CrowdStreet's Anna-Marie Allander Lieb is joined by Zack Streit, Senior VP at George Smith Partners, to discuss more recent vaccine news and the affects seen in the capital markets, how distressed deals in asset classes like hospitality are finding new life as multifamily deals and an update on office CRE.
Anna-Marie Allander Lieb, Director of Investments
CrowdStreet
CrowdStreet
Anna-Marie Allander Lieb is our Director of Investments, sitting on CrowdStreet's Investment Committee while also managing the team responsible for identifying and reviewing potential offerings for the Marketplace. Prior to joining CrowdStreet, Anna-Marie worked for the Tax Credit Investment Group at PNC where she specialized in underwriting innovative tax credit equity and debt financing solutions for Historic Tax Credit, and Low-Income Housing Tax Credit investments. Anna-Marie started her real estate career in Boston where she was a member of the CBRE New England Capital Markets Team. Anna-Marie holds a B.Sc. in Economics with a concentration in Real Estate from the Wharton School of Business.
Zach Streit, Senior Vice President
George Smith Partners
George Smith Partners
Zachary D. Streit has arranged and closed in excess of $1 billion and has underwritten in excess of $6 billion of debt and equity financings for a broad array of real estate transactions. He has significant experience arranging and closing construction loans, CMBS loans and private/hard money loans across all commercial property types. Zachary’s clients recognize him for his relentless focus on execution and responsiveness.
Zachary is an active member of real estate industry groups and related charities and has a number of professional designations. Affiliations include: Urban Land Institute (ULI), International Council of Shopping Centers (ICSC), National Association of Industrial and Office Parks (NAIOP), Jewish Federation Real Estate and Construction Group (REC), AIPAC Los Angeles Real Estate Group and Jewish National Fund’s (JNF) Commercial Real Estate Division. Zachary is a Member of The State Bar of California and is also a licensed real estate broker in the State of California.
Zachary has 12 years of real estate experience, including 5 years of experience as a principal lender. Prior professional positions include: Managing Director of Originations for Anchor Loans LP; Vice President of Originations at Colony American Finance, a Colony Capital subsidiary; Founder and President of Streit Lending; and Investment Associate, Aviva Investors’ Global Real Estate Multi-Manager Group.
Zachary has a Master of Science in Real Estate Finance from New York University, a Juris Doctorate from the Benjamin N. Cardozo School of Law and a Bachelor of the Arts, Summa Cum Laude, in Political Science from Yeshiva University. Zachary remains involved with his alumni associations.
00:00:04 Welcome to this week's edition of StreetBeats where we talk all things capital markets, debt equity, and greater economic trends and tie it back to commercial real estate. We've got some more great vaccine news out of the AstraZeneca, um, vaccine. You know, one that's definitely a lot more stable than what we saw from the, uh, Moderna and Pfizer vaccine. Yeah. Um, and easier to produce is my understanding and a lot cheaper. So I think, you know, uh, some good news on that front. Um, what are you seeing kind of the coming up here on the end of the quarter? Are things still, you know, transactions still happening, things still keeping busy kind of on the debt, the debt side of things?
00:00:41 Yeah, I a hundred percent touching on your earlier point. I think there was sort of, uh, three big influences on the Dow this morning. I think the presidential transition process moving forward and the GSA providing resources to the Biden administration is probably, you know, having a calming effect on the market of saying, you know, okay, this isn't gonna be a long protracted dispute. AstraZeneca vaccine shown to be 90% effective, joining Pfizer Moderna and then Eli Lilly's treatments. Um, and I think there was one other group that, um, kind of had an antibody treatment too. So continued good news on the vaccine front means there's light at the end of the tunnel. And then Janet yell, uh, being appointment appointed for, uh, treasury sector for Biden, um, is a big deal. Um, you know, I think she was definitely what would call an interest rate dove, uh, which is good.
00:01:28 Does this mean you have a big stimulus bill coming in January? Probably you do if you can't get one done before then. So that's gotta have a calming effect on the market and you may need that, you know, as this sort of, you know, new round of lockdowns that have occurred in, you know, in different places. We're dealing with it in California, Washington, Chicago, mass, and Utah elsewhere. So, you know, I think that's positive. Um, so, so that led to a big, a big rally in the Dow. Um, from the deals perspective though, to answer your second question, there's been a big pickup for us post-Lab day, um, and it's been amazing. Uh, you've seen just a bunch of new business sort of flow in, um, and that doesn't feel like covid. I think we're still working really hard to get some sort of legacy deals, deals that are, call it three to nine months old, sort of over the line and we're on the one yard line on two or three of 'em. That still feels pretty tough. So that feels like Covid, but I hope that, you know, with the, the positive macro factors and all of this new business that has started, um, you know, post Labor Day that into the first and second quarter of next year, it will, it will become easier, um, that they'll have kind of positive effect on the capital market increase, you know, liquidity and, and make it just a little easier to kind of, um, get deals over the line.
00:02:42 Definitely. I, I agree. I think, you know, here at CrowdStreet we've seen, definitely seen the same thing. Um, as I was saying earlier, you know, we've kind of almost filled up our slots now for December launches that, that we're working on to, to get out to investors and are already starting to kind of fill up January, which is, feels like we're, we're ahead of where we usually are at this point in the year, um, which is exciting to see. Yes. Um, also, you know, as, as I was saying, we've seen a couple of kind of interesting new asset classes come, come on through specifically. Um, you know, one is kind of taking advantage of the distress and the, the hospitality market, um, with a focus on, you know, taking some of those deals and converting them to, to multi-family, which is Yeah. You know, providing a nice alternative. Um, in terms of the addressing kind of the affordable housing sector, you know, you can take these, you know, great hotels with great locations and, um, you know, high amenities for, for a property that you wouldn't get with your traditional multi-family, um, and offer these kind of studios and one bedrooms upon the conversion, um, at an appealing price point. Yeah. Um, for, for the renters. So, you know, that's definitely one asset class we've kind of kept our eye on and are now Yeah. Starting to, to see come through.
00:03:52 We, we, we love that asset class. We're actually, um, marketing right now, 40 million loan request, um, for, uh, uh, hotel to mold deconversion in Salt Lake City. Also a market that I think we both love. Sure. Um, and what's really interesting about that deal is, is the price point on the rents is exactly what you were saying. Um, I think the average, um, price point on the rents is about a thousand bucks a unit. Now granted these are smaller units, they're about 330 square feet, but the most comparable small product in Salt Lake now is probably unit sizes of about 450 square feet. And those rent for, call it 1250 to $1,300 and you're offering a $1,000 proposition, so you're significantly below where your nearest competition is. So from an affordability standpoint and also a location standpoint, I mean, you're just blocks from all, all the great amenities that Salt Lakes and many other cities have to offer.
00:04:52 You know, the restaurants, retail, which we all believe are coming back with the vaccines in normal time. And that's, that, that's a lot of what people are paying for. So now you're saying you can get all that, you can get it for cheaper. Um, our, our hotel is going to have a, a full floor, um, of amenities and that's a pretty high floor, like most of the apartment product in Salt Lake is mid-rise. This happens to be a high-rise. So you're gonna have amazing views, uh, from some of the top floors of the Wasatch Mountains. And you're also gonna have amazing views from the amenity deck, which is on one of those top floors. Um, and so, you know, interesting stuff that you can get, uh, when you can be creative in a space like that.
00:05:32 Definitely. Yeah. And I, you know, I think, you know, even with, you know, this great news and in terms of the, the vaccine and whatnot that we've seen, you know, there's no denying that there's gonna be continued distress, you know, um, in the hospitality market. I think moving forward. I know, um, as I mentioned to you earlier, right, we, we heard the stat that I think Walker and Dunlope mentioned that their hotel portfolio, currently 70% of, of, of the debt there is is in forbearance. So, um, you know, that, I think that speaks to, you know, possible potential opportunities out there for, for some of these unique business plans. Um, and also, you know, being able to, you know, bank on that when things do come back, you know, I think you and I probably are both of the, the opinion that when things open up, the vaccine gets distributed, whether, you know, the greater population, you know, gets that, you know, towards the end of 21, maybe it's into 22, but that leisure travel, you know, it's gonna come back. Um, and so if you can kind of manage through that and get there, there's, there's gonna be some great, great opportunities, um, going forward.
00:06:35 It, it's all about the liquidity and staying power and that hockey stick. Like we're starting to feel it on the new business front, not in the hotel sector and other sectors. A lot of multi-business, a lot of industrial business. We've been starting to feel some office business, um, which is great. Um, but if you have a liquidity in staying power in the hotel space, you, you will capture, and it will be a smaller pool of hotels cuz many will close, um, and not reopen and, you know, be converted to, you know, some other use, um, or maybe remain vacant. I don't know. But those, those that you know, can withstand it are gonna do. Okay. We are actually excited, I mentioned to you offline, but we signed up our first, um, hotel loan sale, uh, that we worked on, um, this cycle. And so we're pretty excited to get that into the market and sort of, you know, see what happens with that asset.
00:07:20 Um, funny, I know the background on it is another client of ours actually before the loan was for sale, tried to buy the asset with the intention of converting it to multi, um, they were as transitional housing. Um, they were, they were offering, uh, together with a tenant and tow master lease, I think either from the city of LA or the county of la. So that business plan had already been in place for this asset and I could easily see whoever this note buyer is, you know, either foreclosing or striking a deal with a sponsor and saying, Hey, you know, maybe we want to take this in a different direction, or maybe their basis is low enough that they can hold it for a couple years and then just continue to operate it as a hotel. So it'd be interesting to see how it plays out.
00:08:01 There you go. Um, what about on the, the office side of things? What are, what have you been seeing there? Um, I mean I think, I think the vaccine news obviously is, is great for, for obvious tenants. Um, but in terms of kind of activity there, I mean I think, you know, we've seen most of the leasing has been kind of those big tech, um, sectors, um, you know, kind of making moves at this
00:08:25 Point. O o office is still a tough asset class. There was a great article in the journal today about how I think like your five of the biggest tech tenants, Facebook, Amazon, apple, Google and Microsoft have actually expanded their real estate footprint by more than a quarter this year, which is actually their fastest paced, uh, in a decade. Mm-hmm. <affirmative>, which is really amazing to behold, but sort of makes sense, right? Every big office lease you read about these days is really those guys outside of those guys. I think it's still pretty tough. Um, we're working on an office deal that's sort of a light value add, Lisa play in Boise. Uh, we may actually do it with you guys, which I'm excited of. I hope so. We're
00:09:05 Excited.
00:09:06 So, you know, we're sort of like picking and choosing our spots on that. Uh, you know, if you've got an office building with significant role or significant vacancy, if, if, if, if value and pricing and, you know, debt expectations have adjusted to a post covid world and you've got a good plan and some staying power, I think you're fine. But if you, if if the idea and the expectation is that you're gonna finance that, it's sort of, you know, pre covid values and pre covid pricing, I think that's a pretty tough proposition right now. Yeah, of course if you've got credit on the rent role in a very low degree of occupancy and it's largely stabilized and you haven't had, you know, any collections issues or delinquencies issues, then I think you're fine. Um, but, but it's really sort of a tale of, of two markets.
00:09:48 So when you're gonna sort of take on that kind of value add, Lisa play, you want to have a good story. Like you want to have, like we do a purchase price that's, you know, 15% below what the ask was. Um, you'd wanna have kind of an angle as to why this asset is a little bit different, what you're gonna do here that allows you to attract tenant base and you probably want to be in a strong kind of emerging primary or secondary market like a Boise or, or a Salt Lake, you know, or a Phoenix or somewhere like that where, where there's a lot of growth. I think trying to finance that play in an LA or in San Fran or in New York right now is probably pretty tough.
00:10:23 Yeah, no, I, I agree. And I'd say also I'd I'd add to that I think, you know, part of it too is some of that pricing discovery out there and, and still kind of the <inaudible> spread that, that we're seeing in office. Um, and I think is, um, my guess is some more of those transactions start happening, um, we'll get some more clarity there. Um, and, and more of those deals are gonna get done. So.
00:00:41 Yeah, I a hundred percent touching on your earlier point. I think there was sort of, uh, three big influences on the Dow this morning. I think the presidential transition process moving forward and the GSA providing resources to the Biden administration is probably, you know, having a calming effect on the market of saying, you know, okay, this isn't gonna be a long protracted dispute. AstraZeneca vaccine shown to be 90% effective, joining Pfizer Moderna and then Eli Lilly's treatments. Um, and I think there was one other group that, um, kind of had an antibody treatment too. So continued good news on the vaccine front means there's light at the end of the tunnel. And then Janet yell, uh, being appointment appointed for, uh, treasury sector for Biden, um, is a big deal. Um, you know, I think she was definitely what would call an interest rate dove, uh, which is good.
00:01:28 Does this mean you have a big stimulus bill coming in January? Probably you do if you can't get one done before then. So that's gotta have a calming effect on the market and you may need that, you know, as this sort of, you know, new round of lockdowns that have occurred in, you know, in different places. We're dealing with it in California, Washington, Chicago, mass, and Utah elsewhere. So, you know, I think that's positive. Um, so, so that led to a big, a big rally in the Dow. Um, from the deals perspective though, to answer your second question, there's been a big pickup for us post-Lab day, um, and it's been amazing. Uh, you've seen just a bunch of new business sort of flow in, um, and that doesn't feel like covid. I think we're still working really hard to get some sort of legacy deals, deals that are, call it three to nine months old, sort of over the line and we're on the one yard line on two or three of 'em. That still feels pretty tough. So that feels like Covid, but I hope that, you know, with the, the positive macro factors and all of this new business that has started, um, you know, post Labor Day that into the first and second quarter of next year, it will, it will become easier, um, that they'll have kind of positive effect on the capital market increase, you know, liquidity and, and make it just a little easier to kind of, um, get deals over the line.
00:02:42 Definitely. I, I agree. I think, you know, here at CrowdStreet we've seen, definitely seen the same thing. Um, as I was saying earlier, you know, we've kind of almost filled up our slots now for December launches that, that we're working on to, to get out to investors and are already starting to kind of fill up January, which is, feels like we're, we're ahead of where we usually are at this point in the year, um, which is exciting to see. Yes. Um, also, you know, as, as I was saying, we've seen a couple of kind of interesting new asset classes come, come on through specifically. Um, you know, one is kind of taking advantage of the distress and the, the hospitality market, um, with a focus on, you know, taking some of those deals and converting them to, to multi-family, which is Yeah. You know, providing a nice alternative. Um, in terms of the addressing kind of the affordable housing sector, you know, you can take these, you know, great hotels with great locations and, um, you know, high amenities for, for a property that you wouldn't get with your traditional multi-family, um, and offer these kind of studios and one bedrooms upon the conversion, um, at an appealing price point. Yeah. Um, for, for the renters. So, you know, that's definitely one asset class we've kind of kept our eye on and are now Yeah. Starting to, to see come through.
00:03:52 We, we, we love that asset class. We're actually, um, marketing right now, 40 million loan request, um, for, uh, uh, hotel to mold deconversion in Salt Lake City. Also a market that I think we both love. Sure. Um, and what's really interesting about that deal is, is the price point on the rents is exactly what you were saying. Um, I think the average, um, price point on the rents is about a thousand bucks a unit. Now granted these are smaller units, they're about 330 square feet, but the most comparable small product in Salt Lake now is probably unit sizes of about 450 square feet. And those rent for, call it 1250 to $1,300 and you're offering a $1,000 proposition, so you're significantly below where your nearest competition is. So from an affordability standpoint and also a location standpoint, I mean, you're just blocks from all, all the great amenities that Salt Lakes and many other cities have to offer.
00:04:52 You know, the restaurants, retail, which we all believe are coming back with the vaccines in normal time. And that's, that, that's a lot of what people are paying for. So now you're saying you can get all that, you can get it for cheaper. Um, our, our hotel is going to have a, a full floor, um, of amenities and that's a pretty high floor, like most of the apartment product in Salt Lake is mid-rise. This happens to be a high-rise. So you're gonna have amazing views, uh, from some of the top floors of the Wasatch Mountains. And you're also gonna have amazing views from the amenity deck, which is on one of those top floors. Um, and so, you know, interesting stuff that you can get, uh, when you can be creative in a space like that.
00:05:32 Definitely. Yeah. And I, you know, I think, you know, even with, you know, this great news and in terms of the, the vaccine and whatnot that we've seen, you know, there's no denying that there's gonna be continued distress, you know, um, in the hospitality market. I think moving forward. I know, um, as I mentioned to you earlier, right, we, we heard the stat that I think Walker and Dunlope mentioned that their hotel portfolio, currently 70% of, of, of the debt there is is in forbearance. So, um, you know, that, I think that speaks to, you know, possible potential opportunities out there for, for some of these unique business plans. Um, and also, you know, being able to, you know, bank on that when things do come back, you know, I think you and I probably are both of the, the opinion that when things open up, the vaccine gets distributed, whether, you know, the greater population, you know, gets that, you know, towards the end of 21, maybe it's into 22, but that leisure travel, you know, it's gonna come back. Um, and so if you can kind of manage through that and get there, there's, there's gonna be some great, great opportunities, um, going forward.
00:06:35 It, it's all about the liquidity and staying power and that hockey stick. Like we're starting to feel it on the new business front, not in the hotel sector and other sectors. A lot of multi-business, a lot of industrial business. We've been starting to feel some office business, um, which is great. Um, but if you have a liquidity in staying power in the hotel space, you, you will capture, and it will be a smaller pool of hotels cuz many will close, um, and not reopen and, you know, be converted to, you know, some other use, um, or maybe remain vacant. I don't know. But those, those that you know, can withstand it are gonna do. Okay. We are actually excited, I mentioned to you offline, but we signed up our first, um, hotel loan sale, uh, that we worked on, um, this cycle. And so we're pretty excited to get that into the market and sort of, you know, see what happens with that asset.
00:07:20 Um, funny, I know the background on it is another client of ours actually before the loan was for sale, tried to buy the asset with the intention of converting it to multi, um, they were as transitional housing. Um, they were, they were offering, uh, together with a tenant and tow master lease, I think either from the city of LA or the county of la. So that business plan had already been in place for this asset and I could easily see whoever this note buyer is, you know, either foreclosing or striking a deal with a sponsor and saying, Hey, you know, maybe we want to take this in a different direction, or maybe their basis is low enough that they can hold it for a couple years and then just continue to operate it as a hotel. So it'd be interesting to see how it plays out.
00:08:01 There you go. Um, what about on the, the office side of things? What are, what have you been seeing there? Um, I mean I think, I think the vaccine news obviously is, is great for, for obvious tenants. Um, but in terms of kind of activity there, I mean I think, you know, we've seen most of the leasing has been kind of those big tech, um, sectors, um, you know, kind of making moves at this
00:08:25 Point. O o office is still a tough asset class. There was a great article in the journal today about how I think like your five of the biggest tech tenants, Facebook, Amazon, apple, Google and Microsoft have actually expanded their real estate footprint by more than a quarter this year, which is actually their fastest paced, uh, in a decade. Mm-hmm. <affirmative>, which is really amazing to behold, but sort of makes sense, right? Every big office lease you read about these days is really those guys outside of those guys. I think it's still pretty tough. Um, we're working on an office deal that's sort of a light value add, Lisa play in Boise. Uh, we may actually do it with you guys, which I'm excited of. I hope so. We're
00:09:05 Excited.
00:09:06 So, you know, we're sort of like picking and choosing our spots on that. Uh, you know, if you've got an office building with significant role or significant vacancy, if, if, if, if value and pricing and, you know, debt expectations have adjusted to a post covid world and you've got a good plan and some staying power, I think you're fine. But if you, if if the idea and the expectation is that you're gonna finance that, it's sort of, you know, pre covid values and pre covid pricing, I think that's a pretty tough proposition right now. Yeah, of course if you've got credit on the rent role in a very low degree of occupancy and it's largely stabilized and you haven't had, you know, any collections issues or delinquencies issues, then I think you're fine. Um, but, but it's really sort of a tale of, of two markets.
00:09:48 So when you're gonna sort of take on that kind of value add, Lisa play, you want to have a good story. Like you want to have, like we do a purchase price that's, you know, 15% below what the ask was. Um, you'd wanna have kind of an angle as to why this asset is a little bit different, what you're gonna do here that allows you to attract tenant base and you probably want to be in a strong kind of emerging primary or secondary market like a Boise or, or a Salt Lake, you know, or a Phoenix or somewhere like that where, where there's a lot of growth. I think trying to finance that play in an LA or in San Fran or in New York right now is probably pretty tough.
00:10:23 Yeah, no, I, I agree. And I'd say also I'd I'd add to that I think, you know, part of it too is some of that pricing discovery out there and, and still kind of the <inaudible> spread that, that we're seeing in office. Um, and I think is, um, my guess is some more of those transactions start happening, um, we'll get some more clarity there. Um, and, and more of those deals are gonna get done. So.