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Hey, Welcome to the latest episode of Commercial Real Estate Talk with Steven Arnie, where we have what we hope to be interesting and compelling conversations with leaders in the commercial real estate industry. And today's show, we'll get over that bar as our guest is John MCNs, founder and partner with MCNs Partners. Um, but before we bring in John, let me first introduce myself and my co-host. I'm Steve Bloom, founder and c e o of Rent tv, the news and media company for the commercial real estate industry. Hope you're familiar with it Now, in our 24th year, uh, our news website is rent tv.com daily news and information. Uh, we also put on rent TV conferences, uh, and we have our video platform, the review, the website you're on now, where you're watching this video, which we built for the industry. Uh, and let me introduce our co-host and the show producer, my good friend, Arne Garfinkel. Hey, Arne. Hey, Steve at Arne Garfinkel. I'm president of the All-Star Group. We do commercial real estate loans anywhere from 500,000 up to 10 million and more. Uh, we also do events. All of our events are commercial real estate related, uh, and we produce events for other companies, such as Rent TV and the Click conference. Uh, and you've got one coming up, right? Don't you have one? Uh, in a few weeks. Yeah. We got a, uh, online conference coming up June 21st. It's online, it's free for everybody to attend. And then we have a new event we're doing in San Francisco, the end of August, August 29th at the, uh, Hyatt Regency in Barcode. That should be an interesting one, Steve, back to you. Oh, Great. And, uh, with us putting the wrap on our, uh, recent very successful Inland Empire event, uh, you'll be able to watch some of the videos from those panels on the review shortly. And we have Greater LA coming up August 17th. We'll have conferences, uh, panels covering retail office, multi-family, industrial and finance. So look out for more information on that. But enough of us, Steve, let's talk about our sponsors, Right, Arne, uh, we've got great sponsors that make these discussions possible. Um, and starting with commercial real estate inspectors in Southern California, their skilled inspectors provide critically needed inspection information in easily understood terms, as well as inexpensive, simple solutions. Whenever possible, let commercial real estate inspectors help you protect your deal, call Tiffany Simington and book your next inspection today. The numbers on the screen, (818) 957-4654. Call Tiffany Commercial Real Estate inspectors 8 1 8 9 5 7 4 6 5 4. And with inflation causing cap rates to increase and profit margins to decrease, one way you could fight back is by appealing property taxes. Even if you have great income, you could still qualify to have your property taxes lower. The deadline to file is November 30th. Call 8 5 8 2 2 5 1200. That's 8 5 8 2 2 5 1 2 0 0. Ask for West Nichols with Paramount Property Tax Appeal. And lastly, Redwood Mortgage, who we've known a long time Arne, they are a direct private money lender with over 44 years of experience lending on commercial mixed use, multi-family and residential investment properties. Loans range from 200 K up to 10 million, and they are lending in the major metro areas of California and Arizona. Redwood has a long-held expertise in commercial loan transactions. Contact Redwood at 1 806 5 9 6 5 9 3 or redwood mortgage.com for more info. They are a good place to go when the banks say no. And, okay, now let's get to the show. Arne, I know we are in for a very insightful, informative, and interesting discussion given the backdrop of the challenges in the economy in Northern California and in developing real estate today. With that said, let's introduce John MCNs, founder at partner with MCN Partners. Hey, John. Hey, welcome John. Welcome To the So, John, thanks for, uh, taking the time today. Thank you, Steve and Arne, I'm delighted to be here remotely Should be, everything's remotely on this. Well, you Start, we've got a lot, lot of ground to cover today. A lot of topics on the table, a lot of interesting things going on. And, and as you know, leader in the industry, we want to tap your, your thoughts on several of them. But before we really get into some of the issues of the day, why don't you give us an overview of, of McNell's partners, your, you know, the type of properties you own your portfolio. Uh, give us a little overview. Sure. So I've been in the business roughly 40 years. Our primary portfolio, historically has been neighborhood supermarkets all in Northern California. Typical size is about a hundred thousand feet, uh, of building. It's usually a barbell center supermarket on one end, a drugstore on the other, a thin row of shops in between 10 acres. Uh, they're almost all supermarket anchored, and fortunately for us, they're almost all in great neighborhoods. Uh, that's the primary portfolio. Since then, uh, we've done a fair bit of mixed use, uh, a smattering of office and a little bit of residential. What I can't talk about are industrial or hotels, other than which rooms I like at Fancy Hotels. How big's your portfolio now? I know you, uh, buy and sell. How big's your portfolio now? You're holdings? Uh, the retail's a little over a couple million feet. Nice. Uh, and the rest is, I think we may have, you have 35 projects. Um, oh, but yeah, we, we have some nice little office buildings, uh, here in downtown Palo Alto, which is a good place to own office buildings. Yeah, well, if there's a place to, that's the place. But John, how did you get into real estate? Uh, what attracted you? Did you start with retail or did you start with just a house? Great question. Uh, I did start with just a house. I started with a $24,000 duplex, uh, in a Lancaster, which is arguably, sorry, Lancaster. It, it's my hometown, but arguably the worst town in California. Uh, but that went really well. I think I bought when I was 24, 25. You get, you Got a house for cheat there. Yeah, yeah, you still can. But actually, when I got into it, I, I was a young lawyer at a fancy firm in San Francisco in the seventies. I started out in litigation because, you know, e every kid who goes to law school wants to be Perry Mason when I, with the, the suspenders and, and do trials. But I did that for about a year at, at a big law firm, and I hated it. I just, uh, li litigation is terrible. I didn't know anything about real estate or development, but the firm had a business department that was primarily real estate. So then I went to the managing partner. I said, please, please, please let me out of litigation. Uh, so I shifted over to real estate. And guys, it was fun. I, I loved, you know, helping people buy, sell, office, building, shopping centers, finance, do leases and all that. But then quickly enough, I said, wow, I'm making, well, I forget 20,000 a year. And these guys, Arne and Steve are, are buying this building, and they're making 2 million. And I'm as smart as they're, so I, I, I started that as I'm watching, uh, because we, my firm represented the money, which is the Bank of America, Transamerican, whatnot. And I'd see these young developers maybe five, 10 years older than I making a fortune. And I said, wow, I gotta get in that business. And I kept waiting for somebody, you know, or one of these developers to see me across the table and say, whoa, MCNs is a genius. I gotta have him on my team. That never happened. See, you did it on your own. And, and, but that, yeah, I, I teamed up with a client, uh, who was old about 15 years older. So I'm in my twenties. Yeah. I'm in my mid late twenties. I teamed up with a client guy who was about 40, who was a retail developer, and that's how I got into retail. Uh, it just kind of fell into it. Yeah. Uh, and then the rest, like the old line goes, is history. Well, tell, tell me about the, the, the, the deal that you look back on. That was the one that kind of took you from, you know, the houses and the smaller projects up to that next level. What was that deal that you would point to? Yeah, I, I actually, it's in Hillsburg, which is a cute little wine town in northern California. For our viewers who aren't familiar with the wine country. 40 years ago, it was a blue collar town. Uh, and, uh, my, my ex, yeah, my ex-client, uh, future partner, he had this thing tied up. Uh, this was like an 82, uh, and it was a Safeway center, again, just what I described before, about 10 acres, about a hundred thousand feet. It was Safeway and, uh, a drug chain that no longer exists, pay less drug, difficult deal as hell. But it was about a 10 million deal at the time. Uh, and guys, we still own it. Really? Yeah. We, we opened it in 84, uh, and we paid off the mortgage and we, we owned this. And it's a great center. What's the square footage? About a hundred thousand feet, give or take. Yes. Uh, 50,000, 55,000 foot Safeway usual shopping center. But Those communities, those things are priceless, really, you know, so valuable community. Yeah. It, but that, that, that's an aside, you know, with all the issues that are happening to, to all kinds of, uh, real estate and particularly in central business districts, are the well located suburban retail is doing great right now. It, it, um, you, if you own it, uh, it doesn't make sense to develop it right now, but owning it is great. You're, you're, what major standout project can you put your finger on that you accomplished in your career? That you say that that was the, you know, we talked about that one, but that's great, but which one do you wish you could undo? That I could undo? Well, you actually, guys, I, I had, I had to add a wing to my whole of shame, uh, a few years ago. More than There, there's more than one that, that I, I wish I could undo. But you know, what I like to say is, um, deals you, you make money or you, you learn a lot that's valuable. I, I'm not sure, uh, uh, let's see. Yeah. Well, every few years, you know, I'm at the point in my career where I'm making, I'm starting to repeat mistakes. I'm I made in the early days. Every once in a while we will get into a deal for the wrong reasons. Uh, and then, you know, rather than just, you know, these numbers work, let's jump on it. But I can't think of one in particular, but That's okay. You know, tho those, those failures create success. We all know that you Gotta learn, you Gotta fail first before you could succeed. So, And that led you leads right into my next question is, how do you find the deals? Is it through brokers, uh, on your own deal, you know, properties you track or manage, perhaps with third parties? And then, like, what, how do you green light? Like is it an, I always want to put myself in the mind, you know, of a developer owner, cuz I, you know, I'm jealous of you guys. I'm gonna live vicariously. So is it like i r r, are we, are you that technical or is it more of a gut feel, uh, when you pull the trigger? How, how do you make that decision? Okay. So multiple questions in that question, but first, How do you find 'em, first of all? Yeah, in the early, it evolved over time. Uh, in the beginning it was, you know, knocking, 40 years ago, it was knocking on doors, please show me deals. Uh, you know, going out and calling every broker out there. One of the things that we did that as a small, uh, retail developer that the bigger corporate guys couldn't do, is we would tell brokers, look, bring us a good deal. You can get your full commission and we're fine with that, and we'll give you 5% on the back end, you know, after we get, let's say a 10% preferred return. Uh, you know, I jokingly called it our layaway program, and that worked pretty well. Uh, money, I mean, I don't hear many people doing that. Yeah, No, it, it, it, it really works. Uh, and, and, uh, I, I have one broker that on, on one deal that Calgary bought 25 years ago, he probably makes 75,000 a year, uh, uh, in, in cash flow off, off that backend piece. It, it really, so that helped us find deals then, and I think this is probably true of fellows who've had a relatively good fortune in their career. The deals, after a while start to find you, uh, you know, people, you know, you get a decent reputation and people call and say, Hey, this is the right deal for you. Uh, principals call at this point, guys, I'll be honest, a deal has to hit me on the nose, like a two by four for me to look at it. Really. Uh, so that's evolved. Uh, I'm sorry, Steve. The second part of your question was, oh, yeah. Right. Well, How's the velocity been before we get to that second part, you mentioned, you know, deals hitting you. Are you ge seeing a lot of deals coming through? Or has that leveled off a bit over the last few months? Uh, good question. No, it, it has leveled off quite a lot. I, I am not, you know, everybody, every time there's a downturn and, and we've been, I don't know, five or six, everyone says that there's gonna be a flood of great deals that we can step up and buy. Didn't happen in 2000 8, 9, 10. I don't know that it's gonna happen. Now, the, the, the stuff that I see that's for sale on the market's fully priced, uh, I, I, I think that that will have to break at some point. But you guys know this, there are trillions of dollars sitting on the sidelines, you know, it can quote opportunity funds so that the moment somebody senses a good deal, you know, the money is gonna flood in. Right. So I, I think there will be good deals on the margin out there because, you know, the, the four Ds, death, divorce, disaster, disillusion, those happen regardless of whether we're in, in a recession, a depression, or an upmarket. So some people will have to sell in this market. Now that, and we found over the years that, um, so 40 years, we've done maybe a hundred deals over the last 40 years. So two and a half a year and, and en ragingly good markets, we might not do a deal for a couple years. And then in a downturn, uh, when there are fewer players out there, we may pick up three or four. That's what happened. You know, like right now there's this downturn in certain areas Where you can, you know, uh, San Francisco for example, you know, right. You walk through there and everything's vacant, you know, Has kinda become a darling again, in a way. Exactly. You know, The second part of my question is, and I find this fascinating, is how, you know, you, you've done the analysis. Are you more I r r return on equity? You know, how, what's, what's the key metrics that you use when you're analyzing a, a, a, a new acquisition? And do you rely on that? Or is it more of a gut feel that you just know that it's gonna appreciate or do well, even though maybe the I r the R O E isn't really showing that? How, how do you go about that? Okay, guys, I think IRR is a load of crap. These Are the answers I love. I love No, that that they're so true. Yeah, go ahead. It, It's the, I r you, you both know this. The I r r, the whole principle, the i r is what the value of that building is going to be 10 years out. It is, the analogy is so perfect to predicting weather 10 years out, That Joke. So I have discounted the I R R forever. We look at return on investment immediately. You know, the book I wrote making it in real estate. I have a chapter in there called Back of a Napkin. And, and so Steve, what we really do is you pitch me a deal and you say, okay, John, it is, we're gonna buy it for 7 million. We're gonna put 3 million in it, and the NOI is going to be a million. And I say, okay, that that's a 10% return. Hell, I'll do that deal all day long. And, and it really has to be that simple. I, I've noticed that the, the more detailed you get, the more argu programs you run, and the more you know, frankly, b******t that, that you add to it, the more likely you're gonna go wrong. Uh, it, it really has to be a, a simple deal. Uh, and I've got younger partners that do, uh, apartment deals and it's, okay, we're gonna buy this for two 50 a door. We're gonna put 50 a door into it. And so when for 300 in and all the properties around are going for 4, 4 50 a door, I said, okay, that makes sense. I'll, I'll do that. You know, it's, it's, it's really like a, an elevator, right? It's riding on the back of a napkin, listening to an elevator pitch. No. So it, it's not a gut. Now, occasionally, uh, if it's dirt, you know, last downturn, so probably in 12, coming out of last downturn, so 11, 12, someone showed us a piece of dirt in, uh, Hercules, which is a little town on the way out of the Bay Area. Yeah. And it was at the intersection of, of Highway four, which is Pineapple Freeway, and then 80, which is a major freeway. And I said, this is the corner of no and brainer. No, that's Bright Line. And that's your gut, you know it. Yeah. Yeah. And so I, I, I said, I don't know who I'm gonna put there. And so we bought it out of our, out of foreclosure, uh, our r e o, and we sat on it for a few years, and it took us, you know, I, I thought because guys, it's gotta be an optimist being in our business. I thought it would take three or four years to figure it out. Took us about nine to get the thing done. But it turned out to be a great, uh, Safeway anchored shopping center. Right, right. Yeah. And that, and that's where you gotta, you know, like, like you mentioned with the, uh, you know, like people tell me I'm in the finance business, you know, what do you think rates are gonna be? I don't know. I don't have a Christmas. Nobody knows. Nobody knows that these rental increases that, you know. Yeah. Yeah. You gotta you gotta go with what you, you feel is happening in the market. And, you know, speaking of, of the finance industry, you wrote a whole article on the Silicon Valley Bank, a collapse, you know, Hey, you read my stuff. I love it. Yeah. And that, and that's gonna, and that's gonna come into, you know, financing deals and so on and so forth. You know, tell everybody what, what your opinion is on that and why you saw that coming. Well, I, I think financing deals for all, but the, the most deep pocketed developers is very, very difficult right now, bordering on impossible. I had a couple of, of my younger partners in, and they, they were complaining about, so what's happened, uh, on development deals is it's, the loans are no longer, you know, loan to value. They're loan to cost. So, so that drops off 20%. They're no longer 60, 65, or even 70%. They're, they're running 55, uh, 55, 60%. And that's not so bad. But, and if the three of us were running a regional bank, we would make this same requirement. They're saying, okay, we'll we'll loan you the 10 million you need in a at 50% loan to cost, but you need to put in 3 million in our, in our bank non-interest bearing and lock it up. Because, you know, the, the banks are desperately afraid of another, you know, Silicon Valley Right. Style run. So what that means is the developers, you, you're putting up 60, 70% in equity at the end of the day. So the deals aren't Pence, you know, you can't borrow money. Uh, so we're coming into, I think we're there, and this happens every downturn. The, the rise of the hard money guys, you know, they, they, they are relatively quiescent during good times, cuz there's money available everywhere, but now they're back. And so a a sharp young developer who's got a good project, uh, and actually I have a friend who, who does hard money lending. I, I don't think they call it hard money lending, but No, They, they like to call it private money. They don't like the word trying to, trying to make it sound a little Yeah. They don't, they don't wanna sound like, uh, but, but you, you bring up a good point and, and let me interrupt you for a second. Sure. Uh, when we, when we do my events, we talk about the lending industry and who's out there and the private money industry right now is the key lending part because like you said, 50, 55%, you're renting money. There's usually no prepayment penalty for that stuff. And a smart developer like yourself, you'll say, look, I'm gonna lend if, if the big banks are only giving me 55, I'll take 50 from a private money lender. I'm enough to deal with all the brain damage of giving all this other stuff. Get in, get out. And once we get this thing stabilized, we can get ourselves a, a quality loan. Is, is that what you're finding when you're, you're seeing projects right now and, and Yes, you're absolutely right. Arne, uh, sir, if, if the deal is good enough, it, and, uh, my experience is right now it's the, it's not, it's, well, I'd say it's hard enough. Yeah. It cost, it costs you 10% plus a couple points a year. Correct. So you say, okay, that that's 12%. I I can stand that for a couple years. Things will get better and I'll refinance. Uh, but you know, that, that, that's where, as far as I can see that all the development deals are going. And so the trickier to pencil, I'm going down to Las Vegas, uh, on Sunday for the I c s. So it'll be interesting to see, uh, the retail world's doing. Our leasing has been very strong, uh, for the neighborhood centers. Uh, but the, the development deals are not penciling out right now. Yeah. I mean, retail came back pretty well after the pandemic better than it did. Most people thought The office market has obviously, uh, you know, go ahead. I'm sorry. Our money guys. Are you seeing other alternative sources of financing, uh, springing up and in these ch challenging times? I haven't seen it, but I'm sure it will. You know, there, there's a, a big need for it. And so, you know, you know, whenever there's a need, someone who is going to, to supply the answer, um, yeah. It, it, it'll be here soon enough if it isn't already. When was the last acquisition you closed on? Bought a little center down your way in, uh, orange? Uh, we bought, i, i, I like lease holds and, and that, that is a, a con conversation in itself for an hour. But I'm one of the few guys out there that, that likes to buy lease holds because I'm one of the few guys that doesn't think he's gonna live forever. So, and, and I, I think of leaseholds as, as bonds, uh, as opposed to a ground up development deal as, as a long-term capital game stock play. Interesting. Uh, if, if you buy an existing leasehold, and guys, we bought this thing as is and it had a, like a 16% cash on cash return. It only has like, uh, 12 year, 10, 12 years before that there could be a crossover before the ground run grows up, goes up too high. Right. But I said, I don't care. I'll have all my money. How long is left on the lease? The ground lease? Yeah, It might be 40 years, but, but it, but it goes up. You have to be careful with lease holds because, because, uh, re retail rent are, are, are good, but they're kind of flat. And if the, the ground rent is going up and then there's a crossover point and depending on where Yeah. And it's CPI based, so depending on how much c p increases over the next 10 years, it could happen that, uh, the ground rent will exceed, uh, uh, that the subtenant rent. But if it does, interesting. Who cares? We've got all, got all our money out a good return. Right. That's interesting you mentioned that cuz it's not as big of a deal out here. I grew up in New York City and started in real estate there where ground leases are everywhere. And I live in Marin Delray where the whole thing is a, the entire Marin is a ground lease. Yeah. So it's pretty interesting that you bring that up as a topic. Um, but I was gonna ask you on, on that, on that deal, how did you finance that, you know, in terms of L T v traditional bank, you know, Leonard Equity? Uh, Yeah. What, what did, uh, uh, sorry, boys and girls, I just paid cash for it. So there you go. You know what cash works. That, that into my next question is, or do you raise for each deal that you do, you have your company, but then do you raise equity partners for each transaction as like each one a separate partnership? And if so, like, how could someone like me and Arne, you know, invest with you? All right. That, so that, let, let's go back. 40, 40 years ago, I had no money. All right. Yeah. And so that shopping, let's use that Berg Shopping Center, I think I had to raise 900 to a million in order to do it. And guys, I was like an actor in a bad off Broadway play. I, you know, I, I was just going door to door trying to raise a million bucks at $25,000 a pop. Somehow we managed to do it. Uh, and so then we had outside partners and, and then the, the, the roaring eighties came along and my partner and I, we rolled into doing deals with the SNLs where they put up all the money, and in fact, they'd put up 105% of the money. You know, we, we'd, we'd actually close a deal and put money in our pockets. And of course that all blew up by, you know, 89 or 90. We had this great recession. Uh, and then I decided, uh, the epiphany I had, it wasn't on the road to Tarsis, but the epiphany I had was, I'd rather own a hundred percent of a million dollar deal. I'd rather own a hundred percent of a gas station or a McDonald's than, than 10% of a hundred million dollar deal. You know, it's the, the money's the, or, or 1% of a hundred million dollar deal. Right. The money's the same. So we stopped having outside partners, and we kind of, the, my older partner and I went separate ways and, and we started over doing the deals with our own capital. Uh, so I, I told you we'd done roughly a hundred deals in the portfolio. We have roughly 35. So we were selling, in order to, to have our own capital, we had to sell two out of three. Uh, and so we'd sell and, and we'd trade into the next one. You know, like that old joke, uh, we buy junk and sell antiques, you know? Yeah. Oh, are you buying, are you selling any of your properties now? Are you in the process of selling? Uh, no. Right, right now I'm not, uh, because the market is terrible to sell. Yeah. I'll give you a data point. We have a little, uh, an oil changers called Take five, uh, on a 15 year ground lease in a, in a decent little bay area town. Uh, my partner on that said, this goes back six months, let's put it on the market, uh, at a 4 75 cap. I said, yeah, okay, sure. Whatever puts it on the market. Crickets. And then he, he would like the cash. And so he says, John, let, let's lower the, lower the price, raise the cap to five and a core more crickets. And then, then finally, uh, maybe two months ago, let's push it to six. Uh, and again, not a single response. And we own the property free and clear eyes said, okay, forget it. Let's just take it off the market. You know, the, uh, there just isn't a lot of financing out there. And I think what's happened is we've worked our way through most of the 10 31 buyers, you know, that, that, that had stuff from one times or better. So my guess is that the velocity, uh, of deals is way off, uh, in my world, you know, retail and offices. I'm sure it's zero. And I can't opine a multi-family. I, I think is way off as well. Yeah. I mean, with that, what are your views right now of what's happening with the office and retail market? I mean, uh, what do you see it going? I mean, I know you don't have a crystal ball, but I mean, you've got, you've got properties right now. What, what are you doing with your tenants and what do you see happening? Yeah. And even on the broader scale with some of the writings, you know, well, yeah, Just in general, you know, in the current market. But Yeah, I, I think that the neighborhood retail even what, what everybody, all the pundits, you know, and the, and the business writers, cuz the, the business writers don't really understand business and, and you can't blame them. They, they're trying to, to write about every business in the world. Uh, you guys know it, our business, it's really specific as to location and as to the type. So in our portfolio, our neighborhood supermarket anchored centers are doing great. You know, we're, we're nearly, we're within basis points of being full. Our mixed use stuff, uh, which is, you know, the retail below office or, or residential that's dependent on the daytime populations, right? That's dependent, dependent on office workers. So the mix use stuff is suffering right now. Uh, and it, it will continue to do so until, if, until people come back to the office, which, as an aside, I think they will ultimately. But it's, it's gonna take a while. Uh, apartments, you know, from what I can tell, you know, you know, all those big fancy apartment buildings that, that I'm sure they just like in, uh, in Northern California, Southern California is full of them. None of those deals that have been built in the last three or four years, uh, it, uh, are above water. You know, the, the, the rents have drop, app operates have gone up. You know, I, at the apartment world, I, I think it's going to cool very quickly, um, if the, the big time apartment builders were like, uh, yes. Silicon Valley Bank and, and had to, you know, clear that they'd be underwater. Yeah, no, that's right. Seems like they're reaching a peak as to how high rents can really get, especially given the downturn, you know, in employment and, and labor. So, uh, interesting. So how, how, how have you changed your strategy, uh, over the last six months to a year, given the hike and interest rates, the bank failures coming outta the pandemic? Yeah, we, we, I put all with one exception, one small, uh, residential project here in Palo Alto. Small, but, you know, very expensive residential projects. I put all of our development deals on hold. Uh, the, they, they aren't making sense. Uh, we've walked away from a couple, we've assigned, uh, our, our rights to a couple to, uh, more aggressive developers. And I wish them well. Uh, we we're being cautious. And so when my partners, um, the younger, the operating partners bring me a deal, I say, look, the only deal that I want to do right now is one that I'll be arrested for stealing. So, you know, I it's gotta be existing as it's got's gotta be a brilliant price. I don't, I don't think it, it's worth it to take the risk right now. And so we're looking, but again, I haven't seen deals like that yet. Uh, but I think on the margin that there, there will be some. So I, I'm kind of optimistic that we can pick off a couple deals in the next couple years. So, so using, and I know I've, I've seen one of your lectures about sports, uh, where you use baseball as an analogy. Yeah, yeah. Uh, how would you say the current market is right now in a sports term? Um, you know, are we, uh, in the, uh, fourth quarter? Are we in the first quarter? We at halftime? Where are we? Boy, you mentioned those quarters that hurts because of you. The, the Lakers just trounced to Warriors. Well, yeah, the Lakers, I wasn't, the Lakers are getting it back right now with, uh, Denver. So Yeah, I wasn't gonna go There with that series with you, John. I wasn't figure We got SoCal NoCal, we, we could talk about Lakers voice. Yeah, I I I'm all in on the nuggets at this point, you know, just for, for retribution, I guess I, I I think it's gonna be a bumpy couple years, uh, uh, a very bumpy couple years. Uh, there, there opportunities will, will be kind of hit and miss through the next couple years. I think the office market will take longer than that to work through. I do think people will come back. Uh, and, and again, it is, we mentioned before we started, I think actually in San Francisco in particular, I, I don't know about southern California. I think if you have, uh, probably somebody else's money and, and a lot of, um, uh, what's the term? Uh, a lot of optimism and now might be the time to buy office buildings. Cause the, the, the news is so unrelentingly bad, uh, that I think you, you probably saw, and there's a building in San Francisco, three 50 California, right? Good building. Uh, it's an escrow at around two 30 a foot, I think a million Right? From 300, something like that. Yeah. Yeah. And, and a couple years ago would've been the better part of a thousand dollars a foot. So, uh, you know, I, I think there, there are deals out there right now, and Especially if you have the cash, well, you don't have to rely on the financing or you can get away with the, uh, private money. Uh, you could get a good deal because you can close 'em quick and before they think about it, you can get the price you want. Yeah. I, I can remember, you know, I, this is why I hate predicting things. I remember in, uh, 92, the, the, the San Francisco office market with was similar, not, not quite as bad, but there was an ocean of space available. And I kind of looked around and said, how is this space ever going to be filled up again? And, and of course it was. Yeah, I think that, and, and the guys who came in with, again, with other people's money primarily, but the snapshot stuff up did really well. So I, I think that can happen. But, you know, there does seem to be, uh, some things do need to be done, though, I think with, with the downtowns, you know, in California on the structural side, political side, you know, we don't wanna make it a political thing, but, you know, you don't have to feel comfortable commuting, you know? No, you're absolutely right. And and unfortunately politics do get involved. You and I have to feel safe walking around downtown. Uh, now the, the reality is it's not nearly as bad as the perception. Uh, you and I would feel totally safe, uh, walking around San Francisco, but you, it, there are some unpleasant scenes we've come across, you know, the, the homeless and drug addicts and whatnot. But, uh, that, that has to be fixed. The, um, one of the issues that the Nordstrom, we talked about the, uh, closing and then the whole foods is closed. Uh, a number of the retailers in San Francisco closed because of the, uh, what we call shrink in the retail business, the, the, the theft. Uh, until, and it's not so much the San Francisco issue as a California issue. I, I guess I'm sure you guys know that we could, the three of us could each deal $950 a day worth of, of goods. And then so that comes out to be, what, $350,000 a year and never go to jail? Yeah. Uh, they, they've gotta change that law people ha, property crime has to be prosecuted. Well, There's, there's no, yeah, there's no, um, retribution. I mean, they, they get away. They just walk in, walk out, and they know they're not gonna get prosecuted. There's not gonna be anything for it. And that happens a lot down in here in Southern California as well. It's not just in San Francisco. Yeah, no. That, that has to change people, you know, I I, I'm sorry for them, but they, they, you've gotta go to jail, uh, and Right. Anyway, so, and the problem Is, you know, you could, you could feel bad for, you know, you, you house this one person, but then the next day you have someone from, uh, you know, North Carolina that hears about California's rules. And then, you know, it's the same, you know, the, the streets full, but now it's from people from other states. Cuz they hear how nice we are. Well, they come here, it's great. Exactly. We have 30% of the, the country's homeless. But on, on a positive note, let's say you were able to wipe the city clean. Are there any regions of California, maybe other states that you look at and say, yeah, if things were right, I would look at going into that market. That's a hospitable place to develop these days. Are are there any of those markets that you see out there in Cali or around the country? You know, guys, I've always been really lazy. And so all of, You know, I I I like to travel, but I like to travel for fun. And the idea of getting on a plane and going to Wichita to, to see whether I'm gonna buy a little shopping center and say, yeah, life's too short for that. So all of our real developments have been within a two hour drive of, say, San Francisco. Uh, the, I I bought a couple of, like the, the, the little shopping center I bought in Orange County that was a hundred percent leased. And there wasn't anything to do with it other than to buy it. Right, right, right. Um, so I don't really go out of state, but I got one shopping center in, uh, Oregon, which was just a, it was a, a existing deal, didn't require any development, didn't require any local knowledge. It, it was a Vader Joe's anchored center. And I said, yeah, sure, this works. But I, I like to, for a development, I like to be able to get up in the morning and drive to the city hall to, to meet with the planning director, talk about it, and then get back to the office by lunchtime. You know, it just, it's a lot easier. Uh, so all of our developments are, are are local smart. So, John, tell us, tell us a little bit more about your books and your columns. I mean, you know, you share a lot of valuable information, uh, yeah. That most developers don't. And, uh, just, just what, what drove you to, to get into that? Well, first of all, uh, thanks, Aaron. I I, thanks for that softball question. I appreciate it. Yeah. You Know, You know, uh, yeah. It just seems to me that, you know, I, I, I could, let's stick with baseball. I, I, I can show you how, how to put your hand on, on, on the seams for, you know, a four seam fast ball or a slider, and then I can say throw it 95 miles an hour. You know, I, I, I can explain that to you, but it's still really hard to do. And so I, I, I really haven't been too worried about people coming in, uh, and, and, and stealing deals from us. I, my first love has always been writing. I I was a journalism major in college. If you had asked me when I was 21, Hey, John, you want to be a developer? I'd say, what the, is that, you know, is that a guy that works at Kodak? Uh, you know, I be, Uh, and so I, it's, it's my hobby. It's, it's kinda my passion, uh, and the book, can I, I did an interview with, uh, the registry magazine now, I don't know, maybe 15 years ago. And, and they said, Hey, John, you're, why don't you do this interview? And I said, you know, I sound a lot smarter on paper than I do, uh, verbally. So I said, just gimme the questions, and, and I'll put them, uh, and I'll, I'll write up the answers. And so I did that, and they said, Hey, you know, you can write, why don't you write for us? And so that I kind of fell into writing a real estate column. And then after doing that for a number of years, somebody said, Hey, you ought turn this into a book. Hmm. And since it was already mostly done, and again, being lazy, I said, sure, I'll do it. So what do you know, I just, just happened to have it right here. Great. It's on Amazon. You Amazon, It's on Amazon. Great book. Yeah. And, and people tell me all the time, I, I get fan mail, you know, for, for one of a, uh, you know, I don't know part of a better word, but I, I hear from a lot of people, uh, about the book, and, and it, it's, that book does quite well. Anyway. It's fun. I love to write and, and I, I, sharing doesn't bother me, but you, but you're right. A lot of guys won't, you know, that they won't tell you what time it is. Well, and it's time consuming to write. I mean, maybe you just, maybe it just comes right off, but, you know, No takes Time consuming. Yeah. But it, it, it's fun. I, I like doing it. Uh, you know, you, you can only do so many deals. Uh, well, some guys never stop, but, right. Uh, you know, I love doing deals, but there's more to life than that. And so, uh, writing I think is a good balance. And, and also, uh, you know, I'll write about stuff that is not exactly in my wheelhouse. So it, it, Steve, to your point, if, if someone says, Hey, write it, think something about, uh, neighborhood shopping centers, you know, I can do that off the top of my head. I don't need to do any research. But if I'm gonna write about, which I think my next essay will be about, uh, the plausibility of converting office towers into residential, th that's gonna require some effort and some research in talking to contractors and, and residential developers. And so I can learn something about it, which I think is fun. Uh, and I haven't decided yet how plausible that really is by Way. Well, I think it's, well, I have, I have a two part question for you. So one, the first part is, if, if knowing what you know from your history and you were starting out today, what, what part of the business would you get into? Um, I, I would, I would still start out with a, a single family house or a duplex. Uh, and in fact, there's a talk that I gave. It's, it's on YouTube somewhere about this. I, I think everything you need to know to be a successful developer, it is contained, you know, within just buying a house, you, you've gotta find the broker, you've gotta do the right due diligence. You've gotta price it, right? You've gotta do the work to fix it up. You know, all the components are there. It, it's, they're simplified. And then the thing we have going for us in California with residential is you have a zero vacancy factor. Any other, maybe industrials close to that right now, but all of the other, uh, disciplines in real estate have a vacancy factor. So if I were a kid and people come in and see me all the time and I say, just go buying the worst house in the best neighborhood you can afford and do it and fix it up. Sell it. And, and if that works for you, do it again. Do it again. And it's essentially what I did. And then you can grow into more complicated deals. Uh, and I don't think that it matters that I'm in retail. Be, uh, you know, it seems like a straight line looking back, but at the time it was a fluke. It was only because I had an older partner that was a retail guy. Uh, I'm sure I would've been happy doing, um, office or a residential or industrial. I don't think of that matters so much, Steve. I think what matters is, is not what you do, but where you do it. Like if, if we, if we, the three of us were the smartest guys in the room, and we went back to my hometown, Lancaster, we'd go broke. Yeah. Cuz it it's the wrong location. Yeah. Yeah. We, whatever we're doing, uh, you know, we wanna be in a town with strong growth, uh, you know, and, and real estate is, is, you know, we're the guys who provide the, the shovels and the picks and the pans and the tents to the, to the gold miners. So you have to be a place like in Texas it's energy. In New York it's finance, and here it's tech. Where you guys are, it's Hollywood on strike. It's Hollywood Entertainment, combiner tech. Right? Yeah. The New, uh, but, but you know, so what's the local growth engine? What are the prospects for growth? You know? And so when, when I've given talks around the country, I remember once, uh, sorry, anybody from Ohio, but I, I was, I was in Cleveland and people were asking me this question, you know, what to do. And I was kind of, you know, biting my lip because I wanted to say, you kids gotta get the hell out of Ohio. Right. But I, I couldn't say that. But, uh, guess I, as far as I could tell, Cleveland's a zero sum game. If, if, if I build a, a nice new office building, the only tenants I'm going to get are from an existing building. So Right. Until that, until Swing occurs, until occurs and then changes the trajectory. I think your, your point, kinda his feeling a little bit of that Research. Um, so I think you answered the second part of my question, which was if, if a, if a, if someone fresh, not with your experience, but some, a kid came to you and said, where should I go? You know, how should I start off in the business? Sounds like you answered that with the same question. Yeah. Start buy. Yeah. You know, where do you think there's, there's gonna be good solid growth over the next 30 years? And, uh, you know, the, the national trend, of course is the, the southeast, southwest. Uh, and I'm glad I don't have to move there. Right. I'm just talking to a friend, uh, this morning about Austin and he just said, yeah, it's great for business, but it is just so damn hot in the Summer. Yeah, no, it's, uh, I, I used to live in Florida, so I know, uh, Well, uh, That kind of humidity and heat, not fun. I'd have a tough time leaving, uh, my kids the coast and Yosemite, you know, so those things We're on that, you know. Sorry. So we talked about the Lakers and Golden State. What, what are your, what interests you do you into sports? Are you have any hobbies that you like to do? Pickleball? I mean, what, what, what is, what interests you outside of real estate? Yeah. I, people and my friends call me the world's worst sports fan cause I'm the last guy to get on the bandwagon. I mean, the team has to really look like they're gonna nail it. And then I'm, I'm like the first guy to pull a rip chord, you know? Cause life is hard enough. L l life has enough in the way of, of drawbacks. I, I just hate rooting for losers. You know, I, you know, I, I, I went to Cal to Berkeley and you know that they've never had a good football team. I, I, I not go and watch them lose year after year. So when the Warriors are great, I was all over the Warriors. Uh, and when the Giants, so, you know, but the, the moment, you know, they, they start to play mediocre. Uh, I, I love to read, I love to write, I love, you know, I work out a lot. You know, spend time with my family, travel a bit, uh, you know, life's good. How about Charities? Are you involved in any, uh, uh, charities that we could give a plug to? Oh, sure. Uh, uh, actually, a, a fair bit. You know, I I, and thanks for asking that. I, I, and I, I try to end my, my talks to these kids with the, the end of the day, you know, once you get a little bit of traction to get a little bit of money, start thinking about giving back, you know, and, and not just your money, but your time. Yeah. So the ones that I've been most involved with are Outward Bound, uh, which is a national organization. Um, sure. Basically helps not only kids, not only teenagers, but adults, uh, become their better selves, uh, and become more confident, uh, more compassionate, uh, more human if you will, uh, through, uh, experiences in the woods. Uh, you know, it is, it's a fabulous organization and it's not, not that well known. Another, which is that I, I work with quite a bit is called Rebuilding Together. Used to be called Christmas in April. Hmm. It's, it's the, uh, four cousin of, um, habitat for Humanity. Right? Everybody knows Habitat cuz of Jimmy Carter Habitat helps, uh, a poor family build one house. And, and the, the family helps 'em build it from the ground up. And, you know, so maybe a Habitat in it's nationwide, their organizations, maybe they'll do 10 or 12 houses a year. Rebuilding Together takes a different approach. It helps people, usually very old people, usually widows who are in their homes, uh, who are no longer physically or financially or emotionally able to keep their houses up, but, but could stay there. You know, the house is kind of falling down around them. And so what Rebuilding does is they, they bring together volunteers, uh, construction captains, and they'll say, okay lady, here's what we'll do for you. We'll put in, we'll replace these leaky toilets. We'll put in these new floors, we'll paint the outside. Uh, and it's a wonderful experience. The, so the volunteers, uh, and I've been heavily involved in that for over 20 years. I, they're, And I, how about the firm? They're great. Uh, the, the group, they're great cuz they were, uh, the beneficiary charity at several of my events, the Rebuilding Silicon Valley, they've got Rebuilding Orange County. And I, I think they also, one of the great things too is they rebuild f charity facilities. Right? Like, that's right. Facility that a charity may have that is needs upkeep or whatever, you know, they'll go in and fix those properties up, which I thought was amazing too. Right. So The's Community Centers, right? Churches, uh, boys Club. Yeah. Boys and Girls Club. Yeah. They, they, they do a lot of that. They've run Around the state with the, the different names on the end, which I think is fabulous. That's great. Yeah. And then that, that's, it's a good organization to be part of. And that makes you Yeah. With it. So, in, in, in wrapping this up, tell us what the future holds for John. I hope more of the things, any Office Come on. You'd be, you should run for an office. Come on. I should run the road now, now the Book. Yeah. You know, I, I actually, uh, I am, I think I, I've said everything I can say about, uh, real estate. So I, I don't think I'm gonna write another real estate book. In fact, it annoys me when I see these guys come have one good book or one good idea. And then they, they milk it with the volume two, volume three, volume four, and it's like, it's the same Thing over and over again. Yeah, same thing over and over again. So actually what I, I just published a novel, uh, which was my first love, and it's called O'Brien's Law. And what do you know? I happen to have that, right? Wow, That's good. Yeah. Is there, is there real estate? Is there a real estate angle in there? No, it, it, it's about what do you know? A a a young lawyer who, who, uh, he's a cocky idiot, uh, set in the seventies, and he thinks he's a brilliant lawyer and he's not, uh, he doesn't know anything. And his, his law firm, one of the partners is trying to get rid of him. So they give him this terrible case to work on. Uh, total, uh, loser, the hero O'Brien. He is basically looking for love and, and accepting one night stance until he can find love. He's lazy. Uh, but he gets into this case. And what do you know, there's a murder involved and it's kind of a murder mystery. It's fun. Well, That's good. Sounds like a show on Amazon at some point there, John. Yeah. Does anybody out there from Amazon, you just listening? You know, call me. We can, we can make a deal. Well, maybe, maybe my daughter who's a screenwriter can help you with some of that stuff too. Give me her job. Well, She's, she's a little busy right now. Striking, you know, You know. Well, you know, again, thank you for the, for the time and sharing your thoughts. Are there any other issues that, you know, you'd like to touch on that we haven't covered that, you know, think are important in, in the times that we're in, in terms of, uh, the real estate business or how you see things going for it? I, I think we covered most of, most of everything. Yeah. I, I think we did cover it. Um, I'm shooting 10 minutes after we got off. I'll say, oh my God, John, you should have said blah, blah, blah. But Well, you know what? We'll have you back we'll, uh, when we do one of our, uh, events up there, we'll have you, uh, speak at the event. So we're Sure, happy to, definitely, We'll definitely utilize you. But, uh, really appreciate you to spending time with us, John, uh, great. Get to know you and, and fascinating, uh, history of you and your company and everything about you. So thank you very much. And thanks. Thank you, Arne. Thank you, Steve. What you're doing for the industry with sharing and, and writing and, uh, best of luck with, uh, the future deals. Yes. Okay. Appreciate it. Thanks guys. Take care. Bye guys. Bye. Hey, You've been watching Commercial Real Estate Talk with Steven Arne, sponsored by commercial real estate inspectors, Redwood Mortgage and Paramount Property Tax Appeal.