Optimism During a Recession with Steve Cassidy | StreetBeats Ep. 3

00:00:06    Hello, everyone. I'm Ian Formigle, Chief Investment Officer here at CrowdStreet. Welcome back to our next installment of StreetBeats, our quick hitting series of videos intended to keep you up to date on what's going on in the world of commercial real estate. Today I'm pleased to have Steve Cassidy here with us. He's president of Den Holt's Properties. Uh, so for starters, Steve, just introduce yourself, uh, for people that have been on the, on the CrowdStreet Marketplace for years. They probably would know you, uh, but for some of our new investors, they might. So please just tell us a little bit about you and your role at Dens.  

00:00:39    Sure, Ian, uh, first of all, thank you for having me on today. Uh, it's exciting opportunity for us to get to speak to our investors, particularly during such a difficult time. As you said, my name is Steve Cassidy. I'm the President of Den Holt's Properties. We're a privately held sponsor of commercial real estate projects. Were located in, uh, red Bank, New Jersey, which is where our headquarters are. Uh, we have approximately 5 million square feet under ownership and management, uh, in the southeast of the United States, largely in Florida and New Jersey. Those are our two primary markets, but, uh, today it's, it's about 5 million square feet total.  

00:01:15    Nice. So, for starters, as we kind of start getting into this, Steve, uh, just tell me how you doing right now. I mean, think times are a little bit different than when you last rolled into town and we had dinner at, uh, Clyde Common last fall. So, so what's been going on?  

00:01:30    Yeah. Well, no, not too much <laugh>. Uh, well, it's interesting. Uh, of course I'm on the transactional side of the business more so than operational day-to-day. So about, uh, 14 or 18 days ago that came to an abrupt halt. The world got sort of knocked off to access as, as everyone's aware, of course. Um, so the general feeling in the world is one that's, uh, unsure here at Den Hall's Properties we're trepidatious about what's going on, but it's also, uh, a really strong underlying feeling of, of optimism. Uh, we feel the trepidation that everyone does. Hey, it's, it's the beginning of April. We're talking, we're watching rent come in, they're dribbling in, they're not coming in as they normally would. So that makes us uneasy. What's gonna happen? Nobody really knows how long coronavirus impact is gonna take. Right? We hear news stories here in the New York area every day.  

00:02:19    They talk about it a month, a week, two months summer. It's really unknown. So that's a little bit frightening for us in terms of how we operate our business because of the unknown. But, uh, what we do here is we've had a tremendous amount of conversations over the past two weeks as well, uh, with, with lots of folks, vendors, tenants. Most importantly though, bankers, right? The, the Fed has really put a great deal of effort into bolstering the economy. Everyone's heard about the stimulus package and people getting this $1,200, et cetera, but that's only a part of it. A much bigger aspect of it is something that people might have heard of called the Payroll Protection Program. And that's designed really to help the small businesses that are our tenants stay in business. Uh, it's allowing them to go to the government capture two and a half months of last year's salary and use it really over the next two and a half or two months rather, to keep their employees working.  

00:03:11    And, and more importantly, for us real estate folks pay the rent, um, further than that, that the F D I C has given the banks a lot of guidance. And what it says, essentially, Hey, play nice, and what the banks are talking about is, is really feeling good about being able to help us. They're not gonna be forced to throw us into what they call the troubled debt restructuring column of their, of their portfolio. So the banks have a lot of willingness and opportunity to help us. And so that really gives us a lot of optimism about not just us in the world, but commercial real estate. We really think that there's a lot of work to be done, but overall it's, it's pretty healthy.  

00:03:49    You know, one thing I think that would be would be interesting is that Den Holds has been around for a long time. This is, uh, I, I don't even know at this. You guys been around for 60 plus years, so how many downturns does that equal? It's, it's a lot. Uh, what do you guys think right now in terms of what do you see that feels different this time from, from, uh, from previous recessions?  

00:04:10    The main factor in is really the, the liquidity is not the issue in 2008, which is the one, uh, anyone has lived through 'em has, there's really no other ones to talk about. We can talk about 2001 and other, and other recessionary periods, but if you survived the 2007, 8, 9, 10 years, what you knew back then was there was no capital markets. They were frozen, banks were illiquid, and it had to do what I, what I alluded to a short while ago, which was troubled debt restructuring. Once you went to your bank and said, Hey, I've got a problem. They had to take you and put you right into a troubled debt column on their balance sheet, which caused them to reserve liquidity. So therefore, immediately their, their entire portfolio was frozen. In terms of liquidity. Today, uh, the F D I C has said to them, if your borrower was solvent on February 15th, right before this crisis, you do not have to put them into that troubled debt column.  

00:05:03    If they're seeking short term assistance, and the difference being, your bank now has free hand to help you, they wanna help you. They don't want to take back endless amounts of real estate. So they have the liquidity, they have the ability, and they're gonna work with you to make sure that these things succeed. And so, from, from my standpoint, that makes a world of difference. It's gonna go largely unreported in the world, but this ability of banks to not have to put you in this part of their program is, uh, just a lifesaver to the real estate industry in the short term.  

00:05:34    Yeah, no, that you're correct. That's a huge difference from, you know, my experience basically would be also oh one and oh and oh eight. So I would say huge difference today in, in terms of those two previous recessions. Um, so let's look forward a little bit. So now, I mean, we know that we're gonna, everyone's gonna struggle for a period, uh, but, you know, periods of, of difficult times ultimately create opportunities. So in that regard, what's Den Holt's looking at in terms of, you know, looking towards later this year, next year, where do you see opportunity emerging?  

00:06:06    Well, it's a good point, Ian. Every crisis breeds its own opportunities, and this one, it'll be no different. Uh, when we look across the, the strategy we've had over time, the southeast of the United States, particularly in Florida, but other areas as well, uh, New Jersey, we have got all development things going on here. Uh, there's a pricing thing going on. So while there's liquidity in the marketplace, uh, people are looking to find ground for pricing. And what we're doing, while everyone is trying to figure out how to collect rents and so forth, is really staying on the phone, staying in touch with the people that we've always stayed in touch with, looking for opportunities. Currently, uh, we have a few off market opportunities for folks that just want to get outta commercial real estate. And those are the kinds of things where, uh, those that of us are, are diligent and really planning towards coming out of this pro process are gonna succeed. Um, the other factor is really, um, looking at the, the regional banks in all of these areas, these are gonna be the big winners in the financing department. A lot of the institutional Wall Street type, uh, lending institutions are, are really an asset management mode. Whereas you see a lot of the regional banks are still out there, and while it's a different world, they're still willing to lend and talk to you about future business.  

00:07:18    All right. Well, that's great. Well, I hope we get a chance to take a look at some deals, uh, from you guys later this year as they emerge. Um, you know, we're all, we're all looking forward to some great opportunities in the months ahead. And so I think with that, that's gonna wrap it up for today. Uh, thanks everyone for joining us. Hope again that you found this was helpful. Uh, we will come back to you again as early as next week. Malcolm Davies is gonna rejoin us to talk about the last week of capital markets and what's going on in the, in the week ahead. And in the meanwhile, uh, everyone stay safe, stay healthy, and we'll be back to you soon. Thanks.