CrowdStreet’s Brent Hieggelke is joined by Vipanj Patel, a CrowdStreet investor, to discuss how COVID-19 has changed CrowdStreet’s deal flow, why he thinks about building his portfolio versus just investing in an individual property, and why Class-B multifamily is a staple asset class for him.
Brent Hieggelke, Chief Marketing Officer
CrowdStreet
CrowdStreet
Brent is a high-growth tech marketing executive focused on start-up and early category innovators and disrupters. He is a seasoned evangelist, and public speaker across a wide-range of topics.
He is a former CMO of several leading SaaS companies such as Urban Airship (mobile), Brandlive (video), Webtrends (data and analytics) and Touch Clarity (AI, machine learning), which sold to Omniture. In 2009, Brent co-founded a real estate start-up, Second Porch, which built the first sharing vacation rental site and ultimately exited to HomeAway, now Expedia. Brent has keynoted and led panels at global events like SXSW, Mobile World Congress, Cannes Lions, Advertising Week, Adtech, and hundreds of other conferences. Brent has been featured or quoted in The Wall Street Journal, Forbes, Advertising Age, and hundreds of other publications.
Brent holds a BA in Economics with honors from the University of Chicago.
00:00:05 Hello everyone. I'm Brent Hieggelke, Chief Marketing Officer at CrowdStreet. Welcome back to a new edition of StreetBeats, our new short video series designed to keep our community of investors, sponsors, and capital markets experts engaged and informed and connected. Very excited to bring you another conversation with one of our investors, VJ Hotel. Uh, vj, welcome to StreetBeats. Uh, thanks for taking time. Would you care to just start off by introducing yourself and talk a little bit about how you found CrowdStreet?
00:00:37 Yeah, absolutely. Uh, thanks for having me on. Brent. First of all, uh, name is Vons Patel. Uh, my background is I'm, um, investor, so I was a venture capitalist for 18 years, investing in technology companies. Uh, my wife and I own some hotels in Colorado currently, and, uh, she does a great job of managing that business for us. And I've been investing on CrowdStreet, uh, actively for about nine months now.
00:01:03 Nine months. Okay. Can you talk about sort of how you discovered CrowdStreet and what appealed to you?
00:01:09 Yeah, absolutely. Absolutely. Um, you know, I'm, my wife describes me as a deal junkie <laugh>, so I'm always out there, uh, kind of looking for good deals. Uh, and, um, you know, I started getting more and more interested in, uh, real estate as an asset class. We obviously have an operating business in the hotels, but I wanted to make it a, um, kind of a core theme as an investment strategy. So, uh, people traditionally think of investments in terms of bonds and stock portfolio, and historically a lot of the asset of people, um, in the real estate side has been in their home. Um, but I feel like, um, um, passive real estate investing or active real estate investing should be a key asset class, uh, going forward for many people. Um, and so that's kind of what got me intrigued and an opportunity to diversify and build a portfolio around different asset classes and, uh, make 'em accessible, uh, to people like you guys do through CrowdStreet. Uh, that's what really kind of caught my interest, the democratization of this asset class for people that can invest 25, 50 grand, not necessarily, you know, limited to those people who have a million or 2 million and know somebody that they can throw in with that's doing a project in New York or Denver or something like that. That's what kinda got me intrigued about, uh, CrowdStreet.
00:02:19 That's great. So, uh, so you've been, you've been on the platform for about nine months mm-hmm. <affirmative>, and so you've probably seen quite a few deals come through. Uh, what's your current state? Are you still watching the new offerings that are launching? Are you paying attention to them? Are you considering investing them? Kind of what's your, what's your attitude today?
00:02:38 Yeah, no, absolutely. I'm, I'm actively looking at deals. Uh, you know, I've probably done about, uh, 20 deals or so, um, over the past 12 months on this, the passive, uh, investment side. And, uh, majority of those have been on CrowdStreet. Uh, I've done some directly with sponsors and developers, um, done an, uh, deal on Real Crowd. I've done a deal on Cadre, um, but the vast majority of them have been on CrowdStreet. Um, I think you guys, um, have the best platform out there, and I think by far you have the best deal flow out there. And so I've been impressed with the quality that sponsors and deals, and so I've done, you know, quite a few deals on there. Um, I am actively looking, uh, I would say the deal flow has gone down, obviously. Um, you know, probably before the crisis I was looking at 40, 50 deals a month on the real estate site, and now it's closer to four to five <laugh>.
00:03:26 Right. Uh, so before, you know, I would get, you know, eight to 10 solid deals from CrowdStreet every month. Um, and now, you know, obviously it's less, um, but I think it's just temporary. I think, um, you know, we're gonna get past this. There's no, there's no doubt in my mind, you know, we live in the greatest country in the world. We have the best economic system for wealth creation. Um, and when this thing comes out and, uh, when we AlAllander on our feet, um, which there's no question in my mind that we will, right? We're the country fine. We have problems and there's political issues and like everything else, uh, but the people are resilient. Uh, people are very entrepreneurial. Uh, they're very capitalistic and, uh, they're very compassionate. And so as a country, we're gonna come out of this thing in, in good shape. And when we do, I think there's gonna be some incredible opportunities to invest, including in real estate.
00:04:18 That's great. Well, um, I for one, appreciate your optimism for sure. I think
00:04:22 <laugh> right
00:04:23 There is, there's a lot of shared optimism, but you know, um, you, uh, you know, you watch the news, right? And you can get depressed pretty easily. So it's certainly, uh, refreshing to hear your optimism and the fact that you're continued to be very engaged on investing opportunities. Uh, are there certain asset types and markets that have kind of a, like a, a focus for you right now? Or how would you kind of characterize that?
00:04:48 That's a good question. Um, so I view this kind of with the overarching theme of portfolio building, uh, like I mentioned earlier. Um, so, you know, I think of it as, uh, uh, portfolio of assets, not necessarily an investment in a deal. And the second thing is I look at it in terms of a, uh, a long-term horizon, right? So I want real estate to be kind of a key asset class for me and my family for 20, 30, 40 years plus, right? So not, that doesn't necessarily mean I'm looking for deals <laugh> invested in for 40 years, but that's how I think of it in terms of the asset class. So within that, um, theme, you know, I, I love multi-family. That's obviously a staple. I think, uh, that's gotta be in every portfolio of real estate investments. It's very resilient, always has a wallet share. Um, and within that I like class B, uh, particularly I think, uh, class C uh, can sometimes be good, but, uh, right now in particular, um, unfortunately I think, um, a lot of the demographics, um, you know, don't, um, you know, uh, point to that class as being challenging.
00:05:49 A lot of the people that have been, uh, disproportionately hit, uh, with the unemployment and things given this crisis are gonna be occupying that asset class, right? Uh, so I think b is interesting. It's a little more resilient. Uh, multi-family is always interesting. Um, hotel sector is one I know well, and obviously it's been decimated right over the last two months. Uh, occupancies have drawn down to single digits. Uh, urban is really struggling. Urban full service is struggling even more than the suburban. Uh, but it's trying to bounce back, right? We've gone from, uh, low single digits to double digits. Um, you know, it's still very low, 10, 15% occupancy, but as the stay-at-home orders are lifted and people start getting out a little bit more, I think that's gonna pick up. And I, I think there's gonna be some incredible opportunities and maybe even some, uh, distress assets that are gonna be available in the hotel space, um, over the next 1224 months.
00:06:39 So I think that's a good one. I think industrial warehouse, you know, logistics, data centers, that's gonna be good. Uh, with obviously everybody kind of staying at home, working from home, entertaining themselves from home, shopping from home, doing everything from home. Um, I think that asset class is blown up. Um, but one thing to be careful of while it keeps growing, uh, need to make sure the cap rates in there right, um, are gonna be managed. Uh, so you really need to look at kinda the entry and the exit cap rate on that one, in my opinion. Cause I think it can, um, it can blow up and heat up pretty, um, uh, pretty quickly over there. Retail's obviously struggling. Um, office is a mixed bag. So again, I look at everything. I think there's opportunity across the, uh, spectrum, but the key in my opinion is understanding the, the macro and the micro, the trends that are out there and the data that's coming out, and using that data to make just smart investment decisions as you build
00:07:32 Your, you're really watching a lot of things. That's great. That's fantastic. And paying attention to so many of the different sectors. Um, is there anything that's kind of a key trigger for you to watch next?
00:07:45 I I look at this from kind of three vantage points, right? So one is kind of from a a macro perspective. So from a macro perspective, um, I feel like the, the coronavirus has pulled us forward to 2030, right? And what I mean by that is imagine what the world would've been like in 2030, and we're gonna start seeing some of those things in 2020 and 2021, right? It, it's really accelerated. And so that doesn't mean nobody's ever gonna go to a movie theater again, but it does mean we're gonna entertain ourselves maybe with new movie releases at home a lot more, and we're not gonna have to rely on just theaters. And similarly for how we work, uh, office space, how we socialize, et cetera. And I think there's a segment of those that are permanent changes. And so I think there's a, a incredible opportunity to look for that disruption that's happening across the asset classes and the impact that disruption is gonna have in the various real estate asset classes.
00:08:47 So that's from a macro perspective. And then dialing it down to a micro, um, perspective, um, I look for kind of really granular data. So for example, in multi-family, I'm really monitoring the rent payments, um, on a monthly basis, right? So I think 93% for April, and they're holding up well, uh, but how's it gonna look in May and June as stimulation? You know, uh, the stimulus checks come in and they start getting spend. Is that rate dropping? And then, uh, the flip side of that is, you know, the repayment plans that tenants are asking for because they can't make payments, how are those looking? Are they increasing? And you know, there's a significant spike, spike in April, um, and, you know, how's that going to kind of play out in May and June, right? And so I think it's really important to be looking for that type of stuff.
00:09:37 If you look at hotels, um, you know, obviously you need to look at the occupancy rate and the daily rate and stuff, but also it's important to look at the tension, no data that comes out around there. So for example, uh, you know, look at the TSA numbers, right? How many people are flying, right? Uh, you know, how many people are driving, look at the road miles traveled, right? Because that's gonna start giving you indications of how many people are getting out there. And that obviously is gonna impact, you know, the occupancy, uh, look at, um, congenital data in terms of what's happening with Airbnb, right? And that economy and that ecosystem, and what are the changes they're making to their platform and the type of, uh, rental units that they're putting on the market, et cetera. And there's gonna be some changes. Some will be short term.
00:10:19 So for example, I, I think people are gonna travel more domestically and less internationally, uh, this year. Um, but I think there's an opportunity for that in terms of hotels. Now, is that suburban versus urban? Is it limited service versus full service, right? I think those are the stuff I think that kind of has to be played out. But, you know, the beauty is we don't, we as investors, we don't have to figure all this out, right? There's, there's really smart sponsors that do this stuff for a living and developers, and this is what they do day in and day out. And I think there's an opportunity to just make sure you buying the right sponsors and partner with them and invest in 'em. And, um, you know, I think we'll be fine. I mean, what's that old, uh, saying, right? I don't need to be the smartest guy in the room, I just need to be able to find the smartest guy in the room, right? <laugh>.
00:11:07 So as long as we kinda, you know, follow that advice, uh, I think we'll be in good shape. And like I mentioned earlier, I think there are some great sponsors on the crowd platform, and there's a diverse class of assets that are available to us. So I'm excited to see kind of, uh, you know, what opportunities you guys bring our way over the next, uh, one, two, you know, 3, 4, 10 years from now, and, uh, see how we can use that to build our portfolios. Um, the, the third point that I look at is economic data and um, obviously the, um, the fed rate is really low right now. Um, but when you factor in risk, the effective rate at which borrowing is happening is much higher, right? And when that effective rate starts going down and, uh, credit is really available for buying apartments, building hotels, building warehouses and things like that, um, I think that's when we'll know kind of the recovery's really starting to happen. And when that happens, I think us is really well set up for, um, strong growth. Because if you look at the, um, effective fed rate of zero, if you look at all the stimulus that's been pumped in by the, by the Fed into the, um, system, I think we're, uh, we're well positioned for growth for many years. So I think we just gotta get over this hump. And once we do, I, I think the, uh, engine, uh, will, you know, start spinning again. And I think we'll be in good shape.
00:12:29 Yeah. And that's great. And that's one of the reasons we do a straight beats with Malcolm talking about kind of the capital markets and what's happening there. Cause you're right, ok. It's definitely a key, a key input to this whole formula is what's happening on that side as well. So, uh, great. Well, v p thank you so much for taking the time, uh, your thoughtfulness, your, uh, optimism. Very welcome and, uh, to the community watching StreetBeats. Thanks for, uh, watching this video segment. And, uh, as a reminder, you can, uh, subscribe to our StreetBeats. We'll send you a weekly email with all of the episodes on there if you'd like to make sure you don't miss one. And, uh, other than that, thank you. Stay safe and stay sane and healthy. Take
00:13:14 Care.
00:00:37 Yeah, absolutely. Uh, thanks for having me on. Brent. First of all, uh, name is Vons Patel. Uh, my background is I'm, um, investor, so I was a venture capitalist for 18 years, investing in technology companies. Uh, my wife and I own some hotels in Colorado currently, and, uh, she does a great job of managing that business for us. And I've been investing on CrowdStreet, uh, actively for about nine months now.
00:01:03 Nine months. Okay. Can you talk about sort of how you discovered CrowdStreet and what appealed to you?
00:01:09 Yeah, absolutely. Absolutely. Um, you know, I'm, my wife describes me as a deal junkie <laugh>, so I'm always out there, uh, kind of looking for good deals. Uh, and, um, you know, I started getting more and more interested in, uh, real estate as an asset class. We obviously have an operating business in the hotels, but I wanted to make it a, um, kind of a core theme as an investment strategy. So, uh, people traditionally think of investments in terms of bonds and stock portfolio, and historically a lot of the asset of people, um, in the real estate side has been in their home. Um, but I feel like, um, um, passive real estate investing or active real estate investing should be a key asset class, uh, going forward for many people. Um, and so that's kind of what got me intrigued and an opportunity to diversify and build a portfolio around different asset classes and, uh, make 'em accessible, uh, to people like you guys do through CrowdStreet. Uh, that's what really kind of caught my interest, the democratization of this asset class for people that can invest 25, 50 grand, not necessarily, you know, limited to those people who have a million or 2 million and know somebody that they can throw in with that's doing a project in New York or Denver or something like that. That's what kinda got me intrigued about, uh, CrowdStreet.
00:02:19 That's great. So, uh, so you've been, you've been on the platform for about nine months mm-hmm. <affirmative>, and so you've probably seen quite a few deals come through. Uh, what's your current state? Are you still watching the new offerings that are launching? Are you paying attention to them? Are you considering investing them? Kind of what's your, what's your attitude today?
00:02:38 Yeah, no, absolutely. I'm, I'm actively looking at deals. Uh, you know, I've probably done about, uh, 20 deals or so, um, over the past 12 months on this, the passive, uh, investment side. And, uh, majority of those have been on CrowdStreet. Uh, I've done some directly with sponsors and developers, um, done an, uh, deal on Real Crowd. I've done a deal on Cadre, um, but the vast majority of them have been on CrowdStreet. Um, I think you guys, um, have the best platform out there, and I think by far you have the best deal flow out there. And so I've been impressed with the quality that sponsors and deals, and so I've done, you know, quite a few deals on there. Um, I am actively looking, uh, I would say the deal flow has gone down, obviously. Um, you know, probably before the crisis I was looking at 40, 50 deals a month on the real estate site, and now it's closer to four to five <laugh>.
00:03:26 Right. Uh, so before, you know, I would get, you know, eight to 10 solid deals from CrowdStreet every month. Um, and now, you know, obviously it's less, um, but I think it's just temporary. I think, um, you know, we're gonna get past this. There's no, there's no doubt in my mind, you know, we live in the greatest country in the world. We have the best economic system for wealth creation. Um, and when this thing comes out and, uh, when we AlAllander on our feet, um, which there's no question in my mind that we will, right? We're the country fine. We have problems and there's political issues and like everything else, uh, but the people are resilient. Uh, people are very entrepreneurial. Uh, they're very capitalistic and, uh, they're very compassionate. And so as a country, we're gonna come out of this thing in, in good shape. And when we do, I think there's gonna be some incredible opportunities to invest, including in real estate.
00:04:18 That's great. Well, um, I for one, appreciate your optimism for sure. I think
00:04:22 <laugh> right
00:04:23 There is, there's a lot of shared optimism, but you know, um, you, uh, you know, you watch the news, right? And you can get depressed pretty easily. So it's certainly, uh, refreshing to hear your optimism and the fact that you're continued to be very engaged on investing opportunities. Uh, are there certain asset types and markets that have kind of a, like a, a focus for you right now? Or how would you kind of characterize that?
00:04:48 That's a good question. Um, so I view this kind of with the overarching theme of portfolio building, uh, like I mentioned earlier. Um, so, you know, I think of it as, uh, uh, portfolio of assets, not necessarily an investment in a deal. And the second thing is I look at it in terms of a, uh, a long-term horizon, right? So I want real estate to be kind of a key asset class for me and my family for 20, 30, 40 years plus, right? So not, that doesn't necessarily mean I'm looking for deals <laugh> invested in for 40 years, but that's how I think of it in terms of the asset class. So within that, um, theme, you know, I, I love multi-family. That's obviously a staple. I think, uh, that's gotta be in every portfolio of real estate investments. It's very resilient, always has a wallet share. Um, and within that I like class B, uh, particularly I think, uh, class C uh, can sometimes be good, but, uh, right now in particular, um, unfortunately I think, um, a lot of the demographics, um, you know, don't, um, you know, uh, point to that class as being challenging.
00:05:49 A lot of the people that have been, uh, disproportionately hit, uh, with the unemployment and things given this crisis are gonna be occupying that asset class, right? Uh, so I think b is interesting. It's a little more resilient. Uh, multi-family is always interesting. Um, hotel sector is one I know well, and obviously it's been decimated right over the last two months. Uh, occupancies have drawn down to single digits. Uh, urban is really struggling. Urban full service is struggling even more than the suburban. Uh, but it's trying to bounce back, right? We've gone from, uh, low single digits to double digits. Um, you know, it's still very low, 10, 15% occupancy, but as the stay-at-home orders are lifted and people start getting out a little bit more, I think that's gonna pick up. And I, I think there's gonna be some incredible opportunities and maybe even some, uh, distress assets that are gonna be available in the hotel space, um, over the next 1224 months.
00:06:39 So I think that's a good one. I think industrial warehouse, you know, logistics, data centers, that's gonna be good. Uh, with obviously everybody kind of staying at home, working from home, entertaining themselves from home, shopping from home, doing everything from home. Um, I think that asset class is blown up. Um, but one thing to be careful of while it keeps growing, uh, need to make sure the cap rates in there right, um, are gonna be managed. Uh, so you really need to look at kinda the entry and the exit cap rate on that one, in my opinion. Cause I think it can, um, it can blow up and heat up pretty, um, uh, pretty quickly over there. Retail's obviously struggling. Um, office is a mixed bag. So again, I look at everything. I think there's opportunity across the, uh, spectrum, but the key in my opinion is understanding the, the macro and the micro, the trends that are out there and the data that's coming out, and using that data to make just smart investment decisions as you build
00:07:32 Your, you're really watching a lot of things. That's great. That's fantastic. And paying attention to so many of the different sectors. Um, is there anything that's kind of a key trigger for you to watch next?
00:07:45 I I look at this from kind of three vantage points, right? So one is kind of from a a macro perspective. So from a macro perspective, um, I feel like the, the coronavirus has pulled us forward to 2030, right? And what I mean by that is imagine what the world would've been like in 2030, and we're gonna start seeing some of those things in 2020 and 2021, right? It, it's really accelerated. And so that doesn't mean nobody's ever gonna go to a movie theater again, but it does mean we're gonna entertain ourselves maybe with new movie releases at home a lot more, and we're not gonna have to rely on just theaters. And similarly for how we work, uh, office space, how we socialize, et cetera. And I think there's a segment of those that are permanent changes. And so I think there's a, a incredible opportunity to look for that disruption that's happening across the asset classes and the impact that disruption is gonna have in the various real estate asset classes.
00:08:47 So that's from a macro perspective. And then dialing it down to a micro, um, perspective, um, I look for kind of really granular data. So for example, in multi-family, I'm really monitoring the rent payments, um, on a monthly basis, right? So I think 93% for April, and they're holding up well, uh, but how's it gonna look in May and June as stimulation? You know, uh, the stimulus checks come in and they start getting spend. Is that rate dropping? And then, uh, the flip side of that is, you know, the repayment plans that tenants are asking for because they can't make payments, how are those looking? Are they increasing? And you know, there's a significant spike, spike in April, um, and, you know, how's that going to kind of play out in May and June, right? And so I think it's really important to be looking for that type of stuff.
00:09:37 If you look at hotels, um, you know, obviously you need to look at the occupancy rate and the daily rate and stuff, but also it's important to look at the tension, no data that comes out around there. So for example, uh, you know, look at the TSA numbers, right? How many people are flying, right? Uh, you know, how many people are driving, look at the road miles traveled, right? Because that's gonna start giving you indications of how many people are getting out there. And that obviously is gonna impact, you know, the occupancy, uh, look at, um, congenital data in terms of what's happening with Airbnb, right? And that economy and that ecosystem, and what are the changes they're making to their platform and the type of, uh, rental units that they're putting on the market, et cetera. And there's gonna be some changes. Some will be short term.
00:10:19 So for example, I, I think people are gonna travel more domestically and less internationally, uh, this year. Um, but I think there's an opportunity for that in terms of hotels. Now, is that suburban versus urban? Is it limited service versus full service, right? I think those are the stuff I think that kind of has to be played out. But, you know, the beauty is we don't, we as investors, we don't have to figure all this out, right? There's, there's really smart sponsors that do this stuff for a living and developers, and this is what they do day in and day out. And I think there's an opportunity to just make sure you buying the right sponsors and partner with them and invest in 'em. And, um, you know, I think we'll be fine. I mean, what's that old, uh, saying, right? I don't need to be the smartest guy in the room, I just need to be able to find the smartest guy in the room, right? <laugh>.
00:11:07 So as long as we kinda, you know, follow that advice, uh, I think we'll be in good shape. And like I mentioned earlier, I think there are some great sponsors on the crowd platform, and there's a diverse class of assets that are available to us. So I'm excited to see kind of, uh, you know, what opportunities you guys bring our way over the next, uh, one, two, you know, 3, 4, 10 years from now, and, uh, see how we can use that to build our portfolios. Um, the, the third point that I look at is economic data and um, obviously the, um, the fed rate is really low right now. Um, but when you factor in risk, the effective rate at which borrowing is happening is much higher, right? And when that effective rate starts going down and, uh, credit is really available for buying apartments, building hotels, building warehouses and things like that, um, I think that's when we'll know kind of the recovery's really starting to happen. And when that happens, I think us is really well set up for, um, strong growth. Because if you look at the, um, effective fed rate of zero, if you look at all the stimulus that's been pumped in by the, by the Fed into the, um, system, I think we're, uh, we're well positioned for growth for many years. So I think we just gotta get over this hump. And once we do, I, I think the, uh, engine, uh, will, you know, start spinning again. And I think we'll be in good shape.
00:12:29 Yeah. And that's great. And that's one of the reasons we do a straight beats with Malcolm talking about kind of the capital markets and what's happening there. Cause you're right, ok. It's definitely a key, a key input to this whole formula is what's happening on that side as well. So, uh, great. Well, v p thank you so much for taking the time, uh, your thoughtfulness, your, uh, optimism. Very welcome and, uh, to the community watching StreetBeats. Thanks for, uh, watching this video segment. And, uh, as a reminder, you can, uh, subscribe to our StreetBeats. We'll send you a weekly email with all of the episodes on there if you'd like to make sure you don't miss one. And, uh, other than that, thank you. Stay safe and stay sane and healthy. Take
00:13:14 Care.