NIC Chats Market Conditions Podcast with Zach Bowyer

Beth Mace (00:03):

Hello, and welcome to the NIC Chats Market Conditions podcast series. My name is Beth Mace, and I'm currently the Senior Advisor at NIC focusing on the economy and capital market trends and implications. Thank you for joining us today. The focus of this series of NIC Chats podcasts is talking to experts and industry leaders impacted by today's property and capital market conditions and trends as they pertain to the senior housing transaction market, property, pricing, deal flow, and market sentiment. As you listen today, hope that you'll find some insights and ideas that are relevant to you in your business, be it as an operator, developer, banker, private equity provider, public entity, or other capital provider. Zach, before we begin, I would like to thank you for participating in NIC's Fall Conference, both as a member of the planning committee, as well as a panelist on the State of capital markets and Valuation panel. NIC very much appreciates your support and time commitment as a volunteer to help us deliver timely and informative content. So now, Zach, tell us about Cushman and Wakefield and your position there as a senior managing director in the evaluation and advisory living sector.

Zach Bowyer (01:12):

Thank you, Beth. It's always a pleasure just chatting with you about the mortgage, sharing ideas and really working together to try to get smarter. So thank you for having me. So Cushman and Wakefield, I've been at Cushman and Wakefield for almost two years now, and I lead what we call our living sectors on the valuation and advisory side. So, living sectors, that's basically your conventional multifamily, and then all of the subsets underneath student housing, manufactured housing, affordable, etcetera. In the seniors housing space, I specialize almost exclusively there for about 20 years. That is my core competency and really where my passion is from a commercial real estate standpoint. Just to give you an idea on the volume that we do on an annual basis, we'll do, I guess this year within that, within that business line, we'll do around 9,000 valuations and advisory type assignments.

Beth Mace (02:19):

Sounds like a lot, and I bet that keeps you and your team pretty busy. That's a lot of valuation. So I know that, as you just said, you're involved with both valuations for, as you call it, the living sectors group, but that includes multifamily and senior housing, and I think you have a pretty unique window into these property types and their trends as well as the activity of capital and transaction markets associated with these property types. So tell us a little bit more about that in terms of what you're doing for multifamily and then senior housing and how they compare, and we'll get into more detail of this in a minute, but just a brief overview of that.

Zach Bowyer (02:53):

Yeah, I mean,I think at a very simplistic form, everything, I mean, it starts with, starts with the real estate. But I think when you're digging into seniors housing, and really where that differs is the operating and bus operating business that's in place is much more impactful. The valuation you have, not only a more frail population base that requires care. You have a more regulated type environment, especially as you move up that acuity up that acuity scale. And I think that not only that creates more risk from an investor's perspective, but a lot more certainty and expertise involved in managing those properties.

Beth Mace (03:43):

Okay. So we're gonna dive into that a bit more in a minute, but I just wanna talk a little bit about what's been happening recently, and probably most of our audience is aware of this, but a lot has happened in the capital markets since March of 2022 when the Fed started to raise their interest rates. And today the Fed funds rates in a range of five point a quarter to 5.5%, and that's up from virtually zero in March of 2022. The Fed acted quickly to raise interest rates in an attempt to slow the overall economy, to take the strength out of inflation. Inflation was up to 9% at one point last year. And there's a lot of debate as to the causes of inflation, but again, it's been, it's been quite high, but recently we've seen it slow down to, well, in September to pays about 3.7%.

Beth Mace (04:29):

Now at the FOMC meeting, which actually just happened on November 1st, the Fed decided to keep interest rates flat, but it did indicate that it would mean data dependent in making its decisions until inflation comes down, and that it would be higher for longer sort of the Wall Street Creed right now of what the fed's doing. And then on the other end of this, of the yield curve, we've seen the 10 year goal past 5% the end of October, and that was its highest level since 20 2007. So you specialized appraisal valuation and clearly interest rates affect cap rates and it affects valuation. So how has this higher interest rate environment affected valuations for multifamily and also for senior housing in particular?

Zach Bowyer (05:15):

Sure. It's really interesting. I think that there's certainly across the board for all commercial real estate, there's the current capital markets environment, rising interest rate is putting downward pressure on valuations across the board, some more than others. For seniors housing specifically, I think it's a little bit of, in terms of the impact on, on valuations, a little bit of a double whammy, the seniors housing sector. I've been in the space for almost 20 years now, it really through prior recessions earned a reputation for being relatively recessionary resilient. And a lot of that was the more need-driven demand component. Well the last we can we'll call it a recession or downturn during covid 19 really tested that, recessionary resilient reputation for seniors housing.

Zach Bowyer (06:17):

So, we all know a lot of the headlines and it's still fairly recent, so we understand the impact that it had on occupancy for seniors housing. And then also staffing coming out of that, staffing shortages, rising cost on that side really hit operating margins hard and also I think added or brought back a lot more increased that risk perspective that investors had on the space because of that, that environment. So you couple that with the rising interest rate environment, decreased margins, and then what happened for occupancy. I think that just that overall environment and those fundamentals really had a combined impact on, on valuations more than multifamily, a pretty interesting parallel I guess during that time or lack of a parallel coming outta of the covid environment performed really well.

Zach Bowyer (07:27):

Rental increases were near all time highs, vacancy levels, near all time lows. I think if you had a penny during that time, you were putting it in industrial or, or multifamily. So from that operating certainty standpoint or certainty and cash flow standpoint, multifamily became much more, much more attractive than seniors housing. So I think seniors housing valuations did adjust even a little bit quicker, the multifamily to the current environment, but there still is a lot of uncertainty out there.

Beth Mace (08:10):

So you and I have both been in the senior housing business while, so we've seen the yield premium change over time or multi-family versus senior housing, especially when you compare that against the 10 year risk-free rate. So, for a while that yield premium between multi-family senior housing had actually shrunk pretty significantly, and you were seeing the pretty narrow differences between multifamily and senior housing. So, as you just pointed out that the risk, perspective on senior housing has changed since covid. So any sense of what that premium is today versus what it might've been prior to covid?

Zach Bowyer (08:46):

First it's such an interesting conversation because conversation and, I think that the narrative of our aging population, that's always a high discussion point, just so much more transparency in the senior housing sector from an underwriting standpoint, from an operational standpoint, I really think it was slowly we were saying that premium declined in terms of price points that investors were willing to pay for multifamily versus for seniors housing. And so I, you sent me a research paper that you wrote in 2013, and the first three bullet points, I think really speak to that. Number one, you say both asset classes share the same stable cash flow. Well, at the time that was certainly the case, and that was certainly the case leading into leading into covid coming outta covid.

Zach Bowyer (09:54):

I just discussed, we had for seniors, housing occupancy stalled quite a bit and now a lot of uncertainty around operating expenses and where stabilized operating margins are gonna be for seniors housing. Then your next bullet point, both asset classes have very attractive growth outlook. Maybe long-term, yes. But right now I would argue that that's probably more weighted towards seniors housing. I think that multifamily, a lot of construction took place, as I mentioned. I mean, if you had a penny, you're putting in multi industrial, and I think that sector right now, there's, there's a little bit of concern with short-term supply growth. What that's gonna do to vacancy well

Beth Mace (10:42):

Isn't in fact that, aren't there most number of units under construction and multifamily right now that we've seen in quite some time?

Zach Bowyer (10:47):

Absolutely. Absolutely. Now that's, similar to see, seniors housing construction starts are down significantly, and we think those, those units will be absorbed and that will return. But we're seniors housing as it's right now, the NIC data would suggest that the number of occupied units are at an all time high. We went through a period with really strong rent growth, and I can tell you from the valuations that we're conducting, we're still seeing actual rent growth 5, 6% and even in some cases into the low double digits.

Beth Mace (11:21):

So that's not projected, that's has occurred in those properties that you're valued

Zach Bowyer (11:25):

Happening on the rent rolls and still being budgeted in a lot of cases. So I would say, looking at that bullet point, I would go back to the seniors housing side, really strong short-term growth, long-term for both of them. But right now it's, I would put the scales over on the seniors housing side. And then the third bullet point that you mentioned is both asset classes are in a position in which near term supply will not match demand. So just kind of touched on that a little bit for multifamily. We can get into that a little bit more for the senior space. But you and I, as I have also discussed, I mean, it's, since the 20 years I've been in the sector, the baby boomer segment has always been a hot point. The reality is that segment of our population is now literally at the doorstep.

Zach Bowyer (12:14):

For me, just looking at capture rates, historical capture rates, and applying that to the population growth, right now, we would need to increase our construction deliveries by around 35,000 units a year to meet peak demand levels. So we had so much certainty in the market and seniors housing leading up to covid and those spreads were compressing. I think we were started looking independent living cap rates, as little as 25, 50 basis points above conventional multifamily. I think now that spread has widened for some of that operating uncertainty that we're seeing, and now anywhere from a hundred, 125 basis points spread.

Beth Mace (13:06):

Wow. So that's, that's a lot. So given the, sort of the positive prospects as we sort of move out of this current capital cycle that we're in right now with capital constraints on and interest rates and availability and cost of debt, do you think that spread will narrow back to where we were, the 25 basis points for IL from the 125 today?

Zach Bowyer (13:27):

I'd like to say yes in the near term, but I think it's gonna take a little while. I think that one of the things, just looking back at, I think you mentioned the 10 year treasury, well, in Q three, I know it average, the average, 10 year was was 4.3, 4.38.

Beth Mace (13:51):

About five now. Yep.

Zach Bowyer (13:52):

Yeah. So the last time the treasury was at that level was during the GFFC in 2002, where it was right at around 5% during that time cap rates for seniors housing, average, as according to NIC average around 8.1 and pushed up to 9.8 a peak of 9.8 during that period. So I do think that we're gonna continue to see some pricing adjustment in the seniors housing space. I think it's gonna be a little bit more impactful than for multifamily. But I think long term, I think that there's a lot of innovations that are going in place in terms of care delivery models, operating partnerships, and just innovations and technology that will help bring, operating margins. I know if we'll get back to pre covid levels, but I think we'll improve from where we're at today. I think the certainty and operations will return. And I think that when that net demand, when that demand really hits the market, and that's realized by investors, I think we'll once again, start to see those spreads compress.

Beth Mace (15:05):

Yep. I actually agree with you on all of that. So in terms of valuations, how are the inputs or assumption changing today, versus where they were, take any timeframe you want in the recent past or the longer past and what are you seeing in terms of entry and exit caps? What's that spread? What are your kind of rent assumptions? Are you using occupancy projections? So if I were to do my own valuation, what would be some of the key assumptions I'd wanna think about and how would I adjust those to take into account today's positions?

Zach Bowyer (15:40):

Yeah, so we, I've been conducting that investor survey now for about 10 years. We just completed, the first survey that...

Beth Mace (15:53):

Before you go there, can people get that, get a copy of that investor survey?

Zach Bowyer (15:57):

They can, yeah. So we'll send it out. I'll shoot one over to you. It should be published next week. But we sent it out, well, we got a little over 90 respondents, but we only include people who are transactional and focused in seniors housing. So we want sediment from actual market participants who are at that front line, and those are a lot of the questions that we ask. So I can get into some of the responses there, but I can tell you, it is a very highly debated topic right now in terms of where exit cap rates are at and what type of methodology that we're using to get a value in a more stabilized market. It's very simple. We look at market transactions, market sales, we extract the cap rate and we apply that to,

Beth Mace (16:45):

Yeah, so market comps, but limited comps today 'cause of the limited transaction volume.

Zach Bowyer (16:51):

Well, that's very true. And I think that even and we're not seeing a ton of distress, we can get into that, but even a lot of the transactions that we are seeing, there are other factors involved, consumable debt, different types of joint venture investments and other things that you really have to know the details of that transaction to understand that the true cap rate or pricing on the other end. So really what I think we're getting back to is very similar to how we were evaluating properties during covid, where we're relying a lot more on the discounted cash flow analysis, so we can get a lot more certainty where in the property market fundamentals where occupancy is what we're seeing for rent growth, and then we'll rely back to your discount rate.

Zach Bowyer (17:44):

And interesting, I've never had more discussions around what the right terminal cap rate should be then in this environment. And a lot of that, I mean it's, I think it's the debates revolve around the uncertainty on real where interest rates are going. So I think if you're in the camp that,this higher interest rate environment is a little bit more short term, you're getting a little bit more comfortable with a lower or lower spreads in your terminal cap rate above your going in cap rate. I think now probably the majority of the sediment is higher for longer. Right? So that kind of influences where your exit cap rate is, I could tell you from the survey respondents, the majority of them were underwriting a terminal cap rate at anywhere between a 50 to base, 50 to 75 basis points spread over your going in cap rate. And I could tell you that we're still seeing even as low as a 20 basis point spread.

Beth Mace (18:51):

So what would that have been, say, prior to March of 22 before the Fed started raising rates? Would that spread between entry and exit cap rates been flat?

Zach Bowyer (19:00):

I wouldn't say flat. It would be closer to probably more normalized spread would be 75 to hundred basis points between you're going in and your terminal cap rate.

Beth Mace (19:09):

So that's not very different from today then.

Zach Bowyer (19:11):

Well, I would say, I would say it's compressed, so you're going from on average probably about a hundred down to about 50 basis points, so 50 basis points reduction and your terminal cap rate. And I would say for senior solving, again, a little bit of that would, would be your, your outlook on what's gonna happen with interest rates over the next five to 10 years. But then I think too, a lot of people will point to the stronger property market fundamentals where we think occupancy's gonna continue to improve. We are seeing on a lot wider scale improvement in operating margins. So that's good. And all of those things depending on which lever you wanna pull would point to more favorable pricing on your exit.

Beth Mace (19:58):

Okay, good. How about rank growth assumptions? So in my prior career, I spent a lot of time on rank growth assumptions as then put into models. So typically we used to see like 3% type rank growth, but in the last couple years, according to the, some of the data that NIC MAP Vision has, we've seen a growth in well excess of 3%. The latest NIC MAP Vision data shows like a 6% year over year rank growth. And then of course it goes much higher and narrow depending on who you are and where you're located, who's operating. So when you make doing evaluation and making that assumption, how do you think about rent growth? Do you take into account the market? Do you take into account the operator? How does that work?

Zach Bowyer (20:44):

Absolutely, absolutely. So we're looking at the market, we're looking at the operator, we're looking very closely at the rent roll, what's being achieved in the more recent contracts. It's challenging though on the valuation side, even at a property for example, where maybe we are seeing six 8% rent grow we're not gonna be able to underwrite that for the long term. We might go to four or 5%, which is extremely aggressive from an appraiser standpoint. But what that does do is when we see that strength in operating performance, it allows us, I don't wanna use the word aggressive, but it allows us, we'll kind of, we'll get a little bit more room in our capital market assumptions. So for our discount rate, our capital, our cap rate, so that's what we do see, and maybe this is just my methodology and my perspective, but the banks that we're doing valuations for, even a lot of the funds, will have probably more muted long-term rent growth assumptions relative to what we're seeing in today's market.

Zach Bowyer (21:51):

But on the flip side of that, that does reduce the risk in that when the current performance is greater than that. And we'll reflect that probably more on our capital market side.

Beth Mace (22:02):

Yeah, and I think some of the rent growth that we saw in the last year is related to the fact that we've been in a highly inflationary environment. There are a lot of revenue growth that was justified because expenses has gone up so much for PPE and things like that. And I think in social security increase, we saw an 8.7% of social security increase as we went into January of 2023. That's gonna be 3.2% as we go into 2024. So, overall inflation has slowed down a little bit and, um, we'll see how that translates into rents. So when your crystal ball, I don't know if you have a projection, when do you think, or what do you think the Fed, what, when are rates gonna change? When is this capital market period gonna start to end, the turmoil start to,

Zach Bowyer (22:45):

I have no idea. Yesterday rates remained flat, so I think that was good news , yesterday

Beth Mace (22:54):

Being November 1st, which was when the Fed met. Yeah. Just for, yep, yep.

Zach Bowyer (23:00):

So I really dunno. And it's a highly debated topic and there's a lot of very convincing research that points in different directions. I think for me, the way I approach it and what I see in the market right now it's really, we're leaning on what we do now and that's the property market fundamentals. I think that we're, I guess one of the things that is, if you really started to see a lot of the stress truly at the market, which with, and that is certainly a, a lever that can be pulled to get that back under control. And I think there are a lot of headlines around the stress. We're certainly seeing, that in the office space. But, and we can get into this if you want in more detail, but I really don't see at least in my practice, the level of distress in seniors housing that a lot of the headlines might suggest.

Beth Mace (24:24):

Yep.

Zach Bowyer (24:24):

And I think as long as that's the case, I think that the Fed will be comfortable. And, and same, very similar with multifamily and valuations are certainly impaired and returns are getting pressed, but there's, there's not fire sales, not at all levels that we've seen in past recessions in terms of what's happening in the real estate markets. And so, until, or as long as that's not the case, I think the Fed will still, or I think the expectation would be we're, we're in this environment for, for a little bit longer.

Beth Mace (24:59):

Yeah, I mean, my viewpoint is that we're in higher for longer as the Fed has been saying, and I think there will be a time probably sometime in 2024 where rates will come down, but we're certainly not going back to like a 0% interest rate environment again. Yeah, I mean, if they had to settle back down, I would think in the three to 4% range from maybe today's five to quarter percent range, but a lot of things have to happen for that, to her foremost of mine that would be inflation has to really get down to that 2% target that the fed's seeking. So Zach, I know you, Cushman you guys track, loan and loan levels and loan maturities, and you and I have shared data that looks at low maturities coming for senior housing in the next, this year and next. And I think what's the latest value hub on that, and how do you think that's gonna play out?

Zach Bowyer (25:49):

Yeah, so we're up now, so in for seniors housing, low maturities, we're tracking 18 billion in low mat that are set to come due over the next two years.

Beth Mace (26:03):

So that's, that's the rest of 23 and 24 or 24 and

Zach Bowyer (26:07):

25, 24, 25, yes. Or 25. I don't know the ratio for seniors housing for multifamily, I think off memory, I know this is being recorded, but don't quote me on it. I think about 40% of the maturing debt is floating rate mortgages.

Beth Mace (26:27):

Just for perspective, I think that multifamily is like 250 billion, right?

Zach Bowyer (26:31):

It's,yeah. And then I think what, where is that? I've got the number overall.

Beth Mace (26:39):

For like the overall commercial real estate. Yeah, yeah. The, I mean, senior housing is fairly relatively small segment. So, relative to the amount of loans that are maturing across all commercial real estate, small, but for our industry that $18 billion over 24 and 25 is significant. So yeah,

Zach Bowyer (26:59):

We're tracking 90 billion overall for all commercial real estate just within the next 15 months.

Beth Mace (27:04):

So, and that includes office

Zach Bowyer (27:07):

That Yes, that's all, all asset classes.

Beth Mace (27:10):

Wow, okay. So, and that's 15 months and we're looking at 18 billion for two years in senior housing. Yeah.

Beth Mace (27:17):

So, is that gonna, cause you think, is those loans mature and it becomes more difficult for some operators and owners to refinance because rates are higher. Some of those are adjustable rates and they require caps, interest rate caps, and there's also typically lower proceeds. So if you look at that makes it a difficult time to refinance right now for some operators at least. So how is that gonna affect the market, do you think? And will that have an impact on valuations as well?

Zach Bowyer (27:52):

I mean, we think it will, and we think it'll, we think there's potential to maybe even bring some clarity to the market, for better or worse, I think that those loan mat are gonna force people to make tough decisions. The banks are are gonna say, look, we need to move some of this paper. And I think as an investor, you're gonna make the tough decision. Do we wanna do a cash in refinance? And what does that do to our investment returns, or do we wanna go ahead and take our loss. And I think that you will see more properties come to market. I think some people will stay in for various reasons.

Zach Bowyer (28:43):

We are though. Interesting. We have a lot of calls with appraisal departments at various banks and it still is really hard to get a pulse on what direction that's gonna go. We're hearing that a lot of banks are still willing to extend and work with their borrowers. I I think that in the larger commercial real estate bond, again, despite the headlines that we're reading about seniors housing it's a smaller percentage of their book. And from an operating standpoint, it's not, it could be worse. So I really don't know. I mean, that was kind of our thought that those maturing loans would really force a market again and help bring that disconnect between buyers and sellers together. Give a little bit more certainty in pricing. And maybe that will happen. We'll, time will tell at to as to what level.

Beth Mace (29:49):

So that could be a catalyst to get the transaction market moving again. What might be other things, I mean, my expectation is that NIC MAP Vision had data in terms of transaction volumes through the third quarter. It was pretty weak relative to what we had seen in prior years. So the expectation is that things will start to move more in 2024 buyers and sellers that bid ask spread will start to narrow. There'll be a little bit more transparency in the market. Some of the closed end, equity funds are gonna have to sell because they can't extend their life any longer. There is some degree of people needing to sell because they're investors want their returns, they want their cash back, they wanna reinvest. So what might be other catalysts you think to get that transaction market moving

Zach Bowyer (30:37):

In addition to the points that you just made? I really don't know.

Beth Mace (30:43):

Are you seeing like any cash deals that people are trying to get off their

Zach Bowyer (30:47):

Cash deals, but there's, I would long the transactions that we're seeing I I'd three different buckets. So on the distress side where we're seeing, a lot, like the number one question I got asked NIC, are you seeing a lot of distress and where's the pricing on that distress? And the distress that we're seeing is probably at the larger scale with the largest discount are older properties, B minus, investment BC class that were not performing prior to Covid. And so the banks are the banks are liquidating those and very, very significant discount on those properties. A lot of them, however, are being purchased for some alternate use and their behavioral health or, but massively discounted. Right. And, but I would even, I would question as even if the best operator could go in and get a healthy margin outta those properties, right? So those are easy ones. The banks and investors are moving away from those.

Beth Mace (31:53):

So in those repositionings, are you seeing, there's a lot of talk about taking some of those properties and repositioning 'em for middle market. Have you seen any of that yet?

Zach Bowyer (32:01):

I haven't seen much middle market. I haven't seen most of it is some sort of smaller medical office, behavioral health, something along those lines, even just buying it for the dirt and, and holding it. But I would go, I would say, and these are smaller, smaller properties, again. I think that you would just, you would be hard to get a margin outta them with a really great operator, then the next bucket would be, and we're not seeing a whole bunch of this, but what we're seeing would be, say,10 year and newer vintage that, took a pretty big occupancy hit during covid and just hasn't been able to recover. So we're seeing a little bit of that and or properties that were recently delivered, maybe on the tail of covid or recently entered in lease up and just can't get over that hurdle at enough time. And those are coming to market and, and being discounted. I would say that for the very limited volume that we're seeing there, probably a discount of 70 cents on the dollar,

Zach Bowyer (33:27):

I think on average. But anything that's and there's something involved there that's really kind of forcing that sale. I think if people have capital, then they're gonna lease up the property. I think that even with stabilized properties where say you're reaching your investment, you need to sell, I think right now people are doing everything they can to not sell just because of that, that disconnect. And what buyers are willing to pay.

Beth Mace (34:00):

Alright, so that's on the seller side. On the buyer side, there's some, large institutional investors out there, pension fund money that came through. There's the public REITs that are out there, the private REITs that are out there. Any sense of what the buyer profile is like as we go into 2024 versus where we've been? Or has it changed at all? Maybe not.

Zach Bowyer (34:22):

I think right now, so again, going back to our survey, what we saw in terms of the two most prevalent strategies for investors was core plus and then opportunistic.

Beth Mace (34:35):

Oh, okay.

Zach Bowyer (34:35):

So I think that there are core plus investors for stabilized Class A properties. I think the pricing on that is gonna be right around a seven cap. I'll still get emails from brokers and other investors asking if we can support anything below a seven cap. I'm not sure we can in this environment.

Beth Mace (34:56):

Yeah.

Zach Bowyer (34:57):

But those numbers are at least I guess you could assume are being discussed.

Beth Mace (35:05):

And then on the opportunistic side,

Zach Bowyer (35:07):

Thank you. And then on the opportunistic side, I think that's where there's still a big buyer seller spread. I think there's certainly a lot of capital, probably more dry powder than we've ever seen. Not only for seniors, but commercial real estate as a whole. Right now, I think the most recent data is about two 70 billion, dry powder on the sideline. A lot of that is opportunistic. And that also applies to seniors. I think those investors, they're seeing a lot of deals. They're willing to make low offers, but they're also willing to move to the next one because their sentiment is there's a lot more behind this deal.

Beth Mace (35:49):

Okay. So in wrapping up a bit, if you had a one or two sentence just, one or two minute description of where you think we are, can you give us your view? It may look at market fundamentals versus capital market stresses and things like that.

Zach Bowyer (36:04):

Well, that's exactly it. The senior living sector, it's at a very interesting inflection point. Property market fundamentals are stronger than ever with even stronger secular tailwinds. Construction starts are at an all time low, and I think the market still underestimates the magnitude of demand that's literally at the doorstep. On the other hand, as you mentioned, we're enduring one of the more challenging capital market environments. The rising cost of debt, lack of liquidity in the debt markets is certainly stressing short-term valuations. Valuations, I think they will reset. Operating margins will improve and capital will be recycled in today's market. However, it's all about the basis.

Beth Mace (36:56):

Very good. All right, Zach, thanks so much. I really appreciate you taking time and I'm sure our listeners will really enjoy this podcast. It's been really informative. I love the discussion and comparing multifamily to senior housing and your summary marks and the details as well. So thanks very much. Appreciate it.

Zach Bowyer (37:11):

Thank you, Beth. You're the best. It's always a pleasure.

Beth Mace (37:14):

Alright, thanks sir.

Zach Bowyer (37:15):

Bye-Bye.