Jan. 3, 2023

#257: Kyle O'Hehir - Co-Founder of Constitution Lending - Crack Houses, Buying Distressed Debt, & High Yield Loans

Kyle started his fixed-income career on a J.P. Morgan trading desk before joining multi-strategy hedge fund Millennium. In 2018, Kyle left Millennium to manage his own capital, emphasizing real estate debt investing. He has experience investing across the real estate capital structure, including first and second-lien mortgages, tax liens, and equity. He holds a Bachelor of Science in mathematics from the University of Maryland.


On this episode Chris & Kyle discuss:

  • what he learned from trading at hedge funds on Wall Street and why he eventually decided to start buying crack houses
  • how to find and buy distressed debt
  • different types of high-yield loans and strategies
  • forward thoughts on the 2023 real estate market
  • and more!

Learn more about Chris Powers and Fort Capital: www.FortCapitalLP.com

Follow Fort Capital on LinkedIn: www.linkedin.com/company/fort-capital/

Follow Chris on Twitter: www.Twitter.com/FortWorthChris 

Follow Chris on LinkedIn: www.linkedin.com/in/chrispowersjr/ 

Subscribe to The Fort on YouTube: https://www.youtube.com/channel/UCuJ32shRt8Od3MxMY-keTSQ


Follow Kyle on Twitter: https://twitter.com/financeguy725

Constitutional Lending: https://constlending.com/invest




(2:05) - How did you get into Wall St. and where did that transform into buying crackhouses?

(5:22) - How do you come up with a trade idea?

(9:20) - How often do you need to have an idea?

(11:08) - How accurate is the show Billions?

(13:09) - Why forces people to stay in the Wall St. world?

(15:12) - What code do you write?

(16:36) - How would you describe what you do today?

(19:25) - What are you seeing in lending right now?

(24:34) - How would you predict the lending industry’s future in the short to medium term?

(27:12) - What’s happening in Office right now?

(30:21) - What happens on your end when someone presents a loan for you to buy?

(38:31) - What happens when you take control of an asset?

(45:03) - Wanting to own a bank 

(45:42) - How do you source these non-performing loans?

(50:13) - Is your model scalable?

(51:40 - What is a Prevent Foreclosure Loan?

(54:20 - What’s an Airbnb Loan?

(57:02) - Punting assets vs. Running a business

(1:00:35) - Do you think sometimes your ability to operate hurts you?

(1:03:52) - Will high-yield loans still be 8-12% in ’23?

(1:05:06) - What needs to happen for money to start moving again?

(1:10:05) - What do you think about in terms of existential risks to your business?

(1:12:58) - Ranting about insurance

(1:23:07) - Wrapping up



Speaker 1


 Well, and that's, that's another funny angle to the thing, right? A lot of these Banks don't want to be mean the bar or, right? And pray humans. Especially like I said earlier, have this thing where the credit unions are. Like we can't foreclose on this guy but maybe you can and it's a weird dynamic because you're like, isn't this like a business thing? Like, didn't they f******? Like, don't they owe you money? That's are like, no, no, we don't want to, we don't want to hurt our deposit base. We don't want to, we don't want to be the bad guy. So yeah, there is a There's a, there's an opportunity in the market for a bad guy. Hey guys, welcome back to the Fort podcast. My name is Chris Powers and I want to thank you for joining me today. This show is an open-ended discussion and journey covering real estate business entrepreneurship and investing. I would love to hear from you by tweeting me at Fort Worth Chris on Twitter and if you have enjoyed this show, I would be super grateful if you would follow us on Apple podcast Spotify or whatever platform. Listen to, and if on Apple, it would mean a lot. If you'd leave a rating and review last but not least, you can find all these episodes on YouTube. Thank you so much. Again, for joining me and enjoy the show, and this episode is brought to you by Fork Capital at their core Fork. Capital is a privately owned real estate investment firm, but beyond that they are committed to technology and a world-class culture, which leads to a very forward-thinking mentality. Do you want to stay in the know on all things for Capital? Be sure. Sure to follow for Capital and Linkedin and sign up for the quarterly newsletter on www.4wd.com. For capitals quarterly newsletter subscribers are the first to receive business and real estate insights News videos podcasts, free resources and more. All right, Kyle, this is something that the people deserve we have been trying to make this happens for a few months, so thank you for joining me today on the show. Yeah, Chris. Thanks for having me. Super excited for this. Yeah, I think you're hilarious. I think this episode will be informative and funny and that's the goal, so we will just kick it off with. How did you go from one? How did you get to Wall Street? And then how did a career on the world's greatest Street push you in the direction of buying crack houses? Next, that's a great question. That's the same thing. My friends asked you, when I got a soft pitched it, they were like, you're going to do. What are you f****** crazy? I got to Wall Street. Through a state school and stayed math. And I got to Wall Street, really it was a lot of like hustle and like pretty gritty hockey. Pretty, I like sourcing so there's a lot of the shitload of the ways that I Source s*** today is kind of, kind of Harkens back to the good old days. So I would be a Bloomberg all day. We have Bloomberg at the school which was dope. Just downloading folks who worked at funds and then I have a script that would blast out a resume and a trade idea, to all those guys. I went to school, I went to College Park in Maryland, so I would like hop on the bus ditch class Thursday. I am like, get drinks with these guys and try to convince them. They should, they should hire me that ended up panning out. I was a hedge fund in Greenwich when I graduated in 2015, to 2018 or so. And alongside that I had started, compliance is really wild when you trade public markets. Like, you can't really do s*** without asking. I am not a fan of asking, so I know one weekend. I was in the office, and I was like, I wonder if there's anything I could do, and I was flipping. It through the compliance of this big-ass PDF and real estate. They're like Open Season. We don't give an s***, I will try it, why not? So that was kind of the, the impetus for the thing. And then said, the fund I was at is a, it's a multi strats, oh, it's like shitload of Leverage, bunch of desks everybody doing their own thing. So at the guys, I sat across from traded Bank stocks while I was trading corn and soy beans and so it's a sick operation, we get enough desks and you can make it work. And Millennium has made it work for a long time now. But one of the things about it is that they do can like 20% of the front office every year. So, in 2018, my desk got run over by some of the Trump Tower of s***. And we didn't have an incredible year, and they said, Hey, listen! Yeah, we saw enough of this s*** you guys can go home, but I had like three months of garden, leave that I was sitting out. And during that time, I just did the real estate s*** full-time. While I was interviewing with the other, Funds. And it became clear to point that I really like the freedom probably more so than anything just being able to do whatever the f*** I felt like doing. And so that was, you know, the rest is kind of History. I turned down the fund offers that I had that point and said, f*** it. We're going to do is real estate s***. It's been a lot, having spent a lot of fun. I think one of my favorite things about Twitter is a platform as I try, I try to give people some who are like in those institutional seats right-thinking about because I was that I was there before my death. Got the ax. I was like this is an f***. And I don't know if I can do this forever. So but the crack houses, apparently, I can do it forever, so I Crack is its addicting, right? It is, it is Dick to you. Never write. I don't know that smell. You don't forget that smell the first time. You're like, what the f***? Is that somebody microwave, their f****** tough for too long? And you're like, oh, oh, oh that's what that is. All right, we're in the deep in I where I am going to ask a few questions on Wall Street. How do you come up with a trade idea? Like you there's a bungee all showing up every day hopped up on coffee and like how does a trade idea surface and like, what is the process? You go to go like, okay, this is a great idea that nobody else would know about or is it just known that? Like everybody knows about this? We're still going to do it. So, that's a great. That's awesome. F****** question, right? And one of the, one of the things, one of the things that kind of convinced me to flip, from sort of public markets to real estate, was that you, I feel like you can iterate way quicker in real estate and, and the causal link between s*** you do. And good or bad s***. That happens to you. Subsequently, as wait, wait, wait, tighter, right? So like I will give you, I will explain like how my desk could come with the trade idea, right? And for the most part World longer-term, structural very fundamental sort of operation, right? So, we would put together basically using trade flows import export production consumption for mostly agricultural but some energy to Commodities, right? And we would say Hey, you know, over the next six months, L have months, this quarter that corner is there any big imbalances between supply and demand? And do we think that should do something for spreads or price of the Futures? Right. And so if you think about like trade flows, that's where most of it comes out right folks who are, like, buying selling commodities domestically. Like, yeah, there's some hedging but for the most part like trade houses, which is what qua of my, the guys who ran my desk kind of came from, right? Ultimately, if there's a trade imbalance somewhere, someone's going to come to Market in China is going to come Market by a lot more soybeans than, you know. Then sort of people think today, right then there could be a trade there with respect to. Okay, where is it? Do we think the market has anticipated this with respect to where Futures are pricing, right? So that's kind of, and I think a lot of discretionary desks, right, whether it's equities, Commodities rates, it's kind of similar thing, which is you're out there to kind of betting on some sort of mean, reversion betting on to some extent, right? That fundamentals are going to be the thing that drives price over a long term and something that stuff about that, right? As you can see guys who have 20 years experience, in discretionary space get their ass f****** kicked months, right? And with no, with no real reason, right? And they will say oh it's blows, oh it's so that's all it. Says, other a****** hedge fund. Guys are f****** us and just, and I am kind of like, you know, I am pretty new to the whole thing, and I was just like, yeah, I don't know if I could be wrong for this long and without a reason, like I am wrong. A lot but I feel like usually there's a reason like I did something. I was obviously dumb where there's some macro thing go. But you know, I think one of the cool things are private markets relative to public is that causal link between what you do and what happens is a lot tighter. Broadly. Yeah, so you can, in the public markets, you're just that's a you just say, you can be wrong and for a while and have no clue while you're wrong, because it is a lot more emotional and other factors don't have to be worse than that, right? It could be. You're right from a fun, the fundamentals are playing out like You expect, but it's not showing up in Futures pricing and you're like, ah, f*** and so on of the few things that and this was something that in retrospect I end up thinking about what we couldn't trade physical because there's a lot of counterparty risk associated with that, and we pitched a couple of times. You know, the risk folks on letting us do that because you know the physical does tend to line up with fundamentals. It's not the bunch of Wall Street hedge funds, their training physical corn and beans and you know they said Because they couldn't, you know if you do something like that and you know say we f****** and they have to unwind. It's going to be a disaster when they fire people. They want to push a button and make your whole book. Go Away. Nice and smooth. So yeah. Are you coming up with an idea week and idea month and idea day? Like how often do you need to have an idea? Yeah. So for the most part it was I mean we would have because we were a big sort of like structural fundamental desk. We would probably have somewhere in the neighborhood of five to six to seven, to ten on the super high-end ideas in a calendar year, right? So, because you're playing for something, because your sort of seeing something, that's that. You think the market is mispriced, right? It's going to take a while for that to play out. Now, there's a lot of ways of playing whether it's options or spreads or just outright flat price, right? There's a lot of ways of expressing that and a lot of ways of putting that on They would say, but for the most part on big sort of thematic deficit due to its structural sort of stuff like that. Usually you have a couple of, you know, you don't have that many views over the course of a year when you're like, oh this is important enough that we should get in and do this. Yeah, and where you just compensated is that how people are compensated? It's like however, while your idea do you're going to get make a lot of money and if it sucks you're out. It's a very eat what you kill set up and a lot and multi-strap. So like Citadel Point seventy-two millenniums All sort of run like that super eat what you kill and yeah, I mean, we were definitely no exception. Like the folks who go, the guys who started my desk at Millennium, right? They were basically there because it's kind of funny in retrospect that's classic Wall Street guy thing, right? They don't want to run a business, they want to, they want to show up your own ass it in, from the monitors. They want to trade, but they don't want to set up a fund or do fundraising or deers back office, middle office, right, compliance. They don't do any of that s***. They want to do the, I guess for Right? What, what is sort of the fun, The Fun Ship, how much of your life was like the show, billions how accurate is the show. Billions and retrospect to real life, I tried to watch, I tried to watch. Yeah, I tried to watch billions. I mean, I think the thing, the thing, that a lot of those shows get wrong about like especially about like material. Nonpublic information is that for the most part, everybody hedge fund is scared s******* of the, especially now The SEC chases, these things down like criminally as well as simile, right? Everyone is f****** scared of like any because in the criminal setting like it's going to be a jury of your peers and I mean finances for rightly or wrongly it's more complicated than a lot of things. And so the ideal that you would be sitting there explaining, you know, Market microstructure to the same guy who lives, one of my apartments. Right. You're like oh f*** like that's His situation. I should try not to get it. And the compliance oversight is as well. Why? Right, like, I remember one time, one of the guys at my desk, went to a basketball game. This mom compliance is calling. First thing Monday morning, who took you with broker? Took you to that basketball game, and he's texted about it with people. That's how they. And they have so the reading the text, and they're calling saying, you didn't disclose that you were going to a basketball game with you-know-who on the sell side, took you to the game. He's like, f***. He's like I just took my mom to a basketball game, right? So I think the thing that gets a lot of Play whether it's billions or other media, is that there's a lot of people who are sort of down for various flavors of moral, ambiguity, and my experience was kind of not like that. Like, there's a lot of smart people who are aggressive and motivated by money, but there's not a lot of room to do morally ambiguous things. Yeah, if you want to do that, you just go into Congress and then you can do all that you want. You can trade on any idea that you want? That's its more of a political path. Why are you kind of wanting people to get off their seat like what's keeping people's ass and seats on Wall Street as opposed to Jumping? Is it purely money like the next bonus or what causes most people to hang around longer? It sounds like it's like maybe you hadn't gotten kicked off your desk and 18. I am not saying you'd still be there, but maybe you would like what keeps you there. I think what keeps you there? It's different for different folks, but I think that like to there's a lot of people who are afraid of the Void, right? There's a lot of people who would say, okay. Well, you know, I don't even if you say I have got enough money put together like I could do this for a while. I think there are a lot of people who look at the void and say. Yeah it's easier for somebody to direct deposit. This money to my account supposed me, like, having to like, do something make something for it. I think in particular for folks who are on the street that the prospect of running a business is like, really, really terrible. I mean, I did back in the day, right? Like operations. I was like, oh my God, this is listens f****** terrible. Like, can I just go back to like, play around the next cell and like, writing code and like, reading research? Like, that's way more fun. And I think that You need to be a certain type of sicko to be, like, I am going to leave this f****** comfort and do something in the nothing. Make something out of nothing, right? I think that's a big, so even more so than the money. So I think a lot of people you could say, hey we're going to, you know, it's not as much but you were going to we can set this thing up so that you have some degree of like personal comfort and your lifestyle or whatever, and they would still say no because that path is addicting and there's a lot of certainty around. Whereas the void is just totally. That's why I mean honestly that's what I love about it. I love, I love the ambiguity. I love the, I can do whatever the f*** I want. That's my big thing. Honestly, what kind of code were you writing? So I my first job in a hedge fund was I was in college and it was, it was VBA, which Terrible by the time, you know? I am even today. I am pretty much 100% python. I can do some JavaScript, I use some typescript, but python This is my favorite and it's a super friendly language, right? You're not on that, send Rockets into space or any s*** like that and I think high frequency trading. So you do know no scene of C++. But, yeah, python things and you are writing code at the hedge fund to what make better trades or like, why were you coding? Yeah, so there was a lot of like, geospatial data, so we would be looking at whether a lot, we look at crop conditions at various levels of granularity, right? And there're bounces issue, Shitload of that kind of data, right? The price data is not super complicated and because we're longer term, we don't need to know what's going on. Second, but with respect, like fundamental geospatial data that would help us back into what we thought, sort of like fundamental supply-demand was going to do. Yeah. There was a lot of, you know, a lot of that a lot of scraping Indian government websites wedding for extra water. Right. Just, you know, trying to find some kind of edge in a pile of dip. Dubious holidays, I love it. All right. What are you doing today? We can talk about your lending platform. I think you're also an owner operator of sorts. Like, how would you describe what you do today? Yeah. So today, there are sorts of three businesses, and they all came about, you know, from the credit original crack has that one. So today we own and operate, 300 units of affordable housing in Connecticut. For the most part. I would say that, you know, Like I picked up 25 units. Back in June, I am probably going to do pick up at least another hundred next year because I think this is a great environment for buying non-performing loans. They have seen a bunch of that flow in the last month, which has been. So, very quiet, the last two years, the other two businesses. Then we do commercial Construction, general contracting and roofing for the most part. That's ours. Yeah, it's getting Roofing. Our roofers living? Well, do you? Because that's a, that's a whole thing in Texas, right? Like everybody's rooms get wiped out. Like every is, is different with the with EPDM than the resi shingle, right? But like the hail like don't you guys like aren't you like the rotating Crews pretty quickly down there? I have never known. I mean I don't think so. No. I mean if we are compared to what, I don't know what that be compared to but like compared to other parts of the country, we don't get hail here. I don't know. That's a great question. I don't know. So that's one part I saw I hired, so we basically I think like a lot of people do real estate enough said, listen, this construction thing is terrible and it's the biggest risk to talk business. So why don't we just build it in the house? So we have I am doing are all of our for those part, we acquire things that are distressed, right? So we have been doing that internally since 20. Yes 20, end of 2019 now and then because we have sort of finished up a lot of our internal projects. We said you know, we got a great crew. Why would we kind of just let that go? So we started doing the you know the work as a third party general contractor and room for the focus on like retail. Like Clients industrial. We don't really work for. I tweet about this yesterday. We don't really work feel like ourselves because we were there for a terrible client. And yeah. So that's one. And that one of my childhood friends actually came moved out here to, to run that business back and Fab. So, that's been really cool. And the third and final business is lending, which has been a wild one to be in of late, private creditors and f****** crazy. What's been crazy? Let us start there. They're like what do you see in right now? I mean the other cost of capital is up but also like the volatility has been f****** wild like, you know, you I hop on it, I am terminal anymore because some poor but you hop on Yahoo finance, right? And you say, oh my God, like the ten, the tenure just moves 15 basis points of daily. It's nothing too wild. And what is it you how did it move? Historically? Like, for anybody listening, like if it's 15 basis points. Now, what do you? What would You expect in normal times, I mean, daily volatility, you know, for the 10 year. I mean, if it was doing something like 15, 20 basis points, it's because there was a Fed meeting or something right? And now it's just whipping around like that on not very I mean on CPI Prints but even have nothing right? And so that's that has been painful because not only have you know, cost of capital for us, and we have back leverage of Banks and obviously that's a floating rate. So that's gone up, which is sucked but Not only has that going up sucked, right? Spreads of also blown out, right? So the volatility in rates markets have meant that you know now MBS pricing relative to the treasury's curb, the spread between those two things is way wider. And, you know, one of the reasons for that is a lot of this. A lot of the guys who securitize investment loans secured by investment real estate for investment. A lot of them went bankrupt in the last nine months because historically, you didn't, they, I mean, they don't hedge, right? They just have this big, they got home. Millions of dollars of these loans that their packaging up, and they don't have change them because rates don't move that much and when they do, they tend to Rally. So we actually make money on it. But then, you know, this year rates f****** sold off from the 10-year one from, you know, that one handle 18 months ago to having for him and all these guys went from selling, they thought they were going to sell this, you know, 150 million dollar pool of s*** at 108, and they end up selling it 96. So that make, then you can't make A payroll then you can't, you know some a lot of them just gone in Period, like 60 days, right? So how about how much are we talking here? Like how many folks are calling it quits is this? I mean, it was our I think of our five biggest counterparties, three of them went out of business, like 30 days. Holy cow, the fourth one. And, and so we do two things, right? We do, we do balance sheet, lending, because we have facilities with banks that we put the stuff in. We The crowdfunding platform for things that don't meet those criteria as well, right? So we do balance sheet, and then we also would sell to institutional buyers because there was a big sort of permanent bin for that stuff over the last couple of years. And I mean those guys are, they're f****** done. There's not that many players left. The only players who still exist are guys who basically have, you know, captive Capital who have got a fun or a wreath or some vehicle that's a Tively permanent source of capital, everybody who is reliant on? All right, we're going to fill up the bucket, and then we're going to dump it on Capital markets. Those guys are those are from God, and they were filling up the bucket by just getting a line of credit with a big Bank, borrowing all that lending it out at a spread and then hoping to get that s*** out the door as quickly as possible. Well, that's and so, that's the other problem. A lot of their facilities are like 30, 60, 90 day facilities. And so, you know you're like well, you know if I sell the s*** today we're going to get f****** rock. But at the same time, if you don't sell it, you're also fought because you have to buy out of the facility within that, not, you know, even a buyout or take it out somehow of that facility in a, pretty short time frame. So what happens when these things go belly-up? Like what happens to all the loans? I am assuming they just sell them at a distressed price. Who's buying all these pools of loans? When these companies are going out, who's the next buyer? So there's sort of, it depends on whom you are. Right? So a lot of the securitizations they just priced at a place that reflected the volatility in the stress and rates markets. And so like I said, guys were guys are thing. They would sell the s*** at 106 where they sort of used to and then trading ideas for right big sleep. It's your entire quarter Revenue f****** goat, you know, flipping you flipping the sign on it. So, yeah, there was a lot of that right, where they just, they just had to get the show the door. They sold it a big loss Done, Right? We have seen and just Starting to tape on these. Now, we have seen some of the guys who sell to those guys, right? Who got stuck with s*** on their books and now they're looking to sell it, you know, somewhere in the 90 piecemeal, right? So, it depends on what where you are and sort of the, the ecosystem. But yeah, for the, for the most part, there's, there's a mix of people who just took the big hit and said, you know, f*** this for closing up shop and then there's a class of folks who are, you know, smaller probably like us who don't really have the capacity to balance sheet And they're in various states of you know, what do we do? Do we sell it? Do we sit, do we, you know, so I know you don't have a crystal ball but it's just the beginning of a string of this. Like, are we just at the beginning or is, are we through a lot of it? Like how do you think about that is or it's hard to say? Yeah for the paper is hard to say I mean the financial system is way more and especially like the piping behind like short-term lending this kind of thing bank to bank and a lot. So for write all this stuff is way more short up than it was. The last time this happened, but it's also the case that liquidity is one of those things where, you know if until you really needed, you'd say, oh, it's f****** great. I think one of the things that's, that, that's exciting to me as somebody who does by. I mean, we have been originating loans more so than buying secondary, right? But it's someone who is a kind of came to this game as a buyer of distressed loans. I am super excited because I don't really believe that things are going to be that f****** bad. If you just look at the leverage, the system. It's not what it was last time around and I actually feel really good about it, depends on the market right. But I feel good broadly about the collateral and so you know if you think the collaterals fine and you're looking at picking up some 12-month paper that's got nine months left on it at, you know, 90 something right that in my opinion is as a pretty good return. That's AB, it's not free money but I think it's pretty solid. So yeah. No, crystal ball, hard to say, where the f*** rates and, and all this stuff will go and sort of nominal terms, but I think you're going to shake out, and I am this is kind of what I am seeing with like the non-performing loan flow seen, right? The people who are getting shaken out now or the people who on the equity side, when they did their underwrite they said oh we're going to get agency to take us out of three. Something there was people are in trouble. Those people are fun now is everybody else fun. Probably not as badly as that. So you know, that's I am I am looking at a couple of things right now where it's exactly that right Bridge paper. So it's all Bridge paper floating paper that was hoping to get a permanent agency in. The threes are not like fixed rate debt at five that people are not performing on positioning operators happens, idiosyncratic lie. And like I do see that from Banks but you know, people do dumb s***. I have done dumb s***. Like you can't read they likely if I like Risk. Yeah, there's not like a big is not big, you can't there's no narrative there, there's no play for say. Yeah. Okay. Let us just go a little deeper. So everything you're seeing right now that's non-performing is a floating rate probably bought within the last 12 months, like, give me your general. Like what do you see in come through now? Is this office stuff? Is this any asset type? It's basically, yeah, great question, so Kasich Ali. There're two classes, right? There's office and then there's like short term paper who thought there was going to be a long-term take out somewhere cheap and like what's happening in office. Because I mean I am not asking you to put your like office operator had on, but like if you are a lender like is there a price at which you would loan on like a Class, B, s*****, Suburban office building in nowheresville Alabama. Or is it? Or is it? Is it like the cost of the dirt? — the cost of demo — another margin of safety? Like how do you even lend on what we will call the have-nots of office? That might not ever see a tenant again without major capex? Yeah, the only office that we have on the balance sheet is owner-occupied and it's like small mixed-use stuff and that stuff works right now. Yeah, yeah. That's just fine. It's funny that Banks have always hated that s*** and to me I have always been like, this doesn't make sense. It's that you hate this, this seems pretty. Alright, I mean, my office, I am sitting in my office a small mixed use building. Like I don't see, I don't see that, I don't get the hatred for that, right? I mean the stuff that I have seen where I am just like, I don't know what anyone would do with. It is like It mean, it is like you're a definitely be is like a wasteland but even the ation, right? Your kind of like I don't know what the play would be with this. Like everybody is taking that down headcounts coming down a lot and dishing to people just not working offices and life, you know? I feel like and this is one of the things that I have tried to be better about. Probably one of the biggest things I have learned in this business is that when I look at s***, there's sort of like two Dimensions along, which it can sort of land. And one of them is like money, and one of them is like brain and like, I am I will do something small if it's not going to hurt my brain too much, but like, the office s*** is Big, which is good, but it feels like it's going to hurt my brain. A lot like fans, just figuring out what to do with it. So I Don't f*** with that. And to me it just seems like, yeah, I just don't know where you. I don't know where you mark this collateral, right? That's the biggest problem because even if I was going to say, alright, I could end up with the asset, but you know what? I am not going to be the guy who repositions it. I am going to unload. Okay. Well what do you can sell it for like, right? So cuz I have bought loans secured by s*** that I don't want anything to do with. Like I bought loan secured by funeral homes on by lone Skipper all kinds of s***. But I but you know every one of them I was like you know what this has a Fire sale, I call it a chunk value. This has a Chuck value and I think it's this the office. I am just like 50 some 50 percent occupied office in Fairfield County all of Fairfield County but like okay what are you going to do with it? So what happens when a non-performing loans coming down the pipe that you like how does it work on your end you get presented an offer to buy alone then what all happens like how do you make money on it? I would say a lot of are on the npl. And I would say a lot of our Edge actually comes from our ability to source so there's not a lot of usually when I am bidding on something I kind of am the only bit. And so a lot of the edge comes in that and I will never forget the first bad loan that I bought. It was a way secured by a 20-ish unit building in one of my markets and it was probably the biggest probably worth one and a half and the loan was like 400 Grand and I want to on the phone with the bank, right? The heaven credit at the bank and Guys, you know there's no way you could sell, this is a discount because it's just over collateralized. Nice. All right, what would you take 85 cents in the dollar? Do you say yeah, of course? And that was so pretty sad because like, every other for the most part, every other experience has been like that, right? You talk about loans. I mean, the biggest package of s*** I have ever bought, was like 6 million, right? So you're talking about s***, that's like too small for anyone whose like, big to care. And so a lot of times you're the only bit and so hey, 85, whatever, that's f****** close enough. So, you know, that's, that's the way it will go write, something will come in. Usually, it's like outbound, that leads to someone saying, oh yeah, we have this. What was your price B? And then, you know, a lot of this s*** never. This is true of almost everything I own including my office, you know I don't get to go in them or really diligence anything it's me just saying, I feel like this price, I can't lose that. And then from there, you know, there's always some back and forth about the purchase and sale agreement, blah, but Usually pretty straightforward and then from there, you know, you're into probably my favorite part which is trying to get the ass up. So you want the asset if you're buying a loan you want it typically? Yes. Typically, you're not looking to make a deal with the current far. Oh yeah, there are times when like that works. I think the problem is that in my experience, a lot of the folks who get into these situations or definitionally, not going to be able to get out of them. And so then the question becomes, you know what's the next best? And I have had a couple where I push like the funeral home was pushed to a sale. Right? So I have had a couple of things likes that where you can push somebody but realistically, right? How are you getting out of? It's going to be a real fire sale and refi is going to be tough. Okay, so I am going to be the borrower of a loan that I am defaulted on that's Bridge. You just bought it for 85 cents on the dollar. You got a good deal on it, then you're just sending me a FedEx letter sir. I would that says, hey welcome to Daddy to the rumbles. Oh baby, here we go. Baby. Daddy. Now on the loan and then what are you offering me you say here your new loan terms? Or here's when your next payments do like how are you communicating with me? Yeah. So usually I don't waste because Connecticut is a Judicial foreclosure state, so I don't usually end and most of the Northeast is, so I don't really waste time with me. And I will send Dan. If they have an accelerated, though. Well, right, or sent a notice of default, right? I will do those, but that's more of a DOT, my eyes cross. My T's. Usually, the foreclosure starts within a week. And then I like to have contact with the, it's not always possible, but I do like to have contact with the borrower or their counsel especially in a situation where there's a PG or something. Because usually, and this differs a lot from your bank's, your conventional lenders, right? Because a lot of those guys, Don't know what they want. They don't want the asset. They want to get paid off, but they don't, but they, and they like there's its not really clear what they're playing for, right, where's me? And a lot of these setups like I do want the asset and so usually if there's a PG, right? I will just say Hey listen there's one of two ways. This can go, my counsel is very experienced with commercial litigation of this sort and in his opinion there's a decent chance. I am going to own the collateral and probably everything else do. And so if you Don't want that to happen. Simple. I am happy to release you from any deficiency judgment or any, any, any anything forever. But you're going to have to do a deal with and that works most of the time, what's a deed-in-lieu? So deed-in-lieu of foreclosure, right? So basically you're going to creditors going to the debtor and saying, hey, you can just convey the asset to me, and I am going to wave, you know, I am going to release you from any other Associated liability, whether that's deficiency judgment a deficiency. Agency meeting the difference between what my sort of payoff is on the debt and the value of the asset. Right? So I get into a lot of those situations because a bank is three years into some battle. Right? Racked up, this massive tab way, bigger than vast, the asset value and I can come in and pay a discount. Even to the principal on the loan and then go to the borrower and say listen I am going to do a solid here but you're going to have to do me a solid because I don't want to do this litigation for another 3, right? Yeah. And so then they that you sent me that we you and I got on the phone. We talked crack house or disease in Gabe. Yeah you gave me my deed in lieu of foreclosure offer, I decided to take that off for now. What happens? So one of two things will happen, if there's a lot of like subsequent encounter answers which does happen, you know, all usually have to see how the Foreclosure action. Anyways if there's not and it's kind of just you and me, right? Then I would then that's kind of it, right? Usually that usually the conveyance instrument in a deed-in-lieu of foreclosure, just a quick claim deed. So I only asset I am the note. I am going to go ahead and get him release the know. And then depending on, you know where the acid is, right? I am going to either. Do capex or move right into leasing? Or if it's something that I am don't think makes sense for the portfolio. You know on the broker I will list it and see what happens on that side and is it fair to say that? A lot of your competitors don't actually want to own the asset or most of the people in your kind of Niche want to own it. So that's that differentiates use. If you're buying a loan, you're really trying to get your hand on the asset. I remember one of the first loans I bought it was secured by two buildings, one was eight units. One was 12. And the bank have been foreclosed on this guy for four years. And I actually, I actually knew his defense. The council is, doing the defense. I actually hadn't had he done s*** for me. So I saw his name and I called him and I said, hey man, what the f*** is going out this, and he, he said, the bank doesn't know what to do and I said, well, does your guy want the assets, and he's like, no, he doesn't want the f****** ass. I am like, okay well Give him to me, and he's like yeah, of course. So, you know, a week later I guess I have got the dean were it so right? And so that was one. I mean they had probably wrapped up somewhere in the neighborhood of 70 grand and legal to do this thing. And it just didn't make any sense, right? It was a New York bank that got caught up in some Connecticut s*** that they probably shouldn't have f***** with but it was it's weird, right? It's weird because you know, you're hiring Council you're doing all this stuff with the end goal of getting paid. Off. But you guys not gonna be able to refi and probably can't sell. Because the balance on the note at this point is huge, so you're probably going to get the asset but like that was you never wanted that, right? So it's a weird dynamic where the bank is like, you know, yeah, we're going to f*** you up, and then they're like, all right, we will hit me m*********** and they write, no, no. Never mind, never mind. We don't want it especially with like industrial and s*** where they could be environmental, right? They don't want to be the chance. Title ever period. So it's a weird, it's a weird dynamic. So there's a good structural reason I guess for s******** like me to exist. So then you get the asset are you then, like have you kind of underwritten it? It's like, okay, once we get this asset, we got to do X, Y, and Z to it, to create value or no. It's, we get the asset and then were immediately going to go hire a broker and fire sell this thing. Depends on the asset, right? I would say sort of like my bread and butter which is you know, bald some questions like some commercial multi up to like 25 units. Then we're probably going to sit with it. I am a big fan of. I mean, I think Moses, you Moses. I mean, I think a lot of the guys on Twitter, one of the things I have picked up from you, f****** Geniuses is that you shouldn't, you shouldn't sell real estate, it's dumb, it's terrible. It's so in a lot of cases, worse than if you just Continue to operate it. So I that's my preference by a, by a wide margin, but if it's something where there's like a, it's something, I am concerned. It's something that makes sense for like an owner-occupant, then probably I am selling it because there's some business, some operating business associated with it, which I have enough of those. So that's, yeah, that's the end, and I am trying to get better back in the old days. I would just say, oh, f*** it. Like we were getting an s*** cheap, like that's Bob's do it but now I look at it and go okay well you know the catbacks. Is going to be sucky, you know I am much more trying to do things that for a brain-damaged perspective or I call it dollars per brain, make sense. I am going to tell you about a little story and you tell me what you think about this because it kind of goes to what you were talking about earlier. So I didn't know this individual but it's a friend of mine and YPO who knew this guy, and he was an attorney, and he made a fortune in 08, 09 and 10. And here's what he would do. He would go to people that were not performing on their loans that were clearly under water. And he would say, look, I think I can help you and they'd say great, what can you do? And he'd say will send me your loan documents, let me read your loan documents, and he would go through the loan documents and realize quickly. Because again, oh five, six, seven, eight like Banks were just, I mean, who knows who is riding these things, but he'd go through a loan document, and see, so many discrepancies. And the total loan amount, was written different in different places were the Our was mostly owner-occupants, I don't know that but because these are like multifamily properties. Mean these are lots of investment grade properties. But I gotta go, but you had people that were you just had big institutions that were making loans so fast. Like whom is checking all these loan documents especially like the big loan documents with thousands, you know, hundreds of pages. So anyway, his whole deal was. Here's on the. Do you treat you transfer me? I am going to take over the property. You owe no more pain. Mints and then he would sue the bank and basically just say, like, you don't have a good loan here, and I am going to hold you up in court, and he would hold that bank in court for 12, 18, 24. I mean, it's he just kept it until the bank finally was like, alright, we're done, like, it's yours, we're out of it, and he did this consecutively. So, what about what I just said resonates with you? Is that and that's not an old wives tale. That is a, that is a real thing that happened, is that something that happens normally, I mean this Guy made hundreds of millions of dollars. I have heard he's made so much money doing this and now I am seeing, okay, we have been in a hot time. Lots of loans getting done quickly. Like, is that going to happen again? It's super interesting, right? I think so. This guy he's the law firm, and he's the principal on the. Yeah, I think he just went out and became like his own. He just says a legal minded principle that left and did this full time, and so I guess maybe the questions also like from the bank standpoint if you have like if you have discrepancies in the loan Doc and maybe that changed after 2010 like there was some law written and it just seems crazy to me that you could hold a Loan in court so long and you just kind of bleed it out so and you don't have to make payments on it while it's in court. Correct. While the loan is in court, there're no payments being made when you can always not make payments but the thing, that will the thing that can get you and it honestly comes down to the lender, right? I have seen wonders say because I read a shitload of dockets, right? I have seen lenders say Hey listen, our penalty rate, the statutory, there's no statutory maximum Connecticut, but the rate on tax liens in Connecticut is 18. So a judge Jenner will give you more than 18. Right? But I have seen wonders say, Hey listen, technically you owe us three years of this 18% but also technically f*** you. We would love to never see you again. So we will take the principle, we will take the principle, and we will wave goodbye right. So that so, you know, I think the thing that Since the commercial says there's two, there're two worlds, right? If free, for mortgages, there's Commercial Business, purpose loan for any not regulated, some states like, Arizona and California is more regulated, but for most part for the unregulated and then you have got household. So owner-occupants, I mean, I have seen, I have seen in court self reps like there's this one, dude, he's f****** Infamous. He's been at it for like I think 11 years this point, and he I mean this guy will never lose. His house, he will never like that. As soon as he got out there who was like, f***, not this guy. I mean, it was it's so you can order occupied world because it's heavily regulated. And you can always be always had the right of reinstatement. So you can always show up with duffle bag of cash and say. Here it is reinstated my, right? Whereas in commercial once you accelerate the balance, it's really hard to kind of like get back on track, but you can do things. I mean, I have seen this in. If you can, if you can believe that, Assignment of magnet for litigation. I have seen this firsthand where, you know, the judicial system is supposed to kind of do things within reason and supposed to. But if you get someone who grabs that thing and says not an f*** this, we're just going to make this suck for everybody. They can do that and so yeah it's a matter of conveying if you can convey to the Creditor that this is going to f****** suck and you should not want to do this with me, you could make that happen. I mean forget about the discrepancies in the loan docs, right? You could have pristine, but I am X and say I am f****** crazy. This is going to be terrible. Do you want this? And they can be like not really not my money shareholders. Would be okay with it and you're telling me I don't have to see your f****** face again. Goodbye. I actually want to own a bank. One day, I borrowed enough for them to go I would like to be on the other side to having said that, I never want to own a bank and get a call from you and go f***. Here we go. I also well-known Bank. It seems like an incredible. F***. Mrs. Maybe we could do it together one day. I seriously, if there was another business, I would go. Start is probably a bank, which do not have taped to my fridge at home, a list of the smallest nationally, chartered banks in Connecticut by assets. I still don't, I don't know exactly how that works or how any of this work, but believe me. I am ready for it? Why do my push-ups in the morning? I will look at it. Do you want to tell the millions and millions of people that listen to this every day? Now, I am kidding. How you source? Some of these non-performing loans, you said that's your Edge, how to the extent, you're willing to share. Like, what how do you, how do you find all this stuff? Yeah, that's a great question. So there's there was a relationship piece, right? So if you know, the banks who are in is mostly Banks, right Credit. Unions will do some of this, but you're talking about like, yes, we like the one, two, three, the biggest credit unions in your market, for the most part, Credit Unions exist to be like a friendlier bank, and lend to members, right? I have seen Credit Unions that have gone to members and Won't force on something because their dad and their grand dad and everybody's at the, I am like, you have a divided, like, have you actually made that much money in there? Like, no. No. But we don't want to hurt their feelings, and they won't sell it to me either because they don't want me to hurt their feelings, right? So credit unions are not great, but like local banks, if, you know them, like you will, some, it's funny because that's not even enough to get the look necessarily because people who work in credit departments at Banks, don't think about the s*** until it's on their desk. So like number one, no. Oh, All the active commercial lenders, who are local because you're gonna have an easier time with locals than, like, I have watched you have a securitization, don't do that, it's terrible. It's nobody's wanting nobody cares and you're going to have to pay for our guaranteed benefit far. So know the banks but moreover, watch Land records. Watch Land records watch dockets right? Whatever your mark wherever you are. If it's non Judicial Watch land records even if it's Judicial Watch land records, right? Because that's The first, the first place that shows up publicly in terms of distress is going to be that Lis pendens, right? Is going to be that tax lien is going to be that whatever. And I have code that basically watches my markets for me and lets me know when they're interesting things happening. And then like it should be super event-driven your Outreach, right? Because again the people who are in these credit seeds, don't think about this s*** until it hits the fan. And so then you have already gotten coffee with some of you got a beer with somebody and you haven't Hey man, I see 70 all the time. Hey man, I see you guys have this. Not like what the f***? I didn't know about that and you're like, well, you're gonna know about it soon. So, like, can we do something? And, and that's kind of how it goes. So, you know, and then like I am in the process because we're coming into a macro period where I think there is going to be more activity and more interesting stuff, right? I am starting to try to go even Upstream from the Lis pendens, right? So who's not paying taxes, even before it gets to the tax lien stage, right? Who are commercial property owners who are six months? 12 months behind on taxes, right? Usually that kind of technical default. And this is something that, you know, as a wonder myself I would, I don't sweat too hard, but Banks take this. You're a guy who pays five days late every month. God that just, I don't know why, but it really gets the right s*** like that. How you view we have to call you to get you, pay your taxes. I hate that. So those are examples, right of guys, where a bank is not going to generate. Really not going to throw someone into the technical fault. For paying their taxes late or chronically paying the mortgage late or what-have-you, right? But it might bother them enough to sell it to me at a slight discount, and then we can go in and be aggressive about it, right? So that's, those are sort of the, those are the major channels and you want all of your Outreach and I have done it the other way. I have been like, hey, this is me. This is what we do. You know, do you guys have anything in there? Like, oh, that's super cute. But now a people forget is little bit. So yeah. Super adorable. You do that? But no, f*** you. We don't have your thing right now, and they might have something the next day, but they don't know that. Right? So you want to make it super event-driven in terms of the Outreach, like that's like you're going to have a high response rate. You don't sound so bad when you say hey this is Kyle with CutiePie lending. We want to buy any blending. Yeah, well and that's, that's another funny angle to the thing, right? A lot of these Banks don't want to be mean to the borrower, right? And thank you. Specially, like I said earlier, have this thing where the credit unions are. Like we can't foreclose on this guy but maybe you can and it's a weird dynamic because you're like, isn't this like a business thing? Like, didn't they f******? Like, don't they owe you money? But they're like, no, no, we don't want to, we don't want to hurt our deposit base. We don't want to, we don't want to be the bad guy. So, yeah. There is a, there's an opportunity in the market for a bad guy. If you were going to just spin up and you kind of mention the Connecticut markets but Your model, scalable to where you could just spin up in any Market by deploying that code tracking the same public filings. I am assuming every state files publicly tax lien or any deferred tax, any foreclosures. And so it's a scalable model is like it's not like you can only do it in certain markets. You could do this all over. Yeah you could do it anymore. The only difference between markets is going to be honestly Connecticut's, probably one of the worst ones to do this in because we have land records in every town, and we have like 220 1/10. So it's an s*** show in places like Texas where it's at county level thing. It's probably a lot easier and I know that it's just a matter of getting no counterparties. I mean to me, the reason I tend to keep it to the Northeast is because I am a big, you know, it cuts against my Wall Street background. But I am big operator and I have a hard time, like, unless it was decent size, and I was going to move into a new market. I would have a hard time, sort of justifying buying paper and other places and then I think it, you know, then it becomes okay. If I am to buy paper and place where I don't want the asset, I am just like the one like what's the difference may be? My base is a little bit better but like I don't have all the tools in my fun little tool box. You know that I would normally have and so you know maybe at some point we will make a push somewhere but no for now I live here and it's fun to fund to do Chenier what is a prevent foreclosure loan? Besides exactly what it says alone that helps prevent foreclosure. Like what is happening in that loan that would categorize Our eyes it as its own type of loan? So for the most part and I would say this, actually, when we started lending, this was actually a big mistake that we made. We started lending because we were coming from buying non-performing loans, right? We figured well we should lend to people who are f***** because they will pay anything and that's fine and that's one of those things where if you're a Wall Street guy, you would look at the math and say, oh, this is you can't f***** lose doing this and you can't, but you can hurt your f****** head, doing it. Because a lot of the people who are in those situations, they're not going to be repeat borrowers, right? You're going to get off a 1 million dollar, one and a half million dollar, 500k loan and that's it. Like you taught you had to teach somebody how to take out a loan a lot of times, and they're going to do one lone ever in their life, right? And you're like it's going to be 40 L TV and it's going to be a teen sort of rate. But it's not a business more of a sick hobby, right? So we used to do a lot of Special situations, kind of s*** like that. Where there's a guy whose in, foreclosure, nobody will lend to him, right? But the asset values there and will, but will end in the money to get him out of it, right? And maybe we will get the acid maybe we won't, but that's not a great business, right? So today, the business, for the origination side of the, the house is way more about basically, helping. Folks. I mean, leaving example, last quarter, we closed the guys alone for days, right? And he's an investor, he comes in a few. Times a month for the same sort of thing, right? So that is more how that business has sort of grown up, I would say, is that we look to be efficient straightforward debt, capital from guys, who have experience on the equity side, right? And that's one of the things I think killed me. When I was early on in this game, I would get questions from these guys and, you know, I am not like hilariously young anymore, but back in the day like, okay, some guys, like two years out of Baylor's, asking me questions about this. Deal. I am like, buddy. What the f***? Do you know about this? Like you're asking me if I got boiler Insurance, that's not a real thing, right? Like, I would get under right now, we get questions. That didn't make any sense, and I hate, right? So, I think that we have tried to put together a business that puts that does kind of put the borrower's headspace wellness, you know, ahead of other things and prioritizes execution speed, right? So we have gotten away from those one-off players, okay, what's an Airbnb? Occation rent alone. So these are actually super not popular at the moment, but they were very hot earlier in the year, and we did some of them so are DNA which back when I did the scr thing they were super nascent and I actually bought data from them. They were really cool but you can get to a place where, and we don't balance sheet these because it's like a 30-year term but somebody who's buying a vacation an asset, usually single family with the intention of putting on Airbnb, right? Can do an underwrite with your DNA data to get to, you know, that dscr and, you know, going to pay a little bit more than they would, if it was on a long-term lease, but hopefully make up for it on kind of the revenue side, right? So that's one of the things that the capital markets have stopped body, pretty much completely if you can believe it. So, but yeah, that was, that was hot earlier this year. There's a lot of them, and they're just they're not buying them because they're, they're bearish on the short term rental market. It's just not proven out to be what it was or there just bearish on travel or why. Is it not popular? It's interesting. I find that a lot of times, those are all great reasons, but a lot of times it's simply that Capital markets don't want it and it doesn't necessarily make like there's almost never a nice narrative reason like that, right? It could just be that like the guy who sets the buy box woke up this morning. And you know, he was like, you know what, I think, hospitalities f***** because As I drove by the holiday in my f****** town and there were two cars in the parking lot of a lot of this stuff. A lot of especially when you talk about securitization a lot of the rules and this is one of the fun things about us having a balance sheet, right? A lot of the rules that in my opinion, don't necessarily impact the credit, the debt like is it going to pay? They get drug into the thing is if they reflect as if they have something to do with the investment outcome, a lot of times just an arbitrary rule. I will give you a quick example. We for a while, we're selling to a counterparty who got most of their money from insurers and in particular, like P and C insurance, and they kind of in a bunch of States. Unilaterally move the rates up by like a hundred basis points in like a day with like no warrant. Right. I am just gonna I am just sitting there going, what do these guys know about Wisconsin and Georgia and the s*** I have heard things anybody's places like what's going on and I asked them, and they said yeah you know what they got a bunch of premiums in these states already, and they're too overweight. Wait. So they don't want more. I am like okay got nothing to do with whether or not it's a good loan just you know just some guy with a box. Interesting. They will that kind of goes to the next note I made, which was just Banks. You had made a comment. I can't remember. I found it, but it said, Banks lend on their feelings. Not necessarily their metrics. I am a big feeling, guys. I think that's a lot. I think there's a lot of feelings that creep into this s***. You know, that, that should, or should not. But I think one of the things that's cool and I guess a question I would have for you, right? I one of the things that I and I took me taking acid, Bachelor party earlier this year to really, really, really put this into to really put this into words. Well, to get there. I think that there's a healthy amount of investing which is sort of what I would call a hobby. There's a healthy amount of chasing an alpha that I think is a hobby. And what I mean by that is if you're a guy who is a sort of like directionally punting assets, right? Just like I think you can go up. I think it could go down that to me is a hobby. I think it's hard to say that's a business. Write to me, a business is something where you spotted, the structural opportunity right that you can sort of exploit do you know capitalize on whatever you want to call it sort of indefinitely, right? And so like for me there are a lot of things in capital markets that I think are structural and don't always make sense, and they pop up, you know, with some regularity. And that's one of things that makes me feel good about what I do relative to what I used to go trying to Divine From the weather. You know how much corn were going to have? I feel like some of the things that I do now are just structurally f***** up and I have a hard time seeing like how they get worked out. Right. So in your business, right? I mean, what some do you feel the same way about like do you think you're a puncher or you? Are you guys running a business? And no, I think we're running a business. So we have got 46 people. I think, you know, I think I have tweeted about it. But the next few years, you will actually see who's running a business and who was punting, there's a lot of people I think that Ponte think they're running a business, but I could make an argument you go by 700,000 square feet in Houston, Texas with 280, tenants in there and you close and you wire them your money. You have a job that starts the next day and if the markets, you know, free money and everything's going up, maybe you don't have to work as hard at it. But I would tell you I think even The best multifamily operator in the country if they were to take over an industrial asset, there'd still be a learning curve. And, so I think about our business purely, as what you said is like we are operators. We generate returns that I think other people can't purely because of how we operate and anybody that's in our business, totally understands. What that mean, you go tell like a stock Trader that they're like, yeah. Like, how much could you really be? Providing him all the same. I will just, yeah, I will be Alpha hire another one next week. Week. I would say, you tell me how you're going to upload 280 Lisa's into yardi, get every Covenant, right? And make sure it's ginning 30 days. From now while starting to renew 20, leases managing space, dealing with your forecasting, all these different things, I mean, owning an asset depending on how good you are at it. There's a 200 Point checklist to owning an asset who can get the best insurance. I mean, we just bought a deal in San Antonio, five and a half percent fixed. We close like two weeks ago. There's just a lot of people that aren't going to get that loan. It's just that's an advantage. We have. Do you think that sometimes your ability to operate hurts? You mean like presumably when folks have praised, if they're going to appraise it, on the basis of sort of the median, operated, right? Not you? Or when you go to sell it, probably someone's going to underwrite and say, this is this guy's operating margins way too strong. We can't do this, right? Do you think there's any? Because I have seen this, right? And yeah, not with industrialists with it, okay? That I own, but I like, you know what, this f****** sucks. I am the right guy to own this, but I don't think I could sell it to anyone else. Like, there's a point where yeah, nobody's going to get the same value out of it that you get out of it kind of thing. Yeah, it's a good question. I mean, the answer is one, I probably haven't thought about it a ton but for us, it's like look, the more all we care about is like. How much yield can we generate? How long can you stay around the hoop with this asset forever? And if the timings right, and we can sell it, or we can recap it like great. But if you ask everybody like what's our main purpose, every day with every asset is like, create as much cash flow as possible. And whether or not the next person can bite off on that. It will our investors will do better. We can refine it. They're just more we can do with more cash flow gives us more options but I do I have what we have actually talked about. Those like look, we have sold some assets to some people not saying they're not going to operate him as great but you kind of like listen to him on the call. When you're selling something, you do these big buyer calls and you can He will like they are not going to give this thing. That was the basic. Yeah, well they're just they're not going to give this thing the same level because maybe they are punters or Traders like they're actually not playing that game. Now I will give you an example of you know where it works. The other way we bought a deal for 12 million dollar have ever talked about this. On the podcast, we bought a deal for 12 and a half million. Five hundred thousand square foot old. Wheeler production plant in Garland Texas we sold It, two years later for 26 million, and thought we knocked the cover off the ball. That same buyer held it for one year, and just collected rent and sold it for 52 million to link, which is blackstone's industrial a year later. That did nothing but collect rent. And so that game is over. Now, like that's actually what's exciting about the next few years. Like this whole like Hot Potato game is done. The right borrowers are going to get to borrow. They're going to get to raise equity. The Operators are going to matter. Cash flow is going to matter, like there's just no way it couldn't. And, so I think the answer to your question is, I think operating there is nothing but great things that will come for operators of the next few years. And the sad part is, there's a lot of people that were punting the football up and down the field that thought they were operating and that is about to, you're about to have a field day on a bunch of X punters that are retiring from the game of hunting. No. No, no, I love that. That's, I know, I know and I think you're right. It's just, I, it's funny because I have been in that position where I am like, I am on the loan with a lender, right? I am like, you know what? This is really the collectibles worth nothing and then I am over here, looking at like, you know what? Its worth something to me though. Yeah, I guess I have to sew your website said 8 to 12% high-yield loans, is that going to be 8 to 12 percent in 2023? Are We Now move into like 12 to 16 percent? Like, how do you think about that? Yeah, actually think they're gonna come in a little bit because not on the low end but on the high end and that's simply because I think this rates volatility and obviously, I don't know anything, you should never trust someone. Here we go, you should never trust someone's macro view. If they can't trade the product that they're respectful of you about. So don't believe anything I say about this. But I am of the opinion that rates volatility just can't keep being this. F****** crazy. And that spreads, at least have to come in, even if nominal doesn't rally, I think it's written novel, has rallied decently hard here, but I do think that spreads have to come in. Now, you know, the question is going to be whether or not people are going to be okay, putting the money out. And I think other terms are going to move, I think, I mean, we have already seen this lovers coming along right on construction loans loan day RV is coming a lot because under the sort of implicitly betting that the collateral is going to come off. So, you know, we will probably see more of that. I think, in terms of rates I do kind of expect them to come in and you kind of expect. What do you think needs to happen for money to start flowing again that the FED? Like, we just need to have clear direction from the FED that they're done. Raising rates like because everybody kind of thought, alright? Q4 you will start seeing money start moving again. That hasn't really happened. What is it? That's the trigger in your opinion. That gets Capital flows happening. Again, it's interesting. Right because I feel like, I mean, this has been A wild year. Because having, if you got a 60/40, you have got f****** destroyed. I mean, on both legs of that, like the fixing of like, depending on what do you know what kind of duration you have on, like you have gotten hit hard of equities rights while. So I think the question becomes obviously, like rates being higher in nominal terms is kind of less good, but we have had periods in history, where they have been quite a bit higher than where they are now and there was a quiddity. So, I think it's more So about it's more. So about giving people certainty than leading rates to sort of rally in absolute terms and you know, Capital markets have sort of gone ahead. I mean the FED has brought of them but Capital markets. Have gone ahead and pry some pretty bad s*** happening and I think that hasn't really materialized and so, you know, as sort of the macro data comes out in q1 Q2, I think that people will look at, you know what, they wanted to put out in terms of money and Say, we're not in a place where we're going to hit that, and we had to start doing it and the and everybody can feel as bad as they want about this thing. But it's not really the daddy. And I think that's probably, I think just seeing more prints and seeing them not suck is probably, you know what, what people would like to because people don't want to anybody. Nobody wants to be that dumb ass by themselves, right? If you're that dumb ass with a bunch of other people, whatever everybody got it wrong but I think you know to stick your neck out and start swinging. This is one of the things. I am having some trouble with right now and I would be curious to know what your what you guys doing the acquisition side, right? I am like okay well this seems cheap but maybe it will be cheaper next month. It's tough. What do that? And that's okay. That's a great. So we bought a deal in San Antonio like two weeks ago. Yeah. The can we have bought it cheaper one day. Yes. But again I think that's a little more of like punting like If you're operating one we have got six and a half million square feet. So we see the data that's happening like by the day of what's going on and what I would tell you in our asset class, I can't speak to like I know what's going on in class s*** office in New York City or Suburban, it's bad. What I would say is like we're still signing record lease after record lease in small Bay Industrial in the Sun Belt. Like it's two different worlds. It's like the capital markets are dead. The ground game is great. And so we're just having to make a decision of like, are we not going to trust the fundamentals? And just be like, it's almost like we're going to hope that everything gets so much worse next year. So that maybe there's a better entry point. Or we go to follow the data today, and definitely make a price adjustment that reflects today's kind of risk. But also we're pricing whereby, we bought that deal even at five and a half, fix we under Road? It that it would have worked with a seven and a half percent loan for five years, which is not going to happen. But if in five years rates are up higher, and we have to recap there. Again, it goes back to like, well, we have the cash flow and I guess the thing that nobody ever truly underwrites, it's like hard to do. That is like what? If we go through the Great Depression and like everybody goes out of business, and I don't know, we just, we, we don't play that game and now it's just seems like we're in this world. Like we're about to print 1.8 trillion, I mean, like, out of nowhere. We're going to read it in like 48 Hours, like that has to be good for asset owners. I would have to imagine that. It doesn't suck if you own buildings for 1.8 trillion, that you have that incredible. You have that quote, about how the all residual. Yeah, Syria. All the, I am Bochy Mount quote basically The residual value of all Innovation makes its way down to land with cruise to real estate does because so you think about like Amazon like every efficiency they get in the warehouse, eventually they have to renew their lease and the landlord's not an idiot, and they're going to figure it out, and they're going to raise their Remy. It's basically, it's just everything. I mean, if it's cheaper, you can build these places that don't have parking garages because nobody's driving cars anymore. Why aren't they driving cars? Because It was invented. Well guess what? You can pay more per unit or rent it more per unit cause you're not paying for a parking garage and parking service and all this other. So no matter which way you Dice it as we get more efficient as a society, there's like one place that always ends up the end of the day and that's a building owner other than, you know, depression, right? Some big macro collapse. What do you think about when you think about like big existential risks to your business? Big. So like that, the sun Bell or liked our population flows, I guess, slow down. Okay, that would be a big one. You know, we're in an asset class where I am not worried about new Supply. Nobody's rebuilding 1980s warehouses in the center of cities. In fact, they're just knocking them down to build other better stuff. Really? I mean it's a Mac. I guess it's got to be a huge depression that kills business because we have a lot of, we have like a lot of blue blood but business a lot of services, a lot of contractors. I call it kind of the backbone of America that keeps our City's running and like our country flowing. We don't have, I am not worried, if you know, some technique, you know, super tech company goes out of business. They're not operating our stuff right now. If the slow down right now, it seems like there's a big push in society or just the world is like, how do we get products to people, quicker and cheaper and that's not just Amazon anymore. That's like your local roofer. This just trying to, like, do a better route to like, not to save a little gas and Everybody's just trying to stay close to the customer, get to him, quicker, service some quicker that ultimately is really good for what we have to offer. And so if people stop caring about that, that would suck because our capex is our carry things, like great thing to be on the other side of, right? So I was going to say I don't know I don't need it now I can have it later like if you're looking at retail or office even if you were to say like okay demands their the prep, the preferences by tenants is changing dramatically. I mean A restaurant build-out now is like, multi-million and office building. I mean, these are like Museum, quality, build outs for nice office space. So one thing that would keep me up at night is if like what people required by way of capex or t.i. And these buildings like somehow drastically preferences change because I am dealing with sheetrock carpet lights, a tiny office in a warehouse, something that would throw us off considerably. If people were starting to be like, no, you know, we want like marble floors in our 10%. That would be crazy and then I will tell you what's heard it. What's hurting right now is insurance. Now, I think that's hurting everybody, but like we own some stuff in Florida, we own some stuff in Houston. Just the way that ensures are starting to underwrite. A lot of this stuff is now, I don't know if that's hitting everybody but like Insurance sucks this year. Yeah, no, that is. I mean, yeah, it's wild. I mean, I have tried to fight it by doubling our deductibles on some stuff, and you barely get Anything back in preview. I mean it is wild do you think and I don't think either of us know that much about how this works but do you? I mean do you think there's an opportunity for like oh s*** heads like us to band together because I don't make insurance claims. It's ridicu. That's a crazy thing. That's the only thing worse than paying premiums is making claims like it's a fiasco. So I don't do you think that there's a potential for guys to come together and do something captive? They could undercut all these guys or do you think that Do you think they're jacking premiums for good fundamental reason? I think it's the one of the biggest opportunities in the world. I don't really understand insurance. It's hard, even to get the insurers to tell you how it all truly works, you know. The sound bites which are like, oh, there's a hurricane in Florida that wiped out 50 billion there for like the whole country is going to pay for it and premiums basically. Like I get that, I mean the s***** thing is everything's so expensive to build now and it keeps getting more expensive. And so on disaster. And then these lawyers Is just have a field day. I mean, everybody's suing everybody. And so just the magnitude of disasters is been Amplified. The answer is like there has to be a solution. I talk to a lot of my buddies that just own real estate by themselves, and they ensure their stuff for so much less. It's because we have investors in her and have other people's money that we have to Max and sure what we have most lenders require you to have like more Insurance than you really need. Like a lot of it, slender driven. If it was just up to us what we felt comfortable with, we would just say ensure for so much less. They make you insure for like the cost the new cost to build, right? And we're like well we don't need that the lands more expensive like anything, and they're like nope sorry you have to have this. So I am kind of speaking like in a circle but the answer is yes, there has to be because it's unsustainable and like there has to maybe be more incentives. That lawyers can't. Just go sue the hell out of everybody and go after these hundred million dollar. You know, used to get in a car accident. It was like, Hey, you know, we're going to fix you up blah. Now you drive down the street and there're Billboards like I got so-and-so 900 million dollars for getting run over by an 18-wheeler. It's like I get that's a good thing but it's not great for society. When there's like a, everybody's flexing, like how much you can sue somebody for and that shows up an insurance. I know. I moved it from property to Otto The same things happening in property when stuff goes wrong in a building how many times? I don't know if you have had this, we get it all the time. People will suit will show up and trip on your site like just show up trip and then file like a little lawsuit against the landlord for, and they will lawyer will not find some sign that's missing. That should have been placed here and it's a whole game now. And, so I think one of the biggest ways to change the trajectory is the gamification with lawyers of like there has to be penalties for These lawsuits that are kind of frivolous and right now, there are none. Yeah, it's interesting, right. Because one of the things and obviously, I am an idiot who learns everything the hard way. But I was, I was always under the impression, right? That legal fee like the sort of, the prevailing parties, legal fees, would get paid and that almost never happens. Whatever happens. I have got it in every color, every agreement ever, right? And it's, I have never had it happen, and it's just such a there's actually just no deterrent to being like a d******* in the System at all. Not I remember I counted once I have been through like 16 attorneys in the time, I have done this, and it's great because now I have liked one for each of like three main things, and they're gonna. But I took some time to find the right. One of the guys was so f****** bad that I considered filing a grievance, which crazy, right? I mean why would I look do Chris? I looked at the process, and I was like oh my God I would have to hire someone to do this. Like this is crazy, right? There's just nothing. There's nothing. Nothing in there for Bad actors on the, I can't speak to criminal or family, or you go s***. But on the Civil side, if you are f*** face, like you're going to get, you're going to get work. Like, that's the way it goes. It's f****** crazy. And obviously, you know, whatever I am bitten of fart face on the Foreclosure front. But, hey, yeah. I am your there's room for fun faces in the market. That, that might be the title of this episode. Yes. But that doesn't impact people's cost of Casualty Insurance. So II don't feel badly. The answer to your question is like there is an Answer, I don't know how we're going to get there like it seems obvious but I don't know the market. One of the things that I think is wild about it is how opaque the market is. Like it's one of the first for something that is a multitrillion-dollar market for the visibility to be this f****** disk terrible, right? You're like you're calling up a broker. You don't know who he's calling, you don't know. You know the prices he's having its Odd to me that such a massive Market is so opaque. I mean, even homeowners is obviously better. But like, even that one is strange. Like I go back to I tell people this all the time, everybody's like his insurance, a good business, and I am like, I don't know, but the best the greatest investor of all time. Love's insurance and owns a bunch of insurance. And so, my guess on that alone is that it's not too bad to be in, but this Florida Stir like we're paying for it in our Houston. Like there's some of the discussion is what happened? Which is the Florida s*** up here, because I have seen some real know what? I don't we're going back and forth right now on a quote but it's going to be 50 to 100 percent higher. For some people I mean, you know it's a lot and look the incentive again, just I mean, you hear from people all the time like you think like okay that disaster probably cost a hundred billion, probably ten billion of that sphere. Fraud, like just people that are going to get, you know, scrape a little, a lot of it like everybody's like, how can I get the most for the least, basically, that's like the whole game with insurance and so and then you enter the attorneys. I don't know. It's just really incentivized to make prices, go nowhere, but up. So you think, do you think there're a claims issue as well as just the oh, for sure, I mean, everybody's house had ten times as much Furniture in it and, and diamond rings and stuff. Not saying everybody, but I guarantee you that what's claimed in a disaster like that, and don't get me wrong. These people's lives have been just destroyed and it's sad as s*** to see. But on the flip side, if you're just looking at it from a business perspective, like I can't imagine how much fraud happens. I just can't imagine how much fraud happens. I will tell you. One thing, I did as a dumbass young kid, I owned a bunch of rental properties. At TCU there was a huge hailstorm and I just made a claim on like every roof And just thinking this is my time. I am getting all new roofs thank God for Hail and sure enough like it came back, and they were like no like you have liked one roof that kind of qualifies but it put a permanent stain. On me. You have an insurance credit score. I don't think most people understand that, when you make claims, you have a credit score of like how many times this person makes claims against their insurance? So for like, five years, I couldn't get insurance at a good price because everybody's like you're the guy that goes and claims on. House when a hail storm comes in, and I was like, yeah, I was that guy. Now like you said, I do everything we can to not have to make a claim because not only is it getting more expensive, it gets even more expensive when they think you're a guy. That makes a lot of claims. It's a double whammy. Well, you gotta hire a public adjuster we have to make a claim God. This is a couple of years ago now, but it was a hilariously enough. It was the, it was actually the first non-performing loan I ever bought. I really didn't realize On this one it was owner-occupied right? Nice property I think was on five acres at like a riding rink in the back 5,000 square foot house. Good s***. And the occupants who were just say they like the, they like the rock. They let the f****** did nothing. Start on fire, right. Things start a fire and like, oh my god, I have never had this happens before and, you know, the insurance company sends their adjuster, the guys telling us to do, no big deal. He's like, yeah, this is not a big this is not structural. You could just paint this. I said I am over there. I am like you cannot f****** paint. Everybody fire damage RAM. And so, you know, they come back. It's just my first lesson where I can get a public adjuster and fight, and the guy fought, and it was, it was good s***. But, I mean, it was a, it was an s*** show. I mean, this is a single-family house, it takes nine. F****** once it's and again, yeah, the guy low-balled the s*** out of some games. This is probably 20 grand 20, 20 grand to rebuild a house. You f****** crazy. I looked at his pricing, we actually owned some dumpsters in a rolloff truck, and I was Like, I looked at his dumpster pricing and like, I don't, I have owned the dumpsters and I can't dump for this, like, this is f***** up. So, yeah, no, it's a, it's a hell of a racket and you're right, there's a reason buffets in it. You're getting hit from Every Which Way like when true hail storms come out, you know there're roofers out there they're like I know how to get the full client. I mean it's just like everybody's got a game and insurance. It just varies much seems like and a lot of times it's like how hard are you willing to fight the adjuster? Some people just like here. Like all right, I guess that's what we get. Come to find out like if you just fight a little harder there's a lot more. But their game is like how can we give you the least and your game is like what we just paid you a bunch of premiums. I want the most and that's not the true game there. They have built a whole system around. How do we pay you? The least, but make sure your premiums are the most. I asked our public adjuster. You know, they did come. They came back with a more reasonable number. That's all right. What if I don't take this and I mean, it was They were, I am gonna hire an attorney, and they get a hire, an attorney. And then there's the third attorney, and I am just like, what the f*** like this. Like all these third parties are going to get more money that I would on the claim, right? This is wild it's just now they have got this thing set of the things set up. Well, they're really done, we covered a lot, we covered loans, crack houses, we covered office a little bit, little macro, we, little macro, little hedge fund, a little corn Trading. But this was awesome. Yeah man. Listen, I appreciate you having me on. I love your, love your s***. You're one of my favorite f****** followers, your you to your gradually loved you? I loved you a lot. I love you a lot more after this last hour and a half, I didn't think there was much more to give, but I think, I think we're lifelong buddies now. Well, if you're ever in West Hartford again, or if I am in Texas, so I will definitely let you know. You have a place any time you're in DFW and I will holler That you have a great holiday season and Christmas. Yeah, Merry Christmas. And looking forward to here and have bad. I stand on this thing, I am like Everyone, it's Chris here again. Thank you so much for joining me on this journey. If you enjoyed the show, please follow the show on Apple Spotify or subscribe on YouTube. Thanks again, and I will see you on the next episode. Chris Powers is the founder and chairman of for Capital LP, all opinions from Chris and guests of the fort podcast are solely their own, and do not reflect the opinions of for Capital LP. This podcast is for informational purposes only and should not be relied upon for Real Estate or investment decisions. The fort with Chris Powers is produced by straight up podcasts. The fort with Chris Powers is produced by straight up podcasts.