Navigating the Debt Markets to Find Opportunities in Multifamily feat. Jorge Abreu

Hello, future billionaires. Welcome back to another episode of the podcast. This is another great one for you. We keep just coming out with some great episodes. I gotta say, I just enjoy all these recently. They're kind of really specific about the market right now. So we brought on George Abreu, who is CEO of Elevate Capital. They're a very big multifamily operator. He's been in the space for 16 years. He's seen cycles in and out, and it says it was a great, just, you know, kind of heart-to-heart conversation.

So this guy, not just an operator, but he's actively acquiring these properties. So, you know, he's seen all the changes in pricing and has really got some warnings about debt and how debt is changing and what's going on in the market, differences between how everything's happening in Class A versus Class C and the differences. So wealth of market information here.

Yeah, it was really a deep dive and some things we've talked about at a high level, but hearing it from someone with boots on the ground experience with a huge portfolio, and he's seen what's happening in real time, was really, really valuable.

And from a guy who's been through 2008, so we love it. And definitely, yeah, he is. So we ask him, is this the same? So I'll let you, let you listen.

Yes. And at the very end, he also shares a very unique strategy that you're kind of excited about and teed him up on finding a very unique value add in multifamily that a lot of people maybe have not heard of. So stay tuned for that. And as always, we appreciate you listeners. If you're enjoying the show, you know, please share with, with someone that you think would get any value out of this. You know, rate this and review this podcast if you would. It really helps us get the word out and share with more people. If you haven't yet, check out the website at thebillionairepodcast.com for all the information you need to join the investor club, get notified of new deals, and do the reviews and everything there. Thanks so much for listening. Enjoy.

Let's hear from George.

This is the Invest Like a Billionaire podcast, where we uncover the alternative investments and strategies that billionaires use to grow wealth. The tools and tactics you'll learn from this podcast will make you a better investor and help you build legacy wealth. Join us as we dive into the world of alternative investments, uncover strategies of the ultra-wealthy, discuss economics, and interview successful investors. Welcome back to the Invest Like a Billionaire podcast. I am your co-host Ben Fraser, joined by fellow co-host Bob Fraser. And today we're joined by a good friend of ours, George Avroux, who is the CEO of Elev8 Commercial Investment Group. If you haven't seen Elevate or heard of them, then you must have been hiding under a rock because these guys have been very active in the multifamily space. We love George and his team and super excited to have you on the podcast and talk about multifamily. This is, you know, on a lot of investors' minds of multifamily has been great for the past decade plus, but everything's changing, right? Everything's changing.

And so it continue to be or not, you know, what's, what's going on. So George is a wealth of of information and knowledge. So can't wait for this. Yeah.

So George, give us a little background on you. Those that may not know you, you have over 6,000 units in your portfolio currently. Been in real estate over 15 years, exclusively multifamily. You're a one-trick pony, but pretty good at that trick. So give us a little more background on you.

Absolutely. Well, first of all, thanks for having me on here. You know, we've known each other for a while and we've talked quite a bit about real estate. In the past couple years. So yeah, nice to get on here. As far as myself, so I'll take you back to, I guess, when I started in real estate. So that was about 16 years ago now. Decided to jump in and do real estate full-time. At that time I was working for UPS in the engineering department. So I've got an electrical engineering degree. In getting that degree, I knew I didn't want to be an engineer, but I went ahead and finished it off.

It's still a great Experience, right?

Yeah.

You learn, it helps you, but.

For sure. For sure. So started doing single family actually is what I started with 16 years ago. And really liked the fix and flips part of it. Started a construction company to scale that side. We were doing maybe at the max about 50 fix and flips per year and then some other wholesale deals. And then I've been through a cycle. So, you know, what's happening now is, wasn't the same thing that happened in '08 for sure. You know, fundamentals are different. Everything's different. But during that down cycle, we did buy and hold a lot. So, you know, things were really cheap and the fix and flip wasn't really there, but we were buying—

It was a fix and not a flip.

Right.

Right.

So bought some small multis, bought a bunch of single-family stuff, and then I honestly didn't like the management part of it. So I didn't like to have to go and collect rents and hear all these stories and all that stuff. We didn't quite have enough where, at least I didn't think it made sense financially to bring in a third-party management company. So pretty much what happened is when the market heated back up, I sold everything. And went back to fix and flips. And then finally got introduced to multifamily syndications and man, I just did not look back. Like it was instant scale, you know, one deal buying 100+ units, a lot less transactions than what I was dealing with on the single family side. And we've been pretty busy past few years. Acquired around, you know, over 7,000 units, exited another 1,500 or so. So still pretty active right now, you know, maneuvering through the market and pretty much the debt has become really difficult.

Yeah. Talk about that a little bit. So you had kind of a stated goal, you wanted 10,000 units, you know, on your quest to continue scaling, but it's really kind of put a pause on that, right? Because as a lot of people are seeing, a lot of these deals aren't penciling and it seems there's a pretty big gap between, you know, the bid-ask of these apartments going right now in the market. So it's difficult to make deals happen and it's difficult with the changing debt markets. So what are you kind of seeing and what's kind of caused the slowdown from your perspective on acquiring?

Yeah, so I mean, Going back the last couple years, I want to say, I don't know the exact statistic, but I mean, from what I saw, maybe 90, 95% of the loans that were getting done were bridge loans because the rates were so low.

And just because we want to bring all of our listeners in, what's bridge loans? And just walk us through that.

Yeah, so a bridge loan is kind of, what it states, right? It's supposed to be a bridge between a temporary loan and a permanent loan. You're supposed to take the time it takes to stabilize that deal and then go and get a permanent loan on there, more of an agency-type loan. They used to be maybe around 2 years were the terms, but then when the market kept heating up, I mean, I know all the ones we got on were 5-year, pretty much term.

So, so typical bridge loan, people, people know about debts like a bank debt or whatever. So, so what are the characteristics of bridge loans? Let's say when you were doing this, you know, 2, 3, 4 years ago, and what are the characteristics now?

Yeah, the biggest difference is, is your bridge is going to be adjustable rates and, and your permanent is going to be a fixed rate. The adjustable rate didn't seem like a problem when the rates were so low. Right, right.

They had been low for so long.

Right. And then you also have bridge. Bridge is private and private investors. They're not banks usually. They're just hedge funds or private equity companies, right? Rates are a little higher usually, would you say?

Or they usually, but it started trending the opposite.

The opposite way. Okay. And sometimes they'll give you more on higher LTV means they'll loan more against the value the property. Is that right?

Definitely. Definitely. They're going to give you off of the loan-to-cost versus where most agencies are just going to go off loan-to-value.

Gotcha.

So big difference on leverage for sure.

And so what's happened, rates have gone up and are you seeing the bridge lenders getting more conservative now? They're not as willing to go as deep into—

Oh, absolutely. I mean, there's, there's some that have shut the doors, you know, so some of the smaller guys. They just, their lines are getting called and they can't do it.

So they're shut, they're shutting down, they're getting more conservative. Are you seeing the loan-to-cost ratios going down more conservatively?

Absolutely.

Wow.

So, so, so literally debt is just, debt market is completely changed. And that is because that was what, so you said 90% of the deals getting done out there were using bridge.

Yeah. Yeah. So you had a lot of, So I want to say 2018, maybe even going into 2019, you did have a lot of agency getting done, a lot of agency debt. But what happened, and a lot of people saw this issue, is where they got stuck because they had a large prepayment penalty and they couldn't seize the opportunity of the market spiking up and they couldn't sell their properties. So then that's when everybody started going towards bridge and the loan with the rates being under what agency was offering. Yeah, I mean, I want to say, like I said, I don't know if 90% is exact, but it sure felt like that's what everybody was using for acquisitions.

Yeah. And from a pure financial standpoint, if you can get higher leverage and lower rate, that's going to allow you to be more aggressive as a buyer because less equity down. Your debt yield is lower, so you can afford a lower cap rate.

Offer higher yields, higher returns to your investors if everything goes well.

Right, right. But now that it's changing, you know, and it's coming less, more conservative, it's interest rates going up, it's making it a lot harder to pencil these deals, right?

So you can't borrow as much against the value of the property and the rates are higher. All of a sudden deals aren't penciling anymore at the same level. And so, But you know, so we're seeing it's a lot harder to get deals done. What are you seeing around the pricing?

Yeah, so I was about to say that. So there always seems to be like a delay, right? From your seller. And we were dealing with that for a bit. I think the sellers are starting to catch up and realize that if they want to sell right now, they're going to have to take less. That's the only thing that's going to, I don't want to say it's the only thing, it's one of the things that can fix acquiring a property with these rates right now. The other one is getting a little creative with your capital stack as well and filling some of that gap with maybe private equity or preferred equity.

Yeah.

Interesting. So I mean, you're saying there's kind of a gap. So the sellers had in mind, hey, this is what I'll be able to sell it for now, price adjustment. I mean, it seems like too, a lot of sellers may just hold on and wait, right? So if they're not in dire straits, they may just, well, now's not the right time to exit. So it's taking a lot of product off the market as well if they don't want to sell for lower than they're expecting.

For sure. Are you seeing fewer bidders? I know for a while there it was like a bidding war, it was like a feeding frenzy.

You know?

Yeah. Yeah. I mean, we're seeing a lot less, you know, we're negotiating, believe it or not.

Wow. No, for anybody that's not familiar, it was insane. I mean, we're getting outbid by a million bucks or $3 million at a time on these things. And with bids that were already pretty aggressive, you know, when you're looking, trying to get returns and you're looking at what it just, there's not that much meat on the bone. And then we'd get beat out by $3 million. We're going, what is going on? You know? And I think, I think a lot of people got the multifamily bug from a, you know, a syndicator point of view. Like they've attended a seminar about being a multifamily syndicator or something, raised up, raised some capital, and now you got the money, you got to go spend it, you know. And but those days are that the capital is evaporating and those deals are, you know, you know, running out. So now maybe it's getting a little more realistic.

Yeah, I think, you know, same thing I saw back in the other 2008, 2009. The buyer pool begins to shrink. You've gotta be able to raise more equity now, right? Since you're getting lower leverage. Also, your lenders are becoming a lot pickier on who they're gonna lend to. So yeah, I mean, now, you know, we're, there's some deals we're looking at where we're the only one looking at it, or there's only a couple other people looking at it, you know? And it's like, okay, well, you know, your whisper is this, you know, we're gonna offer millions under and we're, we're waiting, sitting and waiting on some of this stuff.

So, so take us back, think back to 2008. What's different? With what's going on now than what you saw happening then?

I mean, you have inflation, right? Back then the inflation wasn't anywhere near what it is now. I feel like you still have really good fundamentals and the economy is, for the most part, other than what the Fed is pushing, you know, they're, they're, they're kind of wanting the economy to do bad, right?

But it isn't.

Yeah.

Not yet. Yeah. Yeah.

Correct. Correct. The economy's still fighting them off. So it's definitely different. Honestly, if it was not for the rates, I mean, it would still be a really hot market. So, yeah.

Yeah.

I mean, 2008 was fundamentally, it was a real estate and a banking collapse.

Yeah.

And this is not that, right? This is not, you know, this is, you know, I actually, I got one on you. I actually was the, I went through the dot-com crash, you know, and that was different. And real estate prices softened, but it wasn't a real estate and banking crisis. It was really a stock market crisis, you know, and, you know, so everything's interlinked at some point, but, you know, 2008 was fundamentally, it was real estate speculation and shoddy underwriting that drove these values to excess and with speculation, and this simply isn't, doesn't have any of those characteristics. And as you point out, inflation is a massive tailwind for real estate, right? If you want to really get a free ride and coast, erect your sail into the inflation tailwind. And that's what real estate is doing. So there's going to be long-term, there's just going to be plenty of demand for this. And in my view, at least inflation is not going away anytime soon.

Yeah. Talk a little bit about George. I mean, we're talking about the kind of debt markets, the capital structuring of these deals, but on the other side of this equation, multifamily, to your point, has very attractive fundamentals. We're seeing housing affordability just plummet right now. Those interest rates are going up and home prices haven't taken a huge hit yet. Maybe they'll plateau or even decline. but it's pricing. I think the year over year difference in affordability was 40% less.

So all of a sudden these, the homes are now out of range. What do people want to live? So the people have to live, what are they going to do? They got to rent, right? Are you seeing strength in the rental side of the business?

Oh yeah. It's nothing like I've seen before. I mean, the increase on, on rents and you've got a lot of people coming towards renting for, so I'll give you an example. I just saw this this morning. Somebody bought a house for $400,000 roughly last year, same time, and they bought it today, the same price, just with the increase in rates, they'd be paying an extra around $750. A month.

A month.

Yeah. So, you know, even if the prices drop, your rates are still okay.

Derivative. Yeah. Comparing to leasing.

Yeah.

So, so it just creates demand for multifamily and one or the other is going up, right? If there's, as long as there's demand increasing, which we're seeing, you know, that there's still a shortage, still a pretty huge housing shortage pretty much anywhere in America. So, so you're, so we're seeing the debt stack has to, has significantly changed. And, and so, you know, but one of the things that we've seen and one of the things, you know, we're going to be talking about, you know, in a future deal, we got, we have found a little unicorn here, you know, with an assumable debt, right? And it's a Fannie Mae loan at 3.49%. So that, I mean, that completely changes the equation, right? All of a sudden it's assumable, 9 years assumable debt at 3.49%. It's like, Okay. Yeah.

I mean, it's crazy, right? Last year somebody would have told me this property has assumable debt. I would have been like, no thank you.

Who cares?

Move on to the next. Now I hear assumable and I'm there, you know, I'm all over it.

So, so there's, there's still good deals out there. In fact, you know, and you're at what you're saying, there's softness in the market. So there's, there's good deals yet to be had and, and including unicorns like this.

Yeah, we're submitting offers weekly. I mean, that's awesome. You know, there's certain, we've definitely changed our criteria. I do think—

What's your criteria? How's it changed?

Yeah, so we were very value-add driven, right? And we've got the in-house construction and we're not scared of heavy lifts.

Heavy value-add where you gotta do a lot of work. Yeah. On the property.

Gotcha.

Yeah. It's a real fixer-upper. Yeah.

Uh-huh. So I'm not saying we're not doing those anymore, period. Just if we're doing that, it's because we're getting it at a really, really low basis.

Right.

Where we're seeing more, or at least easier to add value is more of the A-class, especially straight from the developer. We've done several now where they're more concerned about occupancy and not really pushing the rents, so we can easily come in, do couple tweaks and just kind of take it to the next level. We're looking at, you know, that's a lot of what we're looking right now.

So when you're looking at that, the kind of, you know, it's always all the sponsors flash their big IRRs. Here's what we're going to get on this deal, right? But it's so important to look at what's the risk-adjusted return, right? And through COVID, you know, these heavy value-add deals, have suffered a little bit, not only from just difficulty in getting supplies and the supply chain has disrupted that flow. Labor's been very difficult to get. And so you have all these timing issues and you end up taking a lot more risk in construction and repositioning assets. If you're going from a C to a B or a B to A- or something, and you're trying to get these higher returns, but in these kind of more Class A deals, it's more of just a, operational tweaks. You're not taking undue risk from construction, from supply chain, from the labor markets, from having to prove out a brand new business plan. It's, you know, let's add a little bit of extra revenue by adding parking or add some other amenities like dog parks. Let's do things that are a lot lower, you know, sweat off your brow, but can have pretty similar amplifiers to the bottom line.

Yeah, we, we pay a lot of attention to what the average household income is in the, in the areas as well. And for the most part, you know, these are higher class residents as far as their salaries and, and what they're making. And whether we're in a recession, we're heading towards a recession, whatever you want to call it. I feel like they're going to struggle less versus somebody in a C-class. And we've seen some of that in some of the C-class stuff already.

So you're seeing literally, so more trouble on with renters paying? Correct.

Yeah. Correct.

Interesting. And it makes sense because it's, if especially in inflation, it's the lower income people that are the most hurt by it, right? If it's painful to fill your tank, then, you know, you're going to— I got to drive to work or I got to pay my rent. Which am I going to do? While driving to work is probably— if you— if it really is that bad, you have to make that choice, you know, then, yeah, you know, you know, we're seeing— so tell us if you're seeing the same thing. We're seeing a different difference in demand and pricing for Class A versus Class C properties. And we're seeing— so the cap rates have have moved quite a bit for, for Class Cs. Are you seeing the same, same thing where they're, it's much softer?

Absolutely. I mean, it had the margin between A-class and, and C-class had got compressed so much. That, that's one of the reasons that we're kind of, you know, staying away from the, the C-class right now. I just feel like Pricing-wise, it's going to take the biggest hit for sure. So if you're buying at the height of the price on a C-Class and you think you're going to add all this value, but if you can't for whatever reason, I mean, I don't want to be negative.

Or you already say you do add the value, but because you bought it at the top of the market, you go to sell it, the market's not going to price in that much premium anymore. So you actually achieved your business plan, but now you can't sell it for what you thought you could because Caffrey's have gone back more than me.

Okay, so before we lose everybody, you know, multifamily 101. All right, so A, A, B, and C class, the difference is primarily age, right? So, so the, so the C class are, are like vintage, you know, '70s or '80s typically, right? Uh, you know, and so typically they need more updating, more modernization, that kind. So that's, that's the main difference, right? And is, is age. And C class, and historically C-class sold at a higher cap rate, meaning they were less expensive relative to their net operating income, right? That was historically. And then what happened during the COVID era, all of a sudden the C-class caught up where they priced high, almost, you know, not far under the A-class. And it's like, and that's what you're pointing out.

Looking for that value add, right? So everybody was going towards their—

Everybody was bidding these things up and now it's coming back more to, okay, they're reflecting the price that they really should be. And what we've seen in, you know, during this run-up, we saw a bunch of, I think, smaller syndicators with, with value-add stars in their eyes would go buy this C-class and think, I'm going to fix it up. And they budgeted their— you know, they went in and budgeted their, their, you know, rehab, unit rehabs, but then they blew out the rehab budgets, right? Because whoever you know, experience, you can't hire the workers. All of a sudden the workers are wanting 50% more and lumber went up 3, 7x and it's like your budgets get blown. Well, meanwhile they've raised a fixed amount of, they've raised a fixed amount of capital. They're outta money. And so what are your choice? Well, let me sell it back to the market as a, a, a second version of a value add to somebody else, right? More value to be added. So, so we're seeing a lot of deals blow up, right? Because just this calculus. And so prices are really coming back to normal.

Well, and I think it also takes a lot of work to operate these, especially the C-class with the delinquencies. And just like you mentioned, there's, there's, they're older, right? So there's things hidden and there's issues that are gonna pop up. You're gonna have issues with the boilers, with the chillers, with the roofs. With cast iron sewer pipes and whatnot. A lot of mediocre or even bad operators have been saved with the market, but now that's not there anymore.

Right.

You really gotta be able to be efficient and operate the property better.

So as you've kind of shifted from more heavy value add to more lighter value-add Class A properties. What are other factors you have to look at in underwriting that are maybe different from Class C? What makes a really good Class A, right? Because these generally go for a higher premium, but if you're in a high-growth market or you're next to great job growth, or give us some examples of how do you look at it differently and what are the factors? You've mentioned median income, so how does that kind of play into Do you have some kind of bright line metrics you look at when you're looking in these markets for these deals?

Yeah, I mean, the first thing we look at is the rents and then other income as well. You know, how much can we really push on the rents and are there other income that we can make by, you know, bundling the internet and adding in the internet or just adding an amenity fee. We do that by looking at the comparables in the area and see what other apartments are charging. And we look at the, like I mentioned, the average household income, you know, how much can our residents really afford before it's just, we're asking for too much, right? Right. So really pushing the income is the number one thing. And, and seeing how far we can push it. And then the expenses, you know, what, what efficiencies can we add and where can we cut out some expenses if, if we can? We have been able to find that most developers are not great operators. They, they want to build these and they want to get out of 'em. They don't want to hold 'em long term. So usually we can find a lot of savings on the expenses and a lot of items that we can add for more income.

Buying direct from the developer. Yeah.

Yeah. It's interesting. I mean, it's interesting to look at the math too on generally these Class A properties have a much higher unit count. And if you're going and, you know, to your point, one of the deals that we really looked at a while ago and ended up investing in with you guys was a Class A deal. And one of the value-add plans was bundling internet and having that as a part of, you know, the package. And I forget the specific number, so correct me if I'm way off base here, but you know, maybe something like $50 to $100, somewhere in that range. But you add that across, you know, 300 units per month.

It's real money. Yeah.

I mean, it's real NOI boost, you know, and divide that by your cap rate that Class A is generally going to trade at. That's millions of dollars of value from one little thing that's, it's not gonna be a budget breaker, right? For, for these.

Well, and you're, you're actually, they're already paying internet. You're just changing who they're paying it to.

Right. That's not even the same apartment you're talking about. We just started implementing is we added a smart thermostat, a smart lock, and some USB plugs, and now we're charging $50 to $75 extra for those units.

And you know, that's, and how, how much does that, that cost? Just rough numbers to put those things in. I mean, oh God, a thousand, right?

I mean, we're talking about, No more than $600, $700. Okay.

So you are, yeah, you basically make money within what, 5 months?

Yeah.

Yeah. 8 months.

Insane.

Yeah, that's, that's pretty crazy. Yeah. What, what other things? So you, like, how, I'd love to hear from you kind of going back to younger George and been through different market cycles, different strategies. What are things that you've learned as you've kind of scaled to this, this level? I think that's something that's so interesting. Being where you're at? Because there are so many syndicators that are coming onto the scene and seeing what worked maybe in the last cycle or the last few years. It's probably not going to work going forward like we're talking about with these Class Cs. And how have you kind of shifted your perspective? What are the things that maybe have been underweighted by, you know, younger, you know, glossy-eyed beginners that they need to be overweighting when you're looking at a deal and you're digging through the due diligence, you know, or vice versa?

I think I mentioned it already a little bit, but just, you know, what it's really gonna take to execute some of these business plans, the work it's gonna take, like some of it might sound nice on paper and in your pro forma, but are you ready to actually do the work that it's gonna take to get it there? And do you have the team, right? Are you setting yourself up for success? Or, um, or for failure really. Um, you know, this is, this is, it's gonna be a great few years for some good operators and then it can be a really bad couple years for some that aren't ready for it. Um, yeah. And I, we're ready, we're ready to, to seize the opportunity and, and really pick up as much as we can. You know, I feel like we didn't buy enough the last time in the down cycle, so we're, you know, that's one thing I've learned. We're, we're ready. We're ready to keep buying and, and buying as much as we can.

So, so what are ways that you're kind of preparing, you know, when you're, you're making acquisitions? Obviously basis is the end-all be-all. If you, if you make a good purchase on the front end, you can weather a lot of storms, right? But Outside of basis, what are things that, you know, if we do go into some turbulent territory over the next 12 to 18 months, what do you think as an operator, what are the important things to be aware of as you're navigating challenging circumstances?

I think number one is debt and capital stack, like how you build that, right? Number one is preserving your investor's money, right? You never want to be in a position where a bank or, you know, private equity can take over your deal because then your investors aren't their first priority, right? So I think that's number one, being smart about that, not getting overleveraged and not getting into a bad loan. And then number 2 is location. I know everybody always says real estate's location, location, location, but it really is, you know, especially now, like you, you want to make sure you're picking locations that have strong, good growth and fundamentals and that a recession's not going to wipe it out.

You know, let me, let me jump off there for a second. So you're, your strategy in 2008, what you did is you just held, right? You weathered the storm and ultimately storms do what storms do, they pass, right? And the key is just to not take— the key is to have staying power, right? Is to be able to stay in the game. And the way you stay in the game is by managing your debt. The way you get creamed And you're to your point, it's where you're, oh, you're overleveraged or you can't service your debt. If you can't service your debt, you lose the debt and they will take your property and wipe your equity out.

Right?

So the key is managing your debt service. And so, you know, I would say that's really the most important thing operators need to be doing right now is, is coming up with a Plan B, which is a 10-year plan, right? Because in 10 years, At 8% inflation, literally at 8% inflation, the value doubles in 10 years, right? So a $20 million property is literally a $40 million property if it just keeps pace just with inflation. So, and if you, if you put in, you know, $2 million to buy that $20 million property, you know, that's optimistic, but all of a sudden it's worth $22 million. Your $2 million become $22 million. You did super well. The key, the key is you to ride that that wind, you have to be able to service that debt and stay in the property, right, and not get wiped out. And the key is debt service, debt service, debt service. Pay attention to the debt and have a plan B where you can flip your business plan over, you know. And that was my big problem with the bridge debts is they had, you know, 3-year expiration dates with floating rates and you have to refinance in year 3. Well, what happens if you can't? You know, and that was— I just— it looked to me like a bug looking for a windshield. You know, it's like this, this is, if everything is great, then it's going to be great. But there's a lot of risk here. What if you can't refi? What if you don't have enough debt service to refi? What if the rates are higher or the cap rates are higher when at the moment you want to refi? Well, now it's just massive risk. So I think debt service is really the way forward is to, is to manage that. And as an investor to understand what does the debt stack look like and the terms of the debt.

Agreed. Agreed. 100%.

Awesome. George, well, thank you so much. I don't want to get any other thoughts, but I definitely—

I have one more.

Yeah.

So, okay. On paper, right? I'm a, I love paper, right? I love paper profits, you know, and big ideas. So you look at multi or you look at hotels, they're on fire sale right now, right? No one wants these things. You know, uh, you know, a Comfort Inn or something, you know, and you get these super low prices for hotel properties. You get these super high prices for multifamily. Hey, it's kind of the same. It's got rooms. Let's just boom, do a paper switch. Is that real? I mean, so, and now you ever, you actually done some of this, right? So you end up with kind of a weird product that no one wants, or is it a good product? Are you excited about this? What's the, what's the real scoop on hotel conversions? And hospitality conversions.

I'm excited about it. I'm, I'm really excited about it in certain markets, right? I think it needs to be the right market where you're running out of affordable housing and pretty much what somebody can do is downsize, right? And they can go into these smaller units, studio units, and we're able to get 'em at a really low basis like you mentioned. So that's the, you know, I originally started by saying that we'll still look at value adds and we'll still do 'em a heavy lift if we're getting it cheap enough, which we are on the hotels. It's quicker than building from the ground up, right? So if I'm gonna do a new development, so it's somewhere in the middle between a renovation and a new development, but I can get 'em done much quicker than I can a new development. So I'm excited about it. We're about to close on 3 of 'em in the next couple weeks.

Really?

Have, and you've completed more than one, right?

No, no. This is gonna actually be our first 3 that we do.

Okay.

This is the first.

Yeah. So we have yet to see if you can make a product that the, the, the, the dog food that dogs will eat, right?

I mean, we, we've, Right. We've built from the ground up, so I mean, we trust that we can get the construction part of it done with no problem. And then there is case studies in the same market that have done it and been successful.

And they were, wow. Yeah. I mean, to me that's, if you can crack the code on that, seems like just an easy way to mint money. Yeah, you know, and like everything, it's repurposing unwanted real estate into what's wanted. It's a service, right? It's doing a service to the, to the, to the nation here, the city, right? Creating housing, which is what they need, and getting rid of hotels, which is what they don't need.

I will say, do not close on them without getting them rezoned, though.

So that's—

we've been working on that. So we've got them all rezoned now, and that's why we're closing.

Got it.

Very good.

Yeah. Great, great, great point.

Because then you're just stuck with a hotel.

Oh, which nobody wants.

Awesome.

Well, George, this has been fun. Always get some good nuggets in talking with you and appreciate you coming and sharing, sharing the wisdom and looking forward to some of these opportunities that are kind of coming up. So, you know, you're out there looking, we're out there looking and, you know, stay tuned. We've got some fun, exciting things coming together. So.

Absolutely, man. Absolutely. Looking forward to partnering with you guys.

Awesome.

Thanks so much.