I'm curious, just to get y 'all's opinion on, in your area of specialty,
what do you see crystal ball in the next five years?
>> Yeah, it's a good question. I get that question all the time and, you know, I
always try to take a step back and say, rather than, and I'm not evading the
question, but rather than try to look at a crystal ball and see what's occurring in
the next five years and I could sit here and I could go through how real estate
is valued with NOI and market discount rates and how interest rates affect your
discount rates but rather than go through the litany of what I see over the next
couple of years as a real estate investor and as someone who has been in real
estate for over 30 years, I just take a step back and say, All right, I know
there's going to be up and down trajectories over the next five years. And if you
look back to 1954, which is as far as you could look back with the Fed reserve
and all of the documentation with monetary tightening and everything else that we
have seen, you'll see the different types of trajectories over the last 100 years or
over the last 80 years. And my point is, rather than try to forecast or look in
that crystal ball. I just always take a step back and say, as long as I'm
disciplined enough to stick to the fundamentals of real estate investing, that no
matter what happens in the next five years, I'm gonna be okay. And what are those
fundamentals? Just find good assets, good borrowers as you alluded to, good sponsors,
because real estate is mostly about execution risk rather than asset dislocation, and
in good jurisdictions. and understand that real estate, for the most part, is a long
-term play, and you will be okay, regardless of what occurs in the next five or 10
years. - Great answer. - I've helped the Chinese invest in a $200 million condo
project in 2018. Within that five years, there was a downturn in Seattle.
And so, basically, you need to build in a downturn into the financial model,
'cause the sales price is not gonna be as rosy as it seems. Something's gonna hit,
tech went down, no one anticipated that. And what I noticed is that deals can
either have great numbers and pencil out, or they can be sexy. You could be really
boring and multifamily, but it pencils out, or it could be like, you know, a
Waldorf Astoria, which is great for cocktail conversations. - What's the old axiom?
What is Italian for pro forma? Silly ass wild guess.
- Yeah, so I think we kind of cracked the code. Our canopy by Hilton deal is a
sexy deal, but it also falls under opportunity zone and historic building,
which means you get your money back in three years from year three to 10, it's tax
-free on the upside. So that's a beautiful deal where you can't take pride in the
project in and of itself. If you ever stayed in one, it's just a beautiful
location. And the numbers are just beautiful. You get your principal rollback thanks
to the historic tax credits and then upside on the tax. So on the back end,
you're kind of covered. - That's more. - Back to the boring. We're solidly focused on
the fundamentals. These are institutions that have been around for 200 plus years.
They're gonna continue to be around for 200 plus years. In fact, there is doubling
and tripling of the research investment in these spaces as we onshore medical
technology. So for instance, in Round University of Pennsylvania, it's known as
Celecon Valley, C -E -L -L, Econ Valley. And you know why that is? It's a number one
generator of cell therapies for cancer in the world, and therefore the billions that
are being poured from around the world into this few square block region is
unprecedented. So we're doubling down, quadrupling down on this thesis. A couple of
sort of takeaways, we learned this in medicine, learned this in the Middle East when
I was working there, solidly focus on values. People say this all the time, don't
get into business with partners who don't share your values, don't get into
marriages, don't get into friendships, and certainly don't get into real estate deals
with people who don't share your values. Focus on those who are values aligned,
which is what we're solidly focused on at Titan 3 Capital and Quaker. Number two, I
use the same rigor I do as a heart surgeon. Before I go in and stop someone's
heart, I better be darn sure that that heart is going to restart. I offer that
same level of rigor as do my partners when we underwrite and share a real estate
deal. We have to be darn certain with whatever variables that are in front of us
with the rigor of financial analysis and extrapolation that that is going to perform
at least in a Bates case. And we don't underwrite with cap rate compression in.
That's an upside down the road. Number three, we focus on operational excellence. In
hospitals, it's exactly the same thing. We're focused on appreciation and revenue,
decrease in costs, and flawless execution. And it's essential, as we've found in all
real estate deals. And finally, when you speak to a patient after heart surgery,
it's about communication and transparency. Even when things don't go as you planned.
And we find it's exactly the same in real estate. So these are the areas that
we're focused on. It's not super sexy, but it's super fundamental, essential,
and we believe this will be a path forward towards a billion dollar portfolio. Very
the answer.
So I just came from the United Nations General Assembly and Climate Week here in
New York City, and there are an abundance of forecasts about the next five to ten
years in terms of sustainability, pledges that are being made by nations as well as
local governments, and policies that are affecting all of us for the next seven
generations and beyond. In addition to that, and also there's a trend to net zero
adoption by governments, which means that it's going to be as it's starting in
Europe and also in the United States that properties in particular in real estate
are going to need to adopt net zero practices, meaning they're going to have to
implement climate tech solutions as well as ecological building practices and better
holistic health resources for people and also for the planet. New developments are
going to have new regulations, and also there's going to be an upswell in the
private sector support of these regulations, especially with Gen Zs,
because Gen Zs really care about the state of the planet, and they also are not
going to put up with living the way that people have been living, siloed,
and in nuclear secular families for, and being separated from their communities,
and also from natural resources that are essential to sustain life.
In addition, just a quick anecdote, there was a hurricane in North Carolina,
perhaps you heard of it. The entire town of Asheville was decimated. And my property
in the mountains near Asheville, about 45 minutes north.
We have 48 well springs on the property, as well as an abundance of natural clean
spring water that flows effortlessly through the mountains and has been for centuries,
if not beyond. So we've been providing clean water, as well as crops from our farm
to the local communities. and there's been there's been a great community support
from the properties that are growing food and are producing water to the local
communities in Asheville including lots of condo buildings, apartment buildings, lots
of traditional investments. These types of climate solutions are very real. They're
being experienced by people all over the world at different at different points. I
personally work with communities that have experienced decimation as well as complete
regeneration of their local communities. In addition, there's going to be,
in the next five years, there's going to be a need and a demand for high quality
food and medicine, medicines that come from places like the Amazon. And so there's
going, And also nature -backed assets are becoming a very strong real estate class.
People are starting to value nature as an asset class, thankfully. So these types of
properties, the regenerative real estate properties I work with, have an abundance of
these resources, which actually increases the value of these properties as well as
the actual essential resources that people need to thrive, include in addition to the
returns that are offered that we offer from investing in these properties. Thank you.
I'll try to make my comments real brief. To that point, you know,
I do think that insurance is becoming a real problem and people really do need to
think about, you know, these places that are getting hurt. We invested in a project
in Houston and I am nervous because insurance went from $700 to $2 ,000. I mean,
that's insane. So those are things that I think that's issue number one. Issue
number two to think about.
I think that inflation is here to stay. You saw the numbers come out yesterday.
There's been three soft landings in the past and after three soft landings,
interest rates have started to rise again within a year. So if you were hoping that
rates were going to go low and you bought something in 2021 -22, try to get out of
it next year and get refinanced because I think it's here to stay. The last thing
is really understanding politics.
I love multifamily overall, but when you hear the people talk about national rent
control, that's scary, right? You take a look at it in New York, the only reason
why New York has a shortage of affordable care is really because of the policies.
There are 43 ,000 units right now in New York that are laying empty because it
makes no sense to fix up the apartments because you can't increase rents. So those
are three things that I think that, you know, that people who are investing in real
estate really need to think about. - Sasha, that's a great comment, and we are out
of time, so I'd like to thank the panel for coming up, expressing their opinions.
Thank you.