#27: Alex Epstein, Executive Vice President of OMNE Partners - Competing with Barstool Sports, converting office spaces, and the best asset class in 2024

You know, when you look at the housing market, because everyone in single families locked in their mortgages, right, at under 4%, they're not moving, which means there's no supply. There's no supply to buy a house. So what do those people do? They go rent. Right? And that's why build to rent. Communities are growing really fast. It really is the solution for a lot of these housing problems. Hey, you can have something like a house, but rent it. That's how apartments, you know, I think will can continue to absorb until supply becomes too much. But multifamily, you know, for all, all the demographic reasons, has performed really well. You know, people still need a place to live and, you know, so I think multifamily continues to stay.

On today's episode, we have executive vice president of Omni Partners, Alex Epstein. Steve. Alex came prepared for this podcast episode. He came with all the information. He gave us a deep dive on what's going on in real estate in Omaha. But he went even further. He went, you know, countrywide. And this is if anybody's wondering, hey, what's going on real estate today? This is the episode for you.

You know, Jake, it's when I was listening to Alex and hearing his story from graduating from Indiana and his Twitter company and Target and then how he got into real estate, it was refreshing to hear him as in the trenches, what's actually happening, happening in real estate and specifically in Omaha, that can be applied to many parts of the country. But I learned a lot, and it was a great interview. He was there.

Yeah. You could tell, you know, you alluded to it. He started a company when he was in college that was taking advantage of the Twitter trends going on. And you could tell in this interview that he. He is a guy who knows his details, he knows his facts, he knows his data. It helped him back then. It's helping him certainly now in the real estate market. So this is one, again, an episode people are going to really enjoy if they want to know what's going on in real estate. But it's also some really good stories about how his Twitter company competed with Barstool Sports, how he ruptures Achilles playing pickleball. I mean, it's across the board, but it's really entertaining. Entertaining. So let's just head west.

Yeah, he's just doing life, which is awesome.

Let's head west so people can jump in. Stay tuned as we discuss competing with Barstool Sports, converting office spaces, and the best asset class in 2024 with our guest, Alex Epstein. This Episode is brought to you by Skyline Point Capital. If you're anything like me, you're always considering where to invest your money. Stocks, bonds, crypto, a rental home. The list is literally endless. As we've all seen over the past year, the stock market is unstable, the housing market is just weird, and inflation is on the rise. In times like these, the clear place to invest my money is in multifamily real estate, AKA apartment complexes. Here's why. Returns on real estate investments have little to no correlation with the stock market. There's lower volatility, stable income streams, and, and the tax benefits are insane. And let's not forget that the apartments will typically appreciate in value over time, which means you can walk away with a pretty nice return when the complex is sold in three to five years. Best of all, multifamily investing is passive, so you get all the benefits without the hassle and headache of your typical rental home investment. Getting started has never been easier. Head to skylinepointcapital.com to learn how you can start investing today. I. All right, well, Alex, I thought we'd start our conversation with a story that you shared with us. I'm just going to read it verbatim and then you can tell us how in the world this happened. But you had said that at one point in college you had 700,000 Twitter followers under an anonymous college humor handle, which is super impressive to begin with, but then you were able to parlay that into a business that did a million unique visitors a month to a website. Unpack this, explain what the heck is going on and, and what exactly you were doing here.

Yeah, so that was my pre commercial real estate life, you know, and arguably much more entertaining, depending on who you ask. But yeah, that's kind of, you know, a story that, you know, doesn't seem, you know, seems like it's a couple centuries ago. But you know, if you think about a world where there's just Twitter, there's no Snapchat, no Instagram at the time. So circa 2011, maybe Instagram was just starting. So thought it'd be funny to share, you know, my insights on Twitter under an anonymous handle, but it not be tied to me because of course I was interviewing for jobs after college. So I didn't, I didn't want my name a part of it and just started kind of as a joke. And then I show up to, you know, one of my business classes and then everyone, you know, I look to the person right of me, they're looking at the Twitter account, laughing. They don't know it's me. I said, do you think that's funny? And they go, oh, my God, you got to follow this account. I go, really? I'll have to look into it. And, you know, so shortly, by the time, within a few months of starting it, you know, it's 10,000 followers, 20,000 followers. Then I went on a spring break trip and realized, met some people from University of Iowa. I went to Indiana University and, you know, they started talking about the Twitter account too. So I was like, oh, my gosh.

Yeah.

Spread outside of Indiana and didn't have a business plan for it, didn't know what I was doing with it, but it just kept growing. And so, yeah, you know, at its peak, 700,000 plus followers. And, you know, the big thing then was trying to monetize it. So at the time, my competitors, if you will, or Barstool Sports. I'm sure some people have heard of that.

Yeah, maybe a couple times.

A website called the Chive and then total frat move. And you know what? The Chive was probably the biggest at the time. Barstool was, you know, monetizing through advertisements. And, you know, really, there's no such thing as an influencer in 2011, Kim Kardashian was one. No one else was. And, you know, so this big joke of, well, you got a lot of followers, but you're not making money. So, yeah, the. The quick solution was to, you know, I kind of. My background, you know, just high school, college, was in somewhat journalism and student newspaper and this kind of voice. Why I think the Twitter account went so viral is it was really a voice for college students that they could resonate with. And it wasn't being, you know, there. Everything else at the time was just, you know, very edited. You know, you have the Onion, which is more of a political college website. You had the student newspaper, which was very appropriate. But you didn't just have kind of a website where people could write what they want, say what they want, and then hit publish. And so created a website where all the followers could just submit articles. I'd publish them and then it drive people to the website. And then there's Google Ad revenue. And so, you know, the. The short. You know, the. I guess the short story on that is became wildly popular. Everything from, you know, any type of drinking game associated with any type of athletic event, music event. I think the most viral one was Victoria's Secret fashion show. We published a drinking game associated with that. And then, you know, it just. Just that, you know, was Going just. I think it was trending on Twitter for a good bit. And then that resulted in about a million unique visitors a month, which was healthy ad revenue.

Yeah.

And then kind of the demise of it was, you know, when you're not filtering the content, you have a lot of inappropriate, you know, content that Google Ads didn't like. And so then, you know, then Google Ads stopped serving the website. So then there was no way to, to really monetize it at the time. And, you know, that's when I started looking into, you know, hey, I need a career. This isn't going anywhere. Hindsight's up. Yeah. I don't know if I made the right because, I mean, I think Barstool did 17 million unique visitors a month and was valued at 583 million. So, you know, and that's 10 years later. So you've kind of, you know, it's the big shoulda, woulda, coulda was almost there, but didn't do it too soon. Yeah.

Did you end up just shutting it down or did you sell it or what. What happened with it?

So basically at the time, there's also a big issue, you know, from a content perspective. You, you had a, you know, as time progressed, you know, kind of 18 months a year down the road, you notice all your followers who were then college students are now grad students. So big or graduated young professionals. So the question becomes, do you, do you stick with a college brand or do you migrate your content with your current subscribers? So that became, you know, an identity crisis for the brand of, you know, do we start publishing postgrad postgraduate content, you know, more into what's going on in your quarter life crisis, or do you stick with, you know, very immature college student content? And then, you know, the following was really migrating to Instagram, where we didn't have a following. And then without ad revenue, you know, that, you know, it was a quick fall and, and I really was burnt out from it. Wanted to go start a career like my peers were doing. And, you know, I ended up selling it to a really, a startup company that had a product they're looking to launch through the, through the platform. Nothing ever came of it with them. And it was just a, you know, kind of a simple exit. Nothing too exciting, you know, was able to learn a lot, wipe my hands clean of it. So. So it's good to, you know, just get a token and be done. But it certainly wasn't, you know, possibly as exciting as maybe hindsight, looking at the potential it could have had to grow into something different. I think one of the big mistakes, you know, I made is a lot of competitors pivoted, said, well, if. If we can't serve ads on here, we'll sell our own product. Right. So they became an apparel company, you know, which, you see, that's what barstool you really. One of their main things is they sell apparel. Total frat move. They became a, you know, an apparel company, and they were distributing their apparel through Dillards and Von Mar and Nordstrom. So, you know, could have used the platform to create a product at the time and pivoted and grew something. But ultimately, for me, I guess my calling was in brokerage.

Hey, Alex.

Yeah.

You're telling this story, and we probably have some listeners going, what was the name of that site? Because I was. I was. When I. When I was in college, I was doing this. Is it. Is it the same one? What was the name of the site?

Are you. Are you allowed to say yes?

Yeah. No. I mean, it's. It's nothing today is called the College Town Life. And on Twitter, it was at Collegetown Life. And, you know, after every kind of tweet, we do hashtag ctl and that's what. Which stands for College Town Life. And that's what people used to submit content to get retweeted. And, you know, in. At its peak again, there is a website called Clout that measured your influence. Verse mentions, retweets. Ultimately, the kind of social power you had over Twitter. We were a top 100 Twitter account at the time, ranked above Target X deodorant, Taco Bell, some pretty significant brands.

Wow.

In that. And that. That's just because when we. When we would, you know, tweet out something, you know, it went pretty viral. A lot of mentions, a lot of retweets and a lot of that. But again, in an era in which an influencer, that meant nothing. How you got ad revenue, being big on social media meant nothing. That it just didn't really exist. And so that's, you know, that's kind of the story.

Alex. It seems like just from your talking that your mind is always thinking, what's the next thing? What can I do? And when the College Town life, you're graduating, you got to get better grades. It's time to get on the horse. And in the real world, what were you thinking?

Yeah, I mean, the. I. I really at the time didn't think that would, you know. So, you know, just for timeline, when I graduated at about 25,000 followers, I accepted a job in Nashville, Tennessee, moved down there, and then by the time I moved down there, it had a hundred thousand followers and I was spending all my time on it and really focused on growing it and ultimately ended up just moved to Nashville, grew the website and you know, I think at the end of the day, you know, it was growing exponentially every month. So, you know, you go from 20,000 followers to 40, 40 to 80 unique visitors go from 1000-002000-00200, 400. So the sky is really the limit. I mean, I thought I'd be, you know, forever sitting by a pool, just tweeting. And so that's kind of where my mind was at. But the, you know, I realized pretty quick, you know, I kind of, the grass is always green, you know, the grass is always greener. And maybe that was in for me, you know, possibly not having the patience to stick with it. You know, I was jealous of everyone, you know, working the entry level job at 3M target, you know, Ernst and Young, where, wherever it might be and you know, they had stability. I was in, I was in startup mode. And you know, you can get burnout from that pretty fast.

It probably felt like you were missing out too, especially as you graduate college and you say everybody's going to target 3M. What am I missing here? Like, I'm, I'm trying to build something, like I'm continuing what I did in college. They've exited college and have moved on to another chapter of life. And that's probably some feeling of got got left behind, missing out on something.

Yeah, definitely. You know, there's a thing of growing up and, and then, you know, it wasn't formalized. I had, you know, a business partner that helped with web development and the technical side of it. And so he was in Minneapolis, I was in Nashville. And so, you know, you didn't show up to work and, and have a culture. You didn't have co workers or peers, which was unique then, was, you know, I was communicating with college students and writers remotely and managing campus reps and doing that sort of thing. But definitely to your point, you know, you'd see people at a company happy hour and you'd go, oh, that looks really fun. Not realizing, you know, that, you know, I, I do think hindsight, I, I much prefer a entrepreneurial startup culture than corporate America. So.

Sure, yeah. So then, okay, so you sell the business and you decide, okay, I need to get into the real world. How do you end up in real estate? Did you go, is it a direct pivot or did you have something in between? Tell us about that.

So that's actually some of my friends favorite story is I went, you know, I was really envious of the people that got jobs at Target headquarters. You know, is powerful brand, seemed like a great career track. And in my mind, the way I was raised, I was like, well, you know, I want to go get a job there. At Coming out of the Kelley School of Business at Indiana. I don't even think I got an interview with them. They were interviewing all the top students. Believe it or not, I wasn't a 4.0 student. I know Steve wouldn't believe that. And so I. So then I sent Target a cover letter and kind of said, hey, you know, my brand I created is ranked above your brand. I want a job.

And this is either gonna piss someone off or they're gonna be really interested.

Love it. Yeah. So. So I went through the interview process. I think I had a story that was different than other college grads. And, and so they hired me, and I was going to become, you know, a business analyst for them and a buyer. And in my mind, I said, okay, well, be a buyer for a year, Singer, buyer for a year, and then maybe I'll be CEO of Target. So I didn't understand how corporate America quite worked. And within. This is. It's pretty funny. So right away, they randomly place you in a department. And so, you know, if you, you really want to be in maybe the music department, that's pretty cool. Or sports apparel. Well, they put me in nursing bras and panties in department D22 and D23. And that's great. And, you know, I, I grew up with two brothers, and I had no expertise in nursing bras and panties. Knew nothing about it, but I, I really quickly wanted to leave my mark on that department. So I convinced them. You know, we're sitting through the first meeting, and they said, well, we've got our Heather Gray nude black and. And white or off white. And these are the nursing bras, and this is how many units we're going to order? And I raised my hand and I, you know, using the Target lingo, I go, don't you think the target mom might want to feel, you know, a little more alive, a little more sexy? You know, why don't you give her some animal print, some polka dots? Like, why are we just doing solids here? Yeah, this was my, you know, multi million dollar. Yeah. To raise. Raise up the ranks. And then they, so they, they. They're like, well, that's interesting. We've never heard that before. All right, we'll. We'll run a test run. And, you know, a few months later, product comes in, hits the test stores. My manager grabs me, says, hey, let's go to the. The headquarters store. Let's go look at it. Alex, come over here. And I look, I go, oh, my God, there it is. It's all here. It's great. She goes, well, it's not really good. It's all here. It means it's not selling. So it says on the clearance racks pretty fast. And that's when I realized, you know what? I don't think I'm going to have a career in nursing bras and panties at Target. I want to get into something more fruitful. And so I. Growing up, I knew a lot of developers in commercial real estate and was able to connect with some. Some of those people that had done a lot in Omaha, and they basically helped guide me to, hey, this is what a career in commercial real estate looks like. And that's how I made a decision to start in brokerage.

Yeah. Was your family investing in real estate and that's how you knew these brokers, or was there some other connection there?

No, my family's background, they were in wine and liquor distribution and, you know, distributed that throughout the state of Nebraska. And for me, you know, they. They. A lot of their friends and peers in Omaha were in commercial real estate. So I was able to reach out to them. And, you know, it's just something that interest, you know, really interested me from a perspective of, you know, if you're going to go sell anything. Right. You know, being a young professional, you kind of have a choice. You can sell, you know, printers, you can sell office paper, you can sell cars. But, you know, there's really nothing more, you know, prominent and sexy is selling commercial real estate. It's probably the most expensive asset other than maybe commodity trading that you can go sell. And it's physical and it's there. And so that really interested me to be part of something that's, you know, physical, that you can touch and feel that's meaningful, expensive and important to both tenants who are making, you know, the number one decision tenants can really make is where the real estate is. And then ultimately for landlords, it's, you know, typically their most prized asset, the biggest, you know, part of their net worth. And so, you know, it seemed like as an asset category, there was a lot of allure to being. Being part of that.

Yeah, I. Now that you've brought it up, I'd Love to, I'd love to pick your brain a little bit on, on the current real estate market, let's call it that, especially because you're an expert, you're highly successful here in this area. What's, what's, what's your take on the real estate market today and how it looks over the next six, 12, 18 months? And what, what's causing you, what's giving you a cause for concern in the, in the, the area?

Yeah, so I mean I've been in the business in the industry since 2013 and ever. So that's a 10 year run and I think for a 10 year run things just went up and up and up and up. There's a hiccup with COVID and the scare and then it went up and up and up. As far as asset prices, activity, development, you know, it just was almost a V shape curve in that things just got better and better and better over the course of 10 years. And you know, there's a lot of reasons in the economy for that. And today a lot of the reasons that that happened, you know, they've changed. And the number one thing that's changed is the debt market. Right. So you know, mortgage rates, interest rates, they're the, the highest they've been, you know, is in, you know, very long time. And so, and then construction prices are the highest they've been. And so when you have those two things at the peak, the numbers don't work. Meaning, you know, for the numbers to work you'd have to have rents come up enough for then your developer to create enough yield. And so you know, in simple terms, when, when you look at risk reward, you know, you can invest your money and get a five and a half percent return with the treasury and have zero percent risk. So you know, when, when that wasn't the case and you know, your alternative investments say were to get 50 basis points of return or 1% return of risk free return, then everyone would flood into commercial real estate. Because if you could maybe get a 6% cash on cash yield, well that sounds great. Well now a 6% cash on cash yield doesn't sound that great when 5 1/2% is free. So that's a lot of risk and a lot of, you know, in illiquid activity to get a 6% return. And I think, you know, so where the market is today, you know, as long as interest rates stay high.

You.

Know, in the short term, in the next six to 12 months, activity will stay low because we're not adjusted to it. Meaning Our sellers willing to sell at a discount today, you know, because a buyer's going to say, well I can underwrite this deal to an 8% return. Here's my offer. Well now your offer is 20% lower because of the debt than what it was in 2021. And the reason those deals aren't getting done yet is sellers are not yet distressed enough. Typically most aren't, aren't experiencing enough distress to say, yeah, take me out, I need out. But as you know, you know, I think if we float 12 to 24 months from now, you'll see a lot of the, you know, financing come mature people that maybe built projects and had five year debt or performers, you know, that hey, we're going to refi in 2025. Well now they're either going to have to show up with capital to the table at the refi with more equity or sell it. And so I think we're on the brink of seeing a lot of sales, more inventory coming to the market than there has been. I mean you used to be able to sell an apartment building, multifamily building off market, have 30 offers in 2021 that all exceeded the seller's expectation. Well, we're not there today and you know, it's quite hard to, to, you know, no one's getting to sellers expectations. So something has to give. Either say the debt markets collapse, okay. Then buyers can flood back to low cap rates or you know, inventory comes online, sellers experience distress and then you know, buyers and sellers, you know, the price matches. Right now I'd say you're really at what you'd call a buyer seller disconnect. I know you guys have talked a lot about that. Yeah, and that's just where we are. So if there's a buyer, seller disconnect, there's little activity because sellers don't have to sell and buyers can't make the numbers work. You know, and again I think a lot of that's attributed to your alternative investment being hey, I can go get five and a half percent cash on cash return through the treasury for free. So the only way I'm buying this is to yield a higher return.

Sure, Alex, we see with some of our peers and some of the sellers, they would like to sell but because the inventory is down so far, they're going, what do I do with the money? Even if I sell and I what.

Do I do with it?

There's not enough inventory out there on the marketplace. And so it creates this, this gap like you were talking about that people aren't in it with enough pain to sell yet, but there is so much capital sitting on the side just waiting. We, we heard from some brokers in Florida that some of the people that were around buying big multifamily in the, during the 7, 8, 9, 10, 11 financial crisis that were on the sidelines in the 2000s, 20, 21, the heyday, while everything's going up, they sat in the sideline because prices were too high. Now they're coming into the market, they've got a lot of cash and they're just waiting to scoop things up and they are scooping some things up. But it's a. Yeah, it was interesting in Florida. They were just saying the participants that they hadn't seen for 15 years are now back in the game.

Yeah, big people. And I see, I think that's right. I mean, to make deals work right now, cash is king, right. Not a lot of banks can lend, you know, with minimum equity down. And so a lot of the patient, family offices or institutional capital that look at things through cycles on a five to ten year basis, they're now saying, hey, you know, we can now bid on something that's not going to have 50 offers on it. Right. So, you know, if, if to make the numbers work, if you're gonna have to put 35, 40 down and there's certain groups that, that can do that to make the numbers work, they're back in the game. But locally here, I'd still say, you know, sellers expectations haven't changed enough. Where we're still at a disconnect, right. They're still, you know, they still want, you know, a five cap or a five and a half cap. And with where debt is, it's awfully tough to make the numbers work there, you know, unless you had a need, unless you had a 1031 need or you had incredible scale, you know, you own the property down the street or you own the property, you know, or you have some goal to meet. But I think a lot of people, a lot of buyers are also still on the sidelines, sidelines, anticipating more stress because you don't want to be the person that buys, you know, at a 5 cap today, if you think it's going to be a 6 cap in two years, so in. And then I think a lot of people that bought at these awfully low cap rates in 2019, 2021, you know, so depending on where they bought it, you know, you have to, you're anticipating a lot of rental growth in your Performa and you're also probably anticipating a refi at some point. And so when you take up that refit, refi off the table or rental growth, you know, in Omaha, you know, I think it's between 4.7 to 5.5% from year over year. Nationally, costar said it was less than 1% year over year, which was the first time since the great financial crisis. So you're seeing, you know, rents aren't just going to bump 11% a year like people, you know, if you bought a property in 2019 or 2021, you say, oh my gosh, we, you know, we bumped rents 10%, 12%. It's not that easy every year. And I think the main thesis around real estate that a lot of people forgot is that, you know, real estate's not a get rich fast game. Typically, you know, it's a patient, you know, long term game. It's, you know, very hard to hold an asset two years and generate a 40 return. We got in a frenzy of a market where cap rates became so low, money was so cheap, you could flip properties, sell them, make quick money. Because rents increased, cap rates dropped. But usually for most, the thesis is, hey, we're going to pay down some debt service over time, we're going to slowly raise rents and then we're going to create wealth over the long term. You know, not necessarily a two to five year hold.

Alex, what are you seeing in the Omaha area? As I drive down 204th Dodge street, three seventy, I see a lot of construction going on.

Yeah.

And it would on the surface look like the supply. There's a lot of supply coming on. How is that affecting people in the multifamily market today with investings, with buyers and sellers?

Yeah. So I mean, the 204th corridor has been one of the hottest corridors in Omaha. And then, you know, Gretna, you know, is just booming. And you know, Omaha should be pretty proud. I mean, we've, you know, made significant strides in the last 10 years, five years, three years as far as development becoming more pro development. A lot of great projects going on, attracting solid retailers, creating, you know, which when you attract solid retail apartments gone, you know, be built around that. And so I think in companies in Omaha have been growing so that, you know, Omaha's been healthy in that regard. But you know, we're starting to get a point where when too much supply comes online at once, it gives the tenant choices. So, you know, it's always, does the landlord have leverage or does the tenant have leverage? The landlords had a lot of leverage Meaning when your assets 100% full, you can ask for 10% rental bumps or whatever it might be, but when there's 600 units being built across the street, then it becomes, you know, when supply, anything with supply and demand, when supply increases too much beyond the threshold, it becomes a little cautious for, for everyone. So what you're seeing now in, you know, multifamily, you know, for the first time in a long time, people are renewing year over year, same rate. Some new developments are offering one month free rent on a, on a 12 or 13 month lease just to get the property stabilized. That wasn't happening two years ago. Right. So and with that, that makes your, anyone's perform on a new development probably far different than when they, you know, developments take 30 months. So 30 months ago the debt markets were a lot different. Rental year over year, rental increases were a lot different. And so, you know, basically it means, you know, here we are and if you have a new development, things may not be going to plan as what you thought because you've, you probably perform it well. We're going to stabilize this without giving any concessions. We're going to bump rental rates 7% a year. Oh, possibly didn't know. We're only going to bump at 3%. Oh, we're going to, you know, place long term financing debt at 3.5%, not 6 to 7%, probably closer to 7 today. So your numbers all of a sudden become, you know, that affects your yield. And so again, when I go to that, that's why I anticipate over the next 12 to 18 months there'll be some projects that, you know, I will, you know, people want to sell because their pro formas aren't working out to what they thought they would be.

So where does this, how do you see this all playing out? I mean, based on the couple of things you said, I guess I could see if the Treasury's giving you five and a half percent, buyers can just sit and wait because that's a suitable option until they can find a good deal to buy. So how does that all play out? Does the seller just wait until either they become too squeezed too tightly or until something changes in the debt markets? I mean, how do you see this thing playing out?

Yeah, I mean if, if I had a crystal ball, you know, we'd all be on an island somewhere.

Yeah, right.

That'd be, that'd be pretty great. You know, so I, I think no one really knows, you know, the answer. Right? No one knows, you know, how, how does this play out, you know, from, from the knowledge, you know, you know, we have, you know, it seems like in 2025, probably late 2025, interest rates will decrease. But a year ago we thought that would be probably by end of, you know, 23, beginning of 24, and now it's already pushed further out. So you know, we're anticipating, you know, if it does take till the end of 25, I think there will be a lot of newer developments that will be stressed because of the, the financing scenario, placing stabilized debt on something. So I, I think, you know, at the rate they perform it and you know, raising rents the, the way they thought they would and you know, possibly having to show up to the table, you know, for the projects that are on balloon payments, you know, showing up to the table with more equity. You know, people don't like capital calls. So that's when properties go to the market. And so I think you're going to see an influx of properties hit the market probably at the same time. That's my prediction, you know, which will create some buying opportunities for those. You know, overall today things are healthy land, you know, you know, for the most part multi families properties are getting stable. Nothing, nothing is too concerning for. Bless you Steve. You know, nothing's too concerning for, for people yet, but you're starting to see some scenarios where, where there is stress. But yeah, I think, you know, there's multiple ways to look at it. From a brokerage activity level, I think activity is going to be slow for a couple years, slower because you know, there's an election year coming up that creates political uncertainty. Anytime that happens, that actually affects brokerage business, whether you're in office, industrial people tend to wait to make decisions till there's more certainty in the political climate. So that's a headwind. There's interest rate uncertainty where again like we said, if you were building a project, you have to have certain rents to make that, those, those projects work. And if you don't have those rents, it doesn't work. So that affects, you know, an office building today. You know, I know, I know we're talking mainly on multifamily, but it is interesting to know if you built a brand new class A office building today in Omaha, Nebraska, you're at minimum $32 starting triple nets, probably closer to 35, 36, 37. Well, you know, a lot of the projects, Nomaha, you know, Union bank building, the Carson wealth building, and those properties are leasing for 24 bucks net. So look at the difference. Those are new construction and Here we are at, you know, you probably have to be Almost a whole $10 a foot higher to make those projects work if you're building new. So ultimately that means less construction.

Yeah, let's. Well, since you brought it up, let's talk about office space. Omaha, thankfully, hasn't been as affected as places like San Francisco, New York, places like that where a lot of office space. But I'd love to hear your opinion on how long you think it'll be before we see a bounce back in office space or if it'll even happen at all. I mean, do we, do we imagine that we're going to get back to a certain level of office space being filled? Or do you think it will remain that way until it's converted, it's, it's demolished? I mean, what's your take on, on office space? Not necessarily in Omaha specifically, but you can speak to it if you want.

Yeah, absolutely. So I think there's, there's two ways to answer it. There's nationally and then there's an Omaha. And you know, nationally the trends are, you know, work from home and the workforce is demanding that. And you see, you know, great PR around certain companies bringing people back to the office. But what you're also seeing is because of the unemployment rate, employees have a choice. And, you know, I think long term that dictates, you know, where office space is heading. And also, you know, I think there was YPO statistic I was reading about. They interviewed, you know, all the CEOs and you know, the number of CEOs and I'm, you know, not quoting it correctly, but the number of CEOs say under 45 or 50, that, you know, would be open to work from home, significantly greater. Right. Than if you're 50 years or older. And that's your future leaders of these companies. Right. You know, if you're, that, that 25 year old sitting in an office today who wants to work from home eventually is a CEO in 15 years. Right. And so I think the demographics do follow more work from home or flex work and what that means, you know, certainly I get it. You know, it's better to build a culture. People are in the office, measure productivity. People are in the office. There's all the, the, the naysayers that say you have to be in the office. But I do think statistics and data are showing that there's just going to be more and more companies that utilize remote work and flex. Work and flex means, you know, certain departments are Monday, Wednesday, Friday, some are Tuesday, Thursday, some Are just, you know, in and outs. How you design your space might be differently. Omaha's been lucky in that there's been a number of large leases signed, especially under with medical staffing companies, you know, 100,000 square foot plus leases in the last year that have, you know, kept the office market really healthy. As far as absorbing space. I think Omaha has, you know, for class A space, it's probably been the lowest vacancy in a long time. But I think what you see is class B. You know, if you think about call centers. Right. Well, call centers, you know, they'll never go back to office. And when you actually think about the difference between a space and b space, a space means in Omaha, you're on Dodge street, you're in a new building, you're investing in your space because you might want the, you want a bourbon bar in there, you want a coffee room, you want, you know, a workout room, whatever. You're trying to gather your people, you're investing in the space because you want them in the office. Well, class B office, if you don't, while it's cheaper, if you don't care as much about your space generally, that mean the leader probably doesn't care as much about being in their space. Right. Generally speaking. So B vacancies have been really high lately. We even in Omaha we've seen subleases hit the market. So you know, it's not. Hasn't had a big effect in Omaha, but it has had an effect. And you know, in my opinion, I think there's kind of like politicians, a lot of brokers will say everyone's going to be back in the office, everyone because they want to lease space. And I'm not a politician, I'd say, you know, work from home, here to stay. How what that means to every company is something different. Does that mean normally if you needed 50,000 square feet, you now only need 40? Or does that mean you're programming your space differently, you're being more efficient? It means something different to every company. Say for the most part, you know, client facing companies. Omaha is big on professional services that your law firms, your accounting firms, your financial services companies, your medical staffing companies, you know, they want prime real estate. And so that's what's kept Omaha really healthy. But I do think on a 10 year trajectory, office space nationally and even locally, you'll see more of the startups, more entrepreneurial companies try to maximize some element of work from home because ultimately their rent, their real estate, besides human capital is their number one expense.

So what happens to the excess space, then if we don't go back to, you know, pre Covid times, I mean, does it sit vacant forever? Does it get converted? And have you ever. Have you ever seen anybody? Because the reason I asked this, I've. I've read articles where people have tried converting an office space into multifamily or something like that. Have you seen anything like that? And, and how successful does that tend to work out?

I think that can be done in really dense urban cores, you know, so when you think about New York City, you know, when you have buildings on prime and prime for Omaha, it's a little tough. If you had a building, an office building off L Street or S Street. Yeah, you know, it's probably not going to be the perfect multifamily conversion. Right. So I do think, you know, the converting thing, it's a big thing in urban cores. New York City, Chicago, there'll be projects like that in time, if they can buy them at low enough basis that they'll convert them to multifamily, convert them to hotels. But, you know, it used to be the question of what are we going to do with malls? Ultimately, malls did come back for most part in pretty big way. And then, you know, even today, you see, well, some. Could it be converted to an Amazon distribution center? Could it be converted to pickleball courts? Could it be converted to, you know, just different things like that? It all comes down to location. Omaha office, again, I think, you know, for the most part, unless it's downtown, you probably won't see any suburban conversions. You know, ultimately, you know, you're hoping to, you find tenants and, and for the most part, I'd say, I think Dodge street office in Omaha's very safe office. I do think there'll always be companies that want to be along Dodge street, and Omaha's in a really good position because our rents are lower. You know, if you can rent space for 25 bucks a foot along Dodge street, companies want to be here because they don't want to be paying 60 bucks a foot in San Francisco.

Sure.

So that, that's what Omaha has going for it. But, but what that also means is, you know, depending on how businesses make decisions, there might be less new construction office in the future. Or if you're a developer, you know, you might have to be a little more cautious, you know, or if you're even buying office, depending on your strategy, you probably, you know, are going to be pretty cautious about what you're building and why. Omaha did have a number of Spec office buildings, you know, office that over the last five years got full. So it worked out well for the developers. But again, I think that's the difference between when we're talking about class A new construction office people want to be there, they want to headquarter their companies, make a real estate statement being class A office versus hey, if some of these BC office buildings vacate, what happens to them? It's a good question.

Alex, you mentioned one thing. I can't pick up a magazine without somebody putting a pickleball some in some old building there. It's like they're, everybody's wanting to do a pickleball. Give me, give me your, your input on that. When I look at pickleball and everybody's putting this up, I'm wondering how long is this fad really going to last? What are you seeing?

Well, that's because you have experience with pickle ball.

I understand.

Yeah, I knew that was coming.

You're giving me a little PTSD here. Steve.

Do tell the audience, please.

Yeah, you got, come on.

The camera can't see, but I'm on week nine of a Achilles rupture recovery. Had surgery two months ago playing pickleball beginners pickleball. And you know, they are saying that, you know, I think orthopedics and those types of things have been quite busy because everyone's getting hurt playing pickleball. I didn't think I'd get hurt and here I am, I haven't been able to drive for nine weeks. So the, so yeah, I have a little PTSD with it. But as far as the fad of pickleball, I mean, first of all, I think it's a great use of outdoor space when you're, you know, doing a master development. When you're thinking about green space and how to create community, how to create, you know, you know, when you're thinking about mixed use developments with multi family office, retail maybe, you know, you know, when there's outdoor events and you're trying to bring people to your development, I mean pickleball fads here, it's the fastest growing sport I think United States has probably seen since, you know, football grew in the early 90s or basketball's grown globally, I, I think personally it's here to stay. And the reason is, is, you know, everyone can play. I mean, when you think about sports from a, from a, you know, philosophy perspective, you know, well, if you're 50 years old, you're probably not playing basketball. You like to watch. If, you know, if, and certainly if you go play, you know, if you play your grandchildren, you know, it's, it's not going to be much of a match. You know, you can't really play two on two with your grandkids. It's probably pretty tough. Or five on five. Pickleball has been, you know, incredible because you know, it's, you know, essentially, I mean when you get to a competitive professional level, there's different dynamics of course for, for age and gender, but recreationally, I mean it's, you know, it's kind of cool because everyone used to hide on their, you know, phones and sit inside and now you can drive to the park and you see grandpa playing with his son, daughter and grandchildren and, and grandpa, the grandpa might be able to win and. Right. So it's, you know, you know, it's really, you know, the 18 year old can beat the 70 year old or the 7 year old could beat the 18 year old or the, the woman can beat the man or however you look at it. So I think that's why it's wildly popular is, you know, it really brings people together and there hasn't been a sport that's easy to learn, easy to play and you know, everyone can be pretty competitive at different age levels. So you know, they now have the professional league I think in that. And how that relates to monetization is when you think like how many people love football but they never, I love football, I never even played football. So it's like, wow, what, what's kind of the potential of this sport that everyone's playing, everyone likes and they certainly can relate to because they play it. So it'll be an interesting story to watch how it grows professionally, you know, with that. But I, I do think for, for you know, real estate, master development, parks, it's, it's been, you know, you can add something that brings people to the park instead of sit on their phone or brings people to your development instead of sit on side. And then guess what they do after pickleball? It matters, right? They go to, they go to the, the, you know, your local coffee shop that's across the street, they buy coffee and then you know, or maybe they go to the office that's across the street and they go work and so, you know, and then you have co workers playing during lunch hour. So overall I think it's a pretty positive thing minus the injuries.

Are you planning to go back in and attack the courts again?

I am. I won't consider it a full recovery till I'm, until I'm back out there.

Until you're beating the elderly.

Yeah, that's right.

Hey, watch that.

Oh, I wasn't saying you. I meant just in general. I think it's a great segue for. I've got one last question. Let's bring your crystal ball back out, Alex. You know, in times like this, whether it's Covid or whether it's what's going on with the Fed or whatever the case may be, you start to see asset classes start to perform better than others. One, one that might have been pretty good beforehand might now take the lead in being maybe an asset class that outperforms its history or its projections, whatever. When we come out of, let's say, end of 2023, do you see any asset classes that might be more advantageous for real estate investors or more attractive that maybe wasn't beforehand?

Yeah, I mean, I, I would say, generally speaking, you know, the asset classes that have performed well over the last 10 years, you know, and I'll, I'll just go through all of them. I think, you know, that when things change, the, the more, you know, safe class classes remain. And, and that's where, you know, when we talk about, you know, I'll start with retail. Retail. Everyone thought Amazon was killing, going to kill retail. And now you've seen online storefronts, want physical storefronts, including Amazon. And so retail has done incredibly well since COVID Shopping centers are full, everyone's full. But when the economy shifts and if we enter a recession, which usually is driven by, you know, consumer confidence, consumer spending, gdp, retail usually takes the first hit, right? People spend less and then retailers make less, and then the mom and pop struggle the most. And so, you know, I'd say heading into a headwind, retail's performed so well. I think retail, you know, you know, has, will continue to have more headwinds into the future. You know, if they, if they, if we enter a recession or if we're in an extended recession. Yeah, depending on how you define recession. Office. We talked about office today. Office has headwinds with work from home and then, you know, new, new, new construction. Office becomes hard to pencil with where debt markets are, where rents are today. So I think, you know, you'll just see a little less office. I mean, construction as a whole will be down, but I think office has headwinds, right. You know, more so than the rest. And then if you look at industrial, industrials performed really well because of E Comm. Because of the need for distribution space in, in the growing economy, you know, of course, if GDP goes down, industrial might slow down, but again probably remains pretty healthy. There's just such an undersupply of warehouse space, new spaces being built, you know, so I think industrial has been a safe, good asset class. It's performed really well. That has less headwinds than retail and office. And then multifamily, you know, when you look at the housing market because everyone and single families locked in their mortgages, right, at under 4%, they're not moving, which means there's no supply. There's no supply to buy a house. So what do those people do? They go rent. Right? And that's why build to rent. Communities are growing really fast. It really is the solution for a lot of these housing problems. Hey, you can have a, something like a house, but rent it. It's how apartments, you know, I think will consist, can continue to absorb until supply becomes too much. But multi family, you know, for all, all the demographic reasons, has performed really well. You know, people still need a place to live and you know, so I think multifamily continues to stay full, that the headwinds will be with supply. How much can rents increase in certain markets if we enter a recession or if supply, you know, if the guy across the street's giving away a month free, you bet that affects your, your property. So that'll be the issue. But I think as far as asset classes, I mean, there's a lot to like with multifamily and you could have a thesis around all of them. But again, I think, you know, may, you know, when you look at major demographic shifts and how people work, well, that's a little scary for office. Major demographic, you know, shifts in the consumer can be scary. For retail though, it's performed outstanding lately. And then, you know, you're left with, you know, more the stability and backbone of, you know, America's housing. People need places to live. You know, I think multifamily, you know, remains good projects remain safe. But, you know, I do think, you know, the difference in how we discuss value in debt affects, you know, what the properties are worth. So when I said over the last 10 years, you could have been a fairly bad operator and made money, right, because cap rates kept going down. So your property's full. Maybe you're not increasing rents enough, you're a little under, or you're increasing them as much as you want. But you know, like, you can make a lot of mistakes, still sell your property and make money because cap rates just went lower and lower and lower. When cap rates go up, you really have to perform as an asset manager. It's really how, you know, how, you know, you know, how did you plan your financing? How did you plan your. Your refis, how did you underwrite your, you know, performa. Your rental increases, your controlling your expenses? So, you know, that's when it becomes the good operators separate from the bad. And some people get, you know, get caught with their pants down, as they would say, and need to sell their property because they didn't have good underwriting.

Usually, Alex, you see that in the heyday when it was the wild, wild west, all these people were buying multifamily, syndicating and et cetera. And as, as we talk at Skyline Point Capital, when you're buying a piece of property, you're buy. You're running a business. You have to. You're running a business. And when the cap rate started going up, it was interesting watching some of the syndicators. Now I've got to operate the property. It was more fun to buy, it was sexy to buy. It was fun. All this type of stuff. And that's one thing we like about Skyland Point Capital and what we're doing is in the sense that you've got to run the business, you've got to be efficient, you've got to see how you can provide and increase rents and increase, keep expenses down. And just like any normal business, you just have to run it that way.

Yep, I, I agree completely. And it, you know, it really will separate, you know, so many of the, you know, syndicators that got in, in the game, you know, they were buying property. Buying property because it generates fee for them. But what the strat. Generates fees. But what the strategy is, you know, that's out the door because they just, quote, unquote, run themselves. Well, that's not the case anymore. Right. So.

Yeah, yeah.

And we're seeing it. Yep.

Yep.

Well, Alex, I'd love to wrap up by doing a quick speed round. In the speed round, this is just for people to get to know you a little bit better. It's quick questions, quick answers, and if you're ready, I can just jump right in.

Let's go.

All right, what's one book that's most impacted you?

One book that's probably Daily Dad, Ryan Holiday.

Oh, that's a good one. He's a great. He's a great, great author.

Stoic.

Yeah.

Yep. All right. What's one piece of real estate advice that you'd give to others?

Know your partners well.

Seller answer as well. Yeah.

All right.

What's one thing in life, in business or in real estate that you're really excited about?

Well, I'd say, you know, number one is probably just I've got a two year old and four year old, so, you know, raising my family is number one. That's the best thing, you know, that brightens my day every day. That beats any transaction I can ever do.

100%. You're killing this round. All right, all right, last one. So the title of our podcast obviously is Heading West. And that's really, as we get to interview people like you, we start to see their journey as they head west in life and in business, in their faith, in their marriage, whatever the case may be. So as you head west in your life, in your business, where do you hope it ends up? At the end of the road. And that could be a practical place. It could be a place of feeling and emotion. It could be anything of the above. But where is heading west taking you?

Well, I don't want to be a nursing bra and panty buyer again. So I would say, you know, for me, short term, I want to learn to walk and drive, right? That's heading west. You know, my injuries taught me patience. And then, you know, long term, heading west, you know, I think the more in real brokerage is very transactional, you know, so being able to work with people that have meaningful projects and, you know, that I can always learn from. I think that's been the. My favorite thing about my career is I get to learn about people's businesses, their investment thesises, their assets, and working with people that, you know, you know, are really passionate about real estate and their business. You know, I just look forward to all the people that I will meet. It's really, you know, it's all about connections and relationships and brokerage. And I think that's, you know, when I look back on my last 10 years, the amount of friends, the amount of growth I've had because of people I've met, that's what my business is built on and that's what I enjoy. And so what I'm excited about is all the people that I haven't met yet that I will meet and what I'll learn from them.

That's brilliant. Well, Alex, if people want to get a hold of you, if they want to keep track of you, where can they look you up? Where can they find you?

Yeah, so Omni Partners website or my email is a epsteinmnipartners.com that's the easiest way to get a hold of me.

Love it. And if you guys are interested in learning about real estate investing, you can go to skylinepointcapital.com at any time. Ebooks, podcasts, all of it's there. But Alex, thank you again for joining us. That was a blast. And we're excited for the next conversation.

Hey, thank you guys for having me. It's really impressive what you guys have built at Skyline Point, and, you know, fortunate to know you both and have worked with you both in the real estate and personal capacities.