The Exchanges

Q you know, inexpensively. And, you know, now you're going to amenitize it, which really is sort of all the way back to the Sam Zell thing of like, well, we're going to take this thing and we're going to make it cool. And then, you know, the kids, whatever people are going to want to want to be there instead of One of these other jury. Did I do okay?

A You did great. But we want to be there too, right? I mean, I think that I learn a lot from being around younger people. And I think that the energy of creating, whether you're amenitizing or I love the, um, I love the flip. I've, I've done the, the flip myself and, uh, yeah, I mean, I think being a shape shifter, I like all those things, and I do love the hotel. I, I am so excited about her. I can't even stand it. We had, ah, about a hundred people in Chicago. I called them the champions of Chicago, and one was a broker, and one was an architect. Um, another person was an association person, and this was right at the beginning of December, and we just filled everybody with all the good things. The news, it's really hard to listen to the news, Because, you know, it's like if it bleeds, it leads, and it's become such a negative society. But honestly, Paul, I think the world has never been a more interesting place. It doesn't mean that it's easy. I said interesting, where people are learning to collaborate, right? Today, in the beginning, it was very lonely for me to do deals by myself. Today, I love that word collaboration. I love the fact that in the hotel, I, I probably have five or six people that I enjoy at every level. And what do I love most? I love the fact that I don't have to watch that asset full time myself. We get on a call Monday morning, or I touch base with my part…

AI assessment note: “You did great. But we want to be there too, right?”

Q You hire him as a consultant, as well as an installer, right? I mean, your project manager should set the standard for the whole house, right? If that's the way you're going to go, right? He should be, he's the guardian of the stand. He, he communicates with you. He finds out the way you want to live your life and he creates that for you.

A And look at, it's not to say that there, there's not some heartburn because You know, like I said, the HVAC turns out to be a fix. It's way easier than I anticipated. And now here's one that's not. I, I have such a great network of realtors and developers. I go, give me your best plumber. Best plumber comes out. He goes, yeah, no problem. I know why you got to just do this thing and that thing. And I'm not listening. Like you're the plumber. I'm not a plumber. Like whatever was wrong. To get it right. Do that thing. Yeah. And how much does that thing cost? And they're like, it's five grand. I go, great. Let's do it. Five grand. I have hot water throughout the hall. Yeah. Because, you know, you've got the industrial size instant on, and then you've got the regular size.

AI assessment note: “give me your best plumber. Best plumber comes out.”

Q But, but if you had a long-term rental in that market and you're like, you know what? I've got a tenant leaving. Uh, maybe I can convert this to a short-term rental and capture the demand while the demand's hot and get a few years of outsized returns.

A Sure. Sure. Absolutely. Uh, another thing that impacts, uh, so you talked about, you know, obviously there's supply and demand, right? And then there's cost of the property. These are the, these are the fundamentals. One of the other things that That I believe greatly impacts, uh, the short-term rental business is, uh, is regulations. Um, and so, you know, and I've got, I've got my own theory, you know, so I'll tell it to you, and you can, you know, that's why, that's why we have smart people on, like you on the podcast, is that just me talking to myself, because you, I invite, I invite you to call BS. Um, You know, locally a market, for example, like Palm Springs, and I am winging it a bit, because I don't, I don't own a short-term rental in Palm Springs, it is nearby, but they suddenly got very, ah, very restrictive on short-term rentals. In LA, again, not something I follow, but I am here, and I think there are parts of LA that just, you know, say no short-term rentals at all. So, if I bought based on short-term rental demand, and Uh, and revenue and cost. I did all that great data research, but then the regulations change. Um, how, how can you, do you build that into your model at all, or you just put like a caution flag? How does that work?

AI assessment note: “One of the other things that That I believe greatly impacts, uh... is regulations.”

Q property. Um, And then, and then, you know, as it started to get larger, then there's sort of groups of properties. And so you can do a syndication that has, you know, like we have a short term rental syndication or have a new homes syndication as a different, each one has a different philosophy. How, how many, um, how many of these separate little entities are you putting together?

A Again, it depends on, uh, now that we're getting more into the institutional and family office side, we will probably have even just individual families who want to want us to put a collection together. They may have it right now. Most of the stuff, because it's by shares, it sits in storage. Um, but when we have families who come in and they want us to put something together for them, we'll put a collection together for them. We'll manage it for them. We'll let them know, you know, this is what we think it's worth at this point. Do you want to get rid of it? What do you want to do? Or if it's a family office, same as that same, same kind of structure. So right now, um, that's what we're doing is right now our, our lots are about six or seven paintings per collection. Um, and then if, if, or when we have families come in, which we, we have some, some money transferring now, um, from some larger families, then we'll either do a collection for them on their own, or if they want to get into just shares, they may want to own a share of, you know, 50 different paintings, and they have the access to do that, right? So the best, the best story is, you probably know this one already, Hugh Grant bought a, he had a big regret. He bought a 2.5 million dollar Andy Warhol. And he said, I just, I didn't know what I was doing. I, I think he felt sick about it, he said in his interview. And, b…

AI assessment note: “right now our, our lots are about six or seven paintings per collection”

Q anything like that overnight that, that maybe COVID, but even with COVID, it was a lot of uncertainty in the beginning. We didn't know how it was going to play out. Now, thank God for the interest rates, you know, the interest rates dropped, so that helped us out there. But, but other than that, I don't think you can see another event. Can you? Oh, wait, took time too.

A Yeah. Well, also, as bad as oh eight was, um, You know, it's still recovered pretty quickly. And again, uh, when you look at a market as a whole versus, versus buying smart. So, you know, and I'll give you, I'll give you an example. The average, the average investor is walking into, you know, the average shop and getting the average financial advisor and they're buying whatever. And if it's not an index fund, That's, has less friction because you could go to a discount shop. So here I am and, and I'm, I'm not, certainly not qualified to give, uh, stock advice for sure. But, you know, from the stuff I'm reading, it seems like it would make most sense to stay away from the, you know, active investors, you know, go to, go to the least expensive shop Where the buys and sells cost the least and, you know, buy the, buy the index fund and hold on, and that way you will at least very close to perform with the index.

AI assessment note: “as bad as oh eight was, um, You know, it's still recovered pretty quickly.”

Q Why would their algorithm not do that? One asset's going to make them money. They're only on one platform. They're always booked. The other asset has a bunch of days blocked off because of owner blocks or another booking website. Why would they not prioritize that one?

A Yeah. I never thought of that. I also was thinking that you said the two, the, the Airbnb has, you know, two, two prongs they really need. And I was also wondering if there was a third, which is to Uh, keep you from stealing the guests, but that sort of does it already, what you're talking about. That's built in. Built in. Built in way to, because I was thinking, like, you know, how's Airbnb gonna hide the guest information from you, and they can't really do that because you're gonna have interaction with them, so you grab their information. Anybody that's smart is gonna grab their information. And so how are they gonna protect that? But the answer is...

AI assessment note: “Yeah. I never thought of that. I also was thinking”

Q to a company through your work as you're working, right? Um, if you want to be paid 500,000 dollars a year, you've got to be adding two million dollars worth of value to the company. I think about that across any career, across any transaction. What value, uh, are you bringing to the table? So where do you, uh, where do you add value, uh, to, to an art transaction?

A Okay, so that's a great question, and art can be had and looked at in a couple of different ways. It can be looked at as a casual collector, somebody that sees something they like, oh, they like the way it looks, and while I, I never say, or I always say, you don't match Art to the drapes. Right. Some people will like something, and they'll, they want it, and that's one way of looking at art. Another way is, uh, you, you become a serious collector, and you kind of know what you want, and you know what makes you happy, and you know what's a good investment. Thirdly, is the investment factor that I just talked about, which is art as an asset. So, you know, in a, in a complex and opaque, um, market that the art world is, you can either find a way to buy things. I'm going to use the word at retail or things off retail. And the best way that I can relate to it, which will kind of answer your question is, um, the hype and fashion, the Birkin bag, the hype and jewelry, the Rolex Daytona.

AI assessment note: “the best way that I can relate to it, which will kind of answer your question”

Q the dinner, I started looking them up. I'm like, Holy shit. Fuck this guy. Like he's built a real business. Cause he was like an actor and he's like really entertaining. Uh, so if you're an accountant and you're selling your, Hey, I mean, AI may be after you, but, but if you're like just a small business, how do you tell your story? How do you get out there?

A Um, And I love it when, ah, I love it when I have guests because I, that, that I really, um, I want to learn from. So I'm going to ask your advice, ah, on, on a couple of things. Um, but one of the things, you know, we, we have a mutual friend, Nicole Lappin. Um, that's how we got connected, who has a tremendous show, Money Rehab, and, and she, I didn't realize until I went on her show that she can be, she can be tough. You know, I forgot that I didn't, I didn't realize that of her, you know, six bestsellers, you know, three of them had the word bitch in the title. Um, she's super nice. We, we know that, but, but she's, she's not going to throw softballs, uh, you know, the whole time. So what she came at me with was, um, you know, real estate. You know, during this period of time, and she's got the stats, I don't have the stats, you know, the real estate during this period of time, you know, long period of time, decade, 15 years, whatever it was, has, you know, appreciated on average four percent, uh, per year, and, you know, S&P 500, uh, uh, you know, is 11 and a half percent during that same period of time, so why in the world would I invest in real estate and, you know, why would I even own a home that's rent? And, you know, put that money into, into, uh, the stock market. And the, the answer that I have for that is that, um, so first of all, in that four percent, there's pe…

AI assessment note: “we have a mutual friend, Nicole Lappin... So what she came at me with”

Q Um, how do you allocate between emerging and something that's really established?

A That is something we will put our heads together on. That's where the yin and yang comes together. So he'll come to me with specific, uh, opportunities. They're always, they're always incredible opportunities. And he knows my mandate is don't, we're not buying something that's going to go up just a little bit because these people are expecting some kind of return. Even though the pieces are beautiful, they're cultural, they're legacy building and state building and so on and so forth. We do need to find a return. So he knows that that's the mandate, especially as he's become the PM for us. Um, so we will come together and make the decisions on that. We'll have lots of meetings because I'm in Toronto most of the time or Mexico. Um, we'll have a lot of phone meetings. I voice note he doesn't, but that's okay. I'm getting them there. But we have a lot of meetings about that. Um, I've got a piece. I've got this going on. What do we have in, you know, and so on. So there's a lot of communication that goes on between he and I, and as the team grows, that will continue between, I think just he and I, uh, because we're the two main principles there.

AI assessment note: “That is something we will put our heads together on. That's where the yin and yang”

Q other artworks because told them the truth, gave them really good service, stayed on it with them, even though sometimes you can be discouraged when they pass on one or two or three artworks. Do you, do you think their legitimacy that they really want to buy that artwork or are they afraid of the price point or whatever it may be? And, you know, now they're a great client.

A Do you have clients that, like, if you have, if you have a piece of art that is really undervalued, so somebody needs to sell something. I know, I, I know from conversations we've had and opportunities that you've told me about, it's like, hey, somebody really, you know, they, they want to sell this. They don't, they, they could put it up for auction. They don't want to do that. They don't want the public, you know, they just want to, You know, sell it to somebody and they'll, they'll take a discount. Do you have clients that are looking for those opportunities as a business opportunity and therefore don't care what the art looks like? Um, or, or is it like, you know, I really gotta like it and hopefully it's a decent or good deal.

AI assessment note: “Do you have clients that are looking for those opportunities as a business opportunity”