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Hey, Welcome to the new episode of Commercial Real Estate Talk with Stephen Arne, where we have compelling and informative conversations with leaders in the commercial real estate industry. And I am super excited about today's guest, Michael G Maker, founder, and CEO of MGR Real Estate, the premier owner of Office Properties in the Inland Empire, mainly Ontario. But before we bring in Mike, let me introduce my co-host, Arnie Garfinkel, head of the All-Star Group, and the lending conferences. Hey, Arnie. How you doing today? Good. How you doing, Steve? Uh, recovering Tremend. Good. Wow. We're, we're recovering from our April event. We had a pretty good event in Long Beach. Uh, great event, Great energy, super positive. Thank you. Yeah, well done. Thank you. Uh, and, uh, we have a, uh, online event coming up called the Commercial Real Estate, uh, summit Online. We pretty much do everything we do at the live events, but online we learned, uh, during the pandemic that a lot of people wanna see it online. It's a free event. Anybody can attend. Go to lc.com and you'll meet a bunch of lenders, some third party people, and all kinds of stuff. But Steve, let's tell us what's going on with Rent tv. Oh, great, Arnie, thanks. Uh, you know, many of you may know Red tv, our news and website. We've been online 25 years with our Daily News website for the commercial real estate industry covering the western half of the country. We also put on our conferences, we're doing our next one, June 27th, greater la We do this podcast with Arne, and we also have the review this video website, uh, where you're watching this video where anyone could put their videos on. And it's a search engine platform just for the commercial real estate in industry. It's really exciting, uh, as is our guest. But before we bring in our guest, Arnie, we've got some sponsors to tell the folks about who make this show possible. Uh, we'll start off with Paramount property tax appeal with inflation causing cap rates to increase and profit margins to decrease. One way you can fight back is by appealing the property taxes. Even if you have great income, you can still qualify to have your property taxes lowered. The deadline of file is generally November 30th every year. So get prepared. Call 8 5 8 7 5 8 9 5 1 5. Ask for West Nichols, the owner of the company. 8 5 8 7 5 8 9 5 1 5. West Nichols, a Paramount Property Tax bill. Who's next? Arnie. Our Next, uh, sponsor is Fidelity Mortgage Lenders. Fidelity is a private lending company specializing in commercial real estate, founded in 1971 by Chuck Shon. It is known to, for its unique terms, fast funding, no prepayment penalty, and long-term fixed rates. Call Uncle Chuck, oh Uncle or John McLean at 807 5 2 9 5 3 3. That's 807 5 2 9 5 3 3. Fidelity Mortgage Lenders, who's our last sponsor. Yeah. The other great supporter of our show is commercial real estate inspectors in Southern California. Their skilled inspectors provide critically needed inspection information and services in easily understood terms, as well as inexpensively simple solutions. Whenever possible, let commercial real estate inspectors help you protect your deal. Call Tiffany Simington and book your next inspection today. Her number is 8 1 8 9 5 7 4 6 5 4. The information's also on the screen. Tiffany Simington, 8 1 8 9 5 7 4 6 5 4. All right, Arnie, that's it for the sponsors. Let's get to Job. Perfect. Well, we got a guest. Let's bring in. You got a great guest, Michael G Maker, head of MGR Real Estate Services. Good morning, sir. How are you? Good to see you. Good morning. Nice to see you, gentlemen. Good morning, Mike. Uh, why don't we get started with, uh, give us a little overview of MGR Real estate and any other businesses you may be involved in, uh, and give us a little background on it. Well, MGR Real Estate is a family owned business. We've been based in the Inland Empire now for, since 1983. We started out as a small residential real estate company, and we've grown a significantly in both being in real estate, residential, commercial, as well as our property management division. Uh, we are strategically now located in Ontario's, our corporate headquarters. We have offices in Victorville, Rancho Mirage, Carlsbad Irvine, and Costa Mesa. Uh, we'll be opening four additional offices in the next 18 months to get to a platform of 10 going into what I think will be a full market recovery, the first part of 2026. Excellent. Hey, follow up on, on your company. So you are in brokerage. You also do property management and obviously own properties. Uh, do you do third party property management? Yes, we do third party property management as well. We manage, uh, about 17,000 doors to total. How Many employees? Mike? Apartment Units. Units, Yeah. With different types of stores. Commercial, residential, everything. 17,000 accumulated doors. We have a 113 W2 employees and probably have another 50 plus or minus that are, you know, contracted labor employees that come to work, you know, every day for us for years. Uh, so we're, we're getting a larger platform of people and a little bit more confusing in our, uh, commercial brokerage, uh, division. We also run an additional 150 people. I was gonna ask about the brokerage. And you do residential brokerage too? Yep. Single family homes, Residential brokerage as well. It used to seem kind of, you know, crazy to sell a residential, uh, you know, house. You know, it's a 50, a hundred thousand dollars deal. And the brokerages all thought it was too important. When our residential house is a million, $2 million and it commissions our 50, $60,000, that's not such a bad deal. Right. No, nothing to sneeze at. And we also believe that by one stop shopping, you know, if, if somebody's very effectively could have owned a home, they buy a second one, we handle it, we manage it. When they sell it, they wanna sell that house and maybe turn it into a little duplex or fourplex or a small office building by selling off two or three homes. We wanna somehow become a one-stop shopping with them. And we've been very successful with it. Yeah. It's really Unique to have both the resident, single family residential and the commercial in One shop. Right. A lot of times, you know, a lot of the residential real estate companies try to sell commercial. Right. And, you know, and all the commercial houses know that it's a residential house trying to sell commercial. Right. Uh, we've become the opposite. We're a commercial brokerage house that's successfully and well does sales and residential. So we've done the big platform first, which is commercial. Right. And residential, we're very effective and good at. Good. Excellent. Fantastic. So tell us about your portfolio size, uh, how many properties where they're located, uh, office, retail, industrial, and residential. I mean, you don't have to break it down by that, but just how many, uh, what's the size of your portfolio in, in dollars? And you mentioned how many, uh, keys. It's, my personal portfolio is probably, you know, hard to ascertain. You know, I probably have, you know, about 3 million feet of class a office maybe a little bit more. Uh, currently, uh, our occupancy in the Inland Empire is about 95% our Orange County market. Were, we're pushing up into the eighties, 85. Finally. Now, we bought those portfolios in the sixties. Mm-Hmm. Um, manage. Uh, and we have a number of apartment complexes, smaller ones, you know, under 50 units, 50 and under, or 60 and under range that we own. Uh, we also have a number of, believe it or not, a bunch of single family homes that we ly purchased in, uh, 2000 8 0 9, when they were literally giving 'em away for the cost of a car. Uh, and, and you rent those. And we rent those for a ton. And I really, really wish I would've bought more of 'em. And I bought a ton of 'em when I did. But, uh, when they quadrupled and, or more than value in just 15 years, it's hard to wish you didn't buy more. Yeah. So, and we have some retail, we've been buying some retail around the Ontario Mills and plucking off some little corner pieces. And, you know, we're diversifying, although a largest proportion of our portfolios in residential, excuse me, commercial where you have residential, we do have a little bit of retail. Uh, we will be What's The, what's the largest retail property you owned? Strip center or shopping center? Little, Little 60,000 square foot shopping center. Oh, Little 60,000 grocery anchored. Yeah. Uh, no, no. I don't do grocery anchors. I don't really, I don't, I think that Grocery Anchors is a prescription for failure. Anything that you can get on Amazon, I don't want to have my building. Okay. Yeah. I think you're gonna, let's Reversed the trend, you know? 'cause grocery anchors been kind of the darling lately. Oh yeah. They're, they're wonderful. Until they're not here. They're, you know, uh, I've made money buying buildings that were grocery anchored, and when the anchor moves out, you don't know what to do with your space. That's true. Search in it and everything spirals downhill from there. Right. Now you have, you have a, a a lot of office. How have you been finding that market in, you know, since the pandemic? What have you been finding happening with that? What's the pandemic Didn't hit Ontario? Yeah. I think that what we noticed most in the office market during the pandemic was that our buildings were about 90% functionally vacant. Mm-Hmm. Nobody was coming to work. Our utility costs had to be reduced. Our trash pickup went down, our janitorial was reduced, our rent continued to come in full steam ahead. Wow. Interesting. Our revenues did not dip. Our tenants paid their bills, and we used the extra money to keep the improvements on the property and keep 'em looking physically fit. So when they did return to work, the buildings would be at their best. We've seen pretty much about 80, 85% effective recovery and occupancy not noticed in specific, you know, by what the tenant tells me. Yeah. Or what the rent rolls tell me. Because a lot of these big tenants were paying their rent, even if nobody showed up. I kind of gear effective occupancy by my parking lot. Right. If I go to the parking lot and it's empty, then don't tell me that the building's doing good. Yeah. Yeah. Good point. Parking a long way away and b******g about it, then life's pretty good for the building owner. Right. Our buildings are recovering. Uh, I'm gonna say that in the, uh, in Ontario market, we're running about 95% occupied. That's great. Yeah. And, and We've maintained in the nineties through the entire pandemic, never dropped below nineties globally. That's great. Yeah. And different Than the other markets we've been, uh, reporting on. For sure. What were we gonna say, Arnie? What was your No, I was gonna say in Ontario's, not like a downtown LA or New York, you know, where you have a lot of heavy office and people just weren't going in. I mean, it's, you know, most people live near where most of your offices are. It's more of a, a, uh, uh, Drive to a surface parking lot instead Exactly. Cleared on a train or something like that. Exactly. Much Better. A little bit different office, I think. I think the outer markets like this have done well. Yeah. Uh, but the employees still didn't want to come to the office. I mean, there was a couple years when my parking lots were about 95% empty. Yeah. Right. Nobody wanted to come to the office. The employees all thought that they could effectively work from home. Ironically, I to share a little story that even happened, and one of my remote locations, uh, we've been having trouble with some of the employees in a high price market, you know, wanting to work remotely from home. So I conducted a meeting with 20 plus people, and I asked how many people thought that a lot of our jobs here could be done remotely. Everybody raised their hand. And then we asked them which jobs could be done effectively from home. And they virtually said pretty much all of 'em. Mm-Hmm. So, I told them that I understood and I was gonna embrace their thoughts. And we will now start working and handling the stuff from our corporate office in Ontario. And it'll just be like remote workers for you guys. Good start. Hey, let me back up to the beginning here. 'cause one of the things we wanna do is get know a little bit more about you, Uhhuh. So tell us how you got why, and how did you get into the real estate business? What was it that attracted you? And then tell us how you started MGR the, the genesis of MGR. Well, you know, when I went to high school, I, I was very fortunate to go to a, uh, all boys high school called Damien. But, you know, I was a little over my, under my pay grade to be there. I was, you know, kinda like, uh, uh, the token attendee. My dad worked two jobs to put me there. Um, but Damien taught me a lot of things about just, you know, being honest and work hard. And I, I owe a lot of that to Damien. Uh, I, I, I did remember graduating and I, I think I was even voted most likely to fail, which was a category allowed in the seventies. Uh, because I went to school with a lot of really, you know, you know, kids whose parents had a lot of money and I didn't. So I was always kinda shunned a little bit after I graduated my aunt, which I admired greatly, aunt Marie, I was talking to her and she told me, she says, you know, Mike, she says, of all the nieces and nephews and everybody in the family, she says, we're gonna have a lot of smart people, accountants, CPAs. And she's going on and on about them. And she says, you know, you're just not that smart. Oh gosh. She says, you're one of the dumber ones in the family. Oh my God. And I'm, I'm thinking, I says, Marie, you're my favorite aunt. What are you telling me this? She says, well, I, I, I've been thinking about that. She says, and, and I got an idea for you. She says, you're likable. Everybody likes you but you. And she says, if everybody likes you, maybe you should go into real estate. And she says, and if you're not real smart, just tell the truth. And every time you look up the answer, it'll be the same. So you don't have to be smart. Just look up the answer and tell 'em it again. You don't have to remember anything you tell anybody if it's the truth. 'cause just look up the answer and it will never change. And she says, if you're, if, and never worry about your commission, if you take care of your client, they'll never try to effectively take your money away from you. Okay. And I said, okay. I says, anything else? She says, well buy one property a year and keep it. And she says, someday people will think you're pretty successful. She still around that college education. She, that's, so, I, I did exactly what she said. Pretty smart lady. She still around. Uh, she passed away. Uhhuh didn't see how successful I became, but she, she knew I was, I was well onto that road. And, uh, I did not know that she had been a very successful real estate owner. And she never shared the fact that she owned. Wow. Ah, so she, Santa Monica, you know, I mean, she was, she was very well to do. And she gave me some good advice. Uh, so I, I worked really hard, you know, I, I just, I, I did take her advice. I, I realize if I just tell the clients the truth, it's a lot easier to keep a client. So you got into a residential brokerage started. Yeah. Tell us about your first, your first real estate, uh, deal. What was the very first one that got you started? I went to work very beginning for a company that isn't around anymore, called Red Carpet Real Estate, Uhhuh Carpet Real Estate. Yeah. I think I remember that. And they were a franchise. They were going head to head with Century 21 at the time. And I went to work for a broker named Bob Holden Uhhuh. And his son was there. And I was working in the factory. I was 19 years old, you know, I didn't even own any decent clothes. I mean, I was a factory worker. So he told me that I needed to go out and get a listing and go get a four sale by owner. And he gave me a tape from Tommy Hopkins. And he says, now, when you get there, get an appointment. Don't leave till you get the listing. So I went to my first listing appointment, a nice neighborhood in South Hills, and I thought I was really prepared. And I got there at like six 30. And, uh, about one o'clock in the morning when they finally literally said they were gonna call the police if I didn't leave. I said, well, I can't leave without a listing. You don't understand. They, they told me to be persistent, you know, and yeah. So the, the tape that I listen from Tommy Hopkins also says, don't ever give up. So I came back the next morning with a box of donuts and told 'em I was sorry, ah, that it was my first appointment and I didn't know what I was doing. And would they forgive me? And they said yes. And they, and I says, can I have a donut with you? And four hours later I left with a sign listing. Fantastic. I just was persistent enough to realize I needed to get paid. Uh, real estate's just, just that way, you know, you have to be, but you have to be likable. You have to be honest. And you gotta sell the house. After you got the listing, I did sell the house. Right. I stood it at a good price. And, you know, it got sold. IIOI had an open house, you know, I did everything you're supposed to. I just followed the little trends. That's a great Story. I've never, I've never really found real estate to be extremely difficult. I mean, if you, if you tell the truth, people come back. Yeah. Most real estate people have a tendency of lying. And they don't mean to Exaggerating. They, they over promise it. Under deliver. Well, yeah. You, you're a hundred percent right. I mean, I know, I, I I do lending uhhuh and the one thing I hate, well, not that I hate, is when somebody thinks they're gonna get away with telling you something that can't be verified. Yeah. And then the, you verify it. It's like, well, what's the story here? So, you're right. You gotta be straight with them. And, and, uh, you can't, you can't. B******t. Alright, I got another one for you, Mike. So that was the first deal you did. But what was the first, the big deal, the one that took you from, you know, being someone in the industry to taking you to that next level? So that first deal that jumps you to that, the place that got you closer to where you are today? My very First building, Well, your very first deal is always the one that makes you excited. I, I bought a piece of land on Buenos Air Street in West Covina. It was a very piece of land. Piece of land, very tip top of the market. I mean, this was at the top of the hill. You could see God in the world. Ah. And I thought to myself how lucky I was. This is going back in the, in the seventies. And I bought this thing for $19,000, $5,000 down. Owner carry, pristine, best part of the entire world. And I got the down payment on my Visa card, and I took a cash advance and I was off and running. Right. I was at the property and I was all excited 'cause the owner carried. And I got my first piece of real estate. And I was up there looking at myself and I had somebody taking polar ride pictures of me. 'cause that was the state-of-the-art technology. I was all excited when the neighbor comes down, asked me what I was doing there. I told him I just bought the lot. And he started laughing. He said, oh, he says there's a main water easement for the mountain that crosses over here. Oh no. I have the property over there and nobody's ever gonna build here. 'cause two things will happen. One water easement is not movable and I'm not gonna lose my view. And I have the top of the mountain. Oh, wow. So you'll be one of 10 people that bought it, lost your down payment and moved on. And he started laughing and walked away. Hmm. That was my first deal. So I went to school. I was, I was over at Cal Poly. I told my real estate instructor what happened. He told me back in the twenties and thirties, a lot of these easements weren't right where they were supposed to be. So he got the class, some friends in engineering to, to make this a class assignment. And they went out there and shot the, the line descriptions. We got a backhoe and we dug down nice. Damn, if the pipe was in the wrong spot. Ah-Huh. So we told them that we were now going to put a fence up around the property, but we were gonna go down five foot to have strong footings and that we were gonna break through the main water line of the building. And he should let everybody know tomorrow morning at eight o'clock, there'll be no water for the rest of their lives. Was he still laughing? And then they made a deal with you? They made a deal with me. Now, it was soon as they checked everything and that, that was a, the whole world showed up there within about two hours. Right. S**t hit the fan, so to speak. They all said, oh my God, this the guy's right. The, the pipe's in the, in the wrong place. Right. They said, we'll move it. I said, no, I don't want you on my property. You have no right to be there. Ah, nice. I I did the reverse. Everything they did to everybody else, they would never move it. I said, no, you can't move it. I'm gonna cut it. Yeah. And, uh, so I paid 19,000 for it, and they gave me $55,000 to go away. So you never developed It? I never developed it. Didn't have to. It was a nice thing. I took $5,000 and I turned it into 35,000 in about four months. Nice. So I know that doesn't sound like a lot of money now, but in the seventies, that was a boatload of money. No, that was, and if you're putting the down payment on your credit card, that's a lot of money. That Is. You got that. Right. So, and then it just kind of worked. I bought a couple houses here and there, bought a few more, then I started buying little small office buildings. I think we started making a real notice in the office building market when we bought, uh, the properties at Haven and, and sixth Street, which is the sixth story, 34 0 1 Center Lake. Right. Uh, purchasing that and putting the big MGR on the roof was kind of like awakening that. He got a little bit bigger than they saw. How big is that Building? That building's about 118,000 feet. Right. So we bought the 118 and the sister 80,000 square foot building on Commerce Center simultaneously from, uh, Prudential. But when we did that, people started noticing that we were in town and they were chuckling. Then we bought Six and Haven, you know, we bought the 80,000 feet there. Then we bought, you know, MGR now MGR Towers on Arrow, another 80,000 feet. And we bought the one that's around the courthouse for a little 40,000 square foot buildings. Then we bopped down on the big dance floor and started buying the stuff on Inland Empire Boulevard. Started buying, you know, the, the nine story, 185,000 square foot, you know, city National Bank building. 800 Haven. We just ran down the list, bought, you know, we bought everything in the Empire Collection. Right. One by one. Um, So you have like 30 office buildings now? Something like that. Yeah, a little over 30. Yeah, I got about 30. So From the vacant land that was hard to develop to, that was impossible to develop to 30 office buildings throughout. And we did that, you know, slowly and methodically. Um, and like I tell my, my, my team, you know, my acceptable level of occupancy is zero. A vac, zero vacancy. Yeah. Right. I want a hundred percent of all the possible money that can come in. Just like you want a hundred percent of your paycheck. That's right. No, exactly. Don, I think you have the next question. So, yeah. So, so in other words, it basically, I mean, do you have one major standout project or was it kind of like a building where all of them together became your major project? Or was there one that you could put your finger on and say, that's the one that got me into the big time. Everyone I bought, I said that when I bought it. I see. So, so it Sounds like the, uh, this is The one, this is the one. Exactly. Everyone's the new one. And I get so excited when I buy it that I think it's like, nothing is better than this. So the next one you do is gonna be the best. Yeah. Then I went down, the last one I I bought was in, in Orange County, Uhhuh. I bought, uh, comp list called Canvas. I bought it from Blackstone. They lost about $50 million selling it to me. Uhhuh. Uh, they had to work really hard to do that. That's not easy to do. Oh. And, uh, that build, that consists of five buildings, 555,000 square foot of class a office. That was about That's Nice. We're gonna bring up pictures of it over while we're talking now. So that's a nice Project. 62% occupied. Uh, that probably to this day is probably my trophy piece. Ah, So that's the one. And ironically, uh, that trophy piece is in Orange County, which is my very first building in Orange County. Wow. And it was the largest office transaction in, in I think three years. And top five in the decade in Orange County, uh, in size. And, uh, that was our opening statement that we're in Orange County. Uh, it's a beautiful building. It's right across from the South Coast Plaza. So I'm gonna say that's the one that told everybody in Orange County. I'm serious. The Inland Empire was just an accumulation of all the most beautiful buildings they've ever built. Right, right. We got, All right. Well, now since we've talked about all these great success stories, is there any deal that you looked back on and said, God, that was a failure? I wish I, I wish I didn't pull the trigger on that one. Those are always the ones you learn the most from. None that I would ever admit to, you know, uh, and I've never had one that has lost money. That's amazing. I mean, I've had some that I've had to hold a long time to be Right. But I will hold 'em long enough to be right. Wow. Uh, I've got, sometimes I, I, and a lot of times I bring in junior partners and I've had never had a partner this time, So Nice. Ever. How do you find new projects, Mike? Um, do you get 'em from brokers? How do you decide if you wanna green light the deal? Do you rely on I-R-R-R-O-I or ROE your gut? What are the, uh, uh, decision points of those? How do you come up? Are You big on the spreadsheets and analysis, Or do you just go by, hey, yeah. The gut you go by, but do you Run, do you run the analysis anyway to, you know, kind of give you some backup? That's it. Yeah. Now my, my team does a lot of reports that I, the banks wanna see. Right. That I don't really look at, um, With the different rent projections, staying steady, going up different, different scenarios, and I don't care about that. Yes. Throw the dart at it. I don't care about that. He Yeah. He, he's not, yeah. He goes by, I get the feeling that this is gonna work. Yeah. Yeah. I, I, I'm really simple. When I'm looking at a building, first of all, the buildings kind of find me. I, I look at the internet every day because people send me stuff. I get about 1500 emails a day, so. Right. A lot of people know that I'm an active buyer, so stuff gets thrown at me. Uh, in a lot of cases I pick a market and I go after the buildings, like the one I'm buying to 20, 20 Main Street that nobody knows about. Um, So sometimes it's strategic. You pick an area and you research it as opposed to just something coming off your desk. That's a opportunity. Yeah. We, we pick, sometimes we pick an area and we go to the sellers and, and drive it to market. But when I, when I go into an area, I think I de, I decide I'm buying real estate, not tenant. And a lot of my competitors are buying tenants, not real estate. So I realized that every tenant's gonna move. It's not if it's when Right. Happens is forever. Even. I moved outta my corporate office. I was there 29 years and I moved out and left it a disaster because I occupied 35 of a 45,000 square foot building. Don't tell me it wasn't a nightmare when I left. Yeah. So I kinda look for tenants, you know, and buildings that don't have too many big monsters in 'em. I'd rather have a lot of, a lot of nice smaller tenants. Right. Have quality assets. Uh, I, I think it's really nice what the rent roll is, but I really don't care that much. Like some people do. I'm looking for length and longevity, but when I'm looking at value on the building, before I even look at the rent roll, I just look at what is the market rent today? Yeah. Yeah. What's today's rent? What's today's expenses and what's a reasonable vacancy? And I run that number and then that tells me what I think the building's worth. It takes about three minutes. Yeah. Regardless of what's in there. Now you, you just, I could Care about, this is what it's worth today. If everybody moves out, what am I gonna have to do? Yeah. Yeah. And then I look at the current rental. So, I mean, 'cause I know that it's, let's just say the number's $3 a foot. Right. If I got tenants in there paying three 50 a foot, I know that when their lease rolls, they're gonna say that they need to be adjusted to market. I know that. Yeah. So I can't buy it based on a higher rent. If they're paying two 50 and it should be 300, I'm gonna adjust it up knowing when it's worth three. So the, the math works both ways. In a market like this, generally the, the market's a little bit less than what people are paying. And if that's the case and I underwrite it at three and they're paying three 50 and got two years left on their lease, I have the ability to go to that tenant and offer him a lower rent with an extension, get ahead of what's gonna happen, give it to 'em today. 'cause I didn't underwrite it at three 50. I underwrite it at three. Yeah, no, that's good. And it's gravy if it, you get the three 50. So you're, you're, you're looking at your worst case scenario based on your numbers in your head. Right. And, and I, and I kind of run a really simple formula and, and it, it, it is, it's super simple. You know, I come up with, I think it costs to run a building and, and I think people think I'm nuts with the taxes being lower today because values have dropped a lot in office. Right. We assume that operating expenses run about 12 bucks. That's what I figure you can run a building for 12 bucks a foot per, Per year For per $12 a foot. That's just my number. Right. But then I also add $3 a foot to that for cap back expenses. Nobody wants to talk about those. Right. Everybody says that's a below the line item and the lender doesn't look at that. Well, I do. So that number just went to 15. Well, you'd be surprised. The lenders do look at that. I mean, uh, you know, I mean, speaking of lenders, I'm, I'm gonna skip ahead, uh, Steve. Yeah. Uh, how do you finance your deals? Do you, do you go to, uh, lenders? Do you find self-finance, 'em, do you get debt equity? Uh, how do you, when you, when you get a project, where do you go to get the money? You know, ideally I'd go to my, you know, my, my savings account. But that doesn't happen as much as I'd like it to, unless it's a smaller deal when I, when I'm doing the larger deals. It depends on the structure of the deals. Everyone's different. Yeah. Sometimes if it's the lender's in trouble on the property, you may get some lender assisted financing, which is always the nicest thing. Yeah. Uh, in today's market, it changes every time. Of course. Uh, it's really hard to get an office building market today in office. Oh yeah. Lenders are really against office market deals. I mean, it takes almost an act of Congress to get They've been burned is is part of the problem. It's not become yours. It's just in general that that's what they've been seeing. And they think that there's a big part of the market underwater. So they're, they're desperately avoiding it. That being said, the CMBS market still will finance office buildings. Yeah. But they need to see closer to 85 or 90% occupied with a reasonable waltz. And if you have that type of deal, you can still get financing Half LTV. What, what do they, what do you need to put in, Uh, with A-C-M-B-S today? I could still get 65% financing. Interesting. Alright. Yeah, that's about right. Yeah. Yeah. But you gotta, but you also gotta be a solid operator. Yeah. I mean Right. Even though you're not personally guaranteeing it, they know in 10 seconds if you're a good operator 'cause they pull your name up and they look on the CMVS records. And if you've got 12 CMVS loans and nine of 'em are in default, well you ain't going anywhere. Exactly. Yeah. But they go in and say, gee, you know, the man's never missed a payment. Everybody's cool. They all like him. They get a little extra check mark and it starts moving through the system quicker. Uh, CMBS is, is my backdoor program. My goal is to go in and finance 'em. Mm-Hmm. You know, whatever. I can get repositioned with a CBS loan on down the road. But, uh, a lot of the local banks will work with me up to, I was Gonna say they would know the market and Yeah. At least know that it's stronger than what the press is saying about a, you know, the local market is stronger, They're limited to feeling comfortable at 10, $15 million ranges. Mm-Hmm. That's a problem. Has a hard time doing a single loan over 15, $20 million. Right. And most of my acquisitions are over that. Yeah. So a lot of times smaller Stuff, the local banks are gonna be better, but you're right on, on your portfolio and the stuff you're doing, you gotta rely on CMBS for sure. They're, they're, the local banks are saying that I'm too large for them. Mm-Hmm. Why don't you, you know, open up your own bank. I've thought About that. Isn't he doing enough? I'm sure you Have. Yeah. Well, I, I've kind of assumed that, you know, it won't take too long and they'll be giving banks away at the, on the corner. You know, if you buy a car, you get a bank. Right. You Know, usually whenever I, that's A great line, Mike. Usually I tell the banks that question my financial statements, which is their job. Right. I always ask them before we get started, I says, what was your stock value last year on, on stock exchange? And what is your stock value today? Well, what does that have to do with it? I says, I just wanna see how well you've performed before we start analyzing me, because I have the right to know you're my bank. That's right. And generally their stock is down 30 to 40%. And they tell me the story about, I said, now tell me your story about why, and then would you change the name of your bank to my name and put that in your report? And we don't even have to have a conversation. There you go. Use your own excuses on the economy and how it doesn't affect you. They Gotta turn the tables. That is great. They chuckle. Yeah, no, you're, you're, you're, you're hitting them with real logic. I mean, it's kind of hard to deny it. You Know, my, my my, my vendors are pretty good when I buy a tougher property, especially these, these big 50, a hundred million dollars assets. Um, I use private debt equity. Okay. Uh, the big boys. Yeah. I'm borrowing money from the big boys. Yeah. And, uh, this is, this is, it's, I call it private equity. Some people would call it hard money. And you know what? And there's a place for them and they know the market better than anybody else. That's Arnie's World. Yeah. And, and they're, they're investors as much as, as you are. Uh, I, I remember on my, my last $55 million loan that I took out. And would you agree, you know, Arnie has a large loan and offered Without a doubt. So I went with, with, with the people I borrowed the money from. We met at the property, we walked around, we talked, he says, well, when, when will you need the loan docs? Yeah, That's, I says, you know, I'd like to close in about two or three weeks. He says, well, just let me know when he says, I says, now what about the appraisal? And things like that. He says, well, we don't need an appraisal. He says, I've already walked the property. It's, it's fine. You know, now that's probably, Yeah, no, and then that's, and people, you know, they move, you are a hundred percent Right. Because people call it hard money thinking. That's only for the people that don't have good credit. They, they have no other choices. A smart investor and developer will know that a private money lender is probably the best person to have because you're a hundred percent Right. They don't need the appraisal. They will make a decision just like you do in your head and, and make that decision to do that loan with you. And they're almost your partner, so to speak. Yeah. See what you see And, and the, and the, my cost on it was a little bit higher, but I have no pre-payment penalty. They'll subdivide 'em out and, and, and portions with no issues, uh, that were easy to work with. And I went back to Blackstone and told them that I had to use private equity because of the high vacancy. I, and I told 'em that I was gonna have to pay X dollars more than I had budgeted. So I took that over five years and told 'em, if they gave me that as a discount, I won't cancel. And they said, okay, we'll give it to you. So they paid for it. I didn't even know what to pay for it. That's great. And that's, You don't ask. If you don't ask, you don't, you never find, there are a lot, lemme ask your question, Mike. When you, when you're buying properties, are these MGR real estate, uh, purchases or do you form different partnerships and entities for each uh, property? Every property is a standalone entity. So MGR is a part owner in that. And then you bring another Part. MGR owns none of it. Yeah. They're, they're, they're, they're the, like the property manager or Got it. Yeah. The owner is. Yeah. There you go. The rat maker trust. Right, right. No, that's Maker Trust is the owner, the ultimate owner. The LLC is a standalone entity. So you don't bring in partners for each transaction strictly your Deal. Well, some, some deals are strictly me uhhuh. Some deals are strictly me and my two kids, which is me. Yeah. And some of the partners I, I bring in and I raise investor capitals. I have a small group of people that friends and family type that, you know, when I do a deal, they'll put sometimes anywhere from 500 to $5 million in a deal. Right. And, you know, uh, ride the wave and, uh, and they all always have never gotten hurt. And even when there's been interruptions and things, I've always made sure that their cash flow never changed. So it's not like you have to go spend a lot of deal trying to raise capital or raise equity. We're always raising capital and equity somehow. But it's all there somewhere because of friends and family. I got some good friends and family, you know, uh, that, uh, you know, I don't do crowdfunding, so, you know, I'm not looking for, you know, that kind of money. You know, when when somebody, I talk to 'em, you know, they're usually, you know, they tell me how it's a wrong time to do something and here's $3 million. Yeah, yeah. No, That's So Me and Arnie can't cut you a check and get, get ourselves in on your next deal. Well, There's no background check. You know them. And that's, And they know me. Exactly. Exactly. Right. We had a, we had a guy yesterday who wired us $4 million to be in a deal. And I said, what do you need to know? He sold nothing. He said, I, I've known, known you for 20 years, The account number. He said, I know you, I know who you are. My friends know you. We've done, uh, he says, just send me the paperwork so I can have my people, you know, check the boxes that I reviewed it, which I did. Yeah. And he reviewed it and he says, okay, but you know, why are it being sent? Where do I send it? I mean, and it was nice. I mean, it's not that we have an abundance, but we always seem to come up with it in time. And I only buy with what I think we can feel comfortable with. And, uh, and, and my goal is once I get the properties positioned correctly to refinance 'em and get most of our equity back and use that money to buy another one. Yeah. And that's what we're very good at doing. So your investors are people that are close to you. You're not looking for outside investors In most cases. In most cases. I've known 'em for 20 years. Okay. And if I didn't know them for 20 years, it's because it is the guy I know for 20 years, son, ah, you know, who's using his trust funds that his dad says his trust funds are gonna invest with Mike. There You go. That's, you know, and the kid says, oh, okay. My dad says this is where my money's going. So how you doing? My name is Joe. That's kind of how it goes. Yeah, No, no. And that's, that's exactly, And, you know, generational, and I try to do the same thing with my kids coming into the business. I mean, we're looking to acquire probably 3 million feet in Orange County so we can make some kind of statement Mm-Hmm. We're doing that also at large, large sums buying buildings at anywhere from three to 501st thou, three to 500,000 square foot per spot. So when you're buying the larger buildings, you only have to get eight or 10 buildings and you're a player in Orange County. Right. So you took that last, next question, uh, right, right from under me. So your, your strategy right now is to continue looking in Orange County for additional purchases, uh, in addition to the one you just made. Yes. We're gonna be purchasing heavily in the Orange County market, probably concentrating, uh, between the, uh, Concourse Mar, we call it MacArthur four oh five, running along the 4 0 5 freeway probably. Mm-Hmm. Upward over to, you know, the South Coast Plaza. Take that little two three mile stretch and draw a circle around it, and we're gonna call that home. So Once you pick an area, south Coast Plaza, a lot of that older, older stock, those peak class buildings right in that, uh, Santa Ana, Costa Mesa area, it's prime. Mm-Hmm. Well, we're, we're also, I I, I pay great respect to the Irvine Company, and I don't wanna be stepping into his sandbox, which is a spectrum. Right, right. So, you know, I'm, I'm gonna just, that was a Great panel in March, though, with Mike from the Irvine Company, so Oh, yeah, that Was great. Me and him at, at a, at a good little hoorah. You know, uh, we, we've gone, we've gone around the table twice where he's tried to get my tenants right and big tenants, 10,000 square foot tenants. And, uh, fortunately we were able to, to, uh, outplay him on both hands, um, where he gets a chance to read how I play. And I did exactly the same thing that Irvine Company made an offer and I beat it. Nice. Now you, how about Eastern LA County or San Diego County? Would you look in those markets or you're really kind of focused in, in, in making a statement in the oc Oh, I like San Diego. Okay. And ironically, of all markets I like, I like Carlsbad. Yeah. You know, you're picking an area that nobody thinks about is Carlsbad, because it's the first market to die in the last market to recover. That's got my name written all over it. You know, I like Carlsbad. So, uh, we have an office in Carlsbad. Um, I feel comfortable with it. So the Carlsbad market's pretty good, you know, that stuff in downtown San Diego. I don't feel it's comfortable down there. That's a tough market, surprisingly. I mean, you know, the mission, mission day market, I kinda like, right. I mean, so I am considering San Diego. Uh, I, I also would consider, you know, sections of, you know, east LA County, you know, but, uh, you know, it has to be areas that I feel comfortable with, you know, I mean, I'm comfortable even up along the quadrant, you know, whether it be, you know, in San Dimas, I was very comfortable Glen Door, I'm comfortable West Covina, that market All within your reach from where you're based similar, uh, genre of office buildings. Right. And we're looking also in Scottsdale Phoenix, Really. And we are looking at some potential markets in the Dallas area. Okay. Those are very different dynamics in terms of the office market trends than, uh, inland Empire, orange County. Aren't you finding that like Phoenix, it's kind of the wild west again, it Seems, you know, but I'm a cowboy. Yeah. You know, even down in Orange County, when I was hiring, uh, my team down there that I hired some really good guys and they went around to, you know, to Green Law and some of the big firms and Sure. And ask them what their thought was about joining up with MGR in Orange County Hmm. To get a big move from him to come off a national company. And they basically told him that it would be a tremendous learning curve from him. And that, you know, working with Mr. Maker, he's a cowboy. He's just gonna jump in there and you ain't gonna know what he's gonna do, but he is gonna come out with that deal somehow. Yeah. Yeah. And that your learning curve will be significant. The first time he submitted something to me, it was a four page spreadsheet on an analysis, on a lease proposal. And I wasn't paying any attention to him. And he knew, he says, you know, I've got this whole proposal all the way done, this, that, and the other. I says, yeah, I know. I said, it's gonna net me about $2 and 85 cents a foot. And he looked at me, then he had to go back three pages, and it was $2 and 84 cents a foot. He said, how did you do that? I says, I don't know. I just looked at it and kind of saw the answer. Simple math, you don't have to be too complicated to just figure out about what it should cost. And I'm, I'm a pretty simple guy, you know, and my tenants like me as the most part. If you walk around my buildings, my tent snow me the way I'm dressed today, this is who I am. If you see me on a Saturday at my building, this is me. Yeah. If you see me on Tuesday morning, this is me. If you're coming to the front door and I don't have electric doors, I will. But if I don't have 'em yet, I'll open the door for you. But you don't golf in that alpha, do you? I don't have time to golf. I'm having too much fun. I'm having much fun running around in my building, servicing my people. You know, I used to golf a lot. I'm a single dad Uhhuh, so, and as, as a single dad, you know, my extra time I devote to my kids. Right. Uh, I have two children, uh, my daughter's 27 and works at the company, and she doesn't take as much effort. And you know, when at the end of the week, she's probably happy not to see me because, you know, she's already having me all week. Um, and my son is, uh, uh, is my pride and joy. He's non-verbal, autistic severe, and damn if he doesn't miss the s**t outta me. And Right. We spend every Sunday together, we hang out at the beach and we go goofing off, and he's a kick. And we spend a couple hours together every morning. So everything that I would've normally spent in golf, I spend and spent with my son who teaches me how to be happy. And I owe probably all of my success to him. That's great. Wow. That's A great story, Mike. Yeah. I, I gotta tell you, there's nothing like being with family and kids. I got grandkids now, Uhhuh, and the biggest joy is being with them. I mean, I have, one of my grandson's birthday is today, and we got him a gift yesterday and his eyes lit up. Like, and there's nothing better than than seeing that from, uh, from your kids. But I got, I got a question, uh, for you is what project did you not do yet that you wanna do, that you're looking to get into that would really staple it for you, for your career? The problem is, no matter what I do as my iconic last big trophy piece, uhhuh within 48 hours of the close, I'm looking at the next trophy. But currently the, the next trophy that I'm really looking for is the icon in Ontario Uhhuh. Um, I wanna build that piece. I wanna build that 15 story building, which is the highest building on the M and Empire Round up. Round up. Can you tell us the intersection? No, no. He hasn't found it yet. No, I have, oh, no, he's not. Oh, you Have? Oh, okay. Good. No, it's, it's in plant check. Oh Yeah. Good. It's Close. No, we're, tell Us more About it. We're in, it's, it's in Ontario. It's along the freeway, uh, by most of my holdings near the arena. Mm-Hmm mm-Hmm. Uh, we'll be coming 15 stories, straight up, two eight story Twin towers, parking structures. That'll be phase one. Uh, and then we'll build from there. Phase You have an estimate of when you might be in the ground. It's really hard to predict exactly then, but I would guess it will be less than 18 months, 12 months, 18 months. Wow. Well, you got a good, the right city for it. How about a gc? You have a gc We're doing the final interviews now. Uh, we're going through that process. We wanted to get we the entitlements done and then find out which GC was the hungriest Mm-Hmm. Because none of 'em were true hungry a year ago, because they still had all their contracts from three years ago. Right. But now that these GCs ain't got nobody putting steel up in the air, especially 15 stories Steel would steal I Yeah. Right up, you know, and, uh, it makes no economic sense to build. Yeah. Yeah. Well, what's, I should have asked the architect. Do you have the architect, I assume? Yes. A a depths doing our work. Ah, same one that's doing all the work around the arena. Nice. And, uh, did, do you have an estimate on cost per square foot? No. And let me explain why. And I told him it doesn't matter. Yeah. Because it, I'm building it. Yeah. You got it in your head, you're gonna do it and you're gonna accomplish it, so you know, I'm gonna build it. Yeah. And that, that's the way, that's the way your model is for even buying properties. You know what you want and you'll figure it out as you go along and you know it's gonna be a success. That's fantastic. There's no doubt in my mind that the numbers will be north of 400 a foot to build 500 a foot. There's no doubt. That's not even that bad. I mean, in the scheme of things, 500 A foot just to build A brand new office, prove. Yeah. And, you know, in of it costs six, it costs six. I mean, um, it, it's going to, I'm gonna build it and it'll be the first real additional asset of this quality in 20 years in the valley. Mm-Hmm. And it will suck up the values of the surrounding properties and rents, which I'll get the wind fall out because most of 'em are mine. Right. So you're saying not only will you see the, in this, the increase in rents from this new building will increase the rents in all the other rest of existing building because it'll pull it up. I think that the rents in the Ontario marketplace in three years will be up a dollar a foot. Where's the high-end rent now? In, in, uh, Ontario? Call it two sixty, two sixty five. That's probably per Month. Full service. Gross. That's a full service gross, normal release rate today. Right. And then, uh, and then potentially up to like 3 25, 3 50 after the high rise is finished, Probably three 50, All that space. Oh yeah. So a lot of the absorption for us will be the, the windfall from the surrounding buildings will help offset some of the intrinsic costs of the new one. Right. Do you have some financing partners lined up for the, uh, construction costs? Are you gonna self-fund that Initially We haven't. We haven't decided yet. And, and the reason for it is nobody likes office right now anyways. Yeah. So we're waiting until the market softens up and after our new president is elected, by the way, it doesn't matter if it's Biden his replacement. Donald Duck or, or, or Donald Trump, whoever gets elected. Yeah. Or none of the above. It was one in one state already, but none of the above. Right. You know, the, the market will stabilize, you know, interest rates will go back to some type of sense of reality. And if they stay where they're at, that becomes our new reality. So we, we will all get past the emotion and the drama of what it is. I lived in the 14% interest rates. Seven percent's not that bad. Yeah, right. Oh, you're hundred percent right. Well, you know, you've been around long enough to, uh, you know, understand historically, you know where things have been. Yeah. It's just the market, you know, you don't, you don't get upset with it. I mean, I bought my house in Pelican Hills and I put a little loan on it, or a good sized loan, a little loan for Pelican Hill. Big loan for the world. Yeah. But they gave me a two point a quarter, 30% fixed year mortgage. I took that thing and I figured that was candy. That's, that's a gift. I mean, don't get mad. Just take the care of everybody said, right. There should be two. Well, I'm, I'm fine. Gimme two and a quarter for the rest of my life, I'll be, that's, pay that thing off. And back to the new building though. I know some of it's already, you've already got a lot of it spoken for. Right? You're moving your, uh, facility there, aren't you? Putting a, a restaurant on the top? We figure we'll take the top, uh, top four floors will be food and entertainment. Right. And, uh, we're talking medallion type restaurants as well as the family dining as well as a social entertainment place for people to go to. Uh, you know, we'll be looking down, uh, good on the New Ontario Live project. That'll start construction matter of six months. Uh, we'll be looking down at that, looking at the airport. So those four floors will be restaurant related, which we're fairly sure we have most of those things firmed up, but we haven't signed anything because we're not sure exactly what the rates and delivery dates are. But 15 story restaurants that we're gonna, are fairly easy to fill up because all the restaurants put the new icon, especially with the rapid transit coming in from Vegas and everything like that, being right by the Ontario mills. We'll probably take upward of three floors in the building ourself. Uh, we'll Take. So not even that, not, not that much risk. I mean, in terms of vacancy. Oh yeah. So I'm, and I'm gonna take one floor for private residence, uh, and we're gonna break that up into four living dwelling units. Wow. And those four living dwelling units will be one for me, one for my daughter, one for my son, and one for guests. And then we will have 80 living units in the product as well as As condos or as, as rentals. We're gonna have them as condos, but we're not selling them as condos. We're building 'em as condos, but retaining them all to get forever. But if we ever sold 'em, it'd be after 10 years. I see. Okay. Good construction. Very Exciting. That sounds like an exciting drive. 18 months. Very excited to see that Happen. And then we're gonna have retail straight office. It's gonna be a hundred percent of the real, honest, legitimate mixed use. Real mixed use. The cities all want, uh, the two, the two, uh, you know, eight story buildings. One of 'em will probably be a higher concentration of living, one will be probably a higher concentration, you know, of Office Uhhuh. And we're trying to get a, Do you have a name for the project? Not yet. You know, we're, we're probably, you know, probably thinking of something with a View court or tied to it MG Uhhuh or something like that. I'm not sure. Uh, you know, we'll, we'll have To interview him again in a few years. Yeah. You know, because Mike, we are, we are coming to our allotted times, you know, that we, that we promised you and, and our viewers. And so we gotta still more to cover. We gotta bring you on again. Uh, you know, as, as this progresses and we get updates along the way. I wanna have you see that, you know, when it's going up in construction or my next big glory piece is, is remember it's 2020 Main Street. Right. 12 stories Irvine. That's my next famous best building that I've ever bought until the next one. That's my next till the next one next week. That, that is breaking news next week. I own it. I've already signed the loan documents. That's, that's my next baby. All right. Fantastic. Hey Mike, you touched on it a little bit. Some of your hobbies and, and, and your, your, um, um, deep, um, you feel real deep about. Tell us a little bit more about yourself. I mean, I know your family life, your son means so much to you and your daughter being in the business. Um, what are your personal interests? Are you a sports fan? I mean, I know you don't golf, but, uh, are there any, Any actually priorities or Organizations that we could promote for you that you're heavily involved in that we could give a little Club for? Yeah. I'm, I'm probably, you know, I'm very much into autism. You know, autism Speaks is a good organization or anything with the word autism in it. It's like the, like, uh, I think that that helps. I think, you know, different things. Like I think UCII do a lot with them. UCI has a really good mind institutions for Alzheimer's, and one in seven people in Orange County is gonna suffer from Alzheimer's. Right. So with that kind of statistics and there being one of the leading researchers in it, and me having a house in Newport Coast, I'm trying to have like a bench sheet availability if I start to whacko. Uh, so I think those organizations are, are pretty good. I give a lot to the, uh, Breth and Manor, which just donates out to local charities. Just kind of, I think that, you know, and by the way, I do golf, ar I just don't get to golf as much as I like. I, I, I, yeah, no, no, I hear you. I love, I love events. I, I love going to a soccer game or a, a football game or a basketball game and this is gonna sound really terrible. I don't care who wins and I don't care who's playing. I just, wonderful event. I just wanna go out and hang out with people and enjoy myself and be happy no matter who wins and loses. 'cause I don't want to have any misery in the night. I don't wanna be like, oh, my team Plus, and I'm all depressed. What do I care who Wins? So you don't care. Lakers or Clippers Charger, the Rams doesn't matter. I could care less. I mean, I love when I go to a Laker flipper game, I mean, they're extremely excited. I might prefer the Lakers, but the Clippers put on a better show. Yeah, yeah. I was talking to Upper management about why they have such a good show. He says, we had such a bad team for so many years. People only came for the, for the the show. For the show. And he says, now we have a good team and a show. He says, well, some people like us. I'm seeing a new home Too. Right. That new arena's looks like it's gonna be fabulous, so, Oh, right. Yeah. Everybody's doing good and I'll just wait to go to the new arena. So I love going to events. I mean, I love going to the Super Bowl. Yeah. I mean, to me that was absolutely lots of fun. Didn't matter who was playing just to be there. Yeah. Yeah. And I'm glad the Chiefs won. Yeah. I think I, I mean, because they won. Yeah. Right. The other team would've won. I'd have been glad they won because they won. I'm just happy for whoever. I just, it was a wonderful event to go to those things. Yeah. So I go to a lot of nice places, you know, and I'm, I do a lot with various political organizations. I'm up in, you know, on the, you know, I'm a delicate, I go to the, you know, to the, to some of the events. I won't say Republican or Democrat 'cause you get yourself in trouble. But I go to a lot of political events because I think whether or not you're of any following being Democrat or Republican is irrelevant. I think that both sides, 85% of the time agree that we need to make America better, or make our city or county better. So whether you're be in a Democrat or Republican, we can all work on the common ground that we all agree upon, and the small percentage of things we disagree about, lets somebody else fight about. Yeah. But let's make sure that we're just all set, just good people trying to make the right things happen. Right, exactly. Sounds excellent. Yeah, that's a great closing statement. Exactly. Can anything better that, Mike, we will have to get Sean, you know Yeah. Six months to a year from now. See how these, uh, things are progressing. Oh, no, I, I wanna wait till this, this, I wanna wait till this project is done and then take A get in the ground three months. Yeah. You'll, You'll get a tour, I promise. Yeah, Yeah, yeah. You gotta invite me to the groundbreaking. Yeah, You got a bus. All right. All right. Bye Bye. Thank you very much. Have, thank you, Mike. This has been great. Have a great day. Good luck on your deals and good luck on the projects. Alright, Bye-Bye. Thank care. Have a Great day. You've been watching Commercial Real Estate Talk with Steven Arne, sponsored by commercial real estate inspectors, Fidelity Mortgage Lenders, And Paramount Property Tax Appeal.