J. Darrin Gross
I'd like to ask you, Michael Hieronymus, what is the BIGGEST RISK?
Michael Hironimus
Oh, goodness, the biggest risk. If you're just talking about the commercial real estate industry, overall, I would say the biggest risks that I can think of at this point would be dry up and liquid and access to debt. And a significant shift in interest rates. A lot of the acquisitions that have been occurring have been at, you know, compressed cap rates, and so forth. If we have a large push on interest rates, there's one of two things that can happen either your risk premium, the cap rates are built upon us is going to compress even further, which is probably going to mean to drive people out of the the asset type, or you're going to have increases in capitalization rates, which is going to have severe effects on valuations for all the asset types, really. So I would say that's the biggest risk at this point. The other risk to that I think, at least off from an investor perspective, and, you know, we try to we try to balance this out and be conservative is that and I've seen this in the past, we saw this in the great financial crisis where sort of whatever has happened in the past people project into the future. And so we have these, you know, great rental increases, you know, you're looking at industrial multifamily, even, you know, some increases in retail and office and you go and you try to extrapolate that out into the future, I would say that there's a risk there in that. If you're anticipating those rental increases to continue on. At infinite, that you probably know it underwriting very well. And you may be setting yourself up for risk and potential issues in the future, I would be looking at forecasted demand, looking at jobs, how they're shifting within your metro area, how looking at the changes within the different industries that are focused on your asset type, and be conservative in your underwriting because I think once again, there's there's going to be maybe a slowdown in the future things can't run 100% Hot for forever. So once again, if if these supply chain issues continue, and if interest rates expand, it may signal cooldown in the economy and those rental increases may not continue in the future. So I would say one of the biggest risks is just you know, be conservative in your underwriting when you're doing your acquisitions, and make sure that those those are all increases, make sense and buy on actuals. Today, don't don't buy on anticipated returns in the future.