CrowdStreet’s Ian Formigle is joined by Townsend Baldwin, a 16x CrowdStreet Marketplace investor, to talk about the overall state of the market, the impact of the federal stimulus package, and how Townsend’s overall investing strategy may change going forward.
Ian Formigle, Chief Investment Officer
CrowdStreet
CrowdStreet
Ian is a real estate professional and serial entrepreneur with 24+ years of experience in real estate private equity, startups, and equity and options trading. At CrowdStreet, Ian serves as the key decision-maker for all investments on its Marketplace, totaling over 400 offerings and some $13.7 billion of commercial real estate. Ian is the author of “The Comprehensive Guide to Commercial Real Estate Investing” and he is a contributing author at Forbes.com.
Prior to joining CrowdStreet, Ian was VP of Business Development for ScanlanKemperBard Companies, where he managed the firm’s alternative investment platform and served as a senior acquisitions officer on a team that acquired some $500 million of commercial real estate assets during his tenure. Previously, Ian co-founded and served as CEO of Clarus Property Ventures, a regional real estate private equity firm that focused on multifamily acquisitions. Ian began his career as an equity options market maker and member of the Pacific Exchange. Ian holds a BA in Economics and a BA in Political Science from the University of California at Berkeley and has held numerous securities licenses including Series 7 and 63.
00:00:05 Hello everyone. Thanks for joining us for StreetBeats. This is April 8th. I'm Ian Formigle, Chief Investment Officer here at CrowdStreet. And so for today's installment we thought we'd swish it up a little bit. We want to hear from an actual investor out there and and hear about his perspective. And so to do that, uh, I'm pleased to have towns in Baldwin with us. He's an active investor on the CrowdStreet marketplace. So Townsend, thanks for joining us today. Uh, I'm, I'm happy that you were able to come and provide some insights for
00:00:34 Us. Glad to be here. You.
00:00:35 Great. Well Townsend, let's just walk through a few questions because we're all investors out there and honestly we're all just trying to figure it out in this huge world of uncertainty. Uh, so for starters, what's your current thoughts on just the overall state of the market?
00:00:52 Well, I'd say that when I originally reviewed over 160 CrowdStreet deals over the last few years and built my portfolio of 16 various assets that I thought it was very well positioned in case we went into a recession. And so now with regards to coronavirus, that's kind of out of the left field. Yeah. And so that has created a huge demand shock in the economy with regards to people aren't spending as much money. One of the good things is that the economy will pick up at some point cuz it always does and it always recovers. So however you're feeling right now, if you're in a horrible state, well just remember this, you are not personally liable for your private equity investments is an LP and there's so many people that have signed on the dotted line as being personally liable and so at least you're not gonna really, really feel the pain as people that have signed on the dotted line.
00:02:06 Yeah, you make a lot of interesting points Townsend. So let's talk a little bit more about coming out of it, you know, in terms of, you know, so since the beginning of the Covid crisis, you know, we've now seen a pretty substantial stimulus package get passed. How are you looking at that and do you think that is going to be instrumental? Is it big enough? Is it strong enough to really make a difference and start to get us on a track to recovery later this year?
00:02:32 Well, I think it's unbelievable how quickly the government moved with regards to the stimulus and it's the largest stimulus I think ever that's been put into place so quickly. And so again, a lot of people have lost jobs, for instance, 10 million people have followed for unemployment in the last two weeks. And so that's a problem, that's a demand shock for real estate. However, the government subsidies are there to help and there's all sorts of loan programs right now that a lot of companies are tapping, uh, with regards to being able to keep their employees on or furlough them. And if people have been laid off, the unemployment benefits have increased and so we have extra money and extra time there as well. Given that this is a strange scenario with regards to covid 19. So while I think the government has done a great job, I actually think there's gonna be more coming, uh, from the government as we go along here, but I think that they've done an excellent job responding so far, uh, with regards to helping relieve that demand shock.
00:03:47 Yeah, I'm definitely hopeful that, uh, with the measures are taking right now and potential additional measures that we think are gonna come later this year, uh, that that will provide the catalyst that will kind of begin, um, you know, a new cycle for us. And so I think on that note, let's turn and look a little bit forward now. So assuming that we're back into an environment that's gonna start to look better later this year, maybe the beginning of next year, you know, at CrowdStreet we talk a lot about asset allocation models because, you know, as an alternative assets platform, you know, we're we're just one piece of the puzzle and, and we're the minority piece of that puzzle. So when you think about your overall portfolio strategy, how are you thinking about that right now? And in terms of equities versus fixed income versus alternatives, you know, how how is that changing right now and how are you thinking about assembling a an overall portfolio coming out of this?
00:04:38 If I were looking at deals in the next couple months, I'd probably stay away from retail and hospitality and I would think in terms of some other asset classes in a different way. So for instance, office, well it seems to me that more people are obviously working from home and you've seen stocks like Zoom take off. And the reason obviously being is we've got this new work at home culture. However, some asset classes I do like are, for instance, multi-family. I like both multi-family A and b. Again, as long as there's a supply constraint. Uh, I also like manufactured housing. So in general, I think when anyone builds a portfolio, it's so important to think about building a defensive portfolio, whether you're at the top of the market in the middle or at the bottom. You really need to think outside of the box what type of outside factors could affect my portfolio because we're talking about leverage here in a stream of cash flow that's being levered upon and we wanna make sure that that cash flow is kept intact.
00:05:52 Yeah, Townsend, you make a lot of great comments. Uh, you know, in particular one of the things that stood out from today is, you know, regarding multi-family and the tenant's ability to pay rent. You know, we just got a data point this morning. The National Multi-Family Housing Council just released a report for April. Uh, now in a, in a normal given month, the u the percentage of people that are paying rent on time across the United States is about 82%. So that's, that's, that's a baseline assumption. Right now, today for April, we saw that number drop to 69%, 13% percentage point drop. So we definitely know that the, the layoffs that are happening around the country are definitely affecting, uh, a number of people out there. And we know that some of those people are now struggling to pay their rent. Uh, this is definitely something that we pay attention to very closely.
00:06:39 Uh, and when we're looking at multifamily deals right now, you know, we are trying to assess, uh, the vibrancy of that tenant base. Um, so thanks to Townsend, I really appreciate your insights. It's great to get to hear from an actual industrial out there and how they're assessing the market. And so with that, that's gonna wrap it up for StreetBeats today. So we're gonna come back to you within the next couple of days with more perspectives around the commercial real estate industry. And in the meantime, stay safe everybody. We'll get back to you soon. Thanks.
00:00:34 Us. Glad to be here. You.
00:00:35 Great. Well Townsend, let's just walk through a few questions because we're all investors out there and honestly we're all just trying to figure it out in this huge world of uncertainty. Uh, so for starters, what's your current thoughts on just the overall state of the market?
00:00:52 Well, I'd say that when I originally reviewed over 160 CrowdStreet deals over the last few years and built my portfolio of 16 various assets that I thought it was very well positioned in case we went into a recession. And so now with regards to coronavirus, that's kind of out of the left field. Yeah. And so that has created a huge demand shock in the economy with regards to people aren't spending as much money. One of the good things is that the economy will pick up at some point cuz it always does and it always recovers. So however you're feeling right now, if you're in a horrible state, well just remember this, you are not personally liable for your private equity investments is an LP and there's so many people that have signed on the dotted line as being personally liable and so at least you're not gonna really, really feel the pain as people that have signed on the dotted line.
00:02:06 Yeah, you make a lot of interesting points Townsend. So let's talk a little bit more about coming out of it, you know, in terms of, you know, so since the beginning of the Covid crisis, you know, we've now seen a pretty substantial stimulus package get passed. How are you looking at that and do you think that is going to be instrumental? Is it big enough? Is it strong enough to really make a difference and start to get us on a track to recovery later this year?
00:02:32 Well, I think it's unbelievable how quickly the government moved with regards to the stimulus and it's the largest stimulus I think ever that's been put into place so quickly. And so again, a lot of people have lost jobs, for instance, 10 million people have followed for unemployment in the last two weeks. And so that's a problem, that's a demand shock for real estate. However, the government subsidies are there to help and there's all sorts of loan programs right now that a lot of companies are tapping, uh, with regards to being able to keep their employees on or furlough them. And if people have been laid off, the unemployment benefits have increased and so we have extra money and extra time there as well. Given that this is a strange scenario with regards to covid 19. So while I think the government has done a great job, I actually think there's gonna be more coming, uh, from the government as we go along here, but I think that they've done an excellent job responding so far, uh, with regards to helping relieve that demand shock.
00:03:47 Yeah, I'm definitely hopeful that, uh, with the measures are taking right now and potential additional measures that we think are gonna come later this year, uh, that that will provide the catalyst that will kind of begin, um, you know, a new cycle for us. And so I think on that note, let's turn and look a little bit forward now. So assuming that we're back into an environment that's gonna start to look better later this year, maybe the beginning of next year, you know, at CrowdStreet we talk a lot about asset allocation models because, you know, as an alternative assets platform, you know, we're we're just one piece of the puzzle and, and we're the minority piece of that puzzle. So when you think about your overall portfolio strategy, how are you thinking about that right now? And in terms of equities versus fixed income versus alternatives, you know, how how is that changing right now and how are you thinking about assembling a an overall portfolio coming out of this?
00:04:38 If I were looking at deals in the next couple months, I'd probably stay away from retail and hospitality and I would think in terms of some other asset classes in a different way. So for instance, office, well it seems to me that more people are obviously working from home and you've seen stocks like Zoom take off. And the reason obviously being is we've got this new work at home culture. However, some asset classes I do like are, for instance, multi-family. I like both multi-family A and b. Again, as long as there's a supply constraint. Uh, I also like manufactured housing. So in general, I think when anyone builds a portfolio, it's so important to think about building a defensive portfolio, whether you're at the top of the market in the middle or at the bottom. You really need to think outside of the box what type of outside factors could affect my portfolio because we're talking about leverage here in a stream of cash flow that's being levered upon and we wanna make sure that that cash flow is kept intact.
00:05:52 Yeah, Townsend, you make a lot of great comments. Uh, you know, in particular one of the things that stood out from today is, you know, regarding multi-family and the tenant's ability to pay rent. You know, we just got a data point this morning. The National Multi-Family Housing Council just released a report for April. Uh, now in a, in a normal given month, the u the percentage of people that are paying rent on time across the United States is about 82%. So that's, that's, that's a baseline assumption. Right now, today for April, we saw that number drop to 69%, 13% percentage point drop. So we definitely know that the, the layoffs that are happening around the country are definitely affecting, uh, a number of people out there. And we know that some of those people are now struggling to pay their rent. Uh, this is definitely something that we pay attention to very closely.
00:06:39 Uh, and when we're looking at multifamily deals right now, you know, we are trying to assess, uh, the vibrancy of that tenant base. Um, so thanks to Townsend, I really appreciate your insights. It's great to get to hear from an actual industrial out there and how they're assessing the market. And so with that, that's gonna wrap it up for StreetBeats today. So we're gonna come back to you within the next couple of days with more perspectives around the commercial real estate industry. And in the meantime, stay safe everybody. We'll get back to you soon. Thanks.