The Real Estate Espresso Podcast

Latest Episodes:

Hotel Meltdown Jan 18, 2023

Show notes

According to an article published in the Bloomberg Law Journal last week, we are in store for a massive meltdown in the world of hospitality.

Just as it appears that travel is returning to normal, hotels are about to get slammed in the side of the head again. But this time its from their lenders.

As of December, close to $4.1 billion out of roughly $93 billion in outstanding lodging loans are delinquent, according to data from CMBS analytics firm Trepp Inc. It currently projects about $35 billion worth of those loans to mature this year.

According to the report, there are currently 155 loans secured by hotels that are in financial distress in the US. This number is expected to balloon as loans become due.

Those who are franchisees of major flags also have covenants for capital expenditures to keep the hotels looking fresh and meeting brand standards. These are hard requirements from Hilton, Marriott, and IHG. Many of the hotel operators were allowed to defer those capital projects during the pandemic because clearly they were in financial distress with the large scale lockdowns that were crippling the industry. Now those improvements are required to happen at a time when the cost of financing those capital improvements has more than doubled.

The hotel data company STR Global maintains industry statistics on hundreds of local markets. Recovery is underway when you compare 2022 and 2023 data with 2019. But averages are still below 2019 numbers in most cases. Parts of Europe experienced above 2019 occupancy for certain specific weeks, indicating strong leisure travel.

The real story is that despite the recovery, the Bloomberg law article is onto something. There will be a significant number distressed deals appearing in the market this year. If this is an area of interest, be prepared to jump in and perform your due diligence for the right assets.

World Economic Forum Misses The Mark? Jan 17, 2023

Show notes

The World Economic Forum opened its annual meeting on Monday evening in Davos Switzerland. This five day in person event is one of the global networking events of the year where you can rub shoulders with some of the most influential people in the world.

These folks hold sessions on everything from the economy to energy, to health care to climate change.

The output of the conference seems more like a highly choreographed Hollywood production than a conference designed to influence change. The documents are highly polished and extremely superficial in their treatment of the issues. The footnotes are filled with academic style references. But I found all of the papers I read so far lacking in substance.

On opening day the WEF published the Chief economists outlook for 2023. This 31 page document is based on a survey conducted of the chief economists in the months of November and December. So the outlook is pretty current in terms of the sentiment of these economists.

Remember, the WEF takes a global perspective, not just Europe or USA or Africa.

100% of the chief economists surveyed said that Europe is expected to be weak or very weak this year, and 91% said that the US is expected to be weak or very weak this year.

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Host: Victor Menasce

email: podcast@victorjm.com

Has Elon Changed The Value of Real Estate? Jan 16, 2023

Show notes

When you think of Elon Musk, we largely think first of Tesla, or PayPal, or more recently Twitter. None of these has the potential to materially impact the value of real estate. But SpaceX has changed the value of real estate in ways that are not showing up readily in the metrics. At least, you might not see the effect right away.

Today, a large percentage of the population have adopted high speed internet. If you’re going to work from home, and participate in your office culture, you need a reliable high speed internet connection.

Despite the fact that the internet has been around on a large scale since the early 1990’s, there were many areas that were underserved.

This fact has kept many people from investing in rural properties. Rural properties offer a number of advantages for some families. It offers the potential of lower property taxes, lower utilities costs for those relying on well water and septic. A larger land parcel offers the potential for a home garden and a higher quality of life than a home in the suburbs.

Starlink now has enough satellites in their low earth orbit mesh to supply a decent coverage and very respectable data rates. They have launched 3,500 satellites and just broke the 1M subscriber milestone.

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Host: Victor Menasce

email: podcast@victorjm.com

Carina Guzman Jan 15, 2023

Show notes

Carina Guzman specializes in land development. On today's show we are talking about a 90 acre residential subdivision that is next to a ski resort. To learn more or to connect with Carina, you can find her on LinkedIn, or on Instagram at https://www.instagram.com/the_land_development_queen/

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Host: Victor Menasce

email: podcast@victorjm.com

Aundrea Newbern Jan 14, 2023

Show notes

Aundrea Newbern is the Chief Operating Officer at Get Rich Education. She also runs several businesses including a property management company, and a crime scene cleanup company that is based in Detroit Michigan. It turns out the crime scene cleanup can be a valuable source of properties for investors. Who would have guessed? You can connect with Aundrea at https://www.facebook.com/aundreasells or visit getricheducation.com/course

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Host: Victor Menasce

email: podcast@victorjm.com

Retraction - The Fed Was Right, Sort of. Jan 13, 2023

Show notes

Today’s show is a little bit of a retraction, or perhaps a refinement of something we have covered last year.

The US Federal Reserve had it right. The economists working for the Fed in 2021 suggested that the inflation we were experiencing was transitory. That was the word that they used. J Powell said it. Janet Yellen, Treasury secretary said it. Many including myself at the time didn’t believe it. In fact, in the end, even the Fed didn’t believe it and had to course correct.

AMA - Land Value for Special Use Permit Jan 12, 2023

Show notes

On today's show, we're answering a question from Martin who is looking to underwrite a small development project using an existing structure as the basis for the new higher density building.

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Host: Victor Menasce

email: podcast@victorjm.com

Back To Basics - Volume 1 Jan 11, 2023

Show notes

Today’s show is the first in a series we are calling back to basics. Back to basics means getting clear on underwriting criteria. On today’s show we’re going to examine the interplay between your project approval criteria, versus your lender’s project approval criteria.

When you undertake a new project, how do you know it’s a good project?

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Host: Victor Menasce

email: podcast@victorjm.com

Growth or Recession? Jan 10, 2023

Show notes

On today’s show we’re taking a closer look at what it takes for the Bureau of Labor and Statistics to declare their numbers for GDP, and ultimately when they declare that we are in a recession. Why is this important for real estate investors?

Well, interest rates keep rising because inflation is high and the economy is strong. The economy is strong is the part of that narrative that is continuing to fuel inflation expectations in the eyes of the Fed.

We know intuitively that the economy in Nebraska is different than the economy in California. So knowing that fact, we could conceive it possible that one state could be in economic expansion, while another is in economic contraction.

We’ve long said that real estate is hyper local. So too is the economy. Does the local state data give us any insight into economic contraction on a national basis?

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Host: Victor Menasce

email: podcast@victorjm.com

Search for Higher Quality Collateral Jan 09, 2023

Show notes

On today’s show we are going to focus on the market for T-Bills to try and understand why there is an apparent shortage of this paper. Demand is exceeding supply. Why is that? It doesn’t make sense. Is the market saying that they want to US government to spend even more? Do they want to see even greater deficit spending?

The government holds a monthly auction for T-Bills and these notes sell in the open market to the highest bidder.

The highest yield paid in the Jan 5 auction was 4.1%.

The current RRP set by the Federal Reserve, which is supposed to be the floor set by the Fed at their last meeting, is 4.3%. But none of these T-bills sold at 4.3%. They all sold at a lower interest rate. There were sales at 4%, and the lowest sales were at 3.85%. So why would these bonds selling at auction be getting less than the coupon interest rate? Why would the buyers be willing to pay extra for these bonds and accept a lower interest rate?

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Host: Victor Menasce

email: podcast@victorjm.com

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