The Best Ever Conference is officially in full swing at the Hyatt Regency in Salt Lake City, UT, and it’s our biggest one yet with more than 1,200 investors in attendance.
We kicked off day 1 with an economic summit featuring expert insights from Ben Lapidus of the Best Ever Conference, John Chang of Marcus & Millichap, Neal Bawa of UGRO Investments, and Kathy Fettke of RealWealth Inc. Whether you missed the sessions or just want to relive the experience, you’re in luck! We rounded up the highlights from each presentation below.
Welcome and Economic Primer
Co-Creator, Best Ever Conference
“American life will change more in 2023 than in the last 10 years combined.” Ben shared that he's seen this quote picking up steam recently, and it’s something to consider as the economy continues to shift.
He followed it up with another quote that he recently read in The Economist: “Whether it’s because rates stay high, recession strikes, or policy enters a messy period of transition, investors have set themselves up to be disappointed.”
Despite the fear and uncertainty that seem to be gripping the nation, Ben prefers to remain optimistic. For inspiration, he looks to American democracy, an institution that has survived numerous cycles. Just as the Founding Fathers were able to respect their differences and come together for a common cause, Ben believes investors who choose to collaborate rather than compete are far more likely to survive uncertain times.
Keynote: Interest Rates, Recession Risk, and Resilience; Adapting CRE Strategies for 2023
Senior Vice President, National Director Research and Advisory Services, Marcus & Millichap
What’s on the horizon? John Chang offered some answers by identifying five major trends he believes will shape commercial real estate investment strategies moving forward.
- Unwinding Globalization
Reshoring and nearshoring will likely transform supply chains and invigorate select local markets.
Demographics are expected to continue to drive commercial real estate. Aging millennials and baby boomers will have an outsized impact, driving the need for housing, retail consumption, office space demand, and more.
John projects that we will continue to see suburbanization as the millennial generation continues to shift where it lives, moving out of the urban core to the suburbs. This drives demand for all types of commercial real estate in the suburbs.
- Wealth Transfer
A projected $84T of wealth will transfer from baby boomers to millennials over the next 20 years. John predicts that this will help fuel the commercial real estate marketplace and drive growth and opportunity.
- Increasing Transactions
Each year since 2001, the number of annual commercial real estate transactions has been climbing. John pointed out that there is a lot more capital coming into real estate, and there are a lot of new ways to invest. This is driving investor activity in this space, which will likely continue to rise moving forward.
For more insights from John, you can follow him on LinkedIn and check out his weekly five-minute video updates.
Crisis Boot Camp: Save Your Bleeding Property with Best Practices of Cash Calls, Loan and Equity Injections, Recapitalizations, and Lender Renegotiations
CEO/Co-founder, UGRO Investments
Over 30% of all properties purchased by syndicators using floating debt in 2020, 2021, and 2022 are now bleeding cash. That number will rise to 40% by July 1 of this year, Neal Bawa said.
Neal’s mission is to help these syndicators save their bleeding properties. If you find yourself in this situation, Neal recommends taking the following steps:
- Aggressively cut costs at the property.
- Circulate an addendum to allow more equity to be raised.
- Loan your own money (with accrued interest).
- Sell more equity shares if your NOI is close to projection.
- Ask your bank to reallocate your capex budget.
- Borrow money using your LP shares as collateral.
- Borrow money using your GP shares as collateral.
- Do a cash call.
- Bring in rescue equity.
- Sell the property at up to 100% investor equity loss.
- When all else fails, give the keys back to the bank.
“Remember you have investor money to protect,” Neal said. “This is not the time to be the white knight! This is the time to be the gray knight.”
How to Invest Carefully in the 2023 Economy
CEO, Grow Developments
Co-founder, RealWealth Inc.
Inflation, rising interest rates, and the possibility of a recession all have investors fearing the future. However, Kathy Fettke had some words of wisdom on how to invest carefully in today’s economy.
Tips for Passive Investors
- Make sure the sponsor has experience.
- Have an attorney review documents.
- Review underwriting fees.
- Understand the capital stack. When and how do you get paid out?
Tips for Active Investors
- Be fully transparent.
- Get legal advice.
- Get tax advice.
- Find a mentor.
- Consider a financial partner.
Tips for Acquiring Assets in 2023
- Stress test best-case and worst-case scenarios.
- Make sure investors understand the risks.
- Add plenty of reserves to the pro forma.
- Opt for fixed rates at low LTVs.
“Remember that recessions are also the time when people make the most money,” Kathy said. “You can make or lose money in any market.”
More from BEC2023:
Best Ever Conference Recap: Day 2