Origination
Join us as we delve into the world of multifamily and commercial real estate, engaging in insightful interviews with industry-leading loan originators and salespeople. Discover the secrets that set apart these top performers from the competition as we uncover the strategies and skills that drive their success.
Origination
Episode 40: Chase Johnson - Managing Director at Cushman and Wakefield
The story highlights the speaker's experience as a teenager working at a phone repair kiosk, where customers would frequently ask if he could fix their broken screens. The speaker then taught himself how to fix screens and began selling them at a profit, eventually sourcing them in bulk from Alibaba to lower the cost. The story also touches on the theme of listening to customer needs and responding to them in order to create a profitable business.
00:01 Introduction to this episode.
07:13 Selling screen protectors.
13:01 Being data-driven and sharing information.
15:00 Transparency creates value for both sides.
18:58 Lessons learned from John’s pitch.
25:50 The importance of having committed clients.
31:21 Comparison of debt service on a deal by deal basis.
36:45 Risk of taking a gamble.
40:38 Long term maturities and extensions.
lenders, market, people, loan, client, equity, selling, deals, screen protectors, year, calls, rates, business, borrower, easy, long, sales, chase, interest rates, debt
Hey, it's Morty. Welcome back to the Origination podcast, where we speak to the top salespeople in the multifamily industry to try to understand what separates the top performers from the rest of the pack. On this episode, I'll be speaking with Chase Johnson, Managing Director at Cushman and Wakefield and Greystone. We know sales is not easy, but is it always complicated? Chase learned very early in his life, that sometimes it's just as simple as listening to the customer, listening to what they want, and then delivering that and doing what you say. This is just one piece of so many great nuggets of advice that you'll hear on this episode. I'm sure you'll enjoy it as much as I did. So without further ado, let's speak with Chase. Chase Johnson. It's a delight to have you on the origination podcast. Welcome to the show.
Chase Johnson:Thanks a lot more than happy to be here.
Mordecai Rosenberg:Awesome. Chase, you know, we got to spend some time around the holidays in New York, any kind of memorable impressions that you have from, you know, being around town during that holiday season? This year, anything surprised with
Chase Johnson:You know, it was great. It was exactly how New York should be during Christmas time. You know, we got to walk around. And I think we went to, me and my analysts, we went to Rockefeller Center and took a selfie in front of the front of the tree. And it was, it was a definitely a good fun experience. And it was awesome to see Greystone and meet everyone. So it was a great time.
Mordecai Rosenberg:You came at exactly the right time, because everyone's in a good mood, you know, Thanksgiving when you have a holidays. Then about, Well, exactly. January 2, straight through March 1, everyone goes into a state of depression as it's just cold.
Chase Johnson:And, you know, not too much fun, is like I was telling someone earlier, you know, I'm here in Austin, Texas, and you know, I was telling someone earlier, so like, you know, the cold weather is great up until December 25. And then I'm gonna be done with it. Yeah. You know, after the holidays, I'm not much of a cold. Yeah. booziest.
Mordecai Rosenberg:Alright, well, Chase, why don't we start out with the the question that that I usually start with, which is, you know, if you think about earliest sales experience, you had the first memory of failing something, and it could be when you were little, it could be high school, college after college, but anything could come to mind.
Chase Johnson:Yeah, absolutely. So, you know, my first sales experience, probably working in, in Baybrook mall in, in South Houston area. And so, you know, whenever I was 16 years old, my mom was, my parents were nice enough to give me a vehicle to, to drive around. And so I was super excited about that. But they were saying, hey, look, you got to pay for your, your gas. And so you gotta go find a job. I went to the mall, and I found this place, there was a kiosk in the mall. That's funny. They they did it was called invisible shield, they did iPhone screen repair. And they did like screen protectors. So like, it would be, you know, a just a screen protector that goes on your phone. And in so, you know, I saw the guy sitting there, I was like, man that looks like kind of like a easy job. You know, you just put screen protectors on people's phones and sit in the middle of all and people watch. And so I went up to him, and he got the job. And, you know, did my little training or whatever, on how to apply the screen protector, and it was not too difficult. And then, you know, as I was working there, people would come up to me, and they would say, hey, you know, can you fix my lunch? And so I was saying, hey, no, we can't do that. We just put the screen protectors on the phone so that your phone doesn't crack when you drop it next time. So you're gonna have to go to Apple, and you know, get the screen repaired and then bring it back to me and I'll put the screen protector on. And so after about like 1015 20 times of people coming up to me and asking me the same question they were I guess the marketing of that kiosk was a little off you know, people were thinking hey, you know, you can repair phone screens. And so you know, I kept saying no and then one day my phone I dropped my phone on the ground and I don't know if I had an invisible shield on it or not. But but the screen did crack. And so I went on YouTube and I learned how to repair the phone screen you buy like a glass online and it comes in your house and there's a little screwdriver and little screws or whatever but it was real easy. Back in the day. It was with the I remember vividly it was like the iPhone three jeans or out they had a black back and it washer, it was like the coolest thing. And so the thing he did, it was the easiest thing we did was two screws at the bottom. And then you get a little suction cup. And it brings it up, there's like three little things, you know, electronic components that connect to the main motherboard or whatever. But I had no electronics background back then. But I was too broke, to go to apple and pay, I was like, I can save 50 bucks if I display the screen online and do it myself. So I did it successfully on my own phone. And I was, you know, going back into work, and someone asked me, Hey, can you do you know, my screen got cracked and repaired? And I'm like, yeah, we can repair it. And so that's kind of the first, you know, time where I felt like, you know, at least from an entrepreneurial type of perspective, that, you know, yeah, I can really make money selling something. And that, you know, there is an identified need. And I'm, I think I'm able to fill it in. So I went on in, you could go to whatever website, what are the screens, I ordered, like two or three screens. So out of those really quickly, that did a couple times from kind of a retail perspective. And then I decided, you know, these screens are like 40 bucks and selling for $100. So I'm making like, $60 profit on each screen, because I was really good. But I went to this thing, I guess Alibaba was really early on at that time, with Alibaba, and I were like, minimum order, if you want to. Crack was like, I don't know, like, one of experience. And I was like, Maybe I'm not going to go on 100. But I talked to him on the web on the website, and I was like, just send me 25. And so I got 25. Like, I started getting the bulk orders. And I got the price down to like, five or 10 bucks and screen. Selling for $100. I thought I was just like a genius. And so you know, that's, that's really the first memorable experience of of selling that I've had, you know, that kind of age and about 16 years old.
Mordecai Rosenberg:That that's awesome. It makes me feel nauseous for all of the $100 fees. I paid for to fix screens. Oh, yeah. For you know, my phone or my kids, like, you know, iPads and phones. It's I mean, it's amazing what they charge for. Yeah. I mean, if you don't know, yeah, it's kind of like a black box. It's like I'm intimidated. I'm scared, I can't do this on my own. And I need a professional to do it, or some guts that has done it before. So that's an awesome sales story. It's also interesting that that what you were doing was just listening. You're you're selling you're, you're they're selling these screen protectors, you're selling some of those, right, but you're hearing this recurring need for, you know, actually, what I really want is, is if you could help me fix my broken screen, because that's this urgent thing that I have. Can you help me with that? Right? And in all you did was you responded to? Well, first of all, you just you listened to the customer, and you heard what they had to say. Right? And then you responded and said, alright, well, maybe there's something I can do to to fix that, that that problem? I feel like in you know, in, in our industry, let's say in multifamily finance, it's probably not uncommon for people to just say like, well, let's say I sell Fannie Mae loans. It's like, alright, well, you want a Fannie Mae loan? No, I don't want to offend anyone. What I really would like is acts like, I'm sorry. We don't we don't do that. Right. So you can have that approach. Or you can say, well, after you hear enough times that there's a particular need for something else, you can try to find a source for that. I wonder if that brings up anything for you as far as your approach? Yeah. In your current role in capital markets, and in commercial real estate, the role of listening, any examples that come to mind about that kind of like, just really like listening and trying to understand like to new direction?
Chase Johnson:Yeah, absolutely. I mean, I think that, you know, just recently, you know, we've seen kind of, you know, obviously a bunch of volatility in the, in the financial markets, whether it's on the debt side, or the equity side, over the last, you know, I don't know, five plus years that the equity JV equity was easy to come by, right. So if you were a sponsor that had a few good fullcycle deals under your belt, you had no problem raising your LP equity. And whether that was from friends and family or whether it was from an institutional type of investor, you really didn't have trouble as long as you were a good, good operate. Right? And, you know, obviously those that struggled in the equity space back then were Probably someone Little Reader opinions versus second project, whatever it is, those type of assignments were prevalent back then. But now today, we can see that the LP equity markets have really, really tightened up. And we've seen, you know, a lot of those types of requests come through with strong operators, right. So you've got, you know, operators that have been in business for 20 plus years, that have gone full cycle on dozens and dozens, if not more projects, and they're, you know, coming to us now saying, hey, I need equity ended up, my guys are on the sidelines are pencils down. And, and that's something that, you know, it's not easy to go find in this market, you know, LP, equity money, there's no nothing worth anything of substantial amount is easy. And so we understand that. But there is a shift in that mean, it seems like recently in, you know, JV equity introductions. And so we've kind of, on a selective basis, taking those assignments on with strong sponsors, what we're seeing is that, you know, this gets you in the door with an operator, a developer, or whoever that otherwise would have not really had a need for you in a really shiny market. And so that is a leader into capturing their debt business as well. So if we're doing the equity, we want to do that. And that's an easy trade there. And so it really does open the conversation up, if you can kind of widen your approach from you know, hey, this is this is the only product that I sell, if you can kind of widen that out and say, Hey, what do people need right now, and really dial it in and go find that? Yeah, and that requires conversation. I mean, it's probably easy in let's say, a market, that's very slow to say, alright, I'm not going to pick up the phone, because I have nothing that really offer in this market. But it's you need to stay in conversation in order to keep your ears open to the new needs that are emerging. Absolutely. And, you know, we're data driven. And so you know, those conversations that we're having, whether it's with a lender, or with an equity provider, you know, we keep it very simple on the data collection side, but we are collecting data on what their programs look like, you know, from you know, where they play in the stack. Are you a first mortgage lender? Are you preferred equity? Only? Are you JV equity? You know, are you willing to coach up with a green sponsor, I mean, you know, all those types of things, we're, you're kind of tracking as we're having conversations with lenders, as well. And, you know, for us, if we do our work on the front end, as we're having these conversations, it's easy to leverage the borrower, or sponsor comes to us, because LinkedIn is go to our database that we've got, you know, always updating our database and say, hey, look, this is the need, we can filter out who we've talked to recently that might want to offer that product. That's great.
Mordecai Rosenberg:You've mentioned to me in the past, you talked about being data driven, and just asking the right questions and sharing information, we've talked in the past about your approach with prospects and clients and banks, as well about how everyone wants to know what's going on in the market, just us sharing your knowledge and the data that you're gathering, you know, to just add value to, you know, others that you're talking to, and to build, build those relationships. When you think about it, you know, during the time that you know, I guess, quarter three, quarter four of 2022, we've got turbulence, we've got people that are either, you know, a lot of people are pencils down here to the ground, trying to figure out what's going on, you know, I am too. And so both on the borrower side, and on the lender side, or let's say, on the equity side, and the sponsor side, whatever you want to say, you know, it's funny, I maybe send the joke to you at dinner, it's like we had, we were talking to the borrowers, they were asking where the rates were, and then we're talking to the lenders, and they're asking where the rates were. So it's like, no one really knew, you know, in these kind of volatile times, everyone's trying to gather information. And well, I've always kind of made a cornerstone of my kind of business philosophy is that I want to be transparent with everybody, you know, I'm going to tell you how it is. And you know, no matter what, if it's the, you know, I'm going to try to say, the best way possible, but in and I think that lenders really like that as we're going out to market and a competitive process, where we say, hey, look, we've got these three to four quotes on the table. And this is the best one that we're leaning towards. And if you can get there definitely we'd love to throw your name into the ring. But if you can't, I don't want to waste your time and you know, kind of be very transparent on not only kind of market intelligence on a general level, but also want to do a specific level. And I think that really for
Chase Johnson:adds value directly to the sponsor or the borrower. In that case, where you're saying you're You really are truly creating market and you're not, you know, you're you're creating transparency with the lenders. That opportunity.
Mordecai Rosenberg:So to your point about borrowers want to know where rates are and the lenders want to know where rates are. The interesting thing is that as you're having conversations with both sides, you can answer that question for both both sides. Right, you can you can you're accumulating those conversation points. And in this market where there is no, there isn't a lot of transparency, not for any ill intent. But just because things are moving so quickly. And it's hard to know what what's going on. Just, again, being in those conversations, talking to people asking questions. And listening now gives you more information that you can have in that next conversation,
Chase Johnson:exactly how it compounds on each other, for sure. And you're able to kind of pick up pieces from one conversation to another and formulate your own opinion about where the market is.
Mordecai Rosenberg:Going back to your, let's say failed history. Any particular sales role models that you've had in your career that you look to is like, wow, like you saw someone who just, you know, a ring of light around them when you saw them clip closing deals, and any jobs that just really inspired you or taught you in this industry?
Chase Johnson:Yeah, I mean, I think that, you know, what, whether I would call it a sales room, roll monitor model or not. You know, one person that comes to mind for me is, is my boss for the last eight years. So I was at this a little background on me, I started out with a company called Texas Realty capital, we were a small boutique commercial mortgage banking platform that originated like, life insurance company loans for about 20 different life companies. We originated in service, those loans we sold, the owners of that company was John Moran in June, they were local Boston guys had been here forever. And then they ended up selling the, you know, their business to North mark and April 2019. And subsequently, in September of, I guess, 2022 I moved over to Greystone and in Cushman Wakefield and so, you know, John Moran really was my mentor, as I got out of school. And, you know, the, whether I would say that he was my sales role model or not. But I would say that, you know, he's definitely my, my commercial, real estate, finance and also character model. And I think that that goes a long way, when you're, you know, whatever, Tony Robinson or whatever, or whoever, you know, these large kind of faces in the industry, you know, they they have, there's, there's, you know, kind of that hoo, rah type of mentality, and then there's also this kind of, Hey, be good to, you know, people in goodwill follow up. And if you consistently be good, and be transparent with borrowers and lenders, and if you get the right thing, even when it might be hard to do the right thing, then everything's gonna work out. And so that's really kind of the main thing that key taught me, and then I think it does go into sales, right? I mean, it's, you know, it's maybe a little different than picking up the phone and not not stop calling until you hear a yes, or something like that. But I think in our industry, that's not really the way that it works. I mean, you can't force somebody into these types of products that we're selling, have longer, you know, close cycles, they've got longer signup cycles, they've got, you know, it's a, it's a long game. And so I think as long as you are doing the right thing for, you know, your customers, whether they're a borrower or lender, then then you're going to be alright.
Mordecai Rosenberg:Yeah. Do you remember in maybe in some of your early meetings with John, you're anything that you learn from how he presented to clients or from pitches like anything, you know, that that stands out? As far as Yeah, his approach?
Chase Johnson:You know, I think being curious about the math of it, like being curious of how, how does, how does debt, you know, we all we have debt yield as a measure, well, why do we measure dedicated, you know, what, why do we measure debt service coverage? You know, really kind of getting into the fundamental details and maybe coming up with, you know, I think also explaining something that might be a little more complex to the left instead of laying down in explaining that in a simple form, really is, is I think the way to kind of that you know, that you've maybe mastered your craft is being able to kind of explain something that was maybe difficult, you know, to grasp it. Maybe on your front end and explain it to someone in a very simple, simple way that makes a lot of sense. And I don't know if that answers your question, but keeping keeping it simple.
Mordecai Rosenberg:Yeah, yeah, my, my, my father, he likes to say that if you can't explain it to a third or fourth grader, then you probably don't understand it. Right,
Chase Johnson:exactly. And so I think that that goes a long way,
Mordecai Rosenberg:just over the last 18 months, 24 months, we've had kind of two ends of the bell curve in terms of the market activity, right, you've had just a time where we never seen more sales and REITs were at record lows, capital was available from you know, all corners, than we have today, where rates have increased substantially, the market can grind it to it to a halt. Very different environment. I'm curious, you've had lots of different clients, you probably learn about your clients in good times and in bad times. Yeah, any kind of instinct that you've had about, you know, what makes for a good client, or what kind of clients maybe you would want to avoid? In, you know, in the future, you know, based on, you know, your, what you've seen in good times, and now in challenging times, like insights about what the client profile, you know, what could be their character, their mindset, their their anything else,
Chase Johnson:I can give you two examples of maybe one kind of in this was maybe more of a COVID example than a, but it still kind of goes into the theme. We booked, I don't know$250 million worth of commercial mortgages with a few different life insurance companies with a with a client of ours that owns enclosed malls around the country. So some of the hardest product type defining some of the most disparage kind of got a market, we successfully found the right lender. And then COVID, loaded them up with a bunch of a bunch of long term fixed rate money, and COVID. And, you know, I was shaking in my boots, I'm like, Oh, my God, because we had, you know, guys that were owning whether they were office buildings, or it was less on the multifamily side, but it was mainly office and retail that was kind of, you know, we're getting calls off, you know, back to back, hey, I need relief, I need help, I need flipping interest only or I just need to defer my payments because tenants aren't paying rent, I senators aren't open, you do really understand the character and bad time. And that client followed me up in the thick of it. Every single one of his malls were were forced to be closed in the middle of it by the municipalities because of because, and he called me up and he said, Hey, Jason, I just want wanted to let you know, if you could relay the message to the lenders that we did deals with, I want you to let them know, I'm intentionally not going to request the dollar relief, I'm going to pay my 15 year ends, as you know, like super quick amortizing loans that we originated. And I believe in these properties, and we're going to be stronger on the way out of this thing. And I just want to let you know that we're all good. And so that was something that really kind of took me aback. And I think that that's something that into the next cycle is going to propel them even further. Right? So you doing the right thing, in the bad times, is going to pay off in the good dad's, I really commend him for his decision in there. And I think he was definitely trying to make a point, if you didn't get one, and those lenders are still to this day, love to do business with, you know, I don't know, if they would have the same sentiment, and he had every right to go and request interest only or, you know, man just moving from a 15 year to a 25 year amortization for a few months, you know, give him some, and they were saying they were already, like, hoping not hoping but they were already pretty much understanding that they're getting it from all angles, he's probably going to be one of them. But he decided not to. And I think that went a long way. And then the second, you know, kind of opposite type of, you know, encounter was we had, you know, COVID hit, and we had a borrower that, you know, what will you do? Because we serve as a bunch of mortgages, what we would do is we would we would come through and we'd say alright, send us a send us your rent wall and let us know which tenants are either paying rent and not paying rent, give us a status on each one of the tenants and maybe even just conversation, you had to even get some color about what's going on right now. And so, we had a sponsor come through, and we did an office building with them. And he said Nearly six months after selling my office, here's your rent roll, fill it out, and let us know the status of each tenant. He says, All the tenants are paying rent. And, you know, it's but everyone else is getting six months, I want six months. And I was like, Hey, man, you know, that's probably, you know, not the right approach, we'll chase we got, we need six months, go get, you know, forcing my hand to request this from the lender. And who knows if that deteriorated the, you know, sentiment with that lender in particular, but there's kind of two ways to go about it. And I think that, you know, the way that my mall guy went about, it was a pretty commendable way. It probably was the, you know, not the best on his pocketbook. But, you know, I think he's gonna be just fine.
Mordecai Rosenberg:And you want clients, first of all, who are committed to their property? I mean, there are, look, we're in a money making business, right? So people are, you're not buying an asset, to not make money on it. It that's the reality. At the same time, there are certain clients who will do the least that they possibly can do, right to fix a glaring problem, you know, the, you know, you know, they used to call it like, putting lipstick on a pig or something like that, you know, that's a Texas phrase. Oh, that's
Chase Johnson:a phrase. Yeah, yeah.
Mordecai Rosenberg:Yeah, I didn't hear much in, you know, Keeper school growing up. But then there are others who are really who have are committed to the property and to the tenants to those people are also, you know, probably tend to be more committed to their partners as far as like just doing what they can do, you know, to make a, because it's what a retail.
Chase Johnson:I mean, there's a lot to be said about, you know, obviously, your reputation. And the world of commercial real estate is is small. I mean, it's, it's not this, it seems large at some perspective, but when you get down to it, there's so much crossover, and people talk and leave. There's these large conferences like NMHC, and NBA. And I mean, you know, these things happen, and people talk pretty quickly, and Word travels quickly. And so, unfortunately, all your good deeds don't really travel as quick as your bad deeds, right? Like, something happens, where someone maybe gets in a dispute with a partnership, and there's some controversy that rolls around the market very quickly. So you know, avoiding that at all cost, I think is definitely an important key to being successful in the industry. And it kind of goes back to what we originally said, it's like, just be transparent. Do the right thing. And everything should be okay. Work hard. Simple stuff.
Mordecai Rosenberg:Yeah. Yeah. One, one idea for you. Yeah, I think that the client who you mentioned, who, you know, stayed with, you know, said even in the middle of COVID, they were gonna, you know, keep on keep on paying. It would be you if you went out to lunch or dinner with them, and said, Look, I realize that here's a really admired what you did, I'd love to do business with more people like that. I mean, I'm committed to my business, and I want to work with people who are committed to theirs. Yeah. And is there anyone else that you think comes to mind that you that kind of shares your, your mindset that you think would make sense to me, might be an interesting conversation, because first of all, people like being seen and recognized, you know, and that was something that he did, that person did, because they thought it was the right thing. But people like to be recognized. And, and to, you know, when you say, Look, this is how I see you, and they relate to that picture. It there's a resonance that they that they feel, that might be a interesting way to kind of expand the circle of, you know, committed client. Right,
Chase Johnson:like minded individuals, and individuals. Yeah, absolutely. And, you know, people want it. Yeah, I mean, people want to do business with, you know, who they they like and who they trust. And, and, yeah, who's better endorser than, you know, a person that you'd like to trust?
Mordecai Rosenberg:Right, exactly. I'm curious. And this is for my own, I guess, market research. You know, one of the things that we're trying to figure out is, you know, how can you add value to a client today, when maybe there, you know, it's no longer that rates are at record lows, and it makes sense for everyone to refinance. And maybe they're not buying or selling? I don't know. I'm curious if what you're seeing lenders do if you're seeing lenders do anything to add value to their clients, or any ideas that you might have on, you know, what, what, what can a lender do to serve their clients during this time if it's any kind of advisory work or valuation or share you know, webinar Arthur, just sharing feedback on kind of like what you're talking about about what else, you know, we're seeing in the market, any ideas come to mind for you? Yeah,
Chase Johnson:I mean, something that, you know, intentionally that I'm trying to do this year is provide the market with, you know, short snippet feedback of kind of where each lender type is in a particular week. And so, you know, as we are in the market, you know, kind of all times with different motor types, you know, hey, here's where the agencies are, here's what agency product is going to get you the max proceeds, and the look, you know, the highest, the highest leverage and the lowest grade, and, you know, and then going into the bridge lenders and saying, Hey, here's where the bridge lenders are market is change, and here's how it's changed. And then going into, you know, kind of, you know, a few different classes of, of capital sources there, you know, I think that, that giving away some of that information for free on the front end committee, goodwill on the back end. And then like, as you have deals that come in, not every deal, unfortunately, isn't as easy as it is as a 10 year family with the Latino that some of them are right. And like, you know, we support the investment sales team there, Cushman Wakefield, that has, you know, we're seeing a lot of volume through them. And so we get to see a deal by deal basis. All right, what's the in place debt? Is it assumable? What's that debt service? What's that debt service payment, compared to what if I do a new loan right now, because of doing a comparative analysis and saying, you know, not only like, comparative analysis, A versus B, but A versus B versus C, versus maybe D, you know, and saying, Hey, look, there are a lot of ways to skin this cat. And you can assume this loan, if you want to, for sure. And you've got a loan in place, right? Let's enterprising, you got two years left on it. And maybe you know, you're not, you're probably whatever $3 million lower in proceeds and what you can get today, and maybe a little higher rate, but you're going to have an interest only period on the front end. And here's what your cash flow looks like, side by side. And although that might have looked like the right decision from a 30,000 foot view, and you get a week, maybe a payoff, and that loan doesn't make sense. And at a certain, you know, it's sometimes that the answer is go with the assumption, you know, being able to show clients on paper, what the math is, and comparing it side by side, the simple way is, I think, a way to go, you know, the the next level, if someone instead of saying, Hey, here's your quote, you know, well, there's a lot more options than a five year deal you can do you want to really fix it as long right now, for 10 years, we're going a little shorter, we're going to go the immediate forward. And you know that a lot of people are talking about fillers right now. But the word spreads are pretty wide and the benchmarks really wide. So I don't know, maybe you looked at a five year deals and flexible prepay. Like there's a lot of ways to look at it. And I think the best thing is, is you know, talk to your client, and really understand what their business needs for the property. How long are you going to be ended up in here? What are you planning on doing over the term of your role and matching the product that complements their sheds?
Mordecai Rosenberg:It comes back to actually listening. Right? Exactly, yeah. Like you said, you're seeing a ton of volume through your Cushman divestment sales team, having lots of clients having lots of client meetings, still, you know, lots of pitches. You're we're sitting here, you know, in the towards the beginning of January 2023. What are you seeing what's going on in the market? Are people starting to think about buying at today's levels? Are people starting to think about selling, who's refinancing? Are there gaps? Let's start with buying and selling. You know, we'll work out we'll talk about, you know, dead situations that you're seeing.
Chase Johnson:Yeah, so, I mean, I'd say that on, you know, from what I'm hearing, you know, over the first week of the year, so we do Monday morning calls with the Sunbelt team. So that's Texas to Tennessee, every market that we have in that region, every single person last week, I had mentioned that activity has been off the charts with regards to you know, buyers looking to find deals to do sellers, trying, you know, as hard as they can to meet the market. And I think that with regards to you know, but you know, actual transactions, the sellers are going to transact when there is a true market presentation. What I mean by that is that if I only invest with sales broker for me be successful and to have a seller that transact, I can't show him one bit, I've got to show him five plus 10 bit, just like you should show them in the great times, right? And say, hey, look, guys, I know you want x, but the top 10 buyers in the country bid within 4% region. This is the market. And, you know, I think that if you can get from a buy sell side, basically, you know, inform a seller on where the market is, then there's a higher likelihood that you'll have transactions, that once we receive, you know, some stabilization, from a rate perspective, we're going to have a little, maybe this price discovery mode will become a little bit clearer. And we're going to be able to have a little more certainty in our underwriting, whether that's interest rates, whether that's an exit cap rates, that stabilization is a key. And what I did see over the first week of the year, is that Treasuries are down from Monday to Monday, they're down across the board, five, seven and 10. year treasuries down, like anywhere between 20 and 30 days are pretty good and decrease in the first part of the year. So what that means to me is that bond buyers are looking at the market, and they're saying, Hey, I'm looking five, 710 years out. And I'm thinking that we're in a better spot than we are today. I do think that is providing me with a little more confidence, looking into my crystal ball that I have, you know, really you take my thoughts with a grain of salt, but I mean, it's just like, I think the bond buyers are at least saying that they're they're seeing some sort of stabilization. That's a good sign.
Mordecai Rosenberg:Here, whenever you buy a property, you're taking a gamble some market is going to perform on where interest rates will be at the time your loan matures, you know, or when you have to sell the asset. Yes, that's if you raise money in a fund, if rents are going to continue to increase, there's three other years, there's things there's risks that you're taking, at times like this, where it feels like the future is unknown, because like you don't know where you see interest rates moving very, very quickly. I know, I know the risks that I'm usually getting into and a stable market. I know, maybe I'll assume exit cap rates of either flat or maybe up a point. But if I see interest rates running up fed being aggressive, well now that maybe is a scarier prospect. Right. But as soon as the Fed slows down, I feel like that also calms people's minds a bit. So even they're slowing you just how much they the Fed was raising rates that maybe gives a little more peace of mind to people. I was listening to a podcast recently with JP Conklin, yawns, loan boss and pence furred. And he said that when the Fed stopped raising rates, Cap prices dropped by 50%. Within, like, a couple of months, what's the basis for the price of the cap? Well, one is the expectation of future interest rates when you think rates are going to be but the second thing is volatility. Right. And so if you're taking volatility out of the equation, all of a sudden, like the balloon deflates by by half.
Chase Johnson:That makes a lot of sense.
Mordecai Rosenberg:So we meet, you know, hopefully, we're starting to see that in commercial real estate market as well. On the debt side, there's a lot of thought that we're going to see a lot of gaps in refinancing those shortfalls, you know, that people who bought you know, when rates were at two plus percent, or maybe they bought with a debt fund underwritten at pro forma, and realize that they're going to when they hit low maturity, there's gonna be a shortfall. Are you seeing any of that yet? Or on the horizon?
Chase Johnson:Yeah, I mean, we are seeing that we even if it doesn't matter, if you hit your business plan perfectly on the head, if you didn't dial in your interest rate, I mean, we look at software and over the last 12 months, it's increased to 400 basis points. So if you are underwriting, you know, you go from point zero 4% to 4%. Like in quick, and so no one really underwrote that. And so I think that you can even hit your business plan perfectly on you know, perfectly on point and still be in a tough situation. And so we're seeing the big trend that we're seeing there is that you've got like I said earlier in the podcast was LP equities tightened up right now they're pinching, you know, for the most part Institutional Equity is still pencils down I think we're gonna have way better insight, you know, after kind of MBA in February, maybe after NMHC at the end of January, but right now it seems like they still are in kind of wait and see mode. I kind of look at that in them. And I'm thinking if I'm a JV LP whatever. Equity provider guy say I was Happy getting 15 plus percent on my money at in kind of the when things were great and I was competing at that level. And then now I'm saying what preferred equity and GAP capital costs 14 15%. And I couldn't be higher up in the stack. And I don't have to be in this first loss for this kind of, I guess, not first loss, but almost first loss position that we're seeing this in real time, the transition from JB equity prefered and say, Look, instead of looking in, it's going and trying to find new deals that work today, I'm gonna go find old deals that don't work today. And I'm going to provide the gap. So we are seeing a trend.
Mordecai Rosenberg:So that's on the capital provider side, right? They're saying that, yeah, we're going to switch from LP to press. Are you seeing loan maturities that are coming up short? Or do you think it's still early? I mean, a lot of those deals were done. And we what we were seeing was, they would do these three plus one plus one, if you did one of those loans two years ago, you're still a year out even from initial maturity, and you may have two years of extensions. So I don't know if it's that stuff is actually hitting yet or if it's still disbelief?
Chase Johnson:Exactly, everything was pretty much done on a three year initial term, maybe a two year initial term with two one year extensions. Those one year extensions, though, you got to remember that they have requirements that the property, you know, operating has the operations of the property within a certain level to achieve that one, extension. Good thing is I think most of the lenders in you know that did these bridge loans don't want to be property owners, they will extend and pretend and in try to weather the storm with the sponsor group. As long as you've got a good sponsor, it's doing the right thing that is, you know, in operations are on par with what he presented initially, I think they probably would bid, and they'll allow you that extension, and I'm not seeing right now, with the flood of distressed deals. I'm seeing a flood of operators and equity providers that are on the sidelines looking for blood in the water, and it's just really not there like that. I don't know if that changes six months from now, or what but you know, right now we are seeing a flood of I mean, maybe, you know, a triple hit here and there, but not, not with all the upgrades.
Mordecai Rosenberg:Yeah, we'll see what happens. Yeah, I'm trying to think back to like, 2008-09. And there, you had a serious crunch very quickly, and why that was, but there, I feel like you had banks really pull out liquidity at all levels, right. So like, you know, we as a lender, we're having our lines pulled, right. And so if you're having your lines pulled, now you can extend your loan to your client, because your debt source is wants their money back. It's a it's a domino effect. Right. So yeah, the mean, the repo market, right, the overnight lending market evaporated in, you know, in? Oh, 2008-09. Right. So, is that lead domino that affects everything else? Most loans are doing pretty well. I mean, if you if you have your lower rate, yeah, I mean, look, if you had a floating rate and it ran up, okay, so maybe you have some challenges, but maybe it was IO. maybe there were some room there. Okay, if you've got a cap, all right, you have a cap also. So like that kicked in, you have caps. I also I mean, I get calls from people who are interested in they want to buy their distressed debt buyers, like we want to buy your distressed loans. You know, it's like, alright, easy there cowboy for okay.
Chase Johnson:Yeah, it's not I don't have just a ton of distressed loans that I'm ready to sell for pennies on the dollar. Yeah, it's yeah, it's just not there.
Mordecai Rosenberg:Exactly. Right. Plus, I feel like one of the the lessons that I think people are more sensitive to the relationship these days, you know, and you can't like to sell, you know, you have a relationship with a client and they trust you to make a loan. You can't just sell the loan out from under them, to a Parana. You know, that doesn't feel. Exactly, yeah. So, just in our last few minutes, let's say if you went back and spoke to younger, Chase Johnson, when you were first starting out, any advice you would give your younger self words of encouragement or advice, anything? What would you what would you tell a younger version of yourself?
Chase Johnson:Gosh, I don't know. I would just, you know, make sure to kind of hammer it home. It's like, Look, man, do like work hard. It's not you know, nothing is easy. Nothing worth anything is is easy. And you know, if it was that everyone would be doing it wouldn't be worth anything. Don't be afraid to work hard, and you know, work hard and do the right thing. That's what advice I'd give.
Mordecai Rosenberg:I think that's very true. I've also seen to be fair, I've seen a lot of people work very hard and still fail because Whenever it just wasn't the right fit for them, right? Was there a moment when you realized, oh, yeah, this is something I could do.
Chase Johnson:Yeah, I mean, early on, like I was, you know, I got out of school, I was an analyst for that small boutique mortgage company. And, you know, I was making, you know, very entry level type of salary. But, you know, you start looking around and you start saying, oh, man, he just made X on that one deal, or whatever, like, you start looking and you can kind of see the light. And and so that was sofa, right? It was okay, I wouldn't be How quick can I get there? That's what gets me up everything. What gets me up every day, is that ever, no deal. No two deals are the same. You are directly incentivized by your production. And you can, you've got the freedom to kind of do what you want within a certain range. And, you know, there's no other business that I you know, I'm not looking for another business, but I'm just saying, I haven't found anything that matches what commercial mortgage making can provide someone with regards to flexibility, income, and just general, you know, stimulation of your brain, allowing you not to just feel like you're stuck in his monotonous task, you know, hitting the same five keys every day. You know, so it's just, it's, it's really been great. I feel lucky to be, you know, to have found it such a, you know, as such an early part of my career. I mean, there's a lot of people that had to work in a different industry for 10-15 years before they found what they feel like it's the right
Mordecai Rosenberg:I like hanging out with technology fit. people in tech, because you talk to them, and they have this, this feeling that everything is possible. It's like, yeah, you want to build that? Sure, we can do that. You want to do that? Sure, everything is possible. I find that brokers also, you know, have that mindset of like, you know, even when times there's always the optimism of possibility. You only takes one lender that only takes That's brilliant. It only takes one lender. Thank you for coming on. And I love the the positivity and optimism. I think it's also it's important for people to, especially in times like these to surround yourself with optimistic people, right? Because that has a big impact, you know, so being on a team with others who can energize you and even in your personal social life, just surround yourself with positivity. Yeah. So thank you Chase for being a source of sunshine.
Chase Johnson:Awesome. Well, I appreciate it. Thanks so much for having me on today. And I look forward to seeing you again.
Mordecai Rosenberg:Awesome. Thank you, Chase. I'll talk to you soon. Bye bye.