Today’s guest is Robert Withers.
Robert is an Entrepreneur and Real Estate Finance professional with experience in Conventional , SBA & Private Equity CRE financing.
Show summary:
The conversation unfolds with an introduction to unconventional loans, followed by an exploration of the scale of real estate podcasts.The discussion touches upon selling brokerages, navigating agreements, and imparts valuable lessons on scaling a real estate business. Throughout the episode, the speakers candidly address challenges in scaling, regional business variations, the significance of relationships, and provide a comprehensive overview of the current state of commercial finance.
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[00:00] – Intro
[03:54] – Speaker, guest journey.
[06:48] – Guest’s background, transition.
[09:31] – Selling brokerages, agreements.
[12:45] – Scaling business lessons.
[15:54] – Challenges in scaling.
[18:32] – Regional business differences.
[21:45] – Importance of relationships.
[24:50] – State of commercial finance.
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Connect with Robert:
Facebook: https://www.facebook.com/M1CapitalCorp
Linkedin: https://www.linkedin.com/in/robert-withers-602b16/
Twitter: https://twitter.com/M1CapitalCorp
Phone: (914) 490-8623
Connect with Sam:
I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.
Facebook: https://www.facebook.com/HowtoscaleCRE/
LinkedIn: https://www.linkedin.com/in/samwilsonhowtoscalecre/
Email me → sam@brickeninvestmentgroup.com
SUBSCRIBE and LEAVE A RATING. Listen to How To Scale Commercial Real Estate Investing with Sam Wilson
Apple Podcasts: https://podcasts.apple.com/us/podcast/how-to-scale-commercial-real-estate/id1539979234
Spotify: https://open.spotify.com/show/4m0NWYzSvznEIjRBFtCgEL?si=e10d8e039b99475f
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Want to read the full show notes of the episode? Check it out below:
[00:00:00]:01 – [00:00:36]:12
Robert Withers
Why lock into a seven and a half percent, 3 to 5 year conventional loan with prepayment penalties when you can take interest only debt at a point they have a point and a half to two points over that. Okay. No prepayment penalty. And if it pencils, meaning if the numbers work, you’ll have an opportunity in two years to hopefully lock into long term as cheap as possible interest rates going out for that, you know, for that either five or ten year term that you’re looking for.
[00:00:36]:23 – [00:00:58]:16
Sam Wilson
Welcome to the How to Scale commercial Real Estate Show. Whether you are an active or passive investor, we’ll teach you how to scale your real estate investing business into something big. Robert Withers is an investor, entrepreneur and real estate finance professional with experience in conventional SBA and private equity. Robert, welcome to the show.
[00:00:59]:01 – [00:01:00]:21
Robert Withers
Thank you, Sam. Great to be.
[00:01:01]:03 – [00:01:09]:21
Sam Wilson
Absolutely, Robert. The pleasure’s mine. There are three questions I ask every guest who comes on the show in 90 seconds or less. Can you tell me, where did you start? Where are you now and how did you get there?
[00:01:10]:21 – [00:01:42]:18
Robert Withers
Well, okay. Where do I start? I started in the men’s clothing business back in 1982. And basically what happened was I had was given an opportunity to be able to jump into the mortgage business because of the expensive men’s clothing that I wore. Somebody took notice. So that was a sharp dresser. It gave me an opportunity to be able to get into sales in the mortgage industry in the early eighties and taught me the business.
[00:01:42]:24 – [00:02:14]:15
Robert Withers
Four years later, I went into my own business, started my own company after three mortgage companies on the residential side, which I all sold the last one right prior to the to the financial crisis. We took a little time off, reset things, decided that residential mortgages wasn’t something that I wanted to do any longer, and jumped into the commercial real estate finance field.
[00:02:14]:23 – [00:02:18]:03
Robert Withers
And I’ve been there ever since. That was in about 2014.
[00:02:18]:22 – [00:02:32]:16
Sam Wilson
Got it. Okay, now that’s cool. How did you when you sold all three of those businesses this this is getting in the weeds a little bit, but it sounds like you figured out how to do it once. And you said, look, we built one company. Want to go out and just do it again. But how did you get around non-compete or did you just.
[00:02:33]:03 – [00:02:33]:24
Robert Withers
I waited them out.
[00:02:34]:09 – [00:02:34]:17
Sam Wilson
Okay.
[00:02:35]:04 – [00:02:55]:04
Robert Withers
I waited them out. You know. But you know, Sam, it’s interesting you bring that up because I. I sold a mortgage brokerage. Now, I don’t know if you know anything about our business, but not a lot to sell there, right? There’s not a lot of, you know, really good will and maybe some of a pipeline that you may have in it.
[00:02:55]:20 – [00:03:18]:10
Robert Withers
The companies weren’t huge companies, but they did you know, they did a few million dollars worth of business a year. So they were nice sized companies. My first one was a sale and I was young when I did it, so it was awesome. I sold it for seven figures. I actually sold it to somebody who decided to reinvest the money back into the company so we could go national.
[00:03:18]:17 – [00:03:45]:24
Robert Withers
That did not work out. It didn’t work out for me. It didn’t work out for him. And I wound up buying the company back, which and then developed my second company. So the non-compete wasn’t really an issue because of the fact that I kind of waited it out and then was able to buy the company back and take it into my second mortgage company, which I sold and turned that actually into a mortgage bank that we were in several states.
[00:03:46]:08 – [00:04:07]:00
Robert Withers
So it was kind of cool. We had a great time. But my, my partner and I had a disagreement in the in the direction I wanted to take it more of a New York luxury market based. And he wanted to do government based business. And we had a we agreed to disagree. It was very you know, it was it was very cordial.
[00:04:07]:10 – [00:04:23]:01
Robert Withers
And then my third one, which launched me into my third company, which I shut down really, but sold off some pieces of it, but shut down prior to the financial crisis, non-compete were really never an issue. Timing because of the timing that we took. So.
[00:04:23]:01 – [00:04:42]:02
Sam Wilson
Right. Yeah. And if you’re listening to this and you haven’t sold a business, a lot of times there’s going to be restrictions around you getting back into the same business, especially in the same geographic area. If it’s a geographically bound company where it’s absolute what you can’t for three or five years compete in this, you know, whatever the radius is from your business or, you know, and they’re all structured differently.
[00:04:42]:02 – [00:04:56]:10
Sam Wilson
But that’s a that’s really cool. I appreciate you giving us the insight there. I think you may have answered this question, but you said in the company that you guys look to scale because the name of the show is how to scale commercial real estate. You guys said, hey, we’re going to scale. And I think the principles are the same.
[00:04:56]:21 – [00:05:08]:10
Sam Wilson
We’re going to scale this business, you know, across the United States. And you said that didn’t work out. What were some of the lessons you learned in that didn’t work out, process it?
[00:05:08]:10 – [00:05:46]:18
Robert Withers
I think for the most part it was two things. We were really more of an East Coast. The leadership team on our company was really East Coast focused. So I found as we talked to people throughout the country, that mindset and how things are done both in, you know, on a local basis and on a regional basis differ greatly from New York to California here and from New York to Tennessee and from New York to the you know, to the northern parts of our country.
[00:05:46]:18 – [00:06:11]:02
Robert Withers
So, you know, I think cultural and that not culturally. I think it was just a matter of mindset. And I think the way that we wanted to run our company isn’t what we saw. We could replicate well in other parts of the country. So we decided to really stay more on the East Coast. We were licensed in Connecticut, New Jersey, New York, Florida.
[00:06:12]:09 – [00:06:36]:09
Robert Withers
And from that part, we were we were successful. And we, you know, we were able to scale, but we were able to scale in what we knew rather than, you know. And you would think, you know, listen, you know, a product like a mortgage is universal, right? It’s the same it’s a national thing. You know, it’s it’s it’s rates are driven by national for national reasons.
[00:06:36]:09 – [00:07:02]:02
Robert Withers
You know, there are state regulations. But for the most part, the markets that buy mortgage loans are national at Fannie and Freddie Mac. But doing a good job in markets that you don’t understand is it can be very difficult. And when management doesn’t agree with what boots on the ground, well, the flops, the philosophies of each when there’s no agreement, it’s difficult.
[00:07:02]:02 – [00:07:22]:13
Sam Wilson
So I could see that. And that’s something that I think until you’ve lived in various parts of our country, you may not understand. You know, here in here in Memphis, Tennessee, if you get on the phone, even with somebody if I saw you yesterday, Robert, we’re going to talk for about six or 7 minutes about nothing. We’re going to talk about the weather.
[00:07:22]:21 – [00:07:39]:24
Sam Wilson
We’re going to talk about, you know, family, all sorts of things. I lose you there, Robert? No. Okay, cool. And I was that you were you were you were still a stone. I was like, oh, shoot. Maybe the Internet froze. But no, we’ll talk about a lot of different things long before we ever get to the reason for the call.
[00:07:40]:05 – [00:07:56]:15
Sam Wilson
It’s just the way it’s done. And I’m from Indianapolis. I was born there and we don’t really like we pretty much get on the phone and, hey, you know what you need, Robert? What’s going on, man? And we get down to business, but here in Tennessee, man, I had to slow down. I’m like, wait, like, if I don’t ask and it’s just kind of rude if you’re just like, Hey, what’s up?
[00:07:56]:20 – [00:07:58]:20
Sam Wilson
Click like it just doesn’t work.
[00:07:59]:06 – [00:08:04]:02
Robert Withers
If you’re from Indianapolis, right? You were like, right down to business. Now I’m from New York.
[00:08:04]:05 – [00:08:07]:20
Sam Wilson
Oh, you guys are even more I mean, you guys are like, what?
[00:08:07]:20 – [00:08:33]:01
Robert Withers
We jump a couple of spaces in front of you and it comes down to, okay, we won’t even introduce ourselves. And we’re pitch and we’re pitching a product. You know, we don’t get me wrong, I’m not I’m not a big I’m a relationship builder. I’ve been in this industry for almost 40 years in one way or another. So I didn’t survive this way by being transaction, you know, triad transaction related.
[00:08:33]:08 – [00:08:43]:13
Sam Wilson
And I’m not suggesting that it’s just, it’s just a different way of communicate. And if you’re not prepared to spend the 7 minutes talking on the phone about nothing, then people are going to think you’re rude and be like I don’t wanna do.
[00:08:43]:19 – [00:09:06]:15
Robert Withers
Business with developing relationships are is you know is something that you know I mean you can start it in 7 minutes, but some of my best clients are ones that came back to me, you know, the second, you know, two or three times we had spoken two or three times transactions didn’t work. And then all of a sudden it kicked in and things actually wound up jelling between the two of us.
[00:09:06]:15 – [00:09:08]:10
Robert Withers
So relationship building is huge.
[00:09:08]:14 – [00:09:25]:23
Sam Wilson
Absolutely. No, I appreciate you giving the insight on that because it’s one of those things, even for people out raising capital, it’s an important skill set to master. Am I talking to somebody from New York, New York investors? Man, we is down to brass tacks on the beginning. The phone call, I call somebody from Memphis, Tennessee. We’re going to spend our time on the phone.
[00:09:25]:23 – [00:09:40]:17
Sam Wilson
And so it’s knowing and being able to shift even gears immediately when you jump on the phone with those people. And knowing how that works is I think it’s an important skill that as you scale your business, that you and your team have to master. So that’s a rabbit hole. But I appreciate you taking the time to kind of go down some of that.
[00:09:40]:23 – [00:10:02]:13
Sam Wilson
Tell me about your business today. I know you said in 2014 you decided to get into commercial real estate finance and Gilliam saying this is ten years ago now. You know, 2014 was when I think things really started to recover in the real estate markets. Commercial real estate, residential real estate started to, you know, go on that upward curve that we’ve seen for the last nine or ten years.
[00:10:02]:13 – [00:10:16]:23
Sam Wilson
What tell me about the business you guys are in today and maybe give us, you know, if you can, just a quick rundown on what the last decade looked like and kind of how you guys are positioning yourselves now, changing it.
[00:10:17]:00 – [00:10:41]:03
Robert Withers
Things have changed a lot from going from an investment market where, you know, we’re cap rates were compressed and, you know, they were low and everybody, you know, we had cheap debt. Let’s face it, you know, at one point we were looking at 3%, you know, commercial real estate rates that that were trading. So it wasn’t hard to get a deal to pencil.
[00:10:41]:10 – [00:11:29]:23
Robert Withers
So people were were were trading investment real estate left and right. We work in basically four major food groups or product sets is a better way of describing it. And that is we do a lot of SBA financing for owner occupied clients are looking to finance property they want to buy for their business. We do conventional financing for somebody who’s buying a some sort of a mixed use or multifamily product or an industrial product for purposes of investment, we or or owner occupied, we do bridge loan financing which is short term up to three years type financing, which, you know, is in short, short term a great, great tool for actually what’s going on right
[00:11:29]:23 – [00:12:15]:08
Robert Withers
now because nobody’s actually buying into conventional rates because they’re high. So putting in a short term solution like a bridge loan makes a lot of sense in many cases. And and spec spec construction, construction financing for the purposes of building a, an investment property, whether or not it’s a single family home of a bunch of different homes, you know, you know of it in the case of a of a of a development project or, you know, something that’s more like an apartment building, not and we’re not seeing a lot of mixed use or multifamily construction going on right now for the purposes of of of in the investment markets.
[00:12:16]:17 – [00:12:40]:23
Robert Withers
So we concentrate on those four types of programs here or products here. And from 14 to 23, for the most part, it’s been up and down. You know, Sam, it’s you know, we started off really, like I said, in a very low interest rate market. So the products were really all, you know, either CMBS loans or they were regional banks that I we don’t do a lot of business with national banks.
[00:12:40]:23 – [00:13:06]:24
Robert Withers
It’s mostly local or regional banks offering great product. And as rates changed over time and an opportunity changed over time, we shifted gears. Last year was our biggest year ever with SBA financing. We did a lot of SBA financing and bridge loan financing. So and quite frankly, I think we’re going to we’re going to see a repeat of that for 24, as they’ve been saying in our industry.
[00:13:06]:24 – [00:13:26]:01
Robert Withers
Andrew About your industry. Sam But in our industry they’ve been saying it’s survive until 25. So you know what? I think for the most part, you know, we’re looking ahead and maybe, you know, going to see some of that investment type real estate come back in 2025. Right, equity investment properties.
[00:13:26]:07 – [00:13:44]:13
Sam Wilson
So that makes a lot of sense. We’re going to cover, I think, get into some of the more nuanced pieces of this. I’m looking here, bridge debt. You mentioned that bridge debt is a good tool for now a lot of people. And I’m going to I’m going to I’m going to ask you to tell me why I’m wrong.
[00:13:45]:09 – [00:14:00]:23
Sam Wilson
So a lot of people have taken on short term debt in the last 2 to 3 years. And from this side of things, I look at it and say, man, bridge, that’s a bad deal. It’s a bad deal because right now there’s I don’t know how much what is it? What then? You could probably give me the accurate number on this.
[00:14:00]:23 – [00:14:08]:03
Sam Wilson
I’m going to pull this one up and say it’s north of $1,000,000,000,000 in debt coming due in 2024 on commercial.
[00:14:08]:05 – [00:14:08]:15
Robert Withers
Scale to.
[00:14:09]:03 – [00:14:09]:13
Sam Wilson
I’m sorry.
[00:14:09]:24 – [00:14:10]:17
Robert Withers
Close to it.
[00:14:10]:23 – [00:14:25]:05
Sam Wilson
Right. So in in some of that, I would venture to say I don’t have any empirical evidence to substantiate this claim. But I would say that a large part of that is probably bridge debt where it’s like, hey, man, we got to get out of this. We don’t know how to get out of it. We got to refi somewhere.
[00:14:25]:12 – [00:14:42]:04
Sam Wilson
And so we’re going to see cash in, revise happening and or assets selling at a massive discount because of the way they structured the debt. Tell me why you say in light of that frame, tell me why you say that bridge debt is still a good tool for now and how do you use it without playing with fire?
[00:14:43]:02 – [00:15:09]:18
Robert Withers
Interest rate cycle sent interest rate cycle was lower three years ago when this debt was was originated. So unfortunately, that debt that’s coming due is is being refinanced in a higher interest rate market. We’ve for the most part, if you were to believe the Fed in I have a hard time believing the Fed. But, you know, if you’re over the next couple of years, we’re going to see that cycle turn around.
[00:15:09]:18 – [00:15:31]:15
Robert Withers
I think for the most part, we can agree that interest rates have topped out. You know, there is certain concerns on the employment jobs data side, but for the most part, inflation looks like it’s under control. And although take my word for it, I never seen the price of eggs and bread be where it is at this moment.
[00:15:31]:15 – [00:15:51]:09
Robert Withers
But for the most part, inflation, if you’re going to go on a on a pure core product or service or, you know, in this case a product gasoline, you know, gasoline prices are coming down. Now, you could say that that’s, you know, technical in nature. But quite frankly, I think it’s a good indicator where we’re headed in regards to prices.
[00:15:51]:20 – [00:16:38]:24
Robert Withers
So having said that, I think that people who are originating bridge that now like we have a bridge program that’s one overpriced three quarters to one over prime you’re single digits right why lock into a seven and a half percent 3 to 5 year conventional loan would prepayment penalties when you can take interest only debt at a point they have a point and a half to two points over that okay no prepayment penalty and if it pencils meaning if the numbers work you’ll have an opportunity in two years to hopefully lock into long term as cheap as possible interest rates going out for that, you know, for that either five or ten year term that
[00:16:38]:24 – [00:16:49]:02
Robert Withers
you’re looking for. So it depends on the transaction, but quite frankly, I think is a short term for the right trend, for the right transaction. I think it’s a good solution.
[00:16:49]:20 – [00:16:55]:19
Sam Wilson
So the so the gamble here is that interest rates do not continue to climb.
[00:16:55]:19 – [00:16:56]:07
Robert Withers
Yes.
[00:16:56]:17 – [00:17:01]:05
Sam Wilson
Okay. No. And that’s I mean, that’s as long as you go in eyes wide open. You know.
[00:17:01]:09 – [00:17:49]:07
Robert Withers
I think any substantial climb in interest rates, Sam, would hurt this economy, never mind our industry more than than it already has. And I don’t think the Fed’s willing to take that chance. So, listen, it’s as real estate. It’s you know, there are there is some risk, right? So this is a risk weighted decision. We’re advising certain clients who who have that space in their performer to maybe consider bridge debt now versus convention debt because they’re not facing a 2% prepayment penalty on a $10 million loan in 2025, when interest rates could be the I mean, hypothetically lower and much lower.
[00:17:49]:21 – [00:17:50]:04
Robert Withers
You know.
[00:17:51]:13 – [00:18:11]:07
Sam Wilson
You guys said and that makes sense. I mean, again, you know, for for the right product or the right project at the right time, you know, that’s something you just got to weigh your options there. I think that’s the conclusion there that that there is this is a tool that for the right fit makes perfect sense that let’s talk about SBA 2023.
[00:18:11]:07 – [00:18:22]:01
Sam Wilson
You guys said you wrote a ton of SBA loans at 2023. Walk us through that program. I mean, SBA, I’m assuming, is long term fixed. Yes, we.
[00:18:22]:01 – [00:18:23]:24
Robert Withers
Buy 25 year. Yeah, 20.
[00:18:23]:24 – [00:18:25]:19
Sam Wilson
Five. Talk to us about that if you can.
[00:18:26]:07 – [00:18:56]:19
Robert Withers
Sure. So what we found is there was a host, a lot of owners of businesses out there who had done well, post-pandemic. Their businesses were doing fabulous. Listen, let’s face it. We what you can question is there’s always going to be a debate on it, but our economy is strong. So a lot of small businesses were doing very well and they decided that, you know what, they want to buy something now this is the time to buy it.
[00:18:56]:19 – [00:19:30]:15
Robert Withers
Our financials look great. We’ve got cash. You know, perhaps we’re going to wind up being able to negotiate a great deal on the property that they’re already in, approached the owner say, listen, we you know, we’re interested in buying the property. Interested, or they were looking at property that was on the market for sale. Now, you know, as a seller of a as you know, a retail spot or industrial space or maybe a commercial condo, seller’s got to say to himself, you know what, the market’s pretty ripe right now.
[00:19:30]:21 – [00:19:56]:05
Robert Withers
This is a good time to sell. I mean, you know, where are we going to be in at the end of 2024 in regards to values? Because everybody’s kind of targeting that we’re going to see a reset and that reset is going to be pretty much because of a total environment type. Look at look at commercial real estate, fair or not, things on a macro basis, you know, they impact the smaller markets.
[00:19:56]:16 – [00:20:23]:22
Robert Withers
And what we saw, what people really take advantage of that, you know, they were able to lock in a rate that was. Yes. Higher than they wanted to pay. But they’re an owner. SBA gives them up to 90% leverage, which is, let’s face it, that’s very attractive fixed rate for 25 years. And on the seven eight program, they give you they can give you working capital and they pay your closing costs.
[00:20:25]:00 – [00:20:46]:10
Sam Wilson
That’s wild. I mean, to win it. Yeah. In fixed rate fixed rate debt over a 25 year period. I mean, it’s incredibly tempting because it’s the the real estate investors in this in this case, small business owners, greatest hedge against inflation like you can borrow in dollars and repay and dimes.
[00:20:47]:01 – [00:20:47]:13
Robert Withers
Thank you.
[00:20:48]:03 – [00:21:07]:08
Sam Wilson
It’s yeah that I mean that’s that’s astounding I mean it’s getting through I think one of the things like you mentioned, though, one of the one of the, you know, reasons that people don’t do it is because they look at that interest rate that they’re paying because it’s above market. They’re looking at that. They look at the length of time they’re locked into it.
[00:21:07]:08 – [00:21:11]:04
Sam Wilson
They look at a lot of those factors and then look at are closing costs, which can be onerous.
[00:21:11]:23 – [00:21:40]:24
Robert Withers
Daunting. But since 5000, they’re not paying 5000 in rent and you know, all for their mortgage payment. They may be paying closer to seven because of the interest rate bump, but they’re paying 7500 right now, a month in rent to somebody else and not owning the property. And the money’s gone. And all they get out of it is a line item on their on their pro forma, on the on their if they have financials and a line item expense on their financials makes no sense.
[00:21:40]:24 – [00:21:56]:13
Robert Withers
If somebody is in the position where they can, they have the capital to buy the property that they’re in or something that works better for them. This is the time to use SBA financing. It was without a doubt the leading charge product of 2023 for us.
[00:21:56]:18 – [00:22:01]:17
Sam Wilson
Right. Because it’s one of the last ones that had long term fixed rate debt, the last last minute.
[00:22:01]:17 – [00:22:04]:20
Robert Withers
Single digit rate and single digit rate.
[00:22:04]:20 – [00:22:06]:12
Sam Wilson
So that’s that’s amazing.
[00:22:06]:12 – [00:22:20]:03
Robert Withers
And really the analysis, Sam, is rent versus own. It’s nothing more than that. It’s not interest rate, it’s not copper. It’s nothing else other than rent versus own. Where are the benefits of owning this property versus renting?
[00:22:20]:03 – [00:22:26]:19
Sam Wilson
It makes perfect sense. What is the total dollar amount? The SBA will loan any one person or entity?
[00:22:27]:03 – [00:22:27]:18
Robert Withers
5 million.
[00:22:27]:24 – [00:22:39]:12
Sam Wilson
5 million. Okay. And that’s 5 million in cash. Not and that would include that would include the debt against against real estate. Or is that just 5 million does doesn’t.
[00:22:39]:12 – [00:22:58]:08
Robert Withers
Include any of the other sponsored SBA loans like the I forgot what the till loans that they came out with or the PIP loans that has nothing to do with. In fact we’ve taken the opportunity, Sam, to refinance those loans out that have to be paid back through acquisition, through SBA financing.
[00:22:58]:13 – [00:22:59]:16
Sam Wilson
Right. Right.
[00:22:59]:18 – [00:23:26]:24
Robert Withers
That’s we’re doing that right now on a transaction. We’re actually taking out their PE loans that have to be paid off because they were done on a seven year basis, which made no sense. I know this. The borrower may she just made a really bad decision in regards to the the terms of that peep loan. And we’re now taking that debt, refinancing it into an acquisition, never mind a refinance, and lowering her monthly payments or cash flow.
[00:23:27]:04 – [00:23:44]:04
Sam Wilson
Yeah, we we, of course, you know, had the opportunity to take advantage of those types of loans as well. But I think those are locked in for 30 years at like three or three and a half percent. And I’m like, Yeah, I guess what, we’re never paying those down. I’m going to pay that for 30 years. I’ll be 70 when it pays off and I will be happy to do it because it a payment.
[00:23:44]:04 – [00:23:59]:13
Robert Withers
Is a payment. I don’t care what rate it is, I don’t care what rate it is. It’s a debt. You know what? Why is if you don’t need it? I know people who are sitting still sitting with that money in their bank account, but yet they’re paying a payment on it. They never needed it. They took it because it was cheap.
[00:23:59]:17 – [00:24:00]:05
Sam Wilson
Right.
[00:24:00]:20 – [00:24:05]:13
Robert Withers
But they’re making it, you know, they they have to they had to start paying it back, you know.
[00:24:05]:14 – [00:24:28]:05
Sam Wilson
So very good. Thank you for taking the time to walk us through the opportunity that lies there with the SBA. We’ve talked about Bridge. We talk about SBA. You’ve talked about a reset that you think is going to happen across the macro kind of commercial real estate. I’m going to know how to finish out that sentence, but either way, the macro real estate picture is going to experience a reset.
[00:24:28]:13 – [00:24:47]:10
Sam Wilson
This is a conversation I had with some bond brokers last night who deal with a lot of CMBS loans and things like that. And they said, you know, what isn’t isn’t the kind of price of interest rates and or bridge debt coming due? Isn’t that already baked in like when people are taking stuff to market and I’m like, I don’t know that it is.
[00:24:47]:10 – [00:24:51]:17
Sam Wilson
What do you think about that and what do you mean when you say reset? What do you what do you think of.
[00:24:52]:00 – [00:25:18]:24
Robert Withers
Values are going to get impacted? Sam That’s what interest rates they have to. They always do. So we’re going to see valuations and those valuations a lot of for a lot of especially the larger private rate. So I’m going to be underwater. You know, they were going to have $800 million worth of debt on a building that was valued at 1000000 to 1000000002 and now all of a sudden, that’s about $800 million or $750 million property.
[00:25:19]:03 – [00:25:45]:17
Robert Withers
Right? So values are going to be resetting. And when values reset, there is going to be two ways of looking at it. It’s a cash refinance. Right. As you as you spoke about, there’s going to be capital calls and some of the even larger players, the national players are not willing to come up with those capital calls. They handing the keys over to landlords, those loans excuse me, to the lenders.
[00:25:45]:22 – [00:26:07]:13
Robert Withers
Those banks are going to put that property on the market to savvy investors who are going to do what they’re going to lowball the purchases. They’re going to wind up settling in regards to the debt, using the the bank to finance it, but yet the purchase price is going to be lower. Sam That’s the reset I’m talking about valuation patterns are going to get reset, which is going to trickle down to even in our local markets.
[00:26:07]:20 – [00:26:14]:04
Robert Withers
And I think we’re going to wind up seeing both opportunity and unfortunately, we’re going to see some pain across the board.
[00:26:14]:21 – [00:26:30]:09
Sam Wilson
Yep, I couldn’t agree more. Robert, thank you for taking the time to come on the show. Today was certainly a pleasure to have you. You are a wealth of knowledge and insight. Give us a lot of things to think about here today as we consider what it means and how we are going to finance our properties here in 2024.
[00:26:30]:09 – [00:26:33]:18
Sam Wilson
If our listeners got to get in touch with you and learn more about you, what is the best way to do that?
[00:26:34]:18 – [00:26:55]:21
Robert Withers
I’m going to give you a old fashioned cell phone number, which is 9144908623 mortgage one com. You can always go to the website and there’s a form you can fill out. And the inquiry comes straight to our, our sales team and, and I’m aware of it. So I’ll make sure that it gets taken care of, especially if it’s referred by you said.
[00:26:56]:01 – [00:26:59]:23
Sam Wilson
Fantastic. Robert, I appreciate it. Thank you so much for coming on the show. Have a great rest of your day.
[00:27:00]:05 – [00:27:01]:03
Robert Withers
You two enjoy your day.
[00:27:01]:11 – [00:27:22]:21
Sam Wilson
Hey, thanks for listening to the How to Scale Commercial Real Estate Podcast. If you can do me a favor and subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcasts or whatever platform it is you use to listen. If you can do that for us, that would be a fantastic help to the show. It helps us both attract new listeners as well as rank higher on those directories.
[00:27:22]:21 – [00:27:26]:01
Sam Wilson
So appreciate you listening. Thanks so much and hope to catch you on the next episode.
