A Massachusetts country club claims that because its members have been shanking golf balls onto a neighbor’s property for 125 years, it has a legal right to stop that neighbor from building housing… 📍Tedesco Country Club, Marblehead

Dinner with an exec/friend at a large national property management company tonight. This person oversees ~150k apartments; access to an insane amount of data. Current multifamily market in most of the country is worse than S&L, .com bust, or the GFC. Worst they’ve seen. Class A mostly fine, decent rent growth. However: - credit scores at class A have gone down meaningfully over the past 3 years. - more people are paying rent via credit card. - average bank account balance noticeably lower than even 2 years ago - class A tenants stretched thin, living beyond their means. 20k comes in, 20k goes out every month. - starting to see these renters move down a tier Class B: - simply too many apartments, we built too much new stuff. Ripple effect is enormous. - fewer renters tomorrow than today. Same store foot traffic noticeably down year over year. Some markets down 40-50% - considering dropping rents below $700 a month on some 1beds in major southern markets. Class C: - looking at degrading NOI. Rents aren’t growing for a long time, but expenses keep creeping up - more renters are one missed paycheck away from disaster than they can remember seeing in decades - tenants aren’t paying rent because they simply don’t have it - wage growth has not kept up Lenders: - some major investment funds, household names, haven’t paid their mortgages in 2-3 years. Banks won’t foreclose because “X is a big client.” Mexican standoff. - a roof leak gets ignored, becomes water damage, then mold, then a down building. Buildings are rapidly deteriorating as some owners choose cash preservation over funding losses. - number of pre-foreclosure and REO deals is the highest as a % of total units they can recall. - data providers know it’s bad, but they’re paid to sell optimism to owners/lenders. So every forecast is “it will probably get a little better next year maybe” and that gets regurgitated at investment committees all over. I asked “how do you think this ends?” “Not sure. My gut says slowly then suddenly, and things will get really bad. Been doing this 40 years, you can feel it in the air. But, there’s a chance it’s just a decade of tolerable pain. I’m praying for that.”

This one is long overdue. We've had this conversation multiple times through the years, so here it is memorialized for anyone who may benefit. It's also a great glimpse into how we negotiate construction agreements. The tl;dr is, if you have a completion guarantee, signing a GMP before you've substantially bought out hurts the project more than it helps.

I've got a contrarian yet first hand view on rates and their impact on a specific part of the CRE market across my 70+ listings throughout America. Most buyers in the $2-10M range doing 1031 exchanges to acquire long term single tenant assets have little to no sensitivities on interest rates - their core focus is deferring gains, depreciation, and maximum cash flow. They are preserving capital via a 1031 exchange, it costs $500K-3M in taxes to care enough about rates and pay taxes in this range. They are able to take a long term view given the 10-20 year lease terms with rent increases, which Treasuries do not offer. Treasuries are at 4.5-5.25%, but if a buyer wants these "risk free" they would need to pay $500K-3M in taxes first and then get that same rate on less capital deployed with no built in yield increases. For investors that are not in a 1031 exchange or chasing larger shopping centers, I get their point of view - they do not have this tax consequence or have alternative yield sensitivities - look at the incentives to see each side's point of view. We are seeing offers daily on literally everything - Chipotle, Dutch Bros, oil changers, bowling alley's (like actual no credit bowling alley's), $7M casual dining restaurants, etc. The national brand product (some credit, some franchisee) is getting done in the 4.75-5.75% range all day long during this rising interest rate environment. Anything bonus related like gas stations or car washes are getting non-stop offer activity particularly now that's its year end. At the end of the day, the buyers in this specific segment care about deferring gains coupled with max cash flow. These buyers are focused on long term leases that can weather market declines and pay yield in the interim.

This one just sold for $3,100,990. - 7 day escrow - All cash - No contingencies - 12 offers - Seller represented by yours truly

Fantastic three days at @ReconveneLA, still my only CRE conference. I'll be back next year. Reflections as I kill time in the hotel lobby watching the beautiful LA people: - Own your niche. Big macro plays are fickle and when they're gone, generic operators die. The people doing deals right now are specialized, hungry, deal junkies. - Everyone is (obviously) trying to figure out AI, but today's edge is tomorrow's table stakes. It takes (and will take) a tremendous amount of time and resources to truly stay ahead. Choose that approach wisely. - The elephant in every room was rates. Most of us can't truly conceive of a world with rates as high as they might go, and those that lived through it speak so casually about "a 20% prime rate" that maybe (maybe), we'll be all right. But man, what if everyone is wrong. - Be curious. Perhaps the theme of the conference - the curious will always be ahead of the curve. - Was it really that easy? I love hearing how the old school guys did it - amazing story of buying a vacant 100,000sqft office building and "putting up a billboard." Was it really that easy? Why do we make it so hard? - My favorite talk was on American Reindustrialization (shout out @grant__gregory) - if their thesis is even part right its the brightest hope our country has. What's the real estate play? I'm skeptical TBH, not that money won't be made but whether it will be more than what's lost. - Where else do you get to listen to two crazy developers (highest compliment) talk about what it's like to be venture-backed or have robots carve you a stone, structural facade? Visionaries and I can't wait to see what they build. - If California has a shot, it's because of the people who, despite a million reasons not to, are still insanely passionate about building housing. When you meet them, you can't help but feel optimistic. - I don't come here looking for LPs, but I find them anyway (there's a lesson in there somewhere). - When you're surrounded by people who aren't afraid to try new things and maybe (probably?) fail, at some point your ideas just start flowing. Ingenuity is infectious. - My most memorable encounter had nothing to do with real estate - it was about silver belt buckles and black toenails (@kevinskiles - that second bottle was a great idea). - The most knowledgeable people in these rooms are also the most generous with their knowledge. We should all strive to be like them (@DallasAptGP) - Lastly and most importantly, these past few days made me appreciate the community of real estate people on this site. From @SideHustle_LP to @donkeyDdevelops and @EllliotttB (who are real people), to @robbiehendricks who I finally met IRL (sadly not at a Chili's), these are genuine people who come to this event to hang with their friends. Yeah, business gets done, but it's about the people. Huge props to @moseskagan and Simran for throwing an A+ event and not letting in any assholes!

The development at 1601 Ocean Avenue, San Francisco switches plans from 101 rentals to 98 condos. 18 of which are deemed affordable. More info below. houseberry.com/blog/1601-oce…

It's a scam. The kind of scam one should expect when policymakers try to fix a shortage with tax-subsidy and price-control gimmicks, rather than by liberalizing supply. 2/3

I find that learning how to use the tools through the process of learning the reasoning simply creates better professionals. It's like young people using AI with excel or to write memos. You can immediately tell if they've never actually done it before. The output is trash. Meanwhile, experienced people are using AI to do what they can do anyway, just doing it much faster. I am extremely skeptical that simply typing prompts is going to train better designers, with the sole exception of that advancement potentially allowing programs to prioritize hand drawing, which I'm convinced, is the ultimate training tool for designers of any kind.