J. Darrin Gross
If you're willing, I'd like to ask you, Yoel Mayerfeld, what is the BIGGEST RISK?
Yoel Mayerfeld
Sure. Well answer in a couple of ways. And risk, as I mentioned, from, you know, how I was trained in in my professional life is really what I'm always first focused on, you know, whenever we're looking at an opportunity. I'm always spending a lot more time on what can go wrong than what can go right. Because capital preservation is our sort of number one goal. From a you know, I would I was looking at my calendar yesterday and saw that we had this podcast and Robbie, who set this up with you wrote in the notes that one question you like to ask is about risk. I should be I should be repair at night, and I happen to be talking to a friend of mine. It's a CEO of a large real estate company public read, and I said, Oh, you know, I, I'm interested in what I'm going to say about what my largest, what I think the biggest risk in this industry is what do you think the biggest risk is? And he said, Well, for sure, the biggest risk is capital markets, freezing up, because whenever that happens, it really puts us in, in a bind. And to be able to, to borrow, which we saw, you know, certainly after the oh eight recession and during COVID. But for me, that isn't at all, what I think has the biggest risk and I think part of that is our strategy, which one thing I didn't get into is that we are low leverage borrowers, which I think differentiates us. So a even when capital markets are tight, for our lower loan to value needs. Usually there's more room for us than for others. Our bankers always tell us they can sleep at night with us better than they can sleep at night with many of their other real estate borrowers. So I just thought that was interesting. I think that would be what a lot of Retail real estate or real estate investors in general would say it's the biggest risk. But for us, we're so focused on the real estate, and it performing with or without debt, we're really not about the financial engineering part of real estate, which, at these low cap rates, I think every real estate investor has had to become somewhat more of a financial engineering, trade than a real estate is a real estate great trade, which is where we really try to stick with. So. So for us, that wouldn't be it for us really on our answer on the retail side, which has been the bulk of our experience and our, in our investment. The biggest risk is the, you know, we can't perform well, for attendance don't perform well. So our biggest risk is, is is these retailers, not figuring it out. And and right now they've been, you know, our portfolio, the sales that tenants report to us are stronger than they've been even pre COVID. They're figuring out their integration of bricks and mortar and online. So they're doing that well. But the day that they don't, the day that they they let you know, competition like Amazon, innovate quicker, you know, figure it out in a way that that puts them at a disadvantage. That's a big risk to us, we need our our tenants to do well. So that's on a more micro to the retail aspect for for more of a macro perspective, as real estate investors generally, which is what we are, I would say it's the risk of the unknown. After living through COVID, you know, you mentioned insurance, you know, we have what we feel is, you know, really good insurance for our portfolio and thought of every scenario. You know, we weren't covered for lack of rent during COVID, when your retailers couldn't pay. So I think the unknown is the biggest risk. So the mitigant, I would say, has has been, our diverse diversification is sort of like the answer for all kinds of risk for investing. And adding multifamily and industrial was a huge help now, for COVID. Because our retailers couldn't pay rent during COVID, because their stores were closed. Our industrial properties all paid rent, our multifamily properties all paid rent. So that diversification was huge for for during that three month period of COVID, that helped us sleep better at night.
Now, even the retail properties it was it was very temporary, and it was a stressful few months when those stores were closed, but we defer the rents for most of our retailers, because our lenders allowed us to defer our loan payments. So all worked out fine. But having that diversification was really a mitigate for, for us, globally. And then the diversification even in within our retail portfolio of mixed geographies, mixed tenants for different credits, so that when, you know, the Siena brands struggled and dress barn closed, it was such a tiny percentage of all of our tenancy that it was very easy to to move beyond that fill, fill some of those dress barns and most of our portfolio continue to thrive. So we were Okay, so the answer to mitigating some of these risks that I think about it continues to be diversification, which has really helped us.