February 12, 2024 • 47 mins
In this thought-provoking episode, we sit down with Atif Qadir, a luminary in the fields of real estate and urban planning, to explore the intricate dance between development, technology, and the socio-political landscape shaping our cities. Atif offers invaluable advice for those looking to transition from corporate roles to real estate development, emphasizing market knowledge, specialization, and capital access. We also explore the philosophical impacts of consumerism on city planning, the evolving landscape of office spaces, and how global politics intertwine with local real estate markets. This episode is a must-listen for anyone intrigued by the nexus of development, technology, and urban innovation.
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Episode Transcript
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Atif Qadir (00:00):
I think the question that is fundamentally at the
core of American democracy isthe tension between individual
choice and community, or largerpriority in the longer term, the
short term versus the longerterm.
Colter DeVries (00:18):
I'm Colter DeVries, owner of Ranch Investor
Advisory and Brokerage Services.
As a former commercial nagbanker, my main reason for doing
this podcast is to simply gaugethe market's appetite for
crowdsourcing investment in aRanch real estate fund.
Ad (00:33):
The Ranch Investor podcast, curated by subject matter
experts to give you immensebenefit, because we believe your
time is valuable.
Colter DeVries (00:43):
Atif Kadeer, is that correct?
Atif Qadir (00:47):
So it's long a short line.
So Atif Kader.
Colter DeVries (00:54):
Atif Kader okay.
Atif Qadir (00:56):
I was backwards.
Colter DeVries (00:57):
I was backwards on how long you hold those
vowels Exactly.
Atif Qadir (01:02):
Got it.
Colter DeVries (01:04):
So you are an architect, developer, an
entrepreneur, you have your ownpodcast, your guest speaker I
think I see you coming up on aGoldman Sachs series pretty soon
and so you're just a generalleader in real estate and it's a
pleasure to have you on.
Thank you.
Atif Qadir (01:25):
I appreciate you taking the time and extending
the invitation.
Colter DeVries (01:28):
Now a little bit more about you.
I'm giving your introductionhere.
You founded Commonplace, aFinTech company, a development
company focused on therenovation of historic real
estate in New Jersey, and you'realso, as I mentioned, the host
of a top ranked podcast calledAmerican Building, where you use
(01:53):
that platform as a channel todiscuss topics that you're
passionate about, especially inhousing and impact, and I want
to get into that a little more.
As we see ranches, rural farms,communities on the outside of
cities becoming developed, Imean that's a never ending
occurrence right Is an expansionof these cities into the rural
(02:20):
parts.
So you also serve on thePlanning Commission in Hoboken,
where you live, where you live.
You live there in Hoboken andyou're on the advisory council
of Provident Bank.
Now tell me about your theseschools.
You've been to Columbia andHudson.
(02:41):
You graduated from Columbia.
Atif Qadir (02:45):
Yeah, so I went to Columbia University for my MBA
and my undergrad in architectureand urban planning from MIT.
Colter DeVries (02:54):
Perfect, you're the guy I wanted to talk to you
about.
When is this?
What we see in the West iscontinual expansion of the
cities on prime farmland, and Idon't know about back East what
you'd consider prime farmland orthe phenomena of these
(03:21):
megalopolises that you live inthat are never ending.
They just keep growing andgrowing.
But out here people drivearound the countryside and they
see corn in your low lying.
Here in the arid West they seecorn fields in the irrigated
valleys where you have superiorwater rights.
Of course that's good forhumans, right, and you have good
(03:44):
groundwater.
So municipalities don't have tobring out city services to the
county areas where you cansubdivide into 20 acres, even
one third acre tracks and drilla well 80 feet or less to have
good quality water.
People say, well, dang it.
(04:04):
That's the best farm groundthat should be used for food
production.
And why can't we develop up onthe sandy hills, up in the
bluffs and the trees and thesage brush?
And maybe you can give us youropinion on that?
Answer that question for me,because I mean, I'm a firm
believer in capitalism that thisis a short term phenomena.
(04:27):
Maybe in the long term the costbenefit is there, that barley
is more valuable than basements.
That's the trade off out hereis barley versus basements.
Atif Qadir (04:39):
Yeah, I think it probably comes down to what a
particular area is best suitedto do and, I think, the
competing priorities, both on alocal scale and on a national
scale.
So I think let's talk about thefirst one.
I think when we look at areasacross the United States, in
(05:01):
urbanized states like New Jerseyversus rural states, I think
the two issues that wereprobably are the ones that are
feeding into that question.
Excellent question you broughtup is what type?
of land and where that land isand what it's suited to do, and
then what the particular localpriorities are versus national
(05:21):
priorities and how they maynecessarily compete or contrast
with each other.
So I think the first one whenyou have an urbanized state like
New Jersey, one of the highestand best uses are things that
serve the urbanized areas in andaround New York City.
So that means multifamily andindustrial logistics in order to
(05:43):
serve the demand of the peoplethat live the 8.8 million people
that live in New York City andthe 25 million that live around
it.
So, in those cases it's prettyhard for us to make a case that
Barley makes more sense thanBasements because the median
home price is so high in thisparticular area.
So I can give you one examplethat the median home price in
(06:07):
Hoboken, which is considered asecondary city next to New York
City, is about three quarters ofa million dollars.
That's the median home.
So the rationale there is itprobably makes more sense to go
that way.
I think in a place like Montana, because of the value of
agricultural production and theefficiency of it on a large
(06:31):
scale, you may be hard pressedto make the case that a.
Basement's more valuable thanBarley, so I would probably say
a square foot of agriculturalland is probably more valuable
than residential, namely thatbecause the cost of construction
in a state like Montana is afraction of that of New Jersey,
because of different labor lawsand the availability of labor is
(06:52):
different and the expectationsin terms of quality or materials
that are used are different aswell.
So I think it probably has to dowith what a particular area is
better suited to, and I thinkwhen you look at local
priorities versus nationalpriorities, there may be things
that are competing against eachother, like the desire to want
(07:13):
to preserve open land for thepleasure or the care of future
generations versus the necessityfor two very important things.
One is having natural resourcesecurity for the United States
and being a net exporter of foodand that exporter of petroleum
products, as opposed to netimporter of both of those I
(07:35):
think is really important.
And I think the other one wouldbe the fact that we have a
national storage of housingunits and it's the necessity of
actually growing housing unitsacross the United States.
So I think that there's a bunchof things that probably play
into the question you asked, butI think the second thing that
(07:56):
will bring up is that competingpriorities of local versus
national.
So that's the way I look at itfrom an economic or policy
perspective.
Colter DeVries (08:04):
The old guns versus butter trade off.
Well, this, this is maybe moreof a philosophical question, but
I brought you on so here youmight have a lot about it, is it
?
Do you look at this just fromthe economic or maybe policy
(08:24):
sense, just completelyobjectively, or is there?
Is there subjectivity in it?
And is it okay to be subjectivewhen thinking about guns versus
butter?
Because where I'm going withthis is we have a lot of people
who would say why are wedeveloping so many Amazon
(08:49):
distribution centers on top ofhighly valuable farmland?
Can't we bigger question?
Can't we just be less of aconsumerist society?
Is this really the direction wewant to go?
Is this a good thing to haveindustrial centers that
eventually become gray and brownzones?
And then then you haveimpoverished neighborhoods that,
(09:13):
like the outside of Detroit,detroit has more vacant homes at
one time it did.
Then the city I live in hashomes and is, and that was due
to I mean partially due to thesubsidies of auto manufacturers,
all those jobs created over themany decades of Ford, chrysler,
(09:34):
gm, and that was driven byconsumers wanting cars.
And here's a philosophicalquestion and I don't want to
throw too many out there, notsaying I agree with this one.
But do we need cars?
Do we just get to publictransportation?
I mean, is the underlyingproblem philosophical?
(09:54):
Here Is the direction we'regoing, the right direction.
Atif Qadir (09:59):
I think the question that is fundamentally at the
core of American democracy isthe tension between individual
choice and community, or largerpriority in the longer term, the
short term versus the longerterm, and I think that, from a
(10:19):
pure loss of their perspective,the ideas that any American
should be able to make anindividual choice that they deem
to be the most beneficial tothem.
In the particular example thatyou brought of retail and
consumer goods, I think there isa dangerous compromise to be
made for price versus thefragility of supply chain, and I
(10:45):
think that when you optimizefor price, you end up having a
consolidation of choice aroundways and means of getting you
products that's the fastest andthe cheapest and not necessarily
the one of the most durablethat are able to sustain shocks
(11:08):
to a particular productionprocess, the best example being
face masks during the pandemic.
So I think I tend to be, perhapsmore broadly from real estate
protectionist from aphilosophical perspective that.
I think that those shorter termindividual decisions for
(11:33):
individual Americans is not asimportant as the national
security for our own supplychain and production.
So I think that I would imaginethe difficulty comes in is that
if we have a desire to have awider variety of retailers and
more American production thanthe case for Amazon becomes more
(11:54):
tenuous than it does right now.
But, how do you actually changethe behavior of individuals in a
democratic capitalist society?
It's through taxation.
That's the only way to do it,because you can't force people
to do things otherwise.
So, I could imagine thatperhaps there are increased
taxation on particular types ofbehaviors or retailers that are
(12:18):
necessarily conducive to thosefederal parties.
And that's going down a veryslippery slope of the heavy
handed nature of big government.
But that's probably myperspective on your very good
question.
Colter DeVries (12:30):
So wouldn't taxation be the whip, and
doesn't the carrot work better?
Atif Qadir (12:38):
I actually personally think that the whip
is more effective than thecarrot.
Colter DeVries (12:45):
Just rain them in, just heavy handed on them,
just hammer them down, they willcomply.
Atif Qadir (12:52):
I mean the thought process is the example of
economic development incentives.
Ad (12:57):
That's the carrot.
Atif Qadir (12:59):
It assumes that people will behave in ways that
are good for society.
So let's take a long-termhousing tax credit, for example
that by offering an economicdevelopment incentive, it will
induce developers to be able toproduce more units of affordable
housing.
And there's many versions ofthese carrots that exist in the
(13:20):
world of economic development,incentives for real estate.
Generally speaking, the processto actually execute on those
carrots eventually results inthat carrot might have started
like this, but the actual sizeof the carrots is small when
it's delivered.
because of all the frictionalloss in the process, taxation
(13:41):
tends to be, I think, a smootherprocess than economic
development incentives, becausethere's a particular means by
which you can account for that,whether that's a property value
or that's an income that someonereports on their income taxes.
So I think from thatperspective I would say that
(14:01):
taxation, or the width, is moreefficient means of delivering
changing behavior than a carrotis.
Colter DeVries (14:15):
That never seems to work for cigarettes, though,
don't.
People just want what they want, and if I want to build a house
on five acres rather than farmthat five acres, if it's in the
right location, has the rightview, has the right amenities,
(14:37):
I'm gonna build that house Maybenot me, but someone else more
wealthy than me who can affordthat tax will.
Atif Qadir (14:44):
Yeah, I think that that's exactly the option that's
available, but the persons orand the persons desire to want
to do so, has to be so strongthat they get over that hurdle
of the taxation to want to do it.
I mean an equivalent one forGreater New York City that's
been talked about for a while iscongestion pricing.
To say that New York City hassuch insane traffic it's not
(15:06):
sustainable for business, it'snot sustainable for tourists,
for the local economy.
So, essentially, do congestionpricing to say that use my
desire to drive into Manhattanduring rush hour able to get me
over $50, $60, $70 to drive intoManhattan?
In that case you're essentiallyusing that version of the whip
(15:30):
in order to clear the market ofthe people for whom they don't
have enough desire to want to dothat.
Colter DeVries (15:36):
I've heard about that.
I've heard about the fee thatthey would use to decongest New
York City the flat rate fee.
Wouldn't that just get passedon to consumers though?
So you're Airbnb or not Airbnb,your Uber price would go up.
Isn't that just what wouldhappen?
Atif Qadir (15:54):
Yeah, those types of taxes are often considered
taxes on the poor because theidea, if it's a flat tax, $50
for someone that is consideredwealthy is rather marginal
versus $50 for someone who isworking class and, generally
speaking, people that areworking class are the ones that
(16:17):
are in the outer boroughs withpoor public transit and need a
car as a means of getting totheir employment within the city
.
So I think that, from thatperspective, those costs are
passed on to the end user andthey're often done unfairly or
inequitably, but I think thatthere are means by which that
(16:40):
can be adjusted, to say thatperhaps below a certain income
threshold you have a far lowerincome tax rate.
So that's essentially agraduated income tax rate that
compensates for congestionpricing that you might pay on a
temporal basis, David.
Colter DeVries (17:00):
How does all this relate to problems that
you're focused on, solutionsthat you are trying to provide?
What are you working on and howdoes all this relate?
Yeah?
Atif Qadir (17:11):
I'd say that being cognizant of public policy in
general is important for anyonethat is within the real estate
industry, and then, morespecifically, what I'm working
on is basically selling my realestate portfolio because we're
at the top of the market in NewJersey.
So I'm selling my multifamilyportfolio both on the market
(17:35):
rate side as well as theworkforce housing side, and I'm
actually in the process ofselling my technology company as
well.
So it's a kind of a funny timeto be in sell mode as opposed to
buy or build mode right now.
But I'm curious from yourperspective of what you see in
terms of land acquisition, landbanking versus actual
(17:56):
development of agricultural landin.
Montana.
Colter DeVries (18:00):
Which is kind of what we've been talking about.
There is more value inassemblage that if you buy two
ranches next to each other, thesum of the parts is worth more
than the individual partsseparately.
So that gets into ruralsubdivision and you talked about
(18:20):
.
There might be a need forhousing across the United States
at whatever income level orprice point.
So there's this belief that,well, rural subdivisions,
there's demand.
We're gonna see more ruralsubdivisions, 20 acre homes.
We're not seeing that though.
(18:41):
We're seeing branches actuallyget bigger and big ranches sell
for a premium and medium sizedranches, small ranches, aren't
getting chopped up andsubdivided.
So this is almost counter toour conversation and it's
counter to what happened in 2006.
Yeah, rural subdivision took offin the West.
(19:04):
It just boomed, and there'sbeen times and locations where
people come in and they willchop up one section of 640, but
the absorption rate always seemsto be very slow.
They don't get their quick flip, they don't get their huge
(19:24):
profit within five years likethey intended.
Selling those lots usuallyproves to be more difficult than
they anticipated.
So that absorption rate is veryslow.
That could change.
I mean, real estate tastes andpreferences are always changing
and price points, maybe interestrate driven.
(19:44):
There might be someone whosupplies that product per se,
that rural lot out in thecountry, but we're just not
seeing that.
Atif Qadir (19:55):
So my thought is I'll give you the example within
.
Metro New York City, and I havea feeling there might be
something similar with you inMontana, so in New York City, in
New York City, that the abilityto assemble land for
multifamily development and say,like starter home developments,
(20:16):
really important, particularlyin the 95 corridor, which is the
main highway that goes throughNew Jersey.
So companies like Toll Brothers,for example, over large amounts
of time, assemble largesections of land in order to
make several hundred homes.
Because of the efficiencies ofscale In that, my thought is
(20:36):
that what is driving theassemblage of agricultural land
is the desire for industrialscale farming that is more
efficient than family scalefarming.
On a dollar made per expenseperspective, is that the main
driver of why assemblages areworth more per square foot than,
(20:57):
say, smaller lots?
Colter DeVries (20:59):
Yes for farming, absolutely when it comes to
that input, intensive operatingassets, intensive farming, your
equipment is more than ranching.
So yes, that operating ateconomies of scale does
correlate to a premium in landvalue.
(21:19):
With ranches that are cowboysand cattle driven, it's likely
more there is operatingefficiencies at scale, but it's
likely more driven few thingsview shed, so what some might
call a public good open space,that view shed has value and if
(21:44):
you were to chop that up into 20acre lots you lose that value
of the view shed.
So today's buyers are putting abigger portion of that on view
shed value.
There's also the issue of justcontrol.
(22:05):
Being kind of a land barren isthe feelings behind owning more
comes with more reward.
It must come with more rewardbecause people are willing to
pay more for that.
Now, how about your portfolio?
Is assemblage the same?
Can you separate units and sellthem at an eight cap versus
(22:29):
assembling a whole bunch into adiversified portfolio and
selling it at a six cap?
How does that work?
Atif Qadir (22:36):
Yeah, so to be.
I do urban infill development,so that tends to be ones where
there's like a older buildingfor the areas that I work in
that's between the 1800s andthen I will do a gut renovation
of the building and then redoall the mechanical, actual
plumbing, update the finishes,keep architectural details and
(22:59):
then either sell them as condosor rent them out as rental units
.
So for that strategy,assemblage generally doesn't
particularly work because thisis more of like a surgical
strike within an urban area, Iwould say.
From that perspective, thechallenge right now is the cost
(23:20):
of acquisition is still very,very high, which makes being a
buyer not lucrative but being aseller incredibly lucrative.
Colter DeVries (23:30):
What do you see for sellers?
I mean with institutional ownedfarmland, so now we're talking
about farmland of scale and ofgood quality they are reluctant,
hesitant and unwilling to sellwhat they have because they
can't replace that.
And a lot of ranchers I meanthere's many, I don't want to
(23:52):
say most or a lot, but there aremany ranchers who do not want
to sell today because they can'treplace that.
What are you seeing for thattype of you know that human
behavior in your areas?
Is it much the same?
Atif Qadir (24:09):
I think the desire to hold on to real estate is
something that is veryintrinsically human and it's
probably also specifically veryAmerican this idea of real
estate being the greatestgenerator of generational wealth
.
So I think that's probablysomething that's common no
matter what corner of the UnitedStates that you're in.
(24:29):
But I think the biggestchallenge is going to be folks
that have homes with mortgagesthat are coming due,
particularly because the normalcycle is five year resets, 10
year resets, 15 years and thosetimeframes were all ones with
(24:50):
historically low interest rates,and now, at seven and a half,
it's going to make it difficultfor people that are wishing
to hold on to their homes buthave to refinance that loan
because it's come due to be ableto actually do that.
So I think, from a residentialperspective, we're probably
looking at next five years ofmore absorption by institutional
(25:14):
investors of single familyhomes, as has been happening
since the beginning of thepandemic, and I think we're
probably also looking at thebeginning of a financing crisis
on the commercial real estateside, because there's about $2
trillion of debt commercial realestate debt coming due by the
end of next year.
So largely that's office, but alot of that's also luxury and I
(25:38):
am multifamily too.
That made sense when cap rateswere extremely low and interest
rates were extremely low, butdon't make sense when those that
economic environment, alongwith this.
Colter DeVries (25:52):
Yeah, that means there's like a convergence
right now of borrowing at 6% 7%and then your cap rates at 6% 7%
.
I mean, what is that?
What is that?
It's a push.
What is that?
Is that just saying people aredeferring to the future, like,
hey, we'll just hang out, seewhat happens in the future, just
(26:13):
buy at our time?
Atif Qadir (26:15):
Yeah, I think there's definitely people that
run the acquisition side thatmay not have the ability to
underwrite overmulti-generations and for whom
the cost of capital is animportant consideration that
would be small to mid-sizedprivate equity.
I think that those players aregoing to be playing golf over
(26:37):
the next couple of years, ormaybe like coming out or going
out west and pretending to becowboys for a few years, or
coming back to New York City tostart buying again, but I think
that the types of buyers thatare going to do very well in
this very volatile environmentare probably two types in
particular, I thinkmulti-generation, local to
(26:59):
regional family offices for whomthey are likely managing the
assets themselves about a thirdparty and don't necessarily have
the concerns of short-termhighs of interest rates because
they're underwriting for theirgrandchildren and their great
grandchildren.
So the ability to acquire anasset in a prime market like
(27:20):
Hoboken at a 5.5 cap, even ifthey're borrowing at a 6 cap,
doesn't particularly matter,because they realize that in 3,
4, or 5 years.
They can refinance that back,probably at a 3.5 or a 4.
So for them I think that thosetypes of buyers small to
mid-sized family offices,multi-generation are going to do
very well in this purchasingenvironment.
(27:42):
And the other one are corporatebuyers that have extremely low
cost of capital because they usetheir own balance sheet to buy.
So, companies like Avalon Bay,for example, I think are going
into extreme land banking modeover the next couple of years.
May not necessarily be buildingbecause of the continuing high
(28:02):
cost of construction, because ofsupply chain and tariff issues
with China, but I think thatthey are likely going to be
buying in land banking.
Colter DeVries (28:13):
So I think that's very correlated to farms
and ranches.
And if I can summarize what Iheard is if you're a buyer today
, you are well-capitalized, youhave a very long-term outlook
where the holding costs are notgoing to affect you.
They're not going to affectyour daily operations, your net
(28:33):
worth, your credit collateral.
You're good with the holdingcosts for a very long time.
So that weeds outentrepreneurial, opportunistic
type buyers.
Atif Qadir (28:49):
it sounds like yeah, well, I mean on its surface,
yes, but then the question is,what is the lever that's
available?
And I think one is do you haveaccess, if not to extremely low
cost of capital?
Do you have access to low costof construction?
(29:09):
And the way that comes in isare you a developer that does
in-house construction?
There you go.
That's one lever to be able touse.
Do you have family landholdings that you had just owned
for a long time and now you canactually develop them such that
your cost of acquisition isextremely low?
Okay, that's one other leverthat you'd be able to pull.
(29:31):
Or do you have the ability torelease these units, perhaps to
a university for student housing, because student housing demand
is still very strong, becauseuniversities are definitely
still expanding.
So I think, if you're able totake the risk on an income
(29:53):
perspective off the table,that's a lever you're able to
pull, and I think someone thatis entrepreneurial is probably
going to imagine what they cando in a high cost of capital
environment around any of thoseoptions or other ones.
Colter DeVries (30:06):
Now you yourself .
You said you were selling yourportfolio, so you're shorting
the market.
You're not the near term.
You don't have a lot of beliefin the near term.
Right now is the time to shortthe market, correct.
Atif Qadir (30:22):
I think the levers that I'm able to pull.
Typically it's been low cost ofacquisition.
So that comes through deeprelationships in the markets
that I work in and therecognition amongst the brokers
that I work with of the highlikelihood to close.
So generally speaking thatgives me purchasing power and I
(30:45):
like to buy all the moneyafterwards.
So in those situations my leveris very dominantly the cost of
acquisition and perhapssecondarily because on a
licensed architect the cost ofthe design and construction
portion of it can be optimizedbecause I have a sense of
foresight as to how somethingcan be used that tends to save
(31:07):
time and effort from a designand construction perspective.
But I don't necessarily haveconfidence in those two levers
in this market.
I think that the cost ofcapital so far outweighs any
advantages that I have in thosetwo areas that more likely, a
better use of my time is to playgolf or pretend to be a cowboy
for a few years and come back.
Colter DeVries (31:28):
You're welcome.
You're very welcome to come outand play cowboy and bring
billionaire New Yorkers with you.
You brought up anotherparticipant on the buy side.
We still, even though withrecord low inventory and we've
got these high interest rates,we still see strong demand in
(31:51):
farm and ranch closings everyday going under contingency
contract.
Every day Things are happeningand maybe it's people who think
they have a competitiveadvantage because that would
also be, as you mentioned,someone who's got some of the
other skill sets to optimize advalue.
(32:11):
Is that the only play right now?
Is that value ad?
Is core real estate a bad idea?
Atif Qadir (32:22):
Going back to, say, east Coast urbanized markets.
If you want to be active, Ithink the way to do it is go to
the sectors of the market whichare the least risky.
I think in that perspective,when I'm looking at asset or
(32:45):
geography, it's going to be ringurban, because I think that
urban itself has a lot of issues, particularly with things like
crime and taxation and outflowof populations.
I would much rather make a beton Princeton, new Jersey, than
on New York City, for example.
I think the optimizing aroundthe geography is really
(33:06):
important.
I think being able to pick theasset class that makes sense in
that particular time and thatgeography In this case it would
be from Metro New York City,it's single family and highly
monetized multifamily it'sprobably the areas that I would
go into and I would likely lean,from a class perspective, into
(33:28):
affordable and workforce asopposed to luxury, because I'd
rather be in a situation where,if I'm delivering a unit, there
are 100 people that can rentthat or 100 people that can buy
it than one.
I think that being able tooptimize towards that
perspective is really important.
Then, if I have the choicesbetween new construction, heavy
(33:50):
redevelopment or renovation, Iwould pick the least risky of
that, which would be renovation.
If someone were to try to be, Ithink, astute and make a buck
in this market in Metro New YorkCity, I would probably focus on
light value.
Add single family homes andtownhouses in that range of 30
(34:13):
minutes to one hour drive fromNew York City and see what
neighborhoods and what townsmight be next to very wealthy
areas, are in good schooldistricts but are dominantly
working class right now, but youcan see the movement towards
middle class in those areas.
That strategy is probably likeshooting fish in a barrel, but
(34:37):
if you're able to come up with astrat like a platform to do
that, because you have brokenrelationships or there's other
ways you're able to procure allof these assets in a diffuse way
but then operationalize them ona platform perspective, that
sounds like a winner to me for ahigh-cost, high-taxation market
like New York, new Jersey.
Colter DeVries (34:59):
I can relate that to Farm and Ranch.
We talked about creating aproduct that has the most broad
general appeal.
For me that's like okay, let'sstart within an hour of Bozeman,
montana, or Bend, oregon, anhour within Cordelaine, idaho,
places like that.
Start there.
(35:20):
Then you're thinking okay, whatprice point.
We watched the bread and buttergo from $2 million pre-COVID.
Lots of people could get intothat $2 million ranch.
That's now up around $3, $3.5,even with the increased interest
rates, bread and butter isstill around that $3.5.
(35:42):
Then, don't over-customize,don't over-build.
Do some value add, but don't dotoo much.
I can relate Farm and Ranch tothat play in New York City.
You got into my next question.
Actually, when you're looking,you're going to sit on the
(36:05):
sidelines for a while and I wantto hear how long you're
forecasting to sit on thesidelines after you short the
market.
I also want to know, in yournext consideration, how do you
rank these risks in your ownmind of cap rate?
Do you want to go?
Interest rate, political,geopolitical crime, average
(36:28):
incomes, us incomes?
What are these risks in yourmind and how are you waiting
them?
Yeah, I think for when?
Atif Qadir (36:39):
when an investor, like a developer like me, is
very hyper specific in terms ofgeography, it allows me to Kind
of be like an ostrich with thehead.
This and when it comes togeopolitical or macroeconomic
risk, because those things don'tparticularly impact me in any
particular way.
So I would say the social,cultural, political issues are
(37:03):
Probably a very littleconsequence.
I think a lot of it has to dowith the operational risk.
So the ability to acquire, theability to effectively and
quickly Renovate and the abilityto lease up or sell.
That is the the backbone andthat, I think, is the for For
conversation.
When you're hyper specific interms of your geography, I think
(37:23):
that if you attempt to be adeveloper that's agnostic to
Geography and it's open so allacross the Sunbelt, for example,
a mid-sized developer I thinkthose types of folks are gonna
be much more hard-pressed, sothey're gonna have a lot of
risks to be able to weigh Acrossthese larger regions as they're
making decisions as to wherethey're out where they're out in
capital.
(37:44):
So I think I can ignore most ofthe ones that you're talking
about.
Colter DeVries (37:46):
For that reason, Okay, much more, much more
at-home, hands-on, tangiblewhat's within my own control.
Atif Qadir (37:55):
Exactly because I mean think about it.
The state of New Jersey.
He is one to eight millionpeople.
The city of New York City iseight million people.
That means there's 16 millionpeople between the city and New
Jersey that need homes.
That's more than enough for onedeveloper to do so.
Always kind of give side eye topeople.
Let's say that they're agnosticto geography.
They'll do deals everywhere.
They're good.
(38:16):
I mean that basically just needto have.
Colter DeVries (38:21):
So is that?
Is that a in your experience?
Is that you're?
One of your recommendations isstart by defining your strategy.
Write it out vision, values,mission, what is your, what is
your core Beliefs and and howare you going to?
What is your competitiveadvantage or comparative
(38:41):
advantage?
Is that a good place to start?
Atif Qadir (38:44):
completely.
I mean the same way that culture, when you did your 2024 vision
board and Maybe on your visionboard you want to have a really
cute puppy for your kid.
That's a new vision board get apuppy.
I think the same way to thinkabout what is it that you are
looking to focus on this yearand why is it that you're
looking to do it?
I think absolutely from aprofessional perspective.
I think the really great pointthat you bring up is probably
(39:06):
very particularly applicable toyour listeners that might be
interested in leaving theircorporate job and becoming a
developer, or Maybe they workfor a corporation and want to go
out on their own.
I think from that perspective,there's probably three things
that are really, reallyimportant.
One of them is to choose ageography that you want to be
(39:28):
the king or the queen of andjust know everything about it
know the price per square foot.
No, who owns what?
know, what public policy issueis going to affect your land
value?
What's going on the taxassessor's office with property
taxes?
All of that stuff, I think, isthe core, foundational element.
I think the second one is tomake sure that you're really
(39:50):
really good at one particularpart of the development process.
Then you know enough abouteverything else that you're
dangerous.
I think that's really important.
And I think the third one wouldbe having access to mine.
So if you don't have access tocapital Of scale of size to do
this, just keep doing.
(40:11):
Keep doing your W2, becauseit's gonna be more headache than
this work.
Colter DeVries (40:16):
Well, that, that was a great summary.
I do want to get your crystalball though, your vision of the
future.
When is it time for you to getback in?
How long are you gonna?
How long are you gonna bewaiting for?
So you think the environment'sright that it's come together.
Atif Qadir (40:33):
Given your strategy, I think the there's a couple
things that play.
One is that, more specificallyfor me, I have the benefit of
Having both experience andactive deals and development
perspective, as well as atechnology company perspective.
(40:54):
So I think that the rule oftechnology, particularly around
the buzzword of artificialintelligence on how data is,
used and and and Allowsdevelopers to make smarter
acquisition decisions.
I think companies in and aroundthat data perspective.
That sounds like an area thatI'm very interested in over the
(41:16):
next.
Year or two, particularly as I'min the process of selling my
technology business, I mighteventually land that the buyer
of the business might justacquire me and that might be a
cool thing to do for a coupleyears.
I think from a, but I thinkmore specifically, you're asking
around development, and I thinkfrom that perspective.
(41:37):
There's usually the marker as topresidential elections, and I
think that In this case,depending on which party takes
the White House, there'sprobably going to be a slightly
different trajectory of what.
What will be happening in termsof housing, which is the core
of the real estate industry, butalso in terms of the the zombie
(42:02):
apocalypse of office buildings,which is important for, like
for Old industrialized EastCoast cities, because if there
isn't a good solution for that,I think that actually creates an
incredible opportunity arounddevelopers that are well
capitalized to acquire office onthe chief and Work through the
(42:23):
process of conversion toresidential so I think, that
being able to get smart aroundAnything related to that process
of conversion of uses, which isa very complex thing from a
design perspective, constructionperspective, insurance
perspective, like fire safetyperspective- all of those it's a
complex thing, but gettingsmarter on that is probably
(42:45):
where opportunity lies In, Ithink, the real estate industry,
the next place.
Colter DeVries (42:50):
Absolutely.
And as we think aboutopportunity, what was it, warren
Buffett, who said wait untilthere's blood in the streets?
And I have many friends, peers,contacts, who are Side-lined
waiting for blood in the streets.
But I'm not.
I don't believe there would bethat in farm and ranch.
I think farm and ranch is toostable and the underlying
(43:13):
fundamentals are Not indicatingblood in the streets.
I'm I'm little indifferent.
Split on residential, that's ahard one, because I do want to
be buying another house verysoon.
So residential to me seems IWant, I almost want there to be
(43:33):
blood in the street because I ama buyer.
You know I'm I'm short on themarket right now.
I'm short a house, but I thinkit's gonna come in the form of
that, not commercial, but aoffice space.
In those, those areas wherethey have Hundreds of thousands
of square feet of vacant officespace and it has been that way
(43:53):
for a couple years now, youcan't come to Manhattan exactly.
That's probably where theopportunity lies ahead of us.
Atif Qadir (44:03):
I'm really, and I think the the honest surface,
the idea that once where a footof one space can be converted to
another is so alluring, but Ithink that being able to take
the time to Identify theopportunities and very
(44:25):
surgically go after them.
They're very certain types ofoffices that can convert
effectively.
Those are ones with Enoughlight and air on the perimeter
of the building, relativelysmaller size Footprints of these
are buildings that typicallywere built before the 1970s.
Those are the ones that canconvert most easily to
(44:46):
Residential.
I think the short term strategyis to be able to do something
like that, but I think I'm onebig term strategy is lobbying
public officials to be able toInitiating, deploy more tax
credits for the conversion ofoffice to residential or to ease
Building code requirementsaround light and air and egress
(45:10):
that allow for the more easierconversion of those.
So those feel like the placesthat I would be focusing my
attention if one chooses to beable to go down that path of
Office to Resid conversion.
Colter DeVries (45:26):
Well, thank you for the crystal ball, that's.
I like to get people's forecast.
What they believe is is in thecards and, as you're gonna take
us out of this this episode,tell me about your podcast.
Atif Qadir (45:40):
Sure, it's the American building podcast.
So if any of your listeners areinterested, they can head over
to American building podcast.
Calm and it's.
Ad (45:51):
We've done three seasons.
Atif Qadir (45:53):
We're, I think, close to about a hundred
episodes.
And it's a collaboration betweenmyself and Michael graves
architecture and design, whichis a famous design from based in
Princeton, new Jersey and NewYork, dc, and our goal is to
Tell the story of Up-and-comingnew, really fascinating
(46:14):
developers and designers and theprojects that they're working
on.
On the third season focused onthe housing challenges of the
greater New York City area andthen In future seasons, will be
tackling other important issueswith the real estate industry.
But I enjoy it and I think mylisteners do as well, so
definitely give it a chance.
Colter DeVries (46:34):
Well, thank you for coming on the ranch investor
podcast and if there's anythingI can do for you personally in
the future, please reach out andlet me know.
Thanks for your time thatsounds good.
Atif Qadir (46:44):
Thank you very much.
Colter DeVries (46:45):
Hold it listeners of the ranch investor
podcast who are receiving thisimmense value for free.
Thanks for tuning in.
I do have an ask in place ofadvertising.
I do not monetize this onspotify, apple, anywhere.
I don't click the monetizebutton, so I do have to get a
(47:07):
plug in here and I ask what I'dlike from you is to hear some
feedback.
So, on our social media, pleaseshare this episode.
All I all I ask in return fornot having promotions and
advertising is that you sharethis, send a text, get it out
(47:28):
there so more people can enjoywhat we're producing.
Thanks for tuning in.
Ad (47:31):
We feature only the best accredited and established rural
real estate professionals whoanalyze, transact and manage
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when the latest episode hasdropped.
I think the question that is fundamentally at the
core of American democracy isthe tension between individual
choice and community, or largerpriority in the longer term, the
short term versus the longerterm.
Colter DeVries (00:18):
I'm Colter DeVries, owner of Ranch Investor
Advisory and Brokerage Services.
As a former commercial nagbanker, my main reason for doing
this podcast is to simply gaugethe market's appetite for
crowdsourcing investment in aRanch real estate fund.
Ad (00:33):
The Ranch Investor podcast, curated by subject matter
experts to give you immensebenefit, because we believe your
time is valuable.
Colter DeVries (00:43):
Atif Kadeer, is that correct?
Atif Qadir (00:47):
So it's long a short line.
So Atif Kader.
Colter DeVries (00:54):
Atif Kader okay.
Atif Qadir (00:56):
I was backwards.
Colter DeVries (00:57):
I was backwards on how long you hold those
vowels Exactly.
Atif Qadir (01:02):
Got it.
Colter DeVries (01:04):
So you are an architect, developer, an
entrepreneur, you have your ownpodcast, your guest speaker I
think I see you coming up on aGoldman Sachs series pretty soon
and so you're just a generalleader in real estate and it's a
pleasure to have you on.
Thank you.
Atif Qadir (01:25):
I appreciate you taking the time and extending
the invitation.
Colter DeVries (01:28):
Now a little bit more about you.
I'm giving your introductionhere.
You founded Commonplace, aFinTech company, a development
company focused on therenovation of historic real
estate in New Jersey, and you'realso, as I mentioned, the host
of a top ranked podcast calledAmerican Building, where you use
(01:53):
that platform as a channel todiscuss topics that you're
passionate about, especially inhousing and impact, and I want
to get into that a little more.
As we see ranches, rural farms,communities on the outside of
cities becoming developed, Imean that's a never ending
occurrence right Is an expansionof these cities into the rural
(02:20):
parts.
So you also serve on thePlanning Commission in Hoboken,
where you live, where you live.
You live there in Hoboken andyou're on the advisory council
of Provident Bank.
Now tell me about your theseschools.
You've been to Columbia andHudson.
(02:41):
You graduated from Columbia.
Atif Qadir (02:45):
Yeah, so I went to Columbia University for my MBA
and my undergrad in architectureand urban planning from MIT.
Colter DeVries (02:54):
Perfect, you're the guy I wanted to talk to you
about.
When is this?
What we see in the West iscontinual expansion of the
cities on prime farmland, and Idon't know about back East what
you'd consider prime farmland orthe phenomena of these
(03:21):
megalopolises that you live inthat are never ending.
They just keep growing andgrowing.
But out here people drivearound the countryside and they
see corn in your low lying.
Here in the arid West they seecorn fields in the irrigated
valleys where you have superiorwater rights.
Of course that's good forhumans, right, and you have good
(03:44):
groundwater.
So municipalities don't have tobring out city services to the
county areas where you cansubdivide into 20 acres, even
one third acre tracks and drilla well 80 feet or less to have
good quality water.
People say, well, dang it.
(04:04):
That's the best farm groundthat should be used for food
production.
And why can't we develop up onthe sandy hills, up in the
bluffs and the trees and thesage brush?
And maybe you can give us youropinion on that?
Answer that question for me,because I mean, I'm a firm
believer in capitalism that thisis a short term phenomena.
(04:27):
Maybe in the long term the costbenefit is there, that barley
is more valuable than basements.
That's the trade off out hereis barley versus basements.
Atif Qadir (04:39):
Yeah, I think it probably comes down to what a
particular area is best suitedto do and, I think, the
competing priorities, both on alocal scale and on a national
scale.
So I think let's talk about thefirst one.
I think when we look at areasacross the United States, in
(05:01):
urbanized states like New Jerseyversus rural states, I think
the two issues that wereprobably are the ones that are
feeding into that question.
Excellent question you broughtup is what type?
of land and where that land isand what it's suited to do, and
then what the particular localpriorities are versus national
(05:21):
priorities and how they maynecessarily compete or contrast
with each other.
So I think the first one whenyou have an urbanized state like
New Jersey, one of the highestand best uses are things that
serve the urbanized areas in andaround New York City.
So that means multifamily andindustrial logistics in order to
(05:43):
serve the demand of the peoplethat live the 8.8 million people
that live in New York City andthe 25 million that live around
it.
So, in those cases it's prettyhard for us to make a case that
Barley makes more sense thanBasements because the median
home price is so high in thisparticular area.
So I can give you one examplethat the median home price in
(06:07):
Hoboken, which is considered asecondary city next to New York
City, is about three quarters ofa million dollars.
That's the median home.
So the rationale there is itprobably makes more sense to go
that way.
I think in a place like Montana, because of the value of
agricultural production and theefficiency of it on a large
(06:31):
scale, you may be hard pressedto make the case that a.
Basement's more valuable thanBarley, so I would probably say
a square foot of agriculturalland is probably more valuable
than residential, namely thatbecause the cost of construction
in a state like Montana is afraction of that of New Jersey,
because of different labor lawsand the availability of labor is
(06:52):
different and the expectationsin terms of quality or materials
that are used are different aswell.
So I think it probably has to dowith what a particular area is
better suited to, and I thinkwhen you look at local
priorities versus nationalpriorities, there may be things
that are competing against eachother, like the desire to want
(07:13):
to preserve open land for thepleasure or the care of future
generations versus the necessityfor two very important things.
One is having natural resourcesecurity for the United States
and being a net exporter of foodand that exporter of petroleum
products, as opposed to netimporter of both of those I
(07:35):
think is really important.
And I think the other one wouldbe the fact that we have a
national storage of housingunits and it's the necessity of
actually growing housing unitsacross the United States.
So I think that there's a bunchof things that probably play
into the question you asked, butI think the second thing that
(07:56):
will bring up is that competingpriorities of local versus
national.
So that's the way I look at itfrom an economic or policy
perspective.
Colter DeVries (08:04):
The old guns versus butter trade off.
Well, this, this is maybe moreof a philosophical question, but
I brought you on so here youmight have a lot about it, is it
?
Do you look at this just fromthe economic or maybe policy
(08:24):
sense, just completelyobjectively, or is there?
Is there subjectivity in it?
And is it okay to be subjectivewhen thinking about guns versus
butter?
Because where I'm going withthis is we have a lot of people
who would say why are wedeveloping so many Amazon
(08:49):
distribution centers on top ofhighly valuable farmland?
Can't we bigger question?
Can't we just be less of aconsumerist society?
Is this really the direction wewant to go?
Is this a good thing to haveindustrial centers that
eventually become gray and brownzones?
And then then you haveimpoverished neighborhoods that,
(09:13):
like the outside of Detroit,detroit has more vacant homes at
one time it did.
Then the city I live in hashomes and is, and that was due
to I mean partially due to thesubsidies of auto manufacturers,
all those jobs created over themany decades of Ford, chrysler,
(09:34):
gm, and that was driven byconsumers wanting cars.
And here's a philosophicalquestion and I don't want to
throw too many out there, notsaying I agree with this one.
But do we need cars?
Do we just get to publictransportation?
I mean, is the underlyingproblem philosophical?
(09:54):
Here Is the direction we'regoing, the right direction.
Atif Qadir (09:59):
I think the question that is fundamentally at the
core of American democracy isthe tension between individual
choice and community, or largerpriority in the longer term, the
short term versus the longerterm, and I think that, from a
(10:19):
pure loss of their perspective,the ideas that any American
should be able to make anindividual choice that they deem
to be the most beneficial tothem.
In the particular example thatyou brought of retail and
consumer goods, I think there isa dangerous compromise to be
made for price versus thefragility of supply chain, and I
(10:45):
think that when you optimizefor price, you end up having a
consolidation of choice aroundways and means of getting you
products that's the fastest andthe cheapest and not necessarily
the one of the most durablethat are able to sustain shocks
(11:08):
to a particular productionprocess, the best example being
face masks during the pandemic.
So I think I tend to be, perhapsmore broadly from real estate
protectionist from aphilosophical perspective that.
I think that those shorter termindividual decisions for
(11:33):
individual Americans is not asimportant as the national
security for our own supplychain and production.
So I think that I would imaginethe difficulty comes in is that
if we have a desire to have awider variety of retailers and
more American production thanthe case for Amazon becomes more
(11:54):
tenuous than it does right now.
But, how do you actually changethe behavior of individuals in a
democratic capitalist society?
It's through taxation.
That's the only way to do it,because you can't force people
to do things otherwise.
So, I could imagine thatperhaps there are increased
taxation on particular types ofbehaviors or retailers that are
(12:18):
necessarily conducive to thosefederal parties.
And that's going down a veryslippery slope of the heavy
handed nature of big government.
But that's probably myperspective on your very good
question.
Colter DeVries (12:30):
So wouldn't taxation be the whip, and
doesn't the carrot work better?
Atif Qadir (12:38):
I actually personally think that the whip
is more effective than thecarrot.
Colter DeVries (12:45):
Just rain them in, just heavy handed on them,
just hammer them down, they willcomply.
Atif Qadir (12:52):
I mean the thought process is the example of
economic development incentives.
Ad (12:57):
That's the carrot.
Atif Qadir (12:59):
It assumes that people will behave in ways that
are good for society.
So let's take a long-termhousing tax credit, for example
that by offering an economicdevelopment incentive, it will
induce developers to be able toproduce more units of affordable
housing.
And there's many versions ofthese carrots that exist in the
(13:20):
world of economic development,incentives for real estate.
Generally speaking, the processto actually execute on those
carrots eventually results inthat carrot might have started
like this, but the actual sizeof the carrots is small when
it's delivered.
because of all the frictionalloss in the process, taxation
(13:41):
tends to be, I think, a smootherprocess than economic
development incentives, becausethere's a particular means by
which you can account for that,whether that's a property value
or that's an income that someonereports on their income taxes.
So I think from thatperspective I would say that
(14:01):
taxation, or the width, is moreefficient means of delivering
changing behavior than a carrotis.
Colter DeVries (14:15):
That never seems to work for cigarettes, though,
don't.
People just want what they want, and if I want to build a house
on five acres rather than farmthat five acres, if it's in the
right location, has the rightview, has the right amenities,
(14:37):
I'm gonna build that house Maybenot me, but someone else more
wealthy than me who can affordthat tax will.
Atif Qadir (14:44):
Yeah, I think that that's exactly the option that's
available, but the persons orand the persons desire to want
to do so, has to be so strongthat they get over that hurdle
of the taxation to want to do it.
I mean an equivalent one forGreater New York City that's
been talked about for a while iscongestion pricing.
To say that New York City hassuch insane traffic it's not
(15:06):
sustainable for business, it'snot sustainable for tourists,
for the local economy.
So, essentially, do congestionpricing to say that use my
desire to drive into Manhattanduring rush hour able to get me
over $50, $60, $70 to drive intoManhattan?
In that case you're essentiallyusing that version of the whip
(15:30):
in order to clear the market ofthe people for whom they don't
have enough desire to want to dothat.
Colter DeVries (15:36):
I've heard about that.
I've heard about the fee thatthey would use to decongest New
York City the flat rate fee.
Wouldn't that just get passedon to consumers though?
So you're Airbnb or not Airbnb,your Uber price would go up.
Isn't that just what wouldhappen?
Atif Qadir (15:54):
Yeah, those types of taxes are often considered
taxes on the poor because theidea, if it's a flat tax, $50
for someone that is consideredwealthy is rather marginal
versus $50 for someone who isworking class and, generally
speaking, people that areworking class are the ones that
(16:17):
are in the outer boroughs withpoor public transit and need a
car as a means of getting totheir employment within the city
.
So I think that, from thatperspective, those costs are
passed on to the end user andthey're often done unfairly or
inequitably, but I think thatthere are means by which that
(16:40):
can be adjusted, to say thatperhaps below a certain income
threshold you have a far lowerincome tax rate.
So that's essentially agraduated income tax rate that
compensates for congestionpricing that you might pay on a
temporal basis, David.
Colter DeVries (17:00):
How does all this relate to problems that
you're focused on, solutionsthat you are trying to provide?
What are you working on and howdoes all this relate?
Yeah?
Atif Qadir (17:11):
I'd say that being cognizant of public policy in
general is important for anyonethat is within the real estate
industry, and then, morespecifically, what I'm working
on is basically selling my realestate portfolio because we're
at the top of the market in NewJersey.
So I'm selling my multifamilyportfolio both on the market
(17:35):
rate side as well as theworkforce housing side, and I'm
actually in the process ofselling my technology company as
well.
So it's a kind of a funny timeto be in sell mode as opposed to
buy or build mode right now.
But I'm curious from yourperspective of what you see in
terms of land acquisition, landbanking versus actual
(17:56):
development of agricultural landin.
Montana.
Colter DeVries (18:00):
Which is kind of what we've been talking about.
There is more value inassemblage that if you buy two
ranches next to each other, thesum of the parts is worth more
than the individual partsseparately.
So that gets into ruralsubdivision and you talked about
(18:20):
.
There might be a need forhousing across the United States
at whatever income level orprice point.
So there's this belief that,well, rural subdivisions,
there's demand.
We're gonna see more ruralsubdivisions, 20 acre homes.
We're not seeing that though.
(18:41):
We're seeing branches actuallyget bigger and big ranches sell
for a premium and medium sizedranches, small ranches, aren't
getting chopped up andsubdivided.
So this is almost counter toour conversation and it's
counter to what happened in 2006.
Yeah, rural subdivision took offin the West.
(19:04):
It just boomed, and there'sbeen times and locations where
people come in and they willchop up one section of 640, but
the absorption rate always seemsto be very slow.
They don't get their quick flip, they don't get their huge
(19:24):
profit within five years likethey intended.
Selling those lots usuallyproves to be more difficult than
they anticipated.
So that absorption rate is veryslow.
That could change.
I mean, real estate tastes andpreferences are always changing
and price points, maybe interestrate driven.
(19:44):
There might be someone whosupplies that product per se,
that rural lot out in thecountry, but we're just not
seeing that.
Atif Qadir (19:55):
So my thought is I'll give you the example within
.
Metro New York City, and I havea feeling there might be
something similar with you inMontana, so in New York City, in
New York City, that the abilityto assemble land for
multifamily development and say,like starter home developments,
(20:16):
really important, particularlyin the 95 corridor, which is the
main highway that goes throughNew Jersey.
So companies like Toll Brothers,for example, over large amounts
of time, assemble largesections of land in order to
make several hundred homes.
Because of the efficiencies ofscale In that, my thought is
(20:36):
that what is driving theassemblage of agricultural land
is the desire for industrialscale farming that is more
efficient than family scalefarming.
On a dollar made per expenseperspective, is that the main
driver of why assemblages areworth more per square foot than,
(20:57):
say, smaller lots?
Colter DeVries (20:59):
Yes for farming, absolutely when it comes to
that input, intensive operatingassets, intensive farming, your
equipment is more than ranching.
So yes, that operating ateconomies of scale does
correlate to a premium in landvalue.
(21:19):
With ranches that are cowboysand cattle driven, it's likely
more there is operatingefficiencies at scale, but it's
likely more driven few thingsview shed, so what some might
call a public good open space,that view shed has value and if
(21:44):
you were to chop that up into 20acre lots you lose that value
of the view shed.
So today's buyers are putting abigger portion of that on view
shed value.
There's also the issue of justcontrol.
(22:05):
Being kind of a land barren isthe feelings behind owning more
comes with more reward.
It must come with more rewardbecause people are willing to
pay more for that.
Now, how about your portfolio?
Is assemblage the same?
Can you separate units and sellthem at an eight cap versus
(22:29):
assembling a whole bunch into adiversified portfolio and
selling it at a six cap?
How does that work?
Atif Qadir (22:36):
Yeah, so to be.
I do urban infill development,so that tends to be ones where
there's like a older buildingfor the areas that I work in
that's between the 1800s andthen I will do a gut renovation
of the building and then redoall the mechanical, actual
plumbing, update the finishes,keep architectural details and
(22:59):
then either sell them as condosor rent them out as rental units
.
So for that strategy,assemblage generally doesn't
particularly work because thisis more of like a surgical
strike within an urban area, Iwould say.
From that perspective, thechallenge right now is the cost
(23:20):
of acquisition is still very,very high, which makes being a
buyer not lucrative but being aseller incredibly lucrative.
Colter DeVries (23:30):
What do you see for sellers?
I mean with institutional ownedfarmland, so now we're talking
about farmland of scale and ofgood quality they are reluctant,
hesitant and unwilling to sellwhat they have because they
can't replace that.
And a lot of ranchers I meanthere's many, I don't want to
(23:52):
say most or a lot, but there aremany ranchers who do not want
to sell today because they can'treplace that.
What are you seeing for thattype of you know that human
behavior in your areas?
Is it much the same?
Atif Qadir (24:09):
I think the desire to hold on to real estate is
something that is veryintrinsically human and it's
probably also specifically veryAmerican this idea of real
estate being the greatestgenerator of generational wealth
.
So I think that's probablysomething that's common no
matter what corner of the UnitedStates that you're in.
(24:29):
But I think the biggestchallenge is going to be folks
that have homes with mortgagesthat are coming due,
particularly because the normalcycle is five year resets, 10
year resets, 15 years and thosetimeframes were all ones with
(24:50):
historically low interest rates,and now, at seven and a half,
it's going to make it difficultfor people that are wishing
to hold on to their homes buthave to refinance that loan
because it's come due to be ableto actually do that.
So I think, from a residentialperspective, we're probably
looking at next five years ofmore absorption by institutional
(25:14):
investors of single familyhomes, as has been happening
since the beginning of thepandemic, and I think we're
probably also looking at thebeginning of a financing crisis
on the commercial real estateside, because there's about $2
trillion of debt commercial realestate debt coming due by the
end of next year.
So largely that's office, but alot of that's also luxury and I
(25:38):
am multifamily too.
That made sense when cap rateswere extremely low and interest
rates were extremely low, butdon't make sense when those that
economic environment, alongwith this.
Colter DeVries (25:52):
Yeah, that means there's like a convergence
right now of borrowing at 6% 7%and then your cap rates at 6% 7%
.
I mean, what is that?
What is that?
It's a push.
What is that?
Is that just saying people aredeferring to the future, like,
hey, we'll just hang out, seewhat happens in the future, just
(26:13):
buy at our time?
Atif Qadir (26:15):
Yeah, I think there's definitely people that
run the acquisition side thatmay not have the ability to
underwrite overmulti-generations and for whom
the cost of capital is animportant consideration that
would be small to mid-sizedprivate equity.
I think that those players aregoing to be playing golf over
(26:37):
the next couple of years, ormaybe like coming out or going
out west and pretending to becowboys for a few years, or
coming back to New York City tostart buying again, but I think
that the types of buyers thatare going to do very well in
this very volatile environmentare probably two types in
particular, I thinkmulti-generation, local to
(26:59):
regional family offices for whomthey are likely managing the
assets themselves about a thirdparty and don't necessarily have
the concerns of short-termhighs of interest rates because
they're underwriting for theirgrandchildren and their great
grandchildren.
So the ability to acquire anasset in a prime market like
(27:20):
Hoboken at a 5.5 cap, even ifthey're borrowing at a 6 cap,
doesn't particularly matter,because they realize that in 3,
4, or 5 years.
They can refinance that back,probably at a 3.5 or a 4.
So for them I think that thosetypes of buyers small to
mid-sized family offices,multi-generation are going to do
very well in this purchasingenvironment.
(27:42):
And the other one are corporatebuyers that have extremely low
cost of capital because they usetheir own balance sheet to buy.
So, companies like Avalon Bay,for example, I think are going
into extreme land banking modeover the next couple of years.
May not necessarily be buildingbecause of the continuing high
(28:02):
cost of construction, because ofsupply chain and tariff issues
with China, but I think thatthey are likely going to be
buying in land banking.
Colter DeVries (28:13):
So I think that's very correlated to farms
and ranches.
And if I can summarize what Iheard is if you're a buyer today
, you are well-capitalized, youhave a very long-term outlook
where the holding costs are notgoing to affect you.
They're not going to affectyour daily operations, your net
(28:33):
worth, your credit collateral.
You're good with the holdingcosts for a very long time.
So that weeds outentrepreneurial, opportunistic
type buyers.
Atif Qadir (28:49):
it sounds like yeah, well, I mean on its surface,
yes, but then the question is,what is the lever that's
available?
And I think one is do you haveaccess, if not to extremely low
cost of capital?
Do you have access to low costof construction?
(29:09):
And the way that comes in isare you a developer that does
in-house construction?
There you go.
That's one lever to be able touse.
Do you have family landholdings that you had just owned
for a long time and now you canactually develop them such that
your cost of acquisition isextremely low?
Okay, that's one other leverthat you'd be able to pull.
(29:31):
Or do you have the ability torelease these units, perhaps to
a university for student housing, because student housing demand
is still very strong, becauseuniversities are definitely
still expanding.
So I think, if you're able totake the risk on an income
(29:53):
perspective off the table,that's a lever you're able to
pull, and I think someone thatis entrepreneurial is probably
going to imagine what they cando in a high cost of capital
environment around any of thoseoptions or other ones.
Colter DeVries (30:06):
Now you yourself .
You said you were selling yourportfolio, so you're shorting
the market.
You're not the near term.
You don't have a lot of beliefin the near term.
Right now is the time to shortthe market, correct.
Atif Qadir (30:22):
I think the levers that I'm able to pull.
Typically it's been low cost ofacquisition.
So that comes through deeprelationships in the markets
that I work in and therecognition amongst the brokers
that I work with of the highlikelihood to close.
So generally speaking thatgives me purchasing power and I
(30:45):
like to buy all the moneyafterwards.
So in those situations my leveris very dominantly the cost of
acquisition and perhapssecondarily because on a
licensed architect the cost ofthe design and construction
portion of it can be optimizedbecause I have a sense of
foresight as to how somethingcan be used that tends to save
(31:07):
time and effort from a designand construction perspective.
But I don't necessarily haveconfidence in those two levers
in this market.
I think that the cost ofcapital so far outweighs any
advantages that I have in thosetwo areas that more likely, a
better use of my time is to playgolf or pretend to be a cowboy
for a few years and come back.
Colter DeVries (31:28):
You're welcome.
You're very welcome to come outand play cowboy and bring
billionaire New Yorkers with you.
You brought up anotherparticipant on the buy side.
We still, even though withrecord low inventory and we've
got these high interest rates,we still see strong demand in
(31:51):
farm and ranch closings everyday going under contingency
contract.
Every day Things are happeningand maybe it's people who think
they have a competitiveadvantage because that would
also be, as you mentioned,someone who's got some of the
other skill sets to optimize advalue.
(32:11):
Is that the only play right now?
Is that value ad?
Is core real estate a bad idea?
Atif Qadir (32:22):
Going back to, say, east Coast urbanized markets.
If you want to be active, Ithink the way to do it is go to
the sectors of the market whichare the least risky.
I think in that perspective,when I'm looking at asset or
(32:45):
geography, it's going to be ringurban, because I think that
urban itself has a lot of issues, particularly with things like
crime and taxation and outflowof populations.
I would much rather make a beton Princeton, new Jersey, than
on New York City, for example.
I think the optimizing aroundthe geography is really
(33:06):
important.
I think being able to pick theasset class that makes sense in
that particular time and thatgeography In this case it would
be from Metro New York City,it's single family and highly
monetized multifamily it'sprobably the areas that I would
go into and I would likely lean,from a class perspective, into
(33:28):
affordable and workforce asopposed to luxury, because I'd
rather be in a situation where,if I'm delivering a unit, there
are 100 people that can rentthat or 100 people that can buy
it than one.
I think that being able tooptimize towards that
perspective is really important.
Then, if I have the choicesbetween new construction, heavy
(33:50):
redevelopment or renovation, Iwould pick the least risky of
that, which would be renovation.
If someone were to try to be, Ithink, astute and make a buck
in this market in Metro New YorkCity, I would probably focus on
light value.
Add single family homes andtownhouses in that range of 30
(34:13):
minutes to one hour drive fromNew York City and see what
neighborhoods and what townsmight be next to very wealthy
areas, are in good schooldistricts but are dominantly
working class right now, but youcan see the movement towards
middle class in those areas.
That strategy is probably likeshooting fish in a barrel, but
(34:37):
if you're able to come up with astrat like a platform to do
that, because you have brokenrelationships or there's other
ways you're able to procure allof these assets in a diffuse way
but then operationalize them ona platform perspective, that
sounds like a winner to me for ahigh-cost, high-taxation market
like New York, new Jersey.
Colter DeVries (34:59):
I can relate that to Farm and Ranch.
We talked about creating aproduct that has the most broad
general appeal.
For me that's like okay, let'sstart within an hour of Bozeman,
montana, or Bend, oregon, anhour within Cordelaine, idaho,
places like that.
Start there.
(35:20):
Then you're thinking okay, whatprice point.
We watched the bread and buttergo from $2 million pre-COVID.
Lots of people could get intothat $2 million ranch.
That's now up around $3, $3.5,even with the increased interest
rates, bread and butter isstill around that $3.5.
(35:42):
Then, don't over-customize,don't over-build.
Do some value add, but don't dotoo much.
I can relate Farm and Ranch tothat play in New York City.
You got into my next question.
Actually, when you're looking,you're going to sit on the
(36:05):
sidelines for a while and I wantto hear how long you're
forecasting to sit on thesidelines after you short the
market.
I also want to know, in yournext consideration, how do you
rank these risks in your ownmind of cap rate?
Do you want to go?
Interest rate, political,geopolitical crime, average
(36:28):
incomes, us incomes?
What are these risks in yourmind and how are you waiting
them?
Yeah, I think for when?
Atif Qadir (36:39):
when an investor, like a developer like me, is
very hyper specific in terms ofgeography, it allows me to Kind
of be like an ostrich with thehead.
This and when it comes togeopolitical or macroeconomic
risk, because those things don'tparticularly impact me in any
particular way.
So I would say the social,cultural, political issues are
(37:03):
Probably a very littleconsequence.
I think a lot of it has to dowith the operational risk.
So the ability to acquire, theability to effectively and
quickly Renovate and the abilityto lease up or sell.
That is the the backbone andthat, I think, is the for For
conversation.
When you're hyper specific interms of your geography, I think
(37:23):
that if you attempt to be adeveloper that's agnostic to
Geography and it's open so allacross the Sunbelt, for example,
a mid-sized developer I thinkthose types of folks are gonna
be much more hard-pressed, sothey're gonna have a lot of
risks to be able to weigh Acrossthese larger regions as they're
making decisions as to wherethey're out where they're out in
capital.
(37:44):
So I think I can ignore most ofthe ones that you're talking
about.
Colter DeVries (37:46):
For that reason, Okay, much more, much more
at-home, hands-on, tangiblewhat's within my own control.
Atif Qadir (37:55):
Exactly because I mean think about it.
The state of New Jersey.
He is one to eight millionpeople.
The city of New York City iseight million people.
That means there's 16 millionpeople between the city and New
Jersey that need homes.
That's more than enough for onedeveloper to do so.
Always kind of give side eye topeople.
Let's say that they're agnosticto geography.
They'll do deals everywhere.
They're good.
(38:16):
I mean that basically just needto have.
Colter DeVries (38:21):
So is that?
Is that a in your experience?
Is that you're?
One of your recommendations isstart by defining your strategy.
Write it out vision, values,mission, what is your, what is
your core Beliefs and and howare you going to?
What is your competitiveadvantage or comparative
(38:41):
advantage?
Is that a good place to start?
Atif Qadir (38:44):
completely.
I mean the same way that culture, when you did your 2024 vision
board and Maybe on your visionboard you want to have a really
cute puppy for your kid.
That's a new vision board get apuppy.
I think the same way to thinkabout what is it that you are
looking to focus on this yearand why is it that you're
looking to do it?
I think absolutely from aprofessional perspective.
I think the really great pointthat you bring up is probably
(39:06):
very particularly applicable toyour listeners that might be
interested in leaving theircorporate job and becoming a
developer, or Maybe they workfor a corporation and want to go
out on their own.
I think from that perspective,there's probably three things
that are really, reallyimportant.
One of them is to choose ageography that you want to be
(39:28):
the king or the queen of andjust know everything about it
know the price per square foot.
No, who owns what?
know, what public policy issueis going to affect your land
value?
What's going on the taxassessor's office with property
taxes?
All of that stuff, I think, isthe core, foundational element.
I think the second one is tomake sure that you're really
(39:50):
really good at one particularpart of the development process.
Then you know enough abouteverything else that you're
dangerous.
I think that's really important.
And I think the third one wouldbe having access to mine.
So if you don't have access tocapital Of scale of size to do
this, just keep doing.
(40:11):
Keep doing your W2, becauseit's gonna be more headache than
this work.
Colter DeVries (40:16):
Well, that, that was a great summary.
I do want to get your crystalball though, your vision of the
future.
When is it time for you to getback in?
How long are you gonna?
How long are you gonna bewaiting for?
So you think the environment'sright that it's come together.
Atif Qadir (40:33):
Given your strategy, I think the there's a couple
things that play.
One is that, more specificallyfor me, I have the benefit of
Having both experience andactive deals and development
perspective, as well as atechnology company perspective.
(40:54):
So I think that the rule oftechnology, particularly around
the buzzword of artificialintelligence on how data is,
used and and and Allowsdevelopers to make smarter
acquisition decisions.
I think companies in and aroundthat data perspective.
That sounds like an area thatI'm very interested in over the
(41:16):
next.
Year or two, particularly as I'min the process of selling my
technology business, I mighteventually land that the buyer
of the business might justacquire me and that might be a
cool thing to do for a coupleyears.
I think from a, but I thinkmore specifically, you're asking
around development, and I thinkfrom that perspective.
(41:37):
There's usually the marker as topresidential elections, and I
think that In this case,depending on which party takes
the White House, there'sprobably going to be a slightly
different trajectory of what.
What will be happening in termsof housing, which is the core
of the real estate industry, butalso in terms of the the zombie
(42:02):
apocalypse of office buildings,which is important for, like
for Old industrialized EastCoast cities, because if there
isn't a good solution for that,I think that actually creates an
incredible opportunity arounddevelopers that are well
capitalized to acquire office onthe chief and Work through the
(42:23):
process of conversion toresidential so I think, that
being able to get smart aroundAnything related to that process
of conversion of uses, which isa very complex thing from a
design perspective, constructionperspective, insurance
perspective, like fire safetyperspective- all of those it's a
complex thing, but gettingsmarter on that is probably
(42:45):
where opportunity lies In, Ithink, the real estate industry,
the next place.
Colter DeVries (42:50):
Absolutely.
And as we think aboutopportunity, what was it, warren
Buffett, who said wait untilthere's blood in the streets?
And I have many friends, peers,contacts, who are Side-lined
waiting for blood in the streets.
But I'm not.
I don't believe there would bethat in farm and ranch.
I think farm and ranch is toostable and the underlying
(43:13):
fundamentals are Not indicatingblood in the streets.
I'm I'm little indifferent.
Split on residential, that's ahard one, because I do want to
be buying another house verysoon.
So residential to me seems IWant, I almost want there to be
(43:33):
blood in the street because I ama buyer.
You know I'm I'm short on themarket right now.
I'm short a house, but I thinkit's gonna come in the form of
that, not commercial, but aoffice space.
In those, those areas wherethey have Hundreds of thousands
of square feet of vacant officespace and it has been that way
(43:53):
for a couple years now, youcan't come to Manhattan exactly.
That's probably where theopportunity lies ahead of us.
Atif Qadir (44:03):
I'm really, and I think the the honest surface,
the idea that once where a footof one space can be converted to
another is so alluring, but Ithink that being able to take
the time to Identify theopportunities and very
(44:25):
surgically go after them.
They're very certain types ofoffices that can convert
effectively.
Those are ones with Enoughlight and air on the perimeter
of the building, relativelysmaller size Footprints of these
are buildings that typicallywere built before the 1970s.
Those are the ones that canconvert most easily to
(44:46):
Residential.
I think the short term strategyis to be able to do something
like that, but I think I'm onebig term strategy is lobbying
public officials to be able toInitiating, deploy more tax
credits for the conversion ofoffice to residential or to ease
Building code requirementsaround light and air and egress
(45:10):
that allow for the more easierconversion of those.
So those feel like the placesthat I would be focusing my
attention if one chooses to beable to go down that path of
Office to Resid conversion.
Colter DeVries (45:26):
Well, thank you for the crystal ball, that's.
I like to get people's forecast.
What they believe is is in thecards and, as you're gonna take
us out of this this episode,tell me about your podcast.
Atif Qadir (45:40):
Sure, it's the American building podcast.
So if any of your listeners areinterested, they can head over
to American building podcast.
Calm and it's.
Ad (45:51):
We've done three seasons.
Atif Qadir (45:53):
We're, I think, close to about a hundred
episodes.
And it's a collaboration betweenmyself and Michael graves
architecture and design, whichis a famous design from based in
Princeton, new Jersey and NewYork, dc, and our goal is to
Tell the story of Up-and-comingnew, really fascinating
(46:14):
developers and designers and theprojects that they're working
on.
On the third season focused onthe housing challenges of the
greater New York City area andthen In future seasons, will be
tackling other important issueswith the real estate industry.
But I enjoy it and I think mylisteners do as well, so
definitely give it a chance.
Colter DeVries (46:34):
Well, thank you for coming on the ranch investor
podcast and if there's anythingI can do for you personally in
the future, please reach out andlet me know.
Thanks for your time thatsounds good.
Atif Qadir (46:44):
Thank you very much.
Colter DeVries (46:45):
Hold it listeners of the ranch investor
podcast who are receiving thisimmense value for free.
Thanks for tuning in.
I do have an ask in place ofadvertising.
I do not monetize this onspotify, apple, anywhere.
I don't click the monetizebutton, so I do have to get a
(47:07):
plug in here and I ask what I'dlike from you is to hear some
feedback.
So, on our social media, pleaseshare this episode.
All I all I ask in return fornot having promotions and
advertising is that you sharethis, send a text, get it out
(47:28):
there so more people can enjoywhat we're producing.
Thanks for tuning in.
Ad (47:31):
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