The Best Ever Conference has kicked off with a bang at the Hyatt Regency in Salt Lake City, UT, and it's already proving to be an unforgettable experience packed with valuable insights and engaging discussions.
Day 1 started on a high note with an in-depth Economic Summit featuring Ben Lapidus (Best Ever Conference), David Rosenberg (Rosenberg Research), and John Chang (Marcus & Millichap). Joe Fairless (Ashcroft Capital) followed with his keynote speech featuring tips for taking control of 2024, and several experts took the stage to tackle topics specific to passive investors, operators, and entrepreneurs in the afternoon, including Ryan McKenna (McKenna Capital) and Neal Bawa (Grocapitus).
If you couldn't attend the sessions or simply want to revisit the key takeaways, we've got you covered! We've compiled the highlights from the day’s presentations so you don’t have to miss out on the wealth of knowledge these exceptional speakers shared.
Welcome & Economic Primer
Ben Lapidus
Co-Creator, Best Ever Conference
Ben provided a brief economic history lesson, highlighting the patterns that precede recessions — financial innovation, political pressure, leverage/cash flooding the system, and a spark that evaporates investor confidence. He emphasized the importance of perspective and pattern recognition in navigating economic cycles.
Ben’s core message was that collaboration and community ("E Pluribus Unum" — out of many, one) is key to weathering tough times and optimizing good times in business and investing.
Multifamily Economics
David Rosenberg
President and Founder, Rosenberg Research|
David Rosenberg made a detailed case for an impending economic downturn and recommended defensive investment positioning, even as the consensus remains relatively optimistic for now.
- Rosenberg is still calling for a recession despite others abandoning that forecast, arguing that interest rate hikes just haven't fully impacted the economy yet due to lags.
- Fiscal stimulus and excess savings from pandemic relief programs provided a big boost to the economy in 2021–2022, but those impacts are now fading.
- Consumer credit card debt has surged to concerning levels, with delinquencies rising, signaling rising financial stress.
- Inflation has peaked and is rapidly decelerating, according to Rosenberg’s analysis of supply/demand dynamics, productivity gains, and anecdotal evidence.
- Despite the resilient economy and job market currently, Rosenberg sees growing imbalances that need to mean-revert, likely through lower interest rates and a potential stock market downturn.
- He recommends defensive positioning in bonds, dividend stocks, utilities, REITs, and energy while avoiding riskier equities on expectations of better bond returns in the next year.
Eyes on the Horizon: 5 Trends Shaping the Future of Commercial Real Estate
John Chang
Senior Vice President, National Director Research and Advisory Services, Marcus & Millichap
John Chang provided a multi-trend analysis of the key factors shaping commercial real estate over the next five years, advocating for a forward-looking investment approach despite potential near-term headwinds.
- Chang presented a more optimistic outlook compared to the previous speaker David Rosenberg, saying that despite potential recession risks, "It's going to be okay."
- He identified the top five trends that will impact commercial real estate over the next five years as AI/technology, demographics (millennials and baby boomers), housing affordability, public policy, and deglobalization/supply chains.
- While AI may disrupt some industries, Chang sees the digital transformation from e-commerce and remote work as currently having the biggest real estate impact.
- The large millennial generation entering prime homebuying years will drive housing demand, benefiting single-family rentals and build-to-rent despite affordability challenges.
- An aging baby boomer population will increase demand for medical office and senior housing properties.
- Public policy risks like rent control could negatively impact multifamily investors.
- Deglobalization is causing a shift in supply chains away from Asia toward Mexico/Canada, impacting industrial/logistics properties in those trade corridors.
- Chang recommends investors keep a long-term five-year perspective on where demand drivers are heading rather than getting distracted by short-term volatility.
Keynote: Take Control of 2024
Joe Fairless
Co-founder, Ashcroft Capital, LLC
Joe Fairless provided a mindset framework and actionable strategies for progressing through challenges and emerging stronger on the other side.
- Focus on what you can control when facing challenges, rather than things outside your control like interest rates or deal flow. Focusing on what's controllable creates certainty and empowers you to take action.
- Ask yourself three questions when dealing with a challenge:
- What's my best realistic outcome?
- What can I control?
- How can I make daily progress?
- Fairless shared personal stories illustrating how not defining the best realistic outcome early on compounded issues and losses in past real estate investments.
- Maintain the right mindset by practicing gratitude, having certainty you can achieve your goals, and having a daily plan for progress.
- Optimize income and expenses line by line, finding creative ways to cut costs like sourcing renovation materials directly from suppliers.
- Adopt habits for sustainable success like being present (no phones), volunteering, discussing highs/lows at dinner, and surrounding yourself with positive influences.
- Focusing energy on areas within your control, making incremental daily progress, and maintaining the proper mindset will position you best for when market conditions improve.
Protecting Your Investment in a GP Default
Ryan McKenna
CEO & Founder, McKenna Capital
Ryan McKenna provided advice and lessons learned from his experiences on how to protect your investment if a general partner defaults or a real estate syndication deal goes awry.
- Real estate syndication agreements/private placement memorandums (PPMs) play a crucial role in defining the contractual relationship, roles, and responsibilities between general partners (GPs) and limited partners (LPs). They help provide clarity and disclose potential risks.
- Signs of a GP default include an unresponsive GP, bankruptcy, misappropriation of funds, fraud, excessive leverage, key personnel departures, lack of transparency, and no contingency plans.
- To protect investments, investors should thoroughly vet GPs, maintain diversification across sponsors/markets/asset classes, monitor performance, and watch for red flags like unresponsive investor relations or unrealistic projections.
- Legal safeguards in PPMs allow investors to inspect records, demand financial information, or pursue litigation or receivership if needed. But the process can be lengthy.
- An investor mindset of patience, venting to others, maintaining a positive long-term outlook, and being willing to cut losses if needed is important when dealing with challenging situations.
- Best practices for GPs include increased communication, maintaining lender relationships, providing 0% loans to avoid diluting returns, transparent capital calls as a last resort, and being well-capitalized/connected.
- Key lessons are to diversify, invest with well-resourced GPs, understand the risks of niche investments, band together with other investors, and never invest more than you can afford to lose.
At the Precipice: Are Banks Facing a Crisis From the Commercial Real Estate Downturn?
Neal Bawa
CEO/Founder, Grocapitus
Neal Bawa’s key message is that while banking turmoil may create some volatility, the fundamentals of investing in multifamily residential remain compelling compared to other real estate sectors facing distress.
- He expects the Federal Reserve to start cutting interest rates in the second half of 2024 as inflation comes down, despite market expectations of no rate cuts.
- Around 300 smaller banks are at risk of failure this year, especially those heavily exposed to commercial real estate loans like office buildings. However, he sees minimal systemic risk to the overall banking system.
- Bawa advises avoiding loans from banks on the FDIC's "problem bank" list or those with high commercial real estate exposure, as they may become distressed and call in loans.
- Office real estate is facing major distress with high vacancy rates (18.6% nationwide), while the multifamily residential sector remains relatively healthy with low delinquencies.
- Bawa views the current market as a good time to buy multifamily properties, as prices have corrected 20%–25% lower and rents are keeping up with wage growth of around 20% since COVID.
- While some investors are concerned about inflation/recession risks, he argues that multifamily fundamentals remain strong compared to other asset classes like single-family homes where mortgages have surged much higher than incomes.
Disclaimer:
The views and opinions expressed in this blog post are provided for informational purposes only and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.