Malcolm Davies, Capital Markets Update | Ep. 81

00:00:04    Hello everyone. Welcome to StreetBeats for December 16th. This is our final installment for 2020 of our capital markets segment. With me, as always, is Malcolm Davies, principal and managing director at George Smith Partners. Malcolm, welcome back for this final installment. And, you know, just to kick things off, it has, you know, we started this on March 30th.  

00:00:28    Yep.  

00:00:28    And could you imagine where we sit now relative to where we started this segment?  

00:00:34    <laugh>? No, <laugh>. Not at all. I mean, I, I think if you look at the stock market was, what, 26,000? I think. Um, you know, s and p was down 29, 30%. Um, reality is, you know, we, we have, we have come back really well, and, and we've done a really good job of, of being extremely like to, so the word is resilient. And, um, you know, we talked about this, this lender participation rate, and before we got on today, the one part that, you know, I think we recall from March 30th was I think what <laugh> I may have, might have said we're at 20% participation rate on that day. Um, which then dropped down, I think in April to 10. Heck, there might have been a day where I don't think there was a lender doing a deal on America, um, you know, somewhere in that second week of April.  

00:01:21    But I'm proud to say that, look, the market is a hundred percent today. I mean, every market participant is in the business doing deals. Now they're being thoughtful about which deal they're gonna do and where they're gonna go and what's going on. But frankly, everyone's doing stuff. So the fact that we went from, in less than nine months, from 20% down to 10, back up to a hundred from just a lender side, um, you know, talk about all the other stuff. I just want to get your perspectives from, you know, obviously the equity markets, um, you know, and how you've seen, or how we saw really just a, a crazy run from the start of 2020 or on January 1st, we woke up having no inkling of what kind of a year we were gonna have to, here we are on December 16th, and, and it feels like it's five lifetimes, but it's, it's  

00:02:09    Remarkable. Yeah. To say 2020 has been a rollercoaster is a massive understatement. You know, and to your point, right, the mar markets were down, you know, when, when we started this on March 30th was, it was a, it was a dark period. We were all scared, right? We were, we were all locked down. We didn't know what was happening. We didn't know how long this would go on. We didn't know how or when, or if a, a vaccine, you know, to the virus could show up there. There was just, everywhere you turned, there was uncertainty and, and fear. And so, and it, and that was priced into the market that was priced into, and that was felt, you know, everywhere you turn. And, you know, what was just phenomenal to see this year is how quickly everything pivoted, you know, stabilized and kind of, and, and then, and then came back.  

00:03:01    And now, you know, now we're sitting here at record levels and the s and p mm-hmm. <affirmative>, we have, you know, we have a vaccine that's actually hitting the streets and Yeah. Really expecting that to be on the street in December. We have a market that is now not looking nearly as bad as what people projected it the end of the year. We talked about this on a, on a live stream we did recently where, you know, we're sitting at sub 7% unemployment today. You know, we still have 10 million jobs to go fill in the economy. Like there's still, you know, some months ahead and, you know, years ahead, we probably aren't gonna hit full employment again for a couple years at least, right. Um, but, you know, sub 7% is far great, you know, better from, than what people were expecting. I mean, people were calling for solid double digits, you know, we saw unemployment nominally, you know, get to 15 or so percent this year.  

00:03:52    People were saying it's really more like 20 plus percent, given that how fast unemployment was, was spiking the data just couldn't really keep up with what was really happening on the streets. So when you, when you think about a real unemployment rate that was spiking into the twenties, that's, that's great. Depression levels. Yeah. And now to be sitting today, you know, in, at basically your, like you said, full participation in the markets, you know, asset pricing that in some cases is back to record levels, be it equities or certain types of real estate. And now, like meaningful optimism for 21 with, you know, for example, 3.8% expected G D P growth next year from groups like Green Street, and most economists projecting somewhere between three and 4%. Yeah. Wow. Like nobody thought we were gonna be here right now, um, with a lot to look forward to next year. I  got one word for us though, and I think it's something we should talk through because, you know, our country did something this year so fast, record fast that we hadn't done in the past because we probably learned from the past and that one word is stimulus. Yeah.  

00:04:54    And you know, the reality is there are two things today of on December 16th, I think we would be looking forward very differently. One, if stimulus hadn't been enacted through, you know, obviously P p P and alike, um, or, and UN and unemployment checks. But the other is look vaccine. I mean, it, it is not good right now as it relates to, um, covid and Covid spikes in the United States. It's certainly, um, much worse. And it's been, I think, since even the pandemic started, however, you know, we're in the forward thinking type business to think about what's gonna happen in the future. And the fact is, I think on Monday I saw the first person in the United States be, uh, received their first shot of the two shot vaccination. That that's amazing. So what do you think about regards to stimulus? I mean, I know you have some thoughts about, you know, what that actually did. Um, I'd love to get your thoughts about that.  

00:05:41    Yeah, I, the, the stimulus was nothing short of astounding in terms of what, what it did do it, and it continued to surprise everybody, I think every step of the way. Uh, you know, I think a lot of, when we got into the pandemic, I think a lot of, you know, the foreshadowing of what, what was gonna happen in Q4 and, you know, flowing into next year wasn't baking into the equation, just really what that stimulus was gonna do. And, you know, look, it could have been, sure, you, you can nitpick it and you can say, it should have been delivered this way or that way, or it was too much or not enough. Whatever it was, it, it did do the job that we needed to do. I mean, we're, we're sitting where we are now. Um, it, it's, it's great to hear that there's one more round that looks like is gonna get done.  

00:06:24    You know, I think that there, that's the final push. You, you could say that to your point, we, we have some rough months ahead of us, there's no doubt. Yeah. Um, you know, we have to get to the backside, you know, meaningfully of the pandemic. Um, we have to ana enable enough time for the vaccine to hit the street, reach the population, and do the job. So, you know what, what that probably all pencils out to is that yeah, look, things aren't gonna start to feel normal again until summer of this next year. Um, you know, that's another six or seven months of some kind of rel relatively tough sledding for our day-to-day lives, if that last round re re but could really kind of push us through, you know, things look pretty good. And so I think, you know, when we think about that, you know, how much liquidity was pumped into the system so fast.

00:07:04    I mean, as I told you offline, the the data point that just, sometimes you sit back, it's amazing. You say, you know, one fifth of all US dollars in existence were created this year. Uh, we've never seen that before. And you, you could argue that, hey, look, that, that may create some inflationary pressure, at least temporarily as we get out of outta the pandemic, as we see demands start to really come back to the economy. Sure. You, you're, you are even getting that telegraph through the Fed saying, Hey, look, we're not gonna like raise it interest rates. So if inflation's gonna have to spike up for a while a little bit, so be it. Um, you know, I I think we're solidly in a relatively low inflationary environment anyways. I mean, you know, some, you know, some, you can look at the articles out there and say, look, it's been, it's been multiple decades since we've seen real inflation and there's so much, central banking has evolved so much since the seventies that, you know, we're probably not going back to double digit inflation in, in any realm.  

00:07:58    Um, but yeah, maybe, maybe three to 4% inflation might be possible for part of, part of this, you know, recovery. Um, but, you know, when if interest rates are low, then you know, it, it, it's not gonna be bad and it's gonna get us back to, you know, more normal ways of life and, you know, a faster recovery. I mean, I think that's the, that's the part that's just amazing. It kept, it kept things from getting, you know, bad, sustainably bad for a long period. And now the stimulus is giving us the opportunity to have a much faster than expected recovery.  

00:08:29    Right. And I, I think, you know, I commend, um, the government in this regard that the, there was this, the P P P, which I thought was very creative, um, it, it absolutely hit it the point where it was where, I mean, even many companies in that moment, and ours included, were sitting there going, okay, we're not underwriting any revenue. I remember in March, I remember my thinking to myself going, I'm not gonna underwrite any revenue for the rest of the year. I was thinking we're gonna be in that 2009 period and we're not gonna have any transactions and nothing's gonna close. And so you're looking at your overhead and going, you know, what decisions do I need to make? And when they announced the PPP, I think every business that happened, thousands and thousands of business all had to sit back and go, okay, the requirement for you to keep your employees to receive the PPP absolutely made a difference.  

00:09:16    Because I think you, they were, they were just looking at the 20% unemployment, 25. I mean, it was gonna be bad. So the fact that it created that confidence for businesses to, and it, and allowed just enough time to hit, to take the shot where we were scared and come out on the other, the other side of the end of the second quarter going into the third quarter, and you could feel it, transactional transactions started to get done as we hit that third quarter. And, you know, I think we've mentioned this before going into fourth quarter, and now you're sitting going, it's been a pretty good quarter. Um, you know, from the debt business, I think from the equity markets, um, folks are looking at things and with the optimism and saying, okay, what does the future look like for us? And I think that's part of today too, is to say, Hey, how do we go into 21? What are things to pay attention to as, you know, commercial real estate investors look to, um, how do you guys see 2021? Um, you know, and what are you looking for as a, as as kind of the vision of CrowdStreet next year?  

00:10:12    Yeah. So good question. I think what I wanna do is let, let's talk about some of the trends this year. Cuz part of what we see going forward is, you know, some of the manifestation of what occurred in 2020. And then to ask the question, is this a short term trend? Or are we, uh, at the beginning of a long term trend? Yeah. And, and then pivoting a appropriately, I mean, you can, you can, there's opportunity in both of those scenarios, right? They're, they're not, they're not mutually exclusive, but I think you, you have to view them through different lenses. So, you know, so let's throw some of that stuff on the table this year. Sure. There's a couple of really interesting, interesting things that's happened over the course of the year. You know, the first thing we happened is we, we saw, you know, this, this migration shift, you know, flowing out of major MSAs into secondary and tertiary markets. So, you know, first question is, you know, I'm, I mean, and I'm curious to get your take on this Malcolm. Like, what, what do you think about that? Do you think, are we seeing a, a short term knee-jerk reaction? Uh, are we, are we seeing something meaningful in terms of how, how and where the population is gonna live going forward?  

00:11:09    I mean, we've never seen, we, nobody knew the initials W f H before, so I didn't, I didn't think we, that's a new word. Uh, that or anachronism that came out this year as a work from home. What influence and what effect will that make on businesses and where they're located, where people live? Um, taxation has certainly come to a decision. Um, we are seen, um, companies, corporate America, um, seem to land a bit out of these large, uh, you know, markets in the West Coast and in New York, uh, with Oracle, Hewlett Packard, uh, and the like, moving to Texas. Um, so that's something that's, you know, is that gonna be a long-term thing? It could be. Um, the question in really at reality is high quality of life, low cost of living, um, lack of affordable housing. And those things are all gonna tie together.  

00:11:56    Um, and you're seeing that trend, and we keep saying that the accelerant, how much are we, have we excel? Is it, you know, retail, you know, started to, you know, we accelerated its demise through covid, right? But people transitioned to these markets, I gotta believe we're gonna continue to see the secondary markets growing. Um, and with regards to that, you're seeing that in Charlotte, Nashville, Austin, Phoenix, salt Lake City, and the like, and I think that trend will grow. So for me, I think that's a, that's one that's gonna stick. Um, you know, other, other areas we could talk about. But that I, I could see that. What about, what are  

00:12:34    Your thoughts? Yeah, so, you know, our, our thoughts on it are that you, we have, well, let's start with kind of like the, the knee jerk reaction. Part of it I would say is that sure there's been out migration from New York City and San Francisco this year, you know, to the, like, that we haven't seen in a long time. Um, I, I think some of that aspect is short term. I mean, I think if we fast forward three or four years, I think New York and San Francisco look pretty good again, you know, they're great cities and they're great cities for a reason. So I think that will, that will sort itself out. I, I think the, the really, the meaningful long-term trend is that, to your point, work from home is now percolating through everybody's mind. They're through every company. Uh, I mean, our company is a good example of that, right?  

00:13:15    It, it took a year of working remotely to then realize, hey, our company can thrive remote. It doesn't, you know, and like going forward, sure there's gonna be this blend, right? The hybrid office will become, I think, more and more a part of like a normal type office culture. There's always gonna be people that want to come in every day. There's now, there's gonna be people that want to come in part of the week, and there's a subset, you know, call it 10 to 20% of a workforce that would like to stay remote, you know, indefinitely. And I think now, if you have these companies embracing that, you know, us being one of 'em, and, and what, so what I think what's fascinating about this is that to me, this unlocks productivity growth. Uh, if you are no longer bound to having that worker live in your city, you, the, the, the country, and perhaps the world is your oyster, right?  

00:14:04    Go get the best talent wherever it is, enable the talent to work from where they work best. And, and, and your company will benefit from that. And now, I mean, and technology's gotten to the point where we've proven this is all doable. I think that's a fascinating long term trend that we're just gonna see continue to have legs, it's gonna benefit, you know, the secondary markets in the short term, it will start to benefit other markets in the mid to long term. You know, uh, and, and to, you know, the Charlottes and the other, you know, the places around the country, you know, to your point is like, these are cities that are, you know, they're desirable. They have good quality of life, they have affordability relative to other places. Uh, they have connectivity too. I mean, there was a podcast I did probably a year ago where I was saying, you know, talking about how the, I, I think one of the number one things that's changed and what has propelled, you know, the, the growing secondary markets and our thesis behind the 18 hour cities is that just look what it looks like to live in a Denver or Charlotte, or in Austin, or in Nashville today, relative to 20 or 30 years ago, very different, totally different.  

00:15:07    You're, you have so much better airport connectivity. You have so much better amenities. You literally have sports teams that didn't exist, like everything, right? I mean, you weren't going to a Titans game, you know, 30 years ago in Nashville. These are all real things. And so I think what's happened is that we've seen the secondary markets grow up. I think we've seen them now offer a lifestyle that competes with what you had to basically go to a primary market, you know, in years past. And those primary markets had the jobs anyway. So we had this guy double whammy. They had the amenities, they had the connectivity, and they had the jobs. And so if you wanted a real career, you were gonna kind of pick your major metro and you were gonna settle in a suburb of that. Now, now this is getting dispersed all over the country, and it's allowing people to have more choice in where they live.  

00:15:54    I think this trend has got many, many years to run to the, and it will run the, the point where, you know, it reaches and kind of runs outta steam is when they're no longer affordable. And if now I can live in San f Francisco or Denver and it's the same price, okay, well maybe I'm, I'm gonna choose San Francisco, right? Like, it's, it's gonna have to kind of reach that point of equilibrium. So that's the part that I think is fascinating. I just think that this year has been just yet another catalyst for, you know, for perpetuating that trend.  

00:16:22    Catalyst is the right word. And I think it's interesting. If you look at the average cost of housing in Austin from 10 years ago to today, it's pretty staggering when you see the, the, the inflation of that. I do think that this has been one success part of this year, um, is housing, right? Um, mo most folks did look at themselves and said, Hey, I, one, one thing I think that drove a little bit of housing decisions, obviously the dynamic of, wow, I'm gonna be spending a lot more time at home. What do I need? Or, wow, I need a second home because I need to be outside of my major market so I can have more space. But part of it is also people weren't spending money like they normally do. So the fact is, folks weren't traveling, they weren't out there entertaining, they didn't do things that, and so they had money, and so they had some plates, more disposable income to spend on, on housing.  

00:17:08    And so housing was definitely, um, uh, a winner this year. I think the average, um, home price in America increased on average 8%. Yeah. You know, from year over year, which is a pretty, pretty successful, um, growth rate. The other part I would say that we've seen in emergence of this year is that single family for rent, it's a little bit on the same, uh, aspect of housing, which is, you know, uh, little small cottage bungalow style, you know, little residential elements that are managed like apartments. But that seems to have just have massive growth in, um, these growth markets outside of California. Um, we are seeing that growth in that, you know, hotel to mo, hotel to housing conversions. You know, obviously we, we've seen that dynamic in hospitality, which, you know, we've talked about a lot this year, right? I mean, we were, I think we fell all the way down to what, 20% at one point occupancy, somewhere in that range. Uh, it bounced back up to 50, 55%. Um, right now, because of the Covid spikes and the, like, we're down to about 37%, um, from Star. And so, you know, that there's all these different trends, but, um, you know, I guess some other things that you've seen, what, what's your perspective, I guess, about retail? What have you learned about retail this year  

00:18:22    In your mind? Yeah, I, I think our perspective on retail has been that, um, you know, it's obviously been a, a super rough year for the sector. Uh, it, it's been, you know, another, you know, for certain segments of retail, you, you gotta wonder is this potentially the fatal blow mm-hmm. <affirmative> and, and what will happen to some of, you know, some of that going forward. I mean, I think if we, if we push it forward and say, what does it look like in the years ahead? I think it looks like consolidation is my thought. I think that certain segments are, are gonna bounce back. I mean, let's, let's kind of put numbers around it, right? We, we jumped from, you know, mid-teens percentage of all sales going, you know, coming online, popping up to around 20 or so, you know, we saw this massive spike in growth, and we're gonna see continued growth.  

00:19:08    You know, I think, uh, we got Green Street, for example, projecting that 30% of all sales will occur online by 2030. Well, even by 2030, then that still says 70% of sales will, will come through brick and mortar. So it's not like this, it's not like the sector's going away, but it means that it, that it, it's no longer a, a growth, you know, sector mm-hmm. <affirmative>. And so what we look at, I would say is really where is the center located? You know, I kind of view it from the perspective of you gotta like the, the number one in two locations in a submarket, you gotta be really skeptical about the number five and six locations, <laugh> mm-hmm. <affirmative>, uh, those are the ones I think might go away, get repurposed. You might see those turn into storage or get turned into multi-family development. I mean, they sit in good locations, right?  

00:19:51    They're on good corners and they have good connectivity to the, to the submarket. So, so the so the dirt is valuable. Yes. Right? You just don't know if that strip center will, will survive in the years ahead. So I think that's how we look at it. I think grocery anchored is still the, I think the spot where if you find a deal that is grocery anchored, but it's getting kind of painted with the broader brush of like retail's bad, that's probably being mispriced and there's opportunity there because those sales are really strong at those centers. The credit is really good. And I don't think that any of us are gonna stop going to Trader Joe's in the next five years. So I think all of that is really, like, I think that all bodes well for certain segments of retail, but it's a trickier asset class for sure.  

00:20:38    Right? It's not like industrial where it's like all up and to the right. I mean, yeah, we, we did industrial round table recently, and I mean, the kind of the thesis coming out of, of that was like, it's hard to mess it up. It's, there's not enough of it. Everybody, everybody's clamoring for it. So no matter where you fit in industrial, if you are perfectly situated for e-commerce demand, okay, well then there's, there's something around the corner. But even if you're eighties vintage class B manufacturing, they're not making more of that. And Right. Everybody else is mopping up everything else. So all of the, all of the users who need that space, need that space. And so they're gonna pay the rent, they're gonna renew, they're gonna accept rent growth. So I think like when you look at the industrial sector, it is just, just this like general, just like this, you know, buoy just lifting, the tide is going up, everything's rising. So, you know, it's, so, it's hard to, you know, when you look at retail, you're like, look, it's not like that asset class at all. Um, but for the right deal, in the right location, there could be some, you know, some interesting value.  

00:21:42    I mean, for, in all reality for retail's loss is industrials gained because of e-commerce, right? And there's gonna be even more things that are gonna be pushed to e-commerce, right? Look, look at the, you know, some of the tech things that have happened this year, right? So Amazon's, uh, getting into the drug drug drug business, drug drug distribution business, right? Yeah. That is, that is going to be a massive hit to the Walgreens and the CVSs of the world. So in that sense, you start to think, okay, how, what is the effect that is that gonna have on that side of the, of the world? Um, but then you also see some other tech things that have occurred this year, right? Airbnb went i p o DoorDash, and like, you know, and, and if you look at these, the public markets are really responding to a lot of these IPOs.  

00:22:23    So, and in essence, tech e-commerce in general will have a massive effect on certain types of real estate, retail being probably the, the greatest detriment with industrial being the greatest, you know, um, attributable gains in reality. And so, like you said, every industrial deal we did this year was incredibly easy to subscribe, so to speak, meaning that there was such an incredible amount of interest. Um, and, and the reality is, you know, I think that's gonna continue to con to, to foster going forward, uh, and how, how retail shopping will change in the future. I mean, the reality is, you know, I ordered, you know, my, I lost my, you know, how many times do we all lose these? I mean, I lose, I lose these all the time, right? So I ordered my AirPods, the Apple stores across the street from our office, um, you know, said you can pick it up from at three to three 15 a watch cross and picked it up three to three 15. That Apple store is probably 85% too big. It doesn't need to be as big as it is, right? So I think a lot of this stuff will be repurposed. You could have a lot more storefronts and then have a lot of back office to deliver the goods or people in that little small storefront that's only 15% in the size of what it is today.  

00:23:32    Yeah. Uh, you know, you touched on a really interesting concept, which I think plays out, you know, forcefully over this decade, is that re retail and e-commerce and industrial are all just kind of, kind of start blending together a little bit more. And to your point, the back of a retail store today could be micro fulfillment tomorrow. Absolutely. And they, and they got stuck. And it's, and you know, and we've already seen this start to happen in certain metros. You got these 10,000 foot spaces that are fully roboticized and, and they're just like, stuff's coming in and going out the same day. H how does that not start to happen at, you know, if, if the technology gets good that you can basically have a small robotic operation in the back of your store and you got a door out the back Yeah. And you just got like, trucks coming and going, and your, your, your, your quote unquote retail storefront is, is just a, basically like a last mile distribution center with whoever wants to walk in, walk in. Great. But like, hey, look, 80% of the business is going out the back door and it's going, it's going, you know, it's getting shoved around the hills of the, of the neighborhood. Like that's, that seems to be like just abundantly obvious that it's gonna come. And so that retail will, will still be valuable. It's just gonna be valuable in a different way. And so I think that's, that's part of these trends playing forward as well.  

00:24:46    So are there other parts of the trends in the markets, right? So let's be candid, right? Who were the winners this year, in essence that the, at least the market from real estate, you know, multi-family industrial, for example, of course, right? But multi-family, multi-family interest rates have never been lower. Uh, it was almost as if we wanted to promote that housing part. And so the agencies got involved in that, um, helped, uh, bring, you know, they, they went even lower than any other asset classes on, on rates. Rates across the board are low. Um, and so more and more of cash flows were allowed to leak out to the equity. Um, you know, stimulus obviously helped. Unemployment checks obviously helped, but you know, it's interesting, we were talking about how multi-family, we were wondering how rent collections were gonna be, and they did dip, but it never dipped to the point of being an over concern to, you know, even an over-levered multi-family purchaser, buyer owner likely didn't have to run into too many troubles this year. You know, it's amazing, right? I mean, multifamily did a, had a pretty good year.  

00:25:48    It, the multifamily had an amazing year. It was so, it was resilient throughout the pandemic. And it, it's fair to say that the stimulus checks helped, you know, through the middle of this year. Uh, but the data shows up. I mean, you know, we always would talk on these, you know, segments about the n m hc, you know, monthly collections. Mm-hmm. <affirmative>, they never dipped below 90% this year at any point, right? And, and, and we, and we were talking in the end of August or early September to say, Hey, look, if there's no more stimulus, do, are we sitting at the edge of the cliff? And there was articles out there that were forecasting that the cliff is coming and that we're gonna see a meaningful drop off in collections never happened. And, and now it's not gonna happen. And now we've had, so to your point, we've had cheap debt come in and say, Hey, look, we, we we're gonna go sub 3% on Fannie Freddy.  

00:26:36    Watch what that does to pricing. It could put the most ridiculous floor under pricing ever. You could essentially have anything anywhere. And it was, there was like literally, I mean, we were scraping to try to find any sort of covid discounts. And I now look, in retrospect, I feel super lucky that we found some single digit co covid discounts because that pricing snapped right back. It's right back now. Now there is really no such thing as a covid discount. And going forward, you're like, look, demand demand stronger cap rates are going down. We're seeing the, the, the, the, the prospect of three point something cap rates coming to a lot of markets is like absolutely real. And we just saw, you know, I'd say Phoenix is a good example. We're talking to some operators there. They're, they're saying, Hey look, we just saw cap rates compressed like 25 basis points in like a couple months. Yeah. And so cheap debt's just basically gonna make multi-family.  

00:27:33    I think, I think this experience is gonna go show that as a multi-family investor, when the markets are strong and the economy is strong, you have the strength in rent collection and people paying rents and, and, and being able to pay even more rent cuz their, their jobs and and income are increasing on the downside. There's a lot of subsidies that occur, um, that, that can help you protect yourself. So from interest rates and the agencies being involved in, in, in the debt markets for the, for multi-family, but also from stimulus and the like and, and unemployment. So as an asset class, it is one where it feels very protected. Uh, and it has certainly earned its stripes as the favorite asset class within commercial real estate, um, for those reasons. Um, and that's, you're seeing very low cap rates, uh, you know, for all kinds of different multifamily from, you know, the class C workforce, housing adaptive re you know, reuse to some to a class B, um, you know, to the class A, um, you know, type assets and, and major markets. You know, these, these are all trading at a very low cap rates, um, even right now. And so I would anticipate that even gen uh, coming even more and more into 2021.  

00:28:46    Yeah. Uh, totally agreed. It's, you know, and let's, so let's talk a little bit about 21. Cause I'm curious to get your take on this, right? So we have, you know, the prospect of now, you know, we get to the backside of this pandemic and we're gonna, we, we think we're gonna see an uptick in velocity of transactions. You know, for example, C B R E is saying, Hey, transactions in the US might approach 40% growth rates over 2020. You know, what are, what are you seeing? You're more on the front lines, you know, are you, how bullish are you that 40% increase in in transaction blossom?  

00:29:15    I, I have to be candid about this. My pipeline is bigger in December of 2020 than it was in nine two December of 2019. And that, and that, I attribute that to pent up, um, projects that were on the sideline, pent up things that we, um, you know, frankly of course you wouldn't look at in June or July or August, but you're looking at them going, okay, can we, do we think that's feasible in 2021 with either a development or an adaptive reuse or a business plan that we think is feasible? So in that regard, um, and then not only that, we have deals that are in app for closing in Q1 where I think it will br break my record for Q1 2000 or 2000, which would was Q1 2019. In Q1 2021 now remains to be seen. We always have fallout heck, something could change tomorrow and the like, so from, from, at least from my personal and the company's pipeline, um, we are looking extremely strong going into 2021 in a different way than we thought of going into 2020, where going into 2020 in December of 19, you know, we had had a pretty good run. 

00:30:22    We have all had, we had some great, you know, great years of transactional volume. And so you always kind of had one eye going, okay, what, where is the shoe gonna drop? And little, little did we know that it was covid, however, you know, that shoe drop and it, and it dropped hard and the fact that it dropped so hard is so fast and we enacted so much stimulus is next year already our first year in that full recovery cycle where we might have normally had a two or three year period of time, and that might have been the case because of the amount of stimulus we put in. Um, so I'm, I'm very optimistic in that regard.  

00:30:55    Well, that's great. Your, your pipeline is what, probably 30 to 60 days, at least 30 to 60 days ahead of mine, because Right, by the time they're showing up for the equity raises, they have the debt term sheets in hand. So, um, so I guess I'll take that because I guess that bodes well for what our Q1 pipeline will look like. Uh, yeah. Uh,  

00:31:15    I'll say this, uh, the, the vaccine, the, you know, we did a decent amount of hospitality in 2019. Of course in 2020 we, it was very anemic. Couple transactions. You know, the question in 2021 will be, you know, hospitality is so interrelated to the vaccine. And, and the reality is the confidence level on that regard. And yes, we've had some green shoots this year and drive to resort markets. Um, there's been resiliencies and, and elements. Um, so big, big picture I would say, you know, hospitality by the end of 2021 will probably look pretty good. Um, but, you know, we're still in the depth of, of covid in itself, but we're hopeful in that regard.  

00:31:56    Agreed. I, I think we gotta get to the backside of the pandemic for, for the kind of the flushing out of whatever assets aren't gonna make it. It's obviously been, you know, a catastrophic year for the sector and there's probably some, some deals still limping along. Forbearance is still really high and forbearance patience is gonna wear off at some point. So I think there's still a little bit of destruction that has to come to that market, and I think it comes next year. But I think to your point, we, by the end of 2021, I think you really are gonna see a parting of the winners and losers and you can probably start feeling good about who is gonna excel and then that, that destruction could lead to, again, some potentially, you know, assets exiting, markets getting repurposed, you know, to, I I'm also a big fan of the conversion of hospitality to multi-family. You know, we're working on our first deal. We'll have our first deal on the, on the marketplace next month in that format. Uh, and, and so I I, I get really bullish about the what will become of hospitality, you know, later this next year. Last thing, and then we'll probably wrap it up for today. What do you think about office? Do you, do you, where does, when, when do we get to clarity and what office is really gonna look like?  

00:33:01    I, my, my, you know, my perspectives office definitely gonna be different. However, it's gonna, we, there will absolutely be a massive need for office space, um, in, in regards to how people interact with each other. I think this dynamic of work from home forever does work for a certain percentage of our, our, our, our workforce. Um, in a lot of companies, you know, ours for example, um, we need, we need to have a, a connectivity between the, there's a, there's a sinking that occurs, um, then in a natural way. And it doesn't mean that we need to be in the office every single day. So this is the part where we just don't know necessarily, this is the one asset class that I just think we, we know we need it, we know it's very important, but we don't know necessarily how much we need.  

00:33:53    And, you know, what is the interior needs to look like? I mean, does because of Covid, do you need an office for every single person, uh, because of Covid? Do you need more space? Um, because of Covid, you need less space because you don't have as many people into the office. And, um, the one part about it is that office will have the ability to, in essence, work itself out because of the nature of the long term leases that are in place, um, in, in, in, per in, in, in certain deals. Now I have some thoughts that, you know, outdoor, uh, you know, with smaller, you know, two, two through two story, um, kind of more your flex space type of office, uh, will be in high demand. Um, how the high-rise market will continue to foster or not remains to be seen. But the only way that some of these things work though, is if you have a lot of office workers in one area, you have a lot of amenities for those, those office workers. When you have a lot of suburban, you know, people have to get in their cars and drive out. So we'll see. But I honestly, that's one that I'm just gonna punt on because you know, I, somebody's gonna look back at this thing and say, you were super wrong knocking, so I'm gonna go, I have no idea. <laugh>,  

00:35:00    I, I, I, I totally agree. I, I think, I think we start to figure it out this summer. I think when people are starting to come back into offices in a real meaningful way now companies are really gonna have to figure it out. You know, I have my personal takes on it too. I think floor plans start to look different. I think that, you know, co-working could actually be an interesting thing in the next couple years because you're gonna have maybe these pockets of people and say, Hey, look, well now I've got five employees here, seven there, I need some space. They want to be together, but like, I don't really need an office, but like, let's, let's go plug them into the local co-working, right? Like that could actually bounce back. I think there's a lot of interesting changes coming to office. I just think that we need to get probably past the pandemic for, for the real substantive conversations to take place.  

00:35:43    And to your point, these are all long-term leases. So it, it will be an evolution. We'll probably we will be talking about this like two years from now and be like, Hey, we finally figured out what the new office is looking like, but it could literally take two years. Um, and in the meanwhile it's like, look, credit is great when we're, we're weighted average lease term is long. Like you saw deals already trading at record highs in Seattle and so forth. Um, that, that part's not changing. Long term lease. Koch Trophy is always gonna be highly valued. It's the other stuff that's gonna have to kind of sort itself out. And I think you're right. Can't sort it out till next year.  

00:36:16    One thing I'm gonna leave us on, because I think my, my hotel clients would, would make me want to say this cuz I believe it too, when this pandemic comes to the end and it might be reminded me about office, people are going to go to the office and go back and go, gosh, it's really nice to have an outlet from my regular life with all the kids around and everything. You know, it's, it feels good. So this's gonna be a euphoric uh, feeling. I think same thing's gonna go on with, with travel and adventure and experiences. This is very near and dear to humans themselves as a, as the the sense of adventure. So I have a feeling that we're not even gonna be able to, to satisfy the amount of demand that there's gonna be, um, particularly in travel and the like. Um, and I, that, that's probably the biggest concern I have for most of my hotel clients is going to be, you know, ha you know, try not to jack the rates too much because I have a feeling it's gonna be quite expensive because of how much demand there's gonna be going into 22.  
00:37:10    Um, from a travel perspective,  

00:37:12    Great. There's pent up demand in that hospitality sector. I think it's coming, we just gotta, we're gonna get there. We're, it, it will seem totally obvious that in 22 2, like people are having like record quarters, you know, um, maybe not all, not all deals in all locations, but certainly segments of the, of the sector I think are gonna bounce back really well. Well Malcolm, I think we just went through like every asset class from, from March to December to 21. We covered a lot. Um, I just wanna say it's been an awesome year. Um, and, and for everyone out there, it's been awesome to, to do these and you know, I would say that we, we look forward to continuing the conversation next year and we'll we'll be talking about different things and markets will start to feel more normal, but there will be some interesting trends to discuss. Um, so, uh, Malcolm to you happy holidays. Have a great one time. I talk to you probably next year.  

00:38:02    Yeah, well, we'll do this again. 21. But it's been a wild ride in, it's been a super, a super enjoyable experience and uh, a lot of fun to do this and uh, we appreciate everyone who's probably, hopefully watched us and virtually heckled us all year. Yeah,  

00:38:15    Well I hope for everyone out there we provided some insights and I don't know, most of what we do is we just get on here and just chat about what's off the top of our head. So, um, maybe everyone hope to have some value in it. Uh, happy holidays to everybody out there. Have a great end of the year. Um, stay safe through the dark <laugh>. Couple months we got ahead of us cuz brighter days are certainly ahead. Um, we'll be back to you next year and, and you know, have, uh, have a happy holidays everyone. Take care.