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

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