Episode 16

Workforce Housing with Industry Veteran Jeff Adler

In this episode of the Real Estate Wealth Podcast, host Ed Aloe discusses Workforce housing as a critical asset class in the current real estate landscape, addressing the growing affordability issues across the United States. Ed and industry veteran Jeff Adler explore challenges and opportunities within this segment, highlighting the persistent housing shortage and the difficulties in bringing new supply to market. Jeff emphasizes that despite short-term oversupply in certain markets, the long-term outlook for multifamily housing remains positive due to strong demand and economic fundamentals. 

Listen as Ed and Jeff discuss how public policy, local regulations, and economic trends shape the multifamily investment landscape, particularly in dynamic regions like the Southeast and Mountain West. 

Takeaways

  • The current housing shortage in the U.S. has persisted for decades, exacerbated by regulatory challenges.
  • Investors are facing a unique market where multifamily properties are under pressure but still present opportunities.
  • Workforce housing is becoming increasingly essential as affordability issues grow across urban areas.
  • The demand for attainable housing continues to rise, especially among younger demographics.
  • Zoning and permitting issues are major roadblocks to increasing the supply of affordable housing.
  • Technology is transforming property management, enhancing operational efficiency in the multifamily sector.

Timestamps

(00:01) Introduction to Real Estate Wealth Podcast

(00:41) Guest Introduction: Jeff Adler

(01:31) Discussion on Workforce Housing

(02:17) Market Landscape of Workforce Housing

(08:39) The Future of Housing Supply

(40:05) Operational Efficiency in Property Management

(48:00) Investor Interest and Capital Flows

Connect

Ed Aloe

CALCAP

Transcript
Host:

Welcome to the Real Estate wealth podcast, where we explore real estate as the most proven way to financial freedom.

Host:

Join us for insights with leading experts and discover how vibrant health and an abundance mindset are the keys to true wealth.

Host:

Today I have the privilege of speaking with Jeff Adler.

Host:

Jeff is an esteemed industry veteran, currently vice president at Yardi matrix.

Host:

With over 30 years in the real estate industry, Jeff has been instrumental in providing market intelligence across various asset classes, including multifamily and the build to rent sectors.

Host:

His extensive experience and leadership roles have positioned him as a thought leader in the field.

Host:

Jeff holds degrees from Yale as well as the Wharton School, and is a board member of the National Multifamily Housing Council, as well as chair of the Urban Land Institute Multifamily Silver Council.

Host:

Jeff is also a lecturer at Harvard University.

Host:

Jeff, welcome to the Real Estate wealth podcast.

Jeff Adler:

Thank you very much.

Jeff Adler:

Glad to be here.

Host:

Did I miss anything?

Host:

Okay, very good.

Host:

Well, listen, we're going to have a discussion today about workforce housing, which is near and dear to my heart and I think yours as well.

Jeff Adler:

Absolutely.

Host:

And I appreciate everything you guys do at Yardy Matrix.

Host:

By the way.

Host:

I think I told you when I saw you at that conference recently, I'm guilty of using your stuff a lot for my newsletters, investor reports, and it's really helpful and great data.

Host:

So I do appreciate everything you do over there.

Host:

But let's talk about workforce housing today.

Host:

Or I guess, attainable housing.

Host:

Is that the new kind of buzzword?

Jeff Adler:

Whatever.

Host:

Are we getting away from workforce?

Jeff Adler:

I don't know.

Jeff Adler:

There's too many acronyms.

Host:

That's true.

Host:

But it's a crucial asset class, as you know, especially as affordability issues are cropping up across the country more and more depending on where you live.

Host:

So let's talk about kind of the landscape of where you see workforce housing today and kind of compared to.

Host:

You've been doing this for a long time and where do you think we are today?

Jeff Adler:

Well, look, it really is grounded fundamentally in a shortage of housing writ large in the United States.

Jeff Adler:

Right.

Jeff Adler:

Coming out of the GFC.

Jeff Adler:

onestly, since the end of the:

Jeff Adler:

Right.

Jeff Adler:

In addition, there is the amount of new supply that can enter the market, and the price point at which that new supply can enter has been just ramped up because of inherent difficulties in the zoning and approval process for New projects pushing up the cost of what can be delivered to these sort of very ultra high price point.

Jeff Adler:

Okay.

Jeff Adler:

And it takes massive amounts of new supply, as we're seeing in a few markets right now, sort of compress that, but it's really episodic and will pass.

Jeff Adler:

But the fundamental problem is the US and again, it's happened at different cities at different points, has not been producing enough housing at the right price point.

Jeff Adler:

And that's what we've seen sort of the general uptick in rents relative to incomes.

Jeff Adler:

And that is creating problems of affordability, which is why, you know, kind of workforce attainable housing is really that kind of like B and C asset type with a tremendous amount of need and an inability because of government regulation, I have to be honest with you, to respond to that need gradually over time.

Jeff Adler:

So now we've built up this deficit and then it's been turbocharged because of COVID and its after effects.

Jeff Adler:

That really is the problem now as an investor.

Jeff Adler:

This is an amazingly insulated asset subtype which is occasionally exposed, occasionally to very large supply floods, which we're seeing in a few markets.

Jeff Adler:

But that really is the exception and not the norm.

Jeff Adler:

And to be honest with you, once this supply surge passes and it's not being really replaced, the sort of normal sort of reality of the inability to expand housing supply will hit you square in the face.

Jeff Adler:

And by the way, there's some great work we support.

Jeff Adler:

Up for Growth just produced a housing report on its housing underproduction.

Jeff Adler:

There's tremendous.

Jeff Adler:

I think there was just a council, a bipartisan council on a housing task force.

Jeff Adler:

I just released a general report and all of them conclude writ large that it is a function of local impediments to the addition of supply and the increase in the cost of that supply, which is driving us now.

Jeff Adler:

It's built up over 40 years.

Jeff Adler:

It's really hard to unpack.

Jeff Adler:

We estimate you need something like 400 to 450,000 units of multifamily produced a year for 10 years solid to resolve the housing shortage, and that is just not going to happen.

Host:

Yeah.

Host:

Is that the number, Jeff?

Host:

Because I hear anywhere from sort of like 2 million to 7 million units.

Jeff Adler:

When you think about it.

Jeff Adler:

Again.

Jeff Adler:

Yeah, it's about that.

Jeff Adler:

Okay, it could be 2 to 4 million units.

Jeff Adler:

Again, there's various different estimates, but we also said, well, how many units would you have to produce to not only keep up with household formation and eat into this deficit over one period of time and about 450,000 units a year over 10 years would be necessary.

Jeff Adler:

Now we're going to have.

Jeff Adler:

We have a supply surge going on right now in about 20 cities.

Jeff Adler:

But when you.

Jeff Adler:

Again, when you get past that, you're down to 300,000 units, which is not doing it.

Jeff Adler:

And it's just.

Jeff Adler:

So you have a structural problem.

Jeff Adler:

Right.

Jeff Adler:

And that's really where things are at.

Jeff Adler:

If you like, what is.

Jeff Adler:

What is driving us.

Jeff Adler:

That's it.

Jeff Adler:

Okay.

Jeff Adler:

You can strip.

Jeff Adler:

And now I can.

Jeff Adler:

We can layer in.

Jeff Adler:

You and I bur in this all the time.

Jeff Adler:

We can layer in other things that sort of either ameliorate it or make it worse.

Jeff Adler:

There's different nuances that we can go over.

Jeff Adler:

Migration, reindustrialization.

Jeff Adler:

There's other things happening in the economy, all right.

Jeff Adler:

In terms of both immigration and all that.

Jeff Adler:

But we have an underlying problem which is structural in nature, which is not easy to resolve because it's local in nature.

Jeff Adler:

Okay.

Jeff Adler:

And that issue is what drives it at its core.

Jeff Adler:

And then there's other things that got layered on top.

Host:

Right.

Host:

So in essence, what you're saying is between the onerous permitting and of course, depending if you're in California or wherever, it could be more or less onerous, but it's bad everywhere.

Host:

Right?

Jeff Adler:

Right.

Host:

Between onerous permitting timeframes, cost of land, et cetera, the only new supply that's being built is really class A.

Host:

Class A plus.

Host:

Right, Right.

Host:

In the free market, rents needed.

Host:

Yes.

Jeff Adler:

You kind of have a.

Jeff Adler:

So let's say California, you have a.

Jeff Adler:

Basically a barbell.

Jeff Adler:

Right.

Jeff Adler:

If you're in the free market, you can only build very, very high end because of permitting, zoning, delays, uncertainty, plus just the cost of doing stuff.

Jeff Adler:

Right.

Jeff Adler:

And the.

Jeff Adler:

And the extra requirements added on or it's heavily subsidized, you know, kind of light tech income restricted.

Jeff Adler:

Right.

Jeff Adler:

That's it.

Jeff Adler:

Nothing in the middle.

Host:

Right?

Jeff Adler:

Nothing in the middle, yeah.

Host:

So in the middle would be attainable or workforce housing, which is why it's a great investment.

Host:

But to your point, you know, even we're feeling it now, Jeff.

Host:

In some markets we're in just because of the oversupply of new where then it becomes very concession heavy and you'll lose residents that sort of move upstream.

Jeff Adler:

Right?

Jeff Adler:

Yeah.

Jeff Adler:

And that will happen.

Host:

Cs go to the Bs, the Bs go to the A's and gets diluted.

Jeff Adler:

Let's say if we were talking about Austin or Charlotte or Raleigh.

Jeff Adler:

Yes.

Jeff Adler:

You will experience that until this supply wave subsides.

Jeff Adler:

And if you want to go back to like, well, why did the supply wave happen in the first place?

Jeff Adler:

Well, rents grew, you know, in Covid, rents grew 40% in all of these markets.

Jeff Adler:

Okay.

Jeff Adler:

to them in the first year, in:

Jeff Adler:

They took San Francisco or LA or New York or Chicago wages.

Jeff Adler:

They were able to move into these other cities.

Jeff Adler:

And even if rents went up, they were better off.

Jeff Adler:

consumer pain happened was in:

Jeff Adler:

That's when the consumer pain happened and renewals came up to market rates.

Jeff Adler:

And by the way, it's taken this long to get them to get that gap to close.

Jeff Adler:

And even in those markets where rents are going down for new lease trade outs, renewals are still going up.

Jeff Adler:

Not by much, but they're still going up between 1 and 4%.

Host:

Yeah, yeah.

Host:

The demand, I think resiliency has been the story here.

Host:

That's amazing, right?

Jeff Adler:

Again, if you look at again, almost.

Host:

Keeping pace with the crazy new supply we've had.

Jeff Adler:

Well, in fact, in fact, when I look at absorption numbers again in these 20 markets that are the high supply markets in the southeast, Texas and the Mountain west, the units are getting absorbed.

Jeff Adler:

They are getting absorbed like a 1.1 ratio, which is really quite good.

Jeff Adler:

Why are they getting absorbed?

Jeff Adler:

Because move outs are way down.

Jeff Adler:

Why are movements way down?

Jeff Adler:

The increase in interest rates and the fact that most people in the single family business is single family world refi at 3% or 2.75%.

Jeff Adler:

They're not moving, say home, single family homes as a percent of stock.

Jeff Adler:

That, that ratio is way down compared to what it was, you know, in pre Covid, there was a surge of sales obviously in 21 and 22.

Jeff Adler:

And then as interest rates went up.

Jeff Adler:

So you don't have the movement of people out and therefore there's less supply in stabilized properties.

Jeff Adler:

So that's how that new new supply is getting absorbed.

Jeff Adler:

Not necessarily at prices that people would prefer they get.

Jeff Adler:

They get, you know, they're, they are driving down rents.

Jeff Adler:

There are, there is concessions among those, those units, but they are getting filled.

Jeff Adler:

They are getting filled.

Jeff Adler:

Right.

Jeff Adler:

And to be honest with you, you know who's actually hurting in Austin?

Jeff Adler:

Believe it or not, it's the light tech deals.

Jeff Adler:

The light tech deals.

Host:

That's really interesting, the light tech deals.

Jeff Adler:

Because you can get a class B minus asset that's actually priced less than the max net rents on a, on a LIHTC deal with a lot less paperwork.

Jeff Adler:

And by the way, I mean I service the affordable housing world too.

Jeff Adler:

And they're feeling that again, it's a temporary pain.

Jeff Adler:

They didn't feel that pain in:

Jeff Adler:

They're feeling the pain now.

Jeff Adler:

And again it will subside.

Jeff Adler:

These things are somewhat transitory.

Host:

Right.

Host:

it's a cyclical phenomena in:

Host:

But structurally, you and I know we're under supply by 4 million whatever units.

Jeff Adler:

Yes.

Jeff Adler:

Again, there's different estimates of that.

Host:

It's not getting better.

Jeff Adler:

Right.

Host:

And it's not getting better.

Jeff Adler:

It's fundamentally not on a path to resolution, let's put it that way.

Host:

Okay, nicely put.

Host:

Nicely put.

Host:

So, okay, so that's kind of where we are today with workforce housing.

Host:

Right.

Host:

Let's talk a little bit about, you know, as we saw, the peak was probably, you know, better than I do.

Host:

Maybe.

Host:

Was it Q4, 21, Q1 22 somewhere?

Jeff Adler:

,:

Host:

Early 20, probably the peak.

Host:

Right.

Host:

And so values are arguably down, depending on the market, 20 to 30%.

Host:

I would say a multifamily, you know.

Jeff Adler:

I've seen, I would say nationally they were down about 20%, but they've kind of picked back up.

Jeff Adler:

So that values again, on a national basis are probably 13 to 15% below peak.

Jeff Adler:

Okay.

Jeff Adler:

And we are seeing transaction activity recover.

Jeff Adler:

Yeah.

Jeff Adler:

Mostly driven by folks who need a liquidity need and they need to execute some kind of.

Jeff Adler:

They have a liquidity need, the funds end of life or they need a limited partner needs to go.

Jeff Adler:

So every deal that's getting done has a story as to what or developer.

Host:

Who maybe isn't leased up enough to get takeout financing.

Jeff Adler:

Yeah.

Jeff Adler:

And again, there's very select stress.

Jeff Adler:

It is very select and very kind of targeted.

Jeff Adler:

But yeah, you've got somebody who's got a refi.

Jeff Adler:

They bought at the peak.

Jeff Adler:

There was variable rate debt.

Jeff Adler:

And so there's slivers of stress.

Jeff Adler:

And I've seen it sort of most evident in Atlanta, quite frankly, and in like Houston, people who Uber syndicators bought at the peak, they're having some trouble.

Jeff Adler:

They're hitting a refi.

Jeff Adler:

They were variable rate debt.

Jeff Adler:

But again, it's a sliver.

Jeff Adler:

It's real.

Jeff Adler:

But one shouldn't take it out of context.

Jeff Adler:

Anyway, so when we talk about values, I would say that they may be under more pressure in certain markets that are very high levels of supply in the short term.

Jeff Adler:

So if you happen again to be in Charlotte, Raleigh, Austin.

Jeff Adler:

Right.

Jeff Adler:

Someplace that is going through a high supply, where you have variable rate debt, you have a loan maturity or you have a construction loan that's maturing.

Jeff Adler:

Yeah, there is some problems, but most folks quite frankly just said if I don't have to sell, I'll just wait.

Jeff Adler:

But I would say again, maybe we'll get to sort of valuations and interest rates in a second.

Jeff Adler:

Right.

Jeff Adler:

We have to consider like what a normal interest rate looks like.

Jeff Adler:

Right.

Jeff Adler:

And then therefore back into what is a normal effective cap rate at some level of stability and it's not what it was now.

Jeff Adler:

So there is some, there is some.

Jeff Adler:

I mean, I think the entry points now are amazing.

Jeff Adler:

And remember, Outside of these 20 markets, rents are growing 3 to 5% in the Midwest, in the Northeast, in other markets in the west that aren't sort of heavily supply rents are.

Jeff Adler:

Everything's going up 3 to 5%.

Jeff Adler:

Okay.

Jeff Adler:

So it really is depending upon where you look in terms of select situations.

Host:

maturities and by the end of:

Jeff Adler:

That's right.

Host:

Seems like a pretty big number.

Jeff Adler:

That's right.

Host:

and I started the company in:

Host:

So I built this company on a distressed platform.

Host:

Right, right.

Host:

And so we were looking in when Covid hit and then the peak values and you know, a lot of syndicators like you mentioned that over leverage, short term variable rate debt are definitely in trouble.

Host:

And with the new supply, operationally in some of these markets, they're not hitting their performance or anywhere.

Jeff Adler:

That's right.

Jeff Adler:

That's right.

Jeff Adler:

I mean there, there are, I mean again, we've laid out in, within our service, like here, here's how you find the situations that are most likely to get into trouble.

Jeff Adler:

And then I also did a little bit of a retrospective where we took the deals that have gone bad and said what were the conditions under which those deals went bad?

Jeff Adler:

And it was very, very similar.

Jeff Adler:

Right.

Jeff Adler:

They were bought late in the cycle.

Jeff Adler:

They're variable rate debt.

Jeff Adler:

They're in places that, where the fundamentals are declining primarily due to new supply and, or they have a construction loan that's coming due and they're upside down.

Jeff Adler:

And there's about, oh, 5 to 7,000 of those properties that are potential candidates out of a stock of, let's call it 122,000 total properties.

Host:

So yeah, so there is a subset.

Jeff Adler:

There's a subset, right, yeah.

Host:

I guess starting the company:

Host:

We're not seeing that at all.

Host:

Even this, the subset of distress that you're talking about.

Host:

Because now the lenders, for whatever reason, we could talk about it, they're really, they really seem to be sort of kicking the can down the road.

Host:

Right?

Jeff Adler:

Well, in the.

Host:

I mean, I'm willing to foreclose like they were.

Jeff Adler:

I've had a lot of conversations with folks in the lender community.

Jeff Adler:

Okay.

Jeff Adler:

And there are, it kind of depends upon the lender type.

Jeff Adler:

There are some lenders, particularly some debt funds that while they did debt, they actually have an equity pool standing behind them and they're just waiting to take the property.

Jeff Adler:

They're like, hey, this is cool, we'll just take it.

Jeff Adler:

Okay.

Jeff Adler:

So there's a couple of syndicators, when I looked at the debt funds they were with, then I talked to people, the debt funds are like, this is cool.

Jeff Adler:

Like, okay.

Jeff Adler:

We just viewed as a different entry point.

Jeff Adler:

Great.

Jeff Adler:

Okay.

Jeff Adler:

So that's not your traditional lender.

Jeff Adler:

Okay.

Jeff Adler:

Because they're really.

Host:

So a low known sort of lender kind of.

Jeff Adler:

Right.

Jeff Adler:

So that's one group, the ones who are the folks who really do need liquidity, the commercial banks.

Jeff Adler:

And remember there's usually about two years of extension on the construction loans.

Host:

Right.

Jeff Adler:

And then yeah, they really kind of want off the loan.

Jeff Adler:

They really want off the loan.

Jeff Adler:

So they are kind of pushing for a resolution and there are, there are takeouts happening there.

Jeff Adler:

Either of the bank at par.

Jeff Adler:

The bank's like, hey, look, you can take the equity guy out.

Jeff Adler:

We're not taking a cut, we're just not going to do it.

Host:

Okay, we've heard that too.

Jeff Adler:

Yeah, we don't need to.

Jeff Adler:

We're not going to.

Jeff Adler:

We think that there's value eventually.

Jeff Adler:

So I'm happy to recycle our capital, but I'm not going to take an impairment go pound sand.

Host:

Okay?

Jeff Adler:

But they would like to do it because they see the lending opportunity right now too and they really want to recycle their capital.

Jeff Adler:

So they'd like to do that.

Jeff Adler:

But the other folks who maybe sort of like are having a.

Jeff Adler:

There's a bit of a sizing problem.

Jeff Adler:

There's plenty of preferred equity waiting out there to fill those gaps.

Jeff Adler:

So again, the lender is willing to say, hey, solve your problem, you know, I don't want it.

Jeff Adler:

I'm not going to take a hit, quite frankly, because they're saving their dry powder for office.

Jeff Adler:

You got to understand it.

Jeff Adler:

Okay?

Jeff Adler:

There is a real structural problem in Class B office.

Jeff Adler:

And the banks are reserving and putting up their reserves against that exposure.

Jeff Adler:

They know that's the way they're going to have to take the hits.

Jeff Adler:

They don't think multifamily is a place that they're going to have to fundamentally take a write down.

Jeff Adler:

Okay.

Jeff Adler:

So they're happy to sell the loan at par.

Jeff Adler:

They're happy to sort of close out the equity.

Jeff Adler:

They don't care about that.

Jeff Adler:

There are some that have deep relationships and are happy to work with the, with the borrower, with the sponsor to recapitalize the deal.

Jeff Adler:

So there is, you know, private equity, excuse me, preferred equity out there to solve that sizing problem.

Jeff Adler:

But they don't see a need for bloodbath in multifamily.

Jeff Adler:

In multifamily.

Jeff Adler:

I want to be clear about that.

Jeff Adler:

Not and different story.

Host:

Yes, answer your point, Jeff.

Host:

I mean if nationally now we're only sort of 15% below peak, the commercial lenders are above water in almost every case in that regard.

Host:

Right, right.

Host:

As opposed to some of the debt funds or the arbors of the world, maybe that got aggressive in an 80, 85.

Jeff Adler:

That's right, right.

Host:

Maybe there's some impairment there.

Host:

But we're not even seeing those guys.

Host:

Right.

Host:

They're all doing modifications, workouts, kicking the can in my opinion.

Jeff Adler:

Right, right.

Host:

But it's interesting on the commercial bank side because I have heard that.

Host:

Right.

Host:

They know like, okay, multifamily, it's a bit of a temporary issue, but we have this looming giant.

Host:

My office portfolio is going to be remarked at $0.40 or whatever the number is.

Jeff Adler:

Right.

Jeff Adler:

No, it's particularly if you got class B office.

Host:

Yep.

Jeff Adler:

Yeah, yeah.

Jeff Adler:

They're going to be impaired and they know it and they've been reserving against it.

Jeff Adler:

And so for them it's just a question of have I built up my reserves enough over time to take the hit.

Jeff Adler:

Right.

Jeff Adler:

It's not a systemic bank risk.

Jeff Adler:

Okay.

Jeff Adler:

A systemic bank risk is when there's so much blood in the water that like, you know, the bank's reserves are at, are at, you know, at risk.

Jeff Adler:

That's not the case.

Host:

But do you think the banks are accurately marking those assets right now?

Host:

Oh yeah, because I've been seeing and I'm sure you have some unbelievable valuations on some deals that have traded in like urban metropolitan.

Host:

The St.

Host:

Louis is of the world, the Minneapolis is.

Host:

You know, some of these class B office buildings are trading for 10 cents, 20 cents.

Host:

Right.

Jeff Adler:

Just they will have already, they've already reserved against the Loss.

Jeff Adler:

You got to understand, for them, it's all about if they already built up the reserve, then it's like time to get it off your books.

Jeff Adler:

They will delay it until they've built up the reserves to a sufficient level where they don't have to take an earnings hit or a capitalization hit.

Jeff Adler:

And so they say, okay, you know, here's a set of loans that are going to be bad.

Jeff Adler:

Hey, we need to, we need to build up our reserves against it over time.

Jeff Adler:

They would do that because, you know, there was a spread in the rates and so they've been building up their reserves against that.

Jeff Adler:

And then they decide, okay, it's time to sort of draw down that reserve and take that hit, get it off the balance sheet.

Jeff Adler:

So they're being quite thoughtful as to how they're doing this so as not to create a systemic banking risk, you know, systemic capital risk to the finance.

Host:

Like we saw in 08, which I don't think, I don't think we're anywhere near.

Jeff Adler:

They're not, remember, because they're not being required to mark to market.

Jeff Adler:

Right.

Jeff Adler:

Which is what got things in trouble.

Jeff Adler:

They're not even having to book their treasury portfolio to market.

Host:

They book, which is a whole nother.

Host:

Correct.

Jeff Adler:

Right.

Jeff Adler:

So, I mean, so you know what took the banks down in 23 when we had those failures was they were having to book their treasury portfolio to market and then the Fed just basically wiped it away and said, we'll redeem it at par.

Host:

Right.

Host:

Then you violate all your covenants and you're done.

Jeff Adler:

Right.

Jeff Adler:

So if you can redeem your treasury portfolio at par, you don't have a liquidity crisis, which is what drove Silicon Valley Bank.

Host:

Yep, exactly.

Jeff Adler:

New York Community bank there, they got screwed because they loaned money against rent stabilized properties.

Jeff Adler:

That rent control has destroyed the value.

Jeff Adler:

That was a secular issue.

Jeff Adler:

There was no coming back from that one.

Host:

Right.

Host:

And those are mostly small buildings in New York City.

Jeff Adler:

Right, Small buildings in New York City, where the whole, I'm from New York, if you couldn't tell.

Jeff Adler:

And that whole business system was based upon rent stabilization.

Jeff Adler:

10% a year, turns marking, doing a value add, marking it to mark, you know, basically putting it up to market.

Jeff Adler:

It was a beautiful business system, kind of grunded zone.

Jeff Adler:

It had its issues, Right.

Jeff Adler:

Because of, you know, of regulation and the problem with the housing market.

Jeff Adler:

The:

Jeff Adler:

It just takes six, seven years for that problem to emerge.

Jeff Adler:

And those market, those buildings are down 40% in value and they Are not coming back.

Host:

Yeah.

Host:

No time soon, that's for sure.

Jeff Adler:

And again, until the laws change.

Host:

Right.

Host:

Hey, Jeff, let's shift gears here and talk a little bit about Build a Rent.

Jeff Adler:

One of my favorite.

Jeff Adler:

One of my favorite.

Jeff Adler:

I love that.

Host:

Okay, good.

Host:

And I know you guys have been tracking it recently.

Host:

I saw you're kind of starting to track it separately now and analyze.

Jeff Adler:

tracking it separately since:

Host:

Oh, have you?

Host:

Okay.

Host:

Because I thought I saw a report recently where.

Jeff Adler:

Well, we do.

Jeff Adler:

We do.

Jeff Adler:

of multifamily housing since:

Host:

So.

Host:

Yeah.

Host:

And we've looked at some of these BTR deals recently.

Host:

I think they're very interesting for a lot of reasons.

Host:

I kind of wanted to chat with you about it and see what your take is, how you think they would affect traditional multifamily assets.

Host:

You know, like we talked about, affordability is a huge issue to buy a home.

Host:

No one's selling a home because 60%, I think, of homeowners have a mortgage rate at 4% or less.

Jeff Adler:

Me too.

Host:

Me too.

Jeff Adler:

I refinanced the first month of COVID There you go.

Jeff Adler:

Right for it.

Jeff Adler:

Yep.

Host:

Yeah.

Host:

So there.

Host:

So you know, there's.

Host:

There's going to be more and more of a renter demand, I think, going forward.

Host:

I think that's the argument.

Host:

And I think I've also heard, you know, does owning a single family home become almost like a luxury asset?

Host:

Unfortunately for a lot of people.

Host:

Like it is in many countries around the world.

Jeff Adler:

Yeah.

Jeff Adler:

I mean, we'll talk about that maybe separately, but let's just talk about SFR btr.

Jeff Adler:

That is single family rentals in built to rent communities.

Jeff Adler:

Okay.

Jeff Adler:

And I want to.

Jeff Adler:

Just before we even go into that.

Jeff Adler:

Absolutely.

Jeff Adler:

Segment, you know, differentiated that between single family rentals, basically called scattered site.

Jeff Adler:

Okay.

Jeff Adler:

So scattered site rentals are your existing single family homes that are purchased as purchased and turned into rentals.

Jeff Adler:

They tend to be clustered.

Jeff Adler:

And again, there's.

Jeff Adler:

I was in that business too, on a separate platform.

Jeff Adler:

It's a great business.

Jeff Adler:

There's organizations that are now learning how to run that thing at scale, but it generally appeals to people who already are.

Jeff Adler:

Have families and are placing and renting a home because they want to be in a certain school district or that's the best school district they can afford to be in.

Jeff Adler:

Okay.

Jeff Adler:

For their kids.

Jeff Adler:

The SFR BTR world.

Jeff Adler:

Okay.

Jeff Adler:

Is because of its nature.

Jeff Adler:

And there's three or four different subtypes within that because you can have attached, you can have detached, you can have cottages.

Jeff Adler:

But the bottom.

Jeff Adler:

So there's, there's different subtypes that are still emerging.

Jeff Adler:

We're tracking about:

Jeff Adler:

And that' stuff that, that asset type is growing quite rapidly.

Jeff Adler:

It was very, very little, it was maybe 100,000 units right around the pre Covid timeframe.

Jeff Adler:

There were a few innovators in Phoenix, in Texas, in the Midwest.

Jeff Adler:

There are like three companies, three, four companies that really had pioneered this asset type.

Jeff Adler:

And it is kind of blown out.

Jeff Adler:

And so where is it being built?

Jeff Adler:

It's being built at the edge of metropolitan areas because the land has to be cheaper than in, you know, near term.

Jeff Adler:

So it benefits from the spreading of the population.

Jeff Adler:

And in metropolitan areas that have more hybrid work arrangements, that works out well.

Host:

Yes.

Jeff Adler:

So it's at the fringes.

Jeff Adler:

It's, it's, it's in emerging school districts so that you are not getting people who have a school age children, you're getting people who have pets.

Jeff Adler:

They are couples, they retirees, they want some more space, but they don't need a school district, at least not yet.

Host:

Okay, so these are free, these are, these are couples for kids or after.

Jeff Adler:

Yeah, exactly, exactly, exactly.

Jeff Adler:

And that was a, like I had to like pound it, you know, to my clients is like, hey, this is not, you know, this is not scattered site sfr, it's not school district.

Jeff Adler:

That's not what the people are doing.

Jeff Adler:

They're, they want more space.

Jeff Adler:

It competes directly with two bedroom suburban product.

Jeff Adler:

And you can look at the relationship and it moves very, very much in sync with two bedroom product now more of the three bedroom product is now being built, less of the one, more the two.

Jeff Adler:

And then we track that, how much, what the unit mix is and we're seeing more of a drift to three bedroom and higher of the new projects being built now.

Jeff Adler:

And it's really for folks who want more space.

Jeff Adler:

They want more space than a two bedroom and they're willing to drive further out or be further away from shopping or commercial districts or downtown in order to accomplish that.

Jeff Adler:

And their lifestyles enable that.

Jeff Adler:

And that is much more true, you know, kind of post Covid.

Jeff Adler:

So it's a, it's an adjacent multifamily asset class.

Jeff Adler:

It's adjacent of course to single family homes and it fits that.

Jeff Adler:

Again, there's a clear consumer need for it.

Jeff Adler:

It's a new asset type.

Jeff Adler:

It's growing rapidly, but it's very, very small.

Jeff Adler:

I mean again in the larger scheme of things.

Jeff Adler:

So it is a niche.

Jeff Adler:

It's a niche product.

Jeff Adler:

I happen to love it because you can see there's a clear need for it.

Jeff Adler:

It's very clear.

Jeff Adler:

But there is a range of different kind of product.

Jeff Adler:

Many of them are like communities.

Jeff Adler:

They've got amenities, centralized amenities, they have services.

Jeff Adler:

It's great.

Jeff Adler:

Some are sort of town homes that are not detached.

Jeff Adler:

So there's attached and detached product there.

Jeff Adler:

I'd say in some certain places in the southeast they're truly single family homes where there's no amenities.

Jeff Adler:

It's just.

Jeff Adler:

It's a neighborhood for rent.

Jeff Adler:

That's it.

Jeff Adler:

Okay.

Jeff Adler:

Right.

Jeff Adler:

So there.

Jeff Adler:

And the different.

Jeff Adler:

The builders are coming at it from different perspectives and different heritages.

Jeff Adler:

So it's still a product type that's in flux in experimentation.

Jeff Adler:

And I think Fanny just put out a research note on the SFR BTR segment using some of our data.

Jeff Adler:

And again, it's a niche.

Jeff Adler:

I love it.

Jeff Adler:

It basically fills a need that needed, I think is quite durable.

Jeff Adler:

Over time the school districts will build up in those areas.

Jeff Adler:

So it will become more appropriate for families with school age children.

Jeff Adler:

But this first wave of residences and residents aren't that, but it will be give 10 years.

Jeff Adler:

Then these areas will have built up schools, districts and then they'll appeal to a different customer segment.

Host:

Okay.

Host:

So you think it has legs to run for a long time and it's just going to carry sort of the younger couple to now a couple with little kids who are in the school district and they're going to stay.

Jeff Adler:

I mean if they don't stay, then they'll attract new residents who do.

Host:

Yes.

Jeff Adler:

Okay.

Jeff Adler:

And it does seem to have the same turnover relationships like single family rentals on a scattered site where the turnover rate is about 30%.

Jeff Adler:

The cost per turn is higher on a sort of a turn adjusted on the P and L, it's about the same kind of turn costs of multifamily because you have fewer turns.

Jeff Adler:

But the term, the cost per turn is higher.

Jeff Adler:

So it kind of again, the economics kind of work out, you know, so.

Host:

The economics flush out.

Host:

But I mean if you're at 30, that's half of sort of a traditional multifamily turnover.

Jeff Adler:

Yeah.

Jeff Adler:

Though we have seen traditional multifamily in this segment.

Jeff Adler:

Okay.

Jeff Adler:

This last, you know, couple of years, this year or two where the retention or turnover has come down significantly because they can't afford the move out.

Jeff Adler:

Right.

Jeff Adler:

To buy a home.

Jeff Adler:

But this is a good halfway house, right?

Jeff Adler:

Again, if you, if your lifestyle enables you to be further afield, work from home, or at least work from home more often, let's put it that way, yes.

Jeff Adler:

Then you can make it work for.

Host:

A hybrid work from home model.

Host:

I think it's perfect for that.

Jeff Adler:

And again, that may drift you if you.

Jeff Adler:

I've been tracking hybrid work and work from home right out of the gate from COVID and I.

Jeff Adler:

I haven't been surprised, but a lot of people have been surprised.

Jeff Adler:

Like I could tell right away due to demographics and the aging of the population that work from home and hybrid was going to have huge legs.

Jeff Adler:

And it really has broken out the way I kind of thought it would break out, which is again, let's just look at office using employees.

Jeff Adler:

Okay.

Jeff Adler:

A third and really totally breaks out by industry and by function.

Jeff Adler:

Okay.

Host:

Okay.

Jeff Adler:

So there isn't a one size fits all thing here.

Jeff Adler:

It's really industry and function.

Jeff Adler:

And therefore the industry mix and the functional mix then have a different differential impacts on different metro areas.

Jeff Adler:

Okay.

Jeff Adler:

So that's why the different metro areas are impacted by different ways.

Jeff Adler:

You have about a third of the workforce that is back in the office four to five days a week.

Jeff Adler:

They are primarily early stage tech finance and sort of like illegal, but deal legal, you know, deal teams, not your general contracts.

Jeff Adler:

That's about a third of the workforce, 35% of the workforce.

Jeff Adler:

And by the way, there's a great data source here called the Flex Index, which is free.

Jeff Adler:

The company's up for sale that have been producing this Data on about 6 to 7,000 U.S.

Jeff Adler:

companies.

Jeff Adler:

Best data set I've seen in this area at all, bar none.

Jeff Adler:

Best thing ever.

Jeff Adler:

Okay.

Host:

What's it called?

Jeff Adler:

Called the Flex Index.

Jeff Adler:

These guys are great.

Jeff Adler:

I've spoken to the guy who runs the company.

Jeff Adler:

Super, super guy, really nice guy.

Jeff Adler:

Great data.

Jeff Adler:

Okay.

Jeff Adler:

Just amazing.

Jeff Adler:

So a third is in.

Jeff Adler:

Is in the office all the time.

Jeff Adler:

20% ish.

Jeff Adler:

Call that 20.

Jeff Adler:

20% ish.

Jeff Adler:

Are now fully remote.

Jeff Adler:

These are specialized workers now.

Jeff Adler:

That's up from 5%.

Jeff Adler:

Okay.

Jeff Adler:

From 5 to 20.

Jeff Adler:

And these guys are fully remote.

Jeff Adler:

They're specialized skills.

Jeff Adler:

They're just, they're just completely remote.

Jeff Adler:

And they are everywhere.

Jeff Adler:

Okay.

Jeff Adler:

They're in small towns, they're in mountain towns, they're in beach towns.

Jeff Adler:

They were in Lisbon and they've come back, but they're everywhere.

Jeff Adler:

They're just everywhere.

Jeff Adler:

And that's what's feeding a lot of the small town growth, the mountain town growth, the beach kind of growth.

Jeff Adler:

But not expensive.

Jeff Adler:

Not retirees, but this sort of less expensive world.

Jeff Adler:

And then you have the rest of the population is hybrid at about two and a half days a week.

Host:

Okay.

Jeff Adler:

Okay.

Jeff Adler:

Particularly.

Jeff Adler:

And again, when I'm talking about office using employees, these are people who are moving information.

Jeff Adler:

Okay.

Jeff Adler:

That's what they're doing.

Jeff Adler:

They're moving information.

Jeff Adler:

And most of the people who are hybrid are executing stable processes.

Jeff Adler:

Right.

Jeff Adler:

If a, if a job function is chaotic, they're in the office.

Jeff Adler:

Can't.

Jeff Adler:

There's too much going on.

Jeff Adler:

Can't figure it out.

Jeff Adler:

That's why the real estate deal teams never left the office.

Jeff Adler:

They were gone for a month.

Jeff Adler:

They'd been in the office ever since.

Jeff Adler:

But most people who were sitting in an office, it really was an information factory.

Jeff Adler:

They were executing a stable process.

Jeff Adler:

Those people are most inclined to be.

Jeff Adler:

They fit with hybrid and they spread all over the place.

Jeff Adler:

And that's where we've had movement of companies into the southeast, right.

Jeff Adler:

From California, from New York, from Chicago, right into the southeastern cities.

Jeff Adler:

And then those companies, when they settled, yes, they got an office probably smaller than the one they left.

Jeff Adler:

Okay.

Jeff Adler:

And that their employees are hybrid.

Jeff Adler:

And so those folks are spreading over the entire metro area.

Jeff Adler:

So for example, we spread.

Jeff Adler:

We've expanded our coverage areas in major metros because of the spreading of this population.

Jeff Adler:

All the southern metros, we've picked up all the surrounding counties because people are scattered in search of lower cost housing because they could.

Host:

All right, the phenomena of zoom calls and work from home and Covid, again, it's very durable.

Jeff Adler:

It's very durable.

Jeff Adler:

In the United States.

Jeff Adler:

It's hybrid ish to call two and a half days a week.

Jeff Adler:

And please don't get distracted by some of the tech companies saying, hey, five days a week you gotta come back to the office.

Jeff Adler:

I mean, look, I love the folks who are office leasing, but you know, like, honestly, that's a back ended layoff that has got nothing to do.

Jeff Adler:

That has nothing to do with the sort of core of work productivity that is a way to fire people without having to go through a formal layoff and deal with the market, blow out of that.

Host:

Right.

Host:

It's like, oh, you five don't want to come back.

Host:

Okay, sorry, Gone, right?

Jeff Adler:

Yeah, gone.

Jeff Adler:

And by the way, if you're that important, I'll make an exception for you.

Host:

Yeah.

Host:

Although I think Jamie Dimon's been saying you got to get back to the office for a couple of years now.

Jeff Adler:

But I want to differentiate finance from tech.

Host:

But I still don't think it's even happening at his firm.

Host:

Yeah, it's happening more four days a week maybe.

Jeff Adler:

It kind of depends on whether you're doing a deal, executing a stable process.

Jeff Adler:

Right.

Jeff Adler:

Different function, different dynamics.

Jeff Adler:

Look, I will also say, just to be honest, I run a business which is basically executing a lot of the research we do has a lot of stable processes.

Jeff Adler:

Right.

Jeff Adler:

We are a largely hybrid organization.

Jeff Adler:

My division, personally, and our turnover has gone down by two thirds because we are able to access and retain people, build their skills because we're giving them workforce flexibility.

Jeff Adler:

Now we can measure productivity very tightly.

Jeff Adler:

So we are getting as good or better productivity with much better retention and much better skillset.

Jeff Adler:

Because again, it just so happens that my business has the characteristics that lend itself to that kind of working environment.

Host:

Yeah.

Host:

As long as you're able to measure and track and have accountability, it's perfect.

Jeff Adler:

That's right.

Host:

Right.

Jeff Adler:

And there is a role for the office and there is a role for training, for socialization, for skill building, you know, but it's not five days a week, it's a day or two.

Jeff Adler:

Okay.

Jeff Adler:

And my company, we have, as we've been rolling our leases, we've cut our footprint by 55%.

Host:

Wow.

Jeff Adler:

Yeah.

Host:

And I've been hearing that across the board.

Host:

Right.

Host:

Major law firms, they're all cutting back 20, 30%.

Jeff Adler:

Again, it very much depends.

Jeff Adler:

This is what I'm saying is.

Jeff Adler:

So do I think the, I think the overall reduction in office is.

Jeff Adler:

Footprint's probably 20% overall.

Jeff Adler:

Right.

Jeff Adler:

It's not like, you know, because I'm not everybody and.

Jeff Adler:

But for our business, for what we're doing, that works for us.

Jeff Adler:

So we now have, I run, I run three offices within Yardy's network of 40 offices.

Jeff Adler:

And we have a schedule where all the teams have a schedule as to when they can come in the office because we couldn't accommodate everybody if they all came in at the same day.

Jeff Adler:

But everyone's on a schedule.

Jeff Adler:

It works.

Jeff Adler:

Everyone seems to be happy with it.

Jeff Adler:

Some people are on Tuesday, some Wednesday, some Thursday, and nobody likes to come in on Monday and Friday.

Jeff Adler:

That's when I go in when no one's around.

Host:

Perfect.

Jeff Adler:

But.

Jeff Adler:

But it works anyway.

Host:

Yeah.

Jeff Adler:

Let's talk more.

Host:

So.

Host:

Right.

Host:

So for some, so for these reasons and others, like I was going to ask you, still staying on, sort of, the build to rent product is a great sustainable, long term, great product.

Jeff Adler:

Absolutely.

Host:

You know, we're also seeing or hearing about either, to your point, both demographics, the younger sort of millennial Gen Z pre kids who maybe well, either can't afford to buy a home because of the affordability issues or choose not to because they want flexibility.

Host:

And same for sort of the older baby boomer retirees who are like, you know what, we're going to sell our house in Phoenix.

Host:

We got a nice little nest egg.

Host:

We just want to rent from here on out.

Host:

We're going to take Winnebago and tour the countryside.

Host:

Beautiful.

Jeff Adler:

Beautiful.

Host:

And, and so I think, I think for all those reasons, it is a product type that's very interesting.

Jeff Adler:

Yes.

Host:

Let's talk a little bit about operational efficiency technologies.

Host:

Some of the stuff you're doing at Yardy Matrix with your business intelligence and how that might help customers manage costs or increase some of their efficiencies.

Host:

What are you guys seeing on that?

Jeff Adler:

Yeah, so I'm going to separate this in sort of Yardy Systems, you know, because I'm a division of Yardy Systems.

Jeff Adler:

Yardi Systems is one of the largest property management software companies.

Jeff Adler:

Software and services that help support people who own and manage commercial real estate.

Jeff Adler:

And then I can talk about Matrix as a division of the company.

Jeff Adler:

We're a relatively small division of the company.

Jeff Adler:

But on the software side, the fact of the matter is that the requirement to reduce cost on an ongoing basis is critical.

Jeff Adler:

Costs are, expenses have been increasing significantly, we hope and we do think that they're beginning to come down.

Jeff Adler:

The rate of growth is beginning to come down.

Jeff Adler:

But labor costs are up 20%.

Jeff Adler:

Materials costs and supply costs are up.

Jeff Adler:

Obviously, you know, insurance costs are up, taxes are still rising.

Jeff Adler:

So, you know, we track the expenses.

Jeff Adler:

So expense expenses have still been going up.

Jeff Adler:

So what happens when you want to provide a better customer experience that's less intrusive and you have expense pressures all over the place.

Jeff Adler:

Well, you do adopt technology, technology, you do that.

Jeff Adler:

And so we have 40 modules that basically comprise every component of operating a multifamily property where you can basically you have a foundation in the property management of record itself.

Jeff Adler:

And then there's all these different modules that plug in from marketing to utility management to procurement to insurance compliance and vendor management.

Jeff Adler:

There's a gazillion of them, but all of which is driving the expense down, providing still very positive customer experience and focusing your labor on things that are uniquely consumer facing.

Jeff Adler:

That's the issue is if you're going to have people focus them on actually having an impact, not on basically back end.

Jeff Adler:

Yeah, that has no value fundamentally to the customer experience.

Jeff Adler:

And so a lot of the customer acquisition, lease management, even a lot of the maintenance Activity is being the back end of that is all being automated, driving down costs.

Jeff Adler:

Now also inside of those, the new development of artificial intelligence is basically being just driven into those existing products.

Jeff Adler:

So when it comes to procurement, there's like an AI bot that basically helps you buy stuff.

Jeff Adler:

There's a big, big move on the customer acquisition side where or the thing we call chat iq, which is really a chat bot that has replaced a lot of the initial call center costs and yielded to the leasing professionals a high likelihood leasing person who actually needs to see somebody.

Jeff Adler:

So you can basically digitize the entire transaction for people who just don't want to see somebody and are willing to lease completely.

Jeff Adler:

And we can verify their identity, we can take payments, you can do a virtual tour, you can do all the infrastructure, but there are people who actually want to see it and you can support them and that now you can increase the productivity of those leasing consultants and have fewer of them and have them more productive.

Jeff Adler:

So that's a big deal.

Jeff Adler:

And it also enables, I would say, some marginal marketing sources that otherwise wouldn't be cost effective to suddenly become cost effective, which is helping on the sort of general.

Host:

What you mean by that?

Jeff Adler:

Well, look, there may be, let's say some websites, right?

Jeff Adler:

So there's a range of SEO, ppc, and there's a whole range of these different sort of marketing channels.

Jeff Adler:

So you may have a marketing channel which traditionally would have generated a lot of activity but very little yield, right?

Jeff Adler:

And you'd say, look, I'm not going to advertise on that particular.

Jeff Adler:

I may get an incremental one or two leases, but like all the crap I have to deal with to get to those one or two leases, the economics don't work, right?

Jeff Adler:

But if the chatbot's dealing with all of that sort of sorting through and now you're only seeing the few people on site that actually will lease, suddenly that marketing source, that marketing channel becomes economically viable where before it wasn't.

Jeff Adler:

So you're accessing more incremental demand because you're not paying the cost associated with the labor cost of clogging your pipeline to get to get to the leases that you actually need and that it's rippling through every aspect of all the products, right?

Jeff Adler:

Utility management, procurement and marketing and also moving all the payments so it's recurring revenue that's automated, that's already know done this.

Jeff Adler:

All that stuff is you really have to drive the cost down.

Jeff Adler:

But just, you know, Fred Smith at FedEx said this 40 years ago and there's Nothing new under the sun.

Jeff Adler:

You automate the routine, you humanize the exception.

Jeff Adler:

That's what this is all about.

Host:

I like it.

Jeff Adler:

So when there is a problem, you get to a real person who can solve it.

Jeff Adler:

Be empathetic, provide great service provider.

Jeff Adler:

But all the routine stuff should all be automated away.

Jeff Adler:

And remember also it's harder to hire people in this labor market.

Jeff Adler:

Harder to hire, harder to train.

Jeff Adler:

You gotta have a better technology backbone.

Jeff Adler:

And the way the world works now is it's variable priced.

Jeff Adler:

Okay.

Jeff Adler:

So back in my day when I was running deals, we had large fixed cost systems.

Jeff Adler:

Now they're all variable costs, variable cost systems.

Jeff Adler:

Right.

Jeff Adler:

So it moves up and down with your scale as an, as an entity.

Jeff Adler:

So because basically yardi is the back end infrastructure as bearing the sort of like fixed cost to keep the infrastructure up in place.

Jeff Adler:

So you as an owner, operator or as a manager, you're only paying on a variable cost basis tied to your revenue stream.

Jeff Adler:

It's a much better, much better sort of model.

Host:

We always joke, the yardy, let me guess, $2.50 per unit, whatever.

Jeff Adler:

Right, right, right, right.

Host:

But it's a very good model and it works.

Jeff Adler:

And we.

Host:

Module after module.

Jeff Adler:

Yes, it adds a lot of value.

Jeff Adler:

Yeah.

Jeff Adler:

And again Yardy matrix is the market intel module of Yardy.

Jeff Adler:

And so we are also working on AI initiatives in our, you know, in our organization that are separate from what's going on elsewhere.

Host:

Right.

Jeff Adler:

But again my whole system, my whole purpose for being is to save our clients time, help them make better decisions more quickly by doing a lot of the monotonous labor intensive work so that you in the investor are only focused on the things where you add value and a lot of the routine stuff is basically done for you.

Jeff Adler:

And that's why fundamentally you trade money in order to get back time.

Jeff Adler:

It's a basic trade and it only works because I'm at scale and I can do things at scale and then I can basically, you know, make an economic trade, you know, for my labor cost is less than your labor cost.

Jeff Adler:

And that, that's how the economics work.

Host:

Yeah.

Host:

Now makes perfect sense.

Jeff Adler:

Yeah.

Jeff Adler:

Most things do if they work.

Host:

Yeah.

Host:

Let's talk a little bit about speaking of investors, about the investor side and capital flows into the business.

Jeff Adler:

You bet.

Host:

Because you know, we've been hearing for a long time that there's so much capital for multifamily on the sidelines.

Host:

Right.

Host:

Sitting on the side of the side.

Jeff Adler:

Yeah.

Host:

I mean, are you seeing, because you mentioned earlier, and we're seeing it ourselves, you Know, more movement.

Host:

Right.

Host:

More deals coming into play, starting to come in.

Jeff Adler:

Yeah, yeah.

Host:

Like for example, Jeff, we looked at a deal in Vegas a couple of weeks ago.

Host:

They had 30 offers on this deal.

Host:

30 offers, which I'm like, wow, exactly 15.

Host:

Best and final, by the way.

Jeff Adler:

Okay.

Jeff Adler:

Well, there's a fair amount of interest out there.

Host:

So there's a fair amount of that was in Las Vegas.

Jeff Adler:

Right.

Host:

So I'm wondering what you're seeing, you know, is money.

Host:

Obviously there's a lot of money sitting on the sidelines still.

Host:

What's it going to take for that money to move?

Host:

You know, and kind of, where do you see that?

Host:

Where do you see the, the investment demand?

Host:

I mean, we know workforce housing is a great niche within the world of multifamily.

Host:

You know, where do you see investor interest there?

Host:

And kind of where do you think we are at this point?

Jeff Adler:

So I'll call it.

Jeff Adler:

The fundamental, fundamental conundrum is this.

Jeff Adler:

Okay.

Jeff Adler:

It's very hard for people to buy below their debt cost.

Jeff Adler:

Right.

Jeff Adler:

Because you actually then have to.

Jeff Adler:

You've got negative leverage and you got to believe that you're going to get rent growth to get you out of that.

Jeff Adler:

And again, the short rate is five.

Jeff Adler:

Okay.

Jeff Adler:

Tech that.

Jeff Adler:

So really you're talking about eight.

Jeff Adler:

Okay.

Jeff Adler:

Or seven or eight.

Jeff Adler:

The long rate is now 4.3.

Jeff Adler:

Pick 4.5 this morning.

Jeff Adler:

Four, five.

Jeff Adler:

So hey, put 100 at three and a half.

Jeff Adler:

It all worked.

Jeff Adler:

Okay.

Jeff Adler:

At four, four, four, five.

Jeff Adler:

It doesn't quite work.

Jeff Adler:

Okay.

Jeff Adler:

Because you put 175 basis points to 200 basis points on that for a commercial mortgage.

Jeff Adler:

Right?

Host:

Yes.

Jeff Adler:

Remember, the residential mortgage is probably another 100 basis points on top of that for residential mortgages.

Host:

That's right.

Jeff Adler:

So when you look at that, residential.

Host:

Homeowners aren't buying a cap rate, so that's less important.

Jeff Adler:

True, true.

Jeff Adler:

But they still have their own financing issues.

Jeff Adler:

So when you, when you look at that now, you're like, it's really hard to make the deals work unless you're getting an assumable loan.

Jeff Adler:

Okay.

Jeff Adler:

Because they're still out there.

Jeff Adler:

Okay.

Jeff Adler:

And then you can basically close the bid ask spread.

Jeff Adler:

Okay.

Jeff Adler:

So that's, that's an opportunity.

Jeff Adler:

You like a market in the Midwest.

Jeff Adler:

Get a loan that still has eight years to run on it and it was at 3%.

Jeff Adler:

Okay.

Host:

Right.

Host:

You could make that typically is going to require a lot more equity.

Host:

Right.

Jeff Adler:

There's equity in there.

Jeff Adler:

There could be also some other fees and assumption fees.

Jeff Adler:

So again, it's got its own issues or you have to have such level of conviction or your capital cost has to be low enough that you can tolerate that negative leverage and hope to basically earn your way out of it.

Jeff Adler:

And you've got to project some kind of rent pop probably in 26, 27, back in the 20 in order to sort of like make it all work.

Jeff Adler:

Okay.

Host:

Yes.

Jeff Adler:

Or somebody's got to take a haircut.

Jeff Adler:

Right.

Jeff Adler:

In order to make this thing work.

Jeff Adler:

Right.

Jeff Adler:

Somebody.

Jeff Adler:

Something's got to work here.

Jeff Adler:

Okay.

Jeff Adler:

And so the reason you don't see transactions like supercharged is like, it's really hard to line up all of those unless, you know.

Jeff Adler:

So the deals that are getting done tend to be somebody who's got a liquidity issue that they've got to resolve.

Jeff Adler:

Okay.

Host:

And they'll sell at the market price today that.

Host:

Right.

Jeff Adler:

In order to.

Host:

Which is essentially a cap rate that's going to equal the 10 year plus the spread.

Jeff Adler:

Right.

Jeff Adler:

I mean, it's a math problem.

Jeff Adler:

Right.

Jeff Adler:

Like.

Host:

Yes.

Jeff Adler:

So, so, so you know, yes.

Jeff Adler:

You're getting transactions because, you know, somebody's got an issue that they have to resolve and they're willing to basically take the haircut.

Jeff Adler:

,:

Jeff Adler:

They had a big run up in value and they say, ah, well, you know what, I didn't make as much money off the peak, but hail, we hit our numbers, things worked out okay.

Jeff Adler:

And we live to fight another day.

Jeff Adler:

Boom.

Host:

Yeah.

Host:

And now I can buy something at a more sane value going forward and.

Jeff Adler:

Exactly.

Jeff Adler:

So I'm not saying that that's why our deal is getting done.

Jeff Adler:

Sure.

Jeff Adler:

of the matter is the peak of:

Jeff Adler:

The numbers don't line up there.

Jeff Adler:

had enough rent growth since:

Jeff Adler:

Okay, so, so I would say that's what I'm saying is like there's a stress play of those deals bought at the peak.

Jeff Adler:

We're like, I don't know how it's gonna.

Jeff Adler:

I don't know how that's gonna get resolved.

Jeff Adler:

Okay.

Jeff Adler:

So somebody's got to take a haircut again.

Jeff Adler:

Deals bought earlier or pre Covid, they won't make as much money as they could have, but okay, they'll do.

Jeff Adler:

Okay.

Jeff Adler:

All right.

Jeff Adler:

And so those deals will sort of move forward.

Jeff Adler:

Look, there's plenty of capital that would like to come off the sidelines, but obviously there's a return expectation and it is reset at the new cost of capital.

Host:

Well.

Host:

And the buyer now is going to have to make assumptions to your point on rent growth to probably make it work.

Jeff Adler:

Right.

Host:

And, or you know, what's my exit cap rate which I'm hearing guys are exiting at the going in or less.

Jeff Adler:

Okay.

Host:

In the old days.

Host:

Yeah, yeah.

Host:

Going in we were adding 10 basis points a year for hold.

Host:

Right.

Host:

If we held something seven years, we'd add 70 bips to what we were going in.

Host:

And that was our exit.

Jeff Adler:

That's right.

Host:

But now you do that today it doesn't work.

Jeff Adler:

That's right.

Jeff Adler:

So you have to buy anything.

Jeff Adler:

You have to buy anything.

Jeff Adler:

So you have to sort of like play around with someone's assumptions.

Jeff Adler:

But you also have to retain the essence of reality.

Jeff Adler:

Right.

Jeff Adler:

You can't, otherwise you're buying into a new problem.

Host:

Correct.

Jeff Adler:

That doesn't work.

Jeff Adler:

And when I think about long term, I just don't see a ten year anywhere below three and a half.

Jeff Adler:

Like I just don't see it.

Jeff Adler:

I don't see how you get.

Jeff Adler:

So then I don't see, therefore I don't see a mortgage rate on a ten year, anything below five and a quarter ever.

Jeff Adler:

Like Again, for a number of periods of time.

Jeff Adler:

I just don't see that happening.

Host:

Which historically that's probably right.

Host:

In the last 30 years that's where it's been.

Jeff Adler:

Well, again let's say you get 2% ish inflation.

Host:

Right.

Jeff Adler:

And then 100 basis points of real yield on the 10 year.

Jeff Adler:

Okay.

Jeff Adler:

It sort of works.

Jeff Adler:

And you need to get the short rate down to about two and a half with a three and a half to sort of get.

Jeff Adler:

Have an upward sloping yield curve where we're sort of like that's, that's normal.

Jeff Adler:

Ish.

Jeff Adler:

Okay, now we're not there.

Jeff Adler:

And we were getting close.

Jeff Adler:

We were at a 3, 6 for a moment, for a hot minute and then it ran away.

Jeff Adler:

Okay.

Host:

Yeah.

Jeff Adler:

And that's really based upon.

Jeff Adler:

Okay, you know, the election, by the way, interest rates started to move before the election, but it was based upon an understanding that neither candidate was going to do anything about the deficit and the amount of debt that's out there.

Jeff Adler:

And that debt has to get either monetized or it has to have a higher yield.

Jeff Adler:

Right.

Jeff Adler:

And anything I'm seeing on inflation, inflation does look like it's coming into that 2, 2.5% handle where it can work.

Jeff Adler:

And we are seeing that in a reduction in the quits rate, a movement lower in the eci, which is the employment cost index.

Jeff Adler:

So all these numbers are sort of lining up.

Jeff Adler:

We're seeing some level of productivity increases, unit labor costs being 2ish, maybe sub 2%.

Jeff Adler:

So all that, you know, from an inflation standpoint, I can see two to two and a half percent because we have some deglobalization going on, reconfiguration of supply chains.

Jeff Adler:

That's kind of inflationary.

Jeff Adler:

But we are seeing out of China goods deflation like crazy.

Jeff Adler:

So that's helping the task move a little easier.

Jeff Adler:

Okay.

Jeff Adler:

Anyway, like, so when we talk about rates, that's, this is the conundrum of like trying to get all this stuff to line out again.

Jeff Adler:

Special situations, yes.

Jeff Adler:

Broad based, you know, happy days are here again, it's hard to see that sort of work its way out.

Jeff Adler:

But again, you look forward past the supply surge, right.

Jeff Adler:

You do see the ability to have consistent rent growth at 4 to 5%, 3 to 5%.

Jeff Adler:

Again, historically, by the way, if you got one point over inflation on rents and expenses grew at 2, 3%.

Jeff Adler:

Everything worked, all the numbers worked.

Jeff Adler:

Right.

Jeff Adler:

And that is the historic norm, one point over inflation.

Jeff Adler:

That's where I learned for Renko.

Jeff Adler:

I learned to the knee of Terry Considine, a great investor.

Jeff Adler:

He taught me everything I know about multifamily real estate.

Jeff Adler:

He said that's the way the world works.

Jeff Adler:

You just have to like.

Jeff Adler:

And if you get anything above that, you are blessed.

Host:

And we got well above it for many years.

Jeff Adler:

Right.

Jeff Adler:

So anything above a 3, you're, you're, you're in fact city.

Jeff Adler:

Okay.

Jeff Adler:

You know, that's amazing.

Jeff Adler:

And again, you got to keep your expenses so that your noi, you get operating leverage.

Jeff Adler:

So you get a 5% NOI increase and then you lever that up at 65% leverage, you're at a 15 ROE.

Jeff Adler:

Boom.

Jeff Adler:

Everything works.

Host:

And if cap rates compress, then it's really a home run home.

Jeff Adler:

Right.

Jeff Adler:

You go from everything works to a home run.

Jeff Adler:

Right.

Jeff Adler:

And so that's.

Jeff Adler:

But even if cap rates don't compress, if you hit those numbers, you're still going to do fine.

Host:

Yeah, it'll be historically the way it was meant to be.

Host:

You operate a property, right, and you've done very well.

Jeff Adler:

Right.

Jeff Adler:

You get rich slowly.

Jeff Adler:

I mean, remember, multifamily real estate was not designed to get rich quick.

Jeff Adler:

No.

Jeff Adler:

It was to get rich slowly.

Host:

I call this business my get rich slow scheme.

Host:

That's what.

Jeff Adler:

Right.

Host:

I want to write a book called the Get Rich Slow Scheme.

Host:

It's just no one will lie because everyone wants to get rich quick.

Host:

Right.

Jeff Adler:

These market conditions have been ahistoric.

Jeff Adler:

Okay.

Jeff Adler:

Both in terms of capital market costs coming down as well as rent growth that has been outside of the historic norms.

Host:

Yes, no question.

Host:

But to your earlier statements, you still think sort of in spite of some of these, we're kind of in between in many ways, right?

Host:

What you're saying?

Jeff Adler:

Yes.

Host:

But in spite of that, you feel like now is a good time to buy, even though there's a little bit of pain in some of these markets with oversupply.

Host:

Yeah, rent's flattening, maybe rent's going down.

Jeff Adler:

I mean, I think you just have, I think you have to underwrite reality and say, look, yes, if I'm going to buy in Charlotte and Raleigh, Atlanta, you know, Dallas, these are great economies, business friendly economies.

Jeff Adler:

They're going to grow.

Jeff Adler:

They've been dynamic.

Jeff Adler:

I actually did the data back 50 years, okay.

Jeff Adler:

Just to look at population growth and supply response.

Jeff Adler:

And they are more cyclical in nature, but the cyclical is with an upward trend.

Jeff Adler:

Okay.

Jeff Adler:

It's just that this particular cycle, the rent pop was big, the supply pop was big, and now the downside's big.

Jeff Adler:

But they've always, always had had supply responses that come in waves.

Jeff Adler:

Just the ways haven't been that big, but they've always done well because the economies and the public policy consensus around growth have been solid.

Jeff Adler:

Those cities have grown, they've expanded.

Jeff Adler:

Right.

Jeff Adler:

Heck, Dallas is like up to the white, up to the Oklahoma border now.

Jeff Adler:

Okay.

Jeff Adler:

And quite frankly a little bit beyond it.

Jeff Adler:

So.

Jeff Adler:

And they have consistent public policy consensus around growth.

Jeff Adler:

They're making infrastructure investments in their areas.

Jeff Adler:

They can handle the population growth.

Jeff Adler:

The thing, the key thing that I look for, and we've done analysis around it, is when the public policy consensus on growth breaks and when the infrastructure investment stops, then you can see that within 10 years that city is going to blow up.

Jeff Adler:

Right?

Jeff Adler:

Because it can't handle.

Jeff Adler:

And then everything's going to be about allocating scarcity as opposed to facilitating abundance flat out.

Jeff Adler:

And so those are the, those are the.

Jeff Adler:

Again, growth requires a public policy and private market consensus, right.

Jeff Adler:

That the community wants to grow.

Jeff Adler:

Once it decides that it doesn't want to grow, then it's allocating scarcity.

Jeff Adler:

And that usually is not a good place for multifamily investors over the long run for a short period of time, sure, it's great.

Jeff Adler:

But I have seen again and again and again is while you can make money in a society community that allocates scarcity, okay.

Jeff Adler:

At some point in time the community is going to revolt, particularly around housing and say we don't think it's appropriate from a public policy consensus for people to make money on housing, forgetting that housing facilitates growth and is a piece of infrastructure.

Jeff Adler:

That's why it works.

Jeff Adler:

That's why the US is the largest and best and most liquid housing asset class in the world, which is why it attracts a tremendous amount of foreign capital.

Jeff Adler:

I deal with folks from Europe, Canada, South America, Asia.

Jeff Adler:

They're investing in the US multifamily because it is a deep asset type.

Jeff Adler:

And you can't invest in this kind of asset type in many places around.

Host:

The world and especially with the kind of financing you can get, this is.

Jeff Adler:

Not available at scale to allocate the kind of capital that can be allocated, which is where you have Australian money, you have Korean money, you have Japanese money.

Jeff Adler:

For a time, you had Chinese money, you have European capital, you have Middle Eastern capital, you have an amazing amount of Canadian capital, all focused on U.S.

Jeff Adler:

multifamily in addition to the normal amount of U.S.

Jeff Adler:

domestic capital.

Jeff Adler:

It is a very deep capital market.

Host:

And the GSEs provide such a stable source of financing that no other countries really have.

Jeff Adler:

Yes.

Jeff Adler:

And the GSEs have chosen to use it wisely.

Jeff Adler:

Now, I will tell you, just to be honest, between you and me and the fence post, the thing that gave me the biggest scare, the biggest scare was the proposals that were floating around, which we worked on and combated, was to basically attach rent control to GSE financing.

Jeff Adler:

It was that close.

Jeff Adler:

Don't kid yourself.

Host:

Well, and depending on the administration who won last night, it could have been even closer.

Jeff Adler:

It was that close.

Jeff Adler:

The current.

Jeff Adler:

When we were.

Jeff Adler:

When they.

Jeff Adler:

And we knew.

Jeff Adler:

I knew in 20, mid 23, all the RFIs started coming out for the administration from the White House, from the fhfa.

Jeff Adler:

They were all pushing to basically do something where they could run on fixing quote, unquote housing.

Host:

Yes.

Host:

And they could use the lever of the GSEs, which is a big one.

Jeff Adler:

Because 60% of multifamily, to the ever living credit of the NMHC and NAA, they were able to basically beat that back.

Jeff Adler:

And there was some acceptance on fee structures and disclosure, which was fine.

Jeff Adler:

Right.

Jeff Adler:

You know, of all the things that could have happened, the actual proposals that came out of the administration were the least bad thing.

Jeff Adler:

And if you recall, Harris and Biden talked about rent control and they tied it to depreciation.

Jeff Adler:

That really was a gar.

Jeff Adler:

That was a.

Jeff Adler:

That was.

Jeff Adler:

That was not a serious proposal.

Jeff Adler:

That honestly, that was a press release and everybody knew it.

Jeff Adler:

And they knew it.

Jeff Adler:

The stake through the heart.

Jeff Adler:

And they did not need a law to do it was to tie rent control to GSE financing.

Jeff Adler:

There's nothing that prevents that from happening.

Host:

Yeah.

Host:

Well, and having said that, they set the precedent during COVID as you know, by start starting to encroach and saying, okay, now you have to offer an additional 30 days before you evict and.

Host:

Right.

Host:

So.

Host:

And that never went away.

Jeff Adler:

Right.

Host:

By the way, that's still in play because I'm a big user of Jesse Capital.

Host:

So it does scare me because they have a lot of power and leverage and with a swipe of a pen.

Host:

Right.

Host:

Can instantly.

Jeff Adler:

Yeah.

Jeff Adler:

So my point is, public policy does matter in multifamily.

Jeff Adler:

So you are.

Jeff Adler:

So you have a modicum of exposure.

Jeff Adler:

It is a modicum.

Jeff Adler:

It could be a lot worse other ways.

Jeff Adler:

But that was a close call.

Jeff Adler:

That was a close call.

Jeff Adler:

And it's bad public policy.

Jeff Adler:

It's bad for the renters.

Jeff Adler:

It's bad long term.

Jeff Adler:

It's just every possible way you can imagine.

Jeff Adler:

It's just horrible.

Host:

Yes, I know you're preaching on fire.

Host:

And so thank you for working and beating back that initiative.

Jeff Adler:

I had a very small role to play.

Jeff Adler:

Mostly was the NMHC and na.

Jeff Adler:

They did an amazing job.

Jeff Adler:

If you're members of those organizations, your contributions were well spent.

Host:

Yeah, no, they always do.

Jeff Adler:

By the way, I didn't hear what happened to Prop 33 in California.

Jeff Adler:

I haven't checked that.

Host:

It got defeated by a lot.

Jeff Adler:

Wow.

Host:

The last count was about 60.

Jeff Adler:

40.

Host:

Yes.

Jeff Adler:

Wow.

Jeff Adler:

Well, what do you know?

Jeff Adler:

Sanity.

Host:

So that means.

Host:

Correct.

Host:

Sanity in California, which is an insane place, as you know.

Jeff Adler:

Okay.

Host:

And a bipartisan sanity.

Host:

Right.

Host:

So that means a lot of renters themselves realized that was not bad public policy.

Host:

It's bad again.

Jeff Adler:

It's a.

Jeff Adler:

It's a supply.

Jeff Adler:

It fundamentally is adding supply.

Host:

That's.

Jeff Adler:

That's really the issue.

Jeff Adler:

And I'm thrilled that.

Jeff Adler:

That the voters of California.

Host:

Yeah.

Host:

Now, as am I.

Host:

Because, you know, as California goes, some of the crazy ideas spread.

Jeff Adler:

Yeah.

Host:

And so I don't own anything here by choice other than the office building I'm sitting in.

Jeff Adler:

Yes.

Host:

But I know other city states were looking at Prop 33.

Jeff Adler:

Yeah.

Host:

Let's see if it passes.

Jeff Adler:

All horrible.

Jeff Adler:

Okay.

Host:

Yeah.

Host:

So it's all good.

Host:

So listen, Jeff, we're bumping up on just over an hour here, so I think we probably need to wrap.

Host:

But I guess one.

Host:

One sort of final question.

Host:

If you could sort of look in your crystal ball in the multifamily industry and specifically, you know, kind of workforce housing.

Host:

Now that we've had really a historic President Trump getting elected last night, again, it was an unprecedented event.

Host:

I mean, where do you kind of see, where do you see the industry playing out if you had a crystal ball over the next say five or ten years?

Jeff Adler:

Well, fundamentally I love multifamily.

Jeff Adler:

I've been around it 20 years.

Jeff Adler:

I've seen it, how it grows.

Jeff Adler:

I'm very optimistic about it as both for meeting a consumer need and as an investable class.

Jeff Adler:

There's not a, it's a false trade off to say you can't do both.

Jeff Adler:

I do believe that you have to look, you have to really look past the next year, year and a half of new supply being delivered.

Jeff Adler:

Okay.

Jeff Adler:

So let's, let's look past that because there will be short term pain in these 20 markets as this stuff gets absorbed.

Jeff Adler:

There's no question.

Jeff Adler:

But let's look beyond that.

Jeff Adler:

Right?

Jeff Adler:

Most folks are looking into a five to ten year horizon.

Jeff Adler:

Okay.

Jeff Adler:

There we still haven't resolved the housing shortage hasn't been resolved.

Jeff Adler:

If interest rates stay as they are, then it's unlikely you're going to have a boon of single family sales, which means that retention in multifamily will still tend to be pretty good.

Jeff Adler:

Okay.

Jeff Adler:

So all and again, going past 27, a lot of deals don't work in terms of development.

Jeff Adler:

Okay.

Jeff Adler:

Now to the extent that there is a true radical change in local zoning permitting and requirements, and that could happen.

Jeff Adler:

Okay.

Jeff Adler:

But that will take time.

Jeff Adler:

I continue to see the ability to have rent growth in excess of inflation, 1 to 3% in excess of inflation.

Jeff Adler:

It's rather durable.

Jeff Adler:

Right.

Jeff Adler:

Remember, if housing costs are 30ish percent or 35% of incomes, if you have modest 3% wage growth, you can easily have 3,4% rent growth and not crowd out the rest of the consumer budget.

Jeff Adler:

So I view that as absolutely sustainable and we've seen it before.

Jeff Adler:

So the economics of the fundamentals all work in terms of it being an investable class, where both the revenue and the expense structure on an operating basis can work, where unless there's a radical change in planning and zoning policy, and even if it did, it would take five to seven years to work its way through the development cycle.

Host:

Yes.

Jeff Adler:

So I continue to think that this is a, you can continue to see rent growth.

Jeff Adler:

I do believe in dynamic economies that have a consensus for growth.

Jeff Adler:

I believe in a lot of smaller markets.

Jeff Adler:

I believe in the Midwest.

Jeff Adler:

I'm looking at demographic changes, deglobalization really the build out of the energy infrastructure all along the Gulf coast and the growth of the petrochemical industry and manufacturing.

Jeff Adler:

They won't be as labor intensive as maybe some people would hope.

Jeff Adler:

But there's a radical amount of reindustrialization that's going to occur.

Jeff Adler:

It starts with the oil and gas industry, goes into this petrochemicals, goes into plastics and kind of follows from there.

Jeff Adler:

So fundamentally I believe in kind of the Southeast Texas, the Mountain west and to a certain extent smaller cities in those areas because they will continue to grow at the margin among the major kind of global centers we call our core cities.

Jeff Adler:

That will depend upon the level of commitment that they have to re energize and growth in their metropolitan areas.

Jeff Adler:

They're going to have to get control of their public safety issues first.

Jeff Adler:

Security always comes first.

Jeff Adler:

Then they're going to have to sort of actually encourage business to be there.

Jeff Adler:

I think New York has a bit of a leg up in that regard.

Jeff Adler:

Boston's not so bad, Chicago's.

Host:

I think San Francisco and Oakland need a little help in that regard.

Jeff Adler:

And that really is just are there enough.

Jeff Adler:

I grew up in New York in the 70s and things got really bad before there was a public policy consensus around that growth was desirable.

Jeff Adler:

I don't think maybe California is beginning down that road and there may be some great opportunities to buy because remember fortunes were made in New York City right around the late 70s, early 80s when the public policy consensus turned.

Jeff Adler:

Now I can't tell you whether that condition is the same in California or in Seattle or in Portland, Oregon.

Jeff Adler:

But I can tell you is local investors who are clued into their local economies and can see that inflection point and then can invest into it will have legendary wealth opportunities.

Jeff Adler:

But it really same thing with Minneapolis.

Jeff Adler:

Will these cities fundamentally hit that inflection point where they want to grow again and are willing to do the things necessary to grow?

Jeff Adler:

I don't know that.

Jeff Adler:

I can't tell you that.

Jeff Adler:

But someone who is local and is close could do incredibly well in that investment strategy if they can pick that inflection point.

Jeff Adler:

And that's where I'll leave with.

Jeff Adler:

I'm optimistic about multifamily as an asset class and housing as an asset class.

Jeff Adler:

It's got tremendous opportunities, it's imbued with the public interest.

Jeff Adler:

So I think it's good for society, I think it's good for the investor.

Jeff Adler:

And at the best run organizations provide great services to their clients, create value.

Jeff Adler:

And we've seen this again and again.

Jeff Adler:

And again and again, that government run housing doesn't work.

Jeff Adler:

Doesn't work.

Jeff Adler:

That the private sector has to be engaged and activated in order to provide housing for Americans.

Jeff Adler:

And that's what I would argue with.

Host:

Which is why what makes, you know, what we do, what I call affordable with a small, a compelling and great business.

Host:

Yes, yes.

Jeff Adler:

And providing high quality, at low cost to provide clean, basic quality housing.

Jeff Adler:

Right.

Jeff Adler:

Keep the community safe, have high resident quality standards, expect people to pay their rent because it raises the standards within the community that people will meet their obligations and their responsibilities.

Jeff Adler:

And it's incumbent upon the owner of the property to provide a safe, clean and stable housing environment.

Jeff Adler:

At AIMCO, I operated 100,000 workforce housing units.

Jeff Adler:

And that was in my mind, the moral foundation of what we did.

Jeff Adler:

Okay.

Jeff Adler:

And we were able to energize our entire operations team around that mission.

Jeff Adler:

Okay.

Jeff Adler:

That we provide something positive for the world.

Jeff Adler:

We expect our residents to meet their commitments and we commit ourselves to providing a great living environment for them to reach their potential.

Jeff Adler:

And I'm very proud of what we did, what my team did at aimco, to provide that kind of housing.

Jeff Adler:

And I think our industry can feel very proud about what it does and again, imbued with the public interest and, you know, a great public service and a great revenue and wealth opportunity as well.

Host:

Yes.

Host:

Amen, Jeff.

Host:

Very well said.

Host:

So I want to, I want to thank you for joining me on the show today.

Host:

I think there are some great insights you provided in what we know is a very compelling asset class.

Host:

Even though there's some short term oversupply issues.

Host:

Right.

Host:

It is not systemic at all.

Host:

And I like you, I'm convinced that workforce housing not only holds an important spot in overall affordability landscape.

Host:

Right.

Host:

To provide housing in that realm, but should deliver outstanding long term results for investors as well.

Host:

So thanks again, Jeff.

Host:

Appreciate your time.

Jeff Adler:

Thank you.

Host:

Bye.

Jeff Adler:

Bye.

Host:

You're welcome back anytime, my friend.

Jeff Adler:

My pleasure.

Host:

I hope today's show inspired you just a little bit and I would like to thank my guests once again.

Host:

I'm excited to bring you more episodes with interesting and informative experts to help you navigate your way to wealth and health.

Host:

Thanks for listening to the Real Estate Wealth Podcast.

Host:

The Real Estate Wealth Podcast is produced by Truth Work Media.

Host:

Our producer is Seth Creekmore with support from McKenna Smith.

Host:

For show notes and more information about this podcast, visit edeloy.

Host:

Com.

Host:

For more information about CalCap Advisors, visit us at calcap.

Host:

Com or follow us on Twitter at calcapadvisors.

Host:

I'm your host Ed Alloy.

Host:

And thank you for listening.

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About the Podcast

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The Real Estate Wealth Podcast with Edward Aloe

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About your host

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Edward Aloe

Ed founded CALCAP Advisors in May 2008, at the height of the economic crisis. He believed that the disrupted environment presented incredible opportunities for those who could recognize them.

Since founding CALCAP, Ed has been involved in over $1.5B worth of transactions. The Company currently manages over 5,000 units and 65 properties. CALCAP operates in 16 states and has over 140 employees and over $700 million in assets.

Ed graduated from the University of San Diego with a B.B.A. degree in Business. He has served on the Board of Foothill Family Services, a Non Profit, and has actively raised money for Children's Hospital Los Angeles, and the UC San Diego Foundation He also served on the Real Estate Committee for the University of San Diego Burnham-Moores Program, and is currently a founding Board Member of Bridge21 Park City. Ed resides in San Marino, CA with his wife and three children.