind of like really interesting for sure. But I think the insurance and I think if, if we go back, circle it back to ai, I think that's where that we get the biggest boon in AI on the insurance side, because now the insurance underwriters aren't guessing anymore, they can get really good property valuation, get really good insights on as more and more building data becomes available.
Speaker 1:That when they don't have to guess and they and they can really good insights around climate resilience and what we have in and very property specific by using AI. I think that's so. I think if we have any hope of anything in multifamily is that the income bill comes down because they can really accurately underwrite a building.
Speaker 3:Given that expense. Does that then say, okay, the Midwest is becoming a much more profitable investment segment versus the traditional? Well, I mean I'll say Florida and California, california, florida, forget it. Right, insurance has gone crazy, mike, that's a personal pain. But is the Midwest or Texas I mean? Well, yeah, I mean Texas.
Speaker 1:I can't.
Speaker 3:I don't know what the situations are on insurance.
Speaker 1:Oh, the largest insurer pulled out, and that was two. That was three years ago they pulled out of the state. They stopped. We stopped issuing and they stopped renewing. They just pulled out of the state and it's interesting and it was allowed like kind of during COVID, but it was in 2021, was when that happened.
Speaker 3:What's the rationale for Texas?
Speaker 1:I mean, I don't see any highlight, I mean, other than tornado and yeah, tornadoes and hurricanes, and you know COVID and people staying home, I think it. I don't know what. I don't know. It's just they had a lot of snow apocalypse.
Speaker 3:It was right during that snow apocalypse time and they had a yeah like a lot of claims in that area. Maybe they came back in. I don't, I don't know. I just I mean from a, from a, just a casual news follower. I mean, obviously florida and california grabbed the headlines. Yeah, it's kind of like, you know, cocktail information, cocktail party information, you kind of like it didn't make sense.
Speaker 1:It doesn't make a ton of sense to me in uh, in texas, but I don't know much about the market, I don't know that well, yeah, no, I'm with you, I'm with you there, but if we can figure out, I mean, I guess, this whole renter staying longer thing, hopefully we'll, hopefully, yes to that point.
Speaker 3:Like I'd be curious, is that data? Like how's that? How's that segment? Is it? Because SFR obviously stays longer than multifamily, so is it? I'd be curious to see how multifamily, pure multifamily, has moved versus the kind of SFR or BTR segment. Oh yeah, because you could look at saying, okay, there's just, there's that many more BTR, sfr renters Say there's a million of them and and of those they're staying on average six or seven years. And then of the other, I don't know, 40 million I guess, in the multi-family side. There I guess those numbers wouldn't, they wouldn't change it.
Speaker 1:No, I think yeah, yeah, it doesn't say. The article is in globe street and it was uh, this morning at um 6 29 am and philippa wrote it, philippa Meister. It doesn't say but it does say that the Denver, austin my hometown and Salt Lake City have the most short-term renters. So but yeah, it doesn't segment by household type.
Speaker 3:But now that I think about it, I don't know if that would make a difference, because it's just not enough.
Speaker 1:Yeah.
Speaker 3:How much more Sorry because I haven't it? I don't know if that would make a difference, it's just not enough. Yeah, how much more sorry Cause I haven't? Obviously I was not just getting the news this morning.
Speaker 1:How much longer are they staying? It's so it's talking about. It doesn't give you a link, but it just say okay for the people generally, All right. So let me read it. So as 33, wait, it talks about 33% of the? U renters have lived in the same home for at least five years. That's according to Redfin. And it goes through and talks about 17% of the renters have stayed for five to nine, and then 16% have stayed to 10 years or more, and then all of those categories of those have all increased. So that's what it's talking about. So does that sound like's talking?
Speaker 3:about. So is that like apartment to you, or is that something?
Speaker 1:single family um, it doesn't say, it doesn't no just your, your gut instinct.
Speaker 3:Does that sound? Single family I?
Speaker 1:would. I would say for me I would say that's single family.
Speaker 3:I mean I think that's multi-family apartment.
Speaker 1:Yeah, I would agree with that, yeah, I mean, I think, the single family and the fact that there was a builder rent boom and yeah, I would agree with that, and so that was the whole key to doing build a rent way back in the day that you can get multifamily financing for it. And so that was like the storm, exactly Because the people hang out longer. You build a brand new house. You don't have a lot of maintenance.
Speaker 3:You know, it's like I think that the the ability to exit the equity in your current residence and then give that money your kids for a down payment or at least put that somewhere else, like yeah, like I, I totally get that. I think it's we could, uh, I mean I could speculate, but it'd be probably dangerous in a live show on why. But I think there's. You know, if you think about those that are, uh, I'll just put it kind of like the narrative that I've kind of got in my head for, like my kids, right, my kids are probably going to rent a house first.
Speaker 3:Oh, yeah, and then and they're going to save their money and they're going to, and then hopefully they'll buy a house. They'll be able to buy a house at some point in time in their, in their, in their adulthood, and so, like I have to think that's part of the equation is people saving to buy a home, I have to think that's part of the equation is is people saving to buy a home.
Speaker 1:Yeah, it could be, I mean for sure, Even though it because just that I well, obviously the interest rates are still higher than it used to be and everybody has to save more.
Speaker 3:In this whole, I think it's a way better deal than home ownership right now. It's like a better deal. I saw a really good um part that came out just for Christmas and it was like you know it might've been a J J Parsons Parsons. Thank you, they did it. Just talking about the, the renting is a way better deal than owning right now yeah. Especially, you know, cause like, especially from the insurance and a property tax perspective everything right, maintenance all that other stuff.
Speaker 1:My son, my oldest son, is 28 years old and the only reason he knows how to do anything around the house is because I had him working on my multi-family apartments, going and fixing the hvacs, right. But can you imagine, all his friends don't know a lick about there's a leak. They're like I don't know what to do.
Speaker 3:You know, like I have no clue I mean, if he're talking about a generation of soft people, it's too early in the morning to have that conversation.
Speaker 1:I can't imagine I have to go back to Jason, because I don't know if you all know this. Jason's so cool, he's like a legend in the industry. I remember hanging out with Jason one time. He's like yeah, I used to be a plumber. Jason's like he's. He's like a legend in the industry. But I remember hanging out with Jason one time. He's like yeah, I used to be a plumber. I was like no way. Now you're even cooler. It's just super awesome. But, jason, do your kids? Do you have like 23, 24 year olds?
Speaker 4:My kids are 23. My kids are 19, 21, and 22.
Speaker 1:I'm in the throes of everything I know right. Can you imagine them buying a house right now, like I don't?
Speaker 4:think I think like one of my friends, and one of my friends and um on the west coast, sold his house in san diego and bought three of them in boise so that he could have all his kids be near him.
Speaker 1:Really Wow. I mean because you can.
Speaker 4:If you look at like some of the markets that you know, like I lived in San Diego for you know, a long, long time and it's you know home ownership is so out of reach in those markets, like people I mean my kids will be I think my kids will be renters unless they live in you know. You know some other places that are very inexpensive.
Speaker 1:They'll you know some other places that are very inexpensive. They'll be renters for a majority of their lives, right? That's so crazy.
Speaker 4:I mean look at, look at the markets that we all live in and look at the place, I mean depending on where you are. But you know how many people can afford a million dollar house every day, right, or $750,000 house. So or you know, it just gets. It gets really expensive wages, having kept up with some of those costs, Right cost right For sure.
Speaker 3:I had a good conversation with you.
Speaker 4:Amy, the good thing is that I'm sponsored to be on this show, so I can afford a couple extra houses for him now. You guys didn't get your contracts signed. Oh my gosh, call me afterwards, I'll tell you. I'll give you the secrets.
Speaker 3:Jason, I'd be curious to hear your take Like, how much institutional capital is now in the residential, let's say the single family residential market?
Speaker 4:I don't play in single family residential, I play in the build for rent. So we do like just the HCs finance that and things of that nature, but I mean, if you look at it, it's all gone to the big institutions. I mean, I don't know the exact answer to that, but the only thing I would say is, if you look at, you know the big players of the world, they're all in it. So that just tells you that in itself, right, I think the data shows you that it's exactly what we all think, because those guys are more data-driven than any of us and they know more than most of us too, right?
Speaker 4:so yeah they're in it in a humong in a, in a very big way I heard the.
Speaker 3:I heard the expression at sfr west like it's it's one thing to keep up with the joneses, but try keeping up to brookfield, that's that's there, you go, there, you go. Great that's a great comment I love that. Yeah, like what's that gonna do to you?
Speaker 1:Yeah, no, no, no for sure. All right. So a couple more, couple more news story We'll go through All right. So the this is all good news, but apparently everybody's thinking in 2025 that multifamily is the place to be. Y'all like it's going to lead CRE. There was a, there's a Collier's that's well. Who knows if Collier's knows what they're talking about? But they're saying, because of Gen Z, there's strong demand that multifamily is going to place in the commercial real estate industry. What do we think in 2025, you think it's going to be, multifamily is going to be the darling again.
Speaker 2:It's definitely not going to be office to be multifamily is going to be the darling again it's definitely not going to be office there's the bar. It's not going to be office. No, it's not.
Speaker 1:Maybe office converted to data centers might rival multifamily. Yeah, see, that doesn't happen either. It can't right. So that's the hardest part. Like, if you talk about office, it can't be data centers because they don't have the structural load.
Speaker 4:I have all those servers on those floors fine people are going to make a lot more money in other spaces where there's not as many people, it's not as many financing lost your buddy.
Speaker 1:I don't know if you're moving. He's probably out. It's rose bowl. He's out in california there's a lot of other places that you probably can get better returns right yeah, yeah, other than so you cut out for a second, so say that again, bud oh, I was just saying sorry about that.
Speaker 4:Can you guys hear me now? Yeah, you're good I was just saying that at the end of the day, I think you said darling. But what does darling mean? Like what do you say darling? What does that mean? Like best returns or everybody wants to be in it? There's a big difference between what darling means.
Speaker 1:Oh well, okay, so I will. Doesn't everybody want to be in it? Because of the returns? Isn't that the quaint Are you talking about? They're doing it for a safer investment. I don't know. I mean, not everybody can go buy a data center Like that's. I mean, that's the industry that I focus on. Is the data center industry. Not everybody's buying those. They would love to buy those, right, and they don't know how to run them. They don't. I mean, it's kind of the might be easier to run or learn how to run. That's why all those Google groups exist. Might be easier to run or learn how to run.
Speaker 4:That's why all those guru groups exist. I'm with you. I'm with you a hundred percent. So I think that the multifamily space is going to stay the way it is today, but I do think that there's a lot of capital chasing it and I think next year there's going to be a lot of less players in the space. So I think you know pricing and things like that will have to adjust to some more fashion you know, pricing and things like that will have to adjust to some form or fashion, right?
Speaker 1:Oh, you think there's going to be less players. Well, there's going to be a lot of people that get their butts handed to them. That bought BNC at the wrong time, right? I mean, there's nothing you could do to save that.
Speaker 1:You know, that was the. That's where everybody was. There was an entry point for a lot of the newer multifamily investors was let's go buy a class C property and let's make it prettier to be a B minus, and then let's make money. I mean, that's what I did. I did that forever. I was a value-add girl, but yeah, and that everybody who did that in 2021, thinking it's all going to be great now, are like defaulting on their loans, right so, which sucks, because it is what it is. The caps ran out, their interest-only periods ran. The caps ran out, their interest only periods ran out, everything ran out. So now, but what do we do that? What do we do with those from? You know, you don't, can't rebuild everything. You can't do. Covered land plays on everything Cause it's way too expensive now. So what do we do with those assets? I mean, where are they? Just change hands?
Speaker 3:They go back to the banks.
Speaker 1:I mean I don't know what happens. So there's a lot of those.
Speaker 3:You mean the season office or what do you mean which ones you asked?
Speaker 1:no, I'm talking about multi-family. I'm talking about they bought class b, class c, multi-family stuff, right? And they go affordable maybe, maybe you can't convert everything into affordable, though it's pretty, it's pretty tough. I don't know, jason, is there any private credit that's coming out now to kind of save these folks? Like where they're adding? Have you seen? You know, 2020, 2021 is the age of the bridge lender. Is that coming?
Speaker 4:back. No, I think it's the age of. I think a lot of people are just. I think you've seen a lot of entrants into the press space, like the preferred equity space. I think that's where the entrants are playing today. To try to help save folks is in the press, in the press equity space. That's where we're seeing a lot of people playing there.
Speaker 1:Oh, are you Okay? Well, that's kind of private credit, I guess.
Speaker 4:I mean there's also there's a ton of debt funds that are playing there. Equity is getting more expansive, but I think, at the end of the day, not too much has changed besides those couple of things.
Speaker 1:So three, four years from now, they're betting on the fact that interest rates will come down. These people will be able to refi, the inflation will come down, because that PREF equity stuff is two years max usually, right, or is it? I don't know?
Speaker 4:No, I mean most of PREF is for the life is usually yes, is it? I don't know? No, I mean most of most of preface for the life is usually yes, it's yes, it's two to three years, but most of the lenders require that come in at the, at the. So if you do prep with the agencies, they require the prep to be the same length as the loan. But, like a lot of the prep that's in the debt funds is two to three year prep. Right, that will come due. I mean, everything will come due at some point in time. If you look at the debt fund world, like we were talking about earlier, they're extending because of the reasons that we mentioned. Pref is not going to extend. Pref will just take the property back themselves at a different basis. So that will actually create some liquidity in the marketplace and create a different atmosphere.
Speaker 1:Yeah for sure. So be careful who you get in bed with. That's all we got to say about that. I have no idea. All right, let's talk about one more topic. So office, we're back to office. It's you know, multifamily can be better than that. But now there's more and more office to multifamily conversions, which always sounds like brain damage to me. But apparently the office price point is so damn low that actually makes sense. Anybody seeing any of those? I know our buddy Kenny Wolf Jason was doing those way back in the day. You seeing any more?
Speaker 4:of those. Here's a really interesting fact on that is that Kenny Wolf was doing it. He was doing a great job doing it too, but he also has some issues. But he was buying his properties without the construction loan in hand, so that's where he got hurt the most. But what's interesting is I just had a conversation the other day with a very big fund called a billion dollar fund that came to me and they said hey, jason, one of our allocations, and so if anybody has these, give me a call, I can kind of get us all together because I actually have a call today on this.
Speaker 4:And so if anybody has these, give me a call, I can kind of get us all together because I actually have a call today on this. They said we have a big allocation in our next fund that we need to do 25% of the fund. So this is called a billion dollar fund 250 million equity leverage in the office to apartment conversion space. And I was like really and so I think you know, like you said, like you know, one of our good friends that was doing this, you know, had some issues, ran into some troubles but he was a little early to the space, but he's still in that space and people are still getting good returns to that space because they're working with the cities, municipalities, to get you know tax abatements. They have different incentives because people want to turn these older office buildings into nicer, newer, into something that's useful for the community and that they're getting taxes from.
Speaker 4:So I think you're going to see more people digging into that, and if you look in Washington DC alone, there's a couple operators that I work with there that have a couple thousand I don't even know how to explain it, but maybe I don't know how many square feet they own of office that they're going to convert but they have thousands of units and buildings that they're planning across the city that they think is going to be very impactful to their bottom line and to what they're doing in the future. So I think that space is definitely something that's going to keep evolving, but it's not an easy space to play in, because it's not like a, b or C deal where you add a new kitchen or you add new flooring and you can rent it for more.
Speaker 4:I mean, it's all about floor plates. I think it's a lot more intensive. It's like a new development without having to build a new building, to some extent, right.
Speaker 3:Yeah, have you seen it done repeatedly? Well, I'm fascinated by it.
Speaker 4:It all comes down to floor plate, four floor plate prints and also.
Speaker 4:I've seen it done really well, like atlanta has a couple really nice ones. I went and toured a bunch there for a while. Um, so there's some really nice historic buildings that have been done into office, to, you know, into apartment conversion, so I've seen some really good stuff. And then some of the older buildings, people are using historic tax credits. So there's a way to do it, I think. Think that it really comes down to how do you put your capital stack together Because, as we all know, whenever you start, you know peeling back the onion on any type of transaction, especially something that's a whole building, you're going to encumber a lot of contingency issues that you're not expecting.
Speaker 3:I stayed in one. I stayed in a Sonder because it's like Sonder in. Dallas and I didn't. I didn't know it was a conversion, but as I was staying in this space I was like this is so weird. It's like everything is Zig, that should be Zag. It just felt like everything was all kind of like I just haven't seen it really done really well, I think you hit the.
Speaker 4:I think you hit the nail on the head, which is it's to be determined, right yeah.
Speaker 3:Yeah, I love this, sondra has that Sondra.
Speaker 4:Sondra does that because Sondra does a lot of like short-term you know. You know, I guess you know they've had their issues too, but I think they've gone up and down a couple different things, but if you look at it, there too, it's like you know, a lot of them might not have parking, and so I think that's where folks like sondra, you know, play a vital role. Right, maybe that's the way they look at that.
Speaker 3:I don't know we got a building here. It's like 40 stories and the lights are off and it's got it's got asbestos in it, and so they're like no one wants to go near it yeah, for sure, right, who I mean that's?
Speaker 1:that's a huge. Unless they get it for free, anybody, any price. I mean, when you get it for free, a lot of people chase it but who's paying for that?
Speaker 3:taxpayers right, the taxpayers are.
Speaker 1:And that's what it's going to happen. That's why all these tax incentives in the in the governments play this huge role I think that's the biggest thing is in the office of resident residential commercial, that's it going to be?
Speaker 4:it's going to be tax incentives, historical tax credits, things like that. I mean, it's going to be like a different version of some HFCs and stuff like that. Right, that's the only way to make it. It's the only way to make it.
Speaker 3:The multifamily side here is that multifamily is getting so many purpose built rentals I should say purpose built rentals, like where you've designated as a rental when you start it they're having a huge amount of tax credits, purpose-built rentals. And that's the solution here is there's more rentals, more rentals, more rentals. And so you're seeing, I mean and this might sound crazy to you, especially in Florida and Austin but they're seeing approvals up to 13 stories on wood frame.
Speaker 3:Yeah, exactly, I was, I was looking for that expression but yeah, 13 stories in the wood frame, right no way, no way I mean, and this is a windy city, it's not like how on earth you can just feel the rocky yeah, you can't, you have to go steal.
Speaker 1:You can't go steal.
Speaker 3:I mean you can't it's funny, you see that you see the skeletons for them and it's just elevator shafts made of concrete and then stairwells. Elevator shafts, stairwells and then sticks that is crazy town crazy town, I don't know they can put them up fast and it's just like oh boy yeah I mean I wouldn't fly, obviously, you know there's the thing they should look at Florida and like Sandy, where they like collapsed and stuff.
Speaker 1:They should just like you know, look yeah. That wasn't even that tall, there's the predicate.
Speaker 3:I mean it's regional construction rules, but it's just like it's. I don't feel good about it.
Speaker 1:No, I wouldn't either.
Speaker 3:I wouldn't either. I wouldn't either unless I don't know, but it's getting, it's solving the problem right. I mean it's like it's just, it's this, it's solving the problem with respect to getting things out there fast, and concrete's really expensive and it's got. I mean you think about it, like when they go with the stick frame they can position it just being more environmental right, because there's never the concrete lurky, because those things just leak.
Speaker 1:Again you know, other people's solutions.
Speaker 3:It's what happens when you put the incentives in front of them.
Speaker 1:That's true, that's true. But I think the office, residential stuff, I mean, if you look at it, if somebody can figure out just the mechanical alone, the mechanical plumbing, that that's what the other than you know. Is the water main big enough to support a residential site there, right, supporting an office is one thing, but supporting like a thousand units or 200 units, depending on how big the office building is, those water mains are different. I mean, you had a plumbing on one floor versus plumbing in every unit, right, and so it was. You have all this different infrastructure side, but it's crazy town.
Speaker 3:I do think I mean, to Jason's point, those that can figure it out, they will make a plenty, they'll make a lot of money.
Speaker 1:Yeah, so we have someone. I have a question. I'm talking about hospitality in a multifamily. What do we think about the hospitality in multifamily? I just don't think there's enough available hotels out there. I think they kind of weather the storm. Have you seen them? Thanks, susan, for the question. No.
Speaker 2:I've not seen too many of those, a handful maybe, but not even recently. Not even recently, I remember it was.
Speaker 1:COVID. We saw COVID, right, People were. Those are easier, for sure, but there's just not a large inventory of hospitality. I don't think.
Speaker 3:And hotels are a desirable asset class.
Speaker 1:Yeah, well, now they are.
Speaker 2:I mean, COVID isn't right.
Speaker 1:But now it's not bad. But I mean, if you could find one, I'm sure people would hop on it. If you found a hotel that ran into the ground. But I can't, I can't imagine there is too many now. But yeah, there was back in the day back in COVID. That was the thing you can find, one that, especially an extended stay, they get all. Basically you're not doing anything, they're all just studios, and then you just turn it into a multifamily unit versus the other. But then you had to deal with zoning. The only thing you had to deal with was zoning, because they already had the kitchens in there, they already had a bathroom and a studio. Right, those were nice for sure, it's really interesting.
Speaker 1:Yeah, oh, caliber is doing one. Susan, that's awesome Very cool. That is super cool. Yeah, good for them. Man, I'd love to hop up.
Speaker 3:If you can do it right, there's plenty to do.
Speaker 1:Yeah, for sure. I just, I just think, and then the whole other. Okay, let's move on to the next story which we're talking about. Which is super interesting is how do we think there's the condos and how there's more and more condos and condo development happening, and it's interesting to see the condo resurgence.
Speaker 1:I don't know what that is? What do we like? I don't know. I haven't heard of condos, and forever in a day, but now it seems like all we hear about are condos. And is it? What is it? Does anyone know what the condo resurgence is?
Speaker 3:What do you mean? I mean, I think it's just a financing.
Speaker 1:You think so. You think it's just easier.
Speaker 3:So, like Canada as a whole, the market is really far behind the U? S in terms of, like multifamily ownership and and the market here is principally condo ownership, and then it's just starting to come around to classic institutional investment in the multifamily building and so the condo model is kind of fractional ownership. I mean, you think about it in terms of a financing play. You get to the let's just kind of parallel the expressions right, like you pre-sell it in pre of, like a financing play. Like you get to the let's just kind of like parallel the expressions right, like you pre sell it in pre con, right, you get to like a lease up number. You know that's effectively the same as a pre sale on a pre con.
Speaker 3:You sell it all out and then you go and you build and you get. Then you get all your final approvals and you put it, push the ground and as a, all you've got to do is ensure that deposits on those pre-construction amounts. Then you hold them, let's say 30% investors, 30% non-resident investors. They kind of fund the startup. It gets built. Then you resell the rest of it out to people that will be residents or owner residents and then the rest of it and then you hire a condo management company.
Speaker 1:I know.
Speaker 3:It's fractional ownership it's crazy.
Speaker 1:Now, I think in texas it wasn't a thing and maybe that's my frame of reference because way, way back in the day the architects stopped building them because these lawyers would go sue like as soon as the condo was built. This was like the big thing. I talked to my friend his I'll name drop. His name is kip shecht and he's a flugger architect. But back in the day he was like amy, I'm never designing a condo and I was like but I was doing the whole thing, the whole business plan. It makes more money and you can sell them and do all this other stuff. He goes, yeah, I go, and in about five years we're gonna get sued. Why?
Speaker 3:would you?
Speaker 1:be sued because it was these, because they would find a manufacturer's blemish or whatever you have like so many years. And so there was these enterprising lawyers that would go out and then they would sue them To the builder.
Speaker 1:Yeah for the builders, for the builders For structural yeah, or whatever Anything. The granite color was wrong or whatever it might be, and so they started getting sued and they started getting. But in Texas that law changed and so now they can't they can't do that. They're there. There's like a limitation on a lot of that stuff, so condos are, so you're starting to see more of them, but for a long time in texas there weren't any condos. They're just no. No, new condos were getting built.
Speaker 3:But it's a great way to kind of, if you're trying to syndicate, I mean you could syndicate or you could condo a building. Yeah, right why not syndicate it or condo it and everyone feels like they got a piece of paper that says they own something and then you get a 402 and then you just manage it and deduct your condo fees and property management expenses and then give everybody out the net. Yeah, no, I give everybody out the uh the net. Yeah, now, I got you.
Speaker 4:I got you for sure, but I mean it's just more. Yeah, I think it's a, it's just a day, yeah, I mean the other. The other thing too is if you look at markets, some markets, I mean, you can sell a condo for twice, which you can sell an apartment for right. So that's just, I think, a piece of it.
Speaker 4:But but hey, amy, I gotta jump, I gotta eight o'clock oh, you're fine so it was good listen, it was nice meeting everybody, good talking to everybody and, um, I'm sorry I was a little late but enjoyed the discussion. Sounds like we got a lot of smart people. That's called less smart than me, so you know, hopefully, hopefully we all find some ways to help each other work together and if you need anything, you know, you know what's gonna find me, so have a great happy holidays and I'll catch up with you guys later all right, right, see you. Jason.
Speaker 3:Thanks everybody.
Speaker 1:All right, that's awesome. Yeah, well, look that we're almost cut. We are at the top of the hour. Look at that. All right, we'll do parting thoughts Jason already did is so, mike? What are you thinking? 2025 multifamily What'd you think I think we're going to happen? All right, so define that for people. So explain that for people.
Speaker 2:Well, I think we're going to have well, this may be a far reaching vision, but I think everybody's going to have their own personal digital agent or co-pilot that goes out and harvest data for them and helps them in a decision-making process, and I think companies are also going to have their version of that, and so companies are going to have agents, and our personal agents are going to interact with those agents and come to conclusions for us, and we'll be free to go and do other stuff.
Speaker 1:We're going to be all on beaches and hammocks and the AI is going to rule the world.
Speaker 4:Wally, we're going to be.
Speaker 1:Wally, my AI agent is going to talk to the other AI agent and they're going to broker a deal and then, I'm going to go find a place to live.
Speaker 2:That's right yeah.
Speaker 3:I think that's what's going to happen?
Speaker 3:No, no, I think that we'll like I don't know if people are ready to buy that yet Like, I do believe that we're going to see agents in our non-multifamily world.
Speaker 3:So I'll put it this way.
Speaker 3:So I'm with you, mike 100% we're building to see is that there's hesitation to buy it because of the, I'll say, the vulnerability in the rental, the resident experience right now.
Speaker 3:So we'll, I do think this will be the year of the outsource and then 2026 will be the year of the agent, and specifically in multifamily, because what we've already outsourced in the rest of our consumer experience, almost every other, one of these kind of like I'll call them, uh, low value touch points, repetitive low value touch points, yep, and I feel like we have to outsource first so that we can figure out what's repeatable, that we can put into the agent and collect the data around it. So I, I'm, we're on the roadmap, the, the agent, the agent experience, one like 10,000%. I just I, I'm not certain people want to buy it yet and there's hesitation around that. And so the, the, there's been enough leading, there's been enough of um wins in the centralization space. That's going to kind of move to outsourcing and then once people outsource for like eight months. They'll be like wait a second. An agent can do this.
Speaker 3:And then the agent's going to flip, just like that.
Speaker 3:So I would like to see like a Q3, q4, like that percentage of agent, let's say, software that's being deployed, like deployments starting to increase and break through that kind of like that water tension.
Speaker 3:And then 2026, it's going to hammer the interim period to get there, because, to what we did, how we opened the conversation around operating expenses, is just like there's just no air, right, right, it's going to have to be outsourcing, and so I just feel like outsourcing is easier to buy in 2025, because you're solving the pain problem around and around operating expenses. And then the pain point that's going to be trying to looking to solve for us is is uh, is uh. So it's a yes and statement, yes, and I think this is because we've been trying to sell the agent experience for like the ai agent experience for like a year, right, and uh, it's just, people are really hesitant. There's still this like belief that they compete on customer intimacy when they actually compete on opex, and people are confused by that and it's just like it's gonna, it's gonna sort itself out. So, uh, yes, and mike's comment, it is the agent experience, it's gonna be about ai operationalizing, uh, operationalizing everything yeah, I think the reason why they go to outsourcing.
Speaker 1:So I'm going to piggyback on all. That is because their ai readiness level is not there. They don't have good systems around their data and the only way they can get that is if they go to outsourcing first. Right, then it forces them to document all their process because the outsource person is going. What the hell do you want me to do?
Speaker 2:I don't know what to do.
Speaker 1:And then they go oh well, we outsource this to like a VA or somebody or whatever. And then they force us to create all these processes. Yeah, now you can automate that crap because you force you to create, get your data clean, get your data systems good. You force you to create, get your data clean, get your data systems good. You teach your staff how to manage around the data. And then, once you do that, yeah, of course it's easy. Now you go because you did the hard work to be ready for AI. Right, I mean, you're just outsourcing it to a person instead of an AI agent. But all of that painful process to go through in order to be ready for AI yes, you're going to do that with a person, but you're going to go in order to be ready for ai yes, you're going to do that with a person um, but you're going to go hey, you know you're going to go like I would source with nothing and then outsource, enhance with ai and then just ai.
Speaker 3:So yeah like, uh, yeah, imagine two acrobats swinging in a trapeze or whatever. Right, they're gonna hold hands for a little bit and then they're gonna let go. Yeah.
Speaker 1:Yeah, that's because of the readiness level at the real estate side. Right, they're not ready for it. And even I mean, if you look at, you know the big year last year. The big spotlight last year was do we have? Can we all point? We had all these desperate systems like all over the place. We had 16 logins or whatever, and everyone was a year of integration. How do we make these things all talk? And so then you had like Perpexo and LotSolutions and all these different people trying to solve that problem. Well, ai can solve that. You don't even need, they don't even need to talk to one another. They can just scrape down the data, pull down the data and it can integrate it for you, put it on a dashboard and tell you what to do. But we're not there yet. So at some point, ai solves the integration problem At the end of the day. No offense, raymond, I really like you, dude, but you don't need to perfect.
Speaker 3:So you don't need to solve that because AI will do it for you. I do have a question then If we agree this is something I've been asking for probably six months now If we agree that we're moving towards a more automated, more centralized market, who is going to buy first? What market? Is it the 1,000? Is it the 2,000 units? Is it the 100,000 units? Who's going to be the one that's willing to embrace that change first? Or they better put who's feeling the most amount of pain that they can't actually run their business, that they don't solve?
Speaker 2:In my head it's not predicated on pain. It may be in part, but I think REITs always move first in this. You think about centralization as a concept. That was happening 20 years ago at residential. I was there, I was on site at the time and we were centralizing Right. So I think they, in my head, the big REITs, are always the drivers, the main drivers of adoption and they're the first to adopt it, either internally or externally, like you're suggesting.
Speaker 3:And because they've got public because they've got public eyes Right.
Speaker 1:No, it's because they have to return 90% of their profits to their shareholders. They're working on a 10% margin.
Speaker 3:Yeah, but every every quarter, every month, every quarter. They have to, they have to publish, and so no one else has to publish.
Speaker 1:Exactly so they've been. They've been on this whole optimization train forever, in a day, you know. And so they yeah, they, of course they're going to adopt technology first. They're like, oh, you know, I mean they got, they've got it. They don't get there, they don't get their number and they publicly forecast what they're going to, if they're going to what they're going to distribute. If they don't hit their damn number, I mean they're in trouble, right?
Speaker 3:Like who's going to refinance and who's got a public number. It's all about the external forces that are actually going to be the ones that force change.
Speaker 2:Yes, I think this might be the year where you see a real. So you have this SFR VTR operating model, right. That was kind of a forcing function, right. They had to figure out how to do it. You couldn't operate single family homes all over the place without some sort of centralized system, and I think you're going to see a lot of those concepts and philosophies come over to multifamily.
Speaker 2:Multifamily has been slow to adopt some of those things and I think that's going to really change the non-REIT multifamily space, but I think REITs are going to adopt that first, because some of those REIT players went off into the BTR and SFR worlds and Fred Tuomi is one of the people who did that and drove that and I think those philosophies are going to come over to multifamily.
Speaker 1:Yeah, interesting, all right. Well, there's your show man, look at that All right. We have this every week on Thursdays at 9 am Central, so y'all tune in 2025. Commercial Real Estate Morning News Show every day of the week.
Speaker 3:We talk about residential more than commercial. I know Okay.
Speaker 1:It's all good.
Speaker 4:You got it wrong.
Speaker 1:I know it's all right, no worries, we don't need to name it, the Real Estate Morning News Show. Who knows?
Speaker 3:It might be easier, it might be easier.
Speaker 1:It might be easier.
Speaker 3:New year, new name everything new?
Speaker 1:Yeah, exactly For sure. All right y'all. Well, thanks for coming on my show, thanks for being here.
Speaker 3:Good to see you. Good to see you Take care All right See you Bye-bye.
Speaker 1:Bye. And there it is, the multifamily edition of the Commercial Real Estate Morning News Show, which now is being renamed to the Real Estate Morning News Show, which is awesome stuff. So, if y'all tune in, next week we're going to start having these every day. We're going to have a focus on every single segment. So we love to have you guys and we will see y'all next week.
