RG 336 – How to Make Smart Business Decisions Based on Today’s Debt Market with Ryan Parker

Ready to dive into more tips that will help you make better business decisions for 2023? Tune into this week’s episode with a very good friend of mine, Ryan Parker.

Ryan Parker is a seasoned commercial real estate professional with extensive experience in financing, leasing, originating, and more. He is the Associate Director of Walker & Dunlop, responsible for originating for Fannie Mae, Freddie Mac, multifamily value-add, and commercial real estate debt placement.

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Ryan discusses the unique needs, risks, and difficulties associated with investing in industrial real estate. Specifically, we go into how to get a tenant in, what the market is like coming out of COVID, and Ryan’s opinions on how the debt markets will affect conservatism, refinancing, and investor or buyer behavior—plus many more topics that every real estate investor wants to hear in today’s uncertain times.

Key Takeaways

• One of the most critical factors of industrial real estate investing is the proximity to major transportation thoroughfares.

• The market is still very liquid; there’s a lot of cash in the system for both the investor and capital sides.

• Avoid making business decisions assuming that rates are returning to historical lows like 2020-2021.

• At the end of the day, lenders don’t want to take deeds back. Consider keeping your returns now and seeing how things go for a few years.

LINKS
https://www.linkedin.com/in/rpparker/
https://www.walkerdunlop.com/what-makes-us-different/bios/ryan-parker/

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Reed Goossens (00:00):

Good day Good day guys. Now, before we dive into today’s show, I want you to let you know that some of you may be aware that over the past eight years, I have built a substantial multi-family real estate portfolio here in the US worth over half a billion dollars. And in that time, my passive investors have received fantastic double-digit returns. And now you too can invest directly into my deals for as little as $50,000. So if you’re an interested investor, head over to reedgoossens.com to find out more. That’s reedgoossens.com. Now, back into the show,

Ryan Parker (00:39):

We’re facing in instability in the market cause we don’t know how bad inflation is, and we don’t know what geopolitical influences are gonna have on the world rates of spike because of that volatility and the perceived risk within just the overall markets. And because of that instability, there’s also indecision because people are waiting for stability to make a decision on how to move forward. My gut, my gut tells me and what I’m seeing everyone and what I’m kind of hearing, we’re all really hoping that the second half of next year is gonna be when, when it all just takes off. Again,

Speaker 3 (01:21):

Welcome to investing in the US, a podcast for real estate investors, business owners, and aspiring entrepreneurs looking to break into the US market. Join Reid as he interviews, go-getters, risk takers, and the best in the business about their journey towards financial freedom and the sheer joy of creating something from nothing.

Reed Goossens (01:41):

Good day good day a Ladies and gentlemen, on welcome to another cracking edition of investing in the US podcast from Los Angeles. I’m your host, Reed Goossens. Good as always, Debbie with us on the show Now. I’m glad that you’ve all tuned into it. Learned from my incredible guests and each and every one of them are the cream of the crop here in the United States when it comes to real estate investing, business investing, and entrepreneurship. Each show I try and tease out their incredible stories of how they have successfully created their businesses here in the us, how they’ve created financial freedom, massive amounts of cash flow, and ultimately created extraordinary lives for themselves and their families. Life by design, as I like to say. Hopefully these guests will inspire all of my cracking listeners, which are you guys to get off the couch and go and take massive amounts of action.

Reed Goossens (02:28):

If these guys can do it, so can you. Now, as you know, I’m all about sharing the knowledge with my loyal listeners, which is you guys, and there’s absolutely no BS on this show, just straight into the nuts and bolts. Now, if you do like this show, the easiest way to give back is to give us a review on iTunes, and you can follow me on Facebook and Twitter by searching at Reed goossens. You can find the show wherever you podcast on iTunes, SoundCloud, Stitcher, and Google Play. But you can also find these episodes up on my YouTube channel. So head over to reed goossens.com, click on the video link, and it’ll take you to the video recordings of these podcasts where you can see my ugly mug, but the beautiful faces of my guests each and every week. All right, enough outta me. Let’s get cracking in into today’s show.

Reed Goossens (03:15):

Turn the show, the pleasure of chatting with an absolute legend and a really good mate of mine, Ryan Parker. Now Ryan is a real estate debt broker with Walker Dunlop’s Capital Markets division based in Irvine, California. He’s just down the road from here, here in Los Angeles Now. He studied his career as an industrial tenant rep in Los Angeles before transitioning into the real estate capital markets. He, when he’s not working, he’s riding his horse through Griffith Park, or he is at home with his wife and young daughter, or hiking and fishing somewhere in California’s wilderness. I’m really excited to pump to have him on the show today to share his incredible knowledge with us. But nothing, let’s get him out here. Good. Hey Ryan, welcome to the show. Hey, mate, mate.

Ryan Parker (03:52):

Hey Reed. Thanks for having me on, man.

Reed Goossens (03:54):

My pleasure. Now for everyone know who’s you? Well, mate, you provided it. I, I just, I I just repurpose it, you know, make, make you sound good. So, ah, thank you for, for, for everyone who’s not aware of you, you and I have been really good friends for a couple of years now. We’ve actually been horse riding together. Yeah. Um, but this is your first podcast ever. First podcast appearance ever, which truly, hopefully is gonna be the kickoff to some lucrative career in the podcasting world that you are just gonna be the go-to guy for capital markets ind debt advice. Exactly. Because, you know, as we know, investing in the US goes around to millions of listeners. Um, but it’s, I I say it all in tongue in cheek because it’s, I’m really excited to have you on the show. I do value your opinion and for everyone who’s listening out there, Ryan is an integral part of, uh, the team here at RSN where he’s a, you know, a go-to advisor in terms of everything to do with debt. Um, and, you know, if, if you are interested, we’ll, we’ll, we’ll have all the show notes and his contact at the end of the show. But Ryan, let’s get into it. Yeah. Before we get into the nuts and bolts of what you’re seeing in your crystal ball here in today’s market, can you rewind the clock and tell me how you made your first ever a dollar as a kid?

Ryan Parker (05:01):

Uh, my first ever dollar as a kid was made, uh, as a horseshoes apprentice, uh, in, um, in high school. So I, I worked three to four days a week, uh, in summers, uh, putting shoes on and off horses. And that taught me that I wanted an office job, cuz it’s, it is hot in Southern California, summer. And, uh, I really loved it, but, uh, taught me that I definitely wanted to get in a nice place like this.

Reed Goossens (05:27):

And for those people listening, it’s not literal shoes like tying with shoelaces. It’s a, it’s the metal thing that goes on the bottom of the hoof. Um, I also spent, uh, back in uni, uh, high school days as well at a thoroughbred racing spelling complex in Australia on the holidays between, you know, prepping horses for what’s called the magic Millions. Uh, in Australia, which is the young, uh, year cult yielding sail in Australia. It’s one of the biggest, um, horse breeding, uh, in, in the, in the racing industry in the world. I believe. Um, this particular stud, uh, had prepped horses for it and I, you know, spent time doing everything, including being an apprentice with, uh, uh, with, with shoeing. Shoeing is backbreaking work, so, um, yeah. Yeah. But, but awesome. Well, mate, walk us through the transition, you know, horses to shoeing to now you’re in the capital markets, it’s completely different world. How did you get there?

Ryan Parker (06:23):

Yeah, so, uh, I say I slid into capital markets backwards. Uh, I started university wanting to first be a marketing major for General Motors. I thought I was gonna market Cadillac to the world. And then, uh, I decided I didn’t want to do that and got into real estate. So I actually entered the real estate world after, you know, at age 19 and, uh, started learning how to sell industrial real estate. That was kind of where it all started. And after that, got into, after college, got into the full-time employment as a broker, as you had mentioned, industrial tenant rep, uh, in the San Fernando Valley area specifically of, uh, Los Angeles. And in that learned, really learned I think the fundamentals of, of what makes good real estate. And that to me is like far more important than what the numbers do. Uh, and now that I’ve learned the numbers more effectively, we all know that you can make an XL model what you need it to be, but at the end of the day, you’re still buying a real asset that, um, is or isn’t a good investment. And so being able to understand a properties at the property level was really beneficial to me. And so after a couple years of really learning that I got into capital markets in Century City was with a boutique firm there. And, um, and after a few years there really learning the capital markets and the debt side and moved into Walker and Dunlop about five years, just over five years ago now, and have been here since. And that’s really launched the national platform that I’m working on now, so. Yep.

Reed Goossens (07:53):

Yeah, that’s great. And we actually have not had anyone on the show in all this history actually talk about industrial. So just for 30 seconds here, um, high level, you mentioned buying good real estate mm-hmm. in the industrial space. What, what does, what does that mean, you know, from, is it close to ports? Is it, you know, population centers? Like how are you looking at it in terms of buying good dirt? Because I know in multi-family we, we, we know how to buy, we’ve talked about this on this, on this show lot, you know, you’ve gotta buy, you know, with certain, you know, household incomes you wanna buy in path of progress, you know, close to transportation hubs. Is it the same with industrial?

Ryan Parker (08:29):

Yeah, so I have a very unique perspective on industrial, cuz it’s Southern California based. So I’ll always have the Port of Los Angeles, uh, in Long Beach, port of Los Angeles and Long Beach as like this anchor point. So there’s really no bad investment in the greater Southern California basin for industrial in that regard. But from like a 32nd, what makes good industrial, um, is generally proximity to major transportation, uh, thoroughfares, uh, across the United States. So whether that’s major highways, major, uh, major ports, major rivers, etcetera, you name it, a major railway is another key thing that’s gonna help because a lot of distribution, whatever you need is going through a distribution channel, whether you’re making something or, or, or distributing something, it needs that. So that’s really important and it can get as granular as multifamily at the end of the day. It’s a concrete cube and how tall you build it and what goes on the inside changes.

Ryan Parker (09:25):

But, uh, and, and so I could, I could pontificate on that for 20 minutes in terms of what, what you wanna look at. Um, my personal standpoint, my bread and butter, my favorite industrial asset class is, uh, multi-tenant industrial space with the average tenant size under 15,000 square feet because it runs a little bit more like an apartment. Your tenants tend to be a little stickier. You can have a diverse tenant mix that allows you to, uh, to protect against any potential market risk for any one particular, uh, vendor or tenant. And so that’s, um, it were, me and I were starting to fund to go by industrial, I’d let you know, I’d let all the big guys keep doing what they’re doing and I’d go chase the quiet cinder block built stuff around all across the country that stays consistently occupied.

Reed Goossens (10:10):

How, how is it in, in, now you got me intrigued. You know, you mentioned tenant, tenant rep, right? Right. I I I go to a property manager, comp property management company and say, Hey, you know, fill up my multi-family, you know, you’re gonna go online. People need rentals, people needs a bed, a roof over their head. In the, in the the industrial world, it, it must look different, right? You, you, you gotta go direct to businesses. It’s a B2B sort of space and making sure you’re putting the right quote unquote tenant in there. That’s, you know, and what’s the risk of them getting up and leaving and moving out and paying the right rent? And, you know, you, you’re probably looking at longer term leases, so mm-hmm. , how, how does that sort of, again, I don’t want to delve too much into it, but like how, how does that, that that work from, you know, make, just make sure you’re filling up the space in, in, in, in a, in a timely manner to reduce your risk if you’re buying something, particularly if it’s a value add sort of space, like you mentioned, you know, a cinder block, you know, mum and top owned type of type of space.

Ryan Parker (11:04):

So how to fill it up quickly. It’s always just the, the lowest lease rate seems always to track people, but that’s not, that’s not always the best business decision. Uh, industrial sells itself relatively well just because it’s, it’s something that people need, businesses need. So as a tenant rep broker, at least in California, we have what’s called dual agency, which will allow a real estate broker, uh, a real estate agent on the commercial side to represent both the landlord and the tenant on the same transaction. And so I carved an niche for myself by focusing on just tenant side, which an industrial in our market for a long time was kind of unique, at least on the ground level, street level you wanna go corporate services, it’s very normal to have a, a, you know, C B R E, JLL Cushman, name it, rep Coca-Cola across the country.

Ryan Parker (11:46):

And so that’s normal. But to have someone campaigning for the 2000 square foot cabinet maker or the, you know, the precision machining guy or the small distributor of Amazon products, uh, was different. So, um, I made a name for myself doing that and how to get the tenant mix in is really what your building will dictate. Nine times outta 10. Who’s gonna move in? If you have lots of power, you’re gonna get a lot more manufacturing. If you have higher ceilings, you’re gonna get more distribution. Uh, if you’re, you know, if it’s, if you’re on a single intersection and it’s all right turns into your property, you’re gonna get more distribution cuz it’s safer for your truck traffic. Uh, how do your courts are, you know, your truck courts are, is gonna make, is gonna make a difference. Then also just what do people need in the neighborhood?

Ryan Parker (12:31):

If you’re looking at something like a smaller mom and pop type, multi-tenant industrial space, what’s in the area? You know, is there enough housing to support the kinds of people that are there? Do, do you, do you have a lot of smaller kind of homes, third party vendors that support a bigger facility down the road? So, you know, like a simple example would be in the San Fernando Valley, it was an aerospace industry market for the longest time. So you have Lockheed Martin, Boeing, uh, and, uh, Glen Air is another really large aerospace manufacturer that, that were out there and they would need smaller companies for over, for overruns if they needed to create a lot of product quickly, or a specialized product. So you had a lot of that support. Um, so that’s, that’s kind of what drives it. But I mean, I can go into more detail if you want.

Reed Goossens (13:13):

No, it’s, it’s, it’s, it, it could be a whole podcast in its own. We’re not need, we might need to get you back because I haven’t actually covered industrial, we’ve covered self storage a lot, but industrial’s definitely been this sort of the new, the new girl on the block, so to speak, coming out of, you know, the, the, the, the reset not, not reset coming out Covid, it was multi-family and industrial. Everyone seems to be flocking to that as people are staying at home. Are you still seeing that being the bell of the ball right now?

Ryan Parker (13:38):

Industrial? I, I absolutely think industrial is, and multi-family are still the bell of the ball. Uh, industrial is the, the dirty little secret that everyone in the industry knew, but, but like Wall Street still is like, yeah, it seems cool,but I don’t know if we’re there yet. Uh, it’s a concrete cube as they said, and, and, and turnover on the simplest degree is really just sweeping the floor and putting a fresh coat of paint and carpet. And that’s technically like the bare minimum you could do to turn an industrial building. There’s obviously a lot more to that, uh, but on, and so I think that’s what everyone realized, that this is a simpler puzzle to solve and a simpler asset class to, to manage per se.Then, you know, a 300 unit multi-family property where you have 300 individuals that are living there and have, uh, it’s a personal decision on some capacity for your tenant mix in an apartment because it’s their home and it’s a business decision and industrial.

Ryan Parker (14:27):

But yeah, industrial is still the bell of ball. It’s still, I would say from what I’m hearing, and I’m not in, you know, I’m not in it day to day like a true industrial broker, but everything I’m seeing from the capital side and what all, all my, you know, all my friends and colleagues and clients in that space, um, and, and what I see, um, I would not describe industrial as, as hot as the sun anymore, but you’re probably somewhere around Mercury or Venus in terms of your exposure to the sun. I mean, it’s still extremely hot. It’s just, it’s just a, it’s a little cool right. Cooling right now, but mm-hmm. cooling, but still hot to the touch is what I’m trying to say here. It’s still an incredible place to go on bath.

Reed Goossens (15:06):

Well, it’s, it’s a good segue because I think a lot of things are cooling right. Well, let’s, let’s get into, you know, the debt markets right now. So maybe give us your 30 second take on, I we did a whole state of the webinar last week Yeah. With RSN and it was, you know, it was, it was our, our opinion on, on where the markets have come from and where they’re headed. But give us your, your close to the coalface in terms of, you know, producing debt, you know, originating debt on, on a, on a wide, uh, slew of different product in commercial world. How has this year been in terms of just momentous swings away from the sun, so to speak, uh, in, in, in the bells of the balls of like the multi-families and, and the industrials, uh, spaces of the world?

Ryan Parker (15:49):

Yeah, so I would say that, uh, this year’s been wild. It started off with a bang, everyone was energetic and then obviously with, uh, inflationary pressure instability, geopolitically, uh, the world changed dramatically. And, but from a, from a 30 second standpoint, to summarize this year and call it the next 24 months, uh, we’re facing in instability in the market. Cause we don’t know how bad inflation is and we don’t know what geopolitical influences are gonna have on the world rates of spike because of that volatility and the perceived risk within just the overall market. And because of that instability, there’s also indecision because people are waiting for stability to make a decision on how to move forward. Yeah, my gut, my gut tells me and what I’m seeing everyone and what I’m kind of hearing, we’re all really hoping that the second half of next year is gonna be when, when it all just takes off again, it’s not gonna be 2020, it’s not gonna be 2021. Um, if you’re trying to make your business decisions, it’s doing that, the rates are gonna be at zero again, that’s probably not the best thing to do, to put it politely because that was a once in a lifetime catch and, uh, people made a lot of hay when they could, but that’s not normal. So you should not, uh, you should not drive your business decisions assuming that that will return.

Reed Goossens (17:09):

Mm-hmm. No, it, it, it’s very, it has been very interesting, um, to see this momentum swing away from just how hot a lot of spaces were. You know, obviously, um, we’re, we’re deep in it with multi-family, you know, how you’re getting sub three caps going in, but you’re getting dead at three and a half caps. So it’s sort of really made sense. And now we’re expanding so much, you’re going a fed rate of from zero to nearly probably it’s predicted to be over 5% next Q1 next year. That’s a fivefold in less than 12 months. That’s, that’s a, it’s gonna have a massive impact. Right. It’s gonna Yeah. Be a big hand break on the market. So you mentioned earlier about, you know, just, uh, uncertainty and instability. You know, I, I know I talk a lot about we can, we as investors, we can make money in any market.

Reed Goossens (17:52):

We just need to know the rules. And I think that instability is coming out cause we don’t know the rules, right? So how are you hearing from other operators and brokers? Is it quiet out there? Is it stagnant? A deal’s just not getting done because seller expectations and debt markets just aren’t aligning, thus deals aren’t, aren’t, you know, you’re either, you’re either got it a good basis and you’re holding, or are you still seeing deals getting done and they’re just getting done because of, you know, panic or because of, um, that, that, that people are starting to get, you know, you know, underwater, so to speak.

Ryan Parker (18:21):

Right. I haven’t heard much on the underwater side of things. I, I, I would say to instill confidence in everyone listening, the market’s still very liquid. There’s a lot of cash in the system on both the investor side and the capital side. So we at this point are not seeing a liquidity crisis that like, of the likes of 2008. So that’s a really positive thing. Uh, and also underwriting parameters in general, uh, have, have become far better than they were that than what led to 2008. So in the great financial crisis. So that’s a positive. Um, deals are still getting done. It, it’s still a very busy market. They’re still, it’s, I think where, where deals have shifted is that the repeat refi business where someone signed a deal up at 5% five years ago and they can take it out at three and a half, you know, call at the beginning of the year, that’s gone.

Ryan Parker (19:13):

Obviously, uh, really rates are, are, they’re high, but they’re not wildly different than where we kind of saw what we, or what some people felt the high watermark was in within the last, you know, 20 years we, we’ve been, we’ve seen deals that had seven coupons and six coupon rates, uh, five and a halfs. And frankly, the market can operate healthly and, and, and really well with interest rates, all in interest rates on long term fixed rate debt. Somewhere between four and a half and five, in my opinion. Uh, obviously want to see a lower, but that’s, that’s very reasonable. We’re still in this pricing discovery mode. You’re seeing it with rfn as you’re, as you’re out competing on deals. Other people are seeing it too, that there’s sellers that still think they can get the same price that they got at the beginning of the year right now when even though the cost of capital is up truly exponentially.

Ryan Parker (20:02):

And that’s, that’s unrealistic and that has to change. And I think it will change, uh, just because if people want to transact, then they have to adjust. The transactions that are occurring now are a lot of, I’d say a lot of 10 31 investors that are not, that, that need to, need to deploy capital because they’ve sold an asset and need to put it somewhere and wanna avoid tax ramifications to that. Also, on an institutional level, a lot of funds that are out and have and have, are required to deploy capital by the end of the year or are required to put out a certain amount of money are are, are driving volume as well. And there’s still some opportunities out there. It’s not to say that, that the market’s toast and you can’t find opportunity. I think there’s plenty of opportunity. It’s just harder. It’s been easy, I hate to say it, but the, the last five to six years has been really easy in the capital markets, you know, and, and in investing in real estate. So it, it, you have to, you have to really show how you’re gonna add value and not take, you know, not be the, the fifth guy in four years to buy the, the value add piece because the first guy did 10 units and proved it and upped it 25 k a unit and the guy, other guy did 25. You know, you’ve seen that read and so mm-hmm. , that’s, I think that’s where the market’s headed is, is in a really positive direction. Uh, it’s scary right now, but overall it’s gonna be positive.

Reed Goossens (21:22):

For those of you who are interested in staying up to date with all the latest happenings in my business, or to learn more about passively investing directly into my multi-family value add deals, then head over to reed guston’s dot com and sign up for my monthly newsletter. By signing up, you’ll automatically be notified about my new up and coming investment opportunities. You’ll be able to stay up to date with all the latest real estate news here in the United States and much, much more. So head over to reed goons.com and sign up today. Now, back into the show, are you seeing people shift away from the floating rate high octane stuff into fixed rate product?

Ryan Parker (22:04):

More so, yes. That, that’s a product of a couple of things. Um, rate cap costs are still really expensive. Uh, fruitions that don’t know you basically you can, you, you pay a, a certain dollar amount to cap what your interest rate will be on a floating rate loan. And because the yield curve was, is still pretty aggressive through at least the middle of next year, there’s, uh, that cost is high. So you used to get the pricing benefit of, oh, I’ll take floating rate and it might be, you know, a little less, maybe a little more, but I got the flexibility of, there’s a lot of pieces of that puzzle. I mean, now you’re paying one and a half to 2% on a three year loan to just capital, the cost of the loan. So add that to your starting, I mean your, basically your point of cost of capital increases that way.

Ryan Parker (22:49):

Uh, there’s also less floating rate debt in a way because when this, this level of instability, a lot of the floating rate lenders that, that competed with, with lines of credit and warehouse lines and not basically having some of their own money, using that money to get a line to then a levered line to then borrow more and deploy more, those lines are going away. Mm-hmm. , excuse me. And so, um, unless they have a really strong balance sheet, they’re kind of hesitant to enter the market. So that’s one of the reasons why there’s just less floating rate debt out there is there’s less floating rate out there. So that kind of happens. And a fixed rate product, it reduces your leverage standpoint, but it’s predictable. And I think that’s what people want right now. Everything seems so unpredictable. So if I can at least have a predictable debt, you know, cost of capital for the next two to three years, so be it, I have to raise a little bit more equity, but I, I know what my return’s gonna be and I think that that’s making people more comfortable.

Reed Goossens (23:49):

Yeah, I completely agree. And as we’re looking at deals in real time right now we’re only looking at fixed rate debt and you’ve, you obviously been looking at a, a ton of stuff for us and, and just trying to, you know, adjust the seller’s expectations of what we can pay for. And, and I think, um, yeah, we’re still, we’re still hot and heavy on the value add space, but I talked a lot about the arbitrage and, and you’ll see you’re probably seeing a lot of arbitrage well between like what’s you going in cap rate versus interest rates. And probably historically you could allow for 50 to 75 bps. Yeah. Because you believed in your business plan today with the increase, you can’t sell at a four cap and try to get rates at a six and a half cap. It just doesn’t work. The business plan doesn’t work.

Reed Goossens (24:25):

You need it to, you need it to readjust. So, um, very, very, very interesting. What, what I wrote down here and, and, and one of the cardinal rules that we do here at R S N is we’ve never underwritten to a refi, right? We don’t, we want it up the sleeve if we can have it, but we’ve never done it. We know over the sort of seven, eight years I’ve been, I’ve been in this business, never done it, but have executed on it and it’s just the, the, the ace up the sleeve. Given where the debt markets are today, are you seeing more people coming in at that lower leverage today and then knowing and, and having confidence that the capital markets will be different in two to three years, thus justifying a refi scenario in their models. Is, uh, is that, is that changing at all for you in, in the conservatism, not conservatism, because we are, you know, I’m seeing leverages points at, you know, as low as 50, 60%, you know, on, on, on some deals.

Reed Goossens (25:16):

It’s like, I know and if I believe in the business plan, I know I’m gonna be able to improve that value, thus I want to go capture some of that value. And to your point earlier, like you might just have to saddle up with a, a fixed rate debt today, you’re raising more money, but is there an opportunity down the line and do you believe personally that there’s an opportunity to come in and do a refined two or three years time because we will be a little bit more quote, stable in the market and we add understand the rules to play by?

Ryan Parker (25:43):

Absolutely. I think one of the things that, uh, gosh, I’m trying to figure out how to phrase this appropriately here. You know, I need, need a minute here. I, I wanna make sure that I, I process correctly. I think that refi business is always a good part of, of your, of your analysis and it’s good to hear that, that you’re doing more of it. It’s, and part of that is that’s a downside risk analysis. So if you can’t sell it at the price at which you think you could, because cap rates have flown out, which we’re kind of seeing now, uh, then it’s good to have, you know, the refi opportunity available. So it’s nice to see that people that people do that, I think more people are looking at it and yes, certainly there’s, there’s a lot, I’m hearing a lot more people trying to put their cart on the horse that believes rates will decline in the next two to three years than, um, stay stable. So that’s, is that, is that kind of processing a little bit?

Reed Goossens (26:42):

Yeah, yeah. No, it’s just, it’s just an interesting, uh, you know, between different operators. I just dunno, if you’re seeing models come through your, on your desk and say, Hey Ryan, I’m, I want to get the 50 or 60% leverage date cause that’s, I’m just trying to back into the lowest interest rate fixed possible, but Right. I am planning to, you know, get these local, you know, credit lenders out or local banks out in two or three years time. And my business plan is to try and get, you know, from a, to call it a six fix today, I, I, I’m hoping it’s down to a, you know, five and a quarter in two years time and I can pull out maybe 10 to 15% equity right. To, to bring my leverage back up to sort of a, um, call it a 65% leverage, you know, typical of what you’ve seen prior to sort of this year, that was sort of the, the, the, the question is more of that coming across your desk?

Ryan Parker (27:28):

Yeah, definitely. I think that more, and I also think that’s because the market is in a position now where we’re not just riding the wave anymore. Mm-hmm. , like you’re, the value that you’re adding is actual value, uh, not that you weren’t before, not that, and I’m not saying you specifically, but the market in general. There was, you could there people in the value ad space could, could demonstrate a little bit about added value, then it would be overbid knowing that there’s even more future value and, and more and more and more that’s kind of stop, at least from what I’m seeing and a sense that you’re probably seeing as well. So now people are like, okay, let’s let’s see what, like let’s go ahead and move rents to just market to where they are today. And, and that can be our value add and not assume that we’re gonna get 20% rank growth in the next three to five years.

Ryan Parker (28:12):

You know, maybe we pop at 10 to 15 the first year and then three to four each year thereafter. And, and that’s a little bit more realistic. And so that is true added value because at the end of the day, you are increasing net operating income and as long, you know, and, and if you believe that cap rates are gonna stay where they’re at or even increased a little bit, you’re gonna make, get port in value just by the fact that you actually did create more cash flow for the property and didn’t just upsell it at a greater cost, you know, deal per, you know, cost per unit because, uh, that’s where the market was at at the time. So I think that in that you will inherently get good refi debt because your cash flow’s improved. So if you’re taking your cash flow from A to B and B’S higher than a, uh, you’re gonna get more, you’re gonna get better capital. You, you not mean you might not even increase your ltv technically you could still go from like a 55 to a 55 ltv, but it’s just that the value of the property’s increased so you’re not having to go from like 55 to 75, you know, if, if that makes sense. Yeah.

Reed Goossens (29:15):

What are you seeing when those guys at Lockton rates, you know, two years ago and, you know, a certain leverage, maybe high octane and then try to come and refine today’s market cuz that there must be some blood coming.

Ryan Parker (29:29):

Yeah. There, there should be in some way. Uh, yes and no. So yeah, the guys that, that, you know, went ahead and got a L i b I b o R plus 2 75 alone three years ago or two years ago when l i bor R was 18 basis points, and now li bor, well, we’re at SFR now and sofas, I think pushing for today. Uh, and their underwritten exit rate was, you know, 3 75, they’re gonna run into some issues, but if they’ve added the value, I think there’s an opportunity for a refi. They also have a lot of these people have extensions on their loans. Mm-hmm. So that’s gonna help. Um, I, I don’t, I guess my gut on it is, is that yes, there’s certainly gonna be some opportunity for distressed assets there at any point. It, there are those that got too aggressive, missed the business plan, and we’re over their skis and, and are, and now have to throw what we say is throw the keys back, which is, you know, lender takes the property back, uh, because there is no other way to, to solve that.

Ryan Parker (30:26):

Or they’re, they’re gonna sell the asset before it gets to that point and just take, take a break even, or a little bit of a loss. So that way they’re protecting their reputation and not having to, uh, be known as someone that is willing to default and foreclose on a property. The, the financial markets, at least from the banks that I’ve talked to, um, and, and others, they don’t wanna do that. At the end of the day, most lenders don’t want to have to take the keys back and, and process that. So from a like, oh, it’s gonna be 2008 again, and there’s gonna be all this bank owned real estate and lender owned real estate and where they’re gonna offload it on fire sales. My gut tells me that’s not gonna happen because everyone did that at the last time and they really hated it.

Ryan Parker (31:06):

It was, it, it is a process to to, to do that. And so if they could, if they believe that, you know, like if everyone believes that the second half of 23 is gonna start things off again, or, and that markets are gonna stabilize, they’re gonna do, the best lenders are gonna do the best that they can to not do that. So whether that’s a loan modification, an extension, you name it. I mean, I’m working with a client right now that he’s moving from a fixed rate product to a floating rate product because there was a five year fix that moved to a float and his, his cost of capital is, is going up by 300 basis points. And Wow. That’s, that’s the potential mm-hmm. , uh, and he, none of us could have planned for that, um, three or four years ago, but, uh, you know, now I’m here helping him and, and the bank is saying, you know what, we don’t have to move it to amortizing and at the higher rate, I mean, it’ll have to move to a higher rate.

Ryan Parker (31:57):

We just won’t, we won’t amortize it. We’ll give him a couple years io help him weather the storm and hope things will stabilize again. And that’s an example of, of, of trying, of a bank that e Barry usually could’ve said, deal with it, screw it. Pay me, pay me my money, and if you can’t gimme the keys and we’re gonna go sell it, they’re looking at it too and not going, well, if value is has decreased, then we’re gonna take a loss. So why not just keep getting that return? Mm. Not exactly how we wanted it. Why not keep getting that 6%, you know, interest rate now or whatever, 5% interest rate now and, and writing that for a few years and then seeing where the situation is.

Reed Goossens (32:29):

That’s interesting you bring that up because I think rates have shifted so much. Cap rates have shifted, thus values have shifted. And real estate is not a stock ticker, but if you was, you could argue that yeah, what you bought 12 months ago isn’t worth what it is today mm-hmm. . Right. Which means you’re underwater. Yeah. And so you just talk, just, just walk people through that and how the banks see that because it isn’t a atop they’re not saying, well, today you are worth less than what you bought at 12 months ago, and that’s not necessarily your fault because it’s all tied into how quickly you increase the business plan. You mentioned earlier, oh, you gotta go add value. Well, if interest rates have risen five, five times in 12 months, I know you can’t implement your business plan that quickly. Right. So there has to be, and what I’m hearing is that there has to be a little bit of give and take there, like lenders aren’t being like, we’re gonna smack you over the back of the head. You bought too high, the market’s now shut the bed. It’s now worth less. Yeah. You know, it sounds like they’re wanting to work with people in order to just like, let’s ride it out together. Let’s take a breath and we know we’re all in this, we’re all in this boat together, so let’s not panic .

Ryan Parker (33:39):

Yeah. De definitely seeing that. And yeah, in the sense that as cap rates move, you know, you have obviously the new change in value and, and so you have a million dollars in NOI at a four cap, it’s gonna be different than at a five cap and it a six cap and at a three cap, we all get that. Uh, but that’s a, you’re gonna transact and you’re actually looking to sell the property. You as long, to me, at least in my viewpoint, and I’m pretty simple as simplistic in this way, if you’re, if your, if your net operating income can still service your monthly mortgage payment, uh, in the short term, great.

Reed Goossens (34:18):

As,

Ryan Parker (34:18):

As a lender, I’m like, fantastic. Uh, you know, this isn’t exactly what I wanted. But if you can still pay your mortgage every month, then that’s a positive. And if you can’t, let’s try and figure out what we can do to, to solve around that rather than immediately go default foreclosure e fire sale. Sorry. No one wants to do that. At least I’m not gonna say no one. Uh, they’re, they’re, they’re out there and there’s plenty of ’em and, and I get it, but the, the sense of it is, is that there’s a lot more, as you said, let’s come alongside and work together so that none of us have to deal with the worst case scenario.

Reed Goossens (34:55):

Awesome. Yeah. Look what I can talk to you for hours, honestly, we, we, we, we do as, as friends. But the one, one question I wrote down here is I know Walker Dunlop has an incredible platform of their own. Yeah. You know, for those listeners out there, they do, Walker does their own podcast and have got into the sort of the podcasting realm and they interview some really big heavy hitters. But what are you hearing internally, obviously you don’t have to tell us any secrets, but what are you hearing on your internal calls about the market, the war inflation, you know, coming into 2023? What is, what’s, what’s the big dogs talking about on, on these phone calls? Right?

Ryan Parker (35:30):

So you could certainly listen to, uh, we have it recorded, uh, Walker Dunlop, uh, third quarter earnings call. We’ll give you a great perspective on how our CEO Willy Walker is looking at planning for the future, what his anticipations are and expectations are. And so that’s gonna be a really good piece of color there. Like anyone in the commercial real estate industry right now, things get slow down. And that, that’s, that’s no secret. Uh, there’s volumes are, are less and what, you know, what’s that look like internally? We’re not panicked, we’re not scared. Uh, you can see our servicing portfolio that that’s, you know, we have, we have good income, we have good cash coming into the company. So from like a corporate walker and Dunlop standpoint, there’s not a lot of panic. That being said, any leadership needs, you know, obviously has to prepare for the worst and hope for the best.

Ryan Parker (36:18):

So there’s, there’s always gonna be those analyses of okay, if, if, um, if we don’t get that stabilization in, in, in, you know, the second half of next year, well, what’s that look like? So there’s, there’s certainly planning for that. But over overall, I can tell you that at least internally a walker and things are extremely optimistic. We’re still doing well with, with our, with our overall volumes. I, if I remember correctly, I think our 22 year to date is somewhere like in excess of 30 billion in transaction volume, I believe for the, for the third quarter, if I remember that correctly. Um, but again, I could provide, I, I can send stuff after the fact for you to, to send your listeners so they can see. So volumes are, are, are, are off, but that’s because they’re off of, uh, where we were at the January, 2022 where everyone thought things were gonna continue in that pattern.

Ryan Parker (37:04):

So of course there’s gonna be a natural transition and, and that’s happened. But yeah, internally, we’re optimistic. Our investment sales platforms still really busy, uh, doing a little bit more b o V work right now than they did before. That’s which is broker opinion of value. For those that don’t know, that’s, that’s normal. When things start to slow down, people start to reassess, Hey, what is my property actually worth now? Doesn’t make sense to make a sale. We’re doing a lot of refi analysis, believe it or not. Uh, even though I said that market slowed down, part of the reason why is, um, is that with, with yield maintenance and diffusions prepayments, those, those we’re expecting a certain return at a certain coupon rate, and now that interest rates have risen, it’s dramatically reduced people’s pre-payment penalties on those loans. So there, there is some motivation to go, Hey, could I, could I, could I get some cash and maybe take a little hit now to, to keep that dry powder if the market were to really turn, uh, or reinvest it as, as things started to ignite again. So overall, we’re, we’re really optimistic with, with where the future is. Obviously we’re kind of looking around and like everyone else, but positive, very positive.

Reed Goossens (38:08):

And, and that’s optimistic not only just from walk of Don Locke’s perspective, but but from the economy’s perspective as well. Is that, is that right? By saying? Yeah,

Ryan Parker (38:14):

I would, I mean, personally, I mean, again, I’m not an economist. You can listen to lineman on the Driven by Insight podcast, he’ll tell you what’s going on, uh, you know, and what, what his thoughts are on that. But from, from an outsider looking in at like the global economy, right? Which is something I, I am not paid enough to, I’m not even paid to do that. I’m paid, I’m paid to broker debt. I’m not paid to, to pontificate on the global economy. But I can tell you that with that, uh, the last week is shown as I think what’s gonna happen, you know, you saw CPI go from, or inflation go from like 8.4 to 7.6, I think was the exact number, but you saw a decrease, right? We’re still on an inflationary world, but it’s not as high as it was. And the markets responded resoundingly.

Ryan Parker (38:55):

Well, everyone was like, let’s go. Treasuries, drop markets are up. Dows, you know, like mid 30 thousands again, everyone’s fired up. Uh, now granted things are kind of climbing back, but I think that’s just more of an indication that we’re all waiting. Like there’s all this cash and everyone’s sitting here waiting for the Fed to slow down their rate at hikes and go, okay, let’s sit flat for like six months and everyone’s gonna go, great. We know what, it’s a what it is, let’s make a run at it. So that’s my sense is that everyone’s waiting by the sidelines with a lot of cash in hand to, to get it, get back in

Reed Goossens (39:30):

Yep. Get the rules of the game. Yeah, understood. Or see some freaking forest be between the trees. Uh, so we have the trees between the forest, whatever the way you talk about it, but just get to get to a point where we know where we’re headed and we see the light at the end of the tunnel, and we understand the rules to play by to go out and, you know, start making, uh, sand start making sandcastles on the sandpit. So with that being said, my friend, let’s dive into the top five investing tips ready to get into it.

Ryan Parker (39:56):

Ooh, okay. Yeah,

Reed Goossens (39:58):

That, uh, it’s five questions. Semi la lightning around that you are unprepared for this as your first podcast ever. Episode recorded. You’re doing fricking fantastic. Thanks. Question, question number one is tell me how you keep on track. What’s a daily habit you, you practice to keep on track towards your goals?

Ryan Parker (40:15):

I just started something that I called the 5:00 AM Club . Mm-hmm. . So, uh, wanna make sure that I’m up at 5:00 AM every morning and I get kinda reading in prayer out of the way and, uh, not outta the way that’s actually a really important thing to help center my day. It, it, it reminds me of my perspective on, on what, what I want out of this life and how to get there. And then that helps me start every day fresh, clean, and focused.

Reed Goossens (40:39):

Love it. Love it. Question number two is, who’s been the most influential person in your career?

Ryan Parker (40:46):

Ooh. Oh, most influential person in my career. I’ve had a lot of people that have influenced me from, I’ll give, I mean, I’m gonna name job here, just shout out some of my favor. Like Cameron Merrill took me on my fir at cbr a took me on my first cold call at 19. Um, let’s see here. Uh, Gary Tenser at George Smith partner has given me a chance to even get into the capital markets as an industrial broker. And then even where I’m at right now, um, my senior partner, Greg Richardson, believing in me and supporting me and, and doing what he can to be successful. So, I mean, those are, those are the guys that have been, you know, the people in my life that have been really influential on helping me grow and, and taking a chance on, on taking a chance on me.

Reed Goossens (41:32):

So that’s awesome. And you got, you gotta have people who take a chance in you, right? You particularly when you’re starting at green and, and shout out to the boys there. So, um, yeah, I hope, hope they will get, get listened to the episode and, uh, absolutely. Tell te tell ’em to listen to minute 38 and they’ll get a shout out.

Ryan Parker (41:46):

Yeah. Listen to nothing else.

Reed Goossens (41:47):

. I

Ryan Parker (41:48):

Did really, really well on the lightning round. Exactly,

Reed Goossens (41:50):

Exactly. Question number three is, what’s the most important tool that you use in your business? And when I say a tool, it could be a physical tool like a Notepad, which I can’t run the business without, or it could be a piece of software that you just, you can’t run the business without. What is that, that influential tool in your business?

Ryan Parker (42:05):

Gosh, uh, I mean, obviously Excel, I mean, without, that’s, I mean, that’s, that’s the obvious answer, right? I mean, I mean, in finance, so XL is pretty, is pretty important. But from a, from a standpoint outside of that, gosh, we, and I mean the big name Salesforce for that, but like a simple tool that I, that I use every day is I also have a notepad, or it’s ADO list, and I write down the people that I need to make sure I call by the end of the day. Mm-hmm. and something as simple as that. And, and making sure that you follow up in that capacity really helped, uh, commercial mortgage alert for people. If there’s like, curious about the literature, commercial Mortgage Alert is something that we get weekly that gives you an idea of kind of where Wall Street’s head is at on, on a lending standpoint.

Ryan Parker (42:44):

And that’s really good to know and really good to have, uh, you know, go ahead and hype, hype the Walker webcast driven by insight on, you know, Spotify. That that’s a great way to kind of just get luminaries from all sorts of areas. And, um, and then again, another proprie, something a little bit more proprietary as well. Internally, we have a lot of technology that allows us to analyze real estate on a very, very deep level. Um, which we, which has been fantastic and it’s something that I use every day when I help consulting clients in terms of what, you know, how to look at refis versus old scenarios. Uh, expense comp for you and multi-family. We’ve got like 2 million units in our servicing portfolio, I believe, and that’s all data that we can use. So that, that’s really powerful stuff. And, um, but, but for the common person that doesn’t have access, I mean, not common person, but just for, for people that don’t have access to what I have at Walker and Dunlap, uh, remove all of the talking heads, Remo Remove as I’m sitting here trying to be one, uh,

Reed Goossens (43:49):

Doing a GRU job.

Ryan Parker (43:50):

Yeah. Just, just look, look at 30 day term. So r and look at the 10 year treasury. Those are the two indexes that the vast majority of our industry is based on, whether really tied to that index or loosely. And that’ll kind of communicate roughly where, where markets are headed. So. Awesome. Yeah.

Reed Goossens (44:09):

Awesome stuff. Question number four is, in one sentence, what’s been the biggest failure that you’ve learned from in your career? What, what’d you take away?

Ryan Parker (44:18):

Biggest failure, man, I never failed. No . Yeah. No, no, that’s not true. Uh, the biggest failure I would say is, um, wasting my time on tasks and transactions. Um, and, and the pursuit of information that, um, I guess the long story short, qualifying my in, you know, in my world you need to be able to qualify quickly and you need to be able to look at a deal, understand it, fit quickly. And so my biggest failure was that early in my career, I spent too much time chasing that pipe, that, that pipe dream deal, that like, if everything just worked right, I know it’ll happen and frankly every deal’s that way, but you need to be able to realistically look quickly. So I’d say my biggest failure had been that is just not, um, not learning that faster.

Reed Goossens (45:07):

Yeah, no, love it. But that comes with, with time and experience, right? Yeah. So exactly. It’s hindsight 2020.

Ryan Parker (45:14):

Yeah. And I, and I, and I needed that. I’m not saying that that was a negative Yeah. In the moment it felt like a negative because I felt, you know, cause I, why is nothing working, but I had to do that in order to find out what does and make sense of it all. Awesome. So yeah.

Reed Goossens (45:27):

Awesome stuff mate. Well, look, last question is, where can people reach you to continue the conversation? They wanna be in your sphere, they wanna have you on speed dial. Where do they go? Just to, to reach out?

Ryan Parker (45:37):

Gosh, to reach out. I mean, LinkedIn’s always a good space. Uh, you can certainly provide that. I can give straight up my contact information. I mean, uh, you know, my email address. What’s

Reed Goossens (45:45):

An, what’s a, yeah, what’s a good email address

Ryan Parker (45:47):

For you? Yeah, email address is rparker@walkeranddunlop.com and, you know, and phone office lines (949) 208-8446. I mean, call me, I’ll pick up. I’m not, you know, as long as you’re not trying to extend my car warranty, I’m, I’m set

Reed Goossens (46:01):

. So , yeah.

Ryan Parker (46:04):

That, that’s the best place.

Reed Goossens (46:05):

Awesome stuff, man. Well, look, I wanna thank you for coming on the show today. I just wanna share some of the, the, you know, the awesome piece pieces of advice that you’ve, you’ve really given out and, and, and kudos for your first podcast you did. You, you absolutely crushed it. But, you know, taking away, I think your in-depth knowledge, you’re a guy that I obviously know personally and, and you’ve really been able to develop a good niche into what you, you, you, you want to become in terms of you wanna become a really good adversary for your clients in terms of the debt markets and what is the best debt to come a buy and, and, and for a, you know, any product from industrial to multi-family to, you know, might be mobile home parks. Um, I also think you, you, you, you talking a lot about, you know, the geopolitical instability and, and, and stuff that coming in around that, how do we plan better for the future and how does that tie into refis and how does that tie into what we are doing from a day-to-day as a business owner when we’re outgoing looking at these deals, um, you know, day in, day out.

Reed Goossens (46:57):

So think providing that context around how you think about the deal in order to, you know, give that value back to your clients to then make, help them make the right decision is pretty much one of your superpowers. I think so, um, did I leave anything out?

Ryan Parker (47:11):

No, that’s it. Yeah. I just, I try and provide the downside risk scenario and help people Yeah. See that and make a, a decision on, on that, you know? Yep,

Reed Goossens (47:20):

Yep. That’s awesome stuff. I look, again, thank you so much for taking some much time outta today. Enjoy the rest of your week and we’ll catch up

Ryan Parker (47:25):

Very, very soon. Yeah, you too. Thanks for having me, Reed.

Reed Goossens (47:27):

My pleasure. Well, they, you have another cracking episode jampacked with some incredible advice from my mate, Ryan Parker. He did an awesome job on his first ever podcast. Definitely go back and re-listen to the entire episode because he’s got some golden nuggets in there. And if you do wanna reach out to him, he’s on LinkedIn. He’s a guy that you need to have in your back pocket on the speed dial when it comes to debt markets and what’s happening day in, day out, I use him probably on a monthly basis just giving him a call, understanding what’s going on when he’s got his finger on the pulse, and definitely check him out over@walkerdunlop.com. Um, if you like this show, the easiest way to give back is to give it a five star review on iTunes. And I wanna thank you all again for taking some time outta your day to tune in, to continue to grow your financial iq. We’re gonna do this all again next week, week’s. Remember, be bold, be brave, and go give life a crack.