The Way I See It

While it seems that the news gets worse and worse every day, stocks down, real estate values down and going further, corporate bonds priced at all time lows, unemployment at historical highs. Its bad, BUT if you look back through history, all the greatest companies have had their breakthroughs in bad economic times.

The way I see it. How could we ever make any money in an economy where we were buying buildings at prices that yielded returns lower than our cost of debt. That means we need to pay to own the building. But its even worse because the debt was at all time lows so interest rates had no place to go but up. Our residents were moving out to buy houses with $250,000 mortgages that were easier to obtain approval for than our credit apps for $700/mo apartments.

Lucky for us that's all changed. Apartment buildings are now priced for profitability. We can now buy buildings that cash flow and depending on when the economy kicks back in, we may even see some appreciation. BUT, it gets even better. Residents can no longer buy $250,000 homes (or even the same house for $150,000) and get 100% loans so they are staying with us longer and longer. Additionally, many sellers bought long term assets (apartment buildings) with short term money (3 year) so now they need to pay back lenders and can't. So what should be priced at $10 Million has to be sold for $8 M. There is some amazing opportunities to be had in these times.

From an operational standpoint the opportunities to work with vendors and suppliers are huge. I have personally witnessed firms offering 30-50% discounts to keep our business. On top of that our new lean management structure has significantly reduced our operating costs.

So the way I see it is this recession is not only forcing us to be a better more profitable company, but also creating buying opportunities that will lay the foundation of our growth into 2010 and beyond.

Let's make it happen.
Nick