(54) How Institutional Investors Really Look at Development Risk - Jeff Thomas - KingSett Capital の全文書き起こし

00:08:55.558 --> 00:08:56.129 I guess. 00:08:56.129 --> 00:09:01.109 Lemme go zoom out and say, how do you, how do you decide which projects to go into? 00:09:01.168 --> 00:09:05.009 What does it, what does a good deal look like from your perspective? 00:09:10.739 --> 00:09:11.774 I'm not trying to do that. 00:11:33.808 --> 00:11:40.318 So is it fair if I wanted to summarize that answer, is that because you're, you're basically swimming in an ocean of risk factors. 00:12:12.269 --> 00:12:15.959 You're trying to minimize some of them by picking the right party and having. 00:12:16.559 --> 00:12:22.109 Having the trust, like you mentioned, that that party is gonna take care of those risks or minimize them or mitigate them. 00:12:22.769 --> 00:12:23.969 Is that a fair way of putting it? 00:12:35.173 --> 00:12:35.663 Very true. 00:12:44.964 --> 00:12:45.084 Y. 00:12:45.389 --> 00:12:45.689 Yeah. 00:13:36.464 --> 00:13:37.994 Wow, Parkinson's. 00:14:40.994 --> 00:14:44.684 That's, that's, that's actually, that's a very rare thing that happens. 00:14:45.043 --> 00:14:49.379 And to your point, um, it was the transparency and the clear the. 00:14:50.219 --> 00:14:58.109 The quality of the messages that are coming through and the fact that they, you don't want to hear the cleaned version of the reality that that really helps. 00:14:58.109 --> 00:15:06.879 That really helps with, even for us on the construction side and running from the construction side of the projects, you always want to get to the bottom of things, not the cleaned version that people. 00:15:07.408 --> 00:15:11.819 Think you want to hear, and because it's typically missing some context. 00:15:11.819 --> 00:15:20.879 Interestingly enough, I was listening to, uh, Uber's, uh, CEO not too long ago, had a episode on the podcast, and he basically said the same thing. 00:15:20.879 --> 00:15:32.609 That the, the one of the keys to success at Uber has been transparency from ground up and the fact that tried to communicate that non cleaned version of the mess so people can actually do something about it. 00:15:33.059 --> 00:15:34.798 With, with that, with that being said. 00:15:35.278 --> 00:15:43.559 There When you go through king set's, um, verbiage and website and the documents that you guys have out there, there's something that it keeps coming up. 00:15:43.559 --> 00:15:46.889 It's a pr, it's a premium risk weighted return. 00:15:47.399 --> 00:15:48.059 What does that mean? 00:15:48.179 --> 00:16:02.009 Like what, for, for layman terms for someone who's not necessarily in the financial world, what you guys are offering in our investment opportunities in terms of, and it's called like it's, it comes up as risk weighted returns. 00:16:02.038 --> 00:16:02.489 What is that? 00:17:19.048 --> 00:17:43.769 So you're, you're, I guess that means that translates into less surprises or fewer surprises down the road for investors and the returns and, and potentially the fact that you've analyzed risk enough and built it into a system enables you to, to be more proactive, like you said, and do make better decisions knowing what they are. 00:17:44.218 --> 00:17:45.418 Is that the favorite way of putting it? 00:17:48.238 --> 00:17:48.928 Fantastic. 00:17:49.259 --> 00:17:49.499 Okay. 00:17:49.499 --> 00:17:52.558 I want to dive into 50 Wilson Heights. 00:17:52.948 --> 00:17:58.918 This project is a massive project that you guys are doing and there are a whole bunch of different partnerships going on. 00:17:59.578 --> 00:18:01.378 Can you walk us through the project? 00:18:01.378 --> 00:18:02.278 It's a big project. 00:18:02.278 --> 00:18:12.658 I think it's an important project because it has lots of moving parts and it will set up some precedence for other people and other projects hopefully to come in the future. 00:18:12.988 --> 00:18:14.433 Can you walk us through that project, what it is? 00:18:14.868 --> 00:18:17.628 Units, partnerships, structure where we are. 00:18:17.988 --> 00:18:18.503 I'm go from there. 00:23:07.928 --> 00:23:11.468 That's the, that's what I gathered from the 50 agreements before getting started. 00:23:11.468 --> 00:23:14.078 So can you, can you tell me what stage are you at right now? 00:23:14.738 --> 00:23:17.168 How long have you been involved in this deal and Woodward stage? 00:23:17.168 --> 00:23:28.043 Are you guys at Yeah, that's a surprise. 00:23:39.408 --> 00:23:40.993 Most, most fun exercise. 00:23:41.113 --> 00:23:41.653 Yes. 00:23:41.658 --> 00:23:41.818 Yes. 00:24:23.053 --> 00:24:23.533 Does this. 00:24:34.453 --> 00:24:36.613 That's pretty exciting to hear that that's moving. 00:24:36.613 --> 00:24:57.613 So looking back at this, these 50 agreements and getting to this point, if you were to document some of the lessons learned for yourself, your team, or for other our listeners who might, and hopefully who will eventually enter into these types of partnerships, because I think as you mentioned, this is a great opportunity for Citi to basically utilize. 00:24:57.983 --> 00:25:07.793 Underutilized or properly utilize the, the, the parcels of land, which there were not few, there are quite a bit of them around the city and, and even further out in the region. 00:25:08.243 --> 00:25:13.868 Uh, what are some of the lessons learned from this process and all the agreements and all the counterparts that you've dealt with? 00:26:39.458 --> 00:26:40.958 And I can, I can only imagine. 00:26:40.958 --> 00:26:53.588 It's with the number of parties involved and the complexity of the situation it has, and everyone can get really creative in things in terms of things that needs to be allowed for, accounted for in the contract contracts and agreements. 00:26:53.858 --> 00:26:54.728 So I guess. 00:26:54.983 --> 00:27:09.593 Building on that, we, not too long ago, we had um, uh, someone from CMHC on the podcast and we went through their most recent report on housing for the 2026 to 2028 market and their forecast

basically. 00:27:10.013 --> 00:27:12.203 How are you seeing that changing? 00:27:12.203 --> 00:27:15.743 Like what is your take on it for the next two, three years on the market conditions? 00:27:15.743 --> 00:27:17.693 How are you guys underwriting projects? 00:27:18.053 --> 00:27:22.338 Obviously we know at this very moment in time, the condo market is. 00:27:23.203 --> 00:27:25.573 Not if entirely, that is very close to debt. 00:27:26.173 --> 00:27:28.783 And, um, what are, what is your take on that? 00:27:28.874 --> 00:27:31.603 What is King said thinking in terms of underwriting new projects? 00:30:49.783 --> 00:30:57.043 To your point, the, the HST, just the, the good news I guess on the HST for the first time home buyer rebate was increased very recently. 00:30:57.433 --> 00:31:01.813 Still probably takes time to make its way to the actual ground and we. 00:31:01.993 --> 00:31:03.374 You what the actual implications are. 00:31:03.884 --> 00:31:11.983 Um, if I want to go and look at that, the look at the current environment and say, okay, this is what we just talked about. 00:31:12.103 --> 00:31:13.273 Condos are not starting. 00:31:13.483 --> 00:31:18.103 The, the purpose-built rentals are pretty much the only thing that is happening. 00:31:18.134 --> 00:31:23.863 If that is happening, are you, or like if you're talking to, uh. 00:31:24.448 --> 00:31:25.378 Smaller developer. 00:31:25.499 --> 00:31:40.228 If you're talking to someone who's, who's been trying to, or is trying to, um, get a smaller six story 60 unit building going, because that's what City of Toronto is these days focusing on, they're allowing it, the whole discussions about the major streets and everything else. 00:31:40.648 --> 00:31:53.394 Do you have any suggestions, red flags, or maybe just would you tell'em to stop and don't do anything for a while, or how would you, how would you advise them if someone wants to start a midrise project these days, regardless if it's condo or PBR. 00:35:03.254 --> 00:35:04.209 I, I love that answer. 00:35:04.209 --> 00:35:08.769 It actually reminds me of a quote from Airbnb founder, I think his name. 00:35:08.919 --> 00:35:14.019 Is Brian Jetski and he, she said, uh, focus on the unscalable. 00:35:14.409 --> 00:35:19.209 'cause to your point, the things that can be scaled bigger boys have already figured out a way to do it. 00:35:19.689 --> 00:35:31.568 The things that, that cannot be scaled, uh, such as the ones that you were just mentioning, going and meeting the local residents, getting to know the community that will potentially buy those units or rent you those units from, from you. 00:35:31.568 --> 00:35:36.969 That's not something that you could do at scale, but you could do it at a 30 to 60 unit range and is. 00:35:37.039 --> 00:35:38.239 Definitely possible. 00:35:38.239 --> 00:35:41.778 It's probably not, it's, it's not gonna be easy, but it's gonna be doable. 00:35:41.778 --> 00:35:42.829 It's definitely doable. 00:35:43.219

--> 00:35:46.129 So I think I, I take that as a great advice there. 00:35:46.519 --> 00:35:47.599 Can we talk about. 00:35:48.704 --> 00:35:50.233 You're focused on modular. 00:35:50.443 --> 00:35:54.224 When you and I were talking offline, you obviously, we touched on your project. 00:35:54.673 --> 00:35:55.874 I think it's in Valhalla. 00:35:55.963 --> 00:35:58.064 It's called Valhalla Village, if I'm not wrong. 00:35:58.544 --> 00:36:00.764 And uh, you guys are using modular. 00:36:00.764 --> 00:36:02.653 Can you talk us about that project? 00:36:02.713 --> 00:36:04.994 What are the parameters, why, why modular? 00:36:05.024 --> 00:36:06.164 How do you like it? 00:36:06.224 --> 00:36:07.184 What are the challenges? 00:36:20.354 --> 00:36:20.804 Gotcha. 00:39:07.124 --> 00:39:07.814 It, it. 00:40:05.159 --> 00:40:10.679 I think one of the things that happens, uh, has happened over the past 10, 15 years is that we kept. 00:40:11.189 --> 00:40:18.028 Adding and adding and adding and increasing the number of criteria to the pile of criteria for approving a new building. 00:40:18.479 --> 00:40:27.959 And we started, I think one of our pre previous guests, uh, put it very nicely that we started optimizing for a hundred different things and we forgot to optimize for the actual affordability of it. 00:40:28.469 --> 00:40:34.469 Is that like you're, you're trying to get everything under the sun to the perfect, uh, degree possible. 00:40:35.009 --> 00:40:36.329 But then you just can't build it. 00:40:36.329 --> 00:40:38.009 You can't get scale, you can't repeat it. 00:40:38.009 --> 00:40:40.709 Every other, every building is gonna be different than the next one. 00:40:41.219 --> 00:40:52.079 And, um, to your point, I, I can definitely see where you're coming from because the modular by definition is putting some constraints on, on some of those variables and say, listen. 00:40:52.084 --> 00:40:53.584 We can't do just, we just can't do that. 00:40:53.584 --> 00:40:54.544 So don't ask us to do that. 00:40:54.934 --> 00:40:58.864 If you're in the municipality, if you're asking us for curved corners, we just can't do that. 00:40:58.864 --> 00:41:05.929 If you want us to do that in like, past timber or CIP or cast in place concrete or, or sorry, not, um, cast in place the, yeah. 00:41:06.524 --> 00:41:08.564 Precast concrete, uh, walls and floors. 00:41:08.564 --> 00:41:17.864 So you kind of have to make a trade off and it gives them, I guess I'm just, sorry I'm ranting here, but it almost gives them an excuse to say, listen, what do you want me to do? 00:41:17.864 --> 00:41:19.304 These guys can't do it any other way. 00:41:19.304 --> 00:41:20.864 You have to stick to their criteria. 00:41:21.193 --> 00:41:26.624 And it reminds me of that old saying that no one got fired for buying from IBM because there was no other option. 00:41:26.864 --> 00:41:28.844 Like this is the option you, you buy from them. 00:41:28.844 --> 00:41:30.614 And yeah. 00:42:30.784 -->

00:42:31.144 Agreed. 00:43:26.149 --> 00:43:32.144 I, I, I think it's, it's not happening yet, and it's. 00:43:32.954 --> 00:43:33.943 It's not happening yet. 00:43:33.943 --> 00:43:36.344 It seems to be missing some political will. 00:43:36.403 --> 00:43:50.713 It will it, it will upset a number of stakeholders on the grander scheme of things because they're always pushing for changes and improvements, which I can definitely, like you said, no, no single policy is probably bad in itself. 00:43:50.713 --> 00:43:53.354 It's just when you add a thousand of them together and tried to make a. 00:43:54.074 --> 00:43:58.213 Project pencil, then that's where things go wrong because it just doesn't work. 00:43:58.213 --> 00:44:02.774 You don't have that much money to split between all those criteria that are eating it up. 00:44:03.044 --> 00:44:17.414 Um, going back to my avatar for, uh, a new developer who's doing a midrise project and who's trying to put together, if they want to come to you and for some sort of partnership, either financing, jv. 00:44:18.099 --> 00:44:30.818 You name it, whichever would be possible, and it might not be on that one project, which is, which might be too small for you guys, but at some point in the future, they want to aim to come and talk to Jeff and say, listen, we want to do something with King Set. 00:44:31.449 --> 00:44:36.489 What would they need to have at that point in time to make them a good candidate? 00:44:36.489 --> 00:44:43.568 From your perspective, and I'm, I'm mainly, I know we talked about trust and track record and reputation, but I'm mainly also asking about. 00:44:43.789 --> 00:44:51.229 Systems, infrastructures and stuff like that is, do you think about that stuff or like what do you think about when someone comes to you and asks that question? 00:47:01.990 --> 00:47:02.980 Let me ask you this question. 00:47:03.430 --> 00:47:13.900 When you look into the future and or the current situation in market, are there any industry trends that you feel excited about that you see? 00:47:13.900 --> 00:47:14.680 You know what, yeah. 00:47:14.680 --> 00:47:15.880 We're in hard times right now. 00:47:15.880 --> 00:47:23.800 Markets are not, we need to be, but in 1, 2, 3, 5 years from now, this is gonna happen. 00:47:24.039 --> 00:47:26.555 Do you see any of those trends that make, that gets you going? 00:47:28.948 --> 00:47:34.228 Yeah, actually there's a lot i I am really excited about right now, I think in and broadly in the market. 00:47:34.288 --> 00:47:43.137 I think what's what's really cool is just, you know, we, we had this lack of expertise in Canada for people who were building rental buildings. 00:47:43.137 --> 00:47:56.458 Like there's, you know, there a small handful who've continued to do it over the last 40 years, you know, but a lot of new businesses that have grown and grown relatively quickly around rental. 00:47:57.268 --> 00:48:07.648 And more people looking to do more rental, you know, and it, and it's a lot different than doing, you know, a high-rise condo versus high-rise rental and needs a different skillset, you know? 00:48:07.648 --> 00:48:24.748 And so I think from an industry perspective, like it's super cool that, you know, we've got all kinds of people and businesses who are like learning and obtaining these skills, which quite frankly, you know, make you a better developer because you have to compete, you know? 00:48:25.168 --> 00:48:32.548 Take on a lot of risk, you know, articulate and underwrite very narrow margins, which you've gotta be perfect on. 00:48:33.268 --> 00:48:49.498 You know, and frankly, probably over a period of time, you know, the industry grew so much and probably got a little lazy, you know, were we competing head to head really well on, you know, some of the condo product, like, I'm not so sure. 00:48:50.097 --> 00:48:52.498 And so I think we're gonna emerge through this. 00:48:53.668 --> 00:49:10.018 You know, at a point in time where there are low, uh, limited amount of supply coming online, some rentals coming online, and then a whole industry that knows how to do this extra product type a whole lot better, you know? 00:49:10.018 --> 00:49:14.128 And so I think, you know, the customer will return. 00:49:14.668 --> 00:49:19.887 Um, it's an inevitability like Canada will continue to grow at some pace. 00:49:21.373 --> 00:49:24.403 Toronto is likely to continue to grow at some pace. 00:49:25.273 --> 00:49:33.343 Um, we will continue to have lots of old and obsolescent things that will be replaced with newer things as well, just, just out of obsolescence. 00:49:33.343 --> 00:49:36.103 So there's going to be like a lot of work to do. 00:49:36.583 --> 00:49:40.603 Um, you know, and I think the industry will emerge more resilient and stronger. 00:49:41.083 --> 00:49:44.383 Um, you know, and hopefully also on the construction side. 00:49:45.583 --> 00:50:08.323 You know, we'll have an opportunity to, for teams to sort of retool and reset and, you know, get their, A teams are great and they're busy and they're working, you know, and their B teams have an opportunity to sort of reset and get, you know, tighter and better so that you come out of it with two A teams and you know, that allows for a lot more productivity as well. 00:50:08.323 --> 00:50:12.103 So like, I think the future fundamentals in the market in terms of supply demand. 00:50:12.778 --> 00:50:13.978 Super favorable. 00:50:13.978 --> 00:50:20.818 I think as an industry, you know, you always emerge stronger when you go, you, you emerge from a tougher period of time. 00:50:21.298 --> 00:50:27.807 Um, you know, and we're picking up a skillset that, you know, not too many people had before. 00:50:27.807 --> 00:50:33.327 So, you know, I think in that sets a table for different creativity to do different things. 00:50:33.597 --> 00:50:38.472 Um, and so we should emerge doing a lot of really exciting things I think in the future. 00:50:39.745 --> 00:50:40.525 That's good news. 00:50:40.585 --> 00:50:41.664 Thank you for sharing that. 00:50:41.695 --> 00:50:44.184 Uh, we have a closing tradition on the podcast. 00:50:44.425 --> 00:50:57.625 Uh, we you a magic wand for about five minutes and we asked you to make a wish that wish, just whatever you like in terms of getting us in a better position. 00:50:58.405 --> 00:51:04.075 In terms of our housing crisis, affordability, and uh, it could be a change in regulation. 00:51:04.075 --> 00:51:09.835 It could be a policy, it could be a mind mindset shift, a paradigm shift, whatever you want it to be. 00:51:09.835 --> 00:51:11.215 What would that wish be? 00:51:14.023 --> 00:51:28.512 My wish would be that, uh, policy makers would recognize and prioritize housing rather than just say it. 00:51:28.932 --> 00:51:30.923 So there's all kinds of things that you can do, but. 00:51:31.573 --> 00:51:32.923 It's too much posturing. 00:51:34.093 --> 00:51:40.873 I would be ecstatic if people would just realize it was something they actually wanted to do and go do it. 00:51:41.503 --> 00:51:49.498 'cause the government can do amazing things when it wants to, and if it wanted to do something, it would've. 00:51:52.195 --> 00:51:52.675 Amen. 00:51:52.885 --> 00:51:53.275 Amen. 00:51:53.275 --> 00:51:54.325 Thank you for the wish. 00:51:54.475 --> 00:51:56.184 Thank you very much for being here, Jeff. 00:51:56.184 --> 00:52:01.704 I'm hoping that we can have a part two of this conversation in a couple years and have better news and 00:52:01.708 --> 00:52:02.008 good. 00:52:02.305 --> 00:52:03.445 conditions going on there. 00:52:03.775 --> 00:52:04.585 Thank you for your time. 00:52:04.948 --> 00:52:05.728 We'll get through it. 00:52:06.175 --> 00:52:08.575 We'll get together through it together. 00:52:08.605 --> 00:52:09.385 We're all in together. 00:52:09.505 --> 00:52:09.925 Thank you. 00:52:11.458 --> 00:52:11.847 Thanks.