Since 2012, everybody made money to about 2021. And I used to say that if you're in a multifamily
business, I mean, if you didn't make money during that time, you shouldn't even be able to stay in
a multifamily property. But then we saw interest rates start changing, right? And the loan to value
changing as well. Nazar, how did you, what did that do for you from an operator perspective when
You know, everybody was buying at a five cap, selling at a four cap, refinancing at a four. Now
you're up at a six and you only need a 60% LTV. So what was that like and how did you respond to
that? I mean, interest rates really dictate whether you're going to build or buy.
It was really easy to develop multifamily when rates are low.
2020-21 and buying part product at low rates when these rates reset and having happening right now
we've got a trillion dollars that are resetting in 2026 and that i think trillion and a half in
2027 massive numbers how you're going to refi when uh rates are still persistently high uh we look
at it from the lens of in a cycle right when rates are low it's easier to borrow and build right
now i'm I see deals all the time. People are building to a six cap. Why would you do that?
It doesn't make no sense. Going through all that work, all through that headache, building to a
very nominal return. So our focus is when rates are higher, we'd like to buy existing product that
is an issue. We come in with rescue capital. We come with capital to finish the deal,
whether it's a project that is mid-construction. where there's partnership problems,
violation removal. I think that is, for us, we're always looking at it,
we're making money on the buy. We're not riding a wave, so to speak,
of we're buying, let's say, at a five cap, we're thinking of selling at a four. I think that's in a
way of looking at things. If I had to make an analogy, it's like momentum stock investing. You're
riding a wave. is very different from that environment now where we are now in the interest rate
cycle. Yeah, go ahead. I think there's like a syndication bubble up to 2021,
two, three. Absolutely. you know raise capital is by snapping your fingers in the right motion
right and like now it's harder so the people who really could force appreciation are the ones who
are surviving and still growing and the problem is that for a lot of people you have to raise more
equity than before for a 10 million dollar property because the ltv has to be different healthier
for the bank and lender but also the capital you raise is harder to get raised and so i think
that's like the dual challenge that is impacting a lot of people or or pref
Or MEZ, which is what you do, right? Yeah, so again, anywhere in the capital stack, but like Rich
said, it's more difficult because now with interest rates, we're stress testing for the exit
strategy. So does that exit strategy... makes sense i think nick put it perfectly right if you're
underwriting to a four or five cap that might not be what your exit strategy is underwriting to
sure and let me add to the uh syndication thing i've been in seven syndication deals and i'm having
my first one where they're going to lose money and and go under and you know not a fun feeling but
you know i think what we're going to see is it's going to evolve more into uh not just uh the
operators but they're recalling that the the trust economy meaning you're gonna you gotta really
dive deeper into who the operator is and you know they can't just base off of uh projected numbers
that are pie in the sky like they did you know richard perfect example you said 2021 everybody was
projecting endless uh rental increases and endless amounts of uh the basically the money train was
never going to end and as we've seen all good things come to an end yeah like uh warren buffett
says you know when the waters recede you who you see who is swimming without any trunks and in the
multi-family space there's been some ugly exposures of that i think and and to me that's fantastic
We didn't buy any multifamily last five, six years, and now we are. You started talking about the
debt that's coming due. It's like $4 trillion over the next two to three years, which is an
opportunity. But, Richard, with the families that you work with and you know, et cetera,
everything was great until 2021. And so now they're getting capital calls, which they never had to
deal with for 15, 20 years. And so how? What are families doing now?
How have they been reacting to this change? Because before it was just throwing money, throwing
money, throwing money, right? Right. I mean, I think John has spoken at probably eight or nine of
our events. And the best comment he's ever made, I think, was just like, even at a billion dollars
and even at all their scaled up institutional capital management, he wants to walk the property
with the owner of the property and be able to point at something and be like, well, why didn't you
guys upgrade that? you know, electrical panel. Like, what are you doing about this obvious
maintenance issue? And if they fumble and have no idea what's going on, he doesn't give them the
money. And I think that that is becoming more of the best practice. There's a flight to quality. If
they haven't met you in person, they're not going to trust you. If they just have a call with you
and you come to one event, you're like, oh, I didn't raise like $5 million from them. It's like,
well, they have no clue who you are. Just give them one pager that promises great things like every
other capital raiser on planet Earth that has some amazing J curve on their PowerPoint, right? So I
think it's just a... a flight to quality which doesn't mean only billion dollar plus groups it
means like they've met you in person your story makes sense they know how you force appreciation
like if none of those instantly line up then you're just kind of out right because they don't know
you yeah i mean i've always said the deal doesn't mean anything if you can't implement right so
it's got it comes back to who's doing that Hi, I'm Richard C. Wilson. Our community has closed over
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