The Real Estate Espresso Podcast

Latest Episodes:

Contracts, Contracts, Contracts Dec 06, 2019

Show notes

On today’s show we’re talking about the complexity of agreements with contradictory language.

One of the realities of the real estate investment business is the need to pay close attention to all of your contracts. There are construction contracts, lending contracts, purchase contracts, letters of intent, employment contracts, insurance contracts. Contracts, contracts, contracts.

It’s often the case that contracts are put together using a template that has standard terms, and then the contract is modified by terms in attachments, or in some cases subject to the terms of other agreements that are referenced in separate documents.

A simple example of this is the standard AIA construction contract. This standard form is used extensively in the construction industry and is widely accepted as fair to both owners and general contractors.

But even a straightforward item like a construction contract is far from straightforward. There are the general terms referenced in the AIA 101 template. These terms are then modified by the AIA 201 contract. These documents then refer to the architectural drawings. The architectural drawings then refer to the architectural specifications. The AIA documents also refer to the general contractor’s schedule, and the General Contractor’s Basis of Estimate document.

It’s common to require five documents open at once to get a complete picture of what the document is actually saying.

It’s pretty common for the base contract to say that it is subject to the terms of the schedules and attachments. That means that if the base contract says the building is going to be painted blue and the architectural drawings say it is to be painted brown, then the drawings will take precedence. Where it really gets complex is if one of the other attachments says the building is to be painted yellow. Which of the contradictory attachments will apply? It’s not immediately clear in all cases. You might read the contract one way, and the builder might read the contract another way.

I’ve heard many investors say that contracts are not their strong suit and they rely upon the advice of their legal counsel to keep them out of trouble.

That’s all fine up to a point. The lawyer will probably do a good job of keeping you protected against the risks and pitfalls of legal challenges to your contract.

What they can’t possibly know is whether you want the building painted blue, brown or yellow. Only you know that. You can read the architectural drawings and see that there is an Ethernet connection in every room on the drawing. But there may be a line item in the basis of estimate that limits the number of Ethernet connections in the building. These need to be taken together. The complexity of not seeing the entire picture in a single place adds considerable risk of misunderstanding.

Legal documents are not drafted with hyperlinks to enable quick and easy reference to items that may affect the meaning.

So how do you make sense of this?

Unfortunately, there’s no shortcut, no easy button. It requires all parties of the contract to read and understand what the contract says.

Reading and understanding the contracts is incredibly detailed and painstaking work. We have a recently completed building design where the specification document alone that clarifies the architectural drawings is 650 pages.

Attention to detail may not be your thing. It might not be your strong suit. But there had better be someone in your team whose job it is to pay attention to the details and make sure they reflect what you want the contract to say, not just the legal risks. Your lawyer often won’t look much past the legal aspects.

Put on a big pot of coffee, get a comfy chair and prepare to dig into the details.

Why Is This House Not Selling? Dec 05, 2019

Show notes

On today’s show we are talking about a specific case study of a property that has been on the market for nearly 5 years.

This story is a cautionary tale of what can happen if you choose a property in the wrong location.

This property is a gorgeous 7,000 square foot home, that’s about 650 square meters for those of you who measure in metric.

This home is located just outside Portsmouth NH in a beautiful residential neighborhood where all the homes are on large estate lots of about 2 acres. All of the homes in the area range in price from about $800,000 to about $3.5M with numerous homes in the $2.5M range. It is located less than a mile from the ocean.

The interior of the home features an extraordinary kitchen with a granite island that is large enough to play ping pong on it. This exceptional property is architecturally driven at every turn.

Walls of French doors lead to the deck from the dining room, living room and entry hall. Magnificent center hall invites you to the rest of the house. Master suite includes bath with Rare Egyptian Alabaster counter tops, custom designed mahogany vanity, Onyx tile floor, oversized walk in shower, 18X13 walk in closet and access via rear stairwell.

The solarium is a beautiful space with a spectacular view of the garden. The entire back of the home is a wall of windows.

The area is a bedroom community for the wealthy who may have built businesses in the Boston area.

This is a truly gorgeous home.

It was built in 1997. It was purchased in 2003 by a friend of mine who owned several luxury properties in the northeast. He was an investor in several of our projects over the years and sadly he was diagnosed with cancer and died a couple of years ago. His lovely wife still lives in the home, and quite frankly they’ve been trying to sell it since 2014 to enable them to focus their energies on their homes in Martha’s Vineyard.

They bought the property in 2003 for $1.65M. They listed the home for the first time at $2.3M back in 2014. It was not selling and in fact was only occasionally getting showings once every couple of months.

They lowered the price to $2M back in 2015. Then they lowered the price another 5% in 2016, and then another 10.5% later that year.

The home is currently for sale at $1.6M, $50,000 less than the purchase price in 2003. The property has been on the market for 144 days and it’s still not selling.

Let me put this in perspective, if you bought this home today at $1.6M, this 7,000 SF home would be selling at $233 per SF. You could not build the home in today’s market at that price. With the level of custom finishes in the home you would spend easily $250 per SF in hard construction. If the add the cost of the land, the design, the permits, you would be well over $350 per SF to build a comparable home today. On the surface, at $233 per square foot this looks like the very definition of a bargain.

So why has the home sat for 144 days on the market and not sold?

It turns out that the property taxes in this community are a bit high. In fact the current property taxes back in 2017 were a little above $31,000 a year.

Even if you buy the house in cash with zero debt, your monthly home ownership cost is over $2,500 a month just in property taxes.

I believe that the high tax environment is what is keeping buyers from jumping onto this bargain. You know that if the value goes up, which is something that almost every home owner wishes for, the property taxes will go up too.

There is nothing physically wrong with this property. It’s a gorgeous home in a beautiful location. It’s been impeccably maintained, and the buyer could buy it below replacement cost.

Unfortunately the cost of ownership is off the charts because of the property tax structure. I don’t know of any people who would willingly move to take on that high a property tax burden.

Metrics, Metrics and More Metrics Dec 04, 2019

Show notes

We just spent 3 intensive days on the beach in Mexico working on goal setting for 2020.

It was not exactly on the beach. We set up our conference table inside a straw hut called a palapa that was situated at the end of a pier out over the water.

The pier was surrounded by schools of fish, needle fish, barracuda. It was a pretty magical and inspiring place to do this kind of deep work where there was a panoramic view of the beach to one side and the ocean stretching to the horizon

You can’t improve something you are not measuring. The business world is filled with performance metrics. Revenue, profitability, efficiency, return on investment, gross profit margin, inventory turns, cash flow, vacancy, delinquency rate, accounts receivable aging. The list goes on and on. We establish these measures to improve business performance.

It’s said that anything which is actively measured has a general tendency to improve. The simple act of measuring brings focus and attention to that metric. Sometimes businesses get off track by focusing on the wrong measures. You only need to look at companies like Sears, Macy’s and General Electric to see examples of companies that did a great job of optimizing the wrong metrics.

Today’s show is about setting expectations, not so much with others, but with yourself.

How often we as humans latch on to measures that we use to define our own sense of self worth. For some people their sense of worth is attached to their career, perhaps their title.

A lawyer who needs to make partner before the age of 40. For some it’s the house they live in, the car they drive. How much money they have in their bank account.

There are so many metrics that we unconsciously track on a daily and weekly basis.

Some people measure their weight, the number of hours they sleep, the number of steps taken each day, the number of likes on a social media post, the miles per gallon they get in their car, the percentage increase in their stock portfolio in the past year, the value of their home.

How many people wished you happy birthday on Facebook?

How much did your spouse spend on your birthday gift?

How big a discount did you get when you went shopping for holiday gifts?

Think about it. In each one of these measures, there is an entire story wrapped up in what a good number means.

More importantly, there’s an opportunity to feel bad about yourself if the number isn’t what you hope it to be.

What does a number actually mean? And who decided what a good number or a bad number means?

Do any of these measures have any real meaning that reflects truly upon your worth as a human being?

How many people measure the quality of the time spent with their children, the hours spent hugging a loved one, the time spent laughing per day?

So often people lose their way by focusing on measures that are not truly in alignment with the core values that will bring fulfillment. In the same way that companies can go bankrupt by optimizing the wrong measures, individuals can become emotionally bankrupt by focusing on the wrong measures.

Sometimes things get measured simply because they’re easy to measure, not because that measurement is truly important to improving my life. The fuel efficiency of my car is not going to fundamentally change the quality of my life for better or for worse. But it is easy to measure.

So many people find themselves climbing the ladder of success only to find when they get to the top that they leaned the ladder against the wrong wall.

I’m going to be taking three days in the next week to complete the work on my goals for 2020 and beyond. But before I can start working on my goals, I need to get clear on my values, what’s important to me. Once I have that clarity, setting the goals becomes obvious.

AMA - Which States Should I Invest In? Dec 03, 2019

Show notes

Kevin from California asks,

I currently live in California and would like to know which other states are good for investments within the next 5-10 years and why?

Kevin,

This is a great question. The first thing to remember is that real estate is hyper local. We will come back to discussing the hyper local aspect of investing in a minute.

The direct answer to your question. Generally speaking I’m looking for areas where there is influx of jobs, and influx of population. That increase in demand in the presence of modest supply means that we should experience increasing prices with all other things been equal. I like to pay attention to demographic trends. I like low tax states where both residents and corporations pay a minimum of tax. I also like states where there is a demonstrated flow of both jobs and population. This means places like Texas, North Carolina, Florida, Nevada, Arizona, and Alabama. You want to choose places where there is an already an established flow of migration.

But in each of these states there are locations that are not suitable. So if you choose a state like, say, Florida, there are local areas that are great investments, and others that aren’t. I might be much more interest in Fort Myers than, say, Ocala. There is a clear migration flow to certain locations in Florida from cities in the North East like New York and Boston to communities like Boca Raton, Jupiter, West Palm Beach. There is a clear migration flow from California to Texas, Nevada, and Arizona.

In fact, Some 660 companies moved 765 facilities out of California in the past two years, and Dallas-Fort Worth has been the beneficiary of many of the relocations, according to a recently published report. Discount brokerage Schwab is among the latest announcements. The company has already moved several hundred roles from its San Francisco location to Dallas. The latest announcement will move about 400 jobs to Dallas to be housed in a new campus being built in Westlake Texas.

Even Uber is moving it headquarters to Dallas from the SF Bay area. One of the culprits that is often cited is the increasing regulation that is making it difficult to do business in California. One of the latest is a law in California that was passed in September that requires companies to hire workers as employees, not independent contractors, with some exceptions. The law is intended to give basic labor rights and benefits to hundreds of thousands of California workers now classified as independent contractors. This is a major shift that fundamentally alters how businesses conduct themselves.

So you want to pay close attention to the specific moves that are taking place. You want to look at the migration of several hundred jobs to a specific office location and then draw a circle of a few miles around that office and see what the dynamics are within that radius. You want to see where the shortage is. There might be a surplus of 3-4 bedroom residential properties and a shortage of one and two bedroom properties.

You also want to look at asset class. Maybe the shortage is in single family residential, perhaps apartments, or maybe self storage.

There are other dynamics affect the value of property. Specifically the distance from a major airport affects property values significantly. The further you get from a major airport, the more prices drop generally. If you look along the Gulf coast, you would find that properties in towns like Englewood are very inexpensive, including waterfront properties. These towns also lack major industry. As you get closer to an airport heading North to Sarasota, prices increase.

Higher prices are not something to shy away from. They’re a reflection of higher demand. Even in those higher priced markets, there are opportunities to acquire bargains and create tremendous value. Again, these moves are subject to the local supply and demand balance.

Will Australia's Real Estate Problems Cascade Outside the Country? Dec 02, 2019

Show notes

On today’s show we’re looking at why prices for real estate in Australia fell by 8.4% in the past two years and we’re answering the question as to whether what happened in Australia could happen elsewhere in the near future.

Australia’s median house price dropped 8.4% between July 2017 and May 2019. With only a handful of larger price dips during the late 1800s, the slump surpassed the recession of the 1990s and 2008 financial crisis, making it the worst ever recorded in recent decades.

markets in Sydney and Melbourne were hit the hardest during the downturn, which lasted from mid 2017 until earlier this year, with an average price drop of 22.5% in Sydney and 32.1% in Melbourne.

Following a boom that peaked in mid-2017, prices began to fall due to tighter lending conditions, low buyer confidence and changes to Chinese investor loan limits.

The government launched a Banking Royal Commission inquiry into lending practices, which commenced in late 2017 and concluded earlier this year, resulting in a crackdown on lending practices by big banks in Australia.

This government-led inquiry, triggered by reports of misconduct by certain Australian banks, was a major reason house prices began to fall.

Much like the 2008 crisis, the downturn in Australia was the result of significantly reduced availability of credit in the market.

At the same time, demand from Chinese buyers, Australia’s largest offshore property investors, also slowed in 2017 and 2018. We’ve seen the same dynamic in the US and Canada. China’s government has imposed tighter capital controls, making it harder for residents to move money out of their own economy. There is still money coming into the market from China, but the numbers are down significantly. Chinese buyers have a cap of A$50,000 (US$33,903) they can take outside the country.

Much like the 2008 downturn in the US, the availability of credit is more important than the interest rate. When financing is hard to come by, the balance between buyers and sellers changes dramatically. If the only buyers are cash buyers, sellers will drop their price in order to sell.

Proof that the problem is a credit problem rather than a real estate problem is the fact that since May, lending has opened up and prices in Sydney and Melbourne have risen almost 6% in both those markets since May.

It’s fair to say that the issues in Australia were unique to that country. But it goes to show that something as simple as an investigation into banking practices can, at least temporarily crater the real estate values in an entire nation.

So the question is, could we see a credit crunch again in the US, in Europe, or in Canada? If so, what could be the cause?

We often think about the levels of sovereign debt that so many countries around the world have signed up to. This includes every major economy in the world. We’re talking about the US, China, Japan, the UK, Canada, Italy, and yes, even Switzerland.

So far the problem in Australia was limited to a regulatory issue. There was no domino effect. There was limited counter party risk. You might be wondering, what is counter party risk again? Well, I’m glad you asked.

Counter Party risk happens when an asset on my balance sheet appears as a liability on your balance sheet. If you fail to pay me, then I’m at risk of defaulting on my obligations to the liabilities on my balance sheet and the dominos start to fall.

Clearly the political will does not exist for any one country to trigger the next financial crisis.

The point is that this time the problem was localized to Australia. No dominos fell, except in Australia. Once the dominos start to fall, there is almost no stopping it from happening.

BOM - Talking with Strangers by Malcolm Gladwell Dec 01, 2019

Show notes

Welcome to December. This is the last month in the current decade. Hard to believe that the 2010’s are almost over.

Today is the book of the month episode. On the first day of each month we review the book of the month. In order to be considered for a book of the month the book has to meet a very simple criteria. It has to be impactful enough that it will change your life or your perspective on the world. Whether it does or not is entirely up to you. You might read the book and comment on what a great book it was. But if you don’t internalize the book and make a part of you, you’re missing the point.

The author of this month’s book is none other than Malcolm Gladwell. He has written several other ground breaking books including Outliers, Blink, David and Goliath, The Tipping Point, and What the Dog Saw. Each of these books would have easily met the book of the month criteria. Malcolm Gladwell is also host of the Revisionist History Podcast in which he goes back through history and looks at something that happened and examines underneath the covers.

At heart, Malcolm Gladwell is a journalist. He’s a Canadian from Toronto and currently lives in NYC where he writes for the New Yorker Magazine.

Our book this month is called Talking with Strangers. Like his previous books, Gladwell takes real life stories and tries to dig beneath the covers to find insights, to find common threads of new learnings and to illuminate the blind spots that are hidden in plain sight.

The premise of the book is that communication happens easily with people whom we are familiar with, whom we understand

The authors examples are diverse. The book is framed around the story of a woman from Chicago who moved to a small town in West Texas to restart her life in a new setting. She had secured a new job, and on her first day in town was stopped by a police officer for a questionable traffic stop. The sequence of events that unfolded found this innocent woman being dragged from her car, handcuffed and brought into custody, and eventually dead three days later in a jail cell, never having committed a crime of any sort.

The author looks at how we process communication. A case study of the TV sitcom “Friends” showed that viewers of the show were able to follow the story line of the show with the audio completely turned off simply by watching the body language and facial expressions of the actors on the show. The accuracy of the interpretation was incredibly high. It shows that many of us rely upon these cue far more than we know.

But this is a TV show and the actors are paid to do a great job of acting. In the real world, a smile isn’t always a signal of happiness. There are those people who make up a small percentage of the population who have learned to disconnect their emotions from their body language.

Some go on to become criminal masterminds like Bernie Madoff. Others go on to become championship poker players.

It is full of case studies that individually can lead you astray. Taken together they reframe the way you will look at interactions. Malcolm Gladwell isn’t shy about confronting difficult topics. He chronicles the case study of the negotiations between Prime Minister Neville Chamberlain of the UK and Adolf Hitler in 1938. Chamberlain’s negotiations with Hitler are widely regarded as one of the great follies of the second world war. Chamberlain fell under Hitler’s spell. He was outmaneuvered at the bargaining table. He misread Hitler’s intentions.

In the book Gladwell argues that something is very wrong with the tools and strategies we use to make sense of people we don't know. The idea of the book of the month is to change your life or change the way you see the world. Talking with Strangers by Malcolm Gladwell will definitely deliver on both those promises.

Special Guest Logan Freeman Nov 30, 2019

Show notes

Logan Freeman is based in Kansas City where he helps out of town investors with their portfolios large and small.

AMA - What to Do With HELOC Proceeds Nov 29, 2019

Show notes

Today's show is part 2 of a question from yesterday's show.

Anthony and Julia from Brooklyn ask.

Hi Victor.

I’ve been listening to your podcast for about a year now and appreciate what you’re doing! I have my wife, who is an architect, listening in now too! We want to invest in other real estate but with two young boys we don’t have a lot of disposable income to work with.

We own and live in a double duplex in Brooklyn. We bought in 2013 and after significant work and neighborhood development its has more than doubled in value. On our block alone there is a lot of studio and one bedroom apartment development going on. We’d like to access some of the equity we have built up in our property. We’ve been renting the lower unit short term for about 4 years, but that business is getting less attractive. We are considering condominium conversion and selling half to capture money to buy other property or renting out both units and taking out a HELOC or do a Cash Out Refi. Ideally we’d like to hold because the neighborhood has a lot of growing yet to do. Our interest rate seems kind of high at 4.875%.

What are your opinions of Helocs vs Home Equity Loans for less experienced eager to grow investors?

Thanks for taking the time and we look forward to learning more from your show!

Anthony and Julia

On yesterday’s show we talked about the differences between the types of debt offerings that could be used to invest in more income properties. On today’s show, we’re going to focus on what to do with the money when you have it.

You’re probably thinking the same way that most DIY investors do, save up some money for a downpayment, put down 20% in equity, borrow 80% and add one more property to the portfolio. That’s definitely one way to do it, and in one sense there’s nothing wrong with it, depending on what your goals are.

In this context I”m going to speak directly to your wife Julia. Julia, you’re an architect. My mom was the second woman in history to graduate in architecture from Cornell University back in 1945. She has her stamp on several landmark buildings in NYC. You entered university to get your degree in architecture, knowing that it would be a huge commitment of both time and money in order to get that degree enabling you to practice as an architect. You didn’t say to yourself, I want to be an architect, but it’s hard so I’ll take a small step and get a degree in drafting. Just like someone wanting to be a doctor doesn’t say, that’s hard so I’ll go to nursing school instead.

So I want you both to look at your investment goals with a longer view. If you truly only want to own a handful of apartments in the NY market and you are willing to get there slowly over the next 20 years, then the approach you’re taking is perfectly fine.

The number one mistake I see rookie investors make is to run their project with too little capital. You want to make sure that in addition to raising the money to purchase the property, you maintain a healthy reserve fund to handle any surprise that the market might throw at you. You might have a water heater fail, or an air-conditioner fail and all of a sudden you’re digging deep into your pocket for a capital repair that wasn’t in the budget. Spend time with other experienced investors in your area and learn from their mistakes, rather than going and making the rookie mistakes yourself. It’s much cheaper that way. Like I said, investing in small properties is a perfectly viable strategy, if that’s in line with your ultimate goal.

But if you want to create a stream of residual income that can provide multi-generational wealth for you and your family, then you may want to think bigger.

If you’re thinking bigger, then you may want to jump to the next level and skip the time wasted on small stuff.

AMA - Investing with Home Equity Nov 28, 2019

Show notes

This question is from Anthony and Julia in Brooklyn.

Hi Victor.

What are your opinions of Helocs vs Home Equity Loans for less experienced eager to grow investors?

Sorry for the sprawling question but I hope you can speak to some of these issues.

Thanks for taking the time and we look forward to learning more from your show!

Anthony and Julia

Let’s look at the condo conversion option. While it’s certainly possible to do a condo conversion, it’s not very practical for such a small condo project. The overhead of managing a condo corporation for the rest of time quite frankly is hardly worth it for two units. The shared common elements between the two units can become a source of friction between unit holders. For a small property you’re better off keeping it all together and not subdividing it in my opinion.

A sale of the lower unit that you don’t occupy would free up some equity, but it might also be considered a taxable event. A refinance on the other hand isn’t a taxable event. It offers you a lot more flexibility in terms of what to buy, and when to buy it.

Let’s start by describing the difference between a home equity loan and a home equity line of credit. A home equity loan would basically be a refinance of your existing two unit property. It would be for a fixed amount of money and rates these days a pretty good. You have a couple of choices in this. If you work with your existing lender, they may be willing to put a second loan on the property while maintaining the original loan. That way, there’s no pre-payment penalty for refinancing the old loan.

The second choice is to replace your existing financing with a new loan up to the new loan amount. Remember, at this stage, the lender assumes that the path to repaying the loan is primarily from your employment income for both of you. They will generally give you credit for the rental income in the second unit, but they will typically want to see a 12 month lease. Short term rentals usually don’t fit with most bank’s lending model.

The third choice is the home equity line of credit. The difference between the line of credit and the home equity loan is the way the funds are advanced, the way the interest is calculated and the way the loan is repaid.

The loan is an amortized loan which means that the monthly payments include both principal and interest.

A line of credit simply requires that the interest be paid monthly. If you’re using the equity in your home to buy another property you probably want to use the equity on an ongoing basis without being forced to repay it on a monthly basis. For that reason, the home equity line of credit might be a better fit. The home equity line of credit also has the advantage that you’re not paying interest on monies you don’t use.

Cloud Kitchens Nov 27, 2019

Show notes

On today’s show we’re talking about one of the latest disruptions to come into the retail industry. This is from the guy who brought us Uber, Travis Kalanick. His latest venture is called Cloudkitchens. The company is currently live in 3 markets, Los Angeles, San Francisco and Chicago.

The idea behind cloud kitchens is to break apart the traditional food and beverage model associated with a bricks and mortar restaurant. The trend toward delivery meals is growing and is being serviced primarily from the traditional bricks and mortar restaurants.

The vast majority of food delivery currently takes place in traditional brick and mortar restaurants, but these locations are not optimized for delivery. Today, online delivery is a high priced luxury product with a very poor experience.

Everything about the restaurant experience is designed for walk-ins and reservations. And while delivery is an increasing percentage of the business, many operators are forced to trade-off the dine-in experience with a booming delivery business.

Cloudkitchens has designed a commercial kitchen along a formula that allows for the basics and at the same time allows for customization of work flow. It’s a turnkey solution to opening new locations for those who want to be in the food and beverage business, with a focus towards building a delivery oriented brand.

The delivery channels like ubereats, grubhub, doordash, each have their own platform. There’s a problem of integrating the data from each of these disparate channels into a single accounting system. Cloudkitchens has completed the integration so that audited financials are a breeze.

The workflow in a restaurant is optimized towards the front of house dining experience. The workflow for a delivery model is completely different. When you are operating a restaurant kitchen with two competing workflows, you end up compromising both.

Kitchens in a restaurant are built to support table capacity. You now have a full set of tables and now additional demands on the workflow for which the kitchen was never designed. This forces food operators to compromise on both the dine-in and delivery experience. When workflows operate above 80% of their capacity, queueing theory says that the delays grow exponentially. A simple example of that is rush hour traffic. When the number of cars exceed 80% of the designed capacity of a road, the delays multiply. The same thing happens in a kitchen.

So what does this have to do with real estate? The traditional bricks and mortar restaurants are located in the most expensive commercial retail real estate. A commercial kitchen can be located in the least expensive industrial space, lowering the operating cost of being in the food business dramatically.

So how is Cloudkitchens capitalized? Well, they recently secured a $400 million dollar round of financing from the Saudi Royal family. You might be wondering why on earth would Cloudkitchens need that much money as a startup? The technology component of their offer wouldn’t cost more than a couple of million dollars to develop from a software perspective. Even the marketing might stretch into a few tens of millions, but not much beyond that.

Well, it turns out that CloudKitchens is a real estate company that provides smart kitchens for delivery-only restaurants. They provide infrastructure and software that enables food operators to open delivery-only locations with minimal capital expenditure and time. They enable food operators to get into business within weeks instead of months or longer in the traditional restaurant model.

I know of several investors in the retail space who have argued that retail investments are safe as long as you are focused on businesses that cannot be satisfied by Amazon or other cloud based businesses. You can’t get your hair cut online. I see that the CloudKitchens model has the potential to upend prepared food.

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