Real Estate Talk Podcast with Jesus Castanon | RETalkPodcast
The Ultimate Real Estate Unveiling! Raw, Real & Revealing insights from industry experts
Dive headfirst into real estate's most electrifying depths with industry legends - Jesus Castanon, Josh Cadillac, and Richard L. Barbara. Why legends? With billion-dollar deals, groundbreaking innovations, and wisdom that's transformed the landscape, they've not just witnessed the game; they've been the game-changers. And if that's not enough, they're joined by a parade of industry-expert guests, spilling secrets and dishing advice that you won't hear anywhere else.
Expect RAW, REAL strategies that shook the market, REVEALING insights, and timely takes on today's market, coupled with actionable advice.
This isn't your typical real estate chitchat. This is RETalkPodcast - where the titans and top minds of the industry unite. Dive in, and prepare to have your real estate perceptions rocked!
Real Estate Talk Podcast with Jesus Castanon | RETalkPodcast
Commercial Real Estate: A Journey through COVID-19's Labyrinth | RETalkPodcast | Episode 7
Sit tight! We've got Mark, a seasoned virtuoso of the commercial real estate landscape, aboard to share his priceless insights on the intricate dance between the global pandemic and the real estate market. Buckle up as we journey through the realities of the market, unveiling how the urban core and its live-work environment is grappling with the pandemic-induced challenges, contrasted against the suburban spaces. We're going to unmask how this sudden shift in the live-work landscape is shaking up the rental market.
Brace yourselves as we press on to dissect investor mentality in this era of COVID-19 and how various sectors are faring. Retail, in particular, is in a tug of war with the pandemic. Here is where Mark’s invaluable perspective shines, as we navigate the labyrinth of the current real estate financing trends. From the focus shift to government-backed loans by banks to contract negotiations and the potential rise of insurance for lost rent, we're decoding it all.
Finally, we’re zooming out to give you a panoramic view of the economic impacts amid COVID-19, the dynamics of loan and interest reserve requirements, and their effects on lenders and investors. Venture with us through various economic landscapes as we traverse the pandemic-affected Orlando sans its once bustling travel and tourism scene. We also delve into the potential recovery prospects for South Florida and the significant social changes the pandemic has ushered, drawing parallels to historical events like the race to the moon and the AIDS crisis. Get ready to embark on this enlightening journey, as we steer through the real estate realm in these unprecedented times.
Real Estate Talk Podcast with Jesus Castanon - @retalkpodcast: The Ultimate Real Estate Unveiling! Raw, Real & Revealing insights from industry experts
Dive headfirst into real estate's most electrifying depths with industry legends - Jesus Castanon, Josh Cadillac, and Richard L. Barbara. Why legends? With billion-dollar deals, groundbreaking innovations, and wisdom that's transformed the landscape, they've not just witnessed the game; they've been the game-changers. And if that's not enough, they're joined by a parade of industry-expert guests, spilling secrets and dishing advice that you won't hear anywhere else.
Expect RAW, REAL strategies that shook the market, REVEALING insights, and timely takes on today's market, coupled with actionable advice.
This isn't your typical real estate chitchat. This is RETalkPodcast - where the titans and top minds of the industry unite. Dive in, and prepare to have your real estate perceptions rocked!
Meet The Legends:
Jesus Castanon: Visionary CEO of Real Estate EMPIRE Group, transforming property transactions into success stories.
Josh Cadillac: Renowned real estate coach, national speaker, and author; revolutionizing the art of 'closing for life.'
Richard L. Barbara, Esq.: Florida's legal luminary, pioneering change and setting the gold standard in real estate advocacy.
Alright, guys, this episode, this is Jesus Catanyong Real Estate Podcast, and we got Mr Josh Cadillac also here with me and on the phone we have an old friend of mine, mark. If you can just step aside a little bit, I'm going to blow smoke up your ass here a little bit. Mark has been in commercial real estate for well as long as I've known him. Mark, how much in commercial loans you did last year 700 million 700 million.
Speaker 1:So he's pretty damn versed in commercial real estate. So yeah, mark and I actually met 2000,. And what was that Mark 7?, 8? At A-Rod's office, at A-Rod, from the Yankees, we actually met. It was right before the shit hit the fan, or did it hit the fan already?
Speaker 2:It hit the fan. It hit the fan.
Speaker 1:There was shit all over the fan at that point. Yeah, yeah, so yeah, and Mark and I, what we like to say, what we like to call it we were definitely in the trenches together and, man, you know what? We definitely, if we were ever going to write books, I would definitely have a chapter on Mark there, because we definitely got out of that shit hole together. I don't know how, if I think back now, all the stuff that we did and all the deals that we pulled off and, yeah, it's been hundreds of deals that we've closed together and every single one of them mattered at that moment. It mattered, meaning we needed to eat and we needed to survive, and we did, and we're both doing very well now.
Speaker 1:So it's a beautiful love story, mark. So, mark, the reason so today we only got Mark for a little bit, and the reason why we haven't for a little bit, it's actually the reason why we're even doing this podcast. Mark, what are you busy with nowadays in commercial real estate? What's your last couple of weeks been like? What's occupying your time?
Speaker 2:Well, you know. Back to your point, hazel, and thanks for having me on. I mean, I know sounds a little more formal than most of our problems. That's what we're just doing, yeah, but thanks for having me on and for everyone who's listening. Back to your point of when we met. There's a saying smooth sea never created an experienced sailor Right. So we've been through some rough waters and we've seen I don't think anyone's seen this movie before, but we have when it comes to financial downturns and crisis and recovery stories, we have, we've seen it before and experienced it and then going through it, you know, this one, obviously, is different because, in essence, it could be considered what we call an act of God or something that is outside of control. Also, the other crisis that we have experienced have been, you know, as a result of economic, you know policies or regulation or failure to put controls in place that led to those downturns. This one's different because it got everyone off guard and it's the whole world too.
Speaker 2:Yeah, and it's a health issue, right, and so, and being the leaders of the free world, you know that's the delicate subject is how do you? You know you have to put human life in front of a financial opportunity. But you know, the one thing that we have seen is that, you know, the government has stepped in and they've done the right things. The core of our business is similar to on the residential side is Freddie Mac and Fannie May. We are a Freddie Mac Fannie May lender, similar to the single family home side. The only the difference is we do this for commercial real estate, apartment buildings and we account for, you know, a big percentage of the liquidity in the market for rental housing. And then it is through the Freddie Mac and Fannie May programs. We are a lender and, in essence, partner I'm sorry, excuse me for the for both agencies. And the advantage of that is when the federal government stepped in and said you know we're going to give relief to renters, they immediately provided relief for their lending partners.
Speaker 1:What does that do? Let's, let's, let's, let's. Stop there for a second, if you don't mind, mark, okay. So so when you're saying, because first thing you start hearing is, oh, people saying I'm not going to pay rent, all right, so that has an immediate. And that when you have a what's her name, ocasia Cortez, saying that everybody should boycott and not pay rent for a year and all that kind of stuff, so all that, all that talk and all that, all that you know, don't pay rent, don't pay mortgage talk, what does that do, in particular, to like a person who owns a 300 unit building and what, what are the numbers looking like? So, on a 300 unit building, how many people are paying rent? How many are not? What are you seeing on the street? As far as as as that, so what?
Speaker 2:what we've seen and you know what we've seen is, surprisingly, in April, for the most part, collections have been anywhere between, you know, 75 to 85%. We have seen Broward County seems to have been hit a little harder than Hamid-Day County, but the reality is we're seeing most of our most of the, the default and rent payments are coming from more of the urban core. You know the live work areas where all of you know the, the, everything that changed in this cycle where folks moved from the suburbs To be closer to jobs. Those jobs and that environment created a lot of service industry, whether the hotels follow some of these companies into the urban core, but more than anything, hospitality on the restaurant entertainment side and the mindset Of that tenant based mostly single millennials were spending the majority of their income on living somewhere near where they work. That was close to the urban core and that live work environment.
Speaker 2:We're seeing those Properties have taken a harder, tougher hit than some of this. You know traditional suburban garden style apartments where you know you have more of your what what they call essential workers. Right, you know firefighters, teachers, police officers, transportation. You know the, the, the core of that Construction. So a lot of those jobs are still paying, even though children are home schooling or school from home but that could change the main if things don't get back to normal to drastically.
Speaker 2:And that's what and that's what everyone's looking to is for the may. That may come from that, but the reality is there is a certain level of rent where the unemployment benefits that are available Cover certain types of properties at the affordable, at that affordability calculator. But the, the urban core, newer stuff there's. There's really no gap to be filled there.
Speaker 2:I think that's the biggest concern is, you know, when you're looking at three dollar for rents, you know four, five dollar dollar rent and you know urban Miami or Miami, you know more near the core for a lot of the whole loss of this area. When you start to look at that in the demographic of the folks that that are living there, you know you have bartenders are making and waiters are making seventy, eighty, a hundred thousand dollars. You know working, you know long shifts, but they were making good money and they were living in these properties and you know that that is where we feel that the hardest hit Properties are going to be now. With that said, you know Freddie and Freddie are stepped in. They put up for their program. May April is better than expected. No one really knows what may is going to look like and everyone's looking to the main numbers, because that's really going to Give us a feel for that one because I want me.
Speaker 1:Let's assume payments are due in May 1st and May 1st through the fifth. So what are you guys going to tell you that up like May 10, may 15.
Speaker 2:You know a lot of folks are have worked out, you know your payment plans or waived late fees, so that the rents are trickling in. But the reality is, you know company seven, you know who's able to pay their rent, who's not able to pay rent, yeah, and then the reality is, until June, you're really not going to know who lost their job and who and who has not lost your job and who can actually, and who's actually applied for benefits and who hasn't applied for benefits, and then who's taking advantage of the system, of the system. Right, because you, there's no way that you could. There's no court, that courts aren't accepting or filing evictions. But the reality is, even even when they do this is a concern for most property owners even when they do open up To file and process evictions at the courts, the amount of backlog that there's going to be, it's going to trickle into, you know.
Speaker 1:The day one. Foreclosures would take like a year, year and a half, to happen. It's going to happen in Broward.
Speaker 3:County. It's still that bad before foreclosures the Broward County court system is. They went from like seven judges down to two. We have one one foreclosure case that we've been working on for five years.
Speaker 2:Holy shit, and you can, you could. You know you could have someone squatting in your, in your apartment for six months without paying rent. So again, a lot of unknowns.
Speaker 1:You know, we're obviously in the business of not spending but being optimistic, obviously because we, this is our livelihood and I believe everyone on the listening their livelihood yeah but that's where you're good here, because you bring a unique perspective, because you're a street guy, you know you started, you know, from the bottom in this business and you know you've, you've always managed to keep your ear to the ground type of stuff. But you're also, you're also, you know, part of an enormous company. I mean, a mortgage group is a, is a, is a damn machine, it's one of the biggest. You know it's a, it's a lost the Wall Street, you know type companies and everything like that.
Speaker 1:So what are you hearing from, from like, and I know nobody knows, and I get that, but what? What's Wall Street saying? You know per se, as far as what's going to happen here and and is this going to be a Real estate as a whole? Is it going to be because, look, you know, we were talking about it last week like five hundred thousand and under residential real estate? I think it's probably the safest of all the you know real estate sections. You know, you know, and then, and then you would maybe, you would maybe say industrial.
Speaker 3:I think a lot of people are going to start moving from the storefronts into, into warehouses and shipping and I think you're gonna also see there's going to be a strategic move to bring a lot of manufacturing back to the US because we realized how strategically susceptible we are a couple of our pants down. Yeah, I'm trying to make 90% of our pharmaceuticals. We've determined now is not a safe place for us as a nation to be, so some of that manufacturing, I think from a strategic standpoint they're gonna force it to come back.
Speaker 1:Yeah, made in America is gonna become way cooler now and people are gonna be willing to pay a little bit more for made in America. You know, I'm assuming.
Speaker 3:So I mean the other cool thing with that is hopefully that happens. Those are manufacturing jobs, which are not necessarily high skill jobs, which will hopefully take and help remove some of this Access labor market that's gonna exist from businesses that have gone, that have shut down, business that are not going to reopen. There are because there's gonna be a piece of whatever is closed that's never gonna reopen. There's gonna be restaurants that we're gonna lose forever.
Speaker 1:Yeah, mark, what worse hit is probably what a strip, a strip centers, right shopping centers well.
Speaker 2:So you know, retail retail's gonna take a big hit here, because the reality, what the and hospitality, but the reality is, and just from an investment standpoint, this is, this is where you know, as a country.
Speaker 2:Traditionally Americans have short memories, but but this one is one that you know.
Speaker 2:The reality is, folks are not, even when they come back, do you really need to go to the mall, you know, to get something.
Speaker 2:When you realize that you know you can get what you need and keep it simple and not have to go into the store and shop. I think that the, the culture here, right, and the fact that we're going to be seeing folks wearing that and we're going to that with this, is something that is, I believe, is going to be permanent. But but but not so much from the consumer standpoint, from the investor standpoint, if you have capital in retail, or if you have capital in, in, in hospitality, in the hotel business, and you know that a pandemic like this, that is not so ours, that is not the go, that is not something that you but the, you know that something can shut you down overnight and that that possibility exists and that we still do not have A vaccine for this right. I think that the investor mentality is going to be something that is so, so intense and apprehensive that we don't know the downside of the effect of that.
Speaker 3:Right. Well, it's gonna have to get baked into the cake at some point. It's gonna be an additional risk factor that's gonna be have to take into account when you, when you, decide to put capital there. But I mean, at the same time, I mean it has has confidence in the stock market been somewhat eroded after watching it go up basically for the last 10 years, and now all of a sudden people have gotten reality check that hey, it doesn't just go up, it goes the other way to. So I mean I think a lot, of, a lot of the different investment types are getting shaken up by by this.
Speaker 3:I think real estate actually comes out of this looking pretty good because real estate values have been In decent. But I think on the commercial side, yeah, and others there's definitely gonna be some fallout as far as investors having to take that into account. But this is also not unprecedented. It's unprecedented in our modern memory, but it did happen in turn of the century. In nineteen teens there was an outbreak, and even the meme you sent me today is true there was a smallpox epidemic during the revolution in this country was.
Speaker 1:It was George Washington was?
Speaker 3:it was George Washington absolutely.
Speaker 1:Sticking the middle, sticking the middle finger out, saying, yeah, we did a war, we had a war, we had a revolution. We had a revolution with with smallpox sticking the middle finger, calling everybody pussies.
Speaker 3:And so I think that part of this is also bred from all the information that exists out there. There's 24, seven bombarding of this information about this, and that's just. It's a new it because of the amount of communication that we have, this is stuff that the world has seen before. It's reacted to. There's been a lot more deaths, absolutely, and then it kind of moves on, the page turns.
Speaker 2:There's gonna be more lingering results from this because there's just such a deluge of information, yeah, and so I think, I think what you know without getting into politics, I think what Is the most impactful Well thing that has happened here In a democratic Of remarked country is that Government has stepped in and shut down business Absolutely and and and and so the, the investor mentality behind that is not not, it has nothing to do with politics. And are we, are we? Are we entering into an authoritarian state where the government can step in and do this?
Speaker 1:You're gonna conspiracy all day. I mean, there's like a thousand of them.
Speaker 2:Well, we know this is a pandemic, we know it's a health issue. We know that. I think most folks will agree that, because it is not authoritarian state and because you know to get to what we consider now will be the new normal and get back to work, you had to set a certain mindset and get to a certain point and come back from there To control the spread of this. But the investor mentality is it and it's an idea. I think everyone needs to get ready for this to have a drag on it, and I think there's gonna be Some pain. I think folks are gonna be able to be able to survive it. It's, but it's. There's not gonna be economic growth here for, I think, 12 to 18 months.
Speaker 2:The fact that someone can say, oh, we're gonna come back in summer and Q4, you're gonna see things come back. That's not accurate, without a vaccine or a cure. And the investors are saying and to answer your point, what's Wall Street saying? What's the investor they're saying? They're saying, listen, this is all great. And then the but how do we know that we're not gonna be back here at the same time next year? And so there's assurances. You know one thing and and and and and in certain sectors like retail. You know our folks really going to, even if they have the money to go out and buy, are they? They have the necessity now, after being able to not know what Amazon was. Well, you know and you did not care for it.
Speaker 2:You know who they are.
Speaker 3:I didn't even know Costco delivered Costco's even so what I hear from this is basically Marcus saying there's going to be a tremendous opportunity in commercial real estate, because the reality of it is. I saw today they started human trials on a vaccine, so we know it's not going to be an insurmountable thing. I mean, I watched 2000, 2008 through 10 occur. Right, we watch it happen. Who are the people that made money? They waited for everybody to run the other way and they started getting in.
Speaker 2:Yeah, but the reality kind of like the reality is that the reality is there are certain sectors where capital is going to say do I really want to go? What's going to be the most resilient? It's probably going to be industrial when you get it, because of packaging, storing, delivery, you need a place to warehouse and store these things and distribution multi-family and back to the point of where's the strongest point of multi-family compared to the $500,000 we go home. The strongest point is the most affordable rents, because the lower income healthy family.
Speaker 2:Right, the shit flows downhill. So the guy that lives in a $4,000 apartment is going to move into a $2,000 apartment. So when you go to the bottom of the barrel, the only place to go from there is to live on the street Cardboard box and so you're going to see a lot of. You're going to see that those properties benefit from a bigger demand and the higher end properties are going to suffer. That's where the opportunity is.
Speaker 1:It's happening in real estate too, mark. I mean in residential sorry a million bucks property for a million bucks. Right now. A lot of these lenders are starting to hold back, a lot of these bank statement programs are starting to hold back. So what's going to keep $500,000 and under below is going to be it's pretty damn close to the FHA limits. You still have some conventional stuff that lends, so you could go in with the smaller down payments. And now? So the reason why I could tell you that I feel confident that $500,000 and under is not going to get hit as much is because I'm on the ground floor there and what I see every day is my worry would be where I'd be panicking would be if I had a closing and no new deals coming in. So everything's coming out and I'm running out of. So it's not, it's every day, every day.
Speaker 1:It's just the rhythm might be a tiny bit slower, but it's still happening. So now my question to you is is that safe? Is there still? If you had people out there applying for financing on these multifamily buildings, are these guys saying, oh, let me hold on and see what's happening. Or are you still having people knock on your door and say, hey, mark, I need financing for this 300 unit apartment building, like I'm seeing for new loan applications here with my lenders. I'm seeing with new contracts, new escrow, that type of stuff. So what are you seeing as far as immediate in and out?
Speaker 2:Well, I mean so for financing. They're. Freddie and Fanny are still in business and they are the backstop.
Speaker 1:So they're like the F&C of residential, so we're good, basically.
Speaker 2:Yeah, their purpose is to provide liquidity when no one else is. Now the banks are pulling back. They're not providing balance sheet. They're deferring to Freddie, Fanny and FHA just like they are on the single family home side. So the banks are not exposing their capital right now. A lot of the banks are making a lot of money with these payroll protection loans, where they're making any between four and five percent.
Speaker 1:Her Bank of America is going 100% PPP now they're going to stop residential lending completely.
Speaker 2:Well, because it's all government backed. Yeah, they're guaranteeing.
Speaker 1:Making your money less risk. It just makes sense.
Speaker 2:They're making money less risk. So that's where Freddie and Fanny step up. And to get to the point of your question, acquisition business has completely fallen off. For now, if you were looking at a deal in February, that was a value add deal. You can buy an apartment building, bring the cabinet and new flooring and bring it up to what the building down the street was comparable and try and push rent. That business model has died. I can tell you countless deals that are under contract with deposits that are going to be negotiated in the courts. I'm not sure if there's a judge that's going to grant.
Speaker 1:That's going to be super interesting too.
Speaker 2:A seller or a claim on a deposit. Do?
Speaker 1:your contracts have an act of God, Because the residential contracts have an act of God section like a force majeure. Do you get that?
Speaker 2:They do, but it's just things determined that came most man made out of a lab. It's going to be interesting to see what's going to happen when you turn into the whole thing. God made the guy in the lab.
Speaker 1:I guess. Right, it's an act of China. Yeah, it's a act of forced.
Speaker 3:China Forced.
Speaker 2:But listen, there's a lot of things that you're going to see not to get side charts off the answer there, but there's a lot You're going to see. Loss of rent, right Insurance if you have loss of rent. A lot of lenders force you to a requirement that you have a loss of rent for if you have a hurricane or fire, so that you can service the loan and there's insurance for that. The insurance companies are taking a stance that this is not qualified as a loss of rent. So the president split up at one of his press conferences and says the insurance companies need to step up. Why would you pay loss of rent and not have the ability to claim?
Speaker 3:that you're losing interest because of the right.
Speaker 2:So it goes back to the act of God. So there's going to be a ton of that. But back to the question, the acquisitions business. This is kind of what I tell when I get asked the question. I ask would you today, right now, would you, if you have a choice, would you go out and buy something, not knowing what the value is tomorrow, even though you knew what the value was a month ago? Or are you going to keep that money under your mattress or inside your bank account? And so the acquisitions business has completely died off. The refinancing?
Speaker 1:I was just going to ask. Your refines must be pretty good though.
Speaker 2:There was a short window where everyone thought that this is going to be a 30 day thing and we're going to get back to work. And some guys took advantage of it. They came out, they got their interest rates dropped. Treasury floors went below one. They were at 40, 50 bids. Some guys took advantage rate locked and were able to close quick and got some great deals. For everyone else. The market had to adjust. They set a floor on the treasury rates. Fannie did first, if Freddie Mac kind of put floor on pricing. That was phase one.
Speaker 2:As this thing extended and it got worse, then they started putting interest reserves because when they announced 90 days of not paying that you don't have to pay your rent for 90 days or there's going to be no foreclosures the lenders had to put mitigants in. So if you had a new deal that hadn't closed and you were not eligible for forbearance, you now had to come in and do a deal with a structure of six, nine to 12 months, depending on the risk profile of the deal of interest reserve, principal and interest. You're talking about, you know, a $10 million deal. You're talking about holding back a million and a half dollars, a million dollar, you know, sorry, like $600,000, $700,000 of proceeds. That kills a lot of deals with the refinances, even though some folks would say I rather have the interest reserve and not worry about this crisis for 12 months. And the reality is a 12 month principal and interest reserve is really going to last you 24 to 36 months, because that's assuming no one pays in the building density. But the underwriting has changed. It's gotten more aggressive as far as being conservative from the lender standpoint, but there's still liquidity in the market.
Speaker 2:Now a lot of these interest reserves have standard language. For example, once the state order or the residential or the federal, whichever one, supersedes, once that order is lifted and whatever is the governing body that lists that order where the property is located, you need to maintain that service coverage that the loan was signed under, where it's a 135 or 135, for 90 days. And once you've done that for 90 days, they will release the funds for the interest reserve. So it's your money. It's there for the sake of the property. It's there for the sake to service the loan.
Speaker 2:But that's been another. That was another phase of the you know the market shock of okay, do I really need to reuse finance now? Do I think that treasuries are going to, you know, go up. Why don't I wait 90 days and see if they list this interest reserve? People are going to get back to work slowly. Maybe the capital markets gain more confidence and I can still get a good rate in 90 days. So the overall outlook and the optimism here, you know, with as much pain as it's been and is that we have experienced our summer with this COVID-19, which in our business were, you know, summer's traditionally are a little slower.
Speaker 1:Yeah.
Speaker 2:Folks are traveling, they're sending most of their kids.
Speaker 2:Yeah, they're working less. If you talk to the hospitality folks you know it's in some markets like South Florida they'll say the summer slower, that these last two months were our biggest months, so it's a double hit. But as far as overall you know, economy, capital, market, they're usually flat. In the summer Most of the Americans are traveling, sending more time with their kids. It's a different mentality as far as the grind and working. So we're hoping that, even though it's going to be a slow startup that we will gain, we won't lose as much from the summer because it's slower.
Speaker 1:It might become productive, mark, because if okay, so school was supposed to end January. What I mean? June 3rd or something like that. I tell you what, man, I don't know about your house. You know, unless you're a way better parent than I am, I can't wait for these fucking kids to get the fuck out of the house. I just want them out of the house. I want them out. I want them on a summer camp. I want them in anything, I want them out. I want them out. Maybe I don't love them as much anymore. I don't know what it is, but they're driving me insane, man. They're in the house. My wife is. I mean, it's just, it's crazy. You know they're fighting.
Speaker 1:And then the school work and the whole situation.
Speaker 1:I mean I think what's going to happen is that people are going to, I think our summer we're having it now Like we're about to end, you know, in 15 days or whatever when this school actually ends, is really what's going to be going back to work.
Speaker 1:I think people are going to send their kids to summer school, I mean just to summer camps, and they're going to get back to work because they're going to have to, because they've been locked up in a house for a month or two months, you know. So it might be a weird thing. It might be where we are experiencing our summer right now and then, you know, come mid June, are we going to be taking vacations? Probably not. People are still going to be a little bit worried. So what are they going to do? They're going to get back to work. So I think the dynamic of this year is going to be completely off. You know, I don't know what's going to happen come winter, when it's winter and fall and all that kind of stuff, I mean, and spring, but we just past spring, yeah.
Speaker 3:So there's there's the interesting dynamic, too, of you know. You have people that have not been horribly economically affected by this, Folks that have not missed a beat and work from home and that represents a big portion of the labor force that have been able to transition to that. And you have the other people that have been economically influenced, but the folks that have been forced to work at home. They've actually been saving money.
Speaker 1:Yeah.
Speaker 3:You know, they can't go out to dinner, they can't go out to a show, they can't spend their money and all the things I mean. Once they're buying a bunch of stuff on the internet and having to ship to their home, there's really not a whole lot for them to take. Well, and you haven't.
Speaker 1:If you haven't skipped a beat and you're still getting and you're getting the government you haven't lost your job and you get that, that stimulus money, and you've been saving money and flights to Italy, not Italy, that's maybe a bad example, but I don't know.
Speaker 3:I hope that's placing the juice.
Speaker 1:Yeah, australia are like 50 bucks. Yeah, do you take the trip to Australia now? I don't know, mark. I mean you have a pretty, you know, close connection to the travel business. What's what's? And I think it has. I think the travel business has a lot to do with, with how we're going to recover. Are people going to start getting complaints with masks for that $50 trip to Europe, or what?
Speaker 2:Well, look, I think that's going to take some time, but I also look, I think the reality is that most For example, our company after Hurricane Sandy in New York, we have our systems and everything was backed up and, for the most part, there's a lot of jobs I grew up in Canada there's a lot of jobs that are able to work remotely, work from home. Now, again, this is phase three, or two or three or depending. Now you're talking about an asset class that may be affected 12 months down the road because of this right, because if you're a company and your production's down, you start to realize that your production's down, but it's not because you can't work from remotely. What's going to happen to the office sector? How much space do you actually need?
Speaker 1:Yeah, you just figured it out. You might need one tenth of that.
Speaker 2:And, by the way, what I've found and I've seen is most of the folks working from home just because they need a break or because not everyone's always available. Now, 7, 8, 9, 10 o'clock, everyone's always available because there's no disconnect. So you know, although production is down because of the overall economy, I think that folks are works A lot of folks.
Speaker 1:The nine to five employees that would punch the clock is probably working a lot harder from home now than they were actually one, and that's what the Googles of the world had figured out a long time ago that you know, people can work from home and they you can make it optional to come to the office dressed like you're about to go to the gym and you're still very productive, probably more, and you know. So, yeah, people are going to figure that out. And the businesses that don't need somebody at home, like accounting, and you know accounting firms, for example. Dude, you can do numbers from anywhere. You can sit down in front of a computer. You're going to be happier there, you're going to be more productive, you know that type of stuff.
Speaker 2:So but there is there is there is major challenges, even in our industry. You know, for example, we all praise appraisers. They can't get into units right now.
Speaker 2:Nobody wants someone in their unit. You don't want to send an employee you know into an apartment building, confined quarters, elevators going into units doing inspections, engineering companies, all the due diligence that needs to get done, you know. But you know there is things evolving. You know there's a lot of municipalities that recording offices are closed right. So even if you want to close a loan you can't where they're looking at virtual. You know inspections. You know zoom, but you know with that comes potential for fraud. Who's on the hook for that? How do what does this closes look like?
Speaker 1:Here's another thing If you're living in a 400, our condo is the condo market going to take a huge ass kicking too. Because if you live in a 400, if you're see, I'm one of the ones that I'm not saying I'm tough or anything, I just, for whatever reasons, this is not freaking me out, right. But if you're one of those, like I have many friends that are just completely freaked out and you live in a 400 unit building, oh yeah it's a parent way off the charts.
Speaker 1:And like it's. Are you reconsidering that? Do you rather now live in a single family home? You're going to buy a farm? Are you going to? Yeah, is the condo market going to take an ass kicking now?
Speaker 3:Oh, the condo market was already taking a bit of an ass kicking it was it was?
Speaker 1:it was the luxury condo market. I don't even know what's going to happen with that and I think that's when we look at the charts. I think that's going to. We're going to see, you know, some sectors of commercial taking a hit. We're going to see condo stuff, we're going to see luxury stuff, but again, I'm I'm seeing ground floor, I'm seeing 500,000 and under workforce. Single family homes are going to be, are going to be all right.
Speaker 3:I think you have to take into account what I like to call the twinkie factor, which is Americans are kind of like fat kids with a twinkie sitting on the table. They can tell themselves no for a while. Yeah, when it comes to their own comfort, americans won't go long without adjusting for their own comfort, and so, like we can sit here and say, oh, everybody's worried about this. You know, I remember after 9 11, nobody wanted to get on a plane. I want to. I figured the next day after 9 11 was the best day in the world to get on a plane. They were never going to do another day, it would be the next day, right? And it took a while for the airline industry to recover from that.
Speaker 1:And, like Mark says, they have short memories.
Speaker 3:And, and so you know 100% they can resist the twinkie on the table for a while. Oh, you know I can't be in a building like that. You know that building's got a nice spa, the gym is great there, and next thing you know they're moving in. So, yeah, I think in the short term, you know there's there's the bell curve of you know, like, how sane people react, and then the outliers, and of course we're going to hear about the outliers, because that's the only one that anybody wants to talk about anymore. You know the person that's out there runs with the coronavirus or streaking the coronavirus ward, licking all the door handles on one end, and then the people that's got a you know a hazmat suit and you let up lined underwear on the other end of the spectrum. Yeah, that won't leave their home.
Speaker 1:Yeah, look, and talking about 9, 11. Mark, what do you think about? Okay, so I don't want to be overly, overly optimistic, right, but we, we Mark has a funny saying to it I want to remind me exactly how it went. But you know, we, we listen, man, we're we're officially old schoolers in this business. We've lived through 2001. Right, 9, 11, which which a lot of things you know it was, it was a weird time which was followed by the best boom in real estate probably ever, and we lived through 2008.
Speaker 1:Right, so I'm seeing this mark more as a 2001. What does that mean? That the United States let me give my thought out first, and then I'm going to. Okay, so, because I want you to have my whole thought in your brain when you, when you, when you, because I have a feeling I've known you long enough to know, kind of, where you're going to go with it but 2001, we had to show the world that we were not going to fall down because of this. We had to show the world that we were going to recover from this story.
Speaker 1:The United States is going to do everything possible, even things that are dangerous to the future economy, to get us up and running again, and I think the real danger is not going to be now. It's going to be later on, but right now we're going to have to, like, make a fake boom, okay, and and I think we're going to recover from this faster than that because we're going to have to find, some time, some type of vaccine, because everybody knows that, okay, and once that comes out, that's great. And then we're going to flood the streets with money. Right, we're going to offer cheap money to the banks. So what about that? I mean, it's possible, this thing. We might rebound from this this year.
Speaker 2:It's possible you know, Well, so you know, I I spoke on a panel in February and I was told I was leaked because I this was my thesis and I said we've been in a healthy economy now for 10 years. We recovered out, we've been recovering out of a recession for 10 years. We've been in a healthy economy. And what we needed to realize and I said this at the time I said there's going to be an event, and I'm looking for the video of this because, you know, I was told by my colleagues on the panel that I was doing the bloom, but I said there's. I said there's going to be an event, okay, and we don't know what it's going to look like. But the reality is, is that we were at a point? No, we were. We were at a point where, where unemployment was at an all time low and it was, and it had been maintained that way for probably the longest time. There's only one place to go from there. So what I like to, the way I like to look at the world, is to say you know that we were heading into this regardless. There was going to be forces or something. And the question is, is that? We're we that delicate that it crashed so hard, so fast because of this virus. Because the reality is, if we had 20% unemployment, right, or 15% unemployment, or even 10%, this wouldn't be as painful when you look at the job losses, because those jobs were at an all time high Right. So the so what I?
Speaker 2:What I do think is that, you know, we almost were at a point where we needed to self induce a recession because this, this economy, wasn't going to last forever. It never does. It was on a road to recovery and it had. So my hope is that we're forced to take our medicine. We don't have to put band-aids on something and we go through a recession that, gradually, would have lasted us two years, three years to get out of. We find the cure for this thing right.
Speaker 2:Businesses are still gonna take two or three years to recover, but it won't be every sector. To answer your question. It'll be more like a 9-11, because it's gonna be the travel, the insurance, the fear factor businesses, the fear factor sectors, and that will trigger into office when people are gonna wanna work from home. But the reality is there's a lot of Americans that were employed, that had $5,000 in savings to go on vacation this summer, and I was supposed to go to Europe, to Spain, and I was supposed to get back a lot Sunday and guess what? I'm still spending 400 bucks a week in groceries, but I saved a lot of money by not going there.
Speaker 2:So I think that the fact that this thing dropped like a, just dropped like a weight, a weighted ball, and it just hit the ground. I think that that pain and the job losses unfortunately for those that are losing them are all. If you look at the sectors that are most affected, those sectors are gonna be affected by any recession, right? But because people are not gonna go to the stores as much, they're not gonna travel as much, they're not gonna go to the Disney World as much, so the fact that that is then it's been so hard and fat and that there's only one place to go now, from where they're at.
Speaker 2:So there was only one place to go from where we were at before. There's only one place to go now, from where we're hopefully at or soon to be at, because it dropped fast, like there was no downward curve. When you talk about curves with the virus, there was no downward curve for these businesses, right. Even with the stimulus. Even with that, that's great. That's. All that's gonna do is make the recovery faster, but that's not gonna. None of that stimulus money is going to put all the people back to work immediately. It's gonna be a subsoil of a stable life.
Speaker 1:Right, and you're gonna have places like Orlando. Disney World's gonna be closed for a little bit they're talking about 2021. So Orlando's gonna take an ass kicking. How many all those vacation rentals and all that kind of stuff like that, right? But is Miami Miami gonna take a hit? Is other regular places gonna take a?
Speaker 2:hit. I don't think Miami is. I'll tell you why, but this is what we don't. This is what we need to keep in account, and when we? I know you're like my thing, but if you feel bad for the guy that has no shoes, think about the guy that has no feet. We live in the United States of America and we still have feet and we're still walking. Think about all the countries that Miami benefits from. Every time there is a crisis, whether it's a dictator or an earthquake, a national event or a narco terrorist state, there's a lot of offer.
Speaker 3:What's that saying, hi, Hi, we're one social we're one revolution away from a real estate boom.
Speaker 2:Well, what we used to say is the United States needs it and the rest of the world gets a cold. What's happened is now the United States needs it and the rest of the world gets pneumonia. And so if you're a person that has a business and one of these emerging, if there are world countries and now you're very successful, but you are, you've been able to deal with the security issues, you've been able to deal with the political issues for years, but there's a point where again it goes back to okay, my family's sick. I mean, there's a pandemic and I'm here, and when I could be in the United States and I could be in a position, just doctors, doctors, lawyers, folks that have degrees and work in their countries, can come here and get their licenses and bring their family here. For them there is a cost of lifestyle, having certain amount of employees at your home and efficiencies, but the reality is is South Florida has always benefited from these crisis and we've always been the first to come out of these things, because, typically, whenever we go into a major recession, especially in today's global economy, we bring the rest of the world down with us and because we're the anchor.
Speaker 2:So the fact that hopefully this could recover, because it was so drastic. It could recover as fast as it dropped. When I say fast relative, because the comeback always takes longer than the drop to the drop the drop. What we don't know is that the downside of these markets we could never really pinpoint when it actually happened, and what I'm saying is that there's a really good possibility that this market was already experiencing a downturn and we hadn't seen it, because you never see it till it happened, and this thing just accelerated it.
Speaker 2:But I do think that we live in a special situation in Miami, as I like to say, we're the closest country to the United States with the American passport. I think we're gonna benefit from a lot of international and this time it's not gonna be so much flight capital. I think it's gonna be actual folks that are going to come here, not just bring their money here. They're going to migrate and stay here, because experiencing a health situation like this and seeing how, for example, the president, I mean, do I think that doing nothing, do I think that a lockdown was necessary? I think some sort of hey, we gotta-.
Speaker 1:I think that's some sort of restriction. Listen, man.
Speaker 3:They were coming from a place of not knowing what they were dealing with, and I mean that really we're gonna have to take and use the hindsight to sit there and say, hey, little kids were never really getting this thing, why did we shut down the? So there's gonna be those kind of questions that get asked after the fact. But I mean, the fundamental thing that I think makes this really so unusual is we had such a strong economy going into this and it was like a light switch gets flipped. The government says, hey, all this consumer demand goes away. And so the question is it seemed like we were in a strong economy and so now you're coming from a strong economy, you're going into this. What does the recovery look like? Because usually when there's a drop like this, it's because there's something fundamentally wrong with the economy and that causes the drop. So you're going from a position of strength now trying to come back, bounce back from this government mandated lack of demand. What does that picture look like? Cause we don't have any historical context to go to.
Speaker 1:But that's what I'm saying. Like I don't, guys, you know I'm not trying to be optimistic, I'm not, I'm really not, I'm starting. I want to think that there's two factors here. Humans are not going to stay uncomfortable for much longer. Like you say, the Twinkie rule in the whole situation. Right, they're just not the mask. People are going to get fucking tired of those masks. They're just going to get tired of those masks. You can't, you can't continue, you can't continue to have to do a line to go into the, into the supermarket. All of that stuff, I think, is going to go away and people are going to get used to it.
Speaker 1:Mark, when we were I mean listen, kind of like when we were growing up, I mean it was AIDS, right, mark, I mean everybody was dying of AIDS, remember, and it was and it was, and it was a lot more people than this, a lot more people. It was millions of people. Oh yeah, it was millions of people, and we made adjustments and we had to be careful and we had to do things and and and and so, and a much higher mortality rate too. Oh, oh, ridiculous mortality rate. And then it was also a brand new thing in the 80s and nobody knew what it was At initially. It was, you know, only the gay people were getting. And then they realized it wasn't and and you know, so you know, and it wasn't shut down. So I understand. Listen, hindsight is 20, 20, I get it. So forget about the past.
Speaker 1:But I think that people are now starting to realize, all right, well, we have to continue on with life. So when they open up those restaurants, I think that a couple of things are going to have there's going to be plexiglass in between, you know, from table to table, and there's going to be these, these safety blankets, because that's all it's going to be, because if you have a fucking plexiglass between from table to table, it's not going to save you, but it's going to feel safer, you're going to feel safer, but after that, all of that's going to go back to normal, and the fact of the matter is that there's going to be some pent up use, a pent up demand of wanting to get out there. Man, I tell you what? Listen, mark, I'm dying for a drink. Man, not in my house, I'm not going to sit down at a bar. How many times will you sit down just by yourselves in a bar and just how to drink, and it's awesome, right, going to a restaurant.
Speaker 1:We're going to appreciate the shit out of it, oh yeah, and and I don't think that's going to go away Soon I think we're always. I think we've never imagined that's going to be taken away from us. So I don't want to be overly optimistic, but I do think there's going to be a maybe not a super sharp V, but a a, a, a, the color like a U shape. Recovery, where you know people are going to start going out to the streets and we're talking about unemployment. Mark at being at 20% now, right, mm-hmm, okay, but a lot of those are furloughs though A lot of those are furloughs.
Speaker 1:They're not. They're not job losses, though.
Speaker 2:Yeah, what I'm saying what? But what I'm saying is, look, we were going in. I still believe that we were going in. We were going into this regardless that our economy was so. You know they call it a bubble right and the bubble's got a burst right Again unemployment at an all-time low for that long right. It was a good economy for everyone. I mean, it wasn't just a good economy for the wealthy, that's the fact that everyone had a job was a good economy for everyone. And we know that that is not sustainable. And you know, my point is the more that Americans come to grips with that. You know, we had a good run. If you look at these downturns, they happen every 10 to 12 years, sometimes eight, nine. We had a good run, it was coming right. So we're taking our medicine, we're staying home, we're doing things. We're actually, you know, right.
Speaker 1:But the other medicine didn't come, with the United States having to get us out of the sickness. You know what I'm saying. So that's the difference between it. You're right, at some point we were going to get it and, by the way, the music stops at some point. But you know what? I know that I know a lot of people are saying, including you and including a lot of people, including myself hey, listen, when's this going to end? So this is almost like all right, guys, it ended. Are we ready? We're ready to start again.
Speaker 3:Can we stop complaining?
Speaker 2:OK, we're done.
Speaker 1:OK, so we're in a recession, we're probably going to hit some sort of minor depression. All right, let's go.
Speaker 2:Let's go on the next run, ok, so it's kind of yeah and listen, I think it needed. Again, when you talk about social distancing, what I think you really are talking about is social training, right, and what needed to happen. What needed to happen was you know, I mean, you know I'm the kind of guy that you know, I mean it's awkward, but you know, when I like airport bathrooms, I like that there's no divorce, I like that everything is digital, I like that you don't have to touch anything, you can walk in, you can go to the bathroom, you know if you don't have to sit down, right.
Speaker 1:So if you wake up in the morning and you have to go to the bathroom, you have to do your own set. You wait till you get to the airport. No no, I like that much. Ok, all right.
Speaker 2:I like airport bathroom and I travel. You know I want to play before.
Speaker 2:I was on a plane every week and I, you know, and I like to, and I'm the kind of person that you know, believe it or not sitting next to the windows, the safest place to be, and if I could find a space between me and another seat, it's not because I'm a big guy, because I'm the kind of guy that if I didn't look, if it wasn't socially awkward, I would wear a mask on a plane, because if someone's coughing next to me, I don't want to be sick for three days.
Speaker 2:You know someone coughs next to me, you know. So I think that we it's been a social experiment and I think we needed to train folks, and I think that the fact that we live in a social media world, I think that a lot of our own peers are policing ourselves, right, and it's now what's ethical and what's unethical? Is it ethical to be standing in front of someone and talking to them In this new world we live in? No, give people their space. You could talk. There's things you can do. I don't think that we would have gotten as a society, as a free society, like I said, not in a authoritarian state where they give you two options stay home and, you know you either die from the coronavirus at home or if you leave you're going to die because of work.
Speaker 1:The president from the Philippines, the guy, the same guy who kills people. You?
Speaker 2:know. So my point is that to protect the older people, like I can tell you that you know, the older people, or the people that are exposed to this disease or to this virus, are going to feel a lot more comfortable participating, you know, with a mask and with gloves, after this social, which I call social experiment.
Speaker 2:That becomes socially acceptable. Yeah, yeah, an experiment. You know. I think they're going to now understand that. You know that people are not going to say, oh, I can't get it, so I don't care about the, you know, or if I get it, it's not a big deal. We had to change.
Speaker 2:I believe this and this has nothing to do with business I do believe that we had to change that mentality and it's the same mentality that's living at home with their parents, that 30 years old and hasn't had to go to work. And I think and I got to jump here but I think the biggest thing that we've learned there's a lot of folks in all of you and a lot of you have, you know, employees or have businesses or work with other people. There's a lot of folks right now that you couldn't get to show up and sit at an open house because times were good. You know that would be dying to do that right now. I think you know we had, because of where employment was, I couldn't get a plumber to show up to my house to fix something, or the AC got to come out, just to you know.
Speaker 2:I think that you know we needed to kind of reset the mindset back to the made in America, back to being less dependent. But also our workforce, you know, did not? There's certain jobs that they didn't want. They did not want to do and we weren't doing, and people didn't want to do certain things, and I think that you know this is kind of. This is a. In many ways it's painful, but this reset button, I think it's going to position us to come out of this with a different outlook on life. But, more importantly, on business, you know and how. You know the work ethic right, like, think about how many folks, not even for financial reasons, think about how many folks just want to go to work, right, forget about whether they need the money or not, they just want to go to work right.
Speaker 2:So you know it'll be interesting. I'd really love to see if there's agents that you can bring me back, you know, in a couple of weeks, and we'll see where we all will come.
Speaker 1:Like an update An update.
Speaker 3:I mean ought.
Speaker 2:We'll revisit this and if there's one thing we all know and it has nothing to do with the virus or whatever, whenever, because we've been through one of these if there's one thing we all know is that you know we don't know anything right, but these conversations and the fact that we could have a dialogue and that we could vent and that we could, you know, opine on what's happening and the fact that we're at a point now you know myself, you and Cadillac where we're leaders in our industry, and when I say leaders, I don't mean because of the position, because of title, because of monies that we've been fortunate to make, because you and me both know that we've made a lot of money, we've lost a lot of money, but the point of these conversations is that we'd come back from it and, at the end of the day, you know this is, you know this is the game we play.
Speaker 1:What's that keg stand saying that you have? That's one of my favorite ones. Our competition is either doing a keg stand, what is it?
Speaker 2:Well I say yeah. I mean I say my kids go to private. You know, I want my kids to. My kids go to private school, not because I think they're going to get a better education, but because I want them to do keg stands one day with the CEO of a company. So maybe, if they're not smart, they at least can get a job.
Speaker 1:Well, there's another one that. I have that our competition right now is either too young, is too old or is doing well. I said that in 2008,.
Speaker 2:But we're the old guys now. But I said in 2008, when we were going through that crisis and with nothing out there, I said listen, here's the good news. Our competition right now is either old and retiring or is in college doing keg stands. And they don't even know what happened, right.
Speaker 1:They didn't live through it.
Speaker 2:They don't know if their dad, you know, took a thing of pills because he couldn't go, bought a pill because he couldn't pay the bills and he survived because he couldn't even do that right at the time. Right, they don't know that, you know, and so, and so we put ourselves in a position to to, to, to, to learn from that. I think we're stronger for it now, today, and I think the one thing we learned Jesus and that downturn, that and this one, we were paying more attention.
Speaker 1:We're learning, like these conversations we're having right now, and these things that we're doing would have killed for the knowledge we have now in 2008.
Speaker 2:Right, and we're learning just by having the conversation right now, and we've we learned that. Guess what? You might not be able to make as much money as you want right now, but you could really spend time learning and preparing yourself, and so I appreciate you having me on here.
Speaker 1:It's been an hour and it's supposed to be half an hour, Mark. There's one more thing. I appreciate it, man.
Speaker 3:Get this out there, because you know one people, we talk about World War II and we talk about what happened with World War II and oh yeah, united States. United States got its ass kicked for the first two years. I mean up and down, left and right. They lost everything. But one thing you never do is bet against us, because we do find a way, a place where people are free to innovate and benefit from that that their innovation, their intellectual properties the best place in the world to be. In a situation like this, where the crap is up against the fan and everybody's racing to try to get an answer, this is still the best place to be, and so you know I agree with that.
Speaker 1:Made in America is going to be a good thing especially when it's slapped on that vaccine. Let's leave it with that, with that positive America. Mark Mark, love you, buddy. Thanks, man.
Speaker 2:By the way, I'll leave it with this thing. That's the new race to the moon. Right Is the vaccine, I think, when you look at the historical times and what things meant, and just showing that you know, I think you know coming up with a cure for this, that is the new vaccine and I do think that we're going to be better prepared for the next one. I mean, if you live in South Florida and you've been through a hurricane, you know it's pretty much a formality.
Speaker 2:It's a formality. It's a formality. Now, right, and if, before a hurricane, you talked about, you know, having a generator and all the things that we do and the way we can prepare and be ready within days, if you talked about having to do that, you know, 15 years ago, you would say the world is ending.
Speaker 1:And so I agree, kind of like we'll get through this world that and, if you don't mind, since I just got the new sound effects, I'm going to leave you with some applause. Okay, a couple of laughs. We got a couple of laughs in here.
Speaker 2:Oh.
Speaker 1:I love you, buddy.
Speaker 2:Thank you guys. Okay, man, bye.
