Dan Fasulo

Capital Synergies podcast with Mr. Dan Fasulo, Director of Market Research for Real Capital Analytics and guest host, Mr. Michael Green, Principal and co-founder of Virtu Investments.

In this interview, Mike and Dan speak candidly about the current market slowdown and the challenges facing commercial real estate investors today.


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DARBI: Hello, this is Darbi Worley your host for the "Capital Synergies" talk show for commercial real estate investors. Capital Synergies is brought to you by Steelhead Capital, your commercial loan advantage.

Today we have with us Mr. Dan Fasulo, Managing Director of Research for Real Capital Analytics. Leading the interview will be Mr. Michael Green, Principal and co-founder of Virtu Investments.

(fade music)

MIKE: Hi, Dan. Welcome to the show.

DAN: Oh, glad to be here.

MIKE: You know, interesting times we’re in these days. I think a lot of the listeners will be interested to hear your take on...on this market. I think sometimes in real estate things move so slowly, and...and lately, it kind of feels like we’re in...we’re in the stock market with real estate.

DAN: Yeah. There’s no question that, you know, sales activity has really fallen off a cliff, you know, over the past 6 to 12 months, and we’re actually running at that level that we haven’t seen since 2004. The second quarter of 2008, we’re looking at about 35 billion dollars worth of sales transactions that Real Capital has tracked, and the last time we’ve seen numbers this low are back in the first quarter of 2004.

MIKE: Unbelievable. Obviously, we’re seeing a result of both the available equity coming into deals slow down and sit on the sidelines and be more cautious, but also the availability of debt, particularly CMBS, given that that’s had such a tremendous impact on rising values, how much downside do you see in real estate values in the United States, given that credits are not available right now?

DAN: We supply data to Moody’s, create the Moody’s real commercial property prices index, and, you know, this massive liquidity of debt that came into our markets through CMBS really apexed at the end of 2006 into early 2007, where, you know, it’s basically a free-for-all. Anybody purchasing a property could get that financed by the CMBS market. And if you look at the index...the pricing index, it shows a pretty clear 10 to 15% price spike over that period, between the end of 2006 and mid-year 2007. So, you know, we feel that that...that 15% froth, if you will, on the market has kind of been wiped out, and, you know, if you look at some of the price points coming in on the deals that are actually happening...

MIKE: They’re proving that out?

DAN: Yeah, pretty much across the board, especially in, you know... they are more global markets on the coasts. It’s a little different story for certain property niches and types; anything that has a value-add component to it is really getting discounted heavily because the banks don’t want anything to do with future income anymore. They’re very much focused on, as you know, on what the in-place income is and, you know, whether a property has a really good story to it.

MIKE: Yeah, we’re seeing a lot of that...the old days of recourse lending is back, you know, and we were able to accomplish a lot of our value-add place, you know, with non-recourse financing over the last three years, and that’s pretty much gone out of the window since. So...

DAN: That game is over.

MIKE: Yeah, sort of back to the old business of going to your local bank and asking them to fill... if they’ll back you on a certain asset—and even they are more cautious because their balance sheets have been affected largely by a...you know, a lot of the single-family residential development-type deals that they’re...they’re involved in, and they’re having a mark to market and it’s just turning their balance sheets upside down.

DAN: Well, I’ll tell you what has kept the market afloat over the last six months have been the ability of, you know, the local and regional banks to loan to the commercial real estate markets. And, you know, this group had a lot of pent-up demand because they were shut out and getting outbid by the CMBS conduits...

MIKE: Sure.

DAN: ... for, you know, a few years. But we’re hearing anecdotally from many of our clients that many of those community and regional banks are not only under pressure from the Fed to make sure that liquidity is in good shape, but we’re hearing that many are hitting their...their entire 2008 allocations; they’re starting to hit them already and we’re only here in July. So...

MIKE: Yeah, I’m sure the Feds don’t want to see, you know, a repeat of the SNL crisis. So, they’re focused on that, trying to chew up all these, you know...all these guys that were...were selling CMBS bonds, but also making sure that the...that the banks don’t start going under.

DAN: Well, you know, I think the other question about different property types and what’s performing better than others, if any. Once, I was reading your questions over the past couple of days, I was going to mention multi-family, you know, apartment sales, which have held up relatively well compared to the other property types, because of the availability of the agencies financing...

MIKE: Yeah.

DAN: ... Freddie and Fannie, but now with the report that came out this morning and, you know, possible liquidity troubles...

MIKE: I know that Fannie and Freddie’s stock has been under a lot of pressure over the last few days, but I didn’t see the report this morning. What’s the latest news?

DAN: Well, there was a report that came out at Wall Street this morning that’s basically questioning their liquidity.

MIKE: Their solvency, huh?

DAN: And whether they would need to raise capital to go forward. You know,, obviously we know that there’s a kind of implied government backstop there, but, you know, they’re certainly going to be under a lot of pressure as far as putting additional capital out to the market, which is kind of in their mandate; help build the dearth of capital that disappeared with the CMBS

MIKE: Sure, being an apartment investor primarily, you know, we do feel like we’re in the place to be right now given that the fundamentals, the actual operating fundamentals, of the business are strong because we’re seeing a lot of people come back out of homeownership back into apartments, and yet the cost of construction and the financing available for constructions limiting supply, so... you know, our portfolio is as healthy as it’s ever been and just, you know, kicking off good cash; fortunately, most of it has permanent financing, it’s just where we are trying to execute on any type of new acquisition or any kind of sale where we’re seeing the market just stagnate because of, you know, lack of financing available and where it is available; as you point out, it’s in the Freddie and Fannie world, and I’ll tell you, if something was to happen there, we would see an absolute grinding halt to the business.

DAN: Yeah, it’s certainly pretty troubling. And, you know, I was watching CNBC this morning and they said—actually, the...President Bush assembled a team to kind of, you know, review the agencies and what their actual position is.

MIKE: Right.

DAN: I’m definitely going to keep a good watch on that.

MIKE: Keep a close eye on that, sure.

DAN: I think you had an interesting point in there. Something that hasn’t been really out there and highlighted as much as I think it should, and that’s how hard new development got hit by the credit crunch. You know, certainly development activity has always been seen as kind of the riskiest way for...for lenders to enter the commercial real estate base, and, you know, unless you’re a very established developer with a huge track record and a project that’s in the perfect location, it’s very difficult to get debt right now, and then you throw on the rise in construction costs and, you know, this is going to have a tremendous affect on limiting supply...

MIKE: Right.

DAN: (...) which, in many markets, is already pretty tight. And so that’s one of the biggest factors that’s keeping me bullish over the, you know, next two to four years, that there’s going to be a huge wave of supply coming in on the commercial side.

MIKE: You know, I was...you know, it’s so interesting to be, you know, in a cycle that isn’t driven by the supply-demand fundamentals. Usually, we see our real estate corrections, you know, occurring on the operational side when supply exceeds demand, and in this case, we’re seeing it, you know...it’s occurring on the...on the capital side, and largely as it relates to the original subprime meltdown is now, you know, tripled into our business and constrained credit to such degree that, you know, our values are dropping, not because of supply-demand fundamentals but because of the availability of credit. It’s...and I don’t, you know...I remember suffering a little bit of this in the late 90’s with the Russian crisis, but that only lasted, you know, six months. Do you have any idea? I mean, are you guys looking out and seeing it improve any time in the near future?

DAN: Well, you know, I think we really need to get the CMBS market jumpstarted again, and, you know, we’re all pretty confident that it’s going to come back, it’s just the question of when and in what format. I think we’re going to start to see some new issues trickling in the fall, and I’m hoping we get back to, you know, a more normalized situation in the middle of next year. But I think when it does come back, it’s going to look a lot more like it did when the industry was just going to go: you know, very conservative, under-riding LTV, and actually makes sense to a lay person.

MIKE: Sure. Real solid coverage levels, subordination levels for triple B’s that all of a sudden make sense.

DAN: I’ll tell you, you know, we have a very talented group of analysts here at Real Capital Analytics, and they’re all real estate people. And some of the CMBS issues got too confusing even for my real estate analysts, and that can never be a good sign.

MIKE: No. I was actually talking to someone the other day about how it might reinvent itself and I think to simplify it—even to simplify it into product types. I mean, I don’t think people would...people thought when they were diversifying these pools—you know, cross-collateralizing office and mobile home parks and hotels with apartments and single-family—you know, that that created a diverse pool, but what it really created was something that no one could even understand the vehicle.

DAN: Yeah.

MIKE: And how do you underwrite those...you know, the various default rates because they all are...tend to be different? You know, that made it hard to value those bonds, I think, and...so I tend to think it’s going to come back in a form that’s more simplified. If you want to go buy a pool of apartment loans, you can buy a pool of apartment loans—or you want to buy a pool of office loans. And hopefully they’ll be underwritten differently and priced differently.

DAN: Well, and there’s definitely going to be much more transparency demanded by the buyers...

MIKE: Sure.

DAN: (...) of the bonds in the future.

MIKE: Well, another question I had which I had sent over to you and I think is...is interesting in this day, is this idea of the falling dollar and emergence of overseas capital. You’ve seen some large transactions where some of these, you know, sovereign wealth funds have come over and bought some prominent buildings in the United States. You know, given the strength of the dollar and also the fact that there’s a, you know, credit crunch, do you see that continuing, and can it have, you know, a bullying effect on the commercial market?

DAN: Well, I...you know, certainly, the falling dollar is one part of the equation, but I’m part of that camp that thinks that too much has been made on the actual dollar fluctuation. I think it’s a little naïve to think that, you know, these savvy investors from around world—you know, someone sitting in their office in London says, “The dollar is down 1% today, let’s go buy American real estate.” I think this is just occasional...international property players has gone to the point where they’re more interested in geographical diversification and, you know, if the currency is moving in their favor, fantastic; maybe they’ll wind up buying a little more here in the States. So I think it’s a part of a consideration, but I think it’s possibly a smaller part than...than many believe.

MIKE: You know, are there other macro trends besides, you know, the emergence of overseas capital that...that you...you all are looking at, that you think are going to, you know, sort of have a major impact on real estate investing over the next 12 months?

DAN: Well, I think the wildcard is the economy, and that’s where we’re going to have to watch very closely. You know, many of our markets that are linked to the global economy and its continued expansion are holding up very well. You know, you’re in Manhattan, D.C., San Francisco, or L.A., you know, activity and pricing has certainly held up much better than your more domestically linked markets here in the States. My biggest concern is, you know, a global slowdown in economic activity, which really affects our entire marketplace. So, you know, the economy is the wildcard, but I think we’re still in the middle of this major structural shift around the world with, you know, emerging economies developing and this demand from a rising middle class. I don’t think we’re at the end of that structural shift, and I think there’s going to be tremendous pressure for new modern commercial real estate product in the future—and that’s keeping me kind of bullish, at least over the next decade.

MIKE: Got you. You know, one of the questions that I had for you was...was this idea of deleveraging. You know, I was...one of my counterparts was in Sacramento this past week and talking about how much the retail segment of the market is suffering; you know, retail developments that are built now that have no one to fill them; you know, those retail stocks have been hammered, the death of the consumers being chanted, you know. Can you...can you sort of explain...if you see, you know, this consumer over the last decade has had more liquidity than maybe in...in any decade in recent history given their ability to borrow against their home and so forth? You know, do you think that we’re now seeing a fundamental shift; that we’re not going to see a consumer in the United States that’s as affluent and able to make those same buys? And do you...do you feel that it has a long-term negative impact on retail investing?

DAN: You know, we’ve been asked this question for years now, several years, and I just don’t understand the American consumers at all. I don’t understand how we could keep spending. I don’t know if you saw, you know, a top story in the Journal today—you know, Wal-Mart and a few other retailers showed increase in in-store sales. It’s just unbelievable how we keep spending and I...I just can’t get my arms around it.

MIKE: Where there’s a will, there’s a way, right?

DAN: Yeah, I mean, it’s...you know, we’re used to...we need to start looking at our economy more from a global perspective as opposed to just our local markets, because, you know, the falling dollar, if it has had an effect, it’s in tourism and, you know, in the personal level. You know, we’ve certainly seen a tremendous uptake in tourism and business travel from overseas folks. And in markets where there’s that strong attraction, it certainly helped to buoy the retail market from a slowdown—domestic slowdown. But, you know, back to your point, there’s no question that if there is one segment of overbuilding in our commercial real estate base, it’s in the...it’s in the retail property type in your secondary and tertiary suburbs around the country.

MIKE: Right.

DAN: But interestingly enough, one of the hottest property niches right now is urban retail, and we’re still recording record pricing on sales for urban retail around the country. So...

MIKE: Well, so...we...you know, the interesting part is we’re probably in the most turbulent real estate environment that we’ve seen in the last decade, which, as we all know, creates opportunities. So, yes, if we can maybe just end with you summarizing, you know, your views of some of those opportunities and what they may be, and give some of the listeners an idea of where, maybe if they have access to putting their dollars, they should be looking.

DAN: Well, if I know anything, the one thing I know is I’m not very good at telling the future. I’m certainly an Econ 101 guy, supply and demand, and I would much rather overpay in an expensive market where I know the supply dynamics are in a buyer’s favor; you know, coastal markets like Manhattan, D.C., San Francisco, L.A, and Boston, even...even some segments in Florida where there’s restricted supply. I really see the greatest potential for growth in those types of markets. And, you know, Real Capital Analytics is the midst of international expansion right now, and I’ll tell you, our rental rates for most commercial property types are starting to look very attractive when comparing our levels to locations overseas.

MIKE: Right.

DAN: It’s keeping me very, very bullish especially on the international markets here in the States.

MIKE: Well, Dan, where can our listeners go to learn more about the reports and subscription services from Real Capital Analytics?

DAN: They can certainly go to our website at rcanalytics.com. There’s a wealth of free data on commercial real estate markets up there, and they can certainly put in their e-mail and sign up for a free trial of our service.

MIKE: Okay. Well, thank you very much. I really appreciate the time. I’ve learned a lot. I think everybody else probably has, too, and I appreciate it. And hopefully we’ll catch up again soon because things are changing so fast that we...we may have some new things to say.

DAN: My pleasure.

MIKE: Thanks, Dan.

(fade music)

DARBI: Excellent. All right. Thank you again to Dan Fasulo, Managing Director of Research for Real Capital Analytics, and Michael Green, Principal and co-founder of Virtu Investments for joining us today on Capital Synergies.

So guys, if you are an investor looking for expert assistance with financing commercial real estate, be sure to check out the new commercial loan programs offered by Steelhead Capital, your commercial mortgage advantage. Again, that web address is http://www.SteelheadCapital.com.

Dan Fasulo

Capital Synergies podcast with Mr. Dan Fasulo, Director of Market Research for Real Capital Analytics. On this show, Dan explores with us the emerging global markets for commercial real estate investors and offers key insights to capital trends and opportunities you won't want to miss...


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DARBY: Hello! This is Darby Worley, your host for the Capital Synergies Talk Show for commercial real estate investors. Capital Synergies is brought to you by Steelhead Capital, your commercial loan advantage. Today, we have with us, Mr. Dan Fasulo, Managing Director for Real Capital Analytics. Dan, welcome back to the show.

DAN: Thank you for having me.

DARBY: So, let's go ahead and hop on to the interview. So your focus is on global market for commercial real estate. Most of our listeners are U.S. investors, but increasingly, we hear of overseas opportunities that may be getting more attractive while our own markets recover. Do you see an increasing number of U.S. investors making that leap into the global market today?

DAN: We are seeing more and more U.S. investors interested in opportunities in emerging markets around the world. At Real Capital Analytics, our client base is really the institutional investors of the world.

DARBY: Right.

DAN: And it was really our clients that drove us to track data...

DARBY: Really?

DAN: ... throughout Asia and Europe over the past couple of years, and, you know, we began in 2006 and, you know, we were getting feedback from all of our investors, many of them are U.S. based, that, "Hey, we want to invest our capital over in Asia, over in Europe, but we just can't get comfortable with the type of information like the way you guys provide it here in the States."

DARBY: Right, right.

DAN: So, there's definitely an education process going on right now, but if you go across the board, almost every major global property player based here in the States has already announced their intentions to increase their allocations overseas.

DARBY: Yeah, and that really only makes sense.

DAN: Yeah. CalPERS, the largest U.S. pension fund, has already stated their intention to move their overseas real estate allocation to 50%, five-zero, from 15%.

DARBY: Wow.

DAN: And when you're talking about a multi-billion dollar pension fund, you could see the capital adds up pretty quickly.

DARBY: If you were to gauge the flow of U.S. dollars entering global markets, I mean, what kind of deal flow are we seeing?

DAN: You know, it's this...there's certainly this wave of geographical diversification going on right now. You know, kind of a way what happened in the stock world about 10 years ago where everyone realized, "Hey, we only have U.S. equities, we should really diversify geographically." And we're right now in the beginning of that wave, and I think the effects of the credit crunch and the domestic slowdown in the economy we're seeing here in the States has only speeded up that process and interest for U.S. investors to invest more capital overseas for diversification purposes.

DARBY: Okay. So in terms of the flow of capital, you know, it's heading out in the near future, what do you see about the longer-range future?

DAN: Well, I really see this trend continuing until investors based in the U.S. feel like they have the appropriate geographical split to get the best returns for their portfolio that are, you know, risk-adjusted. You know, there's a lot of risk in having your entire portfolio in just one country right now, and if that country, you know, undergoes economic downturn, you know, all your eggs in one basket, and every one's realizing the benefits of geographical diversification now.

DARBY: Okay. So, what about the other direction, you know, in terms of the inflow of foreign dollars into domestic acquisitions? We've seen a couple of major landmarks here in New York purchased by Middle East investors just recently; can you comment on that trend?

DAN: Yeah, this is a big week in New York with the announcement that the Chrysler Building was sold to the Abu Dhabi Investment Authority, basically the southern world fund of that country, and, you know, we've seen more and more trophy acquisitions here in the States by overseas investors, especially from the Middle East. It's a pretty simple equation. You know, these groups right now are benefiting from the run-up in oil prices. Their coffers are full of capital that needs to be placed in investments throughout the world, and, there's only a finite amount of places for them to invest their capital and, you know, they try to do it in a most efficient process that they can. And that's why they look for larger assets to buy, you know, billion-dollar plus, and there's just only a finite amount of property in the world that's worth a billion dollars.

DARBY: Yeah.

DAN: So, any time one of these trophy assets, like the Chrysler Building, does come on the market, we'd certainly seen a tremendous amount of bidding activity from foreign investors.

DARBY: Okay. Let's move on to China. The last time that your cohort, Pete, was with us, we spoke briefly about the China market-the opportunities, maybe even some of your concerns with pollution in the upcoming Olympics. What are your thoughts on China these days?

DAN: Well, it's just a tremendous market. We've been tracking a deal activity there for about two-and-a-half years now and it's already the fourth largest country for real commercial real estate investment. An overwhelming majority is going into the development of new properties. You know, they don't have the modern assets for investors to purchase so many institutional investors are entering the country through development activity with local joint-venture partners. There's certainly been a tremendous property boom over the last several years, and, you know, driven by their just overwhelming demographics-you know, you hear about all these...all these hundreds of millions of people entering the middle class and demanding all the types of modern services that other, you know, western countries have around the world, and it's just driving tremendous demand for all types of commercial real estate: apartments, retail, office, industrial...

DARBY: It's also driving the pollution issue. See, I heard this, Dan, yesterday that they will have as many drivers and as many cars as we do within 15 years, and they already have such a horrible pollution problem. How does that play into your market goal? Do you think about that kind of thing?

DAN: There's no question that our investors are concerned in such issues and you would hope that they would learn from some of those mistakes that the U.S. has made over the years, but unfortunately, it seems that every country needs to learn their own lessons. But this new middle class...and as the population there is becoming more well-to-do, they are understanding and recognizing and starting to speak out about the environmental degradation and, you know, the need for there to be some safeguards. Because, from reports we've heard, it doesn't sound like what they're doing right now is sustainable, and it's certainly going to have an impact in the future on investment activity in the way that offshore investors look at their market.

DARBY: So what about India? You know, I hear that there have been some improvements in the transparency of their commercial real estate market recently. First of all, can you talk a little bit about that for our listeners maybe who are unaware of what types of improvements have been made. If you could kind of like back up and give us a little bit of background on that, and then also do you agree with that? Do you think they really are more transparent? Is this a good thing? What are your thoughts there?

DAN: Well, there's no question many of the emerging markets around the country are becoming more transparent, albeit that coming off a very low base, so we still have a far way to go on the transparency part to really get to the point that investors feel overly comfortable the way they do in the U.S., in the UK, throughout Europe, and Australia -- and we're not there yet. But it is improving, which is certainly a positive sign. We are seeing a tremendous amount of capital, foreign capital, flowing to India mainly also through new development. You know, many of the similar trends that are being witnessed in China with the emerging middle class... we're also seeing that in India. And I expected with a billion people and with a much younger population than China, that not many people recognize, I think that India is going to have to be a place where global real estate investors have a significant allocation of their portfolio in the future in order to capture the growth that's going to happen over the next couple of decades.

DARBY: Okay. What about Australia? The past years have seen a lot of Aussie dollars entering the U.S. market, but today, according to Bloomberg, there's talks that Australian Real Estate Investment Trust may have to sell much of the U.S.' 67 billion dollars in overseas property assets. What do you think of that?

DAN: Well, I actually just got back from a two-week Asia trip where I spent a week in Australia, in Melbourne and Sydney, so I got some great first-hand information from many of the property players down in that market. You know, Australia has a situation where there's a tremendous amount of capital that flows into the major property players there through their state-mandated pension plan that basically contributes capital to these funds, these listed funds, every year. So, they're flush with capital, but unfortunately, some of these listed funds, have gotten so large that they've basically outgrown Australia as an investment opportunity, and they've having to look in other countries throughout the region and in the U.S. and Europe. And the Australians have been a major acquirer of commercial property in the United States, mainly retail centers, over the last several years, and some of those players got caught up in the middle of the credit crunch through their use of short-term debt financing, and that certainly sent some shock waves through these companies down in Australia and many of their stock crisis have become fully depressed because many fear that this could some liquidation or...excuse me, some liquidity concerns with those companies as ongoing concerns. And you know, correspondingly, we've certainly seen little to none, no Australian investment in the States this year, and until they turn their ship around, I think it's going to be a while before they are really a player in the States again.

DARBY: Okay. We're covering a lot of ground here, but then, you know, this is the global report. Can we move on the brick countries, which are Brazil, Russia, India, and China? Now, you obviously have already talked a little bit about India and China, but what about Brazil and Russia and their, I guess, relationship with the other two countries that we've already talked about?

DAN: Yeah, they all have their unique factors right now, and with the economic slowdown in the U.S. and throughout Europe, they've been the hot buzz word of the time right now, and more and more investors are looking to allocate capital in these markets which they consider to be great places for growth on the commercial real estate side. And you know, they just have great trends and great supply-demand demographics right now that make it a very attractive place to put your capital in real estate.

DARBY: Okay. Now, let's pretend that it's you, your personal finances; which one of these emerging markets would you be most interested in if you yourself were considering a cross-border investment?

DAN: If I myself, I would say none.

DARBY: Really?

DAN: I'm a big believer in buying what you know, and my base is here in New York and I do purchase properties locally, and real estate is always going to be a local business. That being said, major investors who are interested in investing in emerging countries, I would recommend that they find a very good local partner that they can work with, where they can get their interests in line, and that's only way to make it work.

DARBY: I'm assuming you have a relationship like that overseas.

DAN: We certainly are making relationships with many local firms, and it's the best way to go to navigate those markets which, you know, there are some transparency issues, there's always political risk, and I've already heard some horror stories from investors who, used the wrong local partner and are learning that this learning curve is not going to happen overnight, and you're going to have to team up in the beginning to really learn the market and be successful there.

DARBY: Right. Of all the trends in the global or national marketplaces, which ones do you think are potentially the most problematic for U.S. investors, and then after you speak of that, I'd sure like to hear some good news in what do you think are them most promising for U.S. investors?

DAN: I think the biggest wild card right now is the economy...

DARBY: Right.

DAN: ...and where it goes...

DARBY: Yeah. What do you think of Mr. Gramm's comments that we're not in a recession?

DAN: Well, you know, we're certainly not in a technical recession...

DARBY: Right.

DAN: ...but for many folks around the country, it certainly feels like one.

DARBY: Right.

DAN: And we've certainly slowed down significantly, and I don't think the full effects of higher oil prices have really run through the economy just yet.

DARBY: Right.

DAN: I think we'll continue to see that over the next 6 to 12 months. And, you know, commercial real estate has always been directly related to the economy and, you know, that's why many investors are looking to geographically diversify and look for locations where they feel like there is tremendous growth on the commercial real estate side.

DARBY: Okay. And what about the most promising trends for U.S. investors?

DAN: Many of our clients who are of the institutional crowd of the world, many of them are still very much flush with equity capital that they've raised and needs to be invested over the next 12 months, and it's just a question of when and where. You know, right now there's a disconnect between buyers and sellers because debt cost has risen significantly and, you know, buyers are looking for a discount right now, and sellers, for the most part, are sitting on relatively good fundamentals with many of their buildings being leased and have decided to just pull their properties from the market and wait for a brighter day, as opposed to you know, selling their assets at a discount. So, this game of chicken will have to come to an end at some point because investors are in the business of investing, lenders are in the business of lending, and we all have to get back to work.

DARBY: Right.

DAN: So, I think confidence and having confidence in the market is the most important thing that we could use right now to really jump start everything and get us going.

DARBY: Okay. So, let's talk about the light at the end of the tunnel... Imagine, if you will, that it's there. What does it look like? What kind of economic or political signs are you looking for that might signal a recovery?

DAN: Well, I think it's going to be a combination of things. You know, everyone is waiting for the presidential election.

DARBY: Yeah.

DAN: ...coming up here in the fall in the States, and there is always concern that policies could change especially related to the economy. And I think in this more challenging environment, I think if there's any significant public policy changes on the economics of the tax side, it could be a perilous event for commercial real estate industry. But overall, I think the light in the tunnel, something that keeps me very bullish right now, is the fact that we haven't really overbuilt in this cycle. You know, in the past downturns, it had been created by just a tremendous amount of oversupply, and that's just not the case this time. And it's really keeping me bullish that especially in your built environments like the coast of the United States, I really see a supply-demand scenario that is very favorable for commercial real estate investors over the near term.

DARBY: Any last words of advice or encouragement for our listeners?

DAN: In this challenging time it's very difficult to understand where pricing is and I certainly recommend that folks come to our website and look at some of our information, and we're happy to help investors disseminate the market and try to figure out where the true market pricing levels are.

DARBY: So, guys, if you want to get this kind of investment research data on a regular basis, you can subscribe to these reports at your website, correct?

DAN: That's correct.

DARBY: And what's the URL again?

DAN: www.rcanalytics.com

DARBY: Excellent. So, there are things they can look at right off the bat that are out there and available all the time, but they can also subscribe to receive the reports on a regular basis, is that correct?

DAN: Absolutely.

DARBY: So, that website again, guys, is www.rcanalytics.com. Excellent. All right. Thanks, Dan. This has been a really insightful discussion on commercial real estate, and I'm sure that our listeners appreciate you spending time with us today.

So, guys, if you're an investor looking for expert assistance with financing commercial real estate, be sure to check out the new commercial loan programs offered by Steelhead Capital, your commercial mortgage advantage. Again, that web address is steelheadcapital.com. This has been Darby Worley, your host for Capital Synergies. Dan, thanks as always for joining us, and we hope to speak with you again soon.

DAN: My pleasure, Darby.

DARBY: Take care.

DAN: Bye, bye.