Urban Real Estate Success_ Insights from Don Peebles

0:00Don Peebles:This is an iHeart Podcast. Guaranteed Human. Earners, what's up? Look, building wealth isn't just about making money. It's about knowing where your money is working for you. That's why we partnered with Empower. Empower is all about helping you invest well so you can go out and live a little. Their free Empower personal dashboard gives you a complete view of your financial life in one place. Track your net worth, monitor your budget, analyze your investments, set retirement goals, and more. You've worked hard for your money. Now make sure it's working hard for you. Download the Empower personal dashboard or visit Empower.com.

0:37Not an Empower client paid or sponsored. When traveling for events or festivals throughout the country, every dollar matters. We compare flights, prices, hotel rates, and restaurant options. So why wouldn't we compare rides? Personally, I always check Lyft before booking a ride. Prices can change throughout the day depending on traffic, weather, and what's happening in the city. If you're headed to a concert, out to dinner, or catching up with your friends on a Friday night, taking a few seconds to check lift could leave you with more money to enjoy the experience. Save money. Check lift. Ernest, what's up?

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1:56Learn more at Brex.com slash AF. So, you know, you made your career in D.C., New York, Miami, urban areas, right? So urban development. So what is what what separates successful urban development from non-success? Because we see a lot of like L.A. is famous, this abandoned building. I think the guy was from China, but they have graffiti all over it. He never finished construction. So, you know, and we hear about so many office buildings in New York City right now that's vacant. So the urban landscape as far as real estate development is, I guess, you know, you could win or lose. Right. So from your illustrious career, what separates the winners from the losers when it comes to urban real estate development?

2:45Good question, by the way. So first thing is real estate is a very straightforward business. It's a supply and demand business. You know, if the supply is abundant, prices are down. If supply is tight, then prices are up, especially if demand is strong. And so places like New York City are supply constrained. It's hard to build. Most of the land is developed on. If you look at a place like L.A., you know, there's a lot of open land to be developed. and it's hard to develop in LA in terms of getting approvals and going through their process. Also, LA is very spread out. So it doesn't have kind of core employment centers or economic centers.

3:29And New York does. DC does. You know, you look at Charlotte, it does with uptown. You look at Chicago, you know, but and you look at San Francisco. So what's happening is LA it's been hit like everyone else with, you know, a remote working and, and, and, you know, the other impacts of COVID. And the difference is, is that people don't even live near where they generally work in LA and everything's stretched out. So it's going to be a bigger lift for LA to come back. New York, on the other hand, while office buildings, there's a hundred plus million square feet of office space. It's empty. That's the size of the entire office market in Washington, D.C.

4:12And however, while there's less demand for office space, there's significant demand for housing. And so converting those buildings or tearing them down and rebuilding with housing, so there's a use for the land and the product. And that's why we like urban development is because it's where large numbers of people live and large numbers of people work and their economic engines. And so even with, you know, an unprecedented hit. So I think that one of the things that we want to you want to focus on is investing in markets that are long term competitive where there's significant supply constraint.

4:49My view is that New York City, America's largest city, financial capital of the country and of the world, essentially, is going to bounce back. Washington, D.C., nation's capital, the most powerful nation in the world will bounce back. San Francisco Tech and Innovation Center will bounce back. So those cities are the ones that have been hit the hardest. Then you have places like Dallas, Austin, Houston, and Texas, for example, where it's a very pro-business environment. You'll see growth there. No state income tax. Same thing with Nashville. No state income tax, pro-growth. You'll see more growth there.

5:26So you either want to invest in places where there's significant growth because the fundamentals like tax policy and business policy are sound or that there is a opportunity to play a market cycle because they've been artificially depressed. yeah so does it feel like that that's the solution right when you're talking about you know we've highlighted it in the past when you're talking about commercial real estate and how endangered that was and we spoke about that at market mondays live at msg converting commercial into residential is a process though right there's zoning laws there's permits talk about that because does it work in your favor obviously because your illustrious career whereas a new developer or a new contractor it wouldn't be as easy going forward with that right i would assume well yeah i mean not all buildings are ripe for conversion i mean we've been converting office buildings for two and a half decades right into other uses so we've got a lot more experience in doing that and so that's going to help us identify the buildings that are actually you know economically efficient to actually convert and so that's one of the key things Not every building is ripe for conversion, regardless of its location.

6:38They're just structurally not able to make that conversion. And one of the challenges, say, New York has is that the buildings are so big, they would be massive undertakings and that they would have too many units in one place. And so I think that's going to be some of the trouble. What is happening, though, is Chicago, D.C., New York, San Francisco and other cities recognize the hit that they're taking in their marketplaces because workers are not coming back to many of these buildings and they're sitting empty. And so that means that the stores and the other businesses that benefit from the presence of these office buildings, those businesses are struggling or gone out of business.

7:21So they've got to incentivize new uses for those properties. And so they're giving tax policy and they're accelerating zoning changes and making zoning changes, even Los Angeles, which is very difficult to build in, passed a zoning law that allows conversions for buildings that were built before 1975. You can convert them without going through a land use or entitlement process. They're trying and that should follow in the coming months. You'll begin to see more financial incentives at the local level. And then probably in, you know, first quarter, second quarter of next year, once the presidential election is over, you'll end up seeing federal tax policy that will incentivize conversions as well, some form of tax relief for those types of conversions.

8:08earners what's up look building wealth isn't just about making money it's about knowing where your money is working for you that's why we partner with empower empower is all about helping you invest well so you can go out and live a little their free empower personal dashboard gives you a complete view of your financial life in one place track your net worth monitor your budget analyze your investments set retirement goals and more you've worked hard for your money now make sure it's working hard for you. Download the Empower personal dashboard or visit Empower.com. Not an Empower client paid or sponsored.

8:46When traveling for events or festivals throughout the country, every dollar matters. We compare flights, prices, hotel rates, and restaurant options. So why wouldn't we compare rides? Personally, I always check lift before booking a ride. Prices can change throughout the day depending on traffic, weather, and what's happening in the city. If you're headed to a concert, out to dinner, or catching up with your friends on a Friday night, taking a few seconds to check lift could leave you with more money to enjoy the experience. Save money, check lift. If your best finance people are doing expense reports, chasing receipts, or spending time on month-end close, it's time to get Brex AF, a gentic finance that eliminates that work before it starts.

9:28Learn more at brex.com slash AF.

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