The Insider's Edge To Real Estate Investing w. Lonnie Hendry

Welcome, everyone. Thrilled to have with us today Lonnie Hendry, who is Chief Product Officer at Trep, and as many of you probably know him, also co host of one of my favorite podcasts, the Trep Wire Podcast. Lonnie, wonderful to have you with us today.

Yeah, thanks for having me on, James. We enjoyed having you on our show and I'm thankful to be here today with you.

Well, look, I know that you've been at your podcast for quite a bit of time. We might have even started ours around the same time because you're at about 280 episodes plus maybe you're coming up on 300 now. Even so, I know you're putting out incredible content weekly. I know you have over 1.6 million downloads. Just thank you for all the content and the value put out there. I know as being a fellow podcaster, it's a lot of work, so we appreciate it.

Yeah, thank you. And it's actually we're about 318 episodes in now. We're just under 2 million downloads. So it's amazing to see how the numbers go up and the episodes keep. Keep clicking off. But, you know, for us, it's a labor of love. It's a highlight of the week for us and we really have thoroughly enjoyed being able to bring perspective, data analytics insights to the market since COVID We haven't missed an episode since March of 2020. So every week we've delivered the Tripwire podcast and it's been, it's been really good. But to your point, it's. It does take work, it takes effort, but it's something that we really, really enjoy doing as a team.

Wonderful. It's interesting because I think again that we started the Insider's Edge podcast at about the same time, right after Covid all camped out at home trying to figure out how to stay connected. So the podcast, I guess, was born out of, you know, the pandemic and figured out ways to continue to communicate. Was that or was this already in the works before? Tell us a little bit about the. How the show was created.

So it was combination. It was something we had talked about before but never really created time for as a, as a business endeavor. And Covid really was a catalyst that said, hey, now everyone's at home. Why don't we kick this off? And so it was kind of perfect timing where we had had had some preliminary discussions. We kind of kicked it off and, you know, as we said, it really took hold. And it was amazing to see just the response from the market. I Mean, we put out a lot of newsletters, a lot of daily blog reports and monthly reports and deep dive research and so forth. We've done that for 15 plus years. And so this was just another medium or extension for us to reach our audience. And it's really turned into a huge component of what I think differentiates Trep in the market and gives us an opportunity to connect with our, our clients, prospects and others in the marketplace on a weekly basis. And the amount of emails, I'm sure you get them too. I mean, the interaction we have with people from week to week, show to show, is really remarkable. People tune in and they actually listen to the details and they'll correct us when we're wrong. And they offer insights of their own when they're talking about a local market that maybe they have some more expertise in. And it's been really cool to kind of see it grow from a Covid, you know, here we're going to pass some time and kind of stay connected to now. It's like I said before, a really integral part of our business.

Yeah, I mean, the incredible thing about podcasting is that you can have a longer form conversation and people will actually listen. You know, the, our day and age of just scrolling and, you know, sound bites. You know, again, if it's a little video clip, I mean, maybe you get someone for 30 seconds, maybe a minute, but whether someone's working out, whether they're, you know, on their commute, someone will sit and we'll, we'll listen. And again, there's just, you know, so much more that you can get out of that when you can go deeper on a subject matter. And just to compliment you all, I mean, the amount of research that goes into it. I'm a data guy. I know. You certainly are. And so, you know, you never just kind of throw out. I mean, sure, you've got your green shoots, you got your crab grass, but it's always backed up by, you know, this is why and getting really specific. So I think it would be helpful for our audience to understand what Trep does. And I know it's a whole suite of services ranging from CMBS to CRO, cre, rather collateralized loan obligations. So you have all these different products and offerings. So maybe just for our audience who maybe have not had as much experience with Trep, maybe just give them a little sense of your offerings.

Yeah, so I think Trep is a unique company in the sense that we were founded in the late 70s really as a consulting firm and we made a pivot as a firm in the early 90s when the CMBS securitized market took took hold and BlackRock had an ownership interest in TRAP at the time. And as the CMBS securitization loan market took hold, they needed somebody that could bring transparency to the traders that were using or needing the data to make trades. And so traders Trep was actually written into the reporting structure for all CMBS issuance. So if somebody takes out a CMBS loan, Trep is a recipient of all of the data that gets used during the origination process and surveillance ongoing for the life of the loan. So typical CMBS loan up until a few years ago was 10 year term. We would actually have three year look back at line item income and expense financials prior to the date of origination and then we'd get quarterly updates of those financials, loan performance metrics, et cetera, Every quarter for the full 10 years of the loan. The performance data is updated actually monthly. If they miss a payment, et cetera, we'll know in the month that they miss it. Over time we've expanded that offering. We now track the agency debt. So we have Fannie and Freddie, Ginny, fha, you know, HUD loans and we also have the CRE C lo the collateralized loan obligation. So you know, we have a wide swath of access to owner submitted, you know, SEC regulated type of income and expense data at the property level. And then over time we've taken that data and we built a tool set where you can actually trade, you know, do cash flow analysis on the bond side. You can do CRE underwriting, valuation, benchmarking, comp selection, all of that on the CRE side. And then more recently we launched a corporate CLO product where we're looking at the corporate, corporate credit markets. And so you know, Trep in 2025 is considerably different than Trep was in 1979 and obviously than it was in the 1990s. But the mission has stayed the same. We're best in class data providers. We bring industry expertise and practitioner perspective to how we build and deliver products. And it really helps us because we understand the data, we understand the use cases. Myself, you know, I spent 23 years in the commercial real estate space and so I speak the language, I've lived it, I understand it. And now we're building products to really help practitioners like yourself and others be able to do more deals and be more informed and have a better talk track when they're talking to prospective clients and others. And so, you know, in addition to that we've started a bank consortium. So we actually have about 25 banks across the US that give us their loan data on a quarterly basis. We anonymize the data, but we actually have really deep perspective into how bank lending is transacting. And so we look at loan to value ratios, debt yield, cap rate information, occupancy data, all of that across all property types on the bank space. And then we have a similar consortium of life insurance loans. So we really have a 360 perspective on what's taking place across the CRE markets. And we're really doubling down on the CRE business. It's been our fastest growing line of business and we expect it to continue that way. There's so much untapped as you know, it's been an opaque market for so long that, you know, bringing data to the masses is something that there seems to be a really strong appetite for.

Wow, that, that was a great overview. It also answered a couple of my follow up questions. So, but, but, and it's interesting about that last comment about an opaque market. A big premise of my book, the Insider's Edge to Real Estate Investing, is that you can gain an inside edge because a lot of is not publicly available. So I think it's awesome that, and we try to do this as brokers to try to make the market more transparent. And so I guess what I was going to start by asking, so the CMBS data, you know, this data would you say is publicly available? I mean, again, sounds like you are completely tapped in. I don't know if there's other, you know, data provider analytics services that you know that do the same. But how much of this information could any investor access as opposed to, you know, you talk about the bank data which I was going to ask you about, you know, how do you track that information that might not be readily available?

Yeah, so I think the CMBS data, some components of it are publicly available. The challenge for individuals is just trying to aggregate that data. Getting it accessed and integrated in a timely fashion is difficult. And we obviously have, as a recipient of the data, we get the data real time and we can turn it around real time effectively. And so, and then we have the full historical catalog. So you know, we're, we're one of the only players in the market that can actually give you property level financial performance going back to the mid-90s on every property that's ever had a CMBS loan taken out on it. And so that's not something that can be replicated, you know, know very easily in the marketplace. And so, and all of our tools are super intuitive and user friendly. So it's not like you have to have an advanced degree in data analytics to be able to leverage our tools. Like really, we've built web user interfaces that are, you know, very intuitive. It follows a flow that a traditional broker or an appraiser or a lender would, would normally do in their course of business. And so, you know, I think the proprietary part of our business is just taking all of the data and turning it into insights. I mean like we talked about, data has been opaque, but having access to data on its face doesn't give you a competitive advantage, is turning that data into actionable insights that actually gives you a competitive advantage. And that's where we've tried to short circuit that process for brokers and others, where you get real time analytics that can definitively help your business without your team having to have five analysts go through and crunch the numbers. We're giving you what you need using our insights with the data.

You know, something you said reminded me we had Malcolm Gladwell come speak to our company virtually, you know, gave a webinar for us. But his observation was, you know, yes, we're at this golden age of data and there is a lot of data out there. The question is how do you analyze it? How do you make it actionable? Right. So that's exactly what you're doing. So Lonnie, we try to make this show as helpful to those who are maybe just getting into real estate as a of part opposed to, you know, veterans, very sophisticated investors. I know that you're a teacher as well, you teach at Texas Tech. So for those just getting into the business, can you just define cmbs, Talk about what space that that kind of occupies. I mean, what, what areas do you typically see CMBS play a major role in? Kind of what percentage of the whole, you know, debt environment that does it account for?

Sure. So, and I appreciate this, I think I, I usually put it in my agreements if I do a presentation that I get to have at least one definition. That way I can check off my professor status in the, in the presentation. So CMBS is commercial mortgage backed security. So effectively it's just a pool of loans that get bundled together and then sold off as a bond on the secondary market. So it's no different. The underwriting process, all of, all of the mechanics are effectively the same as a, a bank loan per se. Some of the nuances, the commercial mortgage backed security loans are typically non recourse so they don't have a personal guarantee attached to them, which is something that makes it somewhat favorable for certain borrowers that they don't have to actually personally guarantee the loan. And they get fixed rate financing, typically 10 year term. And it seems attractive when interest rates are uncertain and you can usually get a little higher proceeds on CMBS versus some of the other lending types. So there are some real value add components of cmbs. Some of the challenges with CMBS is it's very covenant driven. There's really not a relationship component. If you go get a loan at a regional bank or community bank, you're dealing with someone that you know, they know you, they know your business, you probably have deposits with their institution. If something goes awry, you can go sit down with someone and actually have a face to face discussion. Probably get a little more amicable workout on the CMBS side. It's just literally what does a loan doc say? We're going to check the box and move to the next step. And so for some people when things go bad, CNBS can really, you know, there's a lot more challenge with some of the workout stuff on the CMBS side. So but it really, it's, it's no different than any other loan. And the way I try to frame it for people is if you walk down, you know, fifth Avenue in Midtown, you don't look at a building and say, oh, that's a CMBS loan. Oh that's a bank loan. Like it's just a loan. It's a different type of loan. Just like you go to a hard money lender, you could go, if you're a multifamily property, you can get an agency or government backed loan, like just a different loan source. Inherently they're effectively the same with some nuance. I think it represents depending on where we're at in the market cycle, the last couple of years for CMBS have been really strong issuance years. So somewhere between, call it 15 and 25% of the overall debt space is represented by CMBS or structured loans. And then on the multi side, you know, it's predominantly Fannie and Freddie, they dominate that market. They probably, you know, originate close to 50% of all multifamily debt. Those are securitized products, very similar to traditional cmbs, but those are agency securitization. So pure cmbs. You're going to see a lot of retail, regional, super regional mall loans, you're going to see a lot of hotel loans and you're going to see a lot of the really large office loans now post gfc, it's really opened up to be an avenue for any property type. So we actually track. It's kind of a misnomer that CMBS is just institutional quality or the really high end loans. We actually track properties with the loan balance as low as 500,000 across all asset classes. Mini warehouse, self storage, senior housing, student housing, you name it. If it produces, we have parking garages that are securitized in our data. So it produces income and it can be underwritten. Then it's usually something that can be considered for cmbs.

Great. And maybe you want to talk a little bit about the single borrower issuance. I mean that seems to be dominating that the headlines now, especially in the office space. We're starting to see some really large loans being sourced from that area.

Yeah. So one of the types of CMBS loans is what we call single asset single borrower or the acronym is sasb. Single asset Single Borrower. Typically what those are are really large single assets as the name implies, or a portfolio of assets with a single borrower. Okay. And so to your point, we've seen a proliferation of those types of loans over the last couple of years. And it makes sense just given where we're at in the market cycle with the increasing inflationary pressure of interest rates, expense costs, etc. Trophy properties and trophy locations are ideal candidates for financing. If you're a lender right now trying to make a loan, you're okay writing loans on Rockefeller center and the Spiral and one Vanderbilt and some of these other iconic type of buildings because really if those buildings don't perform, we have some real issues broadly beyond just the CRE market. And so those single asset single borrowers have accounted for a disproportionate amount of issuance. Last year I think it was over 70 billion of 108 billion in the CMBS market was single asset, single borrower. And again this year we're at about 38 billion of total CMBS. And a large portion of that is that single asset single borrower. As we see the market kind of flatten out and the distress wave kind of play itself out, I do think you'll see what we call the conduit or like the more hedged, you know, multi asset, multi geographic location type of loan come back in vogue. But right now it makes sense given where we are in the cycle, that these SASB deals are taking all the headlines.

I definitely hear what you're saying about the trophy assets and definitely the best in class sponsors but couldn't you make the case that there's actually less risk with the diversified loan portfolio? I mean, how do you, how do you view that? Because I mean, the SASB are definitely some of the biggest loans as well. So the idea that the collateral is just one, one building as opposed to a portfolio, I mean, how does the risk get weighed in those various comparisons?

Yeah, it's very topical and the timing is great to have that discussion because there's been such an influx of the SASB issuance. I think the way the market views it is there's definitely concentration risk with the sasb. But if you look at the risk adjusted, kind of weighted based on location, property type, sponsor, they're probably okay with that concentration risk of a single asset knowing all the other factors around that property. I wouldn't disagree with you. I think if you can, you know, have a well diversified conduit deal with, with properties located across multiple markets, you're probably able to fend off some of the risk a little bit better. The counter to that would be that you have to underwrite each of those individual assets, that there's 60 or 80 of those in a pool. You're probably going to have some that just by definition don't perform and they can disproportionately impact the conduit if they're on the larger side of that deal. So I think it's valid and it's something that we've seen more people talking about in the market. There was a AAA loss on a single asset single borrower deal last year in New York. They got a lot of headlines. But if you look at it post GFC to now, it's pretty unheard of for you to see significant losses on these SASB deals. They've proven through the last 15 or so years that they've been resilient regardless of market cycle. So I wouldn't disagree that you can make a strong case either for SASB or for conduit. And I think that's the beauty of this market is what the investors want to see is what issuers will issue. So if we see a slight change in investor appetite relative to Sasbury, then you're going to start seeing some of the conduit deals pick up an issuance because the market's saying we want a more diversified pool of loans.

That makes a ton of sense. So, Lonnie, I'd like to now kind of take a step back and go a little more macro. And I would say that even if you're not trading CMBS that, you know, just listening to the Trap Wire podcast, there's so much incredible information and that first five minutes should be required listening for anyone in real estate because you really start macro and you'll talk about maybe what's going on in Washington, you'll talk about the 10 year treasury, you know, how important it is it whether you're an investor with you're a broker to kind of know what's going on on a macro basis. I mean, you guys, right now the hot topic might be, you know, the tariffs and the impact as opposed to, you know, I'm sure there's people listening to the show right now saying, you know, Lonnie James, this is great, but I'm just, you know, you know, buying and selling, you know, 20 families in my respective market that, you know, does it really make a difference? But you know, how important is it for what we do, any real estate professional, to have a good handle on what's going on on a macro basis?

Yeah, I think it's, I think it's very important. And you know, we say on our podcast all the time, and it's something that I teach in my classes, on the first day of classes, I say there are a couple of things we know for certain about real estate. The first is that it's cyclical. It's always been cyclical. It's always going to be cyclical. That's just the nature of the business. And you have to understand that now for a lot of people that got in the business in 2012, they had never seen a down cycle until, you know, about 24 months ago. So they would maybe question that, but it's cyclical. The other thing I highlight is that real estate by definition is a local and sometimes hyperlocal endeavor. You could have two buildings on the same street that have completely different outcomes based on who owns them, how they operate them, how much debt they have on them, etc. Notwithstanding those two things, the third thing that's most impactful in my opinion is that while macro trends don't necessarily dictate that local and hyperlocal component of the cycle or of the business, they do have downstream implications. And what we've seen is that play out over the last several months. Like let's take insurance as an example. Insurance cost and CRE over the last 24 months have exploded across the U.S. they used to just be multifamily coastal cities or in California where they had wildfires or some other exposure where they saw outsized insurance premiums relative to the rest of the U.S. well, what we've seen over the last 24 months is that cost sharing has become real. And if you're in Ohio or you're in Atlanta, or you're somewhere where traditionally you haven't seen insurance costs, now you are. Well, those are topics that we talk about on the macro segment. Like this is something that maybe doesn't impact your market directly today, but you should be aware of it. Obviously, the tariffs, inflation broadly, those are things that may not impact your building today. But if you don't understand it, when those things do hit your market, you're going to be unprepared for it. So I don't think people will be making investment decisions necessarily or lender decisions at a local market level based on the macro. But I do think you have to be informed because eventually those macro trends at some level will find their way to your local marketplace. And if you're not well versed and kind of understanding what it is, by definition, you're behind the curve and you're going to have to deal with that longer than you would have if you were prepared.

And let's talk about some of these massive transactions that are happening maybe in your market. So maybe you're an investor in LA and you all reporting on some office deal in downtown LA that's selling at 20, 30 cents on the dollar. Again, you might be a retail investor in, you know, West Hollywood, but how important is it to understand kind of the mega trades that are happening in a market and how much of an impact do you see? Does it have a kind of a halo effect on the rest of the market?

Yeah, I think, you know, we all learned very early on in the business that one sale doesn't make a market, but one sale can impact the market. And it becomes a data point. Back to the discussion around data is if you know your market, you know how many transactions have taken place, you know what properties are on the market listed for sale. And while they maybe don't directly impact your building today, it does give a stigma, positive or negative, to that broader marketplace. And so when you see some office buildings trading at 20 cents on the dollar, that's not great for, for the retailers, it's not great for others. Now the hope is investors bought it so cheap they're able to put some capital into it, they're able to redevelop it into something that's viable in today's market and that has a better long term impact for your retail business, as the example was. But I think it's important if you're going to be in commercial real estate at all, in any level, whether you're a broker, an owner, operator, if you're an appraiser, if you're a lender, you should be well versed on what's taking place in the market that impacts you and some broader macro area around it. Because if not, like deals don't sleep and brokers are making phone calls and they're trying to push deals every single day. And what we see is there's no linear progression in the commercial real estate space. It's deal by deal, day by day, 10 year treasury, you know, week to week, day to day type of business. And if you're not staying up to date with those things, you're just, you know, by definition you're behind the curve. And I think that's those subtle nuanced things are the difference between, you know, brokers that are commoditized, brokers that become an authority in their market, as well as owners that barely check the box and create enough noi to cover debt service and those owners that actually have really high performing properties in the marketplace.

Yeah, Lonnie, that all makes a lot of sense. And that one point also about that asset that's selling at a discount, sure, that could reset the bar. But the positive that you're seeing in that is it could be new investment in an area, right. Maybe an asset's just been sitting and if it's an office deal, maybe the current borrower hasn't been able to know, do the necessary ti and you know, capex to lease the building. And now with a new sponsor at a new basis, that could really, you know, help generate activity. So I think that's a great point. Lonnie, you mentioned it as well. And we might have to have this conversation further offline because this really fascinates me. And it's a part of having been a broker for 25 plus years and seen that, you know, you talk about being a good investor, a good broker is knowing what's on the market. So let's, let's talk about that because, you know, and I talk about this in the book as well, that if, you know, residential listings, if you want to sell your home, it would be unusual that you would sell it on your own. Usually you'd hire a broker, they put it on the multiple listing service. I mean, I don't know what the exact percentage is, but Roughly, I'd say 5% of listings of a residential listing is for sale by owner. And even those owners might try to put it on a multiple listing service, they just might just be trying to save a fee or, you know, whatever else, whereas commercial. And it's hard to get an exact number. But it really seems that there's a good chunk of the deals that are actually out on the market or maybe quietly being marketed that, you know, you, you can't find. Right. And you know, that that's been something that I've observed again in my 25 plus years of doing this. But when you're actually trying to track what is on the market, you know, do you feel that you have, you know, a full sample set? You know, this stuff that's maybe not, you know, and there's, there's, you know, we could talk CoStar LoopNet there, Crexi. There's a lot of great listing platforms that are encouraging brokers to put their listings and yet a lot of this stuff still stays quiet and close to the vest. So any commentary on your side as far as trying to understand what is the addressable inventory that's actually out on the market?

Well, we know, you know, one of the advantages we have with our data is we know when the loans mature. So something has to happen when a loan comes up for maturity that the owner either has to pay it off, refinance it, sell it, or they get foreclosed on. Those are kind of the four options there. So in the system we have true owner data. So you can actually know who the owner is behind the LLC on about 80% of the properties in our data set. And you know when the upcoming maturity is. So you have a pretty good idea of if and when a property is going to be listed or marketed or quietly discussed. Usually it has something to do with one of those upcoming maturity dates. And so we can give you a real. And those are all searchable fields as you can stratify by geography, by property type, etc. And get a really comprehensive list. And then with the ownership data, makes for a very warm phone call. When you call the owner and you say, hey, I think this property would be great for my portfolio. And oh, by the way, I know you know what you're. No, I was last year. I don't even have to ask you to supply me with any information you can come prepared with. You know, if you're a listing broker, here's what I think this could go to market at. If you're an acquisition person, you could say, you know, pretty much we can send you over an LOI without really a bunch of due diligence from the, the bar, the current owner having to supply data. And I, I think, you know, this is the one area where even with platforms that, that make this stuff available, you got to be in the market, you got to drive your area, you got to know what properties are there, you got to know who the brokers are. This part of the business to me is still very much relationship driven handshakes. If people got to know if you're a buyer that you're serious and can close. And it's amazing how quickly you start getting deals that are not marketed sent to your inbox because they know that you're someone that's actionable. Likewise, if you're someone that's actionable, brokers that are bringing stuff to market will a lot of times notify you in advance of the listing hitting the market. Hey, we're going to be bringing this online. So this is the side of the business where I think it still has a competitive advantage for those that are active, that go to the events, that meet people, that shake hands, that do all the legwork that you still have to do individually to kind of get your name in the, you know, in the, in the arena for people to know that you're, you're serious. And it's amazing how much of those listings you can get before everyone else gets to see.

Yeah, very true. And that is again a big premise of the book, the Insider's Edge. When properties aren't widely marketed. And not that all off market deals are great deals, but if you can find them. And that's by being out there, being proactive, you know, leveraging the data that's available, but also the combination that you mentioned, the importance of being out there. This is very much an in person thing. I, I know that you're at, I, I think you've done over 300 conferences, speaking engagements, so hopefully that's not in one year.

No, yeah, not one year. Although I will say the last couple years I've been averaging about 75 presentations, live presentations, presentations a year. And it's, it's interesting, but to your point, like for me, I'm getting to meet people across the country. And so it just, it acts as a supplement to the data, the hard data that we have of getting a pulse check of where brokers and lenders and appraisers feel their market is at a local level. I mean, the data tells you the story, but the brokers in those markets can really fine tune the details for you. And so for me, like that's a little bit of my Competitive advantage that I get to bring to trap is just that meeting with people every day that are still in the trenches doing the work and them sharing that information with me when I'm doing these presentations allows us to take those nuances and build them into our solutions for the marketplace.

Great point. So Lonnie, I'd like to now talk a little bit about the distress side of investing. And that's typically where investors get really excited. So you've been tracking and you do such a great slicing and dicing the data by asset class, by geography. I mean you've even I think on one of your recent shows you were talking about this impending Forever 21 and you already know all the locations, the buildings. I mean you've really been able to go deep on these things. So what tips would you have for distressed investors who are looking for these opportunities? I mean what should they be looking for in your data and then what is the way to execute on those?

Yeah, so I think it's look for the last two plus years that's been the overwhelming majority of inquiries for us as people interested in acquiring distressed assets. And what I've learned through this process is actual distress takes a lot longer than the headline distress. It's easy for us to see articles that talk about this many buildings going back to the lender, et cetera, et cetera. But even if someone announces they're not going to service the debt anymore, the lender doesn't just take title immediately, there's a process that has to take place. And so you know, for distressed investors, one, you have to understand that the distress itself takes a little bit longer than what you were going to like, but you can be proactive. The headlines are basically like a little breadcrumb trail of where you should be looking. And you just have to be patient. And it's not a game. Investors that own buildings, they're incentivized to fight to the very last day to try to preserve their equity or their investors equity in a deal. So unlike the great financial crisis where a lot of these properties were underwritten on pro forma financials and stuff that was going to come in the future, that never, that never materialized. For the most part, properties that have been originated post GFC have been underwritten based on in place rents. The exception of that would be the CRE c lo which by definition are kind of story loans. But most of these properties were underwritten based on actual performance. And so borrowers feel like even in this downturn that their assets are still viable and they're going to fight for them. So it's not the bloodbath that we saw in 0809 where people literally were just giving up. We can show in our System there's several MSAs by property type that have debt service coverage percentages less than 1 of 20 plus percent. But that hasn't immediately translated into foreclosures or people walking away. At some point it will. At some point the borrowers or the LPs are going to get tired of funding capital calls and keeping this property current and you're going to see some distress. So if you're a distressed buyer, you just got to go into it with an understanding that when distressed deals hit the market, they're a little messy, there's a little bit more red tape. It's not a straight shot. Lenders trying to maximize what they can get, minimize their losses. Borrowers are fighting to preserve their equity. With all that said, there's ample opportunity. And right now we're still early in the cycle. I mean our overall delinquency rates in the 6% range and high watermark coming out of GFC was 10.34%. So on a relative basis we're still significantly below what we've seen during high peak distress. Historical norm for distress is somewhere in that 1 to 2% range. So we're some multiple where we typically are. But I would suggest for people that are looking for distressed deals, you have another two, two and a half years where the real distress is actually going to play itself out of the market where lenders take the loss, new capital can come in and acquire assets at a great deal. We just haven't seen that capitulation yet. And it makes sense when you look at it like lenders don't want to take the loss, they're going to kick the can down the road as much as they can. But at some point the reality is some of these assets just don't make sense.

So talk a little bit more about the, you know, that comment of lenders are going to try to wait things out. I mean that might be the case but you also have, you know, bondholders. Maybe you could even talk about the role the special servicers and their fiduciary. I mean how long can these situations be allowed to. I don't want to say stay in limbo but you know, trying to work with the borrower. I mean, is there kind of a clock that needs to be adhered to.

Because. Yeah, yeah, I think it's, it's, it's the byproduct of the market and the covenants on the CMBS side. So if you're a special servicer and you've been brought in to help manage an asset because it's not performed, you know, you have a conundrum where you have a professional operator that currently owns and operates the building that obviously has not been able to get it to meet its debt service obligations and have probably tried to sell it or market it quietly or whatever they can to get out from under the loan and they've not been able to do it. So now you're coming in. You know, it's not often that special servicers come in and think, well, they're going to be able to sell it for more than the professional operator that actually currently owns the property, right? So then you start getting in these calculations, BOVs, appraisals of other things like what is the liquidation price on this and what does that mean for the bondholders. And if there's an indication that you can operate the building, maybe you have to advance it some interest and you have to kind of carry it some, but you can maybe materially impact the leasing or the occupancy or something on a positive way, then you're going to, as a servicer in the vested interest of the bondholder is going to try that path first to try to maximize the value that you could get for a property. It's only until you've exhausted those options and remedies that you would say, okay, our last resort would be to try to sell the property at a loss. So I don't think there's a stringent timeline. I think in practice the first extension modification, you know, kind of relief for the borrowers, usually if they're at a maturity, they can't refinance, they can't pay the building off. The lender will usually give them 12 to 24 months as an extension or a modification. The borrower usually has to bring some capital to the table to get that. If they will do that, then the, the lender says, look, if they're willing to put good money into this asset today, then we think there's still a chance for this property and we'll give them 24 months as an example. At the end of that 24 months, that's when the things get a little more sticky. And I think that's where we're kind of getting to right now. As you've seen a lot of these extensions for 24 months, they're now coming up on that 24 month period. If they're not able to have executed the business plan during that time. I think the servicers, the lenders are going to take a much closer look at do we need to just go ahead and get, get out from underneath this asset. And that's what I was saying a moment ago. I think 2025, 2026, you're going to see a lot more of these distressed transactions actually take place because that initial 24 month extension window has come and gone.

That's very helpful. So, you know, Lonnie, with the time that we have left, I'd now like to pivot a little bit and talk about kind of your story and how you made your way to trap. And then also, you know, I really know that our audience will be able to learn just from the way that you get out there. And it's not just, you know, the podcast, the speaking, the teaching. So I'm excited. I know that there's a lot to cover here, but tell us a little bit about your story because 23 years in the commercial real estate business and it seems like you've been involved in management, you were doing some residential brokerage. So kind of what was your path where ultimately you, you ended up in the position you are today?

Yeah, it's kind of an unconventional path. I think that's what every real estate person has come to, the realization like. None of us grew up at a 10 or 12 year old and said, I'm going to go into commercial real estate. I'm hoping my kids will do that. But you know, for me it was didn't really know what I wanted to do. I actually got a job as a leasing consultant at an apartment complex when I was in college and I fell in love with the business and I was lucky enough to work for a local developer that owned apartments. And so they bought land, got entitlements, built buildings, leased them up and sold them. And they actually had a pretty, you know, nice portfolio. They had some high end class A suburban garden office, multi family properties. They had some low income housing tax credit properties. So I got exposure to all of those and I got to see the development process play out real time as a very young person. And so I finished up school, it really changed my major to real estate. Got me completely focused on real estate. Ended up getting a master's in real estate. Decided that was what I was going to make a career and did the brokerage stuff. Still active in Texas as a broker and did some valuation work, have done some consulting work. And then I got into teaching and I'VE been teaching at the university level since 2013, timeframe, 2014. And so I really love that. And then Trap. I was a user of Traps products at various points in my career and an opportunity presented itself to go work for them and I jumped at it. They were a really great company as a user. The interactions I had with them were incredible. And I thought, you know, this is something where for me, I can make a pivot and take my, you know, years of experience and knowledge on the practitioner side and bring them to a product development, product management workflow. For, For a company like Trep that has a stellar reputation, it seems like a really good match. And I'll tell you, I've been here about six years now and it's, it's definitely the best place I've ever worked. I love it. And the, the brand name, the reputation, the recognition that Trep has, it's, it makes those discussions at conferences and other things just so much easier because people know what Trep stands for and I get to be an extension of that. And it's been, it's been a really incredible ride thus far. The, the podcast obviously is kind of icing on the cake, but, yeah, I think for myself, I view myself as a, as a pracademic. Right. So I'm still part prac practitioner, part academic, and then I get to do some product development management stuff here at Trap in the, in the middle. And I love it. It's a perfect combination for me.

Well, pracademic. I have not heard that before. I want to circle back to that. But, you know, we do get some college students who listen to this and, you know, so let me just be clear. So while you're in college, you're also leasing out apartments? Is that, is that what you were doing? So you were a leasing consultant? So, I mean, because, you know, for, for, for students who obviously, you know, they got to focus on their, their studies and, and maybe have a little fun while they're at school as well. But you found the time to also be able to rent out apartments. I, I've got to imagine that was incredible experience, you know, going into the, the commercial real estate world.

Yeah. So for me, like, I had to work full time and go to college. I paid for my own college and put myself through school. So I worked full time, went to school full time. I didn't have a whole lot of fun in the middle, but I was trying to achieve a goal of getting through school. And so, you know, for me, like, learning just that skill set of Time management of being focused on your goal and doing whatever it takes. Like if you work on my teams at trapp, we, we operate under the hashtag team whatever it takes because that's how my life has been. Like, I'm going to do whatever it takes to hit the goal that I set for myself. And so to your point, like I was working full time, which was great because as a college student I was getting professional experience around engineers, architects, developers, other property management professionals. And I was also building a network of tenants. Every time I leased an apartment to someone, I learned a little bit about them and who they were. And I was working with the vendors, the H Vac folks and the carpet cleaners and all these people. So as a 19, 20 year old kid, I was building a really cool professional network without even intentionally doing that. That was just part of my job. And then on the other side in school, I'm learning all these textbook theory type of approaches to commercial real estate. So I had this perspective as a very young person of marrying up the, the theoretical concepts of real estate with the practical application of real estate. And I think it turbocharged my career. And then now that's what don't. That's really the only reason I teach is because I want to implore my students to take advantage of being a student and leverage the opportunities like brokers, appraisers, lenders, whomever are so much more giving of their time and their resource to students than they would be to non students. And so there is a cheat code for students that take advantage of that status to get in front of people that they otherwise wouldn't be able to. And so I try to really hone in on that with my students and give back and say I'm a huge example of how if you leverage being a student to your advantage, it can really set you up for future success. That's outsized compared to what you think that small investment is. If someone comes to your office today, James, as a student, and wants to spend 20 minutes with you, you're going to find 20 minutes to spend with them and you're going to remember them. And if they're impressive and they look you in the eye and they speak to you and they come back in a couple of years after they've got some experience, you're going to welcome them back and you're going to remember them as well. And so, you know, I lived it and I try to impart that on my students now as a, you know, as a professor in the university setting.

Well, lonnie that's incredible advice and clearly kind of that work ethic that you had from, you know, the on started. Now to team whatever it takes. I mean, no doubt that you're able to accomplish all these things. But Lonnie, how today, how do you find the time and to balance all this between the show, the speaking engagements? You said you're doing brokerage, you're teaching. So what does a typical day look like for you?

Yeah, so I'm, I'm running on usually four to six hours of sleep is what it feels like. And you know, the, the teaching stuff, I'm like seven days a week. It's seven days a week. And I, I teach on the weekends at the community college. I do two to three classes a semester on the weekends there. So on the semesters I do three classes. I'm on campus from 9:30 to 6:30, 9:30am to 6:30pm every Saturday. On the weekends that I only have two classes, it's 9:30 to 3:30 at Texas Tech. I do like five in person classes on a Friday, 6 to 9, the rest of the classes online. So I've just figured out a way to kind of make it all work. And I think for me, like the way I'm wired, I want to be busy. I view work as a blessing. Like the fact that I'm healthy enough and able to work is something that I don't take for granted. And I'm going to give everything I can and I want to make an impact on people's lives and I want to make an impact in our industry. And so if I'm healthy enough to work and lucky enough to have the opportunity, you're going to see me putting in 100 effort every day. And you know, I probably don't do very good on the balance side, but if things go to plan, I'll have plenty of time later in life to kind of balance those things out. I'm trying to really lay the foundation and put the groundwork in today to help my kids be successful and live a life that, you know, they can be proud of. And so that's the motivation. And I love working on teams and Trep has a great team. And you know, when you're building cool things that, that you see the tangible benefits of helping other people, it doesn't feel like work. And, and quite honestly, I know it's cliche, but it, you know, it feels like I'm just really fortunate and blessed to be able to do the things that I'm able to do and I don't take it for granted. I, I enjoy every second of it.

Amazing. And you, you certainly do accomplish all that. And it's, it's just amazing to hear that, you know, you're giving your time over the weekends as well with the teaching. Just what an incredible thing. So, Lonnie, just, just as we part, you know, final advice. And I would, I would set this up for, for two different people you would be giving advice for. So the first person would be, maybe it's one of your college students, maybe it is someone who already has a little bit of experience, they're looking to break into the business. You know, whether go working for an investor, you know, whether it's an operator, developer, big shop, small shop. Any advice you would give that person on, you know, the best thing to start up. And then, and then I guess the other piece of advice I'd love to hear is, you know, someone who's a veteran, who's been doing this a long time, but they've kind of, you know, always invested with their gut and now there's this whole new world of data that's out there, but they kind of feel like the world is passing them by. Like, how do they step up their game? How do they leverage the information that's out there? So if you, if you want to give advice to both of those people, then I'm sure there's a lot of helpful points in between as well.

Yeah. So on the student side, I think, you know, we hit on it a little bit. Take advantage of being a student, get in front of as many people as you otherwise wouldn't be able to and leverage those relationships. If you are at a conference as a student and you get to meet James Nelson as an example, shake his hand and then send him a follow up email afterwards and tell him how great it was to meet him and how you look forward to, you know, working with him in the future. Those small nuance things make a really big impression for folks that are in the business. Like this business is full of people. It's not full of super successful people. And the difference between, you know, a typical run of the mill broker and someone that's, that's top of their field are those small, subtle, nuanced things. And if you can start a habit of doing that as a young student, it really translates well as you, you know, get into the business. The other thing is take your college coursework and turn it into a professional portfolio for you to use as an example when you go on interviews or you're Trying to get yourself a job. If I have two candidates that are generally equally qualified and one can leave behind a business card with a QR code that shows me six or seven projects they've completed in college that's tangible, quantifiable for me to review as someone that's hiring, to me, that gives a huge competitive advantage to somebody that just sits in the room and tells me that they can do the work. Everyone's going to put their best foot forward in an interview. If I can, you know, meet with you, we have a great call and you leave me something as a takeaway that I can see that you can actually do what you said you can. Even if it's not real, you know, PSAs or otherwise or whatever, it's tough for academic. It still gives me something to anchor to that you can take what you know and turn it into action. So those would be my two advices. Piece of advice for, for students, I think for the veterans, it's really interesting. If I'm 20 plus years in the business today and I'm doing, doing well, I may be feeling a little overwhelmed with some of the new technology and other things. And I would caution people from falling into that trap. Like, right now is actually the best time to reinvent yourself. The technology, the tools, the data, all the stuff that's available can allow you to do things at a pace and scale that were impossible 20 years ago. And it's really not as intimidating as it may feel. There's a lot of stuff online with YouTube and other videos and things that you can learn how to leverage this plethora of data and tools and technology and then find companies like Trep and others where you can get a relationship. Like, we're not just a data vendor. We want to partner with you to make your firm successful. And so you need extra training, you need understanding of some of the terminology or verbiage. You need to understand how technology connects. We're going to take the time and explain that stuff to you. So I would just say for the experienced folks, don't be intimidated by the new technology and the new, you know, inflow of data. And it can be overwhelming, I admit it. But lean into it and I think what you'll find is the relationship part of your career cannot be replicated by somebody that's just entering the business today. They cannot take technology and replace your 20 years of experience. But if you can leverage technology in addition to your 20 years of experience, that's a humongous cheat code for you being more successful. Than everyone else in the market.

Wow. Incredible advice again for those starting out, the veterans, everyone in between. Lonnie, you got an incredible story. And just as I saying, you know, from the beginning we just appreciate everything you do for the industry, all the incredible content and insight that you put out. It's, it's just so invaluable, especially during, you know, these times that we haven't seen before. So just, we know every week we can count on you to deliver that. And so just want to thank you again for joining us today and just Lonnie, if you would tell us and we'll put the show notes@james nelson.com but what's the best way to get ahold of you, to follow you, to connect with you?

Yeah, so I'm on all the social platforms. You can connect on LinkedIn, on Twitter, my handle is just Lonnie_CRE or you can shoot me an email at Trapp. It's just Lonnie L O N N I E Underscore Hendry H E N d r y prepp.com and I'd love to connect with anyone that's interested and talk shop or see what we can do to help you out. So feel free to reach out and you know, I'll be more than happy to, to help however I can in whatever capacity that is.

And last but not least, we're not going to shut this down yet. We know we've got a big conference that's happening in New York, so I'd be remiss if we did not mention and Lonnie, thank you for asking me to speak on the panel, but why don't you give everyone the, the information and we'll make sure and put that in the show notes as well so people can register if they want to come see us live.

Yeah. So we're going to have an event hosted by Trep May 13th and 14th for the CRE users and audience out there. If you're a lender or you're on the lending side, we're going to have an event on the 14th and 15th. James is going to join us on the 14th on our CRE event. We're going to do a fireside chat and really we're going to bring together about 200 plus or minus, you know, folks across the U.S. that live and eat, breathe and sleep this commercial real estate business. And we're going to create a really great avenue for networking, for discussion. We're going to have some of the industry leaders on panels. We're going to have economic update. It's going to be a really great time. It's going to be in studio gather in Rockefeller center and it's a great view. It's a great couple of days in New York City. We have a QR code and a link that we can include in the show notes that you can use to register. And if you use the promo code PODCAST 2025, you'll actually get a preferred rate from watching this event today. And so we'd love to have you join us. This is the second year we've done it on the CRE side and we've been doing this for about seven years on the banking side and with great success. So if you have some time May 13th through 15th, join us for both events. Join us for one of the events. We'd love to have you there. And James, I really look forward, you know, I've got to interview you on our podcast and now you've interviewed me and then I'm looking forward to this Fireside Chat. I think we'll have a really, you know, content rich discussion around just what we're seeing in the marketplace and kind of where we're at and where we're going, which is what everyone wants to know.

Can't wait. Well, thank you again for joining. Lonnie thank you everyone for, for listening and we do hope that we see you in person in New York for, for the the TRAP conference and you know, share this with friends as well. So until next week, thank you again for joining.