The Real Estate Espresso Podcast

As many of you are aware, the real estate development company that I’m a partner in is building several projects. On today’s show, I’m going to give you an update on the Norris Ranch project in Colorado Springs. It’s been about ten months since we closed on the purchase of this iconic property. While our investors get regular updates, we know that many of our listeners are also interested in following the story.  Let’s start with a bit of background and context. The Norris Ranch is a property of 1783 acres on the Eastern edge of Colorado Springs. The property is sandwiched between Pike’s Peak National Cemetery and Schriever Air Force Base. Schriever is US Space command. They are our neighbor.  The idea behind developing this property involves a major expansion of the city. It will contain 4 densities of residential, retail, commercial, office , hotel, police, fire, schools, etc. We started the annexation petition to the city in August of 2022, expecting the zoning and annexation process to take about a year. 

Ken Gee is based in Cleveland Ohio and he invests in multi-family assets. On today's show we are talking about the merits of a fund model versus syndicating individual deals. To connect with Ken and to learn more, visit kripartners.com ------------ Host: Victor Menasce email: podast@victorjm.com

Kevin Amolsch is based in Denver Colorado where he runs The Pine Financial Group. They're a private lender with $130M in assets under management. To connect or to learn more, visit https://pinefinancialgroup.com/ or visit https://thepinereport.com/ to get a copy of their latest report on lending in the current environment.

The mainstream media continue to push the narrative that the US and Canadian economies are strong. Unemployment is low and the service sector of the economy is doing great.  This is what is driving the soft landing hypothesis.  But what is being overlooked is the economic headwind that is about to hit the US economy  The US government is low on tax revenue this year. We have reported on the fact that the US Treasury has experienced as massive fall in tax collections this year. We know that there have not been any massive tax cuts announced for this year. So there is no way that the amount of personal income tax collected in 2023 can be down and the economy is growing at the same time. Those two numbers need to track each other very closely.  Effective September 1, in less than two weeks, US student loans become due again.  The US has 45 million people with student debt. Over the past three years, about 60% of the borrowers with student loans took advantage of a pandemic forbearance offer on student loans. That comes to 25.6 million people. The Biden administration attempted to extend this forbearance even further and this executive order was struck down by the Supreme Court. The power of the purse, that is government spending and tax collection is vested with the Congress and not the executive branch of government which is the President’s office.  Effective Sept 1 the interest will start accruing again on these 25.6 million loans and the average payment of $300 per month will need to start coming out of bank accounts on October 1.  For the last quarter of the year, that amounts to approximately 23B dollars that will be pulled out of the economy. Now that might not sound like a huge sum of money within the context of the entire US economy.  But the impact is larger than just 23B. Remember that when money is spent in the economy, it tends to recirculate. This is called velocity of money, the notion that money circulates in the economy. But when a loan is repaid, the velocity associated with that transaction is zero. Those funds go to money heaven. 

On today’s show we are talking about the process for getting properties rezoned. The subject of today’s show is a three parcel land assembly in my home city of Ottawa Canada.  At the start of the planning committee meeting there were no less than six projects being reviewed. Several that had contentious elements were held for further discussion after the procedural portion of the meeting. That front end portion of the meeting that lasted a total of 11 minutes. In that time, all of the projects were announced including our project. The committee basically uses that introductory session to set the agenda for the remainder of the meeting. We were asked if there was any public input. There being none, we asked if we wanted to make a presentation even if the committee recommended approval of the zoning application. We declined to present. The city staff on the file had been in fact notified prior to the meeting that they were not being asked to make a presentation at the meeting.  The project goes next to city council within about a week for a vote, which is then followed by a 20 day appeal period. Upon expiry of the 20 day appeal period the zoning is fully ratified.  Just like that, in about a minute, two years of work were came to a milestone. Our company has multiple projects underway. These are the moments we regularly work towards  -------------- Host: Victor Menasce email: podcast@victorjm.com

Allan Asks: Hi Victor, Thank you again for your excellent content and insight. There is so much of a “punch” packed into a small amount just like an espresso. Hopefully this isn’t an obvious question and worth your time to answer but how do you stay up to date finding books that will be Books of the month? Is there any particular strategy to staying in tune with new material and content to internalize and make a part of you. Thanks again for all you do! ------------------ Host: Victor Menasce email: podcast@victorjm.com

On today’s show we are taking a look at what can happen when politicians print too much money. The US, Japan, Canada, the UK, and Europe, China and many others are all at risk of becoming financially unstable.  Argentina has a history of being fiscally irresponsible. The country has debased the currency a lot over the past two centuries. The country has also defaulted on its debt 9 times in the modern history.  Argentina defaulted on its foreign debt in December 2001. Many analysts thought this would lead the country into a long period of stagnation and would make it a pariah in the world’s financial markets for a long period of time. Oddly this did not occur. A sovereign debt default occurs when a country does not meet a debt payment (principal or interest), that is it fails to meet the terms of a contractual agreement. The incentives for avoiding default are not associated with the collateral damage but with the country’s reputation. A country’s incentive to make repayments is to preserve its future access to international credit markets and international trade. If you become known as a credit risk, then your borrowing costs go up which can have an impact for decades after a default event.  ------------- Host: Victor Menasce email: podcast@victorjm.com

Today’s question is actually two listener questions, both of whom have described very similar situations.  JR got plat approval and paid a contractor called straight edge for the horizontal development.  That work consists of the road paving, and the infrastructure that is buried in the ground. Straight edge went bankrupt and never paid the paving bill.  So the Paving company files liens on all lots that aren’t owned by home owners.  That’s a total of building 20 lots at $6500 a lot. The total  paving bill was $130,000.  Fortunately JR is eating the loss and reimbursing the cost to the paving company.  At the end of the day, it matters the people you’re doing business with. What should JR have done differently?  The second question comes from Mark who had a very similar situation involving a contractor whose business partner disappeared and emptied the company’s bank account. The contractor had been paid for steel and concrete work, but the subcontractors were not paid. The original contractor was forced out of business. The subcontractors wanted to be paid and put a lien on the property. Mark now faced the prospect of paying twice for the same scope of work. Not only that, but the original contractor had low bid the job in order to get the business. After interviewing several contractors to complete the construction, it was clear that the project could not be completed for anywhere near the original construction quote. How could Mark have prevented this from happening?  These are both excellent questions. The very fact that we have virtually the same question being asked twice within a relatively short time period suggests that this is a shockingly common occurrence.

Susan King is based in Chicago where she works with HED, a major national architectural design firm. On today's show we are talking about architecture and how it applies to design of affordable housing. To connect with Susan, visit HED.design or connect with her on LinkedIn at https://www.linkedin.com/in/susan-king-faia-leed-ap-bd-c-lfa-0057b45/ ----------------- Host: Victor Menasce email: podcast@victorjm.com

We hear about all of the risks in the current market environment. But we rarely hear ideas on what you can do to find opportunity in the current conditions. Today's talk was recorded at the 2023 Investor Summit. ---------------- Host: Victor Menasce email: podcast@victorjm.com