Landmark Links May 24th – The Surge

Must Read: The rise in issuance of interest only CMBS loans has now surpassed pre-recession levels.  In fact, I/O issuance as of the third quarter was six times greater than fully-amortizing loan issuance, reminiscent of the bubble era.  A couple of mitigating factors are that leverage is still substantially lower on average than it was back in the bad old days and today’s DSCRs range from 1.5x – 1.6x, versus only 1.25x in 2006-2007.  Still, its at least a cause for concern that so many deals end up with negative arbitrage if they do not get financed with an interest-only loan.


Exodus: Workers without college degrees are fleeing expensive coastal cities, mainly because of affordability and quality of life issues.  But See: 87% of the US population will live in cities by 2040 according to UN projections.

Only Way Out: Like it or not, the only thing that can reverse America’s epic baby bust is higher levels of immigration.

Landing Spots: Recent college grads are flocking to places like Salt Lake City, Pittsburgh and even Baltimore thanks to hot job markets and reasonable rentsBut See: Where educated, upwardly mobile millennials congregate (hint: it’s basically the same places that they have been congregating for years).


Down Market: Investors are targeting industrial assets in secondary markets, lured by population growth and lower prices than assets in primary markets.

Shot Down: Treasury has banned the use of opportunity funds to invest in cannabis businesses including real estate.


Bold Ambition: Zillow is attempting to go from a capital-light, high margin business that makes money through advertising and marketing to a capital-heavy, low-margin business, that makes money by buying and reselling homes with one-click options.  This uberization of residential real estate carries major risks.  However, it also has a lot of potential scale and if they pull it off successfully, the big losers will be realtors.

Aging in Place: Robots, delivery services and smart home technologies will allow aging baby boomers to live independently in their homes longer than previous generations were able to.


Not What it Seems: Private equity returns have been strong in recent years, especially when compared to hedge funds. However, much of that performance has come from a substantial increase in the use of long-term subscription lines of credit which can boost IRRs while decreasing cash-on-cash returns, allowing funds to get into their promotes quicker at the expense of their LPs.

Hey Big Spender: Today’s tech growth stories like Uber, Lyft and WeWork are burning through cash at a rate that would make 1999 Jeff Bezos blush.  But See: Why today’s market is nothing like the tech bubble of the late 1990s.

Con Game: How risky subprime loans that left borrowers with little chance to repay did as much to lead to the crash in the value of New York’s taxi medallions as Uber and LyftSee Also: Uber and Lyft drivers at Reagan National Airport in DC are shutting off their apps simultaneously every night to trick the system into creating a price surge as a way of fighting back against falling driver pay.

Down the Drain: Meet the man who spent what would become $800 million in Bitcoin at today’s price on two shitty Papa John’s pizzas.(God, I hope they at least didn’t have pineapple on them).  He says that he has no regrets.  I don’t believe him.

Chart of the Day

Source: Hoya Capital Real Estate


Top Prize: A group of champion female squash players slammed the Spanish tournament they won as sexist after being given vibrators as a prize.

Gotta Hear Both Sides: Middle school students in Ohio allegedly fed urine and semen-filled crepes to teachers during a gourmet cooking competition mainly because kids are little shits.

Unintended Target: Vegan activists in the UK stormed a McDonalds while wearing pig and chicken masks and sprayed blood on the floor before staging a sit in because vegans are mostly assholes.  They really showed those minimum wage cleaning crew members who had to clean up the mess.  See Also: Forcing your children to go vegan is now a crime punishable by jail time in Belgium.

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