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Hey. Hey, The following video is the finance panel at Rent TV's Greater Los Angeles State of the Market Conference held on August 17th, 2023. It is comprised of Fred or Ellis with Axo Bank. Ryan Park with Ms. Rahi TE Bank, Trevor Blood with Pacific Southwest Realty Services. Gina Conan with Provident Bank and John McLean with Fidelity Mortgage Lenders. Thank you, Steve. Okay. So I work for, uh, Axo Bank. We are, uh, classified as a neobank or digital bank, which means that we have no physical branch network. Pretty much everything is, uh, handled online. We're headquartered down in San Diego. We're about 20 billion in assets. Um, I've been with the bank now almost 14 years. Uh, there's pretty much nothing that we don't finance in terms of real estate. Uh, so we've financed, you know, single family investment, two to four, five units or more multi-family than it could be on the commercial side office, industrial light, uh, light industrial warehouse. Um, and so we pretty much cover everything. We offer bridge and perm loans. A minimum loan size is 500,000, and we lend all the way up to 500,000. We're a balance sheet lender. Thank you. Thank you. My name is Ryan Park from Bisra Bank. We are also known as a U M T B, as some of you may already know. Bankers Love, um, acronym. So, uh, either way, we are the, um, Israeli bank headquartered in, uh, Israel. We are the US lending, um, arm of the bank based in downtown LA in US Bank Tower. Uh, just to get the elephant out, out of the room, I'm not Israeli American. As you can see, I'm more, more so close to Korean American unless you count all the Israeli foods I ate, uh, in here as well as in Israel. But, uh, we are commercial bank. Um, as far as our lending perspective is concerned, uh, we are focused with, uh, lending Bridge value add as, um, f uh, said. And then also we are, we just open up the construction lending platform for the apartment. So, um, one more caveat is we are very recourse driven, so that typically leaves the deal size to range from five to 25 million, but we can discuss the specific, but happy to be here and then look forward to speaking with y'all. Thank you, Ryan. Thank You. Hey, everybody. My name's Trevor Blood. Um, I run the South Bay office of Pacific Southwest Realty Services. We're a mortgage banking firm, um, specializing really in correspondent relationships with life insurance companies. Um, so we have a seven close to a $7 billion book of service debt, um, mortgage bankers, and then we broker outside of our life companies to credit unions, banks. C M B S runs, runs the gamut. So that's basically it. We work on all product types. So that's it. Thank you. Okay. I got my own. Hi, I am Gina with Provident Bank. Provident Bank is a portfolio lender. We lend in all of California. We love, uh, multifamily, primarily, also some small retail, depending on the type, you know, liquor stores, salons, things that are gonna be more stable, especially on the heels of covid, kind of watching, paying attention to he, uh, tenants. Our loan size is 3 50, 300 50,000 on up to about five or 6 million. So we're kind of a small, the larger of the small balance lenders, if that makes sense. Um, before we go forward, I wanna point out, just because we've done panels like this before, if you're new to this particular event or at an event like this, pay attention to each lender that's up here, because we're not direct competitors per se, as we are all the type of lenders you want to keep in your back pocket. So really listen to, you know, like when Fred talks and Ryan and Trevor and John and myself as brokers and investors, it's super important to have, I am gonna say Rolodex and date myself, but having your Rolodex, the, the people to call for different property types. So I just wanted to make sure everybody understood to really kind of listen to, you know, what each, what each lender does up here. Um, also yesterday I celebrated 16 years with Provident Bank, which is probably like a hundred years in, in other industries. So I've been there a long time. So, and that's it for my Spiel and John McLean returning to the panel. Yes, John, welcome back. Thank you. Thank you. Uh, John McLean with, uh, fidelity Mortgage Lenders. Uh, we're, we're a private lender, also known, known as a hard money lender. I, I try to use the private lender a little more than the hard money lender right now. Um, the, the interesting thing I would say with where, where we're at in the market is, you know, I I come from the bank side. I was at Bank of Cal for five years and at Chase, JP Morgan, Washington Mutual for, uh, I'll just say 20 years. Um, but, uh, where the rates are now, um, they're, they're pretty close to where, where we are on the private lending side. And, uh, Fred and I do some similar tri transactions. Um, fidelity funds up to 15 million. We can do, uh, we can actually go above that too, but that's generally what we, we look at. Uh, we don't require recourse. We don't have prepayment penalties. We can fund in, you know, 10 days a week if we need to. Um, and we're doing all types of all property types. Uh, we could actually do a single family if it's an investor, uh, owned property. Um, if we got the short term IO loans, like most of the, uh, other private lenders do, we also have longer term loans. We can do a a 30, doing 15, we can do a 2020. So a lot of business owners that they like need a million dollars. We're all based on equity, uh, not cash flow. We can deal with transactions or borrowers that don't have good credit. Um, although when they have good credit, maybe we give 'em a little bit, uh, off the rate. Uh, we also pay rebates. Uh, so we, we pretty much can do, you know, every type of transaction. We also can do them outta state. Uh, we're in, uh, Oregon, Washington, Colorado, I think Montana, Indiana. Um, so we're able to do that. We can also deal with seconds behind our first, we are first treat trust deed lender. Um, and then completely on the flip side, uh, we also, all the loans that we make, we sell to our investors, and they're on the trust deed. So anyone that's got a 4 0 1 K like mine that's down about 13% right now, uh, you know, you can move into our trust deeds and get kind of an eight, 9%, maybe even a little bit higher return. And most of what we do is low leverage, probably around 50% plus or minus, depending on the trans, like a church or something. It's gonna be lower. And then I was just gonna point out, Chuck, or, I mean, uh, Fred's got a, uh, couple of boxes back there and he shows the, uh, credit box for the bank is this one. And then the Axo credit box is, you know, five times the size. Um, and actually this is, this is our box, uh, Steve put this black, uh, cover on it, but, uh, this is our credit, our lending credit box that we're all sitting on today. So. Excellent. That's it. Way to get us started. Well, I think the elephant in the room is obviously interest rates and we don't wanna, you know, obviously no one wants to hold you guys up there to predict interest rates, but it's a good launching point. So let's go through really quickly and just express with the quarter point, recent quarter point prize. Do you feel we're nearing the end? Do you feel we're plateauing, I mean, we're not gonna hold you to this, but do you feel we're like at the peak and they might start coming down a little bit. What, what's your gut feel on where things are going? Fred, why don't you take us off quick, quick, quick answer. Okay. I actually think that, uh, I think in November they're gonna hold, most likely they'll increase, uh, I'm sorry, in September. And they'll, they'll increase a little bit, uh, uh, the month after. But the reality is for our, for our bank, uh, we're already kind of, um, factoring in any additional increases. So we have stress rates and we usually throw in about 1%. Uh, so I, obviously it has affected our business. We we're, we're staying very, very busy out there. I mean, we're looking at a lot of deals, but as you know, I mean, you guys are out there experiencing the same thing. The number of transactions, the conversion rate is not what we'd like to see. And that's going to come around. We will see an improvement and I'm very confident of that. I think from where we stand, um, interest rate definitely affected the market. Uh, just looking at the same deal because of the higher underwriting rate, you know, loan, the property qualifies for less loan amount. And for a lot of us LA based developer investors, you know, there was always, because we live in a compressed cap rate, there was a big delta between leverage perspective and cash flow per perspective. Um, low interest rate helps. So there was a lesser of gap, but that gap significantly got larger once the rates started going up. So, um, that, that's what has been happening. But from where we stand, I think compared to six to nine months ago, the error from the credit guys was, Hey, let's continue to stress the rates high. Uh, let's really focus on stressing the rate. But today's, I think the air in the air in general credit or rate, interest rate environment is, hey, I think we are getting peak. So let's, you know, we still stress it, but I think there's less emphasis or less heavier, uh, stress being done. Uh, in terms of the interest rate, Trevor, yeah. Um, in talking to some friends that are wealth managers, it seems like they're probably gonna bump up rates again by another quarter point. Um, I think that the new normal, moving on beyond that, I think we'll probably settle back down around four or 5% rate for kind of, that's, that's just hearsay. Don't quote me on any of that. No idea. Um, I could tell you though, that the life companies that we represent, they're at, at kind of best pricing that I've heard of. This one might be even a rumor, it was like a 1 27 spread over the treasuries. So still kind of kicking butt on that front. I don't know if that deal's even possible or whether it was nonsense, but, uh, the best pricing that I've seen has been something in the ballpark of one 50 over the 10 year treasury. Um, more often than not, though, from the life codes, you're seeing deals getting done at like 1 65 to 2 25 over the 10 years. So I threw a lot at you. But in general, six to six and a half percent seems to be your coupon right now. Um, and then, you know, for if, if the deal sizes up properly, we could be sub 6% potentially. So I love this question. It's, it's super unique. And wouldn't we all be super wealthy if, if we could predict the market? Um, I did have a conversation with our C F O yesterday. I kind of take his pulse every couple months 'cause I've worked with him for 20 years and what he said really made a lot of sense. I don't think we can predict, but of course we all know unless inflation kind of corrects itself, we're gonna have to see a rise this fall. It's, it's still unknown whether or not that's gonna happen. There's so much going on politically and and worldwide that we just can't predict. I mean, there, there's so many things that are right on the cusp right now that if they turn the wrong way, that could, you know, change the market and, and lower rates and we just don't know. Um, the biggest thing right now though, is really educating the borrowers to understand that while we can't predict where rates are gonna go, understanding why they're unable to refinance their properties that were purchased five years ago for an inflated value, and now a rate in term doesn't even cash flow. So the biggest thing, while we don't understand nobody, nobody can predict where rates are gonna be a year from now. I agree with Trevor that, you know, we could end up settling around 5% in a healthy market. Um, the new caveat that, that Dave, the C f O was saying yesterday is we're on the heels. Not only are we at the beginning of, you know, this quietly rumored recession, which we're kind of coming into, it looks different. It acts different than 2009, 2010 because we have covid behind us. So combating inflation, people are starting to travel. Other countries slowed out of covid even slower than we did here in the us. So they're starting to travel regardless of whether or not they have money, because life's short and we gotta get it done. So this recession looks different than it did in the last one for many reasons. But also from a consumer standpoint, we're just not slowing on the spending like you would think that you would see with rates going up because people are like, I've lost so many people, I just gotta live, I gotta travel, I gotta do. So this one's different. And I think, you know, this is where we all either survive or, um, find a new industry in a way because it gets difficult. So I don't, I don't know with rates, um, I can't say where they're gonna go, but I think the more we educate the current investors that need to work on their properties, the better. We all are riding through this. Oh, just one last thing. Uh, Gina, I'm not so sure you should use the R word, the recession word. I have to believe it's economic headwinds. Oh, I just, okay, I'll try. John, what's your, what's your gut on, on where we are? Yeah, I, I think, I mean, we're all kind of saying the same thing here. And I think, um, maybe if we look at the, the question, which was in a way, do we feel it's gonna go up or, you know, uh, prime and everything gonna move up a little more? And it might. But I think the, the key is that, um, it's probably the time factor. Um, my thought is, yeah, it'll probably maybe move up another quarter. It may or may not. A quarter doesn't really change things much, but I think it's probably gonna be, up rates are probably gonna be at this level for a while. You know, hopefully when we're in the summer of next year, hopefully we're starting on a downward trend. Um, I don't know, maybe that's wishful thinking, but, um, i, I think it's more the time factor. We're probably not gonna change for a while. This is our new normal for maybe the next year. Hopefully not two, but it might be two and we all gotta deal with it. Alright, well That was, that, that question was really setting up the conversation. So John, keep the mic. So given what you guys have all answered roughly the same, how has that, I think we all know the answer to this, but how has that affected deal velocity? Is that improving since the shock from several months ago? And how has that changed terms on the Right? So, so Velocity and terms, So the velocity's pretty low. Um, and I, and I would say on the transactions, on the buy sell transactions, there's not a lot going on. I'm, I'm sitting on my, uh, 30 year fixed at 2.6%. We're not moving, honey. Um, you know, we'll rent the house out. We're not gonna sell it. So I think, and that's the same with, you know, a lot of my clients, everyone that's financed in the last few years. So I think the transaction volume is, is an issue. We don't have a lot of that many deals that we're looking at. Um, but on the lending side that, I mean, there's so many loans. If I think back, the five year fixed I was making in 2018, um, and 17 and 16 and 19, um, all of those loans, they're gonna be going from probably a three and a, you know, three and a quarter, maybe to four and a quarter, um, to an adjustable. And the adjustable is probably gonna be seven and a half. So that's, there's gonna be a lot of financing things that come up. Um, and it's kind of gonna be unfortunate for a lot of borrowers where if they bought the property or they just refinanced, they pulled a lot of cash out and now, you know, their payment, everything's fine. But they're just about to find out your fixed rate's going away in six months, you're gonna go from, you know, whatever, three and a half or 3 75 your, your new rate's gonna be. 'cause it's based on, you know, either the six month library, which was their prime or whatever. It's gonna go to like seven and a half, seven and three quarters. Um, hopefully not eight, but that's something that's gonna happen. So there are gonna be a lot of refinances that will probably look like cash in refinances. Uh, no one likes that term. Everyone likes to get cash out. And that, to me, there's gonna be some transactions from that a lot on the lending side. There's gonna be a lot of loan mods, a lot of that stuff going on. Um, and that will probably trail into especially office and other stuff that's really having difficulty, um, in transactions out in the market with real estate where some folks are saying it's not gonna cash flow, you know, I want to sell it. You know, so I think there will be more volume. Um, as you know, these rates are settled down to where we're gonna kind of be here for a while. So I think the transaction volume in the real estate market, I, I think it will pick up a little bit. Maybe not for the right reasons, but, um, and then again, on the bank side, I think there's gonna be a lot of loan mods. Um, and you know, Fred and I will probably be getting a few more calls because we can make loans where our rates are higher, but we are able to, to finance those. Right. Gina, that question to you. Well, that was well said, because we were, John and I were talking in the lobby, and Fred can probably echo this. This is one of those unique times where hard money and, or sorry, private money and bank loans kind of come together because on on John's side, he's got interest only products. Fred, do you have interest only products? We do. You do. So that's a world where private money being a little bit higher rate interest only. I, as a, a portfolio lender, we don't have interest only. So our 6.5% or six and three quarters versus their 10% at interest only, it gives people a bridge option to weight out rates. And that's where I was saying earlier, you know, pay attention to every lender because there's always a a reason you would need certain lenders at different times. Uh, for Provident Bank, we are seeing a lot more low leverage, not because we're trying to lower the leverage, but because our ca our debt coverage ratio on properties, our minimum is 1.25. Rents haven't gone up, but rates certainly have. So mortgages that were, you know, 3000 a month, three years ago are now 6,000, when they, they roll into their, you know, just for an example, I mean, three and a half percent versus 8%, that's gonna change. And like John said, it'll be more cash in deals, more low leverage deals or people that are working with bridge lenders in short term to kind of ride out the market. So that's what we're seeing, Trevor, a lot. Do you have velocity? Yeah. Um, just to put things into perspective, uh, one of the lenders I work with the most, uh, one of our life companies who we correspond for is standard insurance. And their biggest year ever, uh, was last year where they did 2 billion in loans. They're more of kind of, they'll take a look at your strip retail center mom and pop kind of thing, or down in dirty industrial multi-tenant stuff. They'll do some more class A stuff, they'll do some more class C stuff and everything in between. More of a story lender. Um, so they did 2 billion last year. This year they're on track to hit 4 billion, which is doubling their previous record year. Um, they're a good example of what the life companies have been able to do as banks have been asking for 10, 20, up to 30% of deposits, uh, 30% of a loan amount as new, uh, kind of a relationship deal. Um, the life companies have really filled in that gap and cleaned up, um, moving forward. Even the standards, the symetra, the emeritas of the world so far this year, they're pretty pretty, they're getting pretty full. So really I think moving forward in terms of deal velocity, I'm really looking forward to next year. So we could start sending them business with that are ear, uh, where deals are earmarked to close early in 2024. So it's been good to have lenders like that in our back pocket. I think the guys from Newmark were saying how a life company is now turning away their retail deals. Make sense? They probably did a ton of retail business with them this year, probably kept them happy and fed. And now that lender is saying, Hey, we're gonna pump the brakes. And I would imagine they'd probably open it up, uh, at the beginning Of next year. So, Ryan, same question, velocity and how that's affecting You. Sure. Um, so, uh, our Ms. Raha bank, uh, we are considered as a branch of our parental company. So we get to piggyback off of their $140 billion asset balance sheet. So we continue to remain open. And actually, I wanna share a little bit of story that when I was interviewing for this position, when they said, Hey Ryan, you wanna come in, build up the team as a head of real estate? And then one of the caveat that they said was, Hey, Ms. Raja, when things are a little dark, when things are a little ugly, that's when we shine. We will continue to remain open. And I said, uh, at that time I thought that was just a sweet talk, typical banker, you know, I, I myself being banker as well, but, uh, I thought that was a sweet talker. But I think right now, we, we are, our group is experienced that exact same thing as he said, uh, we continue to remain open, and then because we are open, we just have a lot more deals that comes to our, uh, pipeline and then get to do it. But as Gina and other panelists have said, we are seeing a lot of, um, refinance opportunities. The clients who have purchased the building at a rather, you know, high price and that they got a floating, uh, bridge loan 12 to 24 months ago, and then now they wanna either convert it to a longer term or they wanna convert it to a fixed bridge, uh, program, which we have. So I think that's where a lot of transactions are happening. And as to the purchase, um, I think things are definitely coming back. I'm starting to see slightly higher cap rates, movements when it comes to apartment, not all, but, uh, I'm starting to slowly, slowly see that transition coming in. Um, so Fred, while you finish this question on velocity, also answer the next question I was gonna ask, which is, uh, given that velocity, how have you changed your parameters to get deals done? Okay. Yeah, certainly the velocity has declined, but Axo Bank, we are actually trying to put money out. We are trying, we are in a growth mode. Um, so looking at things a little differently, um, we are, we're one of the few lenders, one of the few banks that still is able to project rent. So we are able to project rents on buildings that, uh, perhaps on in-place rents. You're below, uh, a breakeven. Um, a again, we're trying to again, just think outside of the box, how can we generate, uh, more deals, get the money out. Uh, we also do lend to debt funds, so we offer credit facilities. Um, but what it, to get these deals down, I think, um, you gotta look at capital, uh, capital structure. So, uh, we might take a senior piece and now more than ever we'll take a look at a subordinated debt piece. So that could be a Mezz or prep or some sort of second TD behind us to get the deal done. Um, so the parameters really we're just, uh, again, looking completely outside of the box, uh, to make these deals work. Um, I have found to actually get the deals done, it requires, uh, me to get on the phone with borrowers and during the process, instead of, you know, sometimes all, I'll wait a week to reach out to 'em and just chat with them and make sure they don't have any questions. I will do it every other day or every three days because borrowers, they're, they're getting a little nervous out there and they're thinking, well, are the rates going down? Are they going up? And so there's a lot of apprehension out there. So I'm like a therapist to be honest with you. I'm just saying, okay, this is a new norm, it's okay, you're gonna be okay. Uh, when you look at rates historically, they're not that bad, so take a deep breath, you know, let's continue on with the process. Um, and so I've been doing that just much more diligent, uh, you know, the, the actual requirements. Um, they're pretty much, I mean, we have a stress rate, uh, but if the deal makes sense, um, we'll, we'll do it. Alright. Start with, let's answer this question. So whichever information you could share, but give me a representative deal that the, the terms that you've closed recently in the last 60 days that are representative that, that you feel comfortable sharing. Okay. Well, we're headquartered in San Diego. Did close a 10 unit building just, uh, this week. And on inplace rents, it was a purchase, uh, inplace rents, we are at a point, I think a 0.9, uh, D c R. And we were able to project rents. We were at a one 50, I think it was like 1 15, 1 17 on projected rents. Um, so that particular program went out at 7.95, was it was a fixed rate swap. Um, for those of you that have, uh, how many people know what a swap is? So, okay, so essentially what we're doing is we're originating a, an adjustable rate loan, it's a 10 year loan, and then in the secondary market you can just swap it out for a fixed rate. So that's what we did on that particular program. But we have other programs like for value add plays where we have a 10 year mini permits, a month to month adjustable. And you might think, well, who's gonna take that a month to month? Again, the market is indicating that the rates will be coming down. So a lot of people that are purchasing value add plays, uh, they're anticipating rates to drop so they can complete the rehab and get some trailing numbers and then refinance later, or they can just go ahead and continue to let it roll. Uh, again, it's a 10 year loan. Great, great answer. Great answer. Ryan, same thing, uh, a deal you did in the last 60 days. You feel there's representative that you could share the information on? 'cause these guys want specifics out there, so Yeah, sure. So for a lot of apartment, uh, purchase transaction for value add deals, a lot of our clients, what they do is they find, uh, mismanaged slash underperforming apartment asset in core LA Market, which essentially means they are, you know, that they have not been able to raise the rent as market has been going up. Um, they purchase it. And then because those were mismanaged or below market, you know, on a conventional loan, they're not gonna pencil. So what we do, similar to what Fred does, we underwrite based on takeoff financing perspective, we underwrite based on as if stabilized n o I give the credit they want. And then we typically give, uh, depending on the location and leverage, uh, three to four year term, uh, with max three year interest only, so that, uh, clients can do what they're good at, which is essentially buy out the existing tenants, renovate it and bring the rents up to market and then, uh, get a takeoff financing to take us out. So that's most of the thing. And then typically we max out at 70% as is L T V. So that does give, uh, um, clients a lot of cash equity cushion that, uh, they can play with, uh, in terms of going to a conventional, uh, side. And also on the construction side, I've been seeing a lot more transactions where they need to put in BPS or MES piece lender into with us because of the higher underwriting rate, which all essentially means they have to put in a lot more higher equity. So we've been getting comfortable with working with, um, uh, other Mezz piece, uh, be lender behind us. Excellent, excellent answers, Trevor. Um, so how are we getting creative to get deals done right and Or a representative deal in the last 60 days that you guys closed? Sure, Yeah. We just closed, uh, a food line deal yesterday outta market, but it's a good indication where the, the life comp, I'm talking a lot about my life companies today for a reason. Um, I'm depending on them to get stuff done. Um, but they were able, it was a purchase, 70% loan to purchase price underwrote down to a 1 25 debt cover. Um, did it with standard insurance at, I think we ended up closing at six and a quarter on a three plus three plus three all the way out to 25 years. So the way those work is those, you know, they get a, uh, a new rate sheet at the end of the three years and then they just roll right into the, the, uh, additional remaining term. In general, how we're getting creative, we're, we're putting a lot of pressure on our life companies to adapt to the market. So their big value add has always been 10 year plus financing, non recourse, low leverage stuff. We're pushing them to push recourse, or I'm sorry to keep recourse where it's at non to 50% recourse, push leverage as much as they can and still underwrite down to a 1 25 cover. It's been hard. A number of lenders are ratcheting that up. They want a one 30 to one 40 debt cover in this environment, which is just no fly zone. So, um, our ability to push some of them though and shorten their terms down from 10 years to five or three years has been a huge value add and most of them have been able to accommodate. So. Excellent. Gina, recent deal that you could share terms? Yes, yes, of course. We just closed, it was a mixed use, basically office and retail in the Santa Monica area, which was really nice. Um, and the reason that I highlight that one is because office is difficult and, and it's rumored, you know, there's a lot of trouble with that. The deals can still be done. Uh, we were looking, because it's office, we were looking for a one 40 debt cover. This one happened to be one, 1.5. So it was a comfortable, it was a rate and term, uh, for office. I thought 7% on a five year fix was pretty fair in this current market. And then another one that we just closed was a million dollar 12 unit in Orange County, and that one was just shy of 1.25. It was actually a 1.23. But because we're portfolio lender, borrowers were strong, had a great history management was able to kind of go, okay, not a, not a problem. We gave them credit for self-management, which I know is kind of unique. That's how we soften the, the expenses rather than using straight market, of course, we're using their, um, their actual taxes credit, 3% credit for self-management. All the creative things are coming out of the woodwork right now. You know, like Fred, like all of us up here, we want loans. We're just trying to make them work in a unique market without taking, you know, exposing too much risk. I don't know if you have one to share. It's been so new. Yeah, Sure. Yeah. So, uh, I'm just thinking a couple different, two different types of transactions, but, uh, one, uh, two industrial buildings refinance, they were free and clear. Uh, we did I think 1,000,008 between the two. And it's, uh, all cash out rates around it was 10 and a half, two points, five year io non-recourse, no prepay. Maybe the loan will last two years or three. And when the, if rates start to drop down, uh, that'll will probably be taken out. And then, uh, a property I drove drove last week. I think they're signing docks today or tomorrow, but that was a single family in Encino. I think it was like a seven 50 loan on probably a 2 million value. So low leverage. And that was I think 10 65. Uh, a couple points on that. So that's kind of what we do. When I say a couple points, that's generally what we're getting. Um, a lot of the transactions we do are broker loans, so they may have a a point or, or something on that too. 'cause we, we pay rebates as well. Excellent. Alright, let's do a, a, a quick, you know, get your quick thoughts on the different property types. So I'll, I'll say different property type and then you guys go down and tell me how, how you guys are feeling about it. So let's start with industrial, Fred Industrial, how you guys dealing with industrial? Good. You Like it? We like industrial. Yes. Alright, you want me Any issues? Um, any issues with industrial? Yeah, not at this time. It's pretty healthy, I think. I think it's, it's good. And you guys have done a lot of deals with industrial? Um, yes, we're doing more. You want more? More than office? Alright. I could tell you that. Alright, we'll get to Ryan Industrial. We're In love and we wanna do more. Excellent. Trevor Industrial. Yeah, of Course. Starting with the easy stuff. Any, any problems, any issues you see in the underwriting? No, absolutely not. Number one product. What, what do you guys project? What do you guys accept for rent projections? It, it doesn't matter. Ah, no, I don't know. I wouldn't know what to say exactly for projections. We'll, we'll The tape later. All right. Yeah. Whatever. Industrial. Send us those deals that they're awesome. Right? I I will tell you for industrial, you can have a vacant building, a vacant industrial building, and we would still cons, uh, do that long. That's, Yeah, that's why I said it doesn't Matter. Doesn't matter. Gina, same? No, not the same. We, we like industrial within reason, common sense tenants, we are going to be a little more conservative. We'll look for a 1.4 debt cover on that. So, unlike Fred, we cannot land on a vacant building. We wanna see history and long-term tenant, you know? Right. We're low risk. No, these, these differences are key. John Industrial, We love industrial. And you could throw some curve balls in there that they've got. They're growing marijuana in there. Oh, that's right. We're okay with that. Or maybe In five years, right. To be Built. Um, so we're, we're an equity lender, so whether it's vacant, uh, you know, the guys want to change it into something or, you know, put in a different tenant, whatever, we're fine with that. Again, we're, we're equity lenders, so, alright. Yeah. Well let's go to the flip side. Office Office. Uh, not as excited about it, but, um, you'll look at it. We are definitely doing it. I think most of the transactions we're looking at on office, we're usually holding more to like 35, maybe 40% loan to value. It's a little tough to figure out where things are gonna to go out on the market there, but it also depends on sub-market and a lot of other things we look at. But again, it's just equity for us. How, How, how deep do you look at an office product in terms of obsolescence? Um, I think that's why we would stay on probably the smaller transactions there. Uh, I was looking one in, uh, Camarillo, um, and it was just interesting going through and analyzing that the occupancy in 2019 when the guy bought it, uh, is, it's now of course half of what it was then. And, uh, the buyer thought it was worth a lot more. And I'm looking at it like the rent's never moved. It's 50% occupied. It's probably worth less than what you paid for it. So, you know, we're gonna be a little tougher on the value and say, uh, you know, if we're selling a distressed asset, we don't want to go there, but we gotta look at that for our, for our investors. Would you look at office to other use conversions? Um, yes. Although we don't really do construction loans, right. So we wouldn't, uh, be as interested. We'd probably look at that as land value. Gotcha. The, the thing is, we can always do a deal, right? It's just trying to figure out what leverage. And then every loan we make, we're also working with the, uh, our investors. So every transaction, there's two transactions. One is with the borrower and then, then we've gotta sell it to the investor too, right? Uh, so that keeps us from doing something that might be a little too risky. Pulls you in, keeps the reins in. Yeah, it keeps the reins in Gina office. Um, well, like I talked about the one that we just closed within reason common sense tenants, uh, new startups would be a little more high risk otherwise. Well, I was gonna say insurance, but I think insurance is kind of risky these days as well. Uh, it just depends on the tenant. Change of use, Change of use, loans, Single use. Again, no Change. Change of use from office to another, uh, proper to office. To a multifamily. You mean if they're converting an office straight into an Apartment, right. Do you get involved in those office To apartment? I would love because there's strength there. Um, we would look at future value, we would look at cost involved in that, but if it was multifamily converted to office, we'd be out. Who would do That? Um, yeah, we, I mean office is tough right now, obviously everybody knows that. Um, prefer a medical office, um, did a deal in Torrance, like a, uh, six story, uh, hodgepodge kind of medical office attorneys, CPAs, all ran the gamut. I really try to push it as a medical office building of course, and said, you know, that herbal company in there, they're, uh, you know, that's a doctor's office or whatever. But, um, no, we're able to, we, we've been able to get stuff done. We're real estate lenders. So if you're looking it, it just, it's all about the fundamentals of the deal, how well occupied it is. If, if if it's sucking wind and has a ton of vacancy, that's probably not the appropriate spot for our life goes. Um, that's when you'd want to talk to maybe one of these guys. Yeah. Ryan. Office. Office. So as a starting a relationship with us through office, it would be very challenging except medical office, as I mentioned also the creative office. Uh, I've seen some conversion to creative office or medical office buildings. So those are definitely the deals we can look. And as far as converting the office into say multi-family, I think I've seen a, a decent amount of deals. I actually sat down with some of the clients and when we went through the numbers, I think they came to a realization that at the end of the day for so much hassle they have to go through with the permit change and whatnot, I think it's, it's difficult for them to pencil, so looked at it, but I think for them to pencil, it's just been challenging from equity side as well. Right. Fred office and then take retail too. Okay. So yeah, office is interesting. Um, but for medical office, uh, like Ryan and uh, Trevor, were saying we're fine with that. Uh, though I did run across a deal that I have in process. It's uh, it's a 14 unit process and a 14 unit office building in the San Gabriel Valley. And the reason why we're doing it is because the tenants, the type of tenants they're therapists of or psychological therapists, but you know, in light of these so-called economic headwinds and the stress that everybody's thinking, you know, experiencing, we think okay, with those 14 therapists in there, we're gonna be okay. So we actually decided to go ahead and proceed with that retail. Um, we're, we're fine with, uh, we're not pushing L T V by the way. Our maximum L T V is 75%, but I'm really transacting on, uh, on retail and commercial in general, right. At about 60%. And again, uh, we don't mind a subordinated debt piece. Ryan, retail issues you're seeing in retail challenges? Yeah, So our portfolio, it's, we have a lot of retail exposure. We love it. That's what I thought. Um, uh, we tend to avoid the big box retail, just like probably a lot of, uh, commercial lenders do. But I think retail is where, uh, uh, retail filled with Amazon proof tenants. I think those are the tip, uh, our go-to and uh, I think retail is, is, um, rents have been really going, uh, over the period of probably last 24 months. I think they just like multifamily as well. They're on a, a trended upward as well. So I think multifamily, I mean retail side, we see a lot of bridge opportunities as well. All different triple net shopper center, just not the big box. Right. Gotcha. Trevor, how do your guys feel? Uh, retail's been the, the top product that I've worked on this year. Um, It, it's amazing how a few years changes things, isn't it? I know It's been, uh, and not just grocery anchored. I mean we've been doing, like I said, the strip retail stuff right as well. Um, no it's been great. I think the difficulty right now, if I had to say something is just a lot of these groups are getting pretty full on it for this year based on relationship though. I think we could still get done a sound deal with good, good metrics. Um, but um, yeah, that's the only real difficulty with retail at the moment is everybody's getting pretty full on it for at least this year. Interesting. Gina, your take on retail? Actually we're starting to put our toes in the water with retail, which is weird because being with Providence for 16 years, I've always been told, no, we don't like retail, we don't like strip centers. But in the last six months, maybe last eight months, we're really kind of looking more at, you know, salons, nail salons. Why, Why do you think that is? Why the change? I think be with OS office becoming more risky. That used to be our type two product now that we're letting go of that we're starting actually focus on retail and seeing the benefit, the people that made it through Covid, the, you know, the businesses that survived. Again, we're a portfolio lender so it's gonna be common sense, but it's fun to start saying yes to retail for the first time in, you know, all these years. So it's interesting and hearing the panel talk about retail now, we don't like the big box, the grocery tenants. We're really looking at your small four to five unit strip, Triple nets, drive throughs. What's that? Triple Nets, drive Throughs. Triple nets. I love drive through food. No. Alright. Laundry. No dry cleaning, no. Uh, Fred Likes the triple net drive through, right. We could do Arnie bid, we could get bidding up there. Love fast food, Which is why we all work together. Right. John, take retail also start off multi-family. 'cause the multi-family panels next, so they're gonna be paying attention to what you guys sound multi-family. Well, so on the retail side, you know, we, we love retail. We're obviously not, uh, looking at a lot of uh, uh, big box anyways. Um, again, we would look at tenants too, service tenants with retail that have survived. You know, that's, that's a great place to be. Uh, we're still, again, we're lower leverage, so we're always looking at what the real estate is, but we also have to think about, uh, who other tenants, you know, what other tenants would go in there. Um, and then, uh, you were, you mentioned drive through all of that. We're fine with that. Uh, we're just gonna look at leverage. Um, if it's a fast food, seems like it's gonna be there forever, we're, we're probably good for, you know, 50, 55%. Um, if it's, uh, more of a smaller one, a restaurant, single tenant, that's, we, we might be a little bit lower leverage on that. Um, and then multifamily. Multifamily in la Yeah, we let's uh, zero in on la right. What do you see as the challenges and the opportunities for multifamily lending? Um, you know, I, I don't actually see challenges on it other than, um, what the Cash flow, what I was saying, what projections that people are putting in now can't be 5% given where we're at. Right. I the challenge is the, the, like for us, again, we're equity, so if the equity's there we're good to go. Um, but I think the challenge is just the cash flow and where rates are and the underwriting rates. So I think that's a lot of, you know, deals that come in and you're looking at, it's like, uh, the banks aren't gonna loan what you're looking for. Um, but for us, that creates, that's a market for us, right? We're looking, you know, a borrower comes in, look, if you put 50% down or maybe 45% down, uh, we'll come in, we'll finance it, we'll give you, you know, five year io or whatever you want on that. And then once they get the rents up, they get it stabilized, they can take us out and maybe at that point, maybe they're gonna get into the, maybe the fives or sixes and, and then it's okay to go with the bank and get a prepayment penalty. Um, but so this is a great market for us right now. We're, as, as things are difficult, again, the, the bank rates are pretty close to where we're at and we have, you know, all that flexibility. So, uh, we're enjoying this. Alright. Gina Multifamily a lot more challenges in multifamily than John made it seem I think. But you know, rent control, rent's peaking out, you know, come on. Absolutely. There are challenges, but multifamily is our bread and butter. I mean, that's what I do all day long. And if you think about what's going on with housing right now, the, the decade that was born in the nineties, they're not able to move out and buy a house like some of us could in our twenties, mid twenties. The housing prices, the rates, the income hasn't all caught up. Um, my son's 27, he's combined with his wife making over 200 and they're already struggling because on a $600,000 house purchase, their payment's gonna be like 4,200 with principal and interest, they can afford it. But what my point is, not everybody has the ability to make that they're getting outta college with big debt and big payments on their student loans. So my point on that is there's not enough housing, there's not enough inventory. The ones that are available are pretty expensive 'cause that's the Inland Empire. I can't imagine what his home would be out here in LA or Orange County. So that puts a demand on apartments and I think that's gonna, the apartment rents are gonna pretty much stay, if not continue to increase while we have a continued lack of inventory. So we're underwriting, you know, the underwriting's changing because rates have gone up and the debt covers have gone up a little bit, but it's still our bread and butter all day long here in California. There's just not enough housing and there's not enough affordable housing. So I think, I think that's just a no-brainer being a strong market. Trevor, same thought. Yeah, I'd say, um, I mean when you have an environment with compressed cap rates, still, I'm looking forward to hearing the multi-family panel to hear what's going on there. But you have low cap rates still. You have the hottest product type and it has been over the last several, probably close to a decade, right? In most markets. Um, the problem is obviously based on the, uh, metrics, you know, with these higher interest rates we're we're falling below a 1 25 debt cover or a one 20 debt cover. So it's gonna, I, I don't know, it's kind of scary. I mean if rates do continue to go up, it's gonna be problematic. Yeah, they're that large deal that was able to garner a 1 27 spread that I mentioned at the beginning of it, of this was um, was a multi-family deal with some cash out. So it's demanding the best rates, but still there's a break breaking point where I think we're gonna probably run into some headwinds when it comes to it. So long as cap rates remain as low as they are, I think there has to be an upward tick. So Ryan, your take Multifamily. We are very bullish with apartment deals. Um, like I said earlier, we are very active in the bridge spaces. Um, clients are very active. Uh, one thing I do notice is for past 12 to 24 months, I think a lot of apartment owners and some of the clients that uh, were very honest with me, I said, Ryan, uh, this six to 8% bump, it was me, it was the market. But now, you know, getting the six to 8% bump is gonna be more challenging as compared to last 12, 24 months. And also because of the higher interest rate costs, clients who are taking a bridge debt from us, they're more proactive in increasing the N O i so, so that they can get a takeout financing. 'cause the longer they wait, the higher, uh, higher the interest rate payments they have to make and then, which is ultimately, uh, affecting their cashflow. But from our perspective, but, uh, it is a bridge loan with Holdbacks or without Holdbacks, I think we are very active. And then with the higher interest rate environment that is impacting the, uh, affordability, uh, to own a home, as Gina mentioned, that is continually bringing the continuous demands for the apartment spaces in LA market. So I think this is a space where we'll continue to be active and bullish. Excellent. Fred, wrap that. Okay. Topic. Well, we, we love multifamily and we are at Axels Bank, we're a value add play lender and I would say most of our business that we're transacting is multifamily. What is a concern for us, especially in Los Angeles, is, uh, legislation and there's some legislation that is being put forth. Uh, you got tenant, uh, uh, justice for tenants out there that will uh, affect, um, there's controls on vacancy, there's relocation costs. So it's really, I think an indirect, uh, concern is just, uh, investor apathy. So, um, we would like to see that the owners in Los Angeles, um, follow the legislation, get out there and vote and protect their assets. Because when you look at the numbers and you, and, and, um, especially with vacancy controls, it does have a bottom line effect on value. So as a lender, when we're looking at legislation that can swing, you know, 20, uh, 10 to 20% in value because you cannot increase your rent or if you're trying to do a value add play, you have to pay for relocation, pay for a couple of months of, of, of rent it, it has a direct effect on value. So if we're pushing L T V and, and we have that in the back of our mind, that okay, in 2024, are we gonna have to deal with the just, you know, justice for tenants? Um, is that gonna swing the value? Um, this is important. So also when you look at, uh, the U L A or the mansion tax, again, that is directly affecting value. So you have certain LTVs in place when you're a lender and if legislation changes those changes those within, uh, a year, it's a problem. So that would be one of our concerns. We're not actually over overly concerned about interest rates because historically they're okay. Right. It's the legislation and, you know, where is that pendulum moving? Is it pro uh, pro-tenant or pro landlord? Right now it's swinging, uh, towards the, the tenant's rights. Trevor, you were gonna say, you gonna add something? Uh, Uh, I was just gonna add something on that. Uh, the tax, that's U T L A, um, and it's, what is it, five or six? Um, the reality is it's 11 because if you were to foreclose on the asset, then when you turn around and sell it, so that, that's something again, when you talk, talk about it hitting value, it's, it's a, it's a pretty big hit. Right. Other concerns on the panelists regarding specifically the greater LA area compared to Orange County, inland Empire, parts North? Besides, uh, the legislation? Anybody LA's looking good besides the legisl things, unforced errors on part of the government? Gina, you were gonna say? Well, No, I was just gonna thank Fred for bringing that up because that is important and I'm more inland Empire in Orange County and I didn't realize exactly all that's going on here. And I think if I didn't realize exactly then that was helpful. So, Alright, we are think of questions. We're running down on time, so we, uh, have time for one question. Tom Holden, I just wanna get your thoughts, quick answers, but the, um, attributes of a successful borrower, you know, the borrower and their situation, Fred. Well, they're, they're levelheaded and they understand the value of purchasing in a down market. And I brought this up last year, it's when is the best time to buy a summer hat? Do you get the best deal in the summer or do you get the best deal on that hat in the winter? So right now, obviously it's, it's the winter. Same thing for a lot of assets, you know, I've made office, I, that's the one thing I, I'm not sure. Um, but, uh, yeah, scary times. Again, I've been doing this, I'm gonna date myself for 36 years, so this is a season and it's an opportunity if you just look at it that way. Okay, Excellent. Ryan? Uh, cashflow. I know wearing bankers had, I think cashflow at the end of the day, that's what banks love to look at it. So if you're focused with generating good cashflow, whether it's a pro, pro forma basis or actual basis, I think that's, that will, that's will look like. They'll, it will look good in any banker's eyes. Excellent. Trevor, I'm getting good answers from this question. Uh, I'd say number one attribute would be probably experience. I mean, the life codes are looking for a, I don't really want to get into the specifics, but, you know, two time, uh, the loan amount in terms of net worth. So experience that's proven by money, success with success I guess, right? Um, but yeah, really experience, you know, I mean, they're story lenders. They wanna know that they have sound borrowers who understand how to operate their real estate properly and who have a track record of success. Gina traits of a successful borrower with you. Yeah, I like the way Fred said that about understanding the season that we're in. I, I think that's kind of a brilliant way to articulate it. For me, what I'm finding is there's a lot of acid reflux happening, um, in the market, you know? No, that's okay. I I have a lot of borrowers because a lot of our products are five year fixed borrowers are coming back five years later and they're screaming and yelling and saying, what do you mean I can't refinance what I owe? And, you know, they got 80% loan to value in 2015 or 2018, and now it doesn't cash flow at that. So I think the perfect borrower not only has good credit quality and has good cash flow and pays their bills and has, um, you know, common sense, it's more the ability to understand that change is happening just because they were sleeping for five years doesn't mean that it's, you know, the market can be shocking when you wake up or don't pay attention to what's going on. And listen to the lenders, uh, we're the ones that are out there every single day. We see appraisals, we see tax returns, we understand what's going on. Um, and then picking aside, I mean, if you wanna avoid tax liabilities and, you know, overwrite your expenses on your Schedule E it's gonna make it hard for a lender to do the loan unless it's private money. Um, I don't know if you guys even look at tax returns. Do you Fred? Not really look at 'em not too closely. We just stick them in the fund. And John, I don't even think you look at 'em, do you? So we're looking at them and we report our loans. The same government, they report their tax returns too. So, you know, beyond the up and up, um, that's kind of the best advice, but we're conservative, so yeah. Careful John, traits of a successful borrower with you guys. Yeah, so, um, hey, if they've got great credit, great. Um, if they've got good tax returns, great. Um, you know, if the cash flow's good, great. But we just love equity, so we're all about the equity. I, if they don't have all of those or any, or all of those things, come on over, you know, we can take care of it. We're just, we're just looking at equity, so. All right. Go in, In that conversation. Tom, you had a question? Yeah, We can't even get on, that's My question. Yeah, I'll, good question Tom. I'll, I'll, I'll man, I'll, I'll talk about that a little bit. 'cause um, I'm running in that myself right now. I'm not financing, but just the insurance side. So, um, property insurance is a, is a big deal right now. Um, I've had a few, uh, lenders reach out saying, Hey, this deal, I've got, it may fall apart because, uh, the insurance company who normally they just charge a lot and they insure everything, they came into the deal and they looked at this, uh, it was an apartment building and they looked at the panel and they said, wow, this thing's from 1950. Um, we're not gonna, we're not gonna, uh, put the policy or renew the insurance policy until you get a new panel. Well, the panels are all on back order, uh, with C O V I D and everything that's gone on. So, um, I've actually had a few, uh, situations on that have come up around insurance and it's not just, they're charging a lot, it's that, uh, they won't, like, farmers won't renew the policy period. So I, I reached out to my insurance agent and just was asking some questions on, you know, here's a picture of my panel between you and me, text message. But take a look at this 'cause it's kind of old and yeah, it is an issue. Um, I don't, I'm not sure exactly how these things are gonna work through. I think a lot of times, you know, the bank can give, you know, a little bit of time they can hold back some money and still fund, but at the end of the day, if this goes on throughout a lot of transactions, um, you know, we're all gonna be in trouble. So that is, that is a big deal. Um, property insurance and it didn't really used to be as much other than the high fees before. Right. I'll just add just one thing, Tom, because, uh, that insurance is important. I had a deal in Florida, it was a eight unit property. This guy was so happy that he went under contract and during the process he finds out the, he, the insurance on this eight unit property is $28,000 a year. And the deal fell through just because of insurance. So, uh, you know, buyers, investors have to be cognizant of expenses and that's actually another attribute of a successful investor monitoring their expenses, keeping, keeping those, uh, expenses under rain. Right. Good question, Tom. Any others for the panel? We wanna get moving. Let's give it up for the finance panel. Huh, great. Uh, great info.