April 24, 2024 • 45 mins
In this episode of FI15, Joe is joined by Real Estate mogul Ryan Serhant, Founder of SERHANT. and Gregg Lemos-Stein, Chief Analytical Officer – Corporates at S&P Global Ratings. The guests discuss the global real estate market, with Ryan sharing his expertise on leveraging social media and AI to drive success in the industry, and Gregg provides his experience of how large multi-national cooperations are currently utilizing AI to unlock new opportunities.
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Episode Transcript
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(00:00):
Hello and welcome.
My name is Joe Cass.
I'm a senior director hereat S& P Global Ratings.
I'm the host and thecreator of the FI15 podcast.
So in this episode, we have Ryan Serhant,founder and CEO of SERHANT and Gregg
Lerner Stein, chief analytical officer,corporate ratings at S& P Global Ratings.
Very quick reminder that the views ofthe external guests are their views
alone, and they do not representthe views of S& P Global Ratings.
(00:22):
Ryan, can you just kick us offwith an overview of your career
to date in real estate fromentering the business as a novice.
To what you're looking toachieve right now with Serhan.
Of course.
I entered the business on the daythat Lehman Brothers filed for
bankruptcy on September 15th, 2008.
(00:43):
mostly because I had run out of money andI didn't want to move home to Colorado.
I wanted to stay in New York.
And a friend told me, getyour real estate license.
You can help people rent apartments.
You know, over 70 percent of thehomes in New York City are rented.
are rental apartments, and it's betterthan being a bartender or a waiter.
You can control your schedule sort of.
(01:06):
and I fell in love with the business.
I fell in love with real estate.
I fell in love with brokerage,working with customers looking to do
lots of different types of things.
I, I got onto a TV show that mostpeople know me from called million
dollar listing, New York on Bravoin 2010, did that for 10 years.
(01:26):
amongst multiple other TV showsand, started writing books.
I've written three books now, and Ihave an education business that teaches
sales training, to sales people andto sales enterprises around the world.
and we have a production company,that does real estate production.
And so I built a largesales team, through 2020.
(01:49):
In 2020, I started my own company.
I'm not timed with COVID.
That just sort of all happened.
By coincidence.
and we have now expanded from kindof the end of 2020 until now into.
we have well over 500 agents workingwith us now, kind of across those states,
and I've done, you know, just over 10billion in residential real estate sales.
(02:14):
We have nearly 30, 000 enrollees in oureducation platform in 128 countries.
I left Bravo and Millionaire Listin New York two years ago and
have a new TV show that comesout on Netflix, relatively soon.
Thanks, Ryan.
Greg, can you give us an overview ofwhat you're doing right now at S& P
(02:35):
Global Ratings and maybe also some kindof high level perspectives on the U.
S.
real estate sector?
sure, Joe.
It's, of course, a big issue.
It's been an issue for a while.
It will be an issue for quite some time.
It's, sometimes described, asa, as a, slow motion car wreck.
Particularly within U.
(02:56):
S.
Real estate.
We're talking about mainly about officewhere we've had a seismic change in the
way people work, particularly in the U.
S.
So, so it's not really real estate.
Overall, other sectors like industriallogistics, warehouses, faring quite
well, multifamily, I understandhas had some weakness lately.
All of them are affected by interestrates, but there's a double whammy
(03:20):
when valuations are decliningand interest rates are rising.
And maybe a triple whammy for officebecause, utilization of office space is
still, creeping up, but still very low.
So what we're doing at S& P Global Ratingsis we're, making sure we're coordinating
across the many, different asset classesthat are affected by real estate.
(03:42):
It really cuts across.
Many, areas.
We do not just corporates, whichis an area where I focus on.
We rate a lot of, reads,that are publicly traded.
And those are corporate ratings.
But of course, we also have commercialmortgage backed securities and our
structured finance colleagues cover that.
we also have mortgage rates,but of course, there's an impact
(04:04):
also on the banking sector.
So our bank analysts, there,there are varying degrees of real
estate exposure among the banks.
Okay.
So it really calls for coordinationamong all those senior analysts
in those asset classes.
And they've been doing that more or lessfor the last, three years, really, since,
these, changes became, very apparent.
Perfect.
Thanks, Greg.
(04:26):
Ryan, your career, as youmentioned, it started in 2008.
So you've seen some ups, you'veseen some downs in us and also
global real estate markets.
What's your forecast or evenyour expectation for real
estate in 2024 and beyond?
We are in a historic low inventoryenvironment, that has been written
(04:51):
about and reported about ad nauseum.
you know, in the United Statesalone, 90 percent of all home
loans are under 5 percent rates.
So when rates are still above 5%,it creates a locked in effect,
which is what we saw in 2023.
Great.
There were fewer home sales in 2023 inthe United States than there were in 2009.
(05:15):
2009, I think if you ask most peoplepre 2023, they would say, yeah, that
was probably one of the worst housingmarkets we've ever seen in recent memory.
and 2023 also turned out to be oneof the slowest housing markets in
over 30 years, nearly 30 years.
this year, what we've alreadystarted to experience is a
(05:37):
little bit of an unlocked effect.
if 2023 was locked in,this is, a little unlocked.
And it's because you can actually predictroughly six months into the future.
You know, that was hard in 2022 and 2023,it was difficult to predict what anything
would cost over the next six months.
(05:57):
Now, you know, inflation seems a littlestickier than I think we'd like it to be,
but you know, within relative certainty,roughly what interest rates are going to
look like over the next couple of months.
So you're either going to move.
Or you're not going to move, andeventually people need to move.
Eventually the baby boomergeneration needs to downsize,
(06:19):
which they haven't done since 2020.
That's a significant amount ofinventory that is only now just
starting to come to market.
And that'll help fuel the inventoryissues that we're seeing, amongst
other kind of demographics.
And I think the, moment we seeinterest rates start to get closer
(06:39):
to, and hopefully they do, kindof that, that 5 percent marker.
you're going to see homeprices really escalate.
So what we're telling people nowis, you know, if you're a seller,
we can't predict the future.
Could pricing go up?
Seems like it will be.
But could it go down drastically?
Sure.
You know, we don't know.
(07:00):
and if you're a buyer, could prices go up?
Absolutely.
Could they do, go down drastically?
We, don't know.
But there are clear market indicationsthat things are going to get much
more expensive should rates comedown because there is so much pent up
demand and not nearly enough inventory.
So I think we're going to see a farstronger year for absorption and volume
(07:21):
in the housing market than we saw in 2023.
And I think we'll end the year, withhigher pricing, 6 percent range.
Thanks Ryan.
Greg, we're speaking, you're speakingto kind of the largest investors,
especially on the buy side globally.
Interested to know what are the kindof the top three concerns these large
(07:44):
global investors are coming to us withon the topic of global real estate?
Yeah, absolutely.
It's a, it is focused on office.
So Ryan makes some good pointsabout, housing more broadly.
And I'd be interested to alsohis take maybe later on about the
change in the commission structures.
that may be coming and what thatimpact that might have on pricing.
(08:06):
But, you're that you're the host, Joe.
So I don't want to take usurpyour no, That was good to me.
But in terms of what investors areasking us, it is focused on office.
And the first question theyask is how bad will it get?
Because it's still evolving, right?
We still have this big gap betweenutilization of office space and
vacancies, which would be actually, what,tenants are paying in terms of rent.
(08:33):
And there's a long tail before, youknow, lease renewals happen, they
happen, they tend to be 10 year leases.
So the implication is if, utilization ofspace is much lower than the vacancy rate
would indicate that when lease renewalscome up, they're going to take less space.
So there's still some pain to be felt.
So the number one questionis how bad can it get?
(08:53):
And then the next question logicallyis, will that have a big impact
crossing over to the banking sector?
And then the next question thatlogically stems from that, is there
more of a systemic risk that wouldemanate from that, that might have
an impact on the broader economy?
Those are the top threequestions that we're getting.
You know, we, to answer some ofsomewhat to give a little bit of
(09:15):
color, Joe, and not just leave thatas a question, we have had a number of
rating actions on some regional banks.
We've had a larger number of ratingactions, even dating back two years
from now, two years ago on the REITsector, those most exposed to office.
So we've been adjusting our ratings.
We've been adjusting our basecase for quite some time now.
(09:36):
and again, I'm not a banking analyst,but what our banking analysts will
tell you is that the commercial realestate exposure largely for banks
is manageable, but there's a bigdifference in, levels of exposure to CRE.
And so some of the largest banks actuallyhave the smallest amount of exposure as
a percentage of their overall assets.
(09:57):
It's the smaller regional playersthat have larger exposures, and those
are where we've taken some actionsalready over the last year or two.
Sometimes though, the commercial,real estate is often, sometimes
it's, again, it's not all office.
And it may not be office inthe most exposed geographies.
It might be.
Areas where office space wasn't soabsurdly expensive and, CFOs aren't
(10:20):
eager to get out of that, space.
So it's, it gets, it really have togo bank by bank, really, area by area.
Again, real estate's allabout location, right?
So that applies here too.
I'll also add to that, youknow, you make a good point.
I, read a lot and hear a lotabout The fall of office, right?
And you see a lot of the big institutionalplayers giving keys back, because they
(10:44):
don't want to chase good money after bad,you know, and if you, know, Starwood,
Brookfield, you see these major players.
So more and more people are doing that.
But there's also a big differencebetween, occupancy and vacancy.
So, you know, I hear aboutit in New York all the time.
Go to midtown.
Oh, look at all these.
All these lights are off.
(11:06):
you know, occupancy must be down.
Yeah.
Right.
there's, you know, no one'shere, no one's going to office.
the spaces may be vacant, butthe leases are fully occupied.
You know, there's a lot ofoffice that is fully leased,
but people just aren't coming.
And so, I think what people are tryingto, and what a lot of these, you know,
(11:27):
big institutional owners and even just,you know, the, you know, these offices
themselves are trying to get to do is,try to get to three days a week of office.
You know, if you can get tothree days a week of office,
you can, fund your facilities.
you can get these buildings moving, youknow, relatively pretty productively.
but if you're just a two daysa week or one day a week,
(11:50):
you have a really, hard time.
And I heard somebody say recently that,you know, this is now all because a
lot of our nouns have become verbs.
You know, it used to bethat you'd go to the shop.
Now you shop on your phone.
It used to be that you,I got to go to work.
Now you just work, work, you know, I'veworked, and so I just, I think it's
(12:13):
an important thing I think, cause Ithink in, in, in terms of, occupancy
in New York office, I think it'sover 90%, a lot of the spaces look
vacant, but those leases are occupied.
Fantastic.
Thank you both.
And Ryan, just to kind of pickup on something Greg said.
Do you have any kind ofcomment or view on the, recent
(12:35):
commission change announcement?
I'm quite kind of uneducated on this side.
If you could provide kind ofan overview of what happened
and maybe your take on it.
Sure.
So there was a class actionlawsuit that was filed in the
state of Missouri years ago.
that was basically saying that thenational association of realtors,
(12:57):
the largest kind of trade unit unionfor real estate agents was colluding
with the largest brokerages Andlocal MLS is to price fix commission
to price fix commissionpayments to buyer's agents.
(13:17):
And what was happening was that, ifan agent was going to a seller, it's
a, the best way to sell your homewould be to put it on the MLS, but to
put it on the MLS, we have to offercompensation to the buyer's agent.
Those are the nationalassociation of realtor rules.
That's what we have to do.
And so if you're going to pay a 6 percentcommission, it's 3 percent and 3%.
(13:39):
That way, the buyer'sagent is also protected.
That way, you never have to havecommission conversations with buyers.
The seller pays it, and it's what'shappened for, you know, for decades.
It's how it's always been, and, it'snot that the seller is unfairly paying
a buyer's agent who didn't do any work.
Just that fee has always been, inthe United States, on the seller.
(14:01):
So when you're a buyer, you don't payit, but when you're a seller, you pay it.
Usually, most people buy a home, and theydon't live there for the next 80 years.
They buy it, they don't pay that fee.
When they go to sellit, they do pay the fee.
So the fee just gets passed on.
So that's what the classaction lawsuit was about.
The National Association of Realtorsand the big brokerages did not, did not
(14:21):
succeed in explaining the reasons why thatwould be a good thing for the marketplace.
and so they lost.
And so what happened on Friday wasthat the National Association of
Realtors, basically came out and saidthey would not appeal the verdict.
They're going to settle for somethingover 400 million, to be paid out over
(14:42):
the course of the next four years, andthat they would be changing the rules.
And the rules will change towhere a seller no longer is
obligated to pay the buyer's agent,should the buyer have an agent.
You don't have toadvertise that you'll pay.
You can pay 0 percent if you want.
Now it's kind of always the way it's been.
(15:04):
I mean, in New York, we don't have an MLS.
We're also not a part of the NationalAssociation of Realtors in New York,
so, so New York City is very different.
You know, we have, customers who willpay 10 percent to get something sold.
we have also customers who willpay 0%, but around the country,
is always a different case.
(15:24):
And so what's going to change nowis that, buyers, agents, if you're
working with a buyer and you'rea real estate agent, you'll get a
buyer's representation agreementthat states, how you are compensated.
And if you are showing homes where theseller is not willing to compensate
a buyer's agent, you will go tothe buyer for your compensation.
(15:45):
and so you will be just veryclear and very transparent as to
where fees come from, which isthe way it's always been before.
This will create a little extra paperwork.
and it'll be interesting to seewhat it does to the marketplace.
My, my prediction is that fees willget higher, and more properties
will start to trade off market.
(16:05):
That's, because that's what happens aroundthe world, outside of the United States.
So as much as we want to think thatthese new rules will be better for
the consumer, what happens around theworld is that off market transactions
end up becoming more of the norm.
And when you do that, thenthere's no transparency,
because people just setwhatever fees they want.
And so, I think you'll see more.
(16:27):
More of that, but it remains to be seen.
The settlement was announced last week.
a judge still has to approve of it.
That'll take a couple of months,probably some time into the summer.
But it doesn't change thatcommissions are paid out.
Doesn't change that a seller,is allowed to pay whatever they
want to whomever they want.
They're free to do that.
just creates a document of transparency,which I think is actually probably good.
(16:52):
and the right thing for the market.
Great.
Thanks, Ryan.
Brian, you've got a really significantonline presence with over 6 million
followers across all the platforms.
Do you believe that other playersin the real estate industry, such
as, you know, developers, investors,companies, are they effectively
(17:14):
utilizing their own online presence?
I think they try to.
I don't think other players, reallylook at their digital presence as
one of their value propositionsbecause it never had to be previously.
I think there are two types ofreal estate firms right now.
(17:34):
I think there are those that are defendingwhere we've been, and I think there are
those who are building where we're going.
and you know, I'm, an active realestate agent all day every day.
You know, I'm a CEO of a firm,understanding what it means to be
every single agent that works with me.
And so when I was looking to startmy own company, you know, we started
(17:58):
Sirhant in 2020, I spent a yearinterviewing with other firms, all
of them, all the big names and smallnames, national franchises, everybody.
And what I realized was that most,all of the other real estate firms
that I interviewed with, are licensinghousing firms that hold your license.
(18:20):
And that's about it.
And their number one pitch is if youcome to us and hang your license with
us, we're going to make you rich.
Right?
We're going to make you better.
And I, as an actual agent, alwaysfelt that a real estate firm's job
(18:41):
shouldn't be to make my agents better.
It should be to be better for my agents.
Because that's the pitch that I alwaysgive to every customer I work with, every
buyer, every seller, every developer.
I don't sit with them andsay, Hey, work with me.
I'm gonna make you a better seller.
Work with me.
I'm gonna make you a better developer.
(19:02):
But that's the pitch thatreal estate brokerages give.
And so, you know, at Serhant,we are the most followed real
estate brokerage in the world.
we use television, streaming, everysocial media platform, books, speaking,
and our own production company toamplify our brand to the benefit of our
(19:22):
customers brands and our agents brands.
and I think if you were toaudit our business, you would
probably say that we are a mediacompany that sells real estate.
And I learned a long time ago thatif you can build a strong content
to commerce business for makeup,you can do it for real estate.
(19:45):
You have to understand that there is anew C in between content and commerce and
it's content to community to commerce.
And no one had ever donethat for real estate before.
And so when we started Serhant that Wasone of our immediate value propositions
outside of the technology and everythingthat we're building now, and I
think we had first mover advantage.
(20:06):
To be able to use our online presenceto the benefit of our agents and
their ability to lead generate andbuild their own brands and create
their own Sir hand effect as theycall it, in a way that other firms
probably are not going to realize isa true value add until it's too late.
Great.
Thanks, Ryan.
Greg, in what parts of the globe isreal estate really growing at present?
(20:27):
And conversely, what parts of theworld is real estate sector kind
of slowing or maybe declining?
Yeah, it's a great question becausewe've been talking about the U.
S.
and the dynamics are very differentin other areas of the globe.
I'd say all real estate is affected by theprecipitous rise in base interest rates.
It is an interest ratesensitive industry for sure.
(20:50):
But the office dynamic we talked aboutis not quite as acute in other markets.
And those of us, those of ourlisteners who are, tuning in from,
let's say, Hong Kong or other areasthat were like scratching their head
at the three day week, model, becausethey're in the office a lot more.
So office, I think is comparativelyless severe in other areas.
(21:11):
And that's borne out in, thevaluation data we're cutting.
The declines are muchless, but it's a factor.
But I think, development.
Has been under severe pressure inChina as, many of our listeners know
about and many, developers have,defaulted or, entered credit stress,
(21:32):
retail is, still an issue.
Maybe it's been around for us long enoughthat we realize that, the e commerce
effect on retail, it's just sort of,it's part of the fabric of what we do.
We're not adjusting to that.
Areas that it's growing, I'd be hardpressed to say where real estate is going
gangbusters, but of course there aremarkets that are, that are expanding.
I'll just mention one.
This is not comprehensive, but justI'm aware that there is a lot of,
(21:55):
activity going on in the Gulf andparticularly in Saudi Arabia, which is
opening up and modernizing its markets.
And Riyadh, as I understand it as abit of a boom town right now, lots of,
ambitious development going on there.
So that would be one I would point to.
Right.
Thank you.
Thanks Fred.
Ryan, how has AI impacted thereal estate industry thus far and
(22:18):
how are you hoping to utilize AIin your own business at Serhan?
Great question
There have been many paradigmshifts in the world, right?
You had the printing press initiallyRight, which, really democratized
(22:38):
information, democratized knowledge,because before that it was
hard to get information around.
it was hard to write, right?
It was hard to copy.
So the printing press helped that.
you know, there was the combustibleengine, you know, which didn't
look exciting, didn't look greatbecause, you know, and cattle or an
(22:59):
ox can go up a hill around a corner.
Tractor couldn't do thatinitially, until they realized,
Oh, maybe we'll just create.
different farms thatare flat and straight.
And then this tractor never needs a nap.
Perfect.
And so I think what we're seeing nowis, you know, much like the internet,
AI is creating a paradigm shift.
(23:22):
And.
It's incredibly exciting because it allowsyou to redefine the way that you work.
and as AI started to get more and morepopular over the past couple years, you
know, we at Sirhant and our, developmentteam and our, technical team really
looked around and said, I think everyone'sgoing to embrace AI the wrong way.
(23:45):
I think everyone is going to be focusedon, a wrapping large language models,
so LLMs and creating chatbots and morescreens, which really is more work.
Which is pretty ironic because I thinkthat the whole goal of having a I now is,
you know, and, you know, resources likechat, GPT and so on, is to really help
(24:06):
you redefine the way that you work andsave you a significant amount of time.
and so we've been focused far moreon what we would call a large action
model, so not focused on large languagemodels, which all of these new dot A.
I.
S.
And dot I.
O.
S.
Are really all the new dot coms.
(24:26):
And the technologychanges every single day.
And so you're constantly playing catchup, which is most of what our competitors
are doing, but being focused on what alarge action model could look like, right?
So whereas a large languagemodel is focused on what's the
next best token, we're focusedon what's the next best action.
How do we scale human support, to createnot just another tool for us to use?
(24:53):
Right.
How do we?
How do we?
How do we?
How do we do that?
And so we created something calledSimple Sir Hans Simple, which at its
core really revolutionizes the approachwith AI by focusing on human support.
So it's proprietary technology.
Yes.
you know, it utilizes A.
I.
Yes, but we have humans and we're scalingtheir ability to support our customers
(25:20):
faster and more precisely than Yeah.
Than ever, before.
and so our agents are able to completely,really redefine the way they work without
having to do more work to learn how toredefine the way that they work so that we
can create the most frictionless, process.
(25:43):
And so right now, simple is inbeta and four different states.
You know, we have, I would say Ilooked at it on Friday, 97 percent
repeat usage I've never had that inanything we've ever built before.
and it's really exciting to see, youknow, the product market fit because
(26:05):
now I can go to all salespeopleand they only have to focus on what
they are uniquely qualified to do.
They no longer have to do workthat another person or system
or process could do for them.
and they can also do it on the go, right?
It's completely mobile.
And so that's where we're,embracing AI and, I think taking
(26:25):
a counterintuitive approach.
Great.
Thanks, Ryan.
Greg, you've got oversight over anumber of corporate sectors, you
know, from pharma to autos and realestate, which you've mentioned already.
What practical Gen R AI or AI usesare companies sharing with us?
And what benefits are they expectingto receive from the technology?
(26:46):
Yeah, Ryan's description of it asa paradigm shift is an apt one.
it's gigantic and it cuts acrossso many different sectors.
And, it's going to be massive.
The impact is going to bemassive in the way we work.
a little bit more difficult to ascertainthe credit implications, but this is
really our calling and what we reallyhave to remain focused on is will it
(27:07):
create disruption in certain sectors?
Will it augment the ability of othersectors to do what they do and be helpful?
Credit positive, perhaps, time will tell.
We've already had some rating actions,notably in the media space, but in terms
of what companies are doing, I guess,broadly, you could bucket it into.
(27:29):
Improving customer service andthe interfaces with customers,
but also cutting costs.
And, those things are not mutuallyexclusive because if you're able to,
you know, replace part or all of yourcosts, your call center with, with AI,
which is not happening immediately,it's going to take some time.
That's a cost savings and potentially evenimproves the way you reach your customers.
(27:54):
But, you know, You know, eventhough it's growing in a huge
area, you might also see some hype.
You might see some sectors where they'resaying it's going to change things
more quickly than it actually will.
So we're cognizant of that.
But look, some examples, pharma,I understand, this is a huge, part
(28:17):
of perhaps shortening the researchand development cycle for pharma
companies, which is enormously expensiveand increasingly time consuming.
For these companies.
just think about theimplications for defense.
We've already seen defensebudgets increasing.
And by the way, I T budgets.
This is a secular change.
It seems for spendingon chips and software.
(28:39):
And we see that reflected in some ofthe stock prices, which I won't comment
on whether they are rational or not.
That's not my job, but wesee a huge impact there.
yeah.
you know, the list goes on utilities,even, ability to predict potential
weather events or wildfires.
I mean, this is a, a huge boon tothem in a growing area of concern to
(29:02):
mitigate some risk so I can go on and on.
But, we're seeing a lot ofconversations with our analysts
and we try to embed these ideas.
And these directions in ourforward looking outlooks, we just
published industry credit outlookson every sector in corporates.
And you'll see a lot of mention ofgen AI and regular AI throughout
that, throughout those reports.
(29:23):
Great.
Thanks a lot, Craig.
Ryan, we've spoken about thepower of social media in building
a business and also a brand.
Have you got any stories abouthow social media has directly
translated into revenue or justopportunities for you or your business?
Oh, sure.
but to, before I forget, youknow, something that was just
(29:44):
mentioned was so interesting to me.
I, you know, that paradigm shift is soreal, but I, look at companies that are
embracing AI and those that are not,or embracing the wrong parts of AI.
of AI, right?
They're not embracing the paradigm shiftbecause they're too distracted by the
technology is a really key point to make.
(30:05):
And I liken it almost to thebird and the bug analogy.
You know, there's a car racing downthe highway and a bird sees that
car coming and Can shift, right?
Can fly higher, let's say, but a bug,can't because the bird can perceive
(30:26):
that rate of change coming towards it.
those are the firms that are embracingthe paradigm shift and building
on top of the quote unquote AI.
Right.
And then you have other firms that arereally distracted by the technology today.
And I know it might sound a bitaggressive, but I, do see those firms
(30:47):
as the bug, you know, they're stillflying, everything's okay until that
car comes through and then windshield.
but to go back to your question aboutsocial, you know, we, so we use simple for
example, to do immediate social audits forall of our agents and to do social audits.
Calendar content creation.
I mean, like you name it simple.
(31:09):
We'll do it for our agents.
It's wild to see it actually in action.
And so We have agents that are nowcreating, you know, video walkthrough
tours, putting them across platformsand then selling site unseen property
and not inexpensive three, seven,10 million homes where the deals
(31:34):
are not transacted through DM.
You still need attorneys.
There's still a lot of email, butthat point of first substantive
contact is through a different device.
Or a different platform and oftentimesit's not us creating the social
content to reach the consumer directly,but to reach their circle of trust,
(31:55):
which sometimes is their kids.
You know, we created a propertytour in the middle of COVID for a
townhouse was asking, I think it was 15million at three 57 West 17th street.
and we, were, you know, realestate agents were not essential
workers in New York city.
We weren't allowed to go outside.
(32:16):
You know, the departmentof state was trying to.
to actually get people in troublefor trying to still work and
make a living, which is a wholeseparate conversation at that time.
but we created a property to her.
A 13 year old girl saw it because shewas not in school or on their phones
all day, showed it to the parents andthe parents bought it sight unseen.
(32:37):
So the deal was done because it wasreal estate, there were attorneys
involved, it was done, you know,the transaction was traditional, it
wasn't done on the blockchain, thecustomer was created, the market was
created, the urgency was created, andthe deal only existed through social.
Fantastic.
Thanks, Ryan.
Ryan, we've got lots of viewers,lots of listeners interested in, you
(33:02):
know, advancing their own career.
What kind of tips would you offerto build a personal brand that
maybe would open doors to, I don'tknow, a more fulfilling or exciting
career opportunity in the future?
Sure.
You know, I saw a statistic in theend of 2017, early 2018 from the U.
(33:24):
S.
Department of Labor.
That said that just over 20 percent of U.
S.
taxpayers are alsofiling a 1099 tax return.
Now they might, you know, they,some of them are also filing
W 2 tax returns and so on.
But over 20 percent were filing a 1099.
(33:47):
And the U.
S.
Department of Labor said by 2027, theyexpect that number to be over 50%.
Which means that over 50 percentof taxpayers That's just in this
country, are going to be filinga 1099 in just a couple of years.
that's an interesting stat.
(34:09):
And that means that thosepeople are selling something.
Maybe they're selling their podcastingservices, their writing, T shirts
online, real estate, cars, whateverthey might be selling, whether they
consider themselves salespeople or not.
And the only way to, to build yourcareer As a 1099 independent contractor
in the United States, who has to make aliving for themselves every day, or make
(34:33):
residual side hustle income, you know,on weekends and evenings, et cetera,
is to create awareness for either yourproduct's brand or your personal brand.
And today, you can dothat from your phone.
You don't have to have the rightconnection to get you into the right
newspaper, or on the right televisionshow, or, kind of know the who's who.
(34:54):
You know, social media has really kindof brought about the democratization
of talent more than anything.
and so brand is broken down into, Imean, it's a math equation, right?
It starts with the core identityof the person or the product.
That core identity translates intoperception the world now has of that
(35:16):
core identity, either in a digitalspace or in a people to people.
That perception then when you leavethe room or your product leaves
the, you know, you know, leaves thewebsite, let's say that perception
turns into reputation and then overtime that reputation becomes the brand.
It's what you're known for.
It's what's clear, concise, and memorable.
and you can build it bybuilding a core identity.
(35:39):
If you're building a personal brand,you're focused on your and, you
know, so I am real estate and media.
That's what I'm known for.
That is my brand.
You know, I wish I could be realestate and, I don't know, fighter jets.
That would be cool.
But that wouldn't reallyhelp me, would it?
So real estate and media, I'mgoing to build my brand on that.
Now I'm going to make consistent content.
(35:59):
That's kind of phase two.
And I can do that through video.
I can do that through static images.
I can do that through LinkedIn.
You can be a thought leader.
You don't have to dance on the internet.
I can do that through in person events.
maybe you don't have a smartphone.
Maybe social's not your thing.
That's totally fine.
But maybe twice a month.
You know, you do an in personnetworking event of some kind, you
(36:22):
know, and you're building that way.
And then lastly is amplification,or the way I like to say it is
really shouting from the mountaintopbecause success begets success.
And no one's going to know that yousell amazing t shirts or that you sell
investment services or that you sell realestate if you don't tell them about it.
and you can build that processnow easier and clearer than ever.
(36:44):
Perfect.
Thanks, Ryan.
Greg.
Thanks, Greg.
I do my research, I took out on LinkedInthat you actually started your career
as a reporter for Associated Pressfor nine years, which I didn't know.
So interested to know what your experiencewas like and what kind of news or
stories were you covering at the time?
Excellent research, Joe.
(37:05):
First off, I'll say that, I've onlyworked for three organizations, since
graduating college many years ago.
The Associated Press, Mellon Bank,which is now part of Bank of New York,
and, now S& P for the last 21 years,all three organizations were founded
somewhere between 1860 and 1880.
(37:27):
So I admire, what this will tellyou is I'm, a, long way off from
Ryan's entrepreneurial spirit.
I like stability.
I like organizations that have beenaround for a long time and will be
around for a long time, to come.
But no, that was an exciting and,wonderful learning experience those years
(37:48):
as a reporter for the Associated Press.
I spent the first fewyears covering sports.
Which was a dream job.
it was, crazy hours working nightsand weekends, which was also kind
of a dream because, way back whenI was concerned about, Working,
normal hours or more specificallygetting up early in the morning.
(38:09):
I'm very, different now.
I'm an early riser, but, I coveredsports for a number of years and then I
covered business news, financial news.
And I really credit that for being thepart of the transition to what I do today.
I got to cover a lot of, stock marketstories, wall street stories, big mergers
at the time, but we're talking a whileback, we're talking about the 1990s.
(38:29):
And I remember two stories inparticular, they were, there were shorter
stories, but one was about Frito, Layentering China for the first time.
and the other one was about, thefirst Russian company listing
on the New York stock exchange.
So this is a very different time, right?
Because this is sort of like thedawn of, Or not the dawn, but sort
(38:51):
of the acceleration of globalization.
And, and now we're, we have a differentcontext where now, there's some
evidence that's, being re rethought.
But, the, I remember the firstparagraph of the Frito Lay story.
They, were launching Cheetos in China,but they had very different flavors.
It was like, cuttlefishand prawns or something.
(39:14):
So the first paragraph was aCheeto isn't a Cheeto in China.
so I remember that one.
It was a short, succinct headline.
And then the Russian, stock marketstories about a Russian wireless
company and, and it doubled on theIPO or something like that did a very
successful IPO and the lead was, thelead paragraph was, even the Russians
(39:34):
couldn't bring a bear to wall street.
So we had a little bit offun with those, stories.
you can grow it all you want.
But, it was a greattraining ground by the way.
and I, and it really resonates withRyan's comments about media and
communication and nouns and verbs.
This is, this has applications, no matterwhat you're doing, it's more applicable
(39:54):
to credit ratings than you might think,because being able to communicate your
opinions is really vital to what we do.
And doing so clearly andsuccinctly is really critical.
Great.
Thanks Greg.
Ryan.
What opinion or view on realestate do you have that few
others would agree with you on?
Oh, I mean, topically, right now, Ithink people are assuming that given
(40:21):
the National Association of Realtorscommission lawsuit settlement, that
buying a home is going to get lessexpensive, and that real estate agents are
going to become more and more obsolete.
that is what most people think.
Everyone has been forwardingme all the articles.
(40:41):
I am obviously biased, but Ialso remember, having to sell
real estate door to door.
And when the internet really tookover on real estate and websites
like StreetEasy, Zillow, etc.
came about, everyone said the same thing.
Salespeople are gone, real estateis now going to be less expensive
(41:02):
because you're going to have thedemocratization of information, people
can see comparable sales now, youpesky salespeople aren't going to
be able to drive up pricing anymore.
and that didn't happen either, right?
The same way, you know, certainfinancial websites didn't, take
down certain investment banks.
The banks only got stronger.
(41:23):
And so I am, very much of the mind that,there will be greater transparency.
now with fees and commissions the waywe've always operated with, you know, our,
firm and in New York City, which is very,different from the rest of the country.
(41:44):
Commissions were always transparent.
They had to be.
but now I think nationally, I thinkthe old guard, which is the National
Association of Realtors and these bigbots brokerages, are in for either a
world of change or a world of hurt.
It's I think the rules are changing.
I think there are new rulesand I think what we're going to
(42:04):
experience now is an evolution.
just like I was talking about with AIand the farmers and the tractors, right?
they didn't throw out the tractors,they just created different farms
and a different way to farm.
and so I don't think that what we'regoing to experience now is going
to get rid of real estate agents.
I think it's going to separatethe agents from the brokerages
(42:28):
who are not open to change.
Because what got youhere won't get you there.
I think old rules pave way for new rules.
And I think that as interest ratesstabilize or continue to come down,
pricing is only going to go up andconsumers are still going to want great
representation, buy side or sell side,because you don't know what's real
(42:48):
anymore when you log in, you know, online.
So that's, I think aunique opinion of my own.
I'll confess Ryan that I thought thatuntil about seven and a half minutes ago
when you started talking about It's alittle more complicated that commissions
actually may go up in some cases.
So listen, So, and, then I know weall have to jump here, but, you know,
(43:12):
in New York City and in most of theUnited States, total compensation for
real estate agents, because there'stypically two agents on the deal, sell
side and buy side, is between 5 and 6%.
It's the way it's always been.
Very rare is it much lower than that.
Very rare is it much,much higher than that.
And I see a lot of, Oh, well, thisis the highest commissions ever.
(43:34):
The rest of the world is this.
The rest of the world is that.
Well, I've been around the rest ofthe world and I've sold property
around the rest of the world.
And what I'll tell youis that is not true.
You have markets where you have salariedsalespeople who are not incentivized
to get the highest price for theirseller or to get the best deal for their
buyer because there is no incentive.
and so what ends up happening is, alot trades off market, which is not
(43:59):
in the best interest of the consumer.
And then you have other markets.
Where you have a mixture ofon and off market property.
And so you could work with an agent andthey'll tell you, Hey, so I have a fixed
fee for anything that's on market, butanything you're going to want to buy
is actually off market and my fees 10%.
So I don't know what everyone thinkswe're going, to, but if going back to the
(44:25):
wild, west is what everybody else wanted.
And what they wanted to bring aboutthrough through these lawsuits that
I'm in, I don't know what to say.
Okay, great.
lastly, just before we go, Ryan,do you want to share any kind of
upcoming projects, goals, ambitions?
(44:46):
That you're looking to do eitherkind of this year or next year.
I'm incredibly excited for SirhantSimple, as we continue to roll it out
to our agents right now, it is justwithin Sirhant at our own brokerage.
because it is a, it's, you know,what makes it so exciting is
that it's a full stack platform.
(45:07):
So, you know, we have agents whouse it, who never want to touch
email again, they don't have to now.
We have agents who use it, who justwant to create marketing plans.
For a year and you know, they don'thave to do that anywhere else, you know?
So I, I'm really excited to see thattake off and, continue to improving the
lives, while also saving significantamounts of time for our sales people.
(45:30):
Perfect.
Well, thank you so much to Ryan.
Thank you to Greg for your time today,for everyone watching and listening.
See you next time in Fixed Income in 15.
Hello and welcome.
My name is Joe Cass.
I'm a senior director hereat S& P Global Ratings.
I'm the host and thecreator of the FI15 podcast.
So in this episode, we have Ryan Serhant,founder and CEO of SERHANT and Gregg
Lerner Stein, chief analytical officer,corporate ratings at S& P Global Ratings.
Very quick reminder that the views ofthe external guests are their views
alone, and they do not representthe views of S& P Global Ratings.
(00:22):
Ryan, can you just kick us offwith an overview of your career
to date in real estate fromentering the business as a novice.
To what you're looking toachieve right now with Serhan.
Of course.
I entered the business on the daythat Lehman Brothers filed for
bankruptcy on September 15th, 2008.
(00:43):
mostly because I had run out of money andI didn't want to move home to Colorado.
I wanted to stay in New York.
And a friend told me, getyour real estate license.
You can help people rent apartments.
You know, over 70 percent of thehomes in New York City are rented.
are rental apartments, and it's betterthan being a bartender or a waiter.
You can control your schedule sort of.
(01:06):
and I fell in love with the business.
I fell in love with real estate.
I fell in love with brokerage,working with customers looking to do
lots of different types of things.
I, I got onto a TV show that mostpeople know me from called million
dollar listing, New York on Bravoin 2010, did that for 10 years.
(01:26):
amongst multiple other TV showsand, started writing books.
I've written three books now, and Ihave an education business that teaches
sales training, to sales people andto sales enterprises around the world.
and we have a production company,that does real estate production.
And so I built a largesales team, through 2020.
(01:49):
In 2020, I started my own company.
I'm not timed with COVID.
That just sort of all happened.
By coincidence.
and we have now expanded from kindof the end of 2020 until now into.
we have well over 500 agents workingwith us now, kind of across those states,
and I've done, you know, just over 10billion in residential real estate sales.
(02:14):
We have nearly 30, 000 enrollees in oureducation platform in 128 countries.
I left Bravo and Millionaire Listin New York two years ago and
have a new TV show that comesout on Netflix, relatively soon.
Thanks, Ryan.
Greg, can you give us an overview ofwhat you're doing right now at S& P
(02:35):
Global Ratings and maybe also some kindof high level perspectives on the U.
S.
real estate sector?
sure, Joe.
It's, of course, a big issue.
It's been an issue for a while.
It will be an issue for quite some time.
It's, sometimes described, asa, as a, slow motion car wreck.
Particularly within U.
(02:56):
S.
Real estate.
We're talking about mainly about officewhere we've had a seismic change in the
way people work, particularly in the U.
S.
So, so it's not really real estate.
Overall, other sectors like industriallogistics, warehouses, faring quite
well, multifamily, I understandhas had some weakness lately.
All of them are affected by interestrates, but there's a double whammy
(03:20):
when valuations are decliningand interest rates are rising.
And maybe a triple whammy for officebecause, utilization of office space is
still, creeping up, but still very low.
So what we're doing at S& P Global Ratingsis we're, making sure we're coordinating
across the many, different asset classesthat are affected by real estate.
(03:42):
It really cuts across.
Many, areas.
We do not just corporates, whichis an area where I focus on.
We rate a lot of, reads,that are publicly traded.
And those are corporate ratings.
But of course, we also have commercialmortgage backed securities and our
structured finance colleagues cover that.
we also have mortgage rates,but of course, there's an impact
(04:04):
also on the banking sector.
So our bank analysts, there,there are varying degrees of real
estate exposure among the banks.
Okay.
So it really calls for coordinationamong all those senior analysts
in those asset classes.
And they've been doing that more or lessfor the last, three years, really, since,
these, changes became, very apparent.
Perfect.
Thanks, Greg.
(04:26):
Ryan, your career, as youmentioned, it started in 2008.
So you've seen some ups, you'veseen some downs in us and also
global real estate markets.
What's your forecast or evenyour expectation for real
estate in 2024 and beyond?
We are in a historic low inventoryenvironment, that has been written
(04:51):
about and reported about ad nauseum.
you know, in the United Statesalone, 90 percent of all home
loans are under 5 percent rates.
So when rates are still above 5%,it creates a locked in effect,
which is what we saw in 2023.
Great.
There were fewer home sales in 2023 inthe United States than there were in 2009.
(05:15):
2009, I think if you ask most peoplepre 2023, they would say, yeah, that
was probably one of the worst housingmarkets we've ever seen in recent memory.
and 2023 also turned out to be oneof the slowest housing markets in
over 30 years, nearly 30 years.
this year, what we've alreadystarted to experience is a
(05:37):
little bit of an unlocked effect.
if 2023 was locked in,this is, a little unlocked.
And it's because you can actually predictroughly six months into the future.
You know, that was hard in 2022 and 2023,it was difficult to predict what anything
would cost over the next six months.
(05:57):
Now, you know, inflation seems a littlestickier than I think we'd like it to be,
but you know, within relative certainty,roughly what interest rates are going to
look like over the next couple of months.
So you're either going to move.
Or you're not going to move, andeventually people need to move.
Eventually the baby boomergeneration needs to downsize,
(06:19):
which they haven't done since 2020.
That's a significant amount ofinventory that is only now just
starting to come to market.
And that'll help fuel the inventoryissues that we're seeing, amongst
other kind of demographics.
And I think the, moment we seeinterest rates start to get closer
(06:39):
to, and hopefully they do, kindof that, that 5 percent marker.
you're going to see homeprices really escalate.
So what we're telling people nowis, you know, if you're a seller,
we can't predict the future.
Could pricing go up?
Seems like it will be.
But could it go down drastically?
Sure.
You know, we don't know.
(07:00):
and if you're a buyer, could prices go up?
Absolutely.
Could they do, go down drastically?
We, don't know.
But there are clear market indicationsthat things are going to get much
more expensive should rates comedown because there is so much pent up
demand and not nearly enough inventory.
So I think we're going to see a farstronger year for absorption and volume
(07:21):
in the housing market than we saw in 2023.
And I think we'll end the year, withhigher pricing, 6 percent range.
Thanks Ryan.
Greg, we're speaking, you're speakingto kind of the largest investors,
especially on the buy side globally.
Interested to know what are the kindof the top three concerns these large
(07:44):
global investors are coming to us withon the topic of global real estate?
Yeah, absolutely.
It's a, it is focused on office.
So Ryan makes some good pointsabout, housing more broadly.
And I'd be interested to alsohis take maybe later on about the
change in the commission structures.
that may be coming and what thatimpact that might have on pricing.
(08:06):
But, you're that you're the host, Joe.
So I don't want to take usurpyour no, That was good to me.
But in terms of what investors areasking us, it is focused on office.
And the first question theyask is how bad will it get?
Because it's still evolving, right?
We still have this big gap betweenutilization of office space and
vacancies, which would be actually, what,tenants are paying in terms of rent.
(08:33):
And there's a long tail before, youknow, lease renewals happen, they
happen, they tend to be 10 year leases.
So the implication is if, utilization ofspace is much lower than the vacancy rate
would indicate that when lease renewalscome up, they're going to take less space.
So there's still some pain to be felt.
So the number one questionis how bad can it get?
(08:53):
And then the next question logicallyis, will that have a big impact
crossing over to the banking sector?
And then the next question thatlogically stems from that, is there
more of a systemic risk that wouldemanate from that, that might have
an impact on the broader economy?
Those are the top threequestions that we're getting.
You know, we, to answer some ofsomewhat to give a little bit of
(09:15):
color, Joe, and not just leave thatas a question, we have had a number of
rating actions on some regional banks.
We've had a larger number of ratingactions, even dating back two years
from now, two years ago on the REITsector, those most exposed to office.
So we've been adjusting our ratings.
We've been adjusting our basecase for quite some time now.
(09:36):
and again, I'm not a banking analyst,but what our banking analysts will
tell you is that the commercial realestate exposure largely for banks
is manageable, but there's a bigdifference in, levels of exposure to CRE.
And so some of the largest banks actuallyhave the smallest amount of exposure as
a percentage of their overall assets.
(09:57):
It's the smaller regional playersthat have larger exposures, and those
are where we've taken some actionsalready over the last year or two.
Sometimes though, the commercial,real estate is often, sometimes
it's, again, it's not all office.
And it may not be office inthe most exposed geographies.
It might be.
Areas where office space wasn't soabsurdly expensive and, CFOs aren't
(10:20):
eager to get out of that, space.
So it's, it gets, it really have togo bank by bank, really, area by area.
Again, real estate's allabout location, right?
So that applies here too.
I'll also add to that, youknow, you make a good point.
I, read a lot and hear a lotabout The fall of office, right?
And you see a lot of the big institutionalplayers giving keys back, because they
(10:44):
don't want to chase good money after bad,you know, and if you, know, Starwood,
Brookfield, you see these major players.
So more and more people are doing that.
But there's also a big differencebetween, occupancy and vacancy.
So, you know, I hear aboutit in New York all the time.
Go to midtown.
Oh, look at all these.
All these lights are off.
(11:06):
you know, occupancy must be down.
Yeah.
Right.
there's, you know, no one'shere, no one's going to office.
the spaces may be vacant, butthe leases are fully occupied.
You know, there's a lot ofoffice that is fully leased,
but people just aren't coming.
And so, I think what people are tryingto, and what a lot of these, you know,
(11:27):
big institutional owners and even just,you know, the, you know, these offices
themselves are trying to get to do is,try to get to three days a week of office.
You know, if you can get tothree days a week of office,
you can, fund your facilities.
you can get these buildings moving, youknow, relatively pretty productively.
but if you're just a two daysa week or one day a week,
(11:50):
you have a really, hard time.
And I heard somebody say recently that,you know, this is now all because a
lot of our nouns have become verbs.
You know, it used to bethat you'd go to the shop.
Now you shop on your phone.
It used to be that you,I got to go to work.
Now you just work, work, you know, I'veworked, and so I just, I think it's
(12:13):
an important thing I think, cause Ithink in, in, in terms of, occupancy
in New York office, I think it'sover 90%, a lot of the spaces look
vacant, but those leases are occupied.
Fantastic.
Thank you both.
And Ryan, just to kind of pickup on something Greg said.
Do you have any kind ofcomment or view on the, recent
(12:35):
commission change announcement?
I'm quite kind of uneducated on this side.
If you could provide kind ofan overview of what happened
and maybe your take on it.
Sure.
So there was a class actionlawsuit that was filed in the
state of Missouri years ago.
that was basically saying that thenational association of realtors,
(12:57):
the largest kind of trade unit unionfor real estate agents was colluding
with the largest brokerages Andlocal MLS is to price fix commission
to price fix commissionpayments to buyer's agents.
(13:17):
And what was happening was that, ifan agent was going to a seller, it's
a, the best way to sell your homewould be to put it on the MLS, but to
put it on the MLS, we have to offercompensation to the buyer's agent.
Those are the nationalassociation of realtor rules.
That's what we have to do.
And so if you're going to pay a 6 percentcommission, it's 3 percent and 3%.
(13:39):
That way, the buyer'sagent is also protected.
That way, you never have to havecommission conversations with buyers.
The seller pays it, and it's what'shappened for, you know, for decades.
It's how it's always been, and, it'snot that the seller is unfairly paying
a buyer's agent who didn't do any work.
Just that fee has always been, inthe United States, on the seller.
(14:01):
So when you're a buyer, you don't payit, but when you're a seller, you pay it.
Usually, most people buy a home, and theydon't live there for the next 80 years.
They buy it, they don't pay that fee.
When they go to sellit, they do pay the fee.
So the fee just gets passed on.
So that's what the classaction lawsuit was about.
The National Association of Realtorsand the big brokerages did not, did not
(14:21):
succeed in explaining the reasons why thatwould be a good thing for the marketplace.
and so they lost.
And so what happened on Friday wasthat the National Association of
Realtors, basically came out and saidthey would not appeal the verdict.
They're going to settle for somethingover 400 million, to be paid out over
(14:42):
the course of the next four years, andthat they would be changing the rules.
And the rules will change towhere a seller no longer is
obligated to pay the buyer's agent,should the buyer have an agent.
You don't have toadvertise that you'll pay.
You can pay 0 percent if you want.
Now it's kind of always the way it's been.
(15:04):
I mean, in New York, we don't have an MLS.
We're also not a part of the NationalAssociation of Realtors in New York,
so, so New York City is very different.
You know, we have, customers who willpay 10 percent to get something sold.
we have also customers who willpay 0%, but around the country,
is always a different case.
(15:24):
And so what's going to change nowis that, buyers, agents, if you're
working with a buyer and you'rea real estate agent, you'll get a
buyer's representation agreementthat states, how you are compensated.
And if you are showing homes where theseller is not willing to compensate
a buyer's agent, you will go tothe buyer for your compensation.
(15:45):
and so you will be just veryclear and very transparent as to
where fees come from, which isthe way it's always been before.
This will create a little extra paperwork.
and it'll be interesting to seewhat it does to the marketplace.
My, my prediction is that fees willget higher, and more properties
will start to trade off market.
(16:05):
That's, because that's what happens aroundthe world, outside of the United States.
So as much as we want to think thatthese new rules will be better for
the consumer, what happens around theworld is that off market transactions
end up becoming more of the norm.
And when you do that, thenthere's no transparency,
because people just setwhatever fees they want.
And so, I think you'll see more.
(16:27):
More of that, but it remains to be seen.
The settlement was announced last week.
a judge still has to approve of it.
That'll take a couple of months,probably some time into the summer.
But it doesn't change thatcommissions are paid out.
Doesn't change that a seller,is allowed to pay whatever they
want to whomever they want.
They're free to do that.
just creates a document of transparency,which I think is actually probably good.
(16:52):
and the right thing for the market.
Great.
Thanks, Ryan.
Brian, you've got a really significantonline presence with over 6 million
followers across all the platforms.
Do you believe that other playersin the real estate industry, such
as, you know, developers, investors,companies, are they effectively
(17:14):
utilizing their own online presence?
I think they try to.
I don't think other players, reallylook at their digital presence as
one of their value propositionsbecause it never had to be previously.
I think there are two types ofreal estate firms right now.
(17:34):
I think there are those that are defendingwhere we've been, and I think there are
those who are building where we're going.
and you know, I'm, an active realestate agent all day every day.
You know, I'm a CEO of a firm,understanding what it means to be
every single agent that works with me.
And so when I was looking to startmy own company, you know, we started
(17:58):
Sirhant in 2020, I spent a yearinterviewing with other firms, all
of them, all the big names and smallnames, national franchises, everybody.
And what I realized was that most,all of the other real estate firms
that I interviewed with, are licensinghousing firms that hold your license.
(18:20):
And that's about it.
And their number one pitch is if youcome to us and hang your license with
us, we're going to make you rich.
Right?
We're going to make you better.
And I, as an actual agent, alwaysfelt that a real estate firm's job
(18:41):
shouldn't be to make my agents better.
It should be to be better for my agents.
Because that's the pitch that I alwaysgive to every customer I work with, every
buyer, every seller, every developer.
I don't sit with them andsay, Hey, work with me.
I'm gonna make you a better seller.
Work with me.
I'm gonna make you a better developer.
(19:02):
But that's the pitch thatreal estate brokerages give.
And so, you know, at Serhant,we are the most followed real
estate brokerage in the world.
we use television, streaming, everysocial media platform, books, speaking,
and our own production company toamplify our brand to the benefit of our
(19:22):
customers brands and our agents brands.
and I think if you were toaudit our business, you would
probably say that we are a mediacompany that sells real estate.
And I learned a long time ago thatif you can build a strong content
to commerce business for makeup,you can do it for real estate.
(19:45):
You have to understand that there is anew C in between content and commerce and
it's content to community to commerce.
And no one had ever donethat for real estate before.
And so when we started Serhant that Wasone of our immediate value propositions
outside of the technology and everythingthat we're building now, and I
think we had first mover advantage.
(20:06):
To be able to use our online presenceto the benefit of our agents and
their ability to lead generate andbuild their own brands and create
their own Sir hand effect as theycall it, in a way that other firms
probably are not going to realize isa true value add until it's too late.
Great.
Thanks, Ryan.
Greg, in what parts of the globe isreal estate really growing at present?
(20:27):
And conversely, what parts of theworld is real estate sector kind
of slowing or maybe declining?
Yeah, it's a great question becausewe've been talking about the U.
S.
and the dynamics are very differentin other areas of the globe.
I'd say all real estate is affected by theprecipitous rise in base interest rates.
It is an interest ratesensitive industry for sure.
(20:50):
But the office dynamic we talked aboutis not quite as acute in other markets.
And those of us, those of ourlisteners who are, tuning in from,
let's say, Hong Kong or other areasthat were like scratching their head
at the three day week, model, becausethey're in the office a lot more.
So office, I think is comparativelyless severe in other areas.
(21:11):
And that's borne out in, thevaluation data we're cutting.
The declines are muchless, but it's a factor.
But I think, development.
Has been under severe pressure inChina as, many of our listeners know
about and many, developers have,defaulted or, entered credit stress,
(21:32):
retail is, still an issue.
Maybe it's been around for us long enoughthat we realize that, the e commerce
effect on retail, it's just sort of,it's part of the fabric of what we do.
We're not adjusting to that.
Areas that it's growing, I'd be hardpressed to say where real estate is going
gangbusters, but of course there aremarkets that are, that are expanding.
I'll just mention one.
This is not comprehensive, but justI'm aware that there is a lot of,
(21:55):
activity going on in the Gulf andparticularly in Saudi Arabia, which is
opening up and modernizing its markets.
And Riyadh, as I understand it as abit of a boom town right now, lots of,
ambitious development going on there.
So that would be one I would point to.
Right.
Thank you.
Thanks Fred.
Ryan, how has AI impacted thereal estate industry thus far and
(22:18):
how are you hoping to utilize AIin your own business at Serhan?
Great question
There have been many paradigmshifts in the world, right?
You had the printing press initiallyRight, which, really democratized
(22:38):
information, democratized knowledge,because before that it was
hard to get information around.
it was hard to write, right?
It was hard to copy.
So the printing press helped that.
you know, there was the combustibleengine, you know, which didn't
look exciting, didn't look greatbecause, you know, and cattle or an
(22:59):
ox can go up a hill around a corner.
Tractor couldn't do thatinitially, until they realized,
Oh, maybe we'll just create.
different farms thatare flat and straight.
And then this tractor never needs a nap.
Perfect.
And so I think what we're seeing nowis, you know, much like the internet,
AI is creating a paradigm shift.
(23:22):
And.
It's incredibly exciting because it allowsyou to redefine the way that you work.
and as AI started to get more and morepopular over the past couple years, you
know, we at Sirhant and our, developmentteam and our, technical team really
looked around and said, I think everyone'sgoing to embrace AI the wrong way.
(23:45):
I think everyone is going to be focusedon, a wrapping large language models,
so LLMs and creating chatbots and morescreens, which really is more work.
Which is pretty ironic because I thinkthat the whole goal of having a I now is,
you know, and, you know, resources likechat, GPT and so on, is to really help
(24:06):
you redefine the way that you work andsave you a significant amount of time.
and so we've been focused far moreon what we would call a large action
model, so not focused on large languagemodels, which all of these new dot A.
I.
S.
And dot I.
O.
S.
Are really all the new dot coms.
(24:26):
And the technologychanges every single day.
And so you're constantly playing catchup, which is most of what our competitors
are doing, but being focused on what alarge action model could look like, right?
So whereas a large languagemodel is focused on what's the
next best token, we're focusedon what's the next best action.
How do we scale human support, to createnot just another tool for us to use?
(24:53):
Right.
How do we?
How do we?
How do we?
How do we do that?
And so we created something calledSimple Sir Hans Simple, which at its
core really revolutionizes the approachwith AI by focusing on human support.
So it's proprietary technology.
Yes.
you know, it utilizes A.
I.
Yes, but we have humans and we're scalingtheir ability to support our customers
(25:20):
faster and more precisely than Yeah.
Than ever, before.
and so our agents are able to completely,really redefine the way they work without
having to do more work to learn how toredefine the way that they work so that we
can create the most frictionless, process.
(25:43):
And so right now, simple is inbeta and four different states.
You know, we have, I would say Ilooked at it on Friday, 97 percent
repeat usage I've never had that inanything we've ever built before.
and it's really exciting to see, youknow, the product market fit because
(26:05):
now I can go to all salespeopleand they only have to focus on what
they are uniquely qualified to do.
They no longer have to do workthat another person or system
or process could do for them.
and they can also do it on the go, right?
It's completely mobile.
And so that's where we're,embracing AI and, I think taking
(26:25):
a counterintuitive approach.
Great.
Thanks, Ryan.
Greg, you've got oversight over anumber of corporate sectors, you
know, from pharma to autos and realestate, which you've mentioned already.
What practical Gen R AI or AI usesare companies sharing with us?
And what benefits are they expectingto receive from the technology?
(26:46):
Yeah, Ryan's description of it asa paradigm shift is an apt one.
it's gigantic and it cuts acrossso many different sectors.
And, it's going to be massive.
The impact is going to bemassive in the way we work.
a little bit more difficult to ascertainthe credit implications, but this is
really our calling and what we reallyhave to remain focused on is will it
(27:07):
create disruption in certain sectors?
Will it augment the ability of othersectors to do what they do and be helpful?
Credit positive, perhaps, time will tell.
We've already had some rating actions,notably in the media space, but in terms
of what companies are doing, I guess,broadly, you could bucket it into.
(27:29):
Improving customer service andthe interfaces with customers,
but also cutting costs.
And, those things are not mutuallyexclusive because if you're able to,
you know, replace part or all of yourcosts, your call center with, with AI,
which is not happening immediately,it's going to take some time.
That's a cost savings and potentially evenimproves the way you reach your customers.
(27:54):
But, you know, You know, eventhough it's growing in a huge
area, you might also see some hype.
You might see some sectors where they'resaying it's going to change things
more quickly than it actually will.
So we're cognizant of that.
But look, some examples, pharma,I understand, this is a huge, part
(28:17):
of perhaps shortening the researchand development cycle for pharma
companies, which is enormously expensiveand increasingly time consuming.
For these companies.
just think about theimplications for defense.
We've already seen defensebudgets increasing.
And by the way, I T budgets.
This is a secular change.
It seems for spendingon chips and software.
(28:39):
And we see that reflected in some ofthe stock prices, which I won't comment
on whether they are rational or not.
That's not my job, but wesee a huge impact there.
yeah.
you know, the list goes on utilities,even, ability to predict potential
weather events or wildfires.
I mean, this is a, a huge boon tothem in a growing area of concern to
(29:02):
mitigate some risk so I can go on and on.
But, we're seeing a lot ofconversations with our analysts
and we try to embed these ideas.
And these directions in ourforward looking outlooks, we just
published industry credit outlookson every sector in corporates.
And you'll see a lot of mention ofgen AI and regular AI throughout
that, throughout those reports.
(29:23):
Great.
Thanks a lot, Craig.
Ryan, we've spoken about thepower of social media in building
a business and also a brand.
Have you got any stories abouthow social media has directly
translated into revenue or justopportunities for you or your business?
Oh, sure.
but to, before I forget, youknow, something that was just
(29:44):
mentioned was so interesting to me.
I, you know, that paradigm shift is soreal, but I, look at companies that are
embracing AI and those that are not,or embracing the wrong parts of AI.
of AI, right?
They're not embracing the paradigm shiftbecause they're too distracted by the
technology is a really key point to make.
(30:05):
And I liken it almost to thebird and the bug analogy.
You know, there's a car racing downthe highway and a bird sees that
car coming and Can shift, right?
Can fly higher, let's say, but a bug,can't because the bird can perceive
(30:26):
that rate of change coming towards it.
those are the firms that are embracingthe paradigm shift and building
on top of the quote unquote AI.
Right.
And then you have other firms that arereally distracted by the technology today.
And I know it might sound a bitaggressive, but I, do see those firms
(30:47):
as the bug, you know, they're stillflying, everything's okay until that
car comes through and then windshield.
but to go back to your question aboutsocial, you know, we, so we use simple for
example, to do immediate social audits forall of our agents and to do social audits.
Calendar content creation.
I mean, like you name it simple.
(31:09):
We'll do it for our agents.
It's wild to see it actually in action.
And so We have agents that are nowcreating, you know, video walkthrough
tours, putting them across platformsand then selling site unseen property
and not inexpensive three, seven,10 million homes where the deals
(31:34):
are not transacted through DM.
You still need attorneys.
There's still a lot of email, butthat point of first substantive
contact is through a different device.
Or a different platform and oftentimesit's not us creating the social
content to reach the consumer directly,but to reach their circle of trust,
(31:55):
which sometimes is their kids.
You know, we created a propertytour in the middle of COVID for a
townhouse was asking, I think it was 15million at three 57 West 17th street.
and we, were, you know, realestate agents were not essential
workers in New York city.
We weren't allowed to go outside.
(32:16):
You know, the departmentof state was trying to.
to actually get people in troublefor trying to still work and
make a living, which is a wholeseparate conversation at that time.
but we created a property to her.
A 13 year old girl saw it because shewas not in school or on their phones
all day, showed it to the parents andthe parents bought it sight unseen.
(32:37):
So the deal was done because it wasreal estate, there were attorneys
involved, it was done, you know,the transaction was traditional, it
wasn't done on the blockchain, thecustomer was created, the market was
created, the urgency was created, andthe deal only existed through social.
Fantastic.
Thanks, Ryan.
Ryan, we've got lots of viewers,lots of listeners interested in, you
(33:02):
know, advancing their own career.
What kind of tips would you offerto build a personal brand that
maybe would open doors to, I don'tknow, a more fulfilling or exciting
career opportunity in the future?
Sure.
You know, I saw a statistic in theend of 2017, early 2018 from the U.
(33:24):
S.
Department of Labor.
That said that just over 20 percent of U.
S.
taxpayers are alsofiling a 1099 tax return.
Now they might, you know, they,some of them are also filing
W 2 tax returns and so on.
But over 20 percent were filing a 1099.
(33:47):
And the U.
S.
Department of Labor said by 2027, theyexpect that number to be over 50%.
Which means that over 50 percentof taxpayers That's just in this
country, are going to be filinga 1099 in just a couple of years.
that's an interesting stat.
(34:09):
And that means that thosepeople are selling something.
Maybe they're selling their podcastingservices, their writing, T shirts
online, real estate, cars, whateverthey might be selling, whether they
consider themselves salespeople or not.
And the only way to, to build yourcareer As a 1099 independent contractor
in the United States, who has to make aliving for themselves every day, or make
(34:33):
residual side hustle income, you know,on weekends and evenings, et cetera,
is to create awareness for either yourproduct's brand or your personal brand.
And today, you can dothat from your phone.
You don't have to have the rightconnection to get you into the right
newspaper, or on the right televisionshow, or, kind of know the who's who.
(34:54):
You know, social media has really kindof brought about the democratization
of talent more than anything.
and so brand is broken down into, Imean, it's a math equation, right?
It starts with the core identityof the person or the product.
That core identity translates intoperception the world now has of that
(35:16):
core identity, either in a digitalspace or in a people to people.
That perception then when you leavethe room or your product leaves
the, you know, you know, leaves thewebsite, let's say that perception
turns into reputation and then overtime that reputation becomes the brand.
It's what you're known for.
It's what's clear, concise, and memorable.
and you can build it bybuilding a core identity.
(35:39):
If you're building a personal brand,you're focused on your and, you
know, so I am real estate and media.
That's what I'm known for.
That is my brand.
You know, I wish I could be realestate and, I don't know, fighter jets.
That would be cool.
But that wouldn't reallyhelp me, would it?
So real estate and media, I'mgoing to build my brand on that.
Now I'm going to make consistent content.
(35:59):
That's kind of phase two.
And I can do that through video.
I can do that through static images.
I can do that through LinkedIn.
You can be a thought leader.
You don't have to dance on the internet.
I can do that through in person events.
maybe you don't have a smartphone.
Maybe social's not your thing.
That's totally fine.
But maybe twice a month.
You know, you do an in personnetworking event of some kind, you
(36:22):
know, and you're building that way.
And then lastly is amplification,or the way I like to say it is
really shouting from the mountaintopbecause success begets success.
And no one's going to know that yousell amazing t shirts or that you sell
investment services or that you sell realestate if you don't tell them about it.
and you can build that processnow easier and clearer than ever.
(36:44):
Perfect.
Thanks, Ryan.
Greg.
Thanks, Greg.
I do my research, I took out on LinkedInthat you actually started your career
as a reporter for Associated Pressfor nine years, which I didn't know.
So interested to know what your experiencewas like and what kind of news or
stories were you covering at the time?
Excellent research, Joe.
(37:05):
First off, I'll say that, I've onlyworked for three organizations, since
graduating college many years ago.
The Associated Press, Mellon Bank,which is now part of Bank of New York,
and, now S& P for the last 21 years,all three organizations were founded
somewhere between 1860 and 1880.
(37:27):
So I admire, what this will tellyou is I'm, a, long way off from
Ryan's entrepreneurial spirit.
I like stability.
I like organizations that have beenaround for a long time and will be
around for a long time, to come.
But no, that was an exciting and,wonderful learning experience those years
(37:48):
as a reporter for the Associated Press.
I spent the first fewyears covering sports.
Which was a dream job.
it was, crazy hours working nightsand weekends, which was also kind
of a dream because, way back whenI was concerned about, Working,
normal hours or more specificallygetting up early in the morning.
(38:09):
I'm very, different now.
I'm an early riser, but, I coveredsports for a number of years and then I
covered business news, financial news.
And I really credit that for being thepart of the transition to what I do today.
I got to cover a lot of, stock marketstories, wall street stories, big mergers
at the time, but we're talking a whileback, we're talking about the 1990s.
(38:29):
And I remember two stories inparticular, they were, there were shorter
stories, but one was about Frito, Layentering China for the first time.
and the other one was about, thefirst Russian company listing
on the New York stock exchange.
So this is a very different time, right?
Because this is sort of like thedawn of, Or not the dawn, but sort
(38:51):
of the acceleration of globalization.
And, and now we're, we have a differentcontext where now, there's some
evidence that's, being re rethought.
But, the, I remember the firstparagraph of the Frito Lay story.
They, were launching Cheetos in China,but they had very different flavors.
It was like, cuttlefishand prawns or something.
(39:14):
So the first paragraph was aCheeto isn't a Cheeto in China.
so I remember that one.
It was a short, succinct headline.
And then the Russian, stock marketstories about a Russian wireless
company and, and it doubled on theIPO or something like that did a very
successful IPO and the lead was, thelead paragraph was, even the Russians
(39:34):
couldn't bring a bear to wall street.
So we had a little bit offun with those, stories.
you can grow it all you want.
But, it was a greattraining ground by the way.
and I, and it really resonates withRyan's comments about media and
communication and nouns and verbs.
This is, this has applications, no matterwhat you're doing, it's more applicable
(39:54):
to credit ratings than you might think,because being able to communicate your
opinions is really vital to what we do.
And doing so clearly andsuccinctly is really critical.
Great.
Thanks Greg.
Ryan.
What opinion or view on realestate do you have that few
others would agree with you on?
Oh, I mean, topically, right now, Ithink people are assuming that given
(40:21):
the National Association of Realtorscommission lawsuit settlement, that
buying a home is going to get lessexpensive, and that real estate agents are
going to become more and more obsolete.
that is what most people think.
Everyone has been forwardingme all the articles.
(40:41):
I am obviously biased, but Ialso remember, having to sell
real estate door to door.
And when the internet really tookover on real estate and websites
like StreetEasy, Zillow, etc.
came about, everyone said the same thing.
Salespeople are gone, real estateis now going to be less expensive
(41:02):
because you're going to have thedemocratization of information, people
can see comparable sales now, youpesky salespeople aren't going to
be able to drive up pricing anymore.
and that didn't happen either, right?
The same way, you know, certainfinancial websites didn't, take
down certain investment banks.
The banks only got stronger.
(41:23):
And so I am, very much of the mind that,there will be greater transparency.
now with fees and commissions the waywe've always operated with, you know, our,
firm and in New York City, which is very,different from the rest of the country.
(41:44):
Commissions were always transparent.
They had to be.
but now I think nationally, I thinkthe old guard, which is the National
Association of Realtors and these bigbots brokerages, are in for either a
world of change or a world of hurt.
It's I think the rules are changing.
I think there are new rulesand I think what we're going to
(42:04):
experience now is an evolution.
just like I was talking about with AIand the farmers and the tractors, right?
they didn't throw out the tractors,they just created different farms
and a different way to farm.
and so I don't think that what we'regoing to experience now is going
to get rid of real estate agents.
I think it's going to separatethe agents from the brokerages
(42:28):
who are not open to change.
Because what got youhere won't get you there.
I think old rules pave way for new rules.
And I think that as interest ratesstabilize or continue to come down,
pricing is only going to go up andconsumers are still going to want great
representation, buy side or sell side,because you don't know what's real
(42:48):
anymore when you log in, you know, online.
So that's, I think aunique opinion of my own.
I'll confess Ryan that I thought thatuntil about seven and a half minutes ago
when you started talking about It's alittle more complicated that commissions
actually may go up in some cases.
So listen, So, and, then I know weall have to jump here, but, you know,
(43:12):
in New York City and in most of theUnited States, total compensation for
real estate agents, because there'stypically two agents on the deal, sell
side and buy side, is between 5 and 6%.
It's the way it's always been.
Very rare is it much lower than that.
Very rare is it much,much higher than that.
And I see a lot of, Oh, well, thisis the highest commissions ever.
(43:34):
The rest of the world is this.
The rest of the world is that.
Well, I've been around the rest ofthe world and I've sold property
around the rest of the world.
And what I'll tell youis that is not true.
You have markets where you have salariedsalespeople who are not incentivized
to get the highest price for theirseller or to get the best deal for their
buyer because there is no incentive.
and so what ends up happening is, alot trades off market, which is not
(43:59):
in the best interest of the consumer.
And then you have other markets.
Where you have a mixture ofon and off market property.
And so you could work with an agent andthey'll tell you, Hey, so I have a fixed
fee for anything that's on market, butanything you're going to want to buy
is actually off market and my fees 10%.
So I don't know what everyone thinkswe're going, to, but if going back to the
(44:25):
wild, west is what everybody else wanted.
And what they wanted to bring aboutthrough through these lawsuits that
I'm in, I don't know what to say.
Okay, great.
lastly, just before we go, Ryan,do you want to share any kind of
upcoming projects, goals, ambitions?
(44:46):
That you're looking to do eitherkind of this year or next year.
I'm incredibly excited for SirhantSimple, as we continue to roll it out
to our agents right now, it is justwithin Sirhant at our own brokerage.
because it is a, it's, you know,what makes it so exciting is
that it's a full stack platform.
(45:07):
So, you know, we have agents whouse it, who never want to touch
email again, they don't have to now.
We have agents who use it, who justwant to create marketing plans.
For a year and you know, they don'thave to do that anywhere else, you know?
So I, I'm really excited to see thattake off and, continue to improving the
lives, while also saving significantamounts of time for our sales people.
(45:30):
Perfect.
Well, thank you so much to Ryan.
Thank you to Greg for your time today,for everyone watching and listening.
See you next time in Fixed Income in 15.
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