CrowdStreet’s Ian Formigle is joined by Malcolm Davies, Principal and Managing Direction at George Smith Partners, to discuss the Fed’s extension of all major buying programs, hotel occupancy rates by region, and what the rest of the year might look like.
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.
Way Capital
Malcolm has over 25 years of experience as an award-winning capital advisor and developer, having advised and been involved with over $15B worth of total capitalizations, both in the equity and debt markets. Davies has utilized his expertise to lead developers and investors to structure and capitalize billions of dollars-worth of commercial real estate ventures. He has extensive experience in structuring transactions across the capital stack, including non-recourse senior and stretch-senior debt, mezzanine and preferred equity financings, and Co-GP and LP equity financing solutions for development, value add and stabilized projects.
Malcolm has vast experience in structuring various scenarios within the capital stack including non-recourse senior debt, mezzanine debt, and preferred & JV equity financings in the construction, value add, and permanent finance marketplace. Malcolm’s expertise as a developer has been instrumental in advising his clients through his real-world experiences in various stages of the real estate cycle, including the Great Recession.
00:01:02 Yeah, I mean, look, everybody's paying attention to that. I think as we should, we we're hopeful that this bridges is us to some hopeful announcements in the fall from Moderna or Pfizer or somebody that gives us confidence that we've got, you know, a vaccine or therapeutics to come. We need this stimulus. So, um, not that they listen to me, I'm just gonna tell them we need to get this done. Uh, but anyhow, but the Fed actually is doing stuff that I wanted to make sure the audience knew about. So the Fed has announced that they're extending all major buying programs, uh, including swap lines until the end of the year. That's very important to, you know, the financial lending community for commercial real estate finance. So something for everyone to be aware of that seems to continue to push the liquidity in the market. I think as you and I have discussed, the amount of liquidity that's been pushed into multi-family lending is tremendous.
00:01:50 Um, you know, I think we've seen agency loans now getting done sub 3%, even when I saw two and a half percent CM bs aaas are down to 1 0 5. So that spread's been, you know, going downwards since we we started this. Um, and so I think in that regard, you're seeing, um, liquidity come, but very careful about what asset classes they're lending into. Um, here, going into the latter part of this year, what's the other thing we're paying attention to? Look, P P P is wearing off, but we did see in that stimulus, at least when the Republicans announcement, was to add some more P P P and how that, that'll affect certain asset classes like hospitality and retail. Um, so again, we don't know where that's going, but so those are things we're paying attention to.
00:02:30 Yeah, so some of the stuff that we're paying attention to, you know, as always, um, let's start off with the, the SST R data because that's something mm-hmm. <affirmative> we would always like to track week over week occupancies in the hotel space. Um, so some good news there. We saw that bounce back, uh, this list last week. So for the week ending July 18th, we saw occupancy nationwide take back up to 47.6% mm-hmm. <affirmative>, and that was actually a 1.6% increase from last week. So a little bit of good news there. So, um, RevPAR was down a little bit week over week, but rooms sold were definitely up. Um, you know, in terms of where that occupancy is going, uh, the biggest, uh, recipient week over week was actually the northeast, uh, drive to destinations, so the northeast coastal locations. Uh, but then overall, as we mentioned last week, uh, the, the biggest occupancy markets nationwide right now are, are the wide open western markets.
00:03:22 So, Montana, Idaho, Wyoming, um, you know, they, they continue to be, they, they continue to Lieb the nation in occupancy in the mid 60% range. So, you know, with that, I mean now if we're thinking about what are some of the things you're looking at this week right now, and also where do you feel, so since we're, we've been kind of talking about this debt parti, you know Yeah. Participation in terms of rates, you know, week over week. Do you feel like we're still seeing an upward trend in people quoting or it, it almost feels like to us the, it's leveled off right now, so I wanna get your take.
00:03:51 Yeah, no, I think, you know, we probably hovered, you know, this 45, 50% of traditional and that that's true because we have like half of the half the market's kinda off for us. I think we're trying to figure out how the Romania part of the year is gonna go. We, we have talked about a little bit the build to red space that multifamily and that just continues to cost growth. I mean, we've seen three large institutional, um, mergers occur, uh, and investments. Um, you know, the recent one was a Brookfield Conrads, uh, Conrads, um, uh, announcement that came out earlier this week, and that is on top of the KO in the Amherst and jpm. The reality is, there's something there in the demand sector in markets like, uh, Texas, Arizona, Florida, Nevada, places where AlAllander is a little bit cheaper. Um, but I think going into the latter part, we've gotta get the stimulus plan done. Uh, I really believe that, you know, we'll have some good announcements on the medical side. It just feels positive. We're hopeful, uh, that that can occur. And I think just consumer confidence as well. Yeah,
00:04:58 And, you know, looking ahead, I think we're both in agreement that we gotta see that package get done and give a little bit of clarity to the markets so that they can start to, you know, kind of resume whatever semblance of recovery that we've got right now. Um, one thing also that I think pay attention to in the weeks ahead is continue to watch the dollar, right, the dollar's been sliding. Yeah. Since, you know, March, the end of March. Um, and, you know, historically speaking, a a sliding dollar is a little bit good for the stock market. It's a little bit good for, you know, us competitiveness. Um, I think that maybe is signaling that, you know, you are, that, that I, I almost feel like if the market's kind of starting to interpret the ding or the dollar that we're currently doing to it through, through stimulus and more to come, um, but I think that's something to pay attention to because obviously, I mean, what's interesting for us being in the commercial real estate world is that that gives us a little bit of optimism on, on asset prices because we know commercial real estate's a pretty good hedge against inflation.
00:05:58 And if the dollar is getting weaker and they're starting to be concerned about the value of that dollar, well then hard assets is where you wanna be. So I think that's something that we're, we're curious to continue to watch and see if we have a, a leveling off of the dollar in the next couple weeks, or we still continue to see it recede.
00:06:13 Look, I think we've always seen the changes of investments in real, in real estate. That's how you started CrowdStreet. You know, that's why I've invited you to speak on our company's webinar on Friday. Yeah. Where we're talking about different avenues, right? Not just crowdfunding and folks directly investing in commercial real estate, um, and kinda getting rid of the middleman, right? That's why we've got, you know, family offices yourselves and, and a private equity firm to talk about this, because I think real estate's always been a good investment. Um, and just getting into it is a, is a place that cross job opportunity. So, um, but you know, again, it's the middle of the summer. Uh, we will see a lot of stuff over the next month to six weeks, and I have a, uh, suspicion that when we hit September, things are gonna be very clear and there's gonna be a lot of stuff going on. And don't forget, we have just a small election going on as
00:07:04 Well. Yeah. Just a, just an election. Just a presidential election. All right, so last thing and then we'll wrap it up. Uh, give us a little plug for your webinar on Friday that I am lucky enough to be a guest on.
00:07:15 So we started this, uh, probably at about the same time we started doing StreetBeats, but finance Fridays, we do it every couple weeks. And we, we thought that rather than just focus on the debt markets, which we generally do, and all of our, all of our, our finance Fridays, we thought we'd focus on the equity side and how folks looking at investing in a postcode world. And so we invited you is one of our esteemed guests. We have a gentleman named Ron Diamond who represents about a hundred family offices, uh, in their investment thesis. And then we invested, uh, we invited David Butler with Argosy, which, uh, focuses on kind of mid-market fif, you know, five to 20 million equity investment checks.
00:07:52 You heard it here. So tune in, uh, 10:00 AM on Friday, uh, for that webinar. I, I don't know Ron Diamond. I'm really looking forward to get to meet him. I do know David Butler, great guy. Uh, look forward to catching up with him online. So anyone here who sees us, uh, tune in on Friday and, and check it out. I think that's a wrap for this week. So, uh, Malcolm, thanks again for joining us on this segment and I'll look forward to seeing you on Friday and for everyone out there, uh, until hopefully we see you on Friday. Uh, stay safe.