Jun 2, 2022
Jim Clayton is the Director and Timothy R. Price Chair at the Brookfield Centre in the Schulich School of Business at York University in Toronto.
In this episode we talked about:
Useful links:
Adam Grant “Think Again”
The surprising habits of original thinkers | Adam Grant https://www.youtube.com/watch?v=fxbCHn6gE3U
https://schulich.yorku.ca/faculty/jim-clayton/
Transcription:
Jesse (0s): Welcome to the working capital real estate podcast. My name is Jesper galley. And on this show, we discuss all things real estate with investors and experts in a variety of industries that impact real estate. Whether you're looking at your first investment or raising your first fund, join me and let's build that portfolio one square foot at a time.
Jesse (23s): Ladies and gentlemen, my name's Jess for galley, and you're listening to working capital the real estate podcast. My special guest today is Jim Clayton. Jim is the director and Timothy our price chair at the Brookfield center and real estate and infrastructure. And that is at the Schulich school of business here in Toronto, Canada. And that is at York university. Jim, how are you doing today?
Jim (45s): I'm good. I'm good. Thanks for having me Jesse. And that was a big mouthful.
Jesse (48s): Yeah, we thought we'd, we'd like, we've talked about before the show, we'd kind of break it down because you've got quite an extensive background in real estate. And before I start a York university at the Schulich school of business, how long have you been at that post?
Jim (1m 3s): I've been here just over four years. I came in 2018 and partly because Schulich school received some funding to create the Brookfield center in both real estate and infrastructure, which is kind of unique. And also it was just kind of time to come home. I grew up in Toronto, moved all the way till my mother-in-law. I was taking her daughter in 1988 away for a one-year master's to UBC and 30 years later, we moved back after 20 of those in the states.
Jesse (1m 36s): That's fantastic. That's another, a really good school for real estate as well. University of British Columbia is program there it's solder solder school of business. If I have that correct.
Jim (1m 46s): You got it. It was really the only place one could kind of end up if you wanted a graduate education in real estate at that time,
Jesse (1m 54s): Right on. Well, you know, once again, thanks for coming on. Part of the reason I thought listeners would get a lot of value about having you on was just some of the research themes that you've been working on and we'll jump into them. I think, you know, just to kind of Telegraph this a little bit, it's going to be a little bit about kind of the trend in real estate and commercial real estate in general, where we've gone from institutional investors and private investors. And I wanted to talk a little bit about the paper that you did that was on the, the impact on real estate decisions in relation to climate change or climate concerns, which is, I mean, definitely topical now in Canada and the U S and globally.
But before we start that maybe you could give listeners a little bit of your background, how you wound up in, in this, in this industry, because like I said, you have quite the story bio.
Jim (2m 44s): Oh, sure. Thanks. Thanks for the opportunity, Jesse. Yeah. So it's, it, it comes from the family a bloodline, if you will, to some extent, when I was a kid, my dad worked for quite a while for CMHC and got moved around from Ottawa to Winnipeg, back to Ottawa. And then he decided to go out on his own and have his own real estate consulting firm and moved to Toronto in the, in the sixties and, you know, fast forward many decades later. And he, he sold his company, Clayton research associates to Altice that you'll be familiar with here.
And he's still, he's still involved in, in real estate at a, at a research center for, at Ryerson university.
Jesse (3m 24s): I noticed that we don't, we don't retire in this industry.
Jim (3m 27s): No, no, no. He keeps trying to contribute, especially when you've got something to say on the policy side. So I just was always growing up, always interested in, in cities. I love being in Toronto. I grew up in Scarborough, but, you know, I was just curious. It's about ended up doing an economics degree. And I was a little disappointed that the urban economics class got canceled when I was at Western. So I kept looking for graduate education, tried to go to Wisconsin, but unfortunately, a James grass camp that was a pioneer of academic real estate there passed away that summer.
And I ended up going west to, to UBC. It was a great time, but to do a one-year master's, but decided to just keep going and got my PhD, some great people to work with there, including the current Dean, Bob Helmsley, and will strange he's at U of T now. And it wasn't a bad place to live for five years with Whistler to the north and a few other things. But once graduated, when you graduate with a PhD, if you want to be in the teaching side, you, you, you have to leave and go to a different school. Not a lot of opportunity in Canada.
I was fortunate. I ended up in Halifax on the other coast, St. Mary's university eventually ended up at the university of Cincinnati down in Cincinnati, Ohio because they had, they had two really strong academic researchers that both were very connected to industry David Giltner. Who's now at MIT and norm Miller that set up the program recently he's at university of San Diego. Both of them are sort of stepping back, but that was kind of a great experience for me for eight years, but always had my head in kind of the real world.
And interesting, as you said, the institutional world in the early nineties actually got some research funding from a group here that involved a number of the, you know, the more guards and the Prudentials in the lake and met Andre cause Mickey named, many of your folks may know who ultimately also ended up at York university and helped bring me here. Just, just really enjoyed that part. And so I transitioned to kind of a hybrid role, if you will. We'll at the pension real estate association meant to move to Hartford, Connecticut, but it meant that I was working in a research education role directly with the institutional investors, the major pension funds and the investment managers.
After, after a few years there, I, I got a little itchy and actually got the opportunity to join one of the members on the investment management side. And luckily it was in Hartford because my wife had had enough of moving every five, five years with a, with a couple of kids in tow. So I had a great experience. I got the opportunity to join the real estate equity arm of mass mutual life insurance company at the time called cornerstone real estate advisors. Now, now part of the bearings, a behemoth multi-asset class, a group or mass mutual eventually merged all it's five different investment management companies and different asset classes into one, one big one big group.
But so kids grew up, moved away, live in good cities in the, in the U S for any of your Southern listeners, Denver and Seattle, and my wife and I are like, why, why are we in Hartford, Connecticut? And let's look at as an opportunity in Toronto, come back and be with family and join, join Shula can get back into the teaching and research world. So it's terrific. I can still do both lots of industry partners and really enjoying it.
Jesse (6m 48s): Yeah, that's fantastic. Yeah. I mean, that's common when you're, you know, we have beautiful February's here. Why not just move back to Toronto, but
Jim (6m 57s): I love winter,
Jesse (6m 58s): You know what? Me too, it's a, it makes the, the other seasons, I feel more special, but you know, the funny thing with, for those that don't know in Toronto, w we're getting into the thick of it. And once we get in June, July, it, people don't realize how hot it is, especially down by the water here. And it, if people in our industry, especially if you're wearing suits tours, they get, they get pretty, you gotta be pretty strategic about them. So when you were at, so is it bearings now? And it was formerly cornerstone. Yeah. And I think I was reading you're the head of investment strategy there.
So were you playing a, somewhat of a, kind of a, an economist role? Were you playing more of an investment, like more on the, the kind of allocation of what they were doing, a consulting role? Like how did that work out? I'm always interested in academics working in industry, which I find is a little bit more common in our world.
Jim (7m 52s): Yeah. That's, that's, that's a great question. The interesting part, Jesse, is that you can, in many ways, depending on how it works out, you can kind of invent to some extent a role that, that bridges some, some areas. So it was kind of all of the above. There was an economics capital markets component to it, helping run the house view that a lot of folks have with, you know, maintaining a lot of discussion between the different groups on the, both the investment and the lending side.
What's everybody thinking what what's the latest reading of the tea leaves from a pure economics perspective, where are we seeing things all the way down to trying to help set strategy for specific separate accounts for the open-ended fund, coming up with ideas for the new closed end funds that were going out there. And then a lot of client communication, answering questions, doing ad hoc projects for them, the biggest part was probably maintaining sort of the, that the house view and keeping everybody informed, but client interaction and working with our portfolio managers, I really enjoyed as well because a lot of that is I call it either, you know, myth-busting or looking under the hood.
A lot of, a lot of times we tend to make generalities and make, make statements based on past relationships. But as you know, the, the world is dramatically changing, always evolving, especially with the longterm forces.
Jesse (9m 18s): Yeah, no, that certainly makes sense. And one thing I found interesting to get your take on it is over the last, I don't know, probably, you know, five, 10 years, especially, but even beyond that, there, certainly beyond that there weren't as many schools that, you know, specialize in real estate, whether you were in the states or in, in Canada, you know, you have the big ones, you know, Wharton, we were just talking about Peter Lindemann and we're S there's some pioneering courses and specializations, but how have you seen, how, how have you seen real estate education evolved over your tenure in, in academia and what you're doing today at Schulich?
Jim (9m 57s): That's a great, it's a great question. So it's, there's a, there's a number of different approaches you can, you can take. And it's, it's interesting to see what folks have tried to do as you, as everybody is aware real estate, incredibly multidisciplinary area. And it's almost, I mean, it's almost impossible to try and do everything. So we're, we're in a business school. So you're going to have a business focus. And historically, a lot of schools have had sort of the finance and investment focus and maybe, you know, there's a course or two, maybe three, and the ones that have the opportunity to go a bit bigger, also spend a lot of time.
So one of the things I love that we do is we don't just teach the finance, but we teach. How do you think about where the numbers come from? Economic, urban economics. We call it economic economic forces in the city. You need to get into design planning. It's not, it's not always easy to do when you're in the business school. You can, you can do guest speakers. You can, you can have faculty that come from those backgrounds. So what works really well is blending some academic content with really sharp practitioners from different areas.
And the thing is to make sure everybody's on the same page so that when we have the, the biggest thing that I think benefits so many real estate programs, and is the fact that the industry just seems whether it's alumni or industry partners, they seem to give back and they understand what's needed. And it allows for a really enhanced co-curricular outside the classroom experience, whether that's with ma mentorship program, but in the learning, we have a developers den case competition, try and send students to other case competitions.
You ally join with, maybe join with some students from another school, from the planning department architecture department, and get that teamwork going together and then work with folks from a diversity of backgrounds. And then the other thing is you have to find a way to differentiate yourself. And what, what ha when Shula is that, that James McKeller, that helped start up the program here, he's actually an architect by background. So that was kind of instilled in him. And then Andre cause his Mickey that came on was, came from the institutional capital side.
And so you've got those blends, but then the infrastructure component got added for, for two reasons, both, both because of the real asset adoption of a lot of the pension funds, major institutional investors now, investment managers. And we're following that, you know, that that alternatives group includes real assets and real estate and now infrastructure and more, but also because a lot of what we're really doing is the business of cities. If you will, and cities are not just real estate there, if we say cities are real estate infrastructure ensuring people.
So it's kind of a, an interesting dichotomy, but, and you've got people trying to figure out all different parts of that in terms of how, how they deliver the product.
Jesse (12m 57s): Yeah. I love that. We I'm sure I'd mentioned on the, on the, on the show before. I'm not sure if you've read the book by Edward Glazer triumph of the city. I think he's is he at Harvard? I don't think it's the business school, right? It's the CA is it the business school?
Jim (13m 12s): He's in economics,
Jesse (13m 14s): He's an urban, urban economist as well. So I guess the, the trend that we're seeing in real estate, well, first of all, one thing I loved about, I, I actually was doing an MBA somewhere else, but I took the, the fine real estate finance course at Schulich with our friend Allen and what I, what I loved about the course, even though, you know, I did different economics and finance courses throughout my undergrad. And, and post-grad, I found this was the first time we were really looking at, okay, here's an industrial building.
Here are the inputs. Here are your recoveries. And you're actually doing a tangible, real life. You know, real-world example of what you might be doing when you, when you graduate, when you leave the school, I wanted to get your take on the trends that we're seeing in some areas, I call it the SA the, you know, I think it's the Samuel lization of Paul Samuelson from a noted economist. That's I believe when the Nobel prize in economics, but the mathematics, the mathematization of economics and how we're seeing a trend that going, you know, to numbers.
And I, I worry that we're losing the, the actual, tangible intuition and a lot of the stuff that you don't see in the data. Do you see trends that, that are going one way or the other when it comes to real estate or finance?
Jim (14m 35s): That's really interesting. You say that Jesse, because I think that's sort of exactly what happened leading up to the financial crisis, that, and there it, at one point in time, you, you weren't allowed to talk about, you know, human behavior and psychology mixed together with economics and finance. It was all about the numbers. I think it has. I think it has changed the numbers still matter. I'm, I'm kind of smiling. You can't see it because teaching a capstone class right now, where were we talk about ways to rethink things and different models and, and combining things from different fields to make innovation.
And it's one of the papers that the students will read is actually from Andrew Lowe at MIT. And I think it's called bubble rebel finance in trouble from a few years ago where he references Paul Samuelson's thesis and subsequent papers that became Nobel peace prize, that, that everything, he kind of argued that, yeah, we, we turned it into physics. We tried to turn economics into physics. Physics were really, it should be adaptive biology and people learn and, and, and, and I'm laughing because that's how I teach about cities.
The system of cities follows nature patterns in terms of the number of big versus number of small and how they're related to each other and how people adapt and change over time. So I think there's almost more of a, a biology, evolutionary biology element to that that brings in changing behavior and learning and, and things. So it is really kind of interesting. And then, although the thing that I, it's funny, because economics, we learn it, we all learn about this utility function and all the math and, and, but nobody really talks about that too much later on in, in, in life.
And it's, yeah, it's, it's, it's quite interesting. One thing I think we don't talk enough about is also is, is simply demographics.
Jesse (16m 32s): Yeah. It's funny like the, for you, you get to economics 1 0 1 and you're talking about utiles and you're talking, you know, how, what w where can we quantify your, your contentment or your happiness? And, you know, it's, I know it's, he's writes controversial controversy, Italy, but Nicholas, a certain esteem, Nicholas talks about this a little bit in that if you really look at the math that we're using in economics, it's, it's really, like you said, it's, it's math that is used for kind of like 18, 19 century physics, not even, you know, the, like you said, the, the, and it's not, it's not to say that the, we just need to use better math.
It's the fact that they, it's almost too complex. The complexity is too large in, in human action and human decisions to try to capture it with just, you know, in the same way we captured nature. So I wanted to get your thoughts on that just cause I see that as a trend. And it's probably because for those that are interested at all in this, there's a great BBC documentary called the mitis formula. And it talks about the black Shoals equation and long-term capital managements, you know, explosion.
And basically the upshot is we had a lot of very, very smart people thinking that we could just break everything down to, you know, the numbers and then what they didn't realize were these events that you really, the crazy part is if there was somebody that was there with the kind of intuition that had been in the industry, that might've been the solution rather than relying on the math.
Jim (18m 7s): Yeah, that's true. Interestingly enough, if they had kept more of their money on their books and not gave it back to their investors, they would have survived. Yeah.
Jesse (18m 14s): Oh yeah, there you go. So I wanna, I want to talk about this, which I don't think we talk about enough in our industry and it's not, it's not in a political sense, but in real world decisions, how climate models and maybe for, you know, for a little bit of context, how, you know, the inter governmental panel on climate change, IP IPC reports, how are those are informing real estate decisions if they are informing real estate decisions. So maybe you could talk a little bit about the paper that you did and maybe some of the findings that you, you reached.
Jim (18m 50s): Yeah. We'd be happy to. So the paper you're referring to, there's been a few different sort of iterations and versions, and it all, it all started, I guess, a little over a year ago, maybe even a little bit longer than that, that I got, I got connected with Matthew alternate at the United nations and environmental program, finance financial institutions, essentially. It was really, really focused from the financial institution perspective on starting to think about understanding the implications of climate risk for financial and asset modeling on the real estate side.
And they had done some studies with some of the providers that are out there now that a lot of action going on with firms that are modeling climate risk, but it was kind of a future look within a black box that they didn't really understand sort of where, what was informing, how these empirical models were formed. So I actually approached myself and we connected with a group of folks from the university of Redding Henley school of business in the, in the real estate program there that Sarah in particular had been doing, focusing on ESG.
And, and so the four of us actually sort of were charged with simply going back and seeing what's even out there in the literature. What does the academic literature have to say about the implications of climate related events on, on property values? What's, what's the, what's the impact? Is it transitory or permanent? How does it tend to work? And not surprisingly, there's been a lot of studies historically about floods and about other things before anybody was really thinking about climate risk, but at the same time ever since hurricane Sandy and especially, which is coming up on a decade, now this, this coming fall and then really within the last five years as well, there's been a real move to this becoming not sort of a backwards looking let's look at specific events.
It's becoming part of mainstream finance and economics, the review of financial studies, one of the big finance publications, one of the top tier journals, like the journal of finance journal, financial economics, they actually did a special climate related issue call for papers, things that, that, that came out not that long ago. So the whole world is kind of changed that special issue had three articles in there about real estate related specifically house prices.
And, and interestingly enough, with sea level rise. So now we're starting to think more about forward-looking nothing's happened yet per se, the not necessarily to do events, but at the same time, we starting to be able to see that and test whether sea level rise, if you can sort of gauge different metrics in terms of risk, what that might be doing is, well, almost all the literature is owner occupied, residential oftentimes associated with nice locations on the ocean that have amenities.
So it's a little tough to tease out the amenities versus now the increasing disability. We're starting to see more commercial real estate income property, institutional property, some good work done by some researchers on, on the impact with a real capital analytics data and some others on the impact of Sandy on not only New York, but on Boston and Chicago prices. So is, did investors, even though it did not get to Boston, did investors start to get concerned up there?
And Chicago was more of a placebo test, so you're starting to see some things like that. And some interesting things coming out on the lending side is as well. So it has happy to talk also about what I'm sort of seeing from the investment committee perspective as well.
Jesse (22m 56s): Yeah. I think the, what, what I found interesting there was a, in the paper anticipated effects on commercial real estate performance. And, you know, just seeing it here, there was effects on cashflow effects on capitalization rates and effects on financing. And I always thought, you know, there's this there's in our industry. I find that there's usually two buckets of, of people people's outlook on ESG, which is, you know, environmental, sustainable governance. And, you know, some people think it's, it's just a window dressing and others are fully committed to it.
And really what I always thought that from a climate perspective, if it was going to affect decisions, the rubber was going to meet the road on the financing side. When lenders said, you know, this area there's going to be a premium because of X. Is, is that where you see potentially the, the decision-making implications or is there some other area that, that it's more pronounced?
Jim (23m 52s): Aye, aye, aye. For a certain part of the market, definitely on the financing side. And you could add insurance to that as, as well. Furthermore, the more institutional side, I think they're being more proactive and thinking not only about those things, but also thinking about liquidity implications down the road at exit, you're starting to see if you have a short horizon, you know, mark, Mark Carney has that great quote from his, his talk at Lloyd's of London and his in his book as well about the tragedy of the horizon.
These are really long-term issues, but if you have a short term window and you can do something and get in and get out, you're probably not too worried. But the, I think the idea is that eventually that game of musical chairs that getting out will eventually be tougher because the folks that want to buy and hold there, they're going to start redlining some areas that have not either adapted in some way. And then it's going to be more expensive to own that property depending on property taxes, insurance and other things.
But I think there's a concern there on the whole liquidity and exit. And in fact, I mean I've seen cases where certain institutional investors have, have already declared that they aren't going to certain states, no matter what now. Well, those states also happen to be the ones with the highest net in migration of people since COVID. So then you can, omic fundamentals might not support that fully, but on the financing side, you are seeing it.
And it's easier to see evidence of this in the states because of the extent of securitization on the mortgage market. So there's a really interesting study that recently got published that by Matthew Kahn and coauthor, that that looks at what happens to what happens on the lending side after major hurricanes, in terms of the types of loans that are originated and more and more, what happens is that that lender starts switching to loans that could go into securitized pools.
So they're starting to get ready in case they have to sell off those mortgages. And you see the same thing with some, some banks down in Florida. And then in another,
Jesse (26m 10s): I want to, I want to talk a little bit about the courses that you teach at Schulich because I think it ties a, I want to be mindful of the time and I think it ties well with kind of the theme in terms of people listening that are either investors or individuals that want to get into the industry. And there's of course, I believe you teach and it's correct me if I'm wrong. It's leadership in real estate.
Jim (26m 31s): Yeah. Yes, we do have a leadership course. Yep.
Jesse (26m 34s): So in general leadership and real estate, what, what have you seen over, over your career in terms of, I think you talked a little bit about how we, we tend to give back as we get older into our, into the industry, which I find is not, is not, is not really similar across the boards in every industry. And I feel like there's almost a badge of honor when you're at that, you know, sixties, seventies of giving back to younger individuals like myself or younger than myself, but how do you think leadership is different in real estate, if at all than other industries.
And how has, how has your experience informed the way you look at leadership in our, in our field?
Jim (27m 14s): It's not. So I would honestly say viewing leadership from both the way it's taught and viewing it within companies is relatively new to me. Cause I was, I saw some leadership, but I was mostly an academic and you're kind of a sole proprietor, as long as you're, you know, you've got to work as a group, you've got good people at a, it all works, but you're really focused on your research and your teaching. And then I, I witnessed different types of leadership when I was in the corporate world. So S some of it, some of it not so good in the sense that these days you cannot be vertical.
I don't think you cannot be siloed, but they, on the academic side where that leadership class comes in is our one-year master's program. That's relatively new in the, in the fifth year, the traditional student doing the MBA like you did, Jesse, you get, you get access to that full round of courses, including leadership change management strategy, if you want to go that way. So what the leadership class is, and it kind of goes back to your physics question or discussion is that we're going to do a one-year master's program.
We will want to have technocrats. We want to have that element to it, where we still have the people skills. We understand how the world works. We have good communication skills. We understand change management, you know, re reframing, stretch, benchmarking, all that aspects of it, with the thinking about the world and, and really dealing with innovation comes into our capstone class as well, and then bringing that back to the real estate. But it's interesting though, this summer, so I co-teach that class with, with, with Psalm Al Hussein, who's a co co-head of the MBA programming, very involved on the strategy side within the summer though, we actually spend a lot of time with leaders.
And what we're seeing is that a lot more of the leaders are focused that the, we seem to be spending time with are really focused on the broader community and longer-term view. Now that might just be Toronto, they're really focused on the S in the ESG or the broader impacts of all three of those within an impact framework. And so we were, for example, we spent tomorrow, we'll be downtown in Regent park, Toronto at the world, urban pavilion with Mitchell Cohen, CEO, and president of Daniels corporation, the C you know, so, and then CEO of Ian Underwood, CEO of habitat for humanity, greater Toronto, doing really interesting things on the housing affordability provision here at Toronto, you know, so, and also related to that aspect of it, it's, it's the folks that also have a different vision in terms of helping solve some of the city's problems, if you will, as opposed to coming in and talking about the IRR.
Jesse (30m 14s): Yeah. That's a perfect contrast right there. And I'd be remiss if we didn't talk a little bit about maybe the impact on the IRR of where the current environment that we're in. So Q2 2022, it looks like we're going to get a interest rates are going to continue to go up. We're in kind of a weird environment right now, where we've had what, you know, technically a recession because of COVID, but really more like a natural phenomenon, like a natural disaster.
We were kind of jolted into a recessionary environment now that we're out of it in employment is low in both the states and Canada. And now we're looking down the barrel of what happens in the next, say 12 to 24 months. What's your view on, on how this, this kind of can potentially unfold over the next short, relatively short term.
Jim (31m 8s): There, there sure is a lot of uncertainty related to a lot of things. And you throw in, especially that the nature of how we're all gonna work and whether it's like the hybrid where I think you're probably home, I'm at work, but I'm usually at home and not often at work, you know, that, that nature. But I, I, I think in a lot of, I think we're in for a bit of a bumpy ride over the next 12 months or so. I don't see, we've got a lot, you mentioned strange time, strange things going on, where we're in an incredibly, we have this major affordability and affordability issue in Toronto.
And I think that's actually a good thing that we've got some natural market forces slowing. I don't think we're pricking any bubbles or anything of that sort. I think we do have too much demand. I think we've got some natural forces at work with the capital markets and let's, and, and people migrating to lower cost areas. And this may be very healthy for places like Halifax. Good for Montreal, maybe even some other places outside of, of Toronto to sort of have a chance to think about how all this works together.
I, I, I'm pretty darn positive on, on where things are going, but we certainly have some challenges. We also have a lot of risks going on with an election coming, coming up. We know how policies can change very, very quickly if something happens that somebody else come comes in. Yeah. I'm not sure I really answered your question on
Jesse (32m 45s): No, I mean, it's one of those things. I, I, I try to crystal crystal ball, my, my guests, and it's, it's just interesting to see different, different responses. I guess the, you know, I'd love to get you back on where we could talk a little bit more in depth. We didn't really get to some of the kind of financial and institutional stuff, but just on the, the interest rate environment, like what we have found is that PR properties that, you know, say we mortgages five-year mortgages, ten-year mortgages that are coming due, or refinances are happening.
The loan to values is not really the litmus test anymore. It's the debt service coverage, right? It's because interest rates have, you know, 2.5, 3%, and now, you know, we're at six potentially more for certain types of mortgages. Do you think that that implication is going to do what recessions typically do or the austerity typically does for the investment community? It kind of weeds out the, the ones that you got over their skis a little bit. Do you have a view on that?
Jim (33m 48s): Well, I think, I think one always has to be very careful with financial leverage and make it very, very strategic, as opposed to just what's the maximum that the lender will give me and, and go do that. It's not only the rates per se, right? It's all the covenants and the bells and whistles and the flexibility that you might have. So if you're, if you've taken on what might be a bit too much, depending on your property situation, then yeah, I think there could be the odd opportunity for those, for those things where, or you better find some friendly long-term equity partners to help you out for the next little while.
But, but I, I think the other option might be to try and see if there's some more favorable, short term financing that might get you through this with some more flexibility and more options that especially if you have some value add opportunities on your property, because the only way that you're going to offset the negative impact of that denominator going up on your evaluations is to think about how you can improve the numerator. And maybe, maybe that is more, you know, more, more value add shorter term, that type of financing, maybe not, but we'll what we'll see in the big question is everybody's discussing is, is, is, is really a, a ramp up a permanent shift in our inflationary environment or two years from now, or are we going to be back to where we are with the long-term trends and demographics and the like
Jesse (35m 18s): Angel transitory is, is the word of the, seems like the word of the, the year w
Jim (35m 25s): Pivot last year. Yeah,
Jesse (35m 27s): Yeah, exactly. Well, that's great. Before, before we kind of wrap up here, are there any resources that you're currently I'm delving into, whether it's books, podcasts that you think would, you know, listeners would get, get some value out of
Jim (35m 45s): Interesting that you say that, so there's, there's actually some, I'll follow up with you Jesse and send you a few that I have from a few classes specifically. But so in addition to our leadership class, we, our capstone class classes a major project, but we have a creative component to that, a creative workshop where we try and sort of, you know, get, get students thinking about innovation, thinking about rethinking, if you will. And that word rethinking, I I'm reading Adam Grant.
Think again, I don't know if you've read that. I found that incredibly interesting and I've gone back and actually the students are watching one of his Ted talks on the surprising habits of original thinkers, for instance.
Jesse (36m 32s): Yeah, because I was like Adam Grant, I knew, I think the book, the original, it was called the originals, right? The great fodder.
Jim (36m 40s): And then his first one was givers and takers, which is kind of how we try and groom our students be a giver, not a, not a taker. And, and, and, and look behind you. It's, I I'm, I'm really enjoying kind of reading that because it's, it gives you different ways to think about things. And it, it puts people into these buckets that you, you, and it goes back to some of what you were saying earlier about, you don't want to, you know, you could be a preacher or a prosecutor and that, you know, with your ideas, but you G you gotta be, you gotta be flexible and realize that you don't know everything.
And I find that one very interesting.
Jesse (37m 20s): Well, you said it better than I did Jim, for, for individuals that are just interested in reaching out, or kind of even the program interested in learning more about the, the program that you teach or the MBA in general, where, where can we send them to, we'll put it in the show notes.
Jim (37m 37s): Oh, you can give him my email address if you want, or, or a send, send you to the, the website for the MRI or the Brookfield center on honestly, they're, they, they need some work and I've been
Jesse (37m 51s): What ed, what I don't know at one academic institution, I went to that the website didn't need a little work. My guest today has been Jim Clayton. Jim, thanks for being part of working capital.
Jim (38m 4s): Thank you. Did I say I really enjoyed myself and appreciate the opportunity.
Jesse (38m 13s): Thank you so much for listening to working capital the real estate podcast. I'm your host, Jesse, for galley. If you liked the episode, head on to iTunes and leave us a five star review and share on social media, it really helps us out. If you have any questions, feel free to reach out to me on Instagram, Jesse for galley, F R a G a L E, have a good one. Take care.