We are going to try out a new segment in this episode. Every week, Dan and Anthony will give their “tepid takes” on the latest news in the world of real estate investing. Or investing in general… ahem… Tesla stock crashing…
The idea is for the two of them blindly react to 10 or so headlines, and give their tepid takes on the news.
In today’s episode, we cover Blackstone’s withdrawal limit, the Minneapolis commercial real estate market, the recent sale of a $250M Twin Cities real estate portfolio, and of course… the 3rd largest bail set in U.S. history for Bankman-Fried.
So, what’s going on in the world of real estate? What’s new? And what are our tepid takes?
Find out on this week’s episode of Multifamily Investing Made Simple.
By the way, in this week’s episode, Dan and Anthony went old school and recorded from their home offices. In case you’re not from Minnesota… this past week we’ve all been snowed in. We’ll be back in the studio recording next week!
“The pursuit of excellence is a grind. It’s exhausting. And sometimes you keep setting that bar higher and higher and you just think, you know, it would be nice if we just take that bar and put it on the ground for the day.”– Anthony Vicino
“Residential, across the board, is undersupplied. There’s a huge shortage of residential units and a huge surplus of office units. So, yeah, it wasn’t so expensive to re convert. It’d make a lot of sense just to swap them over.” – Dan Krueger
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[00:00:00] Anthony: Hey, what’s up? Welcome to the podcast. We have gone back in time blast from the past to our roots. We’re not in the studio today. Dan is back in his closet. Mm-hmm. , I am in my, my home office. And how’s it feel, how’s it feel to go back in time and, and relive our beginnings? I mean, sometimes
[00:00:35] Dan: it feels good to just like strive to do worse than you did before.
you know, it’s like we keep getting better cameras, mics, studios. I think maybe even we get a little better, but sometimes it’s nice to just say, fuck it, let’s just phone it in. The,
[00:00:53] Anthony: the pursuit of, of, uh, excellence is a grind. It’s exhausting. And sometimes, yeah, [00:01:00] cuz you keeps setting that bar higher and higher and sometimes you just think, you know, it would be nice if we just take that bar and put it on the ground for the day.
Yeah. And so so that’s where we are. We, we have put the bar on the ground. I am snowed in. I can’t get out of my driveway cuz Jamie’s car has died. And so I can’t get to the studio. And as a result, here we are . Mm. We’ll take it. So when you think, when you think of investing in Minnesota, this is like what people think of, right?
Like, it’s like 10 below zero outside cars not starting tons of snow. It’s apocalypse, it’s it’s
[00:01:34] Dan: horrible. . We’re living up to the stereotypes for sure. Yeah. Yeah. We are . Yeah. So the tough part is in our area, if it’s cold enough, the salt does not melt the ice. . And so it’s like zero degrees slash slightly negative, so we can salt all we want, but it’s, uh, an ice out there and I’ve gotta drive for about an hour and a half.
[00:01:54] Anthony: God. That’s drive safe, man. It’s funny. That reminds me of the, the meme of the, [00:02:00] you’ve got no P here where it’s like the salt is just ineffective. No. Good. No, it’s not helpful. Yeah. Did I tell, like yesterday, I, I had a, I had a morning. So I, I got stuck in the driveway getting out. My Prius got stuck at the end.
We, we spent half an hour shoveling him out. Mm. Which is crazy. I’ve never had that happen before. And then I came inside and my desk, it’s a standing desk and I pushed the button for it to go down and the battery died halfway through. And so it was stuck in squatting mode, . So I was like, man, my morning’s off to a weird
[00:02:34] Dan: start.
I guess you’re doing wall sits. I was, oh, I’d be worried if, are you? Because those types, bad things usually come in threes and I only count two there. So there’s another, another. Well, today
[00:02:45] Anthony: the car, today Jamie’s car just wouldn’t start. There it is. So now I’m now, and I made the mistake of parking in front of her.
So now I’m stuck. So here we are. , welcome to Minnesota people. This is what we, this is what you came for. . So, but uh, today [00:03:00] actually, we’re gonna do a new episode. We’re gonna do a new take. Um, we’re actually going to do some tepid takes. So these aren’t hot takes. What does that
[00:03:07] Dan: mean, ?
[00:03:08] Anthony: They’re, well, they’re not hot takes, that’s for sure.
So we’re gonna look at some headlines from the news that, uh, we have not seen before. We haven’t read these articles, read. He provided them to us and we’re just gonna read them and then, off the top of our head, a tip and take. It’s might be, might be spicy at times, might just be icy. Probably more likely to be icy, but, uh, it’s a new, it’s a new, uh, sket sketch.
Little new, what do they call it? Program like segment? Yeah. Yeah. .
[00:03:38] Dan: Yeah. New, a new segment. I like that. Um, so yeah, let us know if you like it in the comments. If you don’t, we will cease doing this, but if you do, maybe we’ll do it again. Actually, you know what? If you tell
[00:03:49] Anthony: us you don’t like it, that might just encourage us to keep doing it.
So it’s hard to say , just trying to keep things fresh and exciting over here, you know? Yes. Because I, you can only talk about multi-family investings from [00:04:00] so many different angles. Before we’re like, didn’t we do it all? We’ve done 300 ish, 20 episode episodes. Like, yeah, I don’t know. We talked about it all.
So let’s, let’s, let’s do it. Let’s, before we get into these, these tepid takes,
[00:04:12] Dan: let’s,
[00:04:13] Anthony: uh, Let’s go back to the very beginning, to the very first segment that we ever, ever did, and it’s actually our longest running one, cuz I believe we’ve done it in 99% of episodes, of long form episodes, not the under 10 minute episodes.
Mm-hmm. , what is our bad investing advice for this week? Mm-hmm.
[00:04:31] Dan: so. As we do more and more of these, I, uh, am leaning away from coming in with a tongue in cheek piece of advice. I’m just gonna give you the, he’s
[00:04:40] Anthony: getting advice, he’s getting, he’s getting lazier. That’s what that is. That’s exactly what that is.
He’s like, this is hard to turn. He’s like, it’s hard to be tongue in cheeks.
[00:04:46] Dan: We’re 300 some episodes in, I feel like we can just kick back and, you know, coast. Um, but today’s bad investing tip of the week, which is actually. Advice is always [00:05:00] have a contingency plan because today Anthony did not Wait, wait, and here we are.
Wait, wait, wait, wait. This is all your
[00:05:08] Anthony: fault. Wait. You couldn’t have turned that one into a piece of bad for investing advice. That would’ve been easy. That would’ve been like, Hey, you need to go all in on one game plan, only have one. Like gotta focus on that one thing.
[00:05:19] Dan: The problem is, I’ve done that exact one.
Oh, like the tongue in cheek part. It’s like I’ve used a lot of the intros, but, um hmm. But yeah, it’s, it’s applicable in, in all things because, um, hey, whoa, whoa,
[00:05:31] Anthony: whoa, whoa, whoa. I had a backup plan. I texted you and gave you three. I said, Hey, we could, we could record from home. We could, uh, delay. Or I said, your, your lovely wife, Liz could just fill in for me and she could be the new.
[00:05:46] Dan: Well, I don’t know if you’ve been following her on, uh, the ig.
[00:05:48] Anthony: I was, that’s what, that’s what, that’s what Spawn meant, that I saw her propose that she does wanna do that episode.
[00:05:54] Dan: So it’s kinda like we did with Read. Mm-hmm. . Anyways,
[00:05:57] Anthony: uh, so listeners, if you guys are interested in [00:06:00] having Liz’s wife come on the episode in place of me for an episode just to Liz’s wife.
Liz’s wife is Dan. Yeah. Dan’s wife Liz. But I’m, if you guys wanna have. He’s, she’s, you guys are gonna come on and have a conversation and she’s just gonna ask you complete like newbie questions. Mm-hmm. , because she’s a complete newbie. I don’t think she listens to our podcast, Dan. This could
[00:06:21] Dan: be very bad for our marriage, but good for the show.
So, could be,
[00:06:25] Anthony: we do it, it could be good for, good for the ratings. , what, what am I, I do have piece of bad investing advice this week. Typically. Typically I don’t come with any, but um, cuz my advice is just so damn good. But this week, um, my advice is if it’s not working, after six months, just give up and it’s time to pivot and go to something, something new.
Mm-hmm. . Yeah. So if you’re investing in something, stocks, bonds, real estate, whatever, crypto, and it’s just, it’s not like if it hasn’t doubled in six months, if it hasn’t tripled in nine months, it’s a, [00:07:00] it’s time to walk away. It’s time to cut the losses. Yeah.
[00:07:02] Dan: If you’re not 10 x and in like a day, that’s stupid.
Exactly. It’s embarrass.
[00:07:07] Anthony: Yep. But this one actually, like this one, somebody on a YouTube video recently commented in a way where I was like, oh, you, you’re, that’s the timeline that you’re operating on, aren’t you? Like, you’re looking at your investments through a six month window en, en engaging, like. How quality, and, and I was thinking about it through the lens of Tesla and Facebook, right?
Like Facebook got slaughtered in the last quarter. Tesla over year, over year, like this year is, is getting slaughtered. But if you look at it over a five year window Yeah. It’ss still getting, it’s, it’s getting
[00:07:39] Dan: murdered. 12% yesterday I think, or 10 or something. Yeah. What’s
[00:07:42] Anthony: it, what’s it actually add? I’m curious.
Oh, it’s 1 24. So yesterday. Yesterday it was down to 1 23 and I picked up a bunch cuz I was like, you know what? I still believe in this company over a 10 year window. And so when you see these, like these short term volatilities, you know that that could be an [00:08:00] opportunity. But all that’s to say is like, don’t judge the quality of an investment over one quarter or two quarters, or hell even over four quarters.
I take a longer view and you’re gonna do okay.
[00:08:11] Dan: Maybe I concur. Yeah, people have figured that out from the, on the front end, like. , you’ve gotta make some, like if this, then that type of, um, uh, what’s the word I’m looking for? Qualifications, right? Statements. If something happens, then I’m gonna do this. And then, like you just said, over the next 10 years, right?
So you’re not gonna judge that position in two months when you’re probably gonna be down even more, right? Mm-hmm. , you’re gonna judge. two years from now, three years from now. Right. Has the story changed? Probably not, but a lot of people don’t figure that out. They’re like, oh yeah, I’m gonna buy this and hold forever.
And then a month later it’s down and they’re like, oh, shoot. It’s like, no, no buddy. This is a long-term hold. Mm-hmm. , they’re just [00:09:00] panicking, so you’re
[00:09:01] Anthony: just freaking out over nothing. Gotta set those branders. Yeah. So actually maybe that’s one of the first Tepa takes to make is, I don’t know if, uh, Reid gave us, uh, an article on Tesla, but.
just generally in the last like month, Tesla drops like precipitously. And, and I think a lot of that is in relation to Elon making things hard on himself with Twitter and a lot of people feeling like maybe his focus is, is, um, scattered and as a result, um, I mean, there’s a lot more factors. I’d be curious from your perspective, what, what do you, what do you see like precipitating this, uh, this Tesla crash at the moment,
[00:09:40] Dan: Elon.
That stock is always traded. It’s, it’s Elon stock. It’s not Tesla. And so he’ll tweet something, it’ll react. Um, it’s, it’s not based on fundamentals that stock, it’s all people betting on or against Elon. And for the last couple months, ever since this Twitter thing really started [00:10:00] kicking into high gear, basically since they were forced to acquire it, like it’s very clear that he doesn’t have the bandwidth to run Tesla Twitter.
SpaceX foreign company, boring. You can’t do good at all these things. Yeah. And there’s a really strong argument to be made that like he’s wasting his time on Twitter. So yeah, free speech is important, but like, how are you gonna go to Mars Tunnel of the earth? You know, he still got Solar City there. I don’t think he’s really active, but it’s like, Is that the highest and best use of his time as like, you know, quote unquote genius trying to mm-hmm.
manage the social media platform? Probably not. I’d be
[00:10:35] Anthony: curious, did you, did you see, listen to the most recent, um, all in POD podcast episode mm-hmm. , where they’re kind of talking about this a little bit too. I, I found that really interesting, just thinking about like Elon kind of having a higher duty to humanity.
And kind of having a responsibility at this point for, it’s like, Hey, come on man. Focus on getting us to Mars or focus on it makes sense, like these other things. And yeah, the free speech issue is a big one. Obviously we care about that. [00:11:00] But, um, , that’s why
[00:11:01] Dan: everyone wants him to get a a C E O in there. Sure, own the thing, but don’t operate it.
[00:11:07] Anthony: which I think he’s going to like, he put a pull up recently where he said, Hey, you know, I’ll abide by the results of this. Do you want me to step down and find a replacement? I think that was really, he knows that he’s gonna get voted out, and so he’s just laying the pa, the, the. The, the path for that.
Cause I don’t think he wants to run Twitter. Like if, I think if he’s still running Twitter in three months, I think he’s gonna be really pissed at himself. He’s just the only one
[00:11:29] Dan: there to do it. Everyone’s dipping. So, yeah. Yeah, it’s been, uh, all that’s
[00:11:33] Anthony: to say. So do you look at, say, Tesla Twitter stock as buys right now?
Twitter in the sense that over the last decade it’s been pretty much a. Garbage stock in terms of social media companies and, and, and growth potential. And then Tesla having been kind of like the darling of the automotive industry for the last couple of years, these two things maybe have like different trajectories now.
Does, do you see Tesla being fundamentally less valuable [00:12:00] in the coming years and Twitter starting to gain an importance over the, the next period or what,
[00:12:05] Dan: what are your thoughts? I don’t think he could buy Twitter anymore. He took a private, didn’t.
[00:12:10] Anthony: Oh, sure. Yeah. But I, I guess I’m not saying like from a stock buying perspective, but like in terms of like overall valuation of these companies, do you think this is gonna be a net like Twitter in like five years, we’re gonna look back and be like, holy crap.
Like, that was the best move Elon’s ever made. Like that was super valuable. Um, f based off of what he, what he bought it for, he’s, he’s
[00:12:30] Dan: good at figuring out how to take something and make it economically viable. because Twitter’s been just a shit show for a long time. They’ve never really got the ad revenue thing down.
Mm-hmm. people are frustrated by it. Um, and so I think he’s gonna figure out how to actually monetize the business if he can make it a platform that people actually wanna go and use. But right now, most everybody like is not. Uh, engaging more with Twitter, they’re, they’re jumping to [00:13:00] other platforms. So if you can make it a place that people want to go and he can nail the monetization thing, which I think he, he could, if, you know, he’s charging for the blue check marks.
Um, These aren’t
[00:13:09] Anthony: getting eight bucks a month out of me, man. So like, it’s the first time I’ve ever paid for any of the social media platforms.
[00:13:15] Dan: yeah, and I think that’s a good strategy because that’s also gonna make it tougher for bots because if you’ve gotta pay to be someone who matters, um, it, it used to be almost free to create a bot now it’s gonna cost a significant amount of money to create a bot.
So I think that’s kind of a two. Thing where it’s gonna benefit the company, it’s gonna bring in money, but it’s also gonna, hopefully reduce the whole bot situation. So I think we’ll figure it out. It’s probably gonna take him a long time, but, um, I mean, he bought it, I think it was in the forties, uh, because that price point was penciled a long time earlier, and the pr uh, the, the stock was trading significantly.
By the time he actually sold, by the time he bought it. So the valuation that he had under contract Act just made no sense when he was forced to acquire it. And that’s also why Tesla signed off because he’s [00:14:00] gotta sell tons of his Tesla. He sold,
[00:14:02] Anthony: like, he sold like 3 billion of his Tesla stock just to, yeah, just recently to cover the margin on this.
[00:14:06] Dan: can’t service the debt. Um, Uh, so yeah, I think that’s, that’s also a part of why Tesla is, is tanking. It’s just because the amount of cell volume from, from him, that’s a lot of shares that need to go to the market. Now,
[00:14:20] Anthony: I will say this is like, of all the social media platforms, my, my two favorite, and I don’t know if you would count YouTube as a social media platform per se.
I would. Um, but um, YouTube’s my number. And Twitter’s my number two. I’ve, I’ve been very active on Twitter in the last, uh, five, six months and it’s become like my favorite playground, honestly, for creating content, but also just for engaging with people.
[00:14:41] Dan: It’s good for finance, uh, if that’s not your niche.
Um, for a lot of other people. Twitter sucks. It’s a little bit of, it’s great for like finance. Yeah. Yeah.
[00:14:51] Anthony: So yeah, if you’re in the finance investment mm-hmm. , the, the crypto space, um, any tech space, like, it’s pretty awesome. But [00:15:00] yeah, I remember I used to use Twitter a lot as a writer and there was a pretty, um, robust writing community there.
Um, but that also is kind of very polemic and not necessarily the healthiest place, but that’s our te and take number one, um, te and take number. What do you got? So, let’s see here. The artist artists are A R T I S. REIT sells Twin Cities’ industrial portfolio for 249 million. That’s 17 assets 200, and we’ll just round up 250 million of industrial assets sold here in the Twin Cities.
What do you think about that? Good for them. These properties are 95%.
[00:15:44] Dan: Yeah, I don’t know. That’s crazy who that REIT is. I’m not familiar with them. I don’t know what properties they are. When I hear industrial, I just kind of picture a warehouse for the most part. So, yeah, so,
[00:15:54] Anthony: so it looks. , it looks like the REIT is BA is a diversified REIT outta Canada and they [00:16:00] sold it to a Bahrainian investment company.
Hmm. Um, so foreign capital pouring into the Twin Cities, that’s a pretty big transaction. I, I don’t know what the Twin Cities industrial transaction volume is for a, a year, but that’s, that’s pretty good. I’d say that’s pretty good. There’s good numbers. The big numbers. Industrial’s been very popular. I, I’d say over like the last five, six years, it’s the only sector of, of real estate that’s outperformed multi-family to my knowledge.
Mm-hmm. , and they’ve been running like side by side. I, I have been interested in industrial for a couple of reasons, but I’ve never been interested enough to like change course from multi-family, mainly because we’re already in too deep. We know the, we we’re in our lane, so just gonna own that lane. But if I was gonna make a jump to any sector, I think industrial might be,
[00:16:49] Dan: Yeah. I think there’s something, you know, a little bit more versatile about it than, um, like retail where I think it’s a little bit easier to rejigger things for various tenants if you just [00:17:00] got a warehouse. I’m just chopping up and this is coming from somebody who, who knows almost nothing about the, uh, the sector, but I feel like I’d have an easier time renting out warehouse space than I would retail space.
Mm-hmm. , I dunno. But yes, it’s really tough to
[00:17:12] Anthony: have a take. I agree with that. I agree with. ,
[00:17:16] Dan: I think it’s tough to have a take on this one, just not knowing, um, you know, what that valuation looks like. Is that high? Is that low? You know, do they make a killing? What do they buy it for? You know, what’s the game plan for who bought it?
I mean, 95% occupied implies that they probably got a pretty good price, but, um, No
[00:17:35] Anthony: context is, is 2 50, 200 50 million, is that a lot? Is that not a lot? It feels like a lot to me, coming from a place where last year we transacted and bought about 40 million of real estate, so to think like not two 50. Okay.
Yeah. So not times that, that seems bigger. Um, granted, we’re not a re we’re not like big institutional investors. So Yeah. Um, that’s just, that’s me being a small boy and looking at the, at the, at the big boys and thinking, [00:18:00] oh boy, .
[00:18:00] Dan: Yeah, that’s, . I guess the main thing I’d look at with that is just like, it doesn’t sound like a fire sale, cuz that’s not something you wanna see regardless of whether or not we’re in, um, no, uh, industrial or, or not.
Like you never wanna see assets in your area going up for, uh, you know, a fire sale because they’re struggling. Sounds like it was a really high quality portfolio that. Transacted and changed hands, which is, I think a net positive. Sounds of it.
[00:18:27] Anthony: Yeah. All right. So let’s do Tepa take number two. Three. Um, how did Bankman Freed secure a 250 million bail?
This is the third largest Baille ever issued, um, which I think is really interesting. Yeah. So, uh, roll. What are, what are your thoughts on this? Real quick,
[00:18:45] Dan: his parents put up their house, he moved in with them. Uh, his parents are quite wealthy. and, uh, he also stole a lot of money. It’s
[00:18:52] Anthony: important to notice, note that their house is not worth two 50.
It’s just the, the bond is collateralized against it. And [00:19:00] so if he flees, the family is on the hook for the two 50. But that living with mommy
[00:19:04] Dan: and daddy,
[00:19:06] Anthony: damn dude. How’d the mighty fall?
[00:19:08] Dan: Yeah, but yeah. You mean he stole, he stole money. Um, there’s a lot of money that isn’t accounted for. Um, what do you think?
[00:19:15] Anthony: Should he, should he be. Should, should bail have been granted in this case? I, I don’t know much about it, but like, what do you, what do your gut tell you?
[00:19:23] Dan: I, I mean, I don’t know. There, there’s a whole strategy to this legal stuff where like, you know, the big question was like, you know, why, why was he just sitting there doing interviews for weeks on end before?
And like, I don’t know what’s happening beyond the scenes with the, um, , uh, the prosecutors or anything like that, like what their game plan is? I’m sure there’s a strategy cuz the guys coming after him are not amateurs, but it seems weird that he’s just not like, you know, blocked somewhere because he is obviously a, a major flight risk.
They took away all of his passports and things like that, but like, [00:20:00] you know, it wouldn’t be impossible for him to just acquire a. Large boat somewhere and just sail off, right? Mm-hmm. So it’s just mm-hmm. , it seems weird, but I’m sure there’s a strategy.
[00:20:15] Anthony: Yeah. I have no clue what’s going
[00:20:16] Dan: on. The, he might be cooperating in some way as well that might, that might help the story for him.
[00:20:23] Anthony: Yeah. I, I don’t, I, I honestly don’t know much about this case and the bond situation. I, my gut kind of tells me, um, this. It’s all not gonna matter in the grand scheme of things with him. I think they’re gonna throw, he’s gonna get the book thrown at him. I will be astonished if he doesn’t truly like for the amount of, um, information that we have here and the size and magnitude of this given, like what they threw at Bernie Madoff.
And I think you could make a pretty compelling argument that this is as bad, if not worse than, than that then. I don’t know. My gut tells me it’s not gonna [00:21:00] look so good for Mr. Bankman Fried. Yeah,
[00:21:02] Dan: I think this is a hell of a lot worse than Madoff, cuz Madoff told a bunch of rip rich people that he doubled their money, but he didn’t.
Sam took a bunch of money, just lost their money. A bunch of like not rich people, normal people, did drugs, did drugs with it, stole it, partied hard, lost it. So I’d argue this is significantly worse, but, uh, yeah, I think it’s gonna take several years, if not the better part of a decade to really get the full picture.
[00:21:29] Anthony: Takes a long time. Well think about how long Theranos just took, right? Like we just got some closure on that this year and that, when did that even like go down? That was infinitely more
[00:21:37] Dan: simple. That was, you know, that was a few investors, right? This is like, you know, hundreds of thousands of people.
Tons and tons of transactions, billions of dollars. It’s like mm-hmm. , the amount that has to be unwound, like the Madoff, um, clawback process is still. over, they’re still Yep. Trying to figure [00:22:00] out where everything is and get it to the right people in the right order. And that happened 2000.
[00:22:05] Anthony: Yeah, so, so Theranos, I’m looking here is like, the turning point for them was 2015 when like the, the cat started coming out of the bag and then, you know, around 2018 is when they were formally charged, I believe.
Um, yeah, yeah. She just went to trial a couple months ago. Exactly, so it’s like four years. So, so this, this same thing, this one’s, this one’s gonna play out over a long time period. It’s gonna be juicy. Actually, I don’t even know if it will be because I lost so much interest in the Theranos case. Um, because it, it just seems so cut and dry and obvious that I was like, there’s, there’s nothing here that’s gonna be revol revelatory.
[00:22:43] Dan: Yeah, there’s gonna be plenty of good, uh, movies that come out about
[00:22:46] Anthony: this. So a hundred percent I’m gonna wait for that movie. That’s gonna be fantastic. I heard something about who’s the guy that wrote the, um, who 2000. Michael Lewis, I heard he was working with Sam [00:23:00] Bateman Fried on writing a book about ftx and he had been embedded with that group for the last couple of years or months or something like that.
And Michael Lewis would be
[00:23:08] Dan: able to spot that. A few,
[00:23:10] Anthony: well, he was writing a, he was writing a completely different book on the topic. And so like, it’s interesting from what I understand is that. Like in the, in the weeds now. So he has like front row seats to what’s happening. And so that book, that book is probably gonna be real damn good.
[00:23:26] Dan: Yeah. For those of you who are under where Michael Lewis wrote, uh, the Big Short, um, that was Obvi, it was turned into a, a movie, which he wrote another one
[00:23:35] Anthony: too, right? What was the other one? ,
[00:23:37] Dan: do you remember? I’m trying to remember. Um, li look at that. He didn’t write Liars
[00:23:41] Anthony: Poker did he? Who wrote Liars? He did.
He wrote Liars Poker and Flash Boys.
[00:23:45] Dan: Yep, that’s right. Yeah. Flash Boys is good too. Um, I haven’t read Liars Poker, which is strange because that’s such a recommended book for people that are into that kind of stuff. This, yeah, the Flash Boys is good. If you’re interested in high frequency trading and what that whole thing [00:24:00] is all about, and then Big Short, obviously you.
Classic. Classic. Yeah.
[00:24:06] Anthony: Yeah. All right. Hot take tip and take number. I don’t know what we’re on four or five. This, this article from the Globalist says The Twin cities in Richmond are booming for medical office space, Richmond, so it didn’t even say where Richmond is, and I found that really interesting.
It’s not Richmond, Minnesota, it’s just Richmond, Virginia. Virginia maybe. That’d be my guess. So what they show here is that, um, outpatients volumes increased in min Minneapolis by 33% and 28% in Richmond over the past 10 years, which is. , uh, compared to the national average of 21%, significantly higher. And so the takeaway here is, okay, what’s happening in these two markets to fuel such incredible strong growth in the medical office space in particular?
I think it’s really interesting. Mayo, Mayo’s, or my [00:25:00] mind goes to initially,
[00:25:01] Dan: oh yeah, I dunno what Richmond’s got going on. But I mean, if we’re like a, a healthcare destination that. And I think people might hear that and be like, oh man, those people are getting sick and like they’re not doing good up there, but like people come here to get medical attention.
So I’d assume that’s playing into it.
[00:25:22] Anthony: Yeah, I don’t know either way. I think that’s a good thing in the grand scheme of like boosting medical, um, I know that medical. Uh, facilities, medical office space nationwide has been such a booming industry for the last couple of years, and it’s expected just to keep increasing.
I mean, if you look at this like the national average of 21%, that’s like, that’s pretty strong. So I think that’s another, your window,
[00:25:45] Dan: it’s like the housing needed for, uh, the traveling nurses. I was just at a coffee meeting with an individual. Who’s looking at a deal now in, uh, Southern Minnesota, that’s an apartment building for traveling nurses, and they [00:26:00] charge, I think, like 60 bucks a night or something.
[00:26:06] Anthony: I, I know a couple of which is 1800 a
[00:26:08] Dan: month, but he’s buying at 30 grand a door. Yeah. So the thing’s gonna cash for like 10% on day one.
[00:26:14] Anthony: It’s like this, this new sector called like midterm or mm-hmm. midterm, uh, occupancy. So it’s not like long-term, not short-term. Right. But midterm and that traveling nurse demographic is really popular.
It’s really hopping. The hospital
[00:26:29] Dan: usually pays for it. So you can get away with charging. Yeah. More than you would think. Cuz it’s like part of their compensation
[00:26:35] Anthony: basically from the, well, you can charge a lot too, because they’re typically furnished, right? Yeah. And so these were furnished. . So there’s, there’s, could be, there’s really good money to be made in that space.
I think, especially in the next couple of years where we’ll see the more and more people going remote and just traveling and wanting to have the ability to like, oh, you know what? I’m gonna spend the next three months in this city, just go check it out. And I don’t wanna bring any of my stuff with me. I wanna live in a nice place.
And so I think those midterm rentals, [00:27:00] um, I, I think they could be pretty lucrative. I think that’s an interesting market.
[00:27:05] Dan: Yeah. Maybe gimme, hop on that some WeWork variation for traveling. Gig workers and entre.
[00:27:13] Anthony: So here, here then is, you know, the, take the, the, the flip side of that is this next Tepi take, it’s the, uh, the inverse, which is a big drop, is coming for offices like office space, specifically.
This one is looking through the lens of the 25 largest occupiers of office space in the Twin Cities. Things like United Health Group, Thompson Reuters, tar Corp, and generally they have way too much office square footage compared to how many people that they. . So
[00:27:41] Dan: yeah, New York Peace I think is, uh, Manhattan is like 15 to 20% vacant right now in their office space.
And I don’t know what it was historically, but I think it was typically quite strong. Um, and at this moment they’re sitting about 15 to 20% vacant. Like if you take all the office space and Manhattan, dude, [00:28:00] almost 20 vacant.
[00:28:01] Anthony: Here’s a number that’s really interesting. A numark survey of 12 employers, top employers in Minnesota found that the average occupancy rate is 26% at their corporate campuses on peak occupancy days.
So on peak days, only a quarter of their people are actually in the office using the space. That’s That’s really
[00:28:22] Dan: interesting. , yeah, there’s opportunity there. If somebody wants to reposition office buildings into apartments, it’s really expensive with cost of labor and, and materials. But it’s, that’s, I mean that’s really what’s gotta happen there.
Someone with some deep pockets has gotta come in and reposition some of these things, cuz yeah, they’re not working at 80%, uh, occupancy or, you know, like what you just mentioned, they’re utilization that low. I don’t think that really matters as far as cash flow, but that means. , do they really need that much space?
[00:28:54] Anthony: probably not. Yeah. I think what we’re, we’re already seeing it looks like later in this article to even touch on this a bit, [00:29:00] is the, the play is to go into those spaces and just turn ’em into multi-tenant spaces. Mm-hmm. and so get other, get other businesses in there with you, you know, get cozy. So, or,
[00:29:10] Dan: or residential, cuz I mean that’s where there’s a huge disparity.
Residential, pretty much across the board is undersupplied. There’s a huge shortage of residential units and a huge surplus of office units. So like, yeah, weren’t so expensive to re convert. It’d make a lot of sense just to.
[00:29:28] Anthony: Yeah, I was gonna say, I think it’s, I think it’s gonna be a difficult one for that, you know, if, think about how much it costs to convert, but then also you kind of limit your optionality in the future if you decide to say your Target corp or your Best Buy.
If you, if you convert to some kind of multi-family housing, then in 3, 5, 10 years from now, when you wanna take that space back, you’re gonna have to eat that cost again to be convert it. So I, I don’t know if that is gonna be the play that a lot of these guys go with, especially cuz like the spaces that they occupy, if you think.
Where, where [00:30:00] they’re situated in like the big towers in downtown could be really, really hard to convert to, to multi-family. There’s a lot of even a zoning
[00:30:07] Dan: perspective. We’ve got a building here locally that, that, uh, was a, uh, suburban office building and it was converted to residential. I think it’s called Cloud nine in Eden Prairie.
You might be familiar with it. Yeah. But no,
[00:30:18] Anthony: I know what you’re talking about.
[00:30:18] Dan: Yeah. It’s weird. It, when you’re in it, it still feels like an office. The windows don’t open.
[00:30:23] Anthony: Yeah. Um, you never quite get away from that feeling. No. And it’s interesting cause uh, about seven months ago I was reading some articles about San Francisco and how like their office market just got butchered, uh, coming out of Covid.
And they, they have millions of square foot, uh, feet of, um, vacant office space. And so one of the co one of the counter conversations was, okay, what can we do with the homeless per uh, population to put them up and house them in these things? But then you look at the feasibility study around what it would take to actually convert.
Buildings into Occupiable, domiciles, and it’s like, it’s the, the [00:31:00] numbers just are hard to make work, especially when you’re looking at like with the city. Exactly. Which is not, it is in a city like San Francisco, which is like the hardest thing in the world to get rezoned and do any kind of development deal, like good luck.
Minneapolis is probably a little bit easier. Mm-hmm. , um, maybe, I assume, but I, I, I can’t imagine much harder. Yeah. All right. What do you think? One, maybe one. Sure. One more type of take.
[00:31:26] Dan: I dunno how many, right? How about this one?
[00:31:28] Anthony: Yeah, something like that. How this new one? How about new Zillow report suggests renters must work 63 hours to afford rent in the us.
So it says now takes 62.6 hours of work for the average American renter to afford rent. Nearly beating the record high in 2015. Wait, wait, wait, wait. So there was a record high in 2015. We’re here seven years later. We’re just now getting back up to it. That doesn’t seem like. Call, uh, call for alarm,
[00:31:55] Dan: right?
So it was, it should be fine. 2.2 62.6. [00:32:00] 62.6, and this would be hours a month. So on a weekly basis, if you’re working 48 hours a week, 15.65 of those hours are going towards your rent, which is just shy of 40%.
[00:32:18] Anthony: I think, uh, some interesting things here is that this is not a new thing. So this, this article is kind of, uh, um, I don’t know, a little bit clickbait, but if you look at the graph over the last 10 years, like it’s been floating between 35 and 40%, almost dead, like locked in at those numbers.
Mm-hmm. , it’s not peaking above 40 or coming under 35 ever. It’s, it’s been more or less riding that for the last decade. So I do think that’s kind of interesting. Um, but we do now see a spike up to 62, uh, 63 hours. So like in the last year, big. . I wonder what the, uh, what do you think is that [00:33:00] combination of rent growth or, um, income disparity in terms of people just like income growth is not keeping pace with rent?
[00:33:09] Dan: Uh, it’s probably both. I’d guess it’s in, uh, rent growth and people’s incomes are decreasing as a result of, uh, layoffs. Job changes. Sometimes when people get a, um, , uh, remote work option, they make less for the same job than they would’ve made had they come into the office. So I wouldn’t be surprised.
There’s a lot of people out there who are opting for the flexibility of working wherever, but that means they also might take a slight pay cut if they wanna be able to do that. So there’s probably a few different variables that are introduc.
[00:33:43] Anthony: Yeah. And one of the things with this study, the this report is that it is taking everything as a nationwide average.
So on one hand you have Detroit, where the average worker needs to work 44 hours, which is, if you think about, that’s about 25% of your income, which is below the 30% that most, [00:34:00] you know, economists or financial planners will advise you spend on your, your cost of living or your housing. Um, so 44 hours in Detroit versus Miami, where it’s 96.
Right. So, so that’s, that’s where you’re getting your skews from. Mm-hmm. , um, these outlier cities like Miami, probably San Francisco, New York, uh, la So I don’t like
[00:34:21] Dan: averages. I like media. Yeah. Better because it’s like, okay, what’s the middle number like? Cuz if you take like my income and Jeff Bezos’s income, like the average is amazing, but that doesn’t mean.
Anything . Um, but anyways, I think, uh, this, uh, this topic is an interesting one because I think this is, even though there’s nothing, uh, fundamentally alarming about this, other than the last 12 months of, of changes in the data, , we’re basically kind of on par on the higher end of par with where we have been.
But I think this is important to talk about because this is a really important metric cuz there’s so many people, whether they’re passive [00:35:00] investors or active investors who are drawn to these, uh, markets that have been really hot, where they’ve seen 10, 15, 20% rent growth, which is amazing. However, if, if that’s happening in a market where people are spending 40, 45% of their income on their rents, like how.
More room is there to run there, right? How much more runway is there on that rent growth in the future? Whereas you look at our market, maybe we haven’t been, you know, seeing 20 fif, you know, 20% rent growth here over year. But I wanna say our proportion of income that people are putting towards housing is like mid twenties.
Yeah, it’s about 22 to 24%. Yeah. So we could easily get to 30% and it, it doesn’t create a negative situation. So it’s a long, long ways to go before we’re, we’re on the upper end of what’s reasonable for people to, um, to afford.
[00:35:50] Anthony: Yeah. Which, which it bears out here. It’s like Milwaukee, the average is like 37 hours, I would say in Minnesota.
It’s probably, it’s probably under 40 [00:36:00] hours, which is, is really good in the grand scheme of things. So again, like to your point, not all markets are created equal, just cuz you have high rent growth, high um, population growth. If the income isn’t growing commensurately, then you’re gonna run into this glass ceiling.
Where eventually the, the market can’t sustain the rent growth anymore because nobody can afford to live there. Which, yeah, what you see, what, we see this in real time in cities like Phoenix, where Phoenix was having 30% year over year rent growth, and then this year it was like, it, it, it dropped 20%. Just like that.
And so a lot of that is the fact that, you know, people are getting laid off, no longer have work, there’s no, can’t necessarily afford. what they were before. So they have to start thinking about downsizing a bit. And so in a, a hyper-growth market like Phoenix where they were just building to the moon, um, it’s, it’s maybe not sustainable.
So some things to think about, but that’s our type of takes. Let us know what you guys thought. Were these good type of takes. Was these lame? [00:37:00] Did you like this format? Would you like to see more of it? Uh, leave a comment, review wherever you’re listening to this, that would be super helpful. Kind of help us gauge if you guys are enjoying this content or, uh, we’ll try something new.
We’ll pivot. , but before I let you go, here’s your book recommendation for the week. It is Ogilvy on advertising, and it’s not a real estate book. It’s not a, it’s not a multi-family book. It’s a book about advertising, which regardless of what you’re doing, I think it’s, it’s helpful to understand the world of advertising and the psychology of marketing because, Even if you’re just a passive investor, understanding what are the tactics and tricks and strategies that we use as operators to try and entice you to come invest with us.
I think that better arms you against shady operators, which, you know, we recently did an episode about a shady operator in the space that defrauded some banks to tune a $37 million. So you do need to be aware of these tactics. Um, Dan, I’m curious, have you ever read any kind of book like
[00:37:55] Dan: this advertising.[00:38:00]
Um, I mean, I guess what did you watch? Madman? Oh yeah. Well, yeah. , few seasons. Um, I, I don’t know. I think a lot of the stuff that might be similar I throw in like the marketing category, not necessarily advertising, but I feel like if we’re looking at marketing books, plenty, but advertising, I guess. How would you differentiate the two topics if.
[00:38:27] Anthony: Yeah, I, I don’t know. That’s a good question. The, I, I would think marketing is a little bit more broad and holistic around the strategies and advertising is a little bit more strategic or more tactical in terms of, okay, here’s how we’re gonna execute to, to drive the marketing initiative. So if the marketing initiative is, Hey, we wanna raise brand awareness around these key core principles, how are we actually gonna take that big strategy, um, and weaponize it for, uh, consumption?
[00:38:57] Dan: Okay. So I think I’ve, I’ve had a decent amount [00:39:00] of exposure to the advertising component. Um, but it’s, it’s never been my focus. It’s been something I’ve tried to keep up on. Um, and I really love, like, uh, like how Alex or Mosey writes about those topics. It’s very consumable. Yeah. But, um, it’s not my, it’s something that needs to be done in every business.
But, you know, since I’ve got a partner who. Who, uh, uh, thrives in that side of things. I don’t necessarily need to put as much of my bandwidth into it. So I’ve read some good marketing books. There’s some advertising stuff in there, but it’s something I know very little about. Um, I could know a lot more,
[00:39:40] Anthony: but Well, if you’re looking for a good read on the topic, it’s an entertaining, it’s kind of old, but it’s also a classic.
Um, I think this book was actually recommended, um, a while ago by Alex Hermo. So, you know, it comes from. People.
[00:39:54] Dan: People like it. It’s a good start. I like the old book, so I’m pretty much any topic cuz usually that’s like [00:40:00] in most things I feel like tho those kind of like older books. , um, are the things that pretty much all the new stuff is based off of.
So a hundred
[00:40:10] Anthony: percent. I’m reading a book right now called the Robert Collier Letters, which is, uh, a book about copywriting that was written back in nine, like the 1930s. Mm-hmm. , and just reading through it, it’s so fascinating to see the concepts that this is like the, the starting point for a lot of this, the work.
We just take for granted these days. But to see it applied in like a 1930s context, it’s fascinating. It’s like, man, like they, they, they wrote this ad for turtle soup. Turtle soup, which I don’t, I don’t even know if I’ve ever had turtle soup. Doesn’t sound good. They wrote an ad for it. It was like three paragraphs long.
And I swear to God, by the end of it, I wanted turtle soup. I was like, that was amazing. It was so good. So anyway, interest. Dunno, that’ll be interesting to the majority of the audience out there. But, um, I do think, you know, it’s a, it’s a fun engaging read if nothing else, [00:41:00] so go check it out. It’s called Ogilvy on Advertising and Ogilvy David Ogilvy is considered like the godfather of the advertising, like the Mad Men g generation of advertisers.
So good stuff. I think that’ll, I think that’ll do it for us. Dan. I think that’s all we got. I think we’ve, I think we’ve phoned it in plenty today. What do you think ?
[00:41:20] Dan: I think so. I think we’re done. Um, hopefully next episode will be be back in our. Our studio, uh, if
[00:41:29] Anthony: not, if I’m still stuck in my house, I might have, I might be starving to death.
I, I’d be control,
[00:41:33] Dan: be in some trouble. I’ll send out a search party. If I don’t hear from you in a couple days, I’ll, I’ll send somebody over to do a, a wellness check. But ,
[00:41:39] Anthony: I appreciate it. Send them with a shovel, . Okay? All right guys. All right guys. That’s gonna do it for us. We’ll see you in the next episode.[00:42:00]