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Multifamily Metrics and Strategies in a Post-COVID World

Commercial real estate is the business of building, leasing, managing and selling space. And the demand for and how that space is used is largely a function of human psychology and behavior. With the human-psyche turned on its head due to COVID-19, how we use and interact with space is going to change forever. And that change will greatly impact the economics of commercial real estate, including apartment investments.

In this special episode of the A.CRE Audio Series, Spencer and Michael welcome special guest, Lane Beene, to discuss the impact COVID-19 is having on multifamily investments. Specifically, they discuss which operational and economic metrics matter most for apartments in a post-COVID-19 world, and how multifamily operators are adapting in order to not just survive, but thrive.

A huge thank you to Lane Beene for his guest appearance on this episode. Lane is a 28-year retired LTC, a former F16 pilot, and a successful real estate investor. During the past 15 years, Lane hustled one single family house into a multi-millionaire dollar apartment portfolio with close to 700 units and awards along the way that included Fort Worth property of the year and National Multi-family Housing Council renovation of the year. He achieved this while working full time for the Air Force, deploying 5 times to Middle East and dedicated family man. To contact Lane directly, click here.

Multifamily Metrics and Strategies in a Post-COVID World

Watch as Spencer, Michael, Sam, and Lane discuss their thoughts on how this crisis is changing multifamily underwriting and operations.

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Episode Transcript – Multifamily Metrics and Strategies in a Post-COVID World

Sam Carlson (00:00):

Hello, and welcome back to the Adventures in CRE Audio Series. Today, we are talking about metrics to live by and having a plan of action for multifamily in a post-COVID world. Let’s get started.

Announcer (00:13):

Welcome to the Adventures in CRE Audio Series. Join Michael Belasco and Spencer Burton as they pull back the curtain on everything commercial real estate and introduce you to some of the top minds in the industry.

Announcer (00:26):

If you want to take your skills to the next level and be part of a growing community of CRE professionals across the world, this is for you.

Sam Carlson (00:36):

All right. Welcome back to the audio series everyone. Today I am joined by the ACRE team, Michael and Spencer, say hello.

Spencer Burton (00:44):

Yeah, good to be here. [crosstalk 00:00:45]

Sam Carlson (00:45):

And, we have a special guest with us Lane Beene, and as far as the introduction, I’m going to kick that over to you, Spencer. Let’s get started.

Spencer Burton (00:53):

Yeah, so I’m happy to introduce a friend, and someone who makes me a better professional. So, they say that you are a product of the people who you are surrounded with, and I’ve found that anytime I interact with Lane, both on a personal and a professional level, that I come away a better professional and a better person, and so I’ve been looking for an excuse to get Lane on the Audio Series, and given what’s happening in this post-COVID world and Lane’s experience in the space, I thought he’d be a really good fit.

Spencer Burton (01:25):

Now, some background. Lane is a former Air Force pilot. He’s an F-16 pilot. In fact, at one point, he invited me and my kids and my wife out to his base where we saw these F-16 planes taking off right in front of us. I mean we were out on the runway. You could feel it in your chest as these things fly by. Well, he flew those for 28 years. A retired Lieutenant Colonel in the Air Force, and so just an upstanding guy.

Spencer Burton (01:56):

Now, what’s fascinating about his story is some 15 years ago, so he was an Air Force pilot at the time, somehow begins investing in real estate and started with single family houses, pivoted to multifamily, has built a portfolio for himself of 700 some odd units. And, when you talk to him about his investment strategy, I mean he cares as much about his tenants as any operator I’ve ever met.

Spencer Burton (02:22):

And so, I wanted to get him on, especially now that he’s retired and we can really take advantage of his expertise, and hear about what he’s doing at his properties to help his tenants in the environment that we’re in. And then think about metrics that matter now, that maybe matter more today than they might have six weeks ago.

Spencer Burton (02:45):

So, anyway, Sam that is Lane. Lane did I miss anything?

Lane Beene (02:51):

You covered most of it, Spencer, so I’ll fill in the details as they become applicable.

Spencer Burton (02:55):

Okay, great. Great

Sam Carlson (02:57):

Very good. Yeah so, we’re really excited to be here today. These are interesting times that we live in, and everybody is adapting, and we’re all making plans. We’re all doing our best, so I think maybe, Spencer, I’ll kick it back to you to kind of set up, we’ve kind of done that a little bit, but set up the conversation, and maybe start where we’re at as far as, COVID, multifamily and where this kind of stuff was leading us and what plans we’re making.

Spencer Burton (03:25):

Yeah, so what I really want to get out of this, because this is the adventures in CRE Audio Series, and so we’re Excel nerds. I really want to talk about metrics that matter more than they used to. So that’s one, and then the other is, and this goes hand in hand, but for the operators that are in our audience, and specifically to Lane, what action plans are you putting in place at your properties that matter now? And then some ideas about how multifamily investing changes going forward. Anyway Sam, that’s the set-up, so maybe I’ll start and Micheal can chime in here as he thinks about financial metrics that matter more.

Spencer Burton (04:16):

One that comes to mind is collection percentage. What percentage of tenants pay rent in a given month? And, I know that we have our collection/loss line item, you know a general vacancy and credit loss line item in our performance, and it’s always been, at least in my experience, something you quickly move through. One percent collection credit loss in this deal, and on you move to operating expenses, and I think, especially in properties that are more impacted by social distancing and the careers around that. Tracking the percentage of tenants that are paying rent, I think matters. And, not just during this period, and there’s probably 12 to 18 months where this thing is going to really matter as we have waves of social distancing, but going forward, I just think that this is a metric that is underappreciated. Lane do you disagree? Are you thinking about this differently?

Michael Belasco (05:20):

No, I think you said it right, Spencer. Once you get a project stabilized and you have your stable tenant base, you have a pretty consistent payment. If a tenant is not paying correctly, then they generally become a problem. If they do pay well, then you generally don’t have to worry about that, so your statement that that’s a line item we move through quickly, I think is a very fair statement, pre-COVID. Post-COVID, there’s been so much disruption in employment, disruption in bills. And, I think that that’s really uncharted waters. I know that there’s some government programs to help get through subsidized for the loss of income, but the real question is after the stimulus package has worn off and the political resolve to continue to support the economy, and now self business have to stand on their own and change to the market conditions that are post-COVID market.

Michael Belasco (06:25):

Will these businesses still thrive? Will the small businesses still employ the tenants and will the tenants still pay? So the question you asked was, “This was a line item loss of rent or bad debt was a line item that I moved through quickly or your students moved through quickly pre-COVID?” And I think that was a fair assumption on a stabilized project, but post-COVID, I believe that there probably is an adjustment to that point.

Michael Belasco (06:53):

I don’t know if that [inaudible 00:06:54]

Spencer Burton (06:54):

Yeah, you know in fact in my models, I usually combine general vacancy and credit loss in one line, because it was that inconsequential to my analysis, and I think separating those out and thinking about credit loss matters more. Especially, to your point about businesses. Ultimately, it comes down to the employers for your tenants, and how are those employers doing? That determines whether your tenants are going to be able to pay rent, and it’s always been that way, it’s not like this is something new, but all of a sudden, where a quarter of the economy isn’t operating, you start thinking about that.

Spencer Burton (07:32):

Michael, I’m going to kick it to you. As you think about underwriting multifamily in a post-COVID world, is there a metric that sticks out that maybe matters more or less than it used to?

Michael Belasco (07:43):

Well I haven’t come to a conclusion about a specific when we get to line item metrics, but you’re hitting on something that we’ll roll out, which is the larger discount rate, right?

Michael Belasco (07:53):

And you take a class A building that you’re discounting back at a certain percentage, you want to hit that discount rate or that’s sort of in your risk return world, if you’re looking at a core asset, what do you discount that to? If we’re talking post-COVID world, and you mentioned waves, right? And I don’t have a crystal ball. Nobody has a crystal ball. I don’t understand yet, and I don’t think anybody does how that will impact, but now you’re pricing in so much more uncertainty, not just from the immediate present, right?

Michael Belasco (08:27):

Like there’s all these talks about the V or the longer recovery. This could be an unstable wave back and forth. I’m not trying to be a doomsday sayer here, but what I’m trying to say is there’s more uncertainty now because we haven’t figured out. I’ve heard it, you’ve all heard it. This is a health crisis and we need to figure that out, and as that is the core, it’s not only solving the economics. There’s a bigger picture here and so, pricing that uncertainty, I know we’re talking about specific metrics, but really it’s the discount. How are you pricing these. That’s really. I hate to be so general, as that’s really the big question here, but you know, that to me is obviously the ultimate. How are we pricing. How are you projecting cash flow, projecting revenue, projecting rent. And you hit it. I mean you kind of hit it. Maybe we were saying the same thing, but-

Spencer Burton (09:19):

Well no, I think that’s something else, right? So discount rate is synonymous with return, and return is a proxy for value. And so if there’s less certainty, discount rate or your target return is higher, and to yield a higher return, you must pay less for a property.

Michael Belasco (09:39):

Yeah, which flows up from, what’s the collection percentage? How are you projecting that?

Spencer Burton (09:43):


Michael Belasco (09:43):

What are you going to do about that. They tie together.

Spencer Burton (09:49):

What we’re saying is, and I agree with you by the way. We think multifamily is worth less today than it was worth 30 or 45 days ago. Lane, have you gotten any market intel around valuation in multifamily, and do you have any anecdotal evidence that pricing is falling? Because right now, I think Michael and I are just hypothesizing that values are lower than they were.

Lane Beene (10:19):

Absolutely, Spencer, and let me give you a very specific example. The days leading up to the first news report, the national U.S. news report of the impact of COVID, and this was about three weeks ago. I believe this was about the 14th of March. I had a property in Denton, Texas, North Texas, that was for sale. And we were trying to position it, and it was lined up for call for offers which is basically like the final step of the sale. And we had nine groups interested in making an offer for purchase on this project and they were coming in right at the purchase price that we were anticipating, or at least that was the rumor of that.

Lane Beene (11:04):

On Thursday, is when the first news report of the national impact of COVID occurred and it started to unwind. And then, on Monday was our call for offer, which is basically the last, “Hey, send your offer in and we’ll consider it,” for your audience who is not familiar with how the commercial sales process works. On Monday, that was the worst day of the stock market since the entire century, and I believe that was the 17th of April or the 17th of March.

Lane Beene (11:38):

That day, it was a 20% decrease in value from Wednesday where we were projecting these offers and a broker was reaching out, what are you expecting the offer to come in? On Monday, it was almost a 20% decrease.

Spencer Burton (11:59):


Lane Beene (11:59):

And, a lot of those offers just completely eroded away. There were no offers at all. So, over about a three day period, our value dropped by 20% of our project, and then I’ve also seen that consistent across the whole commercial spectrum. Multifamily has probably dropped or devaluated about 20% for the reasons you Michael, and Sam, were talking about. The lack of consistent durable income streams.

Spencer Burton (12:30):

Yeah, and you could argue that multifamily is one of the safer of the property types still in a post-COVID world. Now industrial is pretty safe. It seems to have shown itself to be, at least certain elements of industrial, have proven itself to be an essential property type, and so those valuations have held up, but retail. And this podcast isn’t about retail, so I don’t want to go down that rabbit hole, but even with that multifamily is still relatively safe. [crosstalk 00:13:06] Go ahead.

Michael Belasco (13:07):

Well, I was going to add. You said a multifamily is an essential, right? Everybody needs to occupy housing, and the question then becomes the mystery. Okay if everybody’s occupied. Whose paying? And there’s expenses. And that’s where it becomes really interesting, because it is an essential. Whether people can pay for it or not, they’re not going to leave. You know? I can’t imagine the mass wave of people who can’t pay rent getting evicted and then all of a sudden, there’s and I’m not saying anything I think that people aren’t already thinking about or talking about, but I just want to call that out. Is it safe or is it more costly, because the occupancy is happening? There’s occupancy costs and all these associated costs that go along with an essential piece of real estate that may not have a revenue stream.

Spencer Burton (14:01):

Yeah, but that’s true. What you’re saying is there’s fixed costs there that irrespective of your occupancy, you’re going to have to cover, where maybe in other property types that [inaudible 00:14:12] is lower. Let’s talk about another metric and then we’ll get into the operating side, because that’s really where Lane shines.

Spencer Burton (14:21):

So the other metric that I thought about that matters more is break even occupancy. It’s a metric that sometimes you see in models and sometimes you don’t, but in this world, I think it’s really important. To understand at what occupancy level I break even, and that break even includes a service coverage, and so maybe we cared about it before a little bit, but I think it matters a lot now. And maybe it’s not break even occupancy. Maybe it’s break even tenants paying, occupied tenants who are actually paying rent.

Michael Belasco (15:03):

Maybe there are new metrics that come out of this. We’re in a new paradigm, right? Maybe there will be metrics they come up with, and maybe, Spencer, you’ll be the one to…

Spencer Burton (15:12):

Yeah, it’s almost like a rev par metric, where these are available units, but are we getting any revenue on them?

Michael Belasco (15:22):


Spencer Burton (15:23):

So anyway, that was the other metric that had come to mind for me. Any thoughts on that?

Michael Belasco (15:28):


Lane Beene (15:29):

Spencer, I think that was something that I’ve heard of, and of course I know what it means, but in light of the last five or six years in the market, that was just such an underlying metric that I don’t know if many people even talked about it. It’s a fairly simple thing to understand, but it just wasn’t really part of the vocabulary on the dynamics, because if it was that close, you just didn’t do it. Even on value add or even on deep repositions, break even occupancy or break even revenue, wasn’t something that was talked a lot about in financial metrics.

Spencer Burton (16:11):

Yeah, and so I’ll be sure to include both that metric as well as the collection loss metric in the write-up to this episode and that way people can go find the definition and learn how to calculate those metrics.

Spencer Burton (16:24):

So, Sam if it’s okay with you, I think we should move to the operating side- [crosstalk 00:16:30] Lane, go ahead.

Lane Beene (16:30):

Hey, I got two other ones, Spencer, that I was thinking about when you and Michael were talking there.

Spencer Burton (16:36):


Lane Beene (16:36):

And just, real briefly, let me hit these, because I think they are very important metrics, and they have changed in light of COVID, and that is the rent growth, because as I was pro-forming, and I was developing the forecast for financial models, one of the biggest things was rent growth, and I think post-COVID, it’s going to be difficult to project a very healthy rent growth.

Lane Beene (17:04):

Generally, based on the property, you would have one percent rent growth, maybe up to four percent rent growth in some projects, and I just don’t know if that’s consistently healthy, so rent growth was one, and the other was vacancy.

Lane Beene (17:19):

Can you imagine showing a unit now, and you’re in stay at home orders? How are you going to do that? And so the vacancies, I think, they’re going to be harder to fill, because there’s going to be fewer people out foot traffic, and that’s going to result in higher vacancies that turn time between down units is going to be higher, and so those two metrics are operational things that I think you will see increase to the detriment of operators and to the detriment of investor returns, so those are two other ones that I thought about in addition to what you mentioned.

Spencer Burton (18:03):

Yeah, I think that’s true. You know, the vacancy piece, you have a short-term element to that. Over the next 12 to 18 months, totally. It’ll be harder to show units and therefore units will be down longer, and to your overall vacancy. Longterm, we’re in a recession. I think that’s universally agreed. If we go into a deep recession and this has a structural impact on the economy over several years, underwriting a five percent vacancy in a stabilized performer may not be right anymore. Maybe it’s seven today, and I’ve seen CoStars drop their vacancy or increase their vacancy projections on almost all sub-markets that I’ve been looking at, and so if we’re talking longterm vacancy, I’m assuming that we’re going to be underwriting something higher than what we did two months ago.

Spencer Burton (19:04):

And then rent growth is a similar issue. Short term, yeah, no rent growth. Even in the midterm, you assume there’s muted rent growth for the foreseeable future.

Michael Belasco (19:16):

Good insights there, on the operation side, Sam?

Sam Carlson (19:20):

Yeah, so I think, understanding how to model. Model deals that you have. Model deals that you might have been looking at, wherever. I think we’ve kind of covered that. What now is important to integrate into these equations. Now, what do people do? I mean you own properties, whatever the case may be. You’re operating properties, what are the action items that we should be taking proactively today to perform at the optimal level. A lot of people are just going to sit back and wait for things to happen. What is the proactive things that we can do, and I’ll leave that up to anybody. I’m not going to kick it over to any one person. Is there anybody that wants to kick us off there?

Spencer Burton (20:07):

Yeah, I can start there. So, we are in the business of leasing space. That’s what we do. That’s what commercial real estate’s all about. And space use determines demand, and space use is a function of human psychology, right? We use space based on how we feel about it, and what maybe economic abilities we have, and that influences how we use space, and so when we use that lens to look at multifamily, how does multifamily use change?

Spencer Burton (20:47):

Now I really want Lane to talk through, he has this kind of six step plan that he uses in his properties, and I want to get to that, but me, who I don’t operate multifamily on the frontline like Lane does, so this is very simplistic, but one thought I have is if I’m an operator of multifamily, my tenants are probably going to be in their units more than they have in the past. A lot of them working from home, and so, how am I supporting that use? That behavior?

Spencer Burton (21:21):

And it could be everything from offering free fast internet, reliable internet, or it might be a new revenue stream where I offer a fast guaranteed cable internet that is at a discounted rate, but I still earn something on that, and there’s a little revenue generator that I didn’t have before. So that was one. Michael?

Michael Belasco (21:43):

Yeah. There’s two spaces, well there’s probably more than two spaces, but there’s the individual family or person’s unit and then the other issue which I think is the most challenging, and I’m really curious to hear Lane’s take on this, is the common areas.

Michael Belasco (22:01):

You have essential areas where people need to interact, elevators, hallways, egress. All these places where you have a six foot minimum distance, and yet you don’t know when somebody’s out in the hallway, right? And that’s a real fear, like am I going to open the door and all of a sudden somebody’s going to be coughing at me when I get out, or if I have to go push the elevator, what if somebody on floor three is getting on and I’m on floor four. How do you handle that? I’m touching my buttons, all these things which seem crazy to think about, but solution-wise, I don’t know. How do you solve that? I haven’t thought about it. I’m not in the multifamily space, but how do you think about that?

Michael Belasco (22:45):

It’s funny. I must have been on some website, I saw somebody with a lighter and a safety pin on the tip of the lighter and he pushed the elevator button and then he’d flicked his lighter on, sanitize and it’s just like you know, it’s funny, but it’s like that’s actually kind of a good solution.

Michael Belasco (23:05):

Common area spaces. Is there like sanitizings? Are you offering, maybe there’s scheduling, right? I don’t know. Everybody can share the stairs. I have no idea. I haven’t thought deeply about it, but there’re going to be some really great creative solutions, and I wonder if, Lane, if you have thought of any. I’m sure you’re thinking deeply about all this stuff, but I’d love to get your take or your thoughts on that.

Lane Beene (23:30):

Well certainly, this crisis has put the national economy, and put every business, every corner store in jeopardy. Whether that’s a restaurant, whether it’s a dry cleaner, maybe with the exception of Wal-mart, or some medical supply companies, everybody’s going to take a bruise from this, and apartments and apartment owners and investors and stock investors are not immune to that as well. So, when you ask that question, Michael, is how do we get through this with no broken bones? How do we get through this and survive? And what procedures do we have to endure to get through it safely? And then what in procedures will stick after the crisis is complete?

Lane Beene (24:28):

And I don’t really know all the answers to that, but let me kind of real briefly, without making you guys experts in operating multifamily, what we’re doing. Well, in any situation like this where we’ve already talked about the restrictions to cash flow and the restrictions to revenue, there’s three things an apartment owner needs, cash, cash, cash. Okay, we need a cash cushion so that we can absorb all of these unknowns, because that’s really what it is. Who’s going to be able to pay? Are they going to be able to pay next month? Is their job going to be terminated? Is their unemployment benefits going to stop? So we need that cash.

Lane Beene (25:08):

And so, we’ve got a crisis action plan that we implemented immediately and it’s five or six steps. Pretty much stop all repairs that are unnecessary. Stop investor distributions. Line by line audit. You know, things that you would normally do in your household budget, and you probably are doing in your household budget, to just try to save cash for that day that you don’t know what’s happening.

Lane Beene (25:38):

So, I can go into more detail if you want to, but basically that’s our process at each apartment complex that I participate in is to save and preserve cash so that we have that margin, so that we can, like Spencer said earlier, our break even number if we start getting close to that, now we have a margin or a cushion that gives us more risk mitigation.

Lane Beene (26:04):

So that’s really, kind of what we’re doing. I could go into more details of how we do that, but essentially the plan’s purpose is to preserve cash while still providing an adequate level of service to our residents.

Lane Beene (26:21):

We’ve had to change that, not necessarily to save cash, but primarily to try to put protocols in place, so that we protect their health and they protect our health while we’re still trying to figure out who’s got this and who doesn’t. Like you see at the restaurants, you can’t go in now, because you don’t know if they’ve got it or you’ve got it. The same sort of idea with the operating maintenance and repair of apartment complexes, so that’s kind of a synopsis umbrella. What would change.

Spencer Burton (26:57):

So what do you do about common area. Let’s imagine you have a swimming pool. Do you close that?

Lane Beene (27:04):

Closed. Yeah. So we’re following the National Apartment Association, the county apartment association, and they’re recommendation is basically to close those, because you can’t group together anyway. They would all be grouped out there, and so that would be a violation of ordinance, and so most of those, Spencer, are closed.

Spencer Burton (27:29):

For how long? So imagine a scenario where we all leave our houses, but we know that we’ll have flare-ups of this thing for some time until a vaccine is in place. Do you limit access to those common areas at some point? Have you developed a plan yet for what those next steps are?

Lane Beene (27:53):

No. I think we pattern what the government does. So when the government allows the restrictions for business to be lifted and the city allows the city pools to open and the parks to reopen, I would assume that would be an indication to say it’s now safe for you to have an outdoor barbecue at your picnic-like or your park-like setting, or your pool-like setting.

Lane Beene (28:21):

If the city pools were open, I would think that would be indicating that, because I don’t have access to the medical documentation, medical experts like the mayor would, or the governor would, and so I’m just going to lean on them, and trust that they are referencing the breakout the hot spots, the number of infections that are occurring in our area, and if they lock it down, we’ll lock it down.

Spencer Burton (28:48):


Lane Beene (28:48):

If they unlock it, we’ll unlock it. And that’s kind of my thought. I haven’t put a whole lot of brain power behind that, but I think that would be a safe way. I certainly wouldn’t want to be out in front of them.

Michael Belasco (28:58):


Spencer Burton (28:59):

Yeah, no I get that. So, what I’m hearing from you is conserve cash in these sorts of times. What about preparing for the future. I think most, and you could tell me if I’m off here, but at least in underwriting these and in my experience, dealing with apartment operators, they prefer not to keep any more reserves than a lender requires them to. Maybe a month of cash flow plus whatever reserves that the lender requires. Does that change? Does three months worth of reserves now become not just a lender requirement, but a discipline that operators use? I mean, you’re a military man who preparation is key to anything. Do you see that changing, or are we going to get two years down the road and everyone will have forgot about this and cash will only matter so long as it’s available.

Lane Beene (30:02):

Well, I think you’ve already seen some of that already be adjusted in the new debt requirements. Fanny Mae and Freddie Mac have already said if your loan balance is above this amount then you’re going to have to either have 12 months of principal and interest on escrow at closing, which is exactly what you’re talking about. It’s that cash. Remember I said you need three things cash, cash, cash?

Spencer Burton (30:29):


Lane Beene (30:30):

So they’re requiring you to bring those three things to closing. So now you’re going to have to have 12 or 18 months depending on the balance of your loan. You’re going to have to have that, day one. So if you have a loan, you’re going to have to have 12 months of principle and interest. And a lot of times in multifamily investing, you would get a period of interest only. I believe that will probably be thinned down. So there’ll be a shorter period of interest only. You’ll have to have a full year or year and a half of that amount of payments, 12 or 18 months of payments set aside in a bank account before you ever take the keys to the property, and in addition to that, you’re going to have to monthly escrow, taxes and insurance amount, so they withdraw that. So that’s even going to increase your debt servicing even more, so what you just asked about, Spencer. I think it’s already been implemented by Fanny Mae, Freddie Mac. Whether that’s implemented by the banks and private debt is yet to be seen, but generally they follow that guidelines.

Lane Beene (31:47):

And so you ask, should the owner have to do that? No. The owner probably won’t do it, because it’s a decrease in return, but it will be required to get the debt at a certain loan to value ratio, so I believe that’s going to happen, or it’s already happened. That’s already happened.

Spencer Burton (32:08):

Yeah, so. Well those are really good insights. I think to finish, what I’d like to hear, and maybe we can go around the horn. Name one new expectation that tenants will have that maybe they didn’t have three months ago. And I’ll start so that y’all can think of one yourself, but I wonder if there’s an expectation that materials are different. And what I’m getting at with this, is cleanliness is going to matter more, and Michael alluded to this with his funny example of the elevator button, but maybe the types of materials that we use, that can be cleaned easier, both in our common areas, and in units will change. I don’t know enough about the composition in the materials and what matter, but I can see a trend where this sort of countertop or this sort of door handle is less likely to transmit disease and therefore tenants will want that in the same way that in this cycle dog parks became a thing. Anyway that’s mine. Maybe I’m wrong, but that would be my guess. One area.

Spencer Burton (33:38):


Michael Belasco (33:39):

I think, those are a great preview for it, but I think private entry is going to be much more of a premium. People are going to want their own private entries into their house. They’re not going to want to be in hallways, not going to want to be in elevators, and this is a guess, but I think that’s going to be a trend that we’re going to see.

Spencer Burton (33:57):

Interesting. Lane do you have any thoughts?

Lane Beene (34:01):

So, I think that both of you guys are right on, so Spencer, I would categorize yours in a bigger, broader category, as wellness. So, you talked about cleanliness. I would say there’s going to be more of an emphasis on the overall wellness concept, so inner air quality, inner environment quality, water quality, air filtering. And you said cleanliness, antibacterial, all of those things fall under a very broad category of wellness. And what used to happen, would you would look at three or four apartment complexes selecting which one and you would think, these are all commodities. They’re all equal wellness factor, but I think in the future, they will some way delineate themselves to say this one’s cleanly or this one’s more sanitary. We have procedures in place. We have materials here. We have inner air quality. And so what you’re talking about, Spencer, is what I believe is going to stick to this, and that’s the wellness factor.

Lane Beene (35:04):

Michael, what you talked about, is you talked about a private entry. And what I would categorize that underneath is a contactless society. You’re going to social distance. You’re going to isolate yourself. You’re not going to shake hands with anybody, and you’re not going to come in contact with somebody when you can do things that don’t require it. I believe that’s going to stick with us or at least some part of that will stick with us for a period of time.

Lane Beene (35:33):

So, contactless society, however you want to word that, and wellness, and then the other thing that I think is going to stick with us and this is probably not the right umbrella to put this under, but I think it will make sense, is just the changes and disruptions in supply chain. And what do I mean by that? Is, I never, I probably within the last year got carry-out food one or two times, but going forward, there’s going to be a lot of carry-out foods and there’s going to be a lot of delivery foods. There’s going to be a lot of groceries delivered to my house from Wal-mart or from Kroger, or whatever, and I don’t yet know how we’re going to handle that, because, Spencer, when you’re at work and they need to deliver groceries to your house, are they going to put them in a cold storage? Are they going to open your door? Are you going to have some type of internet of things lock and it’s going to unlock your door?

Lane Beene (36:30):

I think there’s a lot of tactical questions that we haven’t answered yet, but the change will be the supply change. How will you get service, products and merchandise to you? Are you going to go find it yourself? I think you will. That’s not completely going to be eliminated, but a lot of it, you’re going to find it virtually, and then it’s going to be delivered to you in a different form or fashion, and that’s going to change the way our real estate’s used, and it’s going to change the way our real estate’s accessed and it’s going to have implications.

Sam Carlson (37:11):

Yeah, in conclusion, my final summary, and kind of what I think needs to change and will change in the future doesn’t really have to do maybe with some of the features and the different things you guys are talking about. To me it’s more of the practical. It’s more of the communication aspect that goes between lender to owner and owner to tenant, and I think I was reading earlier this week about a GP that just, he told his investors what was going on, but he did a very poor job. Now, when Lane was articulating his plan, and why they need cash and what they’re doing step by step, all those things. When you tell somebody, “Hey, we’re going to stop disbursements and everything is staying in house. We’re holding onto cash because of a question mark.”

Sam Carlson (38:02):

If you say that and then you’re following it up with, “because we want to be prepared, because we want to protect your investment and things like that.” I think there’s a lot of people that because this is a new situation, they’re not doing that, and so what do they say, with lack of information people make up their own, and so there’s a lot of potential investor confusion, and quite frankly people don’t create good information. That’s not what we default to. We create bad information and so that relationship between investor and GP, LP, there’s some dynamic there. I think there’s some people that are probably doing a great job at it and they’ll probably surge because of this, both in reputation as well as future opportunity, and then I think some people, just because of the way they communicated and their protocols and the way they carried out during this time. I think regardless of the performance of their assets, I think they are going got suffer greatly in the future because of just poor, inadequate communication. Okay.

Spencer Burton (39:08):

Good point.

Sam Carlson (39:09):

And, I think the same thing happens from owner to tenant. Being reactive in that communication pipeline, like not letting people know your expectations, not letting people know what will happen in the future. What happens if this does happen again? You better not be on your heels for that type of situation, and your tenants better know where you’re standing, because all of those things, I mean, the economy works because of people’s confidence in purchasing things. That’s what it is. It’s human psychology at it’s fundamental level, and what most people are doing is they might be reaching up here in the branches and we need to get down to the roots, and the roots is confidence, the roots is communication, the roots is being prepared, okay? And I think whatever rung of the ladder you’re at, and I know people that are working for big companies, and those companies are saying, “Hey, let’s model everything we have. That way we know where we’re at, and now we can then communicate down the chain, what our abilities and expectations will be.”

Sam Carlson (40:16):

By the way, I’m guessing, I don’t know this, but I’m guessing that those boys at the top, those big banks, they’re probably getting that money from the government a lot quicker, okay. And so, if you’re delayed down the chain, what’s a way to accelerate your plan? Go up the chain that you can actually communicate with. So, I think in general the communication part of everybody, everybody’s going to really need to have an actual protocol, up the chain and down the chain and understand what they’re doing, and that way when we get hurt, there’s no question marks. That’s what’s I think unsettling to most people is just the question mark. What are we doing? What happens if? Those ifs need to get solved and they need to get solved quick.

Sam Carlson (41:02):

So, that’s it. Anyway, thank you so much for being here, and Lane thank you so much for being here too. This has been absolutely amazing, and we will see you guys on the next episode.