CrowdStreet’s Anna-Marie Allander Lieb and Zack Streit, Senior VP at George Smith Partners discuss the positive impact of vaccine distributions on the capital markets, the recent drop in occupancy numbers in hospitality, and what the relocation of corporate headquarters means for secondary markets.
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 today's episode of CrowdStreet, StreetBeats. I'm Anna-Marie Lieb, Director of Investments here at, uh, CrowdStreet, and today I'm joined by Zack Streit, uh, George Smith Partners. Um, and we're here to talk everything capital markets and how it ties into commercial real estate. Um, so I think the, the big news this week as we finally have seen in the UK at least, that the, the vaccine is getting distributed. Um, I think it also just was approved today in Canada, and so they're starting distribution, um, there early next week. And I think the expectation is that, you know, any day here will get approval for the Pfizer vaccine, um, you know, here in the US to, to start distributing that. Um, you know, so that, that's great to see, um, and, and huge news, huge news for us, um, to kind of see that that tunnel as to to, to getting that vaccine out there is happening. Um, you know, with that being said, also, I think there's been movement, Zack, as we talked about kind of on the, the stimulus package. Yeah. What are your thoughts there, Amy, you've been waiting for while? For sure.
00:01:06 I, I, I think both are huge. I think the questions now on the vaccine is what is the distribution schedule like? It's, it's most likely first responders and elderly who are gonna get it first. And then the question is when does it hit the business communities? Does it go into inner cities first? Does it going to schools first? Does it, you know, parallel track into the business communities? And then also, like we were discussing how many folks actually take it. Um, you know, I was on the phone earlier as I told you with a buddy of mine who's an office leasing broker and he said he's gonna wait a year cuz that's the decision he and his wife made despite him being in, in kind of a client facing role where I think, you know, pretty soon he is gonna start touring space in person again and, you know, seeing a lot of folks.
00:01:45 So that was interesting. So it, it'll be interesting to see what the demand is for this and, and how that filters in, but for sure once there's some clarity in terms of where it hits the business community that's gonna have, you know, just, just an incredibly positive impact I think on the real estate capital markets. Um, so we should look out for that on the stimulus front. Geez, it's about time. I mean, you know, if they were only gonna pass $1 trillion versus the three or four that maybe we needed, I don't know why they couldn't have done this 60 or 90 days ago and sort of, you know, allay market concerns and just added more liquidity into the market, but at least we're getting there now, so I think that's a pretty good sign.
00:02:23 I agree and I think, you know, the timing, you know, is, is so critical here. I think especially if we, we looked at the most recent, um, numbers from the National Multi-Family Housing Council, um, and their rent payment tracker, uh, for the first week of December, the payment fell to 75%, which is about what below what we saw, um, last year for this week in December and about 5% below what we saw this past November. Right.
00:02:47 Definitely
00:02:48 It's dropping to a level we haven't really seen, um, here for some time. So, you know, a little bit concerning. Granted, it's only the first week of the month, so you know, you gotta wait for the full picture there and I believe also you, you know, um, if you have the fell over the weekend, so that that, that also has something to do with
00:03:04 Yeah. You, you have to think that that's tied to unemployment insurance, right? It has to be that, that rent payers, that tenants are thinking, you know, my gosh, is the federal government gonna turn off this unemployment spigot while we still have record unemployment in the country? So it, you know, it's not super abstract, it's actually this is where the rubber meets the road, but hopefully, you know, if more positive news emerges in the back half of this week and into next week, then you'll see that, you know, payment number rise sort of more consistent with months pass.
00:03:34 Yeah, I know. So just to kind of tie back and look at unemployment, you know, although we saw, you know, it dropped to 6.7% I believe from the 6.9, you know, I think the thought out there is that that reduction in unemployment was actually probably mostly due to, you know, a four thou a hundred thousand dollars or 400,000 person drop in actual labor force participation, right? As gone from being unemployed to permanently unemployed and and not necessarily actively looking for a job.
00:04:00 Right.
00:04:01 Um,
00:04:01 That, that's all, that's always the question. And while we're still talking about some of the rougher news, you know, we can turn to the, uh, the s t r report that we've all been following. Look, it's gotten tough in hotel land a little bit, you know, we had occupancy that was hovering in the fifties for a while, September, October, and then, you know, all of a sudden in November and December it's dropped back into the mid thirties, um, which is, which is really challenging, you know, and I was on the phone with a hotel sponsor of ours earlier and they just closed, uh, alone on some dirt, uh, for a multifamily development. And, and his, his news was a little grim and he is like, look, I think for the foreseeable future we probably focus more on multi now than we do on hotel cuz it's a tough, it's a tough, tough time. Um, and, and, and so I only hope that, you know, with, with the vaccine news and that hopefully we get past the surges, you know, of the holidays that, you know, we sort of see that travel pick back up again because, you know, operating hotels at 30%, you know, nationally is, is, is is is very, very challenging.
00:04:58 Yeah, no, for sure. And again, as you said with kind of the surge numbers, I mean it's expected. We also, you know, if you looked at the TSA numbers, you know, those drop down kind of this week too compared to the last. So I mean, not unexpected, you know, a lot of students going into lockdown again, um, through the holidays here. But as, as we said, you know, hopefully with that vaccine news, as that starts getting distributed, you know, things will start opening back up and,
00:05:21 And, and we finally breached a million TSA travelers on Thanksgiving and that that's just an important psychological and optical number. So we know that we can get back to that or higher. We just have to sort of get through this interim period here.
00:05:33 Definitely. Um, well on the onto kind of the bright side of things, I know before we jumped on here, I mean you guys have been doing a lot of business, which is great to hear.
00:05:43 Yeah, well, and likewise we're trying to keep up with CrowdStreet, but something amazing happened in the markets post Labor Day, um, and, and we're sort of seeing just an explosion in new business. Um, we, we closed about a hundred million dollars in the last two weeks across, call it four or five deals. Um, we've got two more deals that we think we'll close, um, before the end of the year that should total about another a hundred. Um, and then we have about 300 million in application that we think will hit in January or February. Um, you know, we're still a little behind what our pre covid pace was, but this is way, way better than what we were seeing in the second and third quarter just in terms of closings and velocity and application. Um, and we're also getting great proposals on deals, uh, including some that we're working on with you guys.
00:06:31 So despite like some of this near term darkness, let's say, I think the vaccine proposals are having an impact. I think stimulus talks are having an impact and I think the real estate capital markets is beginning to sort of see, you know, past, um, past some of the rough stuff that's going on there. We, uh, we're marketing a hotel note, uh, distress hotel note that will hit the market on next week, which we're really proud of. That could be the first in GS P'S history, certainly my time there and you know, unclear to me if that's just an aberration or if that's sort of the tip of the iceberg, but we're also working on a couple office deals that 60 or 90 days ago maybe we wouldn't be working on. And, and on one of them, the one that we're working on, hopefully with you guys, we got a screaming debt quote for a 65%, you know, occupied office building.
00:07:18 Granted it's in Boise, but some, some vacancy there. We got a debt quote that we didn't even negotiate that hit our full ask, uh, at 65% loan to cost non-recourse. And at LIBOR 450, that's amazing for office land, at least at brisket, you know, with 35% vacancy in an asset, even it being Boise I think 60 or 90 days ago, you either don't get a quote on that or it comes in, you know, a hundred to 150 bips wide of that. And so to see that and to see two other quotes behind it just just leads me to believe that people are starting to look beyond and they're, they're starting to look into, well what does 2021 really look like and what is that? What does that sort of recovery, um, you know, and, and how do I make sure that I position myself to catch the hockey stick growth that is likely to occur there?
00:08:04 So we're, we're really excited kind of about some of this activity. Um, it's a much needed and great bright spot, like when we are going through sort of a tough time, you know, with surges, it was a tough time for me personally too. My father who's older got COVID, but thank god he's doing okay. Um, and, and, and, and I just, you know, we try and really focus on that positivity, on that momentum and on kind of all the new business that's coming in and sort of seeing what hits. So I think that's positive, but I noticed you guys too, like super busy. I just got an email about your, um, op zone deal with Greystar that you're doing and that, that seems amazing.
00:08:38 No, for sure we are, you know, the, the, the pipeline is full and then we're, we're seeing that deal flow and into your point, Zack, um, I would also say, you know, I think we, we've seen the indications that that, you know, circling that debt is, is happening. Um, you know, I think, you know, if even if we looked back a couple of months ago, you know, know, you know, once we approved a deal, we still had a lot of attrition just due to debt falling out. Um, and we're, we're not seeing that, um, so much anymore. You know, the, the debt terms are coming in as, as underwritten, which is, which is great to see and our deal, um, that that's a great one. We're proud of that, that we launched that today. Yeah. Along with that, you know, we've got some other opportunity zones I think, you know, that are coming here at the year end and just really, we've actually, you know, filled up January in terms of, of deal flow. So, you know, things, things are happening, things are moving. It's, it's great to see. Um, and then kind of, I think the, another kind of topic that, that I saw this week was a lot of movement and, and talk about kind of relocating headquarters, right?
00:09:38 Yeah, that's a big one.
00:09:39 Goldman Sachs announced that they're reportedly looking to kind of move office space down to, to Miami and Florida out of New York. Um, you know, Facebook is looking for an additional million square feet of office in Austin. Um, Hewlett Packard is also considering moving their headquarters to Texas from San Jose. Um, you know, you're seeing this move kind of to those non-tax states, um, kind of into the Sunbelt and kind of away from the, the somewhat of the, the gateway cities. What are your thoughts there?
00:10:08 Uh, agree and we also talked about Elon Musk, maybe my favorite loose cannon, you know, talking about how he's ditching California for Texas too, so, we'll, we'll see whether that happens or not. But look, there was a trend towards secondary markets pre covid. Um, it seems like that trend is held consistent through Covid. Um, you know, there's affordability, there's quality of life there, I think that continues to hold true. Um, i, I don't necessarily think it's, it's at the expense of the major markets, cuz I do think they come back also, but I think that that trend probably continues and um, you know, it's why we're doing an, an office deal in Boise. We're actually also working on an office deal in Reno that's a little game year. Um, but really cool, it's a creative office deal and it, it, it's interesting like it's really positioned to build off of this trend.
00:10:57 It's basically in close proximity to Silicon Valley, but in Nevada, which is probably a more pro-business climate, you know, and lower taxes. Um, and, and, and it's a secondary market that's experienced a lot of growth pre covid. So we think there's an interesting thesis, you know, for that. And there's probably, I don't know, about 80,000 square feet or so of spec creative, it needs to be leased up, which really isn't that much space. But again, another deal that maybe six months ago, you don't know if there's a debt quote on at all. And, and we're starting to field quotes on that now. Um, so I I think that that speaks to your trend. The other thing I'd, I'd note is we're launching two deals this week, um, in Salt Lake City. One's a ground up multi, um, and the other is a hotel to multi conversion.
00:11:43 Um, and of course multi family's favorite asset class has been, um, we think will continue to be, but I think it's no surprise that that's also two deals getting done in a secondary market where Goldman moved a lot of it's back office to, but it's just been, been winners historically and we think kind of continue to be winners now. So there's probably more liquidity at the moment, um, in the debt and equity capital markets for deals in secondary markets, um, than primary markets that are again, kind of, you know, super locked down. Um, and I think it'll continue to be an interesting trend to watch.
00:12:16 Great. Um, all right, Zack, I think that covers it for today. I appreciate your time. Um, you know, hope you, you stay healthy and safe.
00:12:24 Yeah, likewise.
00:12:25 Yeah. Well, we'll circle back next week. I think you'll be Ian and Malcolm, so <laugh>
00:12:30 Awesome. All well, I'll always like it, Anna-Marie. Maybe one day we can call this CrowdStreet StreetBeats <laugh> since it's so close.
00:12:38 Love it. All
00:12:39 Right. All right. Take care.
00:01:06 I, I, I think both are huge. I think the questions now on the vaccine is what is the distribution schedule like? It's, it's most likely first responders and elderly who are gonna get it first. And then the question is when does it hit the business communities? Does it go into inner cities first? Does it going to schools first? Does it, you know, parallel track into the business communities? And then also, like we were discussing how many folks actually take it. Um, you know, I was on the phone earlier as I told you with a buddy of mine who's an office leasing broker and he said he's gonna wait a year cuz that's the decision he and his wife made despite him being in, in kind of a client facing role where I think, you know, pretty soon he is gonna start touring space in person again and, you know, seeing a lot of folks.
00:01:45 So that was interesting. So it, it'll be interesting to see what the demand is for this and, and how that filters in, but for sure once there's some clarity in terms of where it hits the business community that's gonna have, you know, just, just an incredibly positive impact I think on the real estate capital markets. Um, so we should look out for that on the stimulus front. Geez, it's about time. I mean, you know, if they were only gonna pass $1 trillion versus the three or four that maybe we needed, I don't know why they couldn't have done this 60 or 90 days ago and sort of, you know, allay market concerns and just added more liquidity into the market, but at least we're getting there now, so I think that's a pretty good sign.
00:02:23 I agree and I think, you know, the timing, you know, is, is so critical here. I think especially if we, we looked at the most recent, um, numbers from the National Multi-Family Housing Council, um, and their rent payment tracker, uh, for the first week of December, the payment fell to 75%, which is about what below what we saw, um, last year for this week in December and about 5% below what we saw this past November. Right.
00:02:47 Definitely
00:02:48 It's dropping to a level we haven't really seen, um, here for some time. So, you know, a little bit concerning. Granted, it's only the first week of the month, so you know, you gotta wait for the full picture there and I believe also you, you know, um, if you have the fell over the weekend, so that that, that also has something to do with
00:03:04 Yeah. You, you have to think that that's tied to unemployment insurance, right? It has to be that, that rent payers, that tenants are thinking, you know, my gosh, is the federal government gonna turn off this unemployment spigot while we still have record unemployment in the country? So it, you know, it's not super abstract, it's actually this is where the rubber meets the road, but hopefully, you know, if more positive news emerges in the back half of this week and into next week, then you'll see that, you know, payment number rise sort of more consistent with months pass.
00:03:34 Yeah, I know. So just to kind of tie back and look at unemployment, you know, although we saw, you know, it dropped to 6.7% I believe from the 6.9, you know, I think the thought out there is that that reduction in unemployment was actually probably mostly due to, you know, a four thou a hundred thousand dollars or 400,000 person drop in actual labor force participation, right? As gone from being unemployed to permanently unemployed and and not necessarily actively looking for a job.
00:04:00 Right.
00:04:01 Um,
00:04:01 That, that's all, that's always the question. And while we're still talking about some of the rougher news, you know, we can turn to the, uh, the s t r report that we've all been following. Look, it's gotten tough in hotel land a little bit, you know, we had occupancy that was hovering in the fifties for a while, September, October, and then, you know, all of a sudden in November and December it's dropped back into the mid thirties, um, which is, which is really challenging, you know, and I was on the phone with a hotel sponsor of ours earlier and they just closed, uh, alone on some dirt, uh, for a multifamily development. And, and his, his news was a little grim and he is like, look, I think for the foreseeable future we probably focus more on multi now than we do on hotel cuz it's a tough, it's a tough, tough time. Um, and, and, and so I only hope that, you know, with, with the vaccine news and that hopefully we get past the surges, you know, of the holidays that, you know, we sort of see that travel pick back up again because, you know, operating hotels at 30%, you know, nationally is, is, is is is very, very challenging.
00:04:58 Yeah, no, for sure. And again, as you said with kind of the surge numbers, I mean it's expected. We also, you know, if you looked at the TSA numbers, you know, those drop down kind of this week too compared to the last. So I mean, not unexpected, you know, a lot of students going into lockdown again, um, through the holidays here. But as, as we said, you know, hopefully with that vaccine news, as that starts getting distributed, you know, things will start opening back up and,
00:05:21 And, and we finally breached a million TSA travelers on Thanksgiving and that that's just an important psychological and optical number. So we know that we can get back to that or higher. We just have to sort of get through this interim period here.
00:05:33 Definitely. Um, well on the onto kind of the bright side of things, I know before we jumped on here, I mean you guys have been doing a lot of business, which is great to hear.
00:05:43 Yeah, well, and likewise we're trying to keep up with CrowdStreet, but something amazing happened in the markets post Labor Day, um, and, and we're sort of seeing just an explosion in new business. Um, we, we closed about a hundred million dollars in the last two weeks across, call it four or five deals. Um, we've got two more deals that we think we'll close, um, before the end of the year that should total about another a hundred. Um, and then we have about 300 million in application that we think will hit in January or February. Um, you know, we're still a little behind what our pre covid pace was, but this is way, way better than what we were seeing in the second and third quarter just in terms of closings and velocity and application. Um, and we're also getting great proposals on deals, uh, including some that we're working on with you guys.
00:06:31 So despite like some of this near term darkness, let's say, I think the vaccine proposals are having an impact. I think stimulus talks are having an impact and I think the real estate capital markets is beginning to sort of see, you know, past, um, past some of the rough stuff that's going on there. We, uh, we're marketing a hotel note, uh, distress hotel note that will hit the market on next week, which we're really proud of. That could be the first in GS P'S history, certainly my time there and you know, unclear to me if that's just an aberration or if that's sort of the tip of the iceberg, but we're also working on a couple office deals that 60 or 90 days ago maybe we wouldn't be working on. And, and on one of them, the one that we're working on, hopefully with you guys, we got a screaming debt quote for a 65%, you know, occupied office building.
00:07:18 Granted it's in Boise, but some, some vacancy there. We got a debt quote that we didn't even negotiate that hit our full ask, uh, at 65% loan to cost non-recourse. And at LIBOR 450, that's amazing for office land, at least at brisket, you know, with 35% vacancy in an asset, even it being Boise I think 60 or 90 days ago, you either don't get a quote on that or it comes in, you know, a hundred to 150 bips wide of that. And so to see that and to see two other quotes behind it just just leads me to believe that people are starting to look beyond and they're, they're starting to look into, well what does 2021 really look like and what is that? What does that sort of recovery, um, you know, and, and how do I make sure that I position myself to catch the hockey stick growth that is likely to occur there?
00:08:04 So we're, we're really excited kind of about some of this activity. Um, it's a much needed and great bright spot, like when we are going through sort of a tough time, you know, with surges, it was a tough time for me personally too. My father who's older got COVID, but thank god he's doing okay. Um, and, and, and, and I just, you know, we try and really focus on that positivity, on that momentum and on kind of all the new business that's coming in and sort of seeing what hits. So I think that's positive, but I noticed you guys too, like super busy. I just got an email about your, um, op zone deal with Greystar that you're doing and that, that seems amazing.
00:08:38 No, for sure we are, you know, the, the, the pipeline is full and then we're, we're seeing that deal flow and into your point, Zack, um, I would also say, you know, I think we, we've seen the indications that that, you know, circling that debt is, is happening. Um, you know, I think, you know, if even if we looked back a couple of months ago, you know, know, you know, once we approved a deal, we still had a lot of attrition just due to debt falling out. Um, and we're, we're not seeing that, um, so much anymore. You know, the, the debt terms are coming in as, as underwritten, which is, which is great to see and our deal, um, that that's a great one. We're proud of that, that we launched that today. Yeah. Along with that, you know, we've got some other opportunity zones I think, you know, that are coming here at the year end and just really, we've actually, you know, filled up January in terms of, of deal flow. So, you know, things, things are happening, things are moving. It's, it's great to see. Um, and then kind of, I think the, another kind of topic that, that I saw this week was a lot of movement and, and talk about kind of relocating headquarters, right?
00:09:38 Yeah, that's a big one.
00:09:39 Goldman Sachs announced that they're reportedly looking to kind of move office space down to, to Miami and Florida out of New York. Um, you know, Facebook is looking for an additional million square feet of office in Austin. Um, Hewlett Packard is also considering moving their headquarters to Texas from San Jose. Um, you know, you're seeing this move kind of to those non-tax states, um, kind of into the Sunbelt and kind of away from the, the somewhat of the, the gateway cities. What are your thoughts there?
00:10:08 Uh, agree and we also talked about Elon Musk, maybe my favorite loose cannon, you know, talking about how he's ditching California for Texas too, so, we'll, we'll see whether that happens or not. But look, there was a trend towards secondary markets pre covid. Um, it seems like that trend is held consistent through Covid. Um, you know, there's affordability, there's quality of life there, I think that continues to hold true. Um, i, I don't necessarily think it's, it's at the expense of the major markets, cuz I do think they come back also, but I think that that trend probably continues and um, you know, it's why we're doing an, an office deal in Boise. We're actually also working on an office deal in Reno that's a little game year. Um, but really cool, it's a creative office deal and it, it, it's interesting like it's really positioned to build off of this trend.
00:10:57 It's basically in close proximity to Silicon Valley, but in Nevada, which is probably a more pro-business climate, you know, and lower taxes. Um, and, and, and it's a secondary market that's experienced a lot of growth pre covid. So we think there's an interesting thesis, you know, for that. And there's probably, I don't know, about 80,000 square feet or so of spec creative, it needs to be leased up, which really isn't that much space. But again, another deal that maybe six months ago, you don't know if there's a debt quote on at all. And, and we're starting to field quotes on that now. Um, so I I think that that speaks to your trend. The other thing I'd, I'd note is we're launching two deals this week, um, in Salt Lake City. One's a ground up multi, um, and the other is a hotel to multi conversion.
00:11:43 Um, and of course multi family's favorite asset class has been, um, we think will continue to be, but I think it's no surprise that that's also two deals getting done in a secondary market where Goldman moved a lot of it's back office to, but it's just been, been winners historically and we think kind of continue to be winners now. So there's probably more liquidity at the moment, um, in the debt and equity capital markets for deals in secondary markets, um, than primary markets that are again, kind of, you know, super locked down. Um, and I think it'll continue to be an interesting trend to watch.
00:12:16 Great. Um, all right, Zack, I think that covers it for today. I appreciate your time. Um, you know, hope you, you stay healthy and safe.
00:12:24 Yeah, likewise.
00:12:25 Yeah. Well, we'll circle back next week. I think you'll be Ian and Malcolm, so <laugh>
00:12:30 Awesome. All well, I'll always like it, Anna-Marie. Maybe one day we can call this CrowdStreet StreetBeats <laugh> since it's so close.
00:12:38 Love it. All
00:12:39 Right. All right. Take care.