Like the title asks, what jobs are you avoiding right now?
Whether you were looking to make a switch before the crisis began, or you are looking because the crisis has put your current job in potential jeopardy, what would you not want to be starting fresh with right now with a pending recession, or depression?
Answer could be a particular...
Role: acquisitions, development, leasing, asset management
Type of company/shop: REPE, developer, small institutional sales shop/brokerage
Industry/asset class: hotels vs. senior living vs. retail vs. office
Investor Relations / Fundraising for an opportunistic hotel fund
Am I a moron for thinking that fundraising/starting a hotel opportunistic fund would be an unbelievably interesting job? If you don't have any capital deployed currently, then you aren't facing losses and you may just have the best buying opportunity of a lifetime in front of you...……..
You’re correct. There will undoubtedly be some funds popping up that will focus on buying distressed hotels, retail centers or their mortgages.
Although in my opinion the better opportunity is in public hotel REITs than hotels. Hotel REITs are trading down 60-80% from December 2019, but in the private market the assets themselves are only 25-35% off from where they were in December 2019
This is the best time to be fund raising. You’re looking at a 6-12 month period of pitches, term negotiations, DDQs, LPAs before inking any commitments. Perfect timing to execute on some of the best deals of our lifetime. The wave of distressed CRE lags equities by months and is 100% coming.
Apartment asset management, although needed now more than ever, I feel I would have a hard time dealing with the day to day. I have a friend in the space and also investors dealing with Class B and C.
I guess next is asset management in retail or office. Dealing with many of the tenants and their “wanting to talk” about concessions during COVID. Whenever your job is to manage people’s most important issue to them (not yours; but collectively yours) then your life becomes hell.
I went through something like this in April.
Great point. Spent an entire week in April dealing with:
CFO: “Hey, can you guys look in to what will happen if we don’t make our lease payment (master)? We have the cash and obviously don’t want to do anything that would cause an event of default on the bonds, but everyone else is getting concessions and they aren’t being very responsive (to providing me free money I don’t need) so I want to use this as leverage to not pay.”
Great. Hold on a sec, let us waste a week and $$ on lawyers to give you a proper answer on how it is obviously an event of default if you don’t pay your f’n lease. Not to mention the “ethics” behind it.
I feel like these CFOs and decision makers are going to get bored from limited access to markets and cash/buying opportunities and start getting grand ideas on how to be “a real cut throat deal maker.” Lol, sick dude, you saved 40K on your rent payment. Big win.
There’s pressure to ask. Even for things like the PPP. Investors be like, what you didn’t go for it? Go for it NOW. Lots of decisions made from reading news articles; FOMO.
Heres the problem with everyone interesting in buying hotels right now...the problem is that everyone is interested in buying hotels. Its really difficult to tell what will happen, but we know big time operators who only specialize in hotels that are salivating at the idea of buying hotels for even a 20% discount. However, theres a lot more liquidity now then there was in 2008, but one other thing to note is that even during the GFC, hotel values didn't drop to the level that you would think. Sure you'll find some hotels trade for a discount, but I just dont think it makes sense to be an opportunistic buyer in it, if the only discount your getting is 10%. I also know a lot of guys in forbearance including ourselves. We will under no circumstance sell for a 20% discount over night. The only way hotel values adjust is that revenue has to see extended periods of declines to justify the new valuation. You can't just offer a 20% discounted price because someone had three bad months, but if it is 12-14 months of constant declines, thats when the discounts start. You'll have to wait.
You can’t really compare today’s crisis to 2008 for the hotel industry. Occupancy rates are essentially 0% vs. 50-60% during the 2008 financial crisis when you could at least cover your debt service. Essentially every hotel out there with leverage (probably most) is going to need some sort of expensive rescue capital in the form of preferred equity, mezz or common equity. Considering that no one knows when the recovery will happen (some pointing to 2023) or look like it’s going to be extremely difficult to source this. Even if an owner is somehow successful in finding rescue capital their cost basis is going increase substantially coming out of this from all the carrying cost and the return-on-cost isn’t going to be attractive. As an owner why throw good money after bad. As a lender I’d be looking to get out of hotels asap via a loan sale to what will probably be an opportunistic buyer who’s looking to take the keys back. At the current rate owners are going to be forced into transactions and you're going to see a major basis reset for the ROC% to pencil out.
When you say you can’t see values dropping 20%, take a look at the public equity markets where values are down 50%+.
I dont know how much values will drop. My point is I know hundreds of owners, I go to industry conferences. We specialize in this. Everyone is looking for deals. So yes the environment is much different than 2008 because there is liquidity. Yes occupancy is zero, but that is not economy related, it is regulation related. Believe me I would love for prices to fall. You're right banks may off load some loans, but many of the guys I know, whether it be a small franchisee or a large REIT are fairly well capitalized. Yes, you will have your duds. Also I would not reference the stock market as an accurate gauge of the economy or valuations at this point. All I am saying is that for every 1 guy I see talking about selling their property for a discount, I see 10 willing to pick it up. Too much capital out there. I agree that UW will reset, but there is still so much capital out there right now, that to some it doesn't matter. Part of the reason valuations keep rising is that holding cash is less beneficial to some, they'd rather buy something and get whatever yield. This is too early of a conversation to make even a slightly educated guess. I foresee if demand is low until 2021, it will get bloody for sure, but we just dont know, thats the issue.