Disruption and Evolution in the CRE Markets | S4E2

Welcome back to season 4 of the A.CRE Audio Series! In this latest podcast episode, Spencer, Sam, and Michael discuss the disruption and evolution that has occurred in capital and CRE markets in the past several years. Specifically, we’ll talk about how rising interest rates and the post-COVID world have changed CRE.

Watch, listen, or read below to learn about risks, opportunities, and changing human behavior in this new episode.

Disruption and Evolution in the CRE Markets

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Episode Transcript

Sam Carlson (00:00):

What’s up, everybody? Welcome back to the podcast. All right. Spencer, a lot of times… And Michael, when I have questions about what’s going on in the economy, I’ll call you and I’ll be like, “Hey, what do you think about this?” There’s been so many changes. There are so many things that are different today than they were definitely since the last series, but just within the last six months, year, and they’re changing everything. I mean, strategies, everything. Let’s talk about today, let’s continue the car conversations we’ve been having about capital markets, all that kind of stuff, because I think we don’t usually opine that much on opinions and things like that, but there’s some crazy things happening right now in the cre markets that I think would be valuable to share with people.

Spencer Burton (00:48):

Yeah, you want to… Michael?

Sam Carlson (00:50):

I teed that up perfectly.

Michael Belasco (00:53):

Yeah, I think I can kick this off. I think it all revolves… There’s strategies and everything revolves around capital and markets go in cycles and interest rates fluctuate, and we are at a time that historically, interest rates are not that high when you look back historically. It’s just in the, let’s call it the modern era or the change into the 2000s era.

Spencer Burton (01:31):

It’s really post GFC even.

Michael Belasco (01:33):


Spencer Burton (01:33):


Michael Belasco (01:36):

We’re just adjusting and what’s happening is there’s just this cooling off and price discovery and everybody’s trying to figure things out. When you think of the fundamentals of it, you get to what is cash positive, I’m going to the basics and then we can zoom back out, but let’s just take any property. You have a cashflow that’s assumed based on certain revenue expenses and then interest on debt, and you have to be net positive. What’s happening right now is that a lot of real estate’s been priced, assuming debt was at a certain interest rate, you have your interest rate and you have your percent yield, and now a lot of that has flipped where interest rates have risen, doubled, or even more, and it’s created a lot of risk.


There’s a lot of properties that have gone underwater, particularly in certain sectors. Office is the obvious victim here, I would say due to just the drastic changes with COVID and everything like that. And this happens, there’s just this incredible opportunity and risk that’s right in front of us, and it’s been going on for a while. We’re at a point now where interest rates are risen, capital’s not flowing, deals have slowed down, and just there is a revaluation of what commercial real estate is going to be in the next cycle, so to speak. And I’m speaking off the cuff here because the prompt was open-ended, so yeah, that’s just where-

Spencer Burton (03:15):

Yeah, I think what you’re describing are two big changes. The first is around how we use space, and how we use space is impacting office in a significant way over the last 24 months and has affected retail over the last 15 years. And you couple that with now, call it a normalizing of interest rates. It’s to be said when the Fed will pause their rate increases. They’re signaling that they’ll probably increase again. We’re sitting in June 2023 for those who are listening or watching. And so they’re signaling another 25 basis point increase in the next meeting or two. The question is that are they bluffing or are they actually going to continue to increase above the five and a quarter that they’re at right now? And that has an impact, as Michael said, on yields and expectations and the like. Anyway, yeah, that’s the framing of the discussion.


I think it’s really two parts. It’s one change of behavior and use, and the other is capital cre market shift. And what’s interesting is that some owners are expecting rates to come back down. And so they say, “Okay, my cap rates at a five. Yeah, borrowing rates are five and a half to six, and therefore I have negative leverage.” If I were to sell at a five cap and the next buyer were to borrow at a five and a half or a six, they have negative leverage and they either have to grow out of that negative leverage or not make the investment. And so do sellers have to adjust their expectations-

Michael Belasco (05:09):

Because just for people who are trying to understand, the unlevered yield, the 5% is lower than the debt at 6%, so you’re cash negative.

Spencer Burton (05:21):

Well, yeah, the unlevered yield before growth, it’s 5%. And that’s why I say you have to grow out of it. Let’s imagine you’re assuming a two point a half percent growth and your unlevered yield is seven and a half and there is positive leverage at some point, but in your early years, you’re negative leverage. On top of that, in order to cover your debt service and in order to provide a debt yield to the lender that is comfortable, results in a much lower leverage level, meaning you’re able to borrow less. Not only are you negative leverage in those early years, you’re not borrowing anywhere near what you could before, so you’ve got to put in more equity and equity’s more expensive than debt. And so it all compounds to mean that the yields are less attractive to borrowers. And at the same time, if you’re a seller, unless you have to sell, why would you sell? And it’s an interesting conundrum. That’s the capital cre market side and the use side, I actually find much more interesting, trends around offices.

Michael Belasco (06:24):

Why don’t we focus on that? I know both are important.

Sam Carlson (06:31):

Before we move on from this, just to maybe put a little bit of a bow on for my own curiosity, what are the risks and potential downsides of all this happening? Is this just a regular market swing and we’re just going to… People are… What are-

Michael Belasco (06:48):

Let’s think about, I’ll give one, Spencer. Think about you buy a building, you have a fixed debt interest rate of 3%. Okay, you’re riding along and you have a 10-year hold period and your hold’s coming due and you are coming into a market where interest rates are now seven, 8%. Where are we, four or five, 5% right now?

Spencer Burton (07:21):

Well, you’re 375 10-year treasury, 200 basis points of that, so you’re 575 on the traditional 10-year.

Michael Belasco (07:31):

Unless your rents have grown exponentially, you’re now entering cre markets where people are placing a value on a cashflow that now doesn’t have 3% debt, but now will have five or close to 6% debt. And so when you think about a real estate investment, there’s two sources of, let’s call it value creation. There’s the operating cashflow and then there’s your reversion value cashflow. And so that reversion value, you could end up coming out and losing on a deal or losing a lot. You might even take such a hit, now if you’re in office and you lose all your tenants and you’re 50% occupied or less, which is a real scenario for many people, and your loan comes due and you need to sell the building, you need to pay back the loan, how are you going to do it? Nobody’s going to buy your building and then you’re in real trouble. You hand the keys back to the bank and-

Sam Carlson (08:23):

This is what leads into use case because now, a lot of these things are going to change what they’re being used for so they can then…

Spencer Burton (08:29):

Yeah, that’s where these two things collide and actually, the real distress in this cycle is happening, and will be compounded. In fact, I think it was today in the Wall Street Journal, they had the article about the ticking time bomb empty office buildings with loan maturities coming. Those are the most obvious, but really, anytime you couple an asset where its purpose, its initial purpose is changing and it creates some distress in the cashflow, and you couple that with a loan maturity into cre markets that is much more difficult to execute or to refinance out of, either because of the interest rate environment, but also you couple that with the banking crisis, which means there’s less capital available to provide debt, and that capital that is providing debt is at terms that’s far less advantageous, it’s going to create some distress.


And we’re already seeing it. In the bigger cre markets, and by the way, if you’re a student of history, the gateway cre markets tend to lead the distress and then they tend to lead the recovery. And so it’s not surprising that the biggest assets that are going back to the banks that are office are coming out of San Francisco or New York, and you would expect that, I mean, no one knows, but I would expect that the secondary and tertiary care markets will see distress. If they do, they’ll follow the gateway cre markets and likewise be delayed in their recovery.

Michael Belasco (10:15):

Yeah, I think that’s…

Sam Carlson (10:17):

Okay. I took over the conversation. We were talking about, what were we going to go to next that I interrupted?

Spencer Burton (10:24):

Well, Michael wanted to talk about the interesting changes in human behavior. What makes real estate so interesting, we’ve made this point a lot, but I think why many of us are fanatics about real estate is real estate fundamentally is about space use. Space use is about human behavior, and as human behavior changes, demand for space changes. And so what we have is coming out of COVID, and it seems to be persistent, this does not seem to be Sam Zell, may he rest in peace, had the view that office would go back to what it was pre-COVID. That does not seem to be holding true.


It seems to be that hybrid work at minimum is the new norm for many firms. And again, I’m painting with a broad brush. Remote work, even wholly remote, is a thing now for some subset of the workforce. And therefore the demand for office space will continue to be muted relative to the last 40 years. And if you have 40,000 office buildings in the country and the demand for office is 25% less, you have, to keep it simple, 10,000 buildings that no longer are needed. And so A, if you’re an owner of one of those buildings, there’s some distress that could happen depending on your position, and then B, what do you do with those 10,000 buildings?

Michael Belasco (11:59):

Yeah, that’s well put. We are at a time, you talk about human behavior. You take this fundamental change in society that was a black swan event. I mean, COVID was a black swan event that in my opinion, I agree with you, Spencer, permanently changed the work environment. You have these functional buildings, and I remember at… I used to work at a large shop, institutional shop, and prolific and office, one of the founding office tower shops, and they talked about how the timing was the riding of this big wave of a transition in human behavior. Office works, white collar jobs, people moving into office, this was the first time happening in human history and anybody who just landed in this space, rode this wave for decades.

Spencer Burton (13:00):


Michael Belasco (13:02):

And if you think of it as a wave or a cycle or whatever, and it’s a big cycle, it’s a big macro. There are these micro cycles that happen, but the fundamental human shift of moving to office is now, I think, going away. I think there’s these articles that come out about office, it’s coming back. I agree with you, Spencer, wholeheartedly. I don’t think that that’s coming back. And I wonder if it’s 25%. Yeah, so then there’s this creative opportunity and there’s not a lot of great answers. A lot of this, “Oh, we can convert these buildings into multifamily,” and anybody who’s in CRE that’s been paying attention knows that there’s a lot of challenges for these types of buildings to do that. What do you do? There’s just incredible opportunity that presents itself for those that have the ability to take advantage of this change. That’s one. I can move on from that. Do you want to hit other office buildings?

Spencer Burton (13:56):

No, no. I like this long-wave concept. I think this is really important. To Michael’s point, the several titans of industry, Gerald Hines being, in this context, probably the most obvious, rode this long wave of office demand, and that wave has now shifted more to industrial. Multifamily is I think more of a function of under-supplied… Yeah, 10 years of underbuilding and multifamily, some of that, and I think some of, if you’re working more from home, you have more demand for space at home.


The other point I want to make though is there’s this view, and I don’t mean any disrespect, that all of a sudden COVID happened and people stopped working from the office. But I think about Stable Wood as a great example. We were imagined as a wholly remote company pre-COVID. I mean, there were firms, I think it’s GitHub, but it’s one of those that was wholly remote pre-COVID. There are firms that have been thinking this way pre and what you had with COVID is it really accelerated some of these trends, the trend towards… Anyway, go ahead.

Michael Belasco (15:17):

Yeah. First off, I feel disrespected, so let’s just get that out there. Total disrespect, but that’s okay. Just kidding. Sorry.

Spencer Burton (15:31):

I’m just going to sip my watermelon juice here and take it.

Michael Belasco (15:38):

That was a tech industry thing and Stable was very forward-thinking in that. And first of all, I personally love the work from home. I love the experience of it. It’s something I love. That was not a thing really that I was aware of in any other industry, and it’s interesting because San Francisco’s one of the hardest hit cities from this human shift in habit. And the reversal of that, the industry with the least reversal back to the office, is tech. And so you see San Francisco and San Francisco, there’s a lot of challenges now because… I saw that when COVID hit, there was a project that I was involved with that had a problem and was like “See you later, we’re not coming back to this building,” and just left and happened all over the city.


I think the tech industry was ahead of its time, and then it took a pandemic to show people the opportunity, now because we have technology and technology can help facilitate all the interactions that we need to have to have commerce move forward and businesses run, the benefits of it. I don’t think that would’ve happened today had that not happened personally. And hindsight’s 2020, you can-

Sam Carlson (17:09):

You’re talking about at scale?

Michael Belasco (17:11):

At scale. No, I don’t know that it ever would’ve happened. There are businesses that I don’t think would’ve transitioned this way, but who knows? I mean, that’s a-

Spencer Burton (17:19):

I was at, at the time, a massive company and we had been shifting to a mode where certain people, I mean, it was rare in fairness, it was rare, but certain people were working hybrid. We had a protocol for work from home where if there was an event, and I was working at a portion of that in Milwaukee, where you had a big snow event and it would be a work-from-home day.

Michael Belasco (17:54):

But that wasn’t a gradual new thing. I’m sure they had that… I mean, it’s Milwaukee, right?

Spencer Burton (18:01):

Well, no, it was relatively new because they issued computers that allowed people… Basically the idea was let’s not have disruption in moments. And in fact, they’d have these flash days where they would send out an email the night before and say, “We’re going to do…” It’s like a fire.

Michael Belasco (18:16):

It’s like a fire drill at school.

Spencer Burton (18:18):

Yeah. It was like, “Tomorrow’s a work-from-home,” and the question is, did everyone bring their laptop home or not? And those who didn’t, got in trouble. When COVID hit, not that everyone was prepared because that was a shift, a significant shift. And to your point, your point is well taken, my point is that there was a gradual movement towards more flexibility in work. And you even saw it in office. I mean, you look 20 years ago, the average worker used, what, 450 square feet? I mean, this is a stat that we talked about. Yeah, and then with the open space concept, it compressed the number of square feet per worker down to 200 or whatever the number was. It was already shifting towards more of a hybrid, and then what COVID did is it just accelerated it.

Michael Belasco (19:09):

I didn’t even think about this because I’m out of the office space. I’m sure there’s listeners out there that are tuned into this, and maybe you are tuned into this Spencer, but this whole office design shift to this communal workspace, I mean, now offices, there’s nothing happening there. What is going on in this space? Are people still working in the design of these? I don’t know that you have any finger on the pulse in this space now either. It’s interesting.

Spencer Burton (19:38):

Yeah, we’re not the people to ask.

Michael Belasco (19:41):

I just thought about because I was so involved. It was a revolutionary concept to change the way the office functioned.

Spencer Burton (19:47):

I wonder, for a decade, we all talked about the open office and this is the office of the future, and it’s got to laugh a little bit. What’s the office of the next 10 years?

Michael Belasco (19:59):

Personally, open office was my biggest… I didn’t have to experience it, but it was my biggest area. I’m like, I can’t work with headphones on, I’ll listen to my music. That was a big fear of mine, open office. Let’s shift back. We’ve focused this whole thing on office, but what we haven’t delved into is the tremendous opportunities elsewhere that has been created because of this shift in human behavior, at least here in the States. And it’s opened up tremendous opportunities, and particularly in a space that I’m heavily involved with now, which is the RV space, which is such an amazing niche that I am incredibly excited about. But demand for this space has exploded, and we don’t need to dive too much into detail, but the fact is that people can work remote. They have so much time to be where they want to be, they can be closer to nature, and there’s been tons of research put out there that people are going back and wanting to spend more time outdoors and around national parks and in nature and with their families. And I think this is a healthy turn of events.


There’s a lot of people who are pro getting back to work, getting back to the office because you need to have that network and you need to be around the water cooler. And there’s some validity to that for sure, but me personally, the opportunity to cultivate the real relationships with your family and you still make time. My professional relationships may have suffered a little bit, but not tremendously. And there is this quality of life and people are fighting against going back to office. There is an actual fight about it because there has been such an improvement in quality of life. What does that mean? It means people can travel more, they can be out and about. The RV space is incredibly exciting. I don’t know how it’s impacted hotels and hospitality, but this impacts housing, how you design housing, the opportunities to create incredible work-from-home capable housing for people is an opportunity that’s not really been fully appreciated yet or taken advantage of, I could say. There’s opportunity there. Yeah, I don’t know. Anything else you could think of?

Spencer Burton (22:35):

Well, I’m excited, we’ll spend several episodes on what Michael’s doing in the RV space. I think part of it is a shift in human behavior creates an opportunity. I think there’s some demographic waves that are in your favor for your strategy. There’s some real estate, commercial real estate, call it capital cre markets, call it whatever you want, specific reasons why it’s an interesting space. You look at SFR as a great example, and I say SFR, Single Family Rentals. Pre GFC, Great Financial Crisis, so pre-2008, that was the domain of mom-and-pop investors. The Carleton sheets, no money down sort of folks. And it was shunned, it was not an institutional investment type.


And there’s a couple of reasons for it, but the largest is simply they’re tiny little assets. And how do you manage those assets at scale? How do you source those assets at scale? And I would say your RV strategy has those similar challenges that now, thanks to technology, thanks to data, and quite frankly, thanks to a capital cre markets environment that A, is a bit more mature in commercial real estate, meaning more open to the niche product types.


The other thing is if office is not a target property type like it has been, then institutional investors need to seek out… And they can’t be just only concentrated in industrial multifamily, they have to seek out other property types or subtypes. And I would argue… And I sit on Michael’s advisory committee in his real estate development firm, and I’ve been really impressed with what you’re doing in RV, but I would argue that it’s an emerging subtype. There are REITs that do it and all that I get, and it’s a sister product to MHC, manufactured housing, which is more institutional, but RV’s really, really interesting. It’s a hybrid between MHC and hotel.

Michael Belasco (24:50):

Yeah. What has happened in this space, and it’s become more apparent, so yes, you have capital searching for yield, and if you are a company that can execute on these smaller deals, there is yield here. The challenge, like you said, it’s hard for a billion dollars of capital to be deployed and be picking off these tiny assets. How do you do that? But what’s really compelling is the basics of every sound real estate investments. And I’ve said this probably on other podcasts, and it’s the most basic fundamental concept, supply greater than demand and the right pricing, and there’s just been overwhelming demand in this space thanks to this shift in human behavior. It is directly correlated to that, this drive to be away from the office and to be able to work remote.


There’s this incredible demand from people who’ve bought RVs and they need to use them to an under supply. There’s no supply. I think the data is 11 million RVs to 1.2 million RV sites in the country. And then you go to the more desirable locations, which is where we’re focused on, and that’s where the higher demand is and there’s even less. In these areas, it creates, and I’m talking about national parks is where we’re focused on, it’s high barrier to entry, incredible demand, very little supply, and you are capital and you can see it in the data, this growth in just A, people just going out and buying and renting RVs. I mean, the data’s incredible, to now just having… Anyway.

Spencer Burton (26:38):

Sam, I would suggest we do an episode entirely on RV. I think it’s interesting, it’s a segment that very few people understand, and as I’ve learned from you about it, it’s fun to dive into. I think that would be an interesting episode. Let’s continue though on the idea, the track of what’s next in commercial real estate and as it relates to investment strategies. Beyond RV, which I know you want to spend most of your time talking to RV, it seems like any time we’re in the car, Michael’s talking about RVs.


What are some other product types, subtypes within real estate that have some tailwinds? I’ll mention several that seems like we’ve been talking a lot about. I mentioned SFR, self-storage is another one where they are now the darling of the high net worth crowd and are becoming institutional. SFR is more obvious. Self-storage, both have been institutional for a while. The Odyssey index is an index that tracks the performance of open-end core funds. There’s 26 of them in the United States or in the world right now. And this is really the most conservative institutional capital in cre markets, and traditionally has been the domain of really the four main food groups, retail, office, industrial, multifamily. In fact, you look at the allocation to these different product types 10, 15 years ago, it was 40% office.


And that allocation has come down, retail allocation has come down. Now it’s largely allocated to industrial and apartments. But what’s interesting is the organization that manages this index are changing some classifications around, one of them is to create a classification specifically for self-storage to move SFR from their other bucket into residential. And I think what that demonstrates is that even this core capital is viewing subtypes like SFR, like cell storage, as core. And prior to the last few years, that was not a core product type.

Michael Belasco (28:53):

Yeah. I mean, it’s just where it’s almost… These are lagging into… This action is a lagging action based on where capital has moved, and technology and AI is further allowing this to evolve. I think it’s probably, it’s harder to find yield where everybody is, and so you have to get more creative, even in the industrial outdoor space and all these niches that are… Industrial outdoor space is a yard, it’s what it sounds like. And like you said, it was never a consideration before, but it’s capital chasing yield and the yield is there.

Spencer Burton (29:38):

Michael’s describing IOS, industrial outdoor storage. And the irony is all of these have been subtypes for decades, but they were always the domain of the independent real estate investor who understood their mark and understood industrial outdoor storage, understood cell storage, understood single-family rentals, understood RV, understood manufactured housing, understood senior housing, whatever else. And as an increased allocation from institutions to commercial real estate, necessitated bringing additional property types into the mix in order to hit their allocation targets.


But also as each one of these segments have become more sophisticated, student housing I think is a great example where it was 20 years ago, purpose-built student housing was a brand new product type, and now you have well-established third-party management firms. You have companies that have been doing this for 20 years that understand the product type. You’ve got now sophisticated individuals that are entering the space, they’re coming from other areas that bring new perspective, new insights that give them an advantage.


The point being now is you have greater capital, you have greater expertise, and therefore you have product types that might be considered core that weren’t before. And if you’re the little guy, if you can find those niches, and I think Michael, you have, if you can find those niches, get in, become an expert in it, build to 11, yield on cost, one day, those cap rates will compress further and you’re sitting in a very comfortable position. It’s an interesting time.

Michael Belasco (31:21):

I’m trying to… I’m just looking back at how our days have changed, and this is just an open-ended comment to explore what other opportunities there may be, even going off the cuff here and seeing, I don’t know if we’re going to come up with anything and say I’m jump in the mix on this one.

Sam Carlson (31:44):

I have to say, I’m actually enjoying just listening to this. I’m the beauty here, everybody.

Michael Belasco (31:51):

Pan left. Look at that guy.

Sam Carlson (31:52):

Yeah, that’s right. I mean, I don’t have a lot to add in terms of real estate expertise, but changing markets and changing behavior is incredibly interesting. And yeah, go ahead.

Michael Belasco (32:03):

Yeah, I’m just using the imagination. It’s like our days have, not so much for us, Spencer, just because Stable was a catalyst. Actually, it happened right at the precipice of COVID, so it’s ironic that that started, but days have changed, the way people do things, what has happened. What other opportunities there? And I think the key is thinking smaller because everybody’s back into their own little ecosystems and spend much more time there. And what are the things that they need to go… One that comes to my mind now is actually, ironically, it’s like I would say, I don’t know if the word is office pods, and you talk about coworking, but maybe it’s coworking, but it’s this… I’m thinking of these suburban little office spots where you can rent 300 square feet and you have a spot that’s just almost storage. You can go and you can get away when you need.

Sam Carlson (33:10):

Yeah, that’s interesting. One of the things that I’m thinking about is, for example, you came to Boise the other day, which is where I live, and we went to Topgolf. Topgolf is a quasi, it’s a golfing experience plus food restaurant thing that’s incredibly fun to go do, so entertainment. But then there’s also the other, in Boise, they also just put in one of those food halls where if you think in a mall, a mall had an old food court, it had all these different kind of food types, but now they’re taking that to the next… Excuse me, to next level, and there’s really good food, high quality food, entertainment, bands, live concerts, whatever it is.


I feel like these are opportunities that are emerging based on creativity, based on circumstance right now where people are, they’re like, “Well, we can’t put our money…” And actually, the food hall that’s in Boise was an office space, and it was an office space that nobody rented. Nobody wanted it. And so they reconfigured it to attach to a movie theater so you could go out of the food hall and then go up to the movies, and then they have this big amazing food hall down there, and they do live concerts and all sorts of things. It’s a complete reconfiguration and rethinking of space utility. Entertainment and what is it, where you eat? Where you, what’s the… I feel like there was a moniker. Guys, I don’t do real estate all the time, but I just remember just that’s how you evolve and create new spaces in real estate. It’s just how people use it, and I think entertainment’s a big one.

Spencer Burton (34:59):

Well, yeah, and we’re all over the place, but I think the point is re-Imagining space, like the Pickle Malls. I don’t know if you’ve heard of this trend right now.

Michael Belasco (35:09):

Oh, Pickleball. Yes. And I know somebody who’s I think investing in a-

Spencer Burton (35:14):

Well, they call them Pickle Malls.

Michael Belasco (35:16):

Oh, go on.

Spencer Burton (35:18):

It’s basically repurposing mall space for pickleball courts, Pickle Malls. And that’ll arrive in Boise in about 10 years.

Sam Carlson (35:25):

That’s about what we’re behind. Yeah.

Spencer Burton (35:30):

And so the point is, how can you reimagine space in a way that’s accretive to capital?

Michael Belasco (35:38):

We had this problem of dead malls. We still have it. And there’s one by me and Simon, the retail re owns this mall, and they have a ton of space. I think when retail started falling apart, they started renting the parking lot out to big rigs. And so you’d go there, I used to go to the movies there and it’d just be full of big rigs all of a sudden. It was my childhood mall where we used to go hang out on Friday and Saturday and it’s half the stores are empty.

Spencer Burton (36:17):

Trailer storage. That’s hilarious.

Michael Belasco (36:18):

Yeah, it’s quite interesting… Halloween adventure opens up there when Halloween comes.

Spencer Burton (36:24):

Yeah. Yeah, it’s the go-to tenant.

Michael Belasco (36:26):

It’s a very interesting… And it’s happened all over America, this is typical. And one of the strategies that they are pursuing is to, and I don’t know how the partnership works, I’m not involved with it in any way, I’ve been reading about it, is they have brought in a multifamily developer and either they’ve ground leased it or they’ve partitioned off a part of the land. And again, I don’t know exactly what the structure is. They’re putting in 700 multifamily units right there. And the idea is live, work, play. I think maybe that’s where you’re going, live, work, play or something like that.

Sam Carlson (37:06):

Probably, yeah.

Michael Belasco (37:07):

But that is a way to bring people. Yes, you can order from Amazon, you can do all that stuff, but you can also walk downstairs and go across right into this mall. That’s a creative strategy of something where we’re taking a dead asset class or something that’s been dying and figuring out a way to rehabilitate. Well, what’s the core reason people aren’t going to retail anymore? What is the problem? What is the solution that has changed for people? Well, retail can come to their door. Being creative, it’s like, “Okay, how can we solve the problem of bringing our building, our stationary building to the door of people? Well, let’s bring the people to the retail center.”

Sam Carlson (37:48):


Spencer Burton (37:48):

Do they have their pickleball court yet? That’s the question.

Michael Belasco (37:50):

I’ll let you know.

Sam Carlson (37:54):

This has been a fun one. I think we could probably continue to pontificate for hours and hours, but let’s wrap it up. We’ve been talking and we’ll continue to talk during this season about opportunities, about the current cre markets conditions and why. I mean, especially when we start talking about your RV project, which is really compelling, interesting, but just the cre markets conditions that make it that much more compelling.

Michael Belasco (38:23):

And I think it’s a case study for any strategy. I think we’re going to talk about why this became an opportunity. It’s not that I forced RV, it’s that there’s a macro way to hone in on a strategy and we’ll go through that.

Sam Carlson (38:35):

Right. Awesome. Thanks for watching this one, guys. We’ll see you on the next one.