Latest / Real Investor Radio Podcast / Ep 63 | Multifamily Space Opportunities, Construction & Land Lending with Danny Hirschberg
Transcript
- Craig Fuhr (00:03) Hey, welcome back to real investor radio. I'm Craig Fior joined again by Jack Bavier of the Dominion Group. Jack, good to see you. Jack BeVier (00:11) Absolutely, sir. Absolutely been enjoying the conversation. Craig Fuhr (00:14) Yeah, we just spent 45 great minutes talking with Danny Hirschberg of Wicanton Partners and Northway Homes. They operate out of mostly Charlotte Mecklenburg County. I would invite everyone to go back and take a listen to that episode. Lots of great information. These guys are super smart and doing it right. So check that one out. But we're going to continue the conversation now. Jack, why don't you jump us in? Jack BeVier (00:39) Yeah, sure. So we, we've been, we spent the last episode talking about, Danny and serious his business, Northway homes, which is a home builder, a private home builder in the Charlotte area doing kind of like moderately priced houses, super strong demand for it. And they've built a phenomenal machine to, to do a couple hundred houses a year. but I would say, you know, one of the things that struck me when I met serious and then definitely when I met Danny is that these guys are Danny Hirschberg (00:53) you Jack BeVier (01:07) you know, frankly, they're like classically trained business school guys, that thought, think what came into the business from a very thoughtful approach. And so they didn't just say, Hey, we're, we're going to be, we're going to build homes because we think it's cool to be a home builder. I, I view these guys very much as, investors first. And it just happens that they seen an opera. They've seen an opportunity in the, in the home building side of things. But in addition to participating in the equity as a home builder, They've also built a, built a pretty significant lending company where they participate on the debt side of things. You know, one, one thing that we've always liked to do is we buy houses, we have rental portfolio. So we're the equity in the market, but we also, there's other times and other situations where we'd, we'd frankly rather be the debt than the equity. and, Danny, you guys have had a really interesting approach and put out a lot of, a lot of, put a lot of good paper out from my perspective. on the death side of things. So tell us about how you guys formed Wiccandon and what you've built it up to. Danny Hirschberg (02:14) Yeah, well, you we stole the playbook from you and Fred with both debt and equity. We completely agree. You guys are giving away your secrets. No, we love having both an equity business and a debt business. At times it's better to be a lender. We agree. And at times it's better to be the equity. And it's important to be able to pivot. Craig Fuhr (02:21) Seems to be a recurring theme on the show, Jack. Jack BeVier (02:29) Yeah, right. Danny Hirschberg (02:43) This business for us, this lending business is really, again, taking something that Sirius was doing when he was in business school and growing it to being a little bit more institutional and having more processes in place than originating a couple loans here and there. And so what we did was, you know, we went out to other builders that were building oftentimes on the same streets that we were building our own homes in our Northway platform. And we found a way to be or to provide a unique source of capital, either much higher leverage or funding draws extremely, extremely quickly or things like that that allowed us to gain a borrowing client. And through that, we've grown to around 40 or 50 individual clients or borrowers of ours. And we're about 90 % or 95 % just lending. in Charlotte. And within that, it's mostly construction lending, which we feel like we're a great counterparty for because we're a borrower ourselves and have borrowed from a lot of different institutions, banks, debt funds, you name it, and have tried to put together a product that fits what a person who's building five to 20 homes a year in Charlotte would be looking for and understanding and even providing advice on the permitting process. providing advice on material providers, just things that we know just from having a home building business in Charlotte that we can add value for for our borrowers. Jack BeVier (04:23) How did you guys put the cap? Like what's the capital structure look like for that? Is it friends and family money? Do you guys go and raise equity for it? Is it just your own retained earnings? Like any, any bank capital? Like how are you guys capitalizing that business? Danny Hirschberg (04:37) Yeah, so it's about a third our own capital. The remainder for the longest time was just friends and family. We don't have any outside capital in our home building business. And this was a great way to keep our friends and family involved in what we're doing, be able to report things are going well, be able to provide consistent returns, which everyone always likes. We haven't had a huge need for a lot of outside capital, but we don't know what the future holds. And it's always nice to have a stable base of investors that we've delivered strong returns for. So we have friends and family in that business. And we actually just brought on our first bank, very small line and not that our business is huge and needs a large line, but we brought in our first bank to help provide capital. to help us grow this business a little Jack BeVier (05:39) Nice. That's a good, it's a, it's kind of an important milestone, right? Like no one wants to be the first bank and S but like once you start, but then when you, once you have a bank on balance sheet, when you're meeting the next bank, you say like, yeah, we've had a line with so -and -so for so long. And all of a sudden, like just the guard comes down, right? Because, know, bankers like to do loan officers like to do group think a little bit. It's something they can bring to loan committee and be like, well, this bank's been doing it for two years and they've been making money. like, we're just missing out on the party. So that's definitely, I think like an important milestone to just to get up, like you said, like just to get a bank on the balance sheet to build the track record. That's great. So what kind of, what kind of projects are you guys going after? I mean, is it all new construction stuff that you guys are doing yourself core? You also lending to flippers. You also lending on the multifamily side of things. Craig Fuhr (06:32) I just have to ask as well, same question as the last episode, are you finding these particular borrowers or are they finding you? Danny Hirschberg (06:41) Again, like Northway and like our disposition process there, we did a little bit of marketing and a little bit of outreach, but it's almost solely word of mouth at this point because we don't have an unlimited amount of capital. So we don't need to go out and search for a lot of new clients. We've got a great base of people that we love working with, that we trust and they trust us. And in this business, we appreciate things going smoothly because we have a separate business, Northway, that takes a lot of time. And we like making good loans to good people that are repeat clients. So we're not doing a ton of outreach because our demand for our money right now exceeds our money. And we're okay with that. Craig Fuhr (07:19) Yeah, right. Yeah. Jack, what was your question again? Jack BeVier (07:44) just the nature of the projects. Is it just home building in Mecklenburg County or you guys do another asset or other project types as well? Danny Hirschberg (07:53) So we've done some bridge multifamily on some quick moving deals. Our cost of capital isn't overly competitive in that space, but we found a way to get a few deals done in that space with clients that we like and assets that we're extremely familiar with, either deals we've underwritten to purchase or deals where we own competitive properties. So we've gotten some deals done in that space. Our largest piece of business there is new construction. But we've also found an interesting mission in funding land because we understand land really well in Mecklenburg County. so where there's really not a lot of land lending right now from really anyone, we've gotten comfortable doing that because We would love, you we love our land basis on those loans and almost, you know, wish we could have our, you know, our borrower's basis and own it. And so we've, we've started doing some land lending as well. Jack BeVier (09:06) What's foreclosure look like in North Carolina? Like how quickly can you get to the asset if you have to? Danny Hirschberg (09:12) So there's a 10 -day demand letter that goes out first upon a default, if you call it default. And then there's a foreclosure hearing that you can normally set. I believe it depends on the process, but somewhere between 45 and 60 days, and then a sale date set from there in another 30 or so days. So think you're probably all in from a 10 -day demand letter. Something like 90 to 100 days. Craig Fuhr (09:43) Just like Marilyn, right Jack? Jack BeVier (09:43) That's awesome. Yeah, just like Maryland. Yeah, right. Craig Fuhr (09:48) Well, maybe we should just take a moment to explain what the difference looks like here versus there. I mean, we've got listeners everywhere. so, yeah, go ahead. I know you've you've probably been. Well, Maryland and other states that could be similar, right? Jack BeVier (10:00) In Maryland? Yeah. Yeah, we have a we have to file a notice of intent to foreclose 45 days prior to starting the foreclosure process is Maryland. And then then you can start the foreclosure process and you have to serve everybody. It's a it's a court filing. So it's a it's a judicial foreclosure process. And then so after the 45 days, there's probably four. four or five months of service for four, four, four, call it four months of service before you are able to set a date 30 days out. Then you have a foreclosure sale and then that sale has to be ratified by the courts. The master's office actually reviews the court filing to make sure that everything was done properly, though, that everyone was served and notices were, were sent out appropriately. And, that foreclosed that ratification process is literally from a practical perspective, it's six months right now. And I've had them take multiple years. But six months is like the median probably. So it's a 10 month process here, 10 to 12 month process, realistically speaking, before you've got clear title again. So yeah, that changes the math a little bit in terms of appetite for lending. Lending on like, you we used to in back in the day, we were an asset based lender, like we would, we were lending in Baltimore because we liked the basis of our borrower. And while everyone was paying, that was a fine theory. But then 2008 happened and, and the courts were backed up. So you weren't even getting the asset in 10 months, it was taken, you know, a year and a half. And by the time you got title, the value had gone down another, you know, another 20%. So that asset based lending approach in a judicial foreclosure state I would counsel against. But in non -judicial foreclosure states and places like Texas and Alabama and Missouri, it works. It works just fine. But it's a different business. You can't apply the same philosophy between judicial and non -investor lending philosophy between judicial and non -judicial foreclosure states necessarily. But obviously you guys are learning on stuff, you know, in your backyard in a pretty nonjudicial context. So that makes sense. Craig Fuhr (12:35) So you mentioned when, before we started recording that not only are you lending and we we've learned on, you know, what, what type of asset classes that you enjoy the most lending on, but I think you just, did you also mention that you guys owns a few other properties that are not residential? Danny Hirschberg (12:55) Yeah, just purely opportunistic buys. We've bought a couple of industrial buildings in Charlotte, near where we've built homes or in the same sub markets that we've built homes. Off market deals where we just feel like we're finding great value. Jack mentioned this at the start of the episode. We feel the same way. We feel like we're real estate investors. Craig Fuhr (13:09) Mm Danny Hirschberg (13:25) and home building is a strategy for us that's been successful and we found a great business in doing that. But we love real estate investing. So we've bought some industrial buildings, some flex shallow bay industrial. We've bought multifamily where we found great value. But it's really just, we love investing in real estate. From buying these industrial buildings or buying multifamily, we love the depreciation that it gives us. which helps in a lot of ways. But we love investing in real estate. Craig Fuhr (14:00) The reason I ask is Jack and I have talked to a few guests here on the podcast and I'm sure we all know folks that start off in one asset class and migrate to another. Lord knows that there's so many residential guys, Jack, over the last few years who have jumped into self storage, felt like the natural migratory path for a minute there. But the thing that I find fascinating about that is you get so you know, you, I would again encourage everyone to go back and listen to the last episode with Danny where it's clear that you guys know your numbers, you know, down to the nail in terms of, you know, building the house and, and, and the lot values as well. And I know you're smart guys, business school trained, but talk about that, that change in sort of mindset to go from one asset class to another. Obviously, you know, you, on your first industrial deal, it was the first deal. So there had to be a bit of a pucker factor there. But what's it look like to sort of spreadsheet that out and get comfortable with it for, you know, the listener who might be thinking about doing the same? Danny Hirschberg (15:09) Yeah, well, you know, so my primary experience before starting this business was serious. I mentioned I had no home building background. It was actually investing more in industrial and multifamily on behalf of private equity firm. And so, you know, I think it would be a little bit different for us if we went and said, hey, we want to go buy a retail center where I've never analyzed a retail lease. Craig Fuhr (15:18) Yeah. Danny Hirschberg (15:38) know there's complexities around retail leases, but I don't even know what the complexities are. Whereas, I've actually, you know, we've looked at a lot of industrial leases and have seen what can go wrong in industrial buildings and what took, you know, not that we're necessarily the experts on industrial, but we know the few things to look for that could steer you down the wrong path. So we have absolutely learned things in owning these industrial buildings that we didn't know before buying them. But we didn't go in completely green with no concept of what to look for or how to underwrite them. I think when buying any sort of commercial multifamily, industrial, even office or retail, we're focused on, at least our main metric is a return on cost spread over ExitCap. what is the appropriate spread for what kind of asset. And that's really what we look for in some of these industrial deals and really in anything. But I can get comfortable with a lot of things as long as I know the building's structurally sound. There's not a huge amount of deferred maintenance and our return on cost spread over a reasonable exit cap is enough. And so once it passes that test, on an industrial building, then looking at access and looking at clear heights and looking at how bad a tenant would, or how interested a tenant may be in leasing that space and market rents. then getting to how you can get to that return on cost is important. But from a first pass, just the very, very basic, is the building okay? Is the return on cost going to be substantial enough that I feel like there's downside protection? Craig Fuhr (17:07) Right. Danny Hirschberg (17:32) that we're going to make money. Jack BeVier (17:34) Hey, what's a, you mentioned a term that I think I know what it means, but I have to ask return on costs spread over exit cap. Can you explain to me how you guys think about that metric? Danny Hirschberg (17:44) Yeah, it's the same way you think about unlevered yield. It's just our unlevered yield over what... And then the delta between the unlevered yield that you stabilize at or the cap rate you stabilize at compared to what market sale cap rates are for a stabilized building today. So the easiest example would be if you're buying a building for $100 a foot, perfectly zero capex needed. warehouse box for a hundred bucks a foot and market rate rents are $10 a foot. If you were to buy that vacant and lease it up at 10 bucks a foot, you'd be at a 10 % return on cost or unlevered yield or cap rate. And if that stabilized building based on today's conditions trades at a seven and a half cap, you've got a 250 basis point spread there before you start losing. Jack BeVier (18:40) Yeah, gotcha. Cool. And what do you guys consider good? Like what's adequate? Danny Hirschberg (18:46) It depends on asset class, depends on quality. I I don't think you'd buy a class C multi -deal in a tertiary market for the same that you'd buy a class B plus garden style deal in a great location in Charlotte. And so I think the question is not really what's an appropriate return on cost, more what's an appropriate spread. Craig Fuhr (18:48) depends on the day. Danny Hirschberg (19:17) to that exit cap because that same building, tertiary building may trade at a seven and a prime multi -commit deal and Charlotte may trade at a five today or a five and a quarter or five and a Jack BeVier (19:27) But would you take a lower spread on a higher quality? I get that both the return on cost is gonna be lower and the exit cap's gonna be lower, but would you take a lower spread on a higher quality asset? Danny Hirschberg (19:44) Yeah, I would just because I think the range of outcomes is likely lower. Right. So you're, kind of like to think about investing as being in a casino, right? Like your, your range of, of, know, how much money you can lose or make the band as much narrow, much more narrow on a high quality asset in a great location. And you're going to command or feel like you deserve. Jack BeVier (19:50) Yeah. Danny Hirschberg (20:13) a higher underwritten spread when you're taking more risk or location risk or asset quality risk. Jack BeVier (20:18) Yeah, gotcha. What you mentioned the industrial deal that you talked about. What did you like? What's the business plan there? Was that was that a vacant that you found a tenant for? Do you just find an opportunistic seller or was an opportunistic opportunity because of a seller with a motivated seller? What was the angle on that deal? Danny Hirschberg (20:40) Yeah, so the one that we're working through right now is two buildings that are next to each other, two different parcels, seller that was ready to retire. I kind of like to think about the, I think we all hear about these kind of sellers in the mobile home park space. Craig Fuhr (20:57) 75 year old guy gray family could care less about it kids live in another state, you know, he's he's he's getting his wrench jack on like an index card as opposed to any sort of software yet that guy Danny Hirschberg (21:10) Yeah, so everyone's favorite seller. so we came in and gave him, struck a price that was below where we felt the property was worth just based on our knowledge of rents and the ability to do a little bit of work on the building that needed to be done. most importantly, we gave him time to move out and flexibility around that just with the amount of stuff that gets accumulated in a warehouse over 25 years. Craig Fuhr (21:40) This is something that he was the tenant, you know, basically had 50 years of his own stuff in there. Danny Hirschberg (21:40) is Yeah, yeah. He had some other tenants in certain spots, but he was probably the largest tenant. And so we gave him time to work through that, but we felt like we could get to a low double digits return on cost in a great location in Charlotte. And it's not necessarily for industrial, a high demo location, but it's got phenomenal access to 485, which is really important for distribution in Charlotte. And so we felt like getting to a low double digit return on cost or cap rate stabilized was an appropriate spread over what someone may pay, a 1031 buyer may pay a seven cap or an eight cap, something like that. And we felt like that spread was appropriate. And for the asset quality, the location and the risk associated with the deal. Jack BeVier (22:43) Do end up leasing it up or you're working it now. Yeah, I got you. Gotcha. Well, what about on the multifamily side? What kind of stuff are you guys? Have you guys picked up on or and or are you looking for on on that side of things? I mentioned at the beginning of the last episode that like I'm I've really started to pay a lot more attention to multifamily recently and I even got one yesterday, which was like it's pretty psyched about it. So you guys starting to Danny Hirschberg (22:45) We're working through it right now. Yeah. Jack BeVier (23:12) to hear any opportunities start to bubble back up. Danny Hirschberg (23:17) Yeah, we've actually bought three deals so far this year, which is, I think, a pretty good number just given where the market is. And there happen to be pretty different deal profiles, but we're warranted in each of their own respects, we feel. Historically, we've bought a lot of multifamily from that same mobile home park seller, lived on site. manage the property themselves. But they're really, it's really hard to find those, especially in a market that's as looked at as Charlotte or even the greater, within an hour drive of Charlotte. It's really, that's not necessarily a scalable business model to only buy those kinds of deals. But we're still just looking for value. So we did buy one of those types of deals in Lenore, which is about an hour Northwest of Charlotte. last month, we bought a deal from a lender who was actually the owner was a very large institution that's been in the news for scaling up in 2021 and 22. We bought a deal from their lender, which we were excited about and got a discount to the loan basis there. And then we bought another deal going in at a seven cap that was cash flowing, that was positive leverage day one, didn't need a substantial amount of value add. So all very different deal profiles, but deals that We felt like had an appropriate return on cost, know, cap rate, stabilized cap rate to exit cap spread. They're either cash flowing day one or very close to cash flowing day one with a very quick path to being, you know, positive leverage. And, you know, we're definitely looking for more. But because we don't have a fund, we're not forced to put out capital. in the multifamily space. We have the benefit of being able to be selective and we've never paid the most, but we've transacted quickly and been a good counterparty done what we say we were going to do. And so we are definitely looking for more and we like that space just for downside protection. And as long as it's capitalized correctly, not over levered. Jack BeVier (25:40) What size of deals are the three that you bought? How many units? Danny Hirschberg (25:44) So the Outlier one was 184 units. That was a positive cashflow day one going in. by far our largest deal that we've done. And we owned one of the three best comps there. So we got very comfortable with the deal very quickly and had known the deal for a while. The other deals are more in line with what we've bought in the past, which is 40 to 80 units. kind of a sweet spot for us where in the same way that we're not competing against the large nationals in our home building business by trying to go chase really large sites and build homes on really large sites, we're also not going to be competitive and not going to find off -market 250 -unit deals because those don't exist. So we've seen a lot of success in the 40 to 80 -unit range and try to build a portfolio that way. Jack BeVier (26:37) Are you mining for that stuff or was that just network wholesalers and inbound call? How'd you find it? Craig Fuhr (26:44) brokers. Danny Hirschberg (26:46) Yeah, there's a lot less wholesaling in that, at least in Charlotte or in our MSA. In that space, there's a ton of multifamily brokers or smaller brokerage shops that are looking for deal, one -off deals that are not running a process. A lot of times, Cirrus will cold call and keep in touch with someone for two years, knowing that at some point they're ready to sell. Those are probably our best deals. and just be the first call and build rapport with an owner. Again, it's really hard to build and scale a portfolio that way, but those are some of our best deals. Jack BeVier (27:29) Nice. You'd taken those down agency financing. How did you close those? Danny Hirschberg (27:36) Yeah, so cash flowing day one, we do agency financing. The other deals we'll do bridge and try to stabilize as fast as possible to get the agency. We're focused on trying to get to non -recourse as fast as possible on those. Jack BeVier (27:55) Yeah, gotcha. Craig Fuhr (27:56) So you guys have become great builders and you understand that, you know, great construction company, obviously. So how do you, how did you learn the business of tenants and toilets and really becoming great operators and, and, know, taking care of that aspect of the business. Danny Hirschberg (28:14) I still think I'm not very good at that, but Sirius is much more focused on it. Just given his first job when he met Jack, managing tough single -family rental housing. I think it's a unique skill set. You need to have the right demeanor for it and be willing to deal with tough situations. He has the right demeanor for it and is willing to deal with tough situations and also has brought a fair number of people that he worked with at that company over to work with us and move to Charlotte and help us build this company. I'm extremely impressed with those people that are now on our team and their ability to manage properties, manage things efficiently, manage renovations and focus on cost as if it was their own dollar. I think that's been extremely important and candidly not a skill set I have. Craig Fuhr (29:19) So how many people are we talking there for the amount of units that you guys have now? Danny Hirschberg (29:24) Yeah, so we had, so the people that we brought from Sirius's first job at a school is actually only three, two or three people. But what we did was we have an outsourced property management company, but a lot of our team works for that company. So they have additional staff that, know, onsite managers that are not necessarily, you know, our long -term employees, but people that we've vetted, we've been pretty involved in how our properties are managed. We have a weekly call on every single property where we review every single aspect of each property. so it's a combination, I think from a number of people managing those units, first of all, it's all third party, technically, but also it's much more than just a couple of people that we've convinced to move here from other cities who we know are really competent. So that's how we've tried to grow that business. Jack BeVier (30:28) So what, you know, what are you guys thinking about for the next, the end of this year, 2025? What's the future look like for you guys? What aspects of the business do you want to grow? How are you thinking about resource allocation between the different opportunities? Is there anything we haven't talked about that you think's, you know, an interesting shiny object? Danny Hirschberg (30:49) Yeah, I think, you know, for us, we try not to try to force growth in any one business just because we don't know where the market's going to take us. And we're just trying to find good value on a certain, on a given day. And so if we say, Hey, we're going to prepare our company, our home building company or force 300 homes next year. We may be right. We may be wrong. But we'd rather the market dictate on a day -to -day basis where our margins are and if that warrants additional home building. So we try to stay away from a one, three, five -year plan from just metrics and where we're going to push. I do think we're going to see a good amount of opportunity in the multifamily space. We said this last year and it really, for some reason, didn't didn't come true, but there were a lot of people that overpaid in 2020 and 2021 and even 2022 for multi that took bridge debt that's coming due. And we think we'll see some opportunity there. We think the home building business will be a really steady source of revenue and home sales. I don't think we're going to, at least in our market, I don't think we will see, I don't have a crystal ball, but I don't see a a huge change for us in that business. But I think we will see a lot more multifamily opportunities to try to pick things off and try to grow that portfolio. Jack BeVier (32:31) What about on the lending side of things? you guys, are you trying to, are you trying to grow that business or I guess that's a cap, a cost of capital, right? Like if there's, if there's a good cost of capital, you guys have more deals than money, but you know, you to make what you think appropriate spread is. Craig Fuhr (32:47) Did we lose Jack? Danny Hirschberg (32:48) think we lost Jack. Jack BeVier (32:50) can you guys hear me now? Craig Fuhr (32:50) Yeah, I've been having intermittent internet issues. Gab, can you jump in here? Jack BeVier (32:56) I can hear you guys. you hear me? You guys can't hear me? Craig Fuhr (33:08) Sorry, Danny. Danny Hirschberg (33:09) No worries. Jack BeVier (33:12) Can you guys hear me? Jack BeVier (33:37) Can you guys hear me? That was weird. I could hear you guys fine. was like, you guys are like, we lost Jack. And I'm like, I'm right here. I can hear you guys fine. Craig Fuhr (33:38) We can. I was actually bumped out as well, so. Jack BeVier (33:49) whatever. Craig Fuhr (33:54) Why don't we finish the thought on there, what you're excited about, where you guys are heading. And I think you were close to done there, but if you want to finish that up, we can edit it in. Danny Hirschberg (34:07) Yeah, was just mentioning that we don't like to put specific targets on what we're going to do in each business, but we do think we're going to see a lot of really attractive multifamily options just given what some people paid in 2021 and 2022 and bridge debt maturing with the inability to refi. So we're excited about that. think we don't necessarily have a target on what we want to buy or how much, but we think we'll see. some interesting deals in that space and we're excited about growing. Craig Fuhr (34:40) Jack, can you speak quickly to some of the news then maybe even folks that you're speaking to about sort of syndications that looked really rosy a few years ago in the multifamily space that are kind of maybe not so rosy today? Jack BeVier (34:54) Yeah, I mean, I think it's very similar to what Danny was just talking about. I think that there's like those opportunities are starting to come out and like the cracks are getting wider there. So far, I've seen a lot of my personal experience so far has been a lot of folks who were like, interested in an offer. And then they don't like the number and they're like, well, shit, like this is going to be a difficult restructuring if that's the number. And so there's like a, you know, a reconciliation process of the market coming around to just right just like everyone agrees with the financials were like no there's no question as to what the cash flow is it's just that hey you you run the old capital structure through the today's new numbers and it just doesn't you know there's someone's going to take a haircut and no one really wants to and so I think that we're going to see I think that they're going to be continually I think there's gonna be a lot of restructurings rather than a lot of people getting taken out to the woodshed and shot in the back of the head. I think it's gonna be harder than that. I think it's gonna be, you're have to roll your sleeves up and get into the capital structure and make friends with the sponsor or get some kind of inside track with the lender in order to get into those deals. But given all the tailwinds to residential housing, I don't really see that it's not a, it's not a demand issue, right? It's not an actually, it's not the operation side of things, right? If there's competent management, you know, occupancies are very high, expense ratios are what they are. So it's not as if there's like a reset because the market fears that there may not, we may not be able to lease these things. It's just that the wrong capital structure is in place and that needs to be restructured. Danny Hirschberg (36:45) Do you think that if the 10 year, you know, 10 year came down 50, 60 basis points or so, I'm not sure where it is today, but, you know, we thought we would see more opportunities now. And I think that with the 10 year coming down 60 basis points, I think that still gives some syndicators some hope. And I think that there has been a lack of opportunities coming out in the last few weeks just because There's now this little bit higher chance of something happening, rates falling more. I'm not sure we believe that, but we are seeing less opportunity in the last couple of weeks just because of that hope. Jack BeVier (37:27) Yeah, yeah, yeah. The deal maker in me wants there to be no hope, right? Because then there'll be capitulation. But then I do like, you know, but it is easier to run the math ourselves, right? When we've got that better financing reference point. But no, think that's absolutely the case. And now people are talking about rates continuing to come down. The sentiment is that rates are going to continue to come down. Powell's now coming out, right? And people don't realize those things are correlated, but not causal. Craig Fuhr (37:32) Ha Danny Hirschberg (37:32) Hey, yeah. Jack BeVier (37:57) so they're like, no rates are going to keep coming down. And so, yeah, there's this like, I agree. There's this additional glimmer of hope, out there that, that folks are just hanging onto, right? So like, Hey, just, just suck it up. You know, if, if the lender's getting paid, just tell the equity to hang out for another year or, know, a year or 18 months. And like, think enough equity is or, or, you know what we got to bid and your alternative is that you're taking a 40 % haircut on, on your equity. So do you want to not get a check for a year or do you want to take or do you want 60 cents in the dollar today? And I think a lot of people are just saying, you know what, nevermind and shutting up and, and as a result, you know, deals won't happen. when the equity allows itself not to be paid for a long time, right? Like they have to be the instigators to force a restructuring. So, and I think it's, and that's an act by the way, and that's an economically rational thing for them to do. They should just shut up and hang out, right? While there's still hope. So that made it that I think that's a, there's a, I think there's a significant probability that that's how this all plays out where everyone just punts and blends and extends and not a whole lot happens other than the folks who are the older guys who just happen to need to sell because they want to retire and it's just not a great time. Right. But those guys have low basis and they're playing with house money anyway. So they would have gotten a better deal. two years ago, they're kicking themselves for that, but they're gonna go play golf anyway and they're fine. So they sell and I'm seeing a lot of that. Danny Hirschberg (39:34) Yep. Yeah, us too. Craig Fuhr (39:38) Well, Danny, can't thank you enough for your time today. You've been a wealth of information. I sure hope all the listeners got a ton from this. If you don't go back and listen to the first episode, it's foolish. These guys are in their young 30s doing things that I think that much older guys would wish they were doing. Jack, you want to wrap us up here? Any final thoughts? Jack BeVier (40:03) No, really appreciate it. Since I met Sirius, I knew that the guy was going to be a very talented operator. when he partnered with you, I was like, dude, this is a dream team. These guys are killers. And you guys have done nothing but kill it since then. So congratulations on all the success. And it's been our pleasure to be able to do some business with you and hang out in RIR. So thank you for your time today. I appreciate it, Danny Hirschberg (40:31) Thank you both. was a pleasure to be on and yeah, thanks very much for having me here. Craig Fuhr (40:37) Well, continued success. Hope you guys enjoyed this episode and the last with Danny Hershberg from Wicanton Partners and Northway Homes. Danny, if folks want to check you out, websites, contact information, we may as well throw that in at this point. we lose it. Danny Hirschberg (41:08) Craig, I think I lost you, Craig. Craig Fuhr (41:10) I'm so sorry. Intermittent issues here. Yes, so I'll do the exit here. So for folks that might want to get in touch Danny, learn more about the companies. How do they get in touch? Jack BeVier (41:12) Yeah, go for it. Do the, do the... Danny Hirschberg (41:24) Yep. through our website, wickendenpartners.com and northwayhomes.com and my email dh@wickendenpartners.com. Craig Fuhr (41:33) Well, thanks again for your time, folks. I hope you enjoyed this episode. Please send us your comments and questions if you have any. This is Real Investor Radio, Craig Fuhr Jack BeVier We'll see you on the next one.