00:00So talk to us about what impact, if at all, this is having on your investment landscape,
00:06and that is the commercial real estate market, because we're not getting data right now.
00:10I have to imagine that's hitting sentiment in some way.
00:14I don't know if it's hitting sentiment.
00:15I would say you can look at things like HUD, which is shut down.
00:21HUD's not a huge provider of capital commercial real estate industry, but we do a lot of business with them.
00:25Those deals have stopped being processed.
00:28Fannie and Freddie, which are part of the federal government, are fortunately outside of that.
00:32So Fannie and Freddie are still producing mortgages on both single-family as well as on multifamily.
00:37So the shutdown really, as it relates to the financing markets, haven't had that big an impact.
00:41As it relates to the data, there have been a lot of people who've been excited about the fact that the Bureau of Labor Statistics data is not going to go to the Federal Reserve
00:49so that they can actually look at what's going on in the market and not just be so data-dependent, if you will,
00:54and hopefully look at it with a little bit broader view.
00:57So I don't think so far, Katie, we've seen any great impact to commercial real estate due to the federal government being shut down.
01:04Well, you make an interesting point about maybe being freed from that monthly rhythm of getting the data and then having to react.
01:10But would it ever start to matter?
01:13I mean, we were talking a little bit in the commercial break about how it hasn't been very tangible yet,
01:18the fact that the government has been shut down for 17 days.
01:21Do you see at any point it having an actual impact that you can measure?
01:26Well, on the data side of things, you think about the revision that the BLS had on their 2000 and the trailing 12 employment numbers.
01:34They revised by over 900,000 jobs.
01:36So you sort of sit there and say, it's been revised by almost a million jobs.
01:40Is that data, once it starts to come back in, actually data that either drives markets or drives decision-making?
01:46But you're going to get to a certain point.
01:49Look, in the D.C. area, there are a lot of office buildings that have government employees in them.
01:54But at the end of the day, those leases are still being paid for by the federal government.
01:58The issue with it is, is those people don't go in.
02:00They're not buying their sandwiches.
02:01They're not parking their cars.
02:03So at some point, you'll get downward pressure on things like GDP in the D.C. metro region.
02:09But other than that, really, for right now, it really isn't pinching on commercial real estate.
02:13I am curious just about, I mean, independent of whatever is going on with the shutdown,
02:17just about the overall health of the commercial real estate market,
02:20and specifically in terms of housing and multifamily housing, which I know you've been a specialist in.
02:25And is there enough of a balance right now between the demand, or future demand, I should say,
02:33and the future supply that might be coming down the pike?
02:36So we had historic supply of multifamily units in 2024 and 2025.
02:44And at the same time, we've also had historic absorption of those units.
02:48So through Q2 of this year, you had over 720,000 apartment units absorbed by the market, which beat all expectations.
02:57And so in the high growth markets, like in Austin, a Charlotte, a Nashville, you had huge oversupply in 2024 into 2025,
03:04but you've also gotten good absorption to suck some of that up.
03:08Then there are the slower growth markets like Detroit or Cleveland, where there wasn't oversupply.
03:15Therefore, rents have held up quite nicely over the last year.
03:18And the real question is, where are you making your bets today?
03:21Are you going and buying a new apartment building or an existing apartment building in Austin or in Cleveland?
03:27And that's the debate, because right now you're getting better rent growth in Cleveland than you're getting in Austin.
03:33Austin rents were down 7.4% T12 over the last 12 months.
03:38And so Austin's one of those oversupplied markets where rents are going down right now.
03:41But you also know that jobs are being created in Austin at a much more dramatic pace than they're being created in Cleveland, Ohio.
03:48And so the question would be, where are you betting today for the future?
03:51But right now, people in Cleveland are very happy with owning multifamily in Cleveland.
03:56What about some of the legacy markets?
03:58It may not be necessarily growth stories, but still stable.
04:00And I mean, I'll bring up just the bias that we're sitting here in New York City.
04:04I mean, is this, I guess, for lack of a better phrase, investable, an investable city when it comes to CRE right now?
04:10It's hugely investable.
04:11Obviously, the mayoral race has a lot of people concerned, has a lot of people concerned about potential additional rent control in this market.
04:18But there are also a lot of people saying the mayor only controls so much of that equation.
04:22The governor has mentioned a number of times that she and the state legislature have a big play in that.
04:28So this has been an incredible market from a multifamily ownership standpoint.
04:32This has not gotten a huge amount of new deliveries over the last couple of years.
04:36So if you own multi in New York, it's been a great place to be.
04:39The issue is that New York is hot.
04:42I mean, I'm going from one office building to the next office building over the last three days here.
04:46They are full.
04:47People are back in the office.
04:49And the rents that office owners are getting right now, eye-popping.
04:54Boston Properties is right now in the ground building a new tower here.
04:59And they are proforming over $200 a foot rents for that new building.
05:03I just told you I was just at the J.P. Morgan new headquarters.
05:06It's a gleaming, beautiful building.
05:08It is a huge competitive advantage going forward for J.P. Morgan.
05:11I've gone to a bunch of other investment bank headquarters over the last three days.
05:14You walk into that place and they will have a great advantage from a recruiting standpoint as far as trying to attract people to J.P. Morgan versus some of the other firms they compete against.
05:22It's interesting how that's gone from being an issue where everyone's like it's sort of a liability and you don't want office space to it can be a differentiator going forward.
05:29Yeah, it even has a bar somewhere in that office building.
05:32It has a bar and it has an entire floor, Katie, that's a gym.
05:36And the view out of it, I've seen it, is just that building is really quite something.
05:42Yeah, of course, in addition to the skyline there, you can see it from Hoboken, which is where I live.
05:47But you mentioned that New York is hot, especially when you talk about the area that you invest in, which is multifamily properties.
05:53Take us to the rest of the country, though.
05:55I mean, are there any markets right now that aren't hot?
05:57Because at least on the residential side, it certainly feels like you can't catch a break.
06:02So there are plenty of in those oversupplied markets.
06:06Denver had the worst rent, negative rents, or, you know, we call it rent growth because we always think that they go up.
06:12But you've had negative 7.7 percent rent degradation in Denver for the last year.
06:17You've had 7.4 in Austin.
06:19Charlotte's up there.
06:20Nashville is up there.
06:21All those high growth markets got oversupplied.
06:23So rents have come down.
06:25At the same time, markets like San Francisco, New York and Boston have not had a huge amount of new supply.
06:31So those have actually been good markets.
06:33San Francisco, interestingly, is a market where the office market was under duress, as was the multifamily market.
06:40You have a lot of smart capital going to San Francisco right now.
06:43San Francisco has gotten cleaned up.
06:45The mayor has done a really good job of getting that city back to where it needs to get to.
06:49And there is a tremendous amount of institutional capital looking at the San Francisco MSA on both office as well as multifamily,
06:55which is a significant shift in the markets over the past couple months.
06:59We only have a few seconds left, Willie.
07:01But I am curious, just circling back to FHFA, Fannie and Freddie specifically,
07:06do you anticipate that we are going to see some sort of resolution on maybe finally ending that conservatorship soon?
07:12I would think we see something in, look, there was talk about it happening in 2025.
07:19It's not going to happen in 2025.
07:21But the director of FHFA, Bill Pulte, has done a great job to get the companies ready to go public.
07:27The Treasury Department has got their hand in what's going to happen with the guarantee and things of that nature.
07:32But right now, the administration is looking to try and take them out in 2026.
07:36And look, on most things that this administration has said they're going to do, they've gone and done them.
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