Brian Underdahl, a multifaceted expert in multifamily real estate and macroeconomic research, holds an MS in Applied Economics from FSU. As CEO at QRE Partners, he led key roles in acquiring and managing U.S. apartment buildings, aligning investments with market trends. Brian’s data-centric approach, using tools like Rstudio and Python, has shaped transparent and evidence-based strategies. His influence extends beyond real estate, contributing significantly to industry thought leadership through data analysis and macroeconomic research.
Here’s some of the topics we covered:
- Brian’s Background From Sales To Economics
- An Alternative Option For Sellers
- $136B In Commercial Debt Coming Due This Year
- Caution About Rate Cuts During 2024
- Will The Fed Print More Money?
- Hyper Inflation and Money Becoming Worthless
- Savings & Loan Crisis
- China’s Reluctance to Rely on the US Dollar
- Opportunity In Other Sectors Of The Economy
To find out more about partnering or investing in a multifamily deal: Text Partner to 72345 or email Partner@RodKhleif.com
For more about Rod and his real estate investing journey go to www.rodkhleif.com
Full Transcript Below
00:00:00:00 – 00:00:22:28
Rod
Welcome to another edition of Life Time Cash Flow Through Real Estate Investing. I’m Radcliffe and I’m thrilled you’re here. And we are going to have a very interesting conversation today. I’ve got a gentleman named Brian under DOL, and Brian is an expert in macroeconomic research, you know, comprehending and deciphering economic trends. He’s got an MSC and Applied economics from FSU.
00:00:23:00 – 00:00:29:23
Rod
He’s got a certificate in real estate investment and analysis from MIT.
00:00:29:25 – 00:00:38:05
Rod
Very impressive. And, uh, and, you know, he was an adjunct instructor, actually, in the Department of Economics. I’m assuming that was at FSU. FSU?
00:00:38:07 – 00:00:38:23
Brian
Yeah.
00:00:38:26 – 00:00:39:23
Rod
Welcome to the show, brother.
00:00:39:24 – 00:00:40:28
Brian
Thanks a lot, Rod. I appreciate it.
00:00:40:28 – 00:00:56:23
Rod
Absolutely. So why don’t you do a much better job of saying who you are and given a little more background and, you know, just kind of let us know why economics may be why commercial real estate now. And and let’s start there.
00:00:56:27 – 00:01:21:23
Brian
Sure. Sure. So let’s see, after undergrad, this would have been back in 0809, which was a fun time to come out of undergrad. Yeah, I had a sales career for a while and did that for about ten years and then realized I wanted to make a change. Went from from sales to economics. And now when I went back for my for my graduate degree at FSU, I really enjoyed it.
00:01:21:26 – 00:01:39:05
Brian
I was into forex trading for a while too, and that’s what prompted me to go back into to get a degree in economics because I just loved it while I was in grad school and met up with a great company out of Tallahassee hedge fund there. And they, they let me come along and intern and later work with them.
00:01:39:07 – 00:01:52:16
Brian
Um, from there they asked if I would head up a real estate fund of funds model. So we were investing passively in syndications and sponsors, primarily in the Sunbelt, in Southeast exclusively and multifamily, though.
00:01:52:21 – 00:01:59:21
Rod
Could you explain for my newbie investors that listen and watch this show what a fund of funds means? Sure.
00:01:59:24 – 00:02:05:19
Brian
Um, well, the simplest way to put it, it’s a fund that invests in other funds. Right.
00:02:05:21 – 00:02:24:01
Rod
So you’ve got operators like me and other syndicators that go out there and they find deals. So you’re basically vetting the operators and deciding investing the deals as well. Obviously. And then you invest you have a fund that invests in their deals and you get a little better deal than the typical, you know, $100,000 LP investor in those deals.
00:02:24:08 – 00:02:36:09
Brian
That’s right. Yeah. So we in fact that was my primary role was was to vet, if you will. Well the the sponsors that we were looking to to work with. And then we would also alongside that look at the deals themselves.
00:02:36:10 – 00:02:43:02
Rod
Sure, sure, sure. And then so please continue. Bring us. Bring us. Sure.
00:02:43:04 – 00:03:09:00
Brian
So let’s see. I guess starting about two years ago, we just couldn’t find any deals that that made sense that we wanted to invest with. Even if we like the sponsors and we understand they need to keep doing deals. Um, we were kind of pencils down, if you will. Right. And then I guess right before the Fed started hinting that they were going to be raising rates soon, we just realized that most of the deals that we had just underwritten in the last five years were on floating rate bridge debt.
00:03:09:00 – 00:03:15:14
Brian
And what that might mean. Of course, even we didn’t predict that the Fed was going to rate rise or raise rates seven times.
00:03:15:14 – 00:03:16:25
Rod
Right? Yeah.
00:03:16:27 – 00:03:24:23
Brian
So then we started thinking about the deals that we had previously underwritten and what that meant for them, and just knew that it wasn’t good, wasn’t good.
00:03:24:24 – 00:03:25:25
Rod
Right.
00:03:25:27 – 00:03:38:15
Brian
Then we started to have a couple of of groups that we had, syndicators that we had met with, spoken with before, come to us and see if we would be willing to do some sort of equity on their deals. And we were able to help.
00:03:38:18 – 00:03:39:06
Rod
People in trouble.
00:03:39:11 – 00:03:49:22
Brian
Yeah, correct. Right. But not in the type of trouble that we’re I think seeing now and we’ll see more of this was more of a I need $1,000,000 for a rate or a for a rate cap extension or something.
00:03:49:27 – 00:03:50:26
Rod
Mm hmm.
00:03:50:29 – 00:03:57:06
Brian
And then we realized that some of the deals we were starting to see that we couldn’t save, we couldn’t help, wasn’t going to help them.
00:03:57:07 – 00:03:57:23
Rod
Right.
00:03:57:26 – 00:04:04:16
Brian
And that was around the same time that my partner and one of my partners, Stuart Keller, he’s the CEO of NUVO.
00:04:04:18 – 00:04:05:02
Rod
Hmm.
00:04:05:04 – 00:04:32:10
Brian
He was he was one of the sponsors that our group actually wanted to invest with still. But he went out on his own. He’s got about six years in the industry as a property manager, asset manager, and again, was one of the groups that that we wanted to invest with. So he asked me if I would come along and basically take what we were seeing at my old shop with the distress in the market and see if there’s an opportunity there to actually build a business strategy around it.
00:04:32:15 – 00:04:33:04
Rod
Hmm.
00:04:33:07 – 00:04:53:09
Brian
And that takes us to today. So we’re actively underwriting deals where our strategy is a little bit unique in that we we try to include the selling sponsor in our deals. Mm hmm. So when they sell, they get to become a passive part of our deal and, you know, then get a piece of the carry when when we sell down the road.
00:04:53:10 – 00:04:56:04
Rod
Right. Could you elaborate on that a little bit more? Sure.
00:04:56:06 – 00:05:15:26
Brian
Sure. So, um, if you have a deal that’s. That’s struggling right now, you really have a couple of options. Maybe you can raise preferred equity for it. Maybe you can sell it outright on the market. But what’s happening right now is that the values of the properties have gone down with cap rate compression or expansion. Excuse me.
00:05:15:27 – 00:05:16:06
Rod
Right.
00:05:16:11 – 00:05:45:10
Brian
And so if you sold it, you might be selling it for what you have in it. You might even be selling at a loss and you might not even be able to get, in some cases, the value of the note or you know, what you still owe first mortgage. Right. That’s right. So we’re providing a an alternative option for the sellers to where they can get out from under the the debt so that they don’t have to worry about the burden of debt or face foreclosure, which we all know will not look good on the record going forward and certainly won’t help getting financing in the future.
00:05:45:11 – 00:06:01:07
Brian
Right. So it’s a way to kind of cut your losses with that property, keep sourcing new deals and continuing the business while still knowing that the if you sell to us that, you know, that property may still be able to give you a return in the future, basically.
00:06:01:09 – 00:06:07:16
Rod
And so they get a little piece of equity in your company, correct, or something. That’s how you structured it.
00:06:07:16 – 00:06:14:02
Brian
It’s basically structured so that the existing entity becomes a partner in the new entity that holds the property.
00:06:14:04 – 00:06:25:17
Rod
Got you. Okay. Okay. And do you see limited partners being out of the picture in that scenario? Or are they going to is that are they going to be out or.
00:06:25:19 – 00:06:33:21
Brian
So that’s that’s the reason we structured by acquiring the existing entity or bringing the existing entity along because the LPs are part of that entity.
00:06:33:22 – 00:06:34:07
Rod
I see.
00:06:34:08 – 00:06:39:14
Brian
So when that entity receives a distribution, it then flows down to the LP LP.
00:06:39:14 – 00:06:45:06
Rod
So everybody’s quasi whole at that. I mean, even better than whole really, if they’re getting some return still.
00:06:45:08 – 00:07:05:28
Brian
Well, and that’s, that’s where each deal is going to be different. So if there’s still equity left in the deal and it rolls over, then yes, you have a chance to be made whole, make a return. But if the deal has no equity left in it, right, like we’re paying the loan balance to acquire it, then we’re just giving a piece of our carry to the to the selling sponsor.
00:07:05:28 – 00:07:10:02
Brian
So it’s not tied to the equity they’re bringing over because there’s there’s no equity coming.
00:07:10:02 – 00:07:29:03
Rod
Got it. And there’s quite a few that don’t have any equity. There are a lot of deals are going south right now. So, you know, we talked briefly before we started recording. I mean, it sounds like a very intriguing business model, and I could see how sponsor that would appeal to sponsors because they’re not completely out of the picture.
00:07:29:03 – 00:07:51:04
Rod
They’re not completely destitute. And and they’re able to at the very least, you know, not have a foreclosure on their record. But, you know, so you obviously are thinking there’s going to be some deals coming down the pike, which is why you set up this business model. Don’t you speak to that a little bit. You’ve got a lot of background in economics.
00:07:51:04 – 00:07:56:22
Rod
Where do you think things are headed in our commercial real estate world and in the multifamily world specifically?
00:07:56:24 – 00:08:16:00
Brian
Sure. Sure. So again, my expertise is is focused on multifamily. So all geared towards that. So there’s there’s roughly $136 billion worth of multifamily loans that were originated in 20 between 2019 and 2021 that are all maturing in 2024.
00:08:16:02 – 00:08:22:08
Rod
I thought it was more than that, actually. I’ve seen articles that say it’s a half a billion, a half a trillion, but so.
00:08:22:08 – 00:08:29:23
Brian
It depends on. So this is a very specific stat. It’s for the floating rate bridge loans that were originated in those years are maturing this year.
00:08:29:23 – 00:08:31:20
Rod
Just bridge debt. Yup. Got it. Okay.
00:08:31:21 – 00:08:36:12
Brian
By by definition there you know the interest rate they went in is not what it is now.
00:08:36:19 – 00:08:51:11
Rod
Yeah we’ve seen reserves. I was looking at an asset in San Antonio with you know these lenders will make you pay reserve payments to in anticipation of a rate cap and the guy’s payment went from 8000 a month to 80,000 a month. Yeah that’s that’s a little sobering. Yeah.
00:08:51:11 – 00:08:54:24
Brian
There’s not many business plans that can absorb that right now.
00:08:54:26 – 00:09:06:18
Rod
And so. So So you’re saying 136 billion in that bridge debt and these are that’s 136 billion that’s got sweat beading on their forehead right now looking for a solution.
00:09:06:20 – 00:09:07:12
Brian
Yes.
00:09:07:14 – 00:09:09:02
Rod
And that’s by the end of this year.
00:09:09:06 – 00:09:09:28
Brian
End of this year?
00:09:09:29 – 00:09:12:25
Rod
Yeah. That’s not an insignificant amount.
00:09:12:27 – 00:09:27:24
Brian
No. And even some of that, even if it spills into 2025, it’s it’s not a perfect stat because some there’s some extensions that are happening right now from the lender side where things are being worked out. So that was as of four months ago, that was a judgment step.
00:09:27:26 – 00:09:42:10
Rod
So so that’s why you did the business model. But backing going more macro now. Speak to, you know, what you think’s going to happen in our world. I mean.
00:09:42:14 – 00:10:07:22
Brian
Yeah, there’s a lot of mixed signals right now. So you’ve got, you know, indices like S&P doing the best ever done right? The same time, you’ve got pretty substantial layoffs of major companies. You can just Google it and you’ll you’ll see who. And then you’ve got nonfarm payrolls that are actually coming in higher than expected each month. So, yeah, a lot of mixed signals.
00:10:07:24 – 00:10:08:21
Brian
I think.
00:10:08:23 – 00:10:09:26
Rod
Housing.
00:10:09:28 – 00:10:15:03
Brian
Housing, of course. Right. Single family doing just fine. Very, very resilient.
00:10:15:03 – 00:10:24:09
Rod
And there’s a huge pent up demand for for housing. I mean, I think we’re short 2 to 3 million units right now. This is. I read that somewhere.
00:10:24:10 – 00:10:27:29
Brian
Yeah. And even if you own a home right now.
00:10:28:01 – 00:10:28:12
Rod
You’re not you’re.
00:10:28:12 – 00:10:29:08
Brian
Not selling it yet.
00:10:29:15 – 00:10:33:28
Rod
Because you got to get a higher interest rate if you buy another one. So, you know, so there’s a pent up demand.
00:10:34:01 – 00:10:35:23
Brian
Supply will remain constrained.
00:10:35:24 – 00:10:51:19
Rod
Right. Right. So do you have any predictions? I mean, you know, we all want the crystal ball. Do you have any thoughts about I mean, I think it’s inevitable that the Fed will lower the rates just on pressure from the current administration to help with the election. But, you know, what are your thoughts there?
00:10:51:21 – 00:11:03:10
Brian
Yeah, so I’ll preface this with economists jokingly call themselves, you know, the weatherman of of right of the markets, because we can predict something if it’s not right. Well, we told you it was a 50% chance. Right?
00:11:03:11 – 00:11:05:01
Rod
Right. Right.
00:11:05:03 – 00:11:21:28
Brian
So my personal opinion is that and we’re already seeing this play out is that the Fed’s not going to cut as aggressively as people were hoping. Right. Each week that goes by, the probability of a rate cut goes down. And so the number of rate cuts that are predicted over the next year just keeps dropping.
00:11:21:29 – 00:11:22:26
Rod
Yeah.
00:11:22:28 – 00:11:45:16
Brian
I think the deciding factor here, too, you mentioned the elections. I’m sure there’s some of that going on in the background where this but I, you know, can’t point to something and say that I think that the Fed’s bigger fear is that inflation takes off again. Mm hmm. They’re less concerned about a recession than they are about inflation going out of control.
00:11:45:19 – 00:12:17:12
Brian
Mm hmm. So if we continue to see persistent inflation or even inflation not coming down as quickly as they like, they’ve got cover to hold rates higher for longer. And so if you if you made me answer to you today, that’s that’s what I would say, is that rates probably are going to stay higher for longer. We might test the waters with a cut or two, but if some of that data starts coming back looking like inflation’s not going down, then we’re likely going to see persistently high rates or higher rates.
00:12:17:15 – 00:12:19:26
Rod
Which is not a good sign for our business.
00:12:20:03 – 00:12:21:05
Brian
It’s it’s I mean.
00:12:21:05 – 00:12:29:23
Rod
For a lot of operators in our business, I mean, I’m an opportunist. I think there’s going to be opportunity with it. But, you know. So your thoughts on that?
00:12:29:25 – 00:12:54:11
Brian
Yeah, for anyone that’s that’s looking to do, you know, hoping that rate cuts or rates coming down are going to save an existing deal. I would just really caution that because they’re not going to come down at the velocity that they went up. Right. And so people on the acquisition side are still going to be hesitant to come in at, you know, let’s call it last year’s valuations.
00:12:54:12 – 00:12:55:07
Rod
Right.
00:12:55:09 – 00:13:16:04
Brian
And so the chances of your previous valuation being the same in the next year is very unlikely. Now it’s this is all market specific, but just talking in general here. So it’s going to take a while before your your the valuation that you purchase that in 2020 or 2021 for your property to be that value.
00:13:16:06 – 00:13:43:02
Rod
To get there again. Yeah. You know, we’re seeing that too. So I know you’re in the multifamily space, but let’s talk office for a minute. I mean, there’s billions and billions of billions of dollars in office assets that is 50 to 70% occupied in major metros in this country. A lot of that debt is held by small and regional banks.
00:13:43:04 – 00:14:02:29
Rod
Now, I know we were talking about this before we started recording. Lenders are much more pliable right now. They even got a directive from the Fed that if you’ve got a creditworthy borrower, you should be working with them to work it out. But what are your thoughts? A little more macro stepping back to the commercial real estate world in general, and I saw an article from a and I gosh, I wish I had his name.
00:14:03:02 – 00:14:16:03
Rod
A fellow from India talking about a series tsunami was would you see that one? Do you know what I’m talking? I do, yeah. Okay. Yeah. And I mean, what are your thoughts? Is it just a number? Doom and gloom, or is there some merit?
00:14:16:07 – 00:14:27:29
Brian
I am. I’m a lot more bearish on office than multifamily. I think most people are. That’s. But office has a really unique problem. Where what?
00:14:28:01 – 00:14:39:24
Rod
What if. What do you do? Exactly. I mean, if you can’t convert them to multifamily or storage, what the heck? Or maybe a you know, where they call it a bank of computers, a computer center or something, What do you turn them into? Yeah.
00:14:39:29 – 00:14:50:21
Brian
So the newer office space is actually doing quite well. And what people want now to pull them out from the home and get back into work is more amenities and much.
00:14:50:21 – 00:14:56:14
Rod
You know, they don’t want to leave the house unless they’ve got the Google amenities and whatnot, you know. But yeah.
00:14:56:21 – 00:15:05:15
Brian
So the older ones make they they’re worth less than the property itself because you have to tear down that property to do something else.
00:15:05:16 – 00:15:18:22
Rod
Right. Which so from a macroeconomic standpoint, you’re an economist. That’s kind of sobering for the economy, isn’t it, For the commercial real estate? Maybe not the economy in general, but but you know, the sector.
00:15:18:26 – 00:15:22:18
Brian
It certainly is. And I’m not sure what the solution is.
00:15:22:20 – 00:15:24:01
Rod
I don’t know. Or the outcome.
00:15:24:05 – 00:15:25:10
Brian
Or the outcome. Yeah.
00:15:25:13 – 00:15:35:19
Rod
It’s the outcome I’m worried about. I mean, I don’t I don’t know that there is a solution. Yeah, except carnage. That’s why I’m asking. Because it’s a lot it’s a lot of a lot of debt that’s in trouble.
00:15:35:25 – 00:15:49:19
Brian
There will likely be some large reset of valuations, which is is already happening. I mean, it’s it’s, I wouldn’t say it’s bottomed out yet. Um, and then those that are stakeholders in those assets get get hurt the worst.
00:15:49:20 – 00:15:50:04
Rod
Yeah.
00:15:50:06 – 00:15:58:26
Brian
Um, and I don’t know that it’ll get far enough along to where there’s some sort of bailout there. I’m not, not predicting that.
00:15:58:28 – 00:16:05:23
Rod
They want to increase inflation. If their inflation is truly a factor then then you know, the they better just let the chips fall.
00:16:05:23 – 00:16:34:05
Brian
But how I how I think it could play out is that a lot of these regional banks, smaller banks and that hold a lot of this office that will be acquired by larger ones. So we saw something similar with, with Lvb. Um, so the, the wells of the world will come in and acquire and we’ll have more consolidation of lending institutions and fewer options for folks like you and me that are trying to get, you know, bigger footprint.
00:16:34:05 – 00:16:54:16
Rod
You know, they got a bigger footprint. So yeah, you’re talking about banks being acquired. But, you know, I’m thinking there’s going to be some bank failures, which is why me personally, I’ve got my deposits at this like this sweep clearinghouse bank. It spreads it out over 80 banks at no more than 250 grand per bank. Right. Familiar with those model?
00:16:54:16 – 00:17:00:27
Rod
Yeah. And decent interest rates. Actually, I’m getting four and a half 5% on my money. But what are your thoughts on bank failure?
00:17:00:29 – 00:17:18:06
Brian
Yeah, I think I agree with you that there will likely be more bank failures going forward. I mean, we just had it with New York. What? They didn’t fail, but, uh, significant cut to their earnings projections and basically acknowledge the problem with their loan performance. So commercial.
00:17:18:06 – 00:17:19:22
Rod
Debt. Yeah. Yeah.
00:17:19:25 – 00:17:26:12
Brian
And so it’s just going to I think the dominoes are starting to fall there. It started last year. We’re going to see more and more.
00:17:26:14 – 00:17:42:26
Rod
And doesn’t it have to We’re talking 66, 50, 60, 70% occupancy. Yeah. I mean, massive write downs, right? I mean, massive. I mean, I don’t know if it’s trillions, but it’s definitely hundreds of billions.
00:17:43:03 – 00:17:45:01
Brian
Yeah, I think it is just over a trillion. Is it?
00:17:45:02 – 00:17:47:12
Rod
Yeah. Wow. Of commercial.
00:17:47:12 – 00:17:47:25
Brian
Real estate.
00:17:48:02 – 00:18:03:19
Rod
Yeah. Yeah. So the Fed’s only options really are to either keep the rates constant. What do you. And I don’t stay as in tune with this as I should. Are they still tightening? Are they still doing quantitative tightening or what? What do you know?
00:18:03:21 – 00:18:06:09
Brian
Yeah, I mean, that one’s kind of.
00:18:06:09 – 00:18:09:20
Rod
Tricky pulling money out of the market. Yeah, I don’t know what that means.
00:18:09:21 – 00:18:12:25
Brian
They basically, by holding rates where they are, they’re having that effect.
00:18:12:26 – 00:18:13:07
Rod
Really.
00:18:13:11 – 00:18:22:22
Brian
So that’s, that’s naturally pulling money out of the market. There aren’t transactions happening in housing, there aren’t transactions in multifamily commercial. So it is removing liquidity from from the market.
00:18:22:23 – 00:18:23:03
Rod
Yeah.
00:18:23:10 – 00:18:42:08
Brian
So in that sense, they are tightening. On the flip side, you look at the debt payments that are, you know, expected to go up, what, 20, 20 trillion in the next decade. And so that implies that you need more money in the system. And so from that standpoint, it’s quantitative easing.
00:18:42:09 – 00:18:42:22
Rod
Right.
00:18:42:24 – 00:18:46:20
Brian
But the effect of what they’re doing right now is the same as quantitative tightening.
00:18:46:20 – 00:19:16:18
Rod
Yeah. Let me ask you this. You know, and this is I hadn’t planned to ask you this, but I just thought about the huge debt we have as a country. Yeah. I mean, it’s who knows what the real number is. It’s but it’s staggering beyond belief. And I had an economist sitting in that chair, I don’t know, six or eight months ago that said the interest on that debt right now, I believe exceeds or comes it’s like close to what we collect in from the IRS every year.
00:19:16:19 – 00:19:22:02
Rod
I mean it’s it’s insanity like we’re borrowing to pay interest. Yeah. Do you have any thoughts on that?
00:19:22:05 – 00:19:36:14
Brian
Yeah, I that’s a serious problem. Yeah. Entitlements like Social Security, Medicare, Medicaid, those basically equal what we’re bringing in, like you said. Well, it’s not. It’s not exactly. I forget the exact percentage. Right. But it’s a huge portion.
00:19:36:15 – 00:19:41:22
Rod
It’s scary when you when you see it side by side. I mean, how do we continue, you know.
00:19:41:25 – 00:19:43:02
Brian
Printing more money?
00:19:43:04 – 00:19:55:18
Rod
Well, but at some point, you know, I think I have a bill in my drawer in my other office that’s like $100 billion. I forgot what country it is now. But, you know, the money becomes worth.
00:19:55:18 – 00:19:56:15
Brian
Of Zimbabwe from.
00:19:56:16 – 00:20:20:09
Rod
Zimbabwe. It was Zimbabwe. Yeah. And, I mean, at some point, the money becomes worthless. We saw that in in a Latin American country as well. I forgot the country, but that had massive hyperinflation, you know, And then you see, you know, I’m not a conspiracy theorist, but you see all these things where the BRIC nations are leaning over to the yen and and they don’t want to trade in dollars for for gas anymore.
00:20:20:09 – 00:20:24:15
Rod
I’m just I’d love to get your thoughts on that if you give that any energy at all. Oh, I.
00:20:24:15 – 00:20:48:24
Brian
Do. And I think it’s a legitimate concern. I think it’ll take longer to play out than okay, maybe in my lifetime. Uh, our lifetimes it may, but I think this is more of a 30 to 50 year problem if we don’t do something about it. So it’s the writing’s on the wall with the BRICS. They essentially are trying to make it so that we don’t have to do trade in U.S. dollars.
00:20:48:24 – 00:20:55:11
Brian
That’s that’s a huge part of the U.S. is success over the last, you know, Right. Since World War two, I guess.
00:20:55:11 – 00:20:56:17
Rod
Right.
00:20:56:20 – 00:21:03:28
Brian
That that we kind of had to do trade in U.S. dollars. So China and the like play a long game.
00:21:04:00 – 00:21:27:16
Rod
Oh, yeah. No, they they they they they work in decades. They don’t work in a year at a time. And the whole Asian community, I mean, we saw that with Japan, you know, when I was younger, you know, they, they they they they think in terms of decades, you know like they took over the TV industry by by cutting costs and losing money for years and and over the T, I mean, you know.
00:21:27:18 – 00:21:54:19
Rod
God bless them. I mean they they they’re they’re smart and but I think that’s what’s happening with China right now as well. And, you know, not just economically, but in in influence as well. You see you see the amount of money they’re spending in some of these other countries for infrastructure. And and I just saw an article that they are heavily in control of the area where most of the lithium is mined in Latin America or maybe goes after Latin America.
00:21:54:21 – 00:21:57:23
Rod
So, you know, they’re playing the long game for sure.
00:21:57:23 – 00:22:00:16
Brian
They are the Silk Road Initiative. I think you’re a.
00:22:00:18 – 00:22:22:01
Rod
Yeah, yeah, yeah. Exactly. And it’s it’s sobering when you think think about, you know, what could happen. Better start learning Mandarin, I guess because, you know it’s like back to multifamily. Thank you guys for humoring me on that conversation. That was more from my own personal interest, but you see opportunity. I mean, I think it’s going to be pain, it’s going to be carnage.
00:22:22:01 – 00:22:26:15
Rod
But but with crisis comes opportunity. Is that is that an accurate opinion?
00:22:26:15 – 00:22:32:23
Brian
That’s accurate, yeah. Um, I would also say so. Nouveau actually stands for Never underestimate valuing others.
00:22:32:26 – 00:22:36:22
Rod
Oh. Um, so okay, that’s a nice altruistic way to That’s it.
00:22:36:25 – 00:22:55:12
Brian
That’s part of where our strategy came from, is that there is opportunity. We’ve got a lot of partnerships in the multifamily space and our thinking was if we can make money ourselves by helping people in some small way, then it’s a win win. You will all come out, you know, few years from now better off for it. But I do.
00:22:55:13 – 00:23:13:10
Brian
To answer your question, I think there is opportunity. Um, if you are, if you have capital to deploy basically. So, you know, we started this company just last year, but we spent the last nine months just working with our equity partners to prepare them for this opportunity. Basically.
00:23:13:13 – 00:23:15:21
Rod
You, you’re dealing with larger equity players.
00:23:15:23 – 00:23:21:28
Brian
For the most part. Yes. Family offices and institutions, alternative asset managers, funds and.
00:23:21:29 – 00:23:37:05
Rod
Sourcing. Nice. I’m hearing opportunity funds pop up all over the place. Your business model is unique in the fact that you’re offering something back rather than just taking. I mean, I feel like right now there’s blood in the water and sharks are swimming about and uh, would you agree?
00:23:37:07 – 00:23:53:13
Brian
I would agree with that. Also, a lot of that stems from the personal relationships that we have with this community. So an outside hedge fund may come in and just say, What’s the lowest price? I can get this out. Right? Whereas that’s not necessarily part of our our strategy. We just we need the numbers to work for us and our investors.
00:23:53:13 – 00:23:54:15
Brian
And if they do, then.
00:23:54:17 – 00:24:16:26
Rod
You’re not trying to get every frickin drop of blood. Yes. In other words. Yeah. No, I like that. And you know, and you don’t know my story. I lost $50 million in 2008 nine. So I’ve been through this before and and I, you know, and I recovered. I’m back. So, you know, I feel bad for the people that are going through what I’m going through it on a couple of assets right now and we’ll get through it.
00:24:16:27 – 00:24:39:04
Rod
It’s going to it’s going to suck, but we’ll get through it. But, you know, if you’re listening and you’ve got a troubled asset, you know, just realize you can get out the other side of this and you just got to stay focused. Don’t wait, don’t be reactive, be massively proactive right now. Communicate with your lender is over. Communicate with us right now, correct?
00:24:39:09 – 00:24:47:03
Rod
Correct. Yeah. Any other strategies for someone facing a challenge right now? Yeah. Well.
00:24:47:06 – 00:24:49:15
Brian
Don’t give up and don’t put your head in the sand.
00:24:49:17 – 00:24:50:07
Rod
Yeah.
00:24:50:09 – 00:24:57:10
Brian
To put it bluntly, it’s a you can’t just hope that there’s a solution that’s going to present itself. You’ve got to figure it out on your own.
00:24:57:11 – 00:25:12:14
Rod
That’s it. And you, if you plant, you know, you focus on plan A, you better have B and C thought out as well. Yeah. And just know do everything you can and, and like I say, overcommunicate with everybody, your investors, your lenders.
00:25:12:16 – 00:25:18:14
Brian
So we were talking about bricks earlier right there, you know, trying to remove the need to pay for oil in U.S. dollars.
00:25:18:19 – 00:25:19:04
Rod
Right.
00:25:19:06 – 00:25:20:05
Brian
I wasn’t happening.
00:25:20:05 – 00:25:21:14
Rod
Yeah yeah.
00:25:21:17 – 00:25:36:07
Brian
And the hope is basically to just make it so that they don’t have to trade in U.S. dollars anymore. Right. There’s another you know, there’s a lot of talk about how China and all of those countries are selling U.S. Treasuries and.
00:25:36:09 – 00:25:37:18
Rod
Who’s going accurate.
00:25:37:21 – 00:25:42:27
Brian
It is accurate, but mixed on why.
00:25:43:00 – 00:25:44:24
Rod
Makes it so interesting.
00:25:44:25 – 00:25:52:21
Brian
There’s there’s a train of thought that they are selling those because they need U.S. dollars. They’re selling their treasuries because the U.S. dollar is in such high demand.
00:25:52:24 – 00:26:17:11
Rod
Interesting. And I’ve read that, too. I, I saw you know, you get these conspiracy theorists. I don’t even know if that’s an accurate word to describe them that are freaking out over these alliances between these nations to start stop trading in the dollar. But then I saw a counterargument that the dollar is still the belle of the ball in a big way, that there’s, you know, billions and billions in mattresses around the world and so on and so forth.
00:26:17:11 – 00:26:18:28
Rod
Would you agree with with what I’m.
00:26:18:28 – 00:26:21:17
Brian
Saying, I do that the dollar is still raining.
00:26:21:17 – 00:26:54:12
Rod
Right? Which is why you said it could be 30, 40 years before things change and who knows what that timeline’s like, But but they have a plan and, you know, and I will tell you in this episode, some people off I, I used to think we were the good guys. But in light of some of the things that I’ve seen over the last 4 to 6 years and the administration and some of the things we’ve done and are doing in the censorship and the propaganda and everything else, I’m, you know, I think I can see why there are a lot of countries that would be angry with us.
00:26:54:14 – 00:26:55:16
Rod
What are your thoughts on that?
00:26:55:20 – 00:27:08:20
Brian
Yeah, I guess, you know, I’m not not old enough to talk about 80 years ago or anything like that. But I would just say in economics and in history and in general, yeah, there just seems to be a pattern of history repeating itself, if you will.
00:27:08:24 – 00:27:09:23
Rod
Yeah.
00:27:09:25 – 00:27:20:21
Brian
Where? All the way back. Roman Empire. And before that, right where you get too big to fail or you think you are and then somebody surprises you, right? I’m not sure what the catalyst would be.
00:27:20:24 – 00:27:36:03
Rod
Well, you remember the savings and loan crisis where you probably weren’t even in business. Studied it. You studied it. Okay. Yeah, I was there. Okay. I remember when I got in the business, interest rates were 18%. True story. And I remember just being so excited when they hit 7%. But so the savings and loan was a big massive one.
00:27:36:03 – 00:27:53:03
Rod
And then of course, you know, 80809 crushed me and then, you know, and then, uh, you know, so who knows what the next, you know, catalyst will be? I thought COVID was going to do it. In fact, I did a YouTube video. I said the coming crash of whatever year that was. Yeah, I got it. It was the most highly watched one I ever had.
00:27:53:03 – 00:28:20:13
Rod
And of course, I got a lot of hate. You know, you’re such an idiot when I. But you know, I really thought that was going to be it. And of course, you know, we we multifamily did just fine. We got hundreds of thousands of dollars in our assets and relief. And so, you know, it was the right asset class to be in through that, you know office and and get money retailing your money industrial didn’t get money but we got, you know, some I mean they got payroll money but yeah but you know that I think played a big role in the inflation.
00:28:20:13 – 00:28:29:07
Brian
Yes yeah I, I do I think something really interesting is that consumer confidence still seems to be so high right now.
00:28:29:07 – 00:28:30:13
Rod
Right. Right.
00:28:30:16 – 00:28:35:21
Brian
But you’ve got, you know, a Happy Meal costing ten, $15. I mean, it’s it’s.
00:28:35:23 – 00:28:54:10
Rod
You know, I’m recently single and so I’m buying my own groceries and I’m like, are you fucking kidding me? Yeah. I mean, I’m shocked filling up my cars over 100 bucks. I’m like, Are you kidding me? Yeah. And and I just wonder, you know, which is why I’m not interested in C-class assets right now, because I think that demographic that’s that’s going for hand-to-mouth is dying.
00:28:54:10 – 00:28:58:03
Rod
I mean, they’re getting their butts handed to them. Would you agree or no?
00:28:58:06 – 00:29:09:29
Brian
So I agree with part of that. What I would say about C or C plus C minus, whatever assets is, that is true, but it depends on what the makeup of that group is.
00:29:09:29 – 00:29:14:12
Rod
So it’s more, yeah, okay, you got to go a little more micro into what’s in there. Okay.
00:29:14:13 – 00:29:20:19
Brian
I because I think blue collar jobs like that have to be performed by a human. I am very, very bullish on.
00:29:20:19 – 00:29:36:06
Rod
Yeah they’re not going anywhere And and we’ve seen of course big increases in pay as well. Huge increases I mean, in a very short amount of time. So, you know, it is you know, it is counter to the those high prices.
00:29:36:06 – 00:29:49:23
Brian
But a big part of what what we think you should look at, if you’re looking at a C class property, is what the AMA is right there. So that you know, so the area median income, it’s basically how much folks in that area are making.
00:29:49:23 – 00:30:00:17
Rod
Right. And you can discover that by the way, on sites like City hyphen, Datacom, best places, dot net, data USA, dot IO, and of course some of the more business centric ones that we use.
00:30:00:17 – 00:30:03:01
Brian
But in the Federal Reserve has their own.
00:30:03:03 – 00:30:03:25
Rod
It.
00:30:03:27 – 00:30:16:14
Brian
The stat they use as a burden households and that’s if you’re spending more than I believe it’s 35% of your income on housing. Yeah and so we use that as a threshold ourselves which I would encourage anyone to do Right now.
00:30:16:14 – 00:30:26:05
Rod
We don’t, we don’t rent to anybody that doesn’t make three times what the rent is. And so, you know, we’re doing an analysis. I’m sure you do the same thing. You know, you’ve got to look at that. Yep. That am I to to determine that.
00:30:26:09 – 00:30:40:02
Brian
And more importantly, on your pro forma on accident in five years, where where is it going to be? Because if you’ve got a price per door of $200,000, but you know, that would put the next buyer above that EMI threshold, then who’s going to buy your your property.
00:30:40:02 – 00:31:00:08
Rod
Exactly. Exactly. Yeah. That’s the that’s the rub on the pro formas trying to calculate what’s going to happen with rents, trying to calculate what’s going to happen with the income, you know what’s going to happen with expenses. We saw huge run ups in building material costs for a while there and supply chain issues and on and on and on.
00:31:00:10 – 00:31:06:05
Brian
So that’s actually another area that I think we’re going to see distress as a new development.
00:31:06:12 – 00:31:07:18
Rod
Yeah.
00:31:07:21 – 00:31:08:23
Brian
We’ve got a global supply.
00:31:08:23 – 00:31:28:16
Rod
So seeing it right now, yeah, I’ve got friends that have a lot of money that have land that’s sitting there that they can’t finance right now. They can’t, they can’t put money in. You know, I told you about the problems I’m having right now and that that particular situation. There’s seven land deals involved there and then there’s some struggle there trying to finance one deal that’s already started to renovation.
00:31:28:17 – 00:31:38:20
Rod
The lender actually went out of business is what I’ve come to understand. So, yeah, I think you’re right. And so what are your thoughts there? Is there opportunity in in in development?
00:31:38:22 – 00:31:46:24
Brian
There’s an opportunity to do something similar to what we’re doing with with existing properties where whereby the developer has a construction loan that’s coming due.
00:31:46:25 – 00:31:48:06
Rod
Right.
00:31:48:09 – 00:31:56:04
Brian
Or maybe they can’t move on to their next project until they close out the last one or get get that financing taken care of so we can do something similar in that space as well.
00:31:56:05 – 00:32:13:18
Rod
Oh, that’s good. Yeah. You know, these deals, you know, you’ll raise money to buy the land. You’ll raise money to entitle it, then you raise money to, you know, finance the, the, the, the vertical and did I miss a piece on them and then is that about right. Yeah. Explain that correctly because that’s not my wheelhouse.
00:32:13:23 – 00:32:14:08
Brian
Me neither.
00:32:14:08 – 00:32:33:10
Rod
I’m learning it very quickly right now because of what I’m dealing with. But yeah, and, and like I said, I’ve got a good friend that, that’s got 9000 units and a big net worth and liquidity that’s struggling to get some ground that he owns and fantastic areas in Texas out of the you know get them get them shovel get them the shovels start moving.
00:32:33:16 – 00:32:34:07
Rod
Yeah.
00:32:34:10 – 00:32:40:12
Brian
So to that site I can’t speak to as much we get involved or are more interested in the pre lease leased up.
00:32:40:14 – 00:32:41:09
Rod
Got you got your.
00:32:41:15 – 00:32:42:04
Brian
Pre stabilize.
00:32:42:04 – 00:33:00:17
Rod
After it’s done and Yeah yeah. And that’s a there’s a real you know I think opportunity there for sure. Um with with those assets as well because a lot of these developers will build it they’ll try to pre-leased it or they’ll sell it to somebody as soon as it’s built. Yeah. So you want to get into that mix somewhere then.
00:33:00:20 – 00:33:02:29
Brian
That’s right. Yeah. And we’re actively doing that.
00:33:02:29 – 00:33:13:01
Rod
You are fantastic. Well you’ve obviously got a rolodex of people you’ve worked with and reviewed. You said how many syndicators did you say you’ve, you’ve analyzed close.
00:33:13:01 – 00:33:15:01
Brian
To 600 over the last five or six years.
00:33:15:01 – 00:33:16:24
Rod
You’ve got relationships with a lot of people.
00:33:16:24 – 00:33:17:13
Brian
We do a.
00:33:17:13 – 00:33:25:02
Rod
Lot of people that did deals, a lot of people that could be in trouble on deals and could be some opportunity for win wins there. Yeah.
00:33:25:05 – 00:33:25:22
Brian
That’s the hope.
00:33:25:27 – 00:33:46:14
Rod
Yeah. No, I like it. And you’re going to stick with multifamily. You’re not interested in any other asset classes. Do you see any other opportunity in other sectors of the economy? Because I tell you and I tell people, figure out what how are you going to take advantage of this? Because opportunities come. And I think businesses opportunity in businesses is 80 million baby boomers, you know, and they’re getting old and getting cold.
00:33:46:14 – 00:34:02:01
Rod
That was my line. So they’re going to come south, but they also have a lot of businesses that they’re want to retire from. And I think there’s an opportunity there. Do you do you do you I’m sure you think about it, but maybe you don’t give it any energy. How about other asset classes and real estate, Are you Any thoughts on.
00:34:02:01 – 00:34:03:27
Rod
Sure. Opportunity there.
00:34:04:04 – 00:34:11:18
Brian
So one thing nouveau we only do multifamily. Got it. And in fact, if we come across some other opportunity that we’d like to be in, we pass it on.
00:34:11:21 – 00:34:15:12
Rod
Put your blinders on and say, focus, focus, focus your shiny penny.
00:34:15:12 – 00:34:39:13
Brian
So we call someone that does that and tell them about the deal. Got as far as you brought up a something I’d love to talk about with the small, medium sized businesses and baby boomer generation retiring or selling, there’s an entire movement right now within call it the the MBA types where instead of going off and starting some tech platform startup, they’re actually just rolling up.
00:34:39:15 – 00:34:40:16
Rod
Rolling up these small.
00:34:40:16 – 00:34:41:19
Brian
Business small businesses.
00:34:41:21 – 00:34:57:11
Rod
That’s yeah, like Wayne Huizenga did with Waste Management and did rolled up a bunch of garbage collectors and turned into a freaking gazillionaire rolling up waste rolling those up. I’ve seen I’ve seen that happen. The funeral industry. What are some industries have you if you’re in tune with.
00:34:57:18 – 00:35:01:02
Brian
With electricians, plumbers and like age back in.
00:35:01:05 – 00:35:28:22
Rod
Oh, no kidding. Yes. Oh, yeah. You know what I know about a guy doing that as well, where basically So what that means, guys, is you’ll put a company together, you buy an h-back company, and then you’ll offer stock in the main company to someone that you’re buying another company from. And that’s how it’s very often how a roll up is done where the whoever you’re buying these different companies from will get pieces of the big company.
00:35:28:24 – 00:35:39:08
Rod
And you can point to some, you know, future opportunity in the value of that stock because you’re going to be buying a lot of companies. Yeah that’s a that’s a proven awesome business model.
00:35:39:10 – 00:35:46:18
Brian
And it just happened in my backyard, actually in Jacksonville, where the we had like the biggest electrician, the biggest plumber. Now they’re under the same name.
00:35:46:22 – 00:35:49:24
Rod
No kidding. Oh, so rolled them rolled different ones.
00:35:49:24 – 00:35:57:25
Brian
Different correct different different professions. And now they’ve got a master GC, if you will, that interest you call if you need electrical plumbing.
00:35:57:27 – 00:36:02:25
Rod
You do all three and one. I’ve seen that here as well. I’ve seen that here’s when they’re huge. Yeah.
00:36:02:28 – 00:36:13:19
Brian
Does that’s that’s happening because there’s there’s a lot of value left in those companies because the mom and pop if you will operators for the last 40 years. They’re not maximizing efficiencies they’re not looking.
00:36:13:19 – 00:36:31:16
Rod
Marketing you know tech. I they’re you know, they’re they’ve done it the same way every time and you know, and can’t even spell the word technology. Yeah. No there’s that that’s very interesting. I wish there was five of me one of them one of them they definitely go do that, you know, and yeah, do something else.
00:36:31:16 – 00:36:47:12
Brian
I do think as far as interesting within the real estate asset classes, industrial, I still I’m still bullish on, but I don’t do anything with it. I know great guys that that do that that again I’ll point people to but try to stay in our lane as far as.
00:36:47:15 – 00:36:50:27
Rod
What you think about retail with the whole Amazon dynamic.
00:36:51:00 – 00:36:52:09
Brian
What do you mean by the Amazon dynamic.
00:36:52:09 – 00:37:09:07
Rod
Well, people ordering online. Oh okay. You know where I mean, if I want something, I don’t care if I want some of these these notepads or or a phone or for food or spices, I just got my spot, my curry spice today from Amazon. I don’t go to the store anymore unless I’m going to try on some clothes.
00:37:09:07 – 00:37:27:10
Rod
I don’t I don’t go. I bought my son online. I bought you know, we bought all this equipment here in this video studio online. So so I know there are some retailers that that was, you know, restaurants and fitness centers and things like that will be fine regardless. But I was just curious, you know, in general, your thoughts on.
00:37:27:11 – 00:37:45:09
Brian
Yeah, in general, I think it’s it’s there’s even a push within retail now to become more of an experience. So you go out and you shop for your clothes or whatever it is and you it’s because you’re, you’re having fun doing it. And anything that isn’t taking that box is probably in terms of struggle.
00:37:45:09 – 00:38:00:22
Rod
Yeah, there’s a, there’s a big mall that used to be the belle of the ball called Sarasota Square here. That’s dead. It’s completely empty. There’s a Costco on the end and who knows what they’re going to redevelop it into its prime real estate. But then you go to University Town Center, which is a big outdoor area with a big mall.
00:38:00:27 – 00:38:23:29
Rod
But the whole area has become this incredible hub of businesses and restaurants. And Man for Christmas, I wanted to go there just to see the lights. It was so beautiful. So they turned it into an experience and and, you know, just beautiful and brilliant family. Benderson, I think, controls most of that. But here locally but so retail. Yeah.
00:38:24:01 – 00:38:29:07
Rod
Great great feedback on the experience component industrial still good.
00:38:29:10 – 00:38:29:26
Brian
Pickleball.
00:38:30:01 – 00:38:51:13
Rod
Pick up yeah you know it’s really funny I we just we’ve got an asset under contract in San Antonio by the way if you’re accredited text the word partner to 72345 and check that out. So we’ve got 100 and we got a 296 unit asset on the same road. A mile down the road we’re buying a 200 unit asset and there’s a tennis court there and I, I’m, I’ve never even seen pickleball.
00:38:51:13 – 00:39:11:16
Rod
My team’s like, we got to put pickleball in this tennis court. I’m like, Whatever, let’s do that. Fine. So we’re doing that. But to give you an idea of, you know, the deal, the one next door sold for 237,000 a door, we’re getting this one for 200. Wow. And it’s the same vintage on a lake on one side, 37 units on a lake, golf course on the other side.
00:39:11:16 – 00:39:35:06
Rod
I’m just a screaming deal was under contract for 26 million. We’re getting it. And it fell through. We’re getting for 20. So real excited about it. Not units in this place are much bigger and nicer than the one we already have, which is killing it. There’s 296 units kill and it’s always in the nineties. This one is every unit is fireplaces, every unit has washer dryer hookups, which we don’t have in the other one bigger.
00:39:35:09 – 00:39:37:18
Rod
So we’re real excited about, about that one. Yeah.
00:39:37:18 – 00:39:39:00
Brian
So congrats.
00:39:39:02 – 00:39:54:21
Rod
Okay. As a home run as first one, we bought in like you said, a year and a half on a year and has first one. We’ve gotten a year and a half as well because we’ve been we’ve put pencils down. I mean, well we kept looking, but we’re in mounting frustration, but we didn’t pull the trigger on anything until this one popped up.
00:39:54:21 – 00:40:11:26
Rod
So, yeah, very exciting. You know, I wish I had that fricking crystal ball for, you know, what’s happening in this country. I get asked all the time. I’m like, you know, if I knew that I’d be on the back of my 300 foot yacht, you know? But, you know, I, I think there’s opportunity in any part of the market cycle.
00:40:11:26 – 00:40:21:00
Rod
You just have to, you know, take a look at it and people say, should I wait to buy real estate? No. If it the price is right and the cash flow is right by real estate and wait, right?
00:40:21:00 – 00:40:25:07
Brian
Yeah, yeah. You keep moving forward, but mitigate risks along the way.
00:40:25:09 – 00:40:32:08
Rod
All about risk. Yeah. What’s Warren Buffett’s famous quote? Never lose money and then be as go look at a or no.
00:40:32:08 – 00:40:33:24
Brian
Don’t forget rule eight.
00:40:33:26 – 00:40:34:10
Rod
Rule number.
00:40:34:10 – 00:40:35:10
Brian
One. Yeah.
00:40:35:12 – 00:40:50:17
Rod
Well, it’s very much pleasure to meet you. I very much enjoyed this conversation. I appreciate you coming down. I know it’s a bit of a hike and and, um, you know, maybe we’ll circle back in a year or two and see where you’re at and see, you know, if you were able to help some operators out and put some nice deals together.
00:40:50:23 – 01:36:56:03
Brian
I really enjoyed it. I’d like to thank you. Pleasure brought you know, I’ve known you’re around for a long time and when you invited me to be on the show, we kind of dug in a little bit and just wanted to say that I like what you’re doing. And, you know, there’s a lot of other coaches out there, but the way that you approach things I think is really helpful for for your students.
01:36:56:03 – 01:36:58:24
Brian
So I’m very happy to be on the show.
