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Cliff Notes: Understanding Real Estate Markets: Capitalize on Down Commercial Real Estate Markets · Earn Your Leisure

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  Speaker 2: Let's say if someone sees an opportunity in la or
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  Speaker 2: Detroit and they want to get a group of investors together,
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  Speaker 2: what steps would you have them take to make sure
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  Speaker 2: that they are buying the right area and that that
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  Speaker 2: building will actually be a success and they won't go
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  Speaker 2: to debt. I try to acquire a property while the
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  Speaker 2: commercial real estate market is now.
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  Speaker 3: Well, I think they got to look at what the
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  Speaker 3: other uses are. So, for example, in a office building market,
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  Speaker 3: vacancy rates at you know, ten percent or below mean
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  Speaker 3: that's a healthy office market. There are very few markets
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  Speaker 3: in the country where that's the case. Miami is probably
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  Speaker 3: one of them, Miami Beaches the second one.
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  Speaker 4: I think there are very few like that.
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  Speaker 3: So then you look at are what's the apartment vacancy
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  Speaker 3: rates and the apartment vacancy rates, what are they running?
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  Speaker 3: And if they're running, you know, vacancy rates on the
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  Speaker 3: apartment side, that is you know, maybe somewhere in the
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  Speaker 3: neighborhood of you know, five percent vacancies and that's a
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  Speaker 3: healthy market. And in places like New York and UH
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  Speaker 3: and DC and even Miami to a degree, these vacancy
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  Speaker 3: rates are even less. So New York's vacancy rate is
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  Speaker 3: less than you know, two percent, So that would mean
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  Speaker 3: it's very conducive to having new apartments. And then once
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  Speaker 3: you look at vacancy rates and you look at rental rates,
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  Speaker 3: and if the rental rates, you know, can support the
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  Speaker 3: acquisition and the conversion of a new building, then it
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  Speaker 3: makes sense to do because you've got strong rental rates
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  Speaker 3: that are supported financially and vacancy rates are low, which
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  Speaker 3: are showing a significant demand. And the same thing with hotels.
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  Speaker 3: I mean, you can look at converting office buildings in
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  Speaker 3: the hotels as well, and so, but it's these conversions
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  Speaker 3: are not for inexperienced people. So they've got to make
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  Speaker 3: sure that they get a contractor that understands conversions and
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  Speaker 3: architects that understands conversions. And then if they're going to
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  Speaker 3: do something to scale themselves as a group, then they
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  Speaker 3: want to hire a season construction project manager that works
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  Speaker 3: for the owner with the investment group and who has
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  Speaker 3: experiencing conversions as well.
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  Speaker 5: So to build dis gootspaper in New York like estimate,
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  Speaker 5: how how much would that cost?
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  Speaker 4: About three billion dollars?
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  Speaker 5: Okay, so how do you how do you go about
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  Speaker 5: securing financing for these large scale projects?
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  Speaker 4: Well, it's interesting. So the way you do this is
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  Speaker 4: you go to you know, a group of.
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  Speaker 3: Banks normal you know, the traditional banks, the JP Morgan Chases,
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  Speaker 3: the Bank of America's, you know, the wealth banks and
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  Speaker 3: so forth. And you go to those banks to get
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  Speaker 3: senior financing. And that's a senior loan. And normally you're
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  Speaker 3: going to borrow between sixty and seventy percent. So let's
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  Speaker 3: use just for simple math that you know you're going
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  Speaker 3: to borrow seventy percent, so thirty percent is going to
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  Speaker 3: be equity and so thirty percent is nine hundred million
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  Speaker 3: dollars so by Affirmation towers. So then you're going to
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  Speaker 3: go to a large global institutional you know, private equity
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  Speaker 3: fund and you're going to go to maybe a couple
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  Speaker 3: of them, and they are going to put in somewhere
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  Speaker 3: between eighty percent or so of that you know, nine
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  Speaker 3: hundred million dollars. So that would mean that the developer,
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  Speaker 3: our team would have to put in ten percent, which
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  Speaker 3: would be ninety million to twenty which is one hundred
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  Speaker 3: and eighty million dollars. And so our group would put
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  Speaker 3: that up. Most likely we would bring in a institutional
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  Speaker 3: general partner. They would come in and they would put
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  Speaker 3: in half of that or a little more. And so
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  Speaker 3: the developer you know, generally going to put in between
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  Speaker 3: fifty and one hundred million dollars between our gruth.
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  Speaker 1: So when you're approaching obviously Affirmation Tower is a huge project.
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  Speaker 1: But I know hospitality is something that you're well versed
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  Speaker 1: as well. Last time we spoke with the UIOU, you
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  Speaker 1: were talking about developing hospitality throughout maybe the Caribbean. What's
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  Speaker 1: the approach there, because it's is it completely different when
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  Speaker 1: you're trying to develop in that space.
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  Speaker 3: Really, So in fact, Affirmation Tower is going to be residential.
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  Speaker 3: If we get to build it, it will be the
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  Speaker 3: Civil Rights Museum, and then it'll be two it'll be
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  Speaker 3: residential rentals with affordable housing. Then it will have two hotels,
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  Speaker 3: you know, a boutique hotel and then an ultra luxury hotel,
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  Speaker 3: and then above that on the top floors it'll have
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  Speaker 3: luxury condos and then an observation deck on the roof.
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  Speaker 3: So there's a big mixture of uses because the building
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  Speaker 3: is a very big building, you know, a few million
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  Speaker 3: square feet, and so mixing up the uses it's like
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  Speaker 3: consider a building being like a neighborhood. Almost a building
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  Speaker 3: of that size is you know, like a neighborhood. You know,
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  Speaker 3: so you're going to have a mixture of uses in
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  Speaker 3: that building, and that, you know, helps drive the economics here.
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  Speaker 3: If you're going to do a one off hotel, then
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  Speaker 3: there the process is different because the first thing you're
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  Speaker 3: going to need to do is determine who's going to
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  Speaker 3: opt break the hotel, who's going to brand, and who's
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  Speaker 3: going to operate it. And I wouldn't recommend building a
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  Speaker 3: hotel of any type you know from either a three
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  Speaker 3: star or a five star hotel, I wouldn't do it
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  Speaker 3: without a brand. And then given that you know normally
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  Speaker 3: it's a real estate entrepreneur who is building it, then
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  Speaker 3: you want the brand to be able to manage the
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  Speaker 3: hotel to or to hire a third party hotel manager
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  Speaker 3: that specializes in managing hotels, so you get a company
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  Speaker 3: that does that, and then then after that the exercise
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  Speaker 3: is pretty much the same as building a apartment building
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  Speaker 3: or an office building. The only difference is is that
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  Speaker 3: you have to furnish the hotel, So you add another
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  Speaker 3: level of complexity because you're hiring an interior designer and
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  Speaker 3: you know, a furniture purchasing agent and the like, and
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  Speaker 3: the assembling of the furniture and the delivery of the
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  Speaker 3: furniture and all of that has to meet the brand
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  Speaker 3: standards of your hotel brand and operator.
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