BIGGEST RISK with Joe Caltabiano

Commercial Real Estate Pro Network

J. Darrin Gross:

If you're willing, I'd like to ask you, Joe Caltabiano, what is the BIGGEST RISK?

Joe Caltabiano:

So in real estate, you know, I think the number one risk as you're looking to grow a real estate portfolio is access to capital. And that access can come in the form of equity or debt. But you know, as you have tightened tightening of free cash flow for people, maybe their investment dollars are a little smaller. And as we sit as a private REIT, unlike a public company, you know, where you're, you're, you're picking up multimillion dollar checks, you know, our check size, again, the minimum for qualified investors is 250,000. Those are regular people a lot of times, so they are impacted by, you know, what's going on in the world. So access to capital, not only on the equity side, and what's in people's pockets today, but also access to capital through the lending institutions and banks. So kind of blending out, you know, where that where that risk is, and ultimately, what's your cost of capital, because if you build a model that anticipates x as a return, and you're wildly off, because access to capital became lack of access to capital creates a higher cost of capital, because as the pools shrink, you're paying more to get that money in either the form of equity or in the form of interest rate. So access to capital is by far the driving factor of of kind of number one risk thing for us. So what that means is, I talked to more investors than I did in both of my previous industries, you know, my hit rate for success is probably lower than my fragile ego thought it would be when I when I got into this space, but talking to more investors, you know, spreading a wider net to talk to more people. And then on the debt side, it's talking to more banks and more lending institutions. Because unfortunately, until you have that bully signed deal with them, things can happen. I've seen banks close, I've been in mid underwriting where the board decides to shut off lending, you know, and that's, again, they do that to protect themselves. It's never anything personal with you, because they wouldn't have given you the term sheet. But when a board says we're not lending more money, there's very few things you can say to the loan officer, to get them to open up that vault and give you capital. So you know, talk to more investors talk to more banks, casting a broader net, and really just getting out there and playing the hand to hand combat game which, which I certainly enjoy. But again, when we launched healing Realty trust, you know, a year plus ago, I would have thought there was more capital than then maybe I was able to stumble into.