← The Rent Roll with Jay Parsons
The Rent Roll with Jay Parsons
EP#57 Chris Finlay | Is It Time To Worry? Plus: A Conversation With Middleburg's CEO
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Welcome. It's episode number 57 of the Rent Roll, your podcast on all things rental housing, apartments, SFR and BTR theme of today. Is it time to worry? That's the big question right now. Obviously for a lot of folks in a lot of different industries, it seems like pessimism is climbing higher. We got a soft job market, we have a government shutdown, we have weak consumer confidence, soft leasing environment both for apartments and sf and yet also a stock market that's at record highs. The 10 year treasury is finally below 4% and still solid signs of consumer financial health, including renter health, at least in the class A and B market. So a lot of mixed signals. We've talked about some of these these last few episodes. We talked about the Q4 part market update. We did a budgeting episode last week. And yet I want to go deeper on this topic today. And obviously I say this all the time. We don't have a crystal ball. People always ask me what's the crystal ball say? I say it's fuzzy. I don't really know. But we can do our best to cut through the noise and at least look at some facts that we could consider and help us come to at least a more informed conclusion and hopefully perspective on where things might go. Prepare for different scenarios. By the way, we're going to get a lot more color on the health of the market this week and next week. And that's because it's REIT earnings call season. Always get a lot of good insight and color commentary from those earnings calls. And we're gonna cover highlights from the apartment REITs as we always do. Apartments and SFR REITs. We'll cover those in these next couple of weeks. Next week we'll be all focused on top five takeaways from the apartment REIT calls. The following week, November 13th, we'll be talking about five takeaways from the SFR REIT earnings calls. And so we do that every quarter. And so we'll keep the tradition going again this time. Hopefully we get a little more perspective what's happening. And you know, the great thing about, you know, the, the REITs, I think as many of you know, they're a relative. They're, they're a very small piece of the overall puzzle for SFR and apartments. But we get such a great color on that. It's the, they're the few owners who can are obligated to share publicly what they're experiencing and be truthful about it. And so we'll get some good insights from those that could be. And I'll try to share the themes I think are reflective of broader industry themes right now. Also this week in today's episode, we'll be covering some big headlines touching on rental housing, including Blackstone. They just had the earnings calls and they talked about moderating returns in private credit. And we'll share what that might potentially mean for multifamily and sfr. Could we maybe see some of those groups that were shifting heavily in private credit? Maybe they come back into LP Equity. We'll see. We'll talk about the possibility of Fannie Mae and Freddie Mac delving into construction loans. Some news around that. We'll talk about institutional SFR investors being net sellers right now. And we'll also talk about the heavy concession market for apartment managers in certain markets, even for renewals, by the way, in some cases. There's an article touch on that today as well. And then later in today's conversation, we'll shift gears for our conversation with today's guest, Chris Finlay. Chris is the founder and CEO of Middleburg Communities. Middleburg, as many of you know, is an active owner, manager and developer of apartments across a number of growth markets. We're going to get Chris's take on the current market and talk about how Middleburg or what opportunities Middleburg sees moving ahead. And we'll also talk about one of the great nonprofits of the rental housing space entryway. And some of you know, this is an organization that Chris founded and started, formerly known as shelters to shutters and helping people struggling with homelessness get training and jobs in the apartment industry. Really great cause. And they're seeing some super encouraging results. I'm gonna talk to Chris about that as well. And that interview is recorded live on location in, in, in in Middleburg. So Middleburg, Virginia. So excited to share that with you guys. All right. So before we dive further, let's, let's give a big shout out to our sponsors for first and foremost to jpi. JPI is a leading apartment developer with a stated purpose to transform building, enhance communities and improve lives. And jpi, of course, a top builder in Southern California and Texas, expanding into the Southeast, into Arizona, as well as in the Pacific Northwest and Seattle area. And so also want to give a shout out to Madera Residential, a leading apartment owner and operator in Texas. Check them out@maderaresidential.com and also one more I just want to give a shout out to this week. Special thanks to our newest sponsor, Funnel, the AI and CRM platform. Some of you noticed that Funnel's been sponsoring the interview segment of the podcast each week, so grateful for them. Check them out@funnelleleasing.com all right, so, as always, kick it off with Here's a chart. And we got a few charts for you this week. And again, the theme of today's episode is that is it time too many is is here. The theme is, is is it time to worry about multifamily and sfr? So there's an article in the Wall Street Journal this week that quoted David Schwartz, the CEO of Waterton and a past guest of the Rent Roll. If those of you heard, that episode was a great one, not because of me, because of David, of course. And he was quoted in this Wall Street Journal article basically implying that we're not banking on 2026 and really expecting 2027 to be the better year. And I've heard other industry players say similar, tell me similar things, that they're, they'll take any growth at this point in 2026 or the grain of, as, I'm sorry, rephrase that they'll take growth in 2026 as gravy on top. But they're starting to ratchet down expectations really out of caution and don't want to be too dependent on growth in 2026. And, and so now, really, the, the mantra has gone from survive till 25 till fix in 26, and now it'll be heaven in 2027. So we'll see. Obviously, you know, people, some people, some of you all think those are, those are silly. Others of you oddly, enjoy the, those cliches. But, but either way, more focus. Now, the main, main, main takeaway here on 2027, and from a budgeting standpoint, we touched about this, touched on this a little bit last week. Maybe that's prudent. And part of the challenge right now is that there's just so many mixed signals in the economy. Okay, so here's one great example. Moody's, obviously leading economic data provider and forecaster. A lot of the financial, almost all the financial institutions use these guys. So Moody's has come out and said there's a 48% chance of a recession. And my reaction to that is 48%. That's super helpful, guys. Thanks. Right? I mean, 48%, you know, that's the ultimate mixed signal. But I get it. I mean, they probably have a lot of different indicators pointing different directions. And I see some people are already comparing 2025 to 2009. And I, again, I've talked about this previously. So I won't talk about this too much, but I remember that 2009, as many of you remember, that was a brutal year. And, and so far at least 2025 doesn't look like 2009 doesn't even rhyme with 2009, at least so far. Need that qualifier in there. Maybe next year is different, but at least so far we know that. But there is actually one variable. I've touched on this before. I've said it before, I'll say it again here. There's one economic variable that's worse than 2009. And so if you heard past episodes or read my newsletter, you probably know what it is. It's consumer confidence. And that's odd because I certainly remember 2009. I'm sure many of you do as well. I actually started in the rental housing research space in 2009. And back in 2009, unemployment was at 10%. That's more than 2x what it is today. And so I can't help but wonder if maybe the headline noise, government shutdown, the political stuff, maybe that sours our moods. And I always am somewhat amused by these surveys that when they ask Americans, hey, how stable are you in your job? How are you doing economically? They'll say, I'm fine. But then they ask, okay, well how do you perceive most Americans are? And they say, well, they're struggling. And so this idea that I'm okay, but everyone else is not is an unusual quirk of these consumer surveys that we see around sentiment. But here's the real problem with weak sentiment is that when we feel nervous, human nature is to do what? Nothing. Uncertainty. I say this all the time. Uncertainty has a freezing effect on major decisions, including relocations and moves and lease signings and home purchases, young adults leaving the nest. And of course for businesses, that impacts hiring decisions, expansion decisions. So where do we go from here? I'm going to give you two scenarios. I shared some of these in my last newsletter. I'm going to recap them really quickly here. I think the downside scenario is this. So we have weak sentiment, weak hirings, that gives way to reduced consumer spending and layoffs. Even worst case scenario is that dreaded stagflation scenario re accelerated inflation coupled with job reductions. Obviously nobody wants that. That's the worst case scenario. Now for those of you who are more glass half full, here's the upside scenario. Maybe you can hearken back to the summer of 2020 or again maybe middle of 2022. In those two periods, sentiment sank for very different reasons. First in 2020, obviously the COVID lockdowns, and later in 2022 due to peak inflation. In both instances, we saw signs Americans pulling back and businesses pulling back, only to step back in once they realized that they were doing okay, the world wasn't falling apart. So the best case scenario is that happens again today, that the current moment of slowed hiring and heightened nervousness gives way to at least steady, if not unspect, if unspectacular growth. Okay, so we'll see what happens. But I can certainly sympathize with Moody's playing it down the middle of that 48% number. And part of what I assume is triggering those Moody's estimates is the recent upticks on unemployment. Now, unemployment is actually quite low by any honest historical measure, but it is ticking back up. And with the caveat being that we of course don't have the latest monthly data because of the government shutdown. And the absence of data just adds to some of the nervousness. Now, one particular segment of the job market getting headlines is the entry level job market for recent college grads. Obviously a critical one for the apartment market. Some brutal headlines talking about the challenges of recent college grads finding jobs. Fed data shows unemployment among recent college graduates ticking up north of 5%. And that may not sound terrible, but it is high relative to history. And most of you probably saw this week the news of Amazon with I think it was 10,000 plus white collar jobs layoffs. And that was primarily driven due to increased automation and AI, which of course fuels all the doomer worries about AI taking over all the jobs. So we'll see if that's an early indicator or something bigger or if it's fairly isolated. I think back around that 2022 period, or even 2023, we had a lot of tech layoffs and there was some concern that would bleed over in the larger economy and it didn't. So maybe we can hope that that's the same time this, this time too. Same thing this time too. But of course that's no sure thing. For now, layoffs do remain more the exception than the rule, even with the government shutdown. Obviously don't have BLS jobs data, but we do still have state filings on war notices of every time an employer plans a mass layoff, there's a war notice that gets filed. And we still haven't, as of this recording this week, we still haven't seen those numbers materially pick up. So that's a good sign. So even a Chairman Powell noted a few weeks ago in his press conference that while there's not a lot of hiring, there's also not a lot of firing. So hopefully that's just a reflective of some nervousness and certainly related to that too. Lack of not only is there a lack of firing, but there's also still solid wage growth. It's moderated of course from the crazy peaks a few years ago, but it's still above today's wage growth is actually above the pre Covid norms at least. At least as of last reporting. So still above 4%. That was prior to the government shutdown when the data spigot shut off as well. And the wager with numbers are actually better among younger workers who are more likely to be renters. So that's good. So maybe some of those employers recall how tough it was to hire people, hire good people after doing mass layoffs in 2020 during COVID Maybe there's some lessons learned there and some reluctance to do too much now. So that's again the the positive way to think about it. And of course the thing about mixed signals, I mentioned this earlier, the ultimate bull signal is the stock market. The S&P 500 is soaring to record highs this week, at least as of this recording. Hopefully this comment's not dated by the time it comes out. And the same thing with the 10 year Treasury. This has been befuddling many of the macro economists the fact that the 10 year treasury is below 4% again and again that's as of this recording, which hopefully this is still true as the when the day that on the day that you're listening to this. So again, very mixed signals. Now let's tile this back to apartment and SFR demand. And again, I know I've talked about this a lot in these last few weeks, but it's important and I'm trying to add some, some, some new context to this. There's a lot of confusion right now and questions about demand and these demand numbers. And I've talked about this before, but I want to give another reminder here. There are a lot of ways to measure demand. If you're talking about net absorption, AKA renter household formation, those numbers are still quite strong. And you know, data providers and nerds like me, we think of demand more in terms of absorption household formation. It's the net change number of occupied units. Data providers like Costar, RealPage, John Burns, Yardi, they all have different data pointing to good macro absorption numbers. And that's a good story. You know, I think a lot of people try to just dismiss those Numbers, I mean, yeah, there's more retention, everything else, but these are still net increases in the number of occupied units, no matter how you slice it. There are other factors, absolutely, but that's still a positive story. Now, not only are those macro numbers high, but the financial health of renters remains fairly healthy. And I've talked about this before too. I'll just briefly recap this. At least in the A and B market, I should say the class A and B renters, we see rent to income ratios, the lowest level since 2019, back below 22%. Now, again, real challenge, the lower end of the market. I don't want to dismiss that, but the class A and B, I make the case all the time. I think that affordability right now is more of a tailwind than a headwind. Plus, retention is sky high with renters who are actually paying the rent every month and no sign of a flight to affordability, which you might expect when consumers lose purchasing power. Instead, we've seen more of a flight to quality with renters moving up market, getting good deals with concessions to, to live in higher quality newer units and better locations. And so it's more a flight to quality, not a flight to affordability. Those are all positive indicators now. But, but, but, but if you're thinking about demand, I mentioned demand, there's different measures, different ways to measure if you're thinking about demand in terms of leasing activity and leasing traffic and vacancy, lease signings, those numbers are weak. And if you're, you know, property manager, property owner, asset manager, you're probably thinking about demand in terms of these, in these types of terms. John Burns and their SFR Leasing Index, I talked about this a while back. They've shown softening numbers since 2022, high renewal demand, but lesser inbound leasing activity, in part because of high competition from increased supply. Now, for sfr, that's not only build to rent new construction, which has been concentrated a handful of markets, but also increased SFR listings, often through these accidental landlords. Those folks who are going to sell their homes decide to rent out, rent it out instead for a variety of reasons. And we've seen an influx of SF or SFR inventory on the market these last few years. And that's, that's slowed down new leasing activity. And it's the same story for multifamily, obviously not accidental landlords, more purposeful in this case, but high supply via the biggest construction boom in a half century. And so while there's a lot of macro demand out there, that demand is being spread across a great number of properties. And so here's the real page data on leads per unit or leasing traffic. And it's dropped off substantially since peaking in 2021. It dropped in 2022, dropped further in 23 and in 24 and in 25, kind of leveling off from 24, which was already kind of a low watermark for Q3. And so vacant unit's taking longer to backfill and that's putting downward pressure on rents as operators prioritize occupancy. But let's zoom out for a moment because it's easy to get really absorbed in the current moment in both SFR and multifamily. The weakening leasing traffic is not new to 2025. It didn't start when people when the moody started ratcheting up their odds of recession, or when we Amazon did their layoff notice, or when unemployment started tick back up or recent college graduates struggling to find jobs. It predates all that stuff. Traffic started weakening back in 2022. That's back when mortgage rates started to increase and when inflation peaked, when job growth was still booming and wage growth was much higher than it is today, even though wage growth is still good. So any honest analysis can't attribute outsized credit just to the job market for softening here in 2025. This trend long predates that. So it really correlates, of course, more to supply. And I still will contend that even right now, supply is a much bigger headwind than anything happening in the economy for both apartments and sfr. Now let's go back to the macro demand stat for a moment. Absorption. Now, I want to encourage you to watch this one very carefully going forward because I think a lot of people are going to misinterpret this number over this next year or two. Okay, so here's a prediction I feel pretty strongly about. Absorption is going to go down. It will. And I think it's going to go down regardless of what happens in the economy, what happens in the job market, what happens to the homeownership. Absorption is going to go down. And specifically for apartments where those numbers have been at or around all time, highs or record highs. And why do I say that? Well, because it's inevitable. And I say it's inevitable because supply is correlated with absorption. So we know that supply is going down and we're going to see absorption go down with it. It's just math. Absorption and household formation tend to be correlated with supply. You can only absorb a housing unit that's available. The big supply Wave has unlocked a lot of pent up demand that drove those numbers way up going forward. Lesser supply means lesser absorption capacity. That's why a place like New York City in San Francisco, even in good times, they usually rank low for absorption despite its their size. Because there's a chronic supply shortage. Less to absorb. The lower the vacancy rate, lesser the supply, the less capacity there is for absorption. So it's really quite simple. So, so hear me on this. Even if you disagree with me on everything else, I hope you align me on this. Lesser absorption is not, is not a signal of a weakening market necessarily. That's because supply, we know supply, whereas we don't know what's going on. The economy, we know supply is going to be plunging these next couple of years. There's less supply to absorb, therefore absorption will be less in the future. So let me give you two quick scenarios. If absorption drops off, but supply drops even more, then what happens? Well, vacancy ticks down, right? Reduced vacancy puts upward pressure on rents. But if absorption plunges faster than supply, then vacancy is not going to improve. And that is a much more concerning scenario. So you have to watch absorption in connection with vacancy. Just because absorption goes down, that's not a bad thing. It's more of an expected thing. But we want it. But you want to see it as the industry participant, you want to see it go down. You want to see supply go down more than the drop off in absorption. Therefore vacancy goes down. So tying it all together, a lot of mixed signals. If you're a doomer, there's plenty of fodder to work with today. If you're an optimist, there's plenty of free to work with to just mixed signals. Uncertainty has been the key word all throughout 2025, and it remains the case here at the end of 2025 as well. All right, that takes us to rental housing trivia. All right, so rental housing trivia. Today's question is. This one is in honor of Wham. The women of asset management meeting happening this week. So the question this week is the nation's first all female architecture firm became known for designing more sanitary and better ventilated tenement buildings in New York city in the 1890s. Who are they? Okay, so tenant buildings is the original workforce housing. New York City had a lot of very undesirable type housing built for workers in the 1800s. Poorly ventilated, poor lighting, not particularly safe. And this all female architecture firm, the nation's first all female architecture firm, found a solution for that that started with actually living in one of these old tenant buildings for a few months and coming up with ideas to do it better. So who are they? And we'll come. That's, this is a tough one. That's one of the harder questions we've had. But I'll give you the answer here in a little bit. But next up in the news, all right, in the news when we break down, headlines touching on rental housing topics of the week. And we got a few big ones this week. First from the Financial Times, Blackstone says era of bumper private credit returns has ended. Now the headline is a little bit sensational, but it's not wrong. You know, I read through the transcript of Blackstone's earnings calls. Earnings call, and they're still very bullish on private credit strategies. But here's what John Gray said. He said base rates and spreads have come down. So the absolute returns reflect that some of that excess return when you were getting mid teens returns, the lender and senior credit two and a half years ago has gone away. So yes, that has been some loss of absolute return. So he's basically saying the returns have normalized. All right. And he's making the point of saying that the private credit market in their view at least, I'm just regurgitating what he said. He's saying that it's still a very healthy market but returns have normalized. And obviously not only have rates come down, but there are so and we think about our world and apartments in sfr btr. There's so many new entrants in the private credit space. And a lot of institutional groups talked about this previously. We had Dan Walsh from citymark Capital talking about this a number of episodes back. A lot of institutional groups have shifted from equity to private credit strategies these last couple of years. And so you know, now you have to wonder with lower returns, a higher competition for quality assets, for quality deals, you wonder is this finally going to push more capital back into LP equity? So we'll see. But we had James Ray on the podcast a couple months ago. I got probably our most listened to episode ever. One of the things he talked about is hey, you know, these things will balance themselves out. And we'll see if that's, this is a trigger for that to happen. All right, next headline comes from the Wall Street Journal. Renters have the upper hand and they are probably keeping it. Apartment rents nationally are advancing at their slowest pace in years because glut of new units is taking longer to absorb than expected. All right, so for those of you in the industry. Nothing terribly surprising here, but it's good to see broader awareness of it. However, there is one good anecdote I want to share from this article from a Ren renter in Denver. And this renter is talking about getting a two month concession, which not surprising. But here's the surprising part. It's two month concession on a renewal. So let me read this. It says Spencer McKean is one of the beneficiaries. The 29 year old video game programmer has been renting a one bedroom apartment in Denver at roughly the same 15 $1,575 a month rent for these past three years. So unchanged rent for basically three years. Okay. Continuing the article, it says that comfortably makes up less than 30% of his income this year. His landlord is charging him only nine months of rent on his 11 month lease. So in our terms, that's a two month concession. A two month concession on a renewal. Now that is pretty wild. I don't think that's going to be the norm by any means, but certainly in a soft market like Denver. And Denver now has the biggest rent cuts among any major market in the U.S. in Denver, it's not particularly surprising and I'm assuming that Spencer lives in a higher supplied submarket. So it's a good reminder. I talked about this last week in the budgeting podcast episode. It's a good reminder that you have to compete for renewals, particularly in an asset where you have, you may have inverted rent rolls or nearing that scenario, meaning that your advertised rents for new leases may be below your in place rents that your current renters are paying. And so a renter like Spencer, like, you know, even if you can afford it, you don't want to pay more than what you're going to be charging a new renter to coming in at. If you see an advertised rent lower than what you're currently paying or lower than your new letter, you're probably say, hey, I'm a renter in good standing. I've been paying the rent every month. I've been a good tenant. You know, I want the same deal. And so if you're offering two months concession in the front door, you know, that's, that's in this case, they're still trying to get those rents. It's probably a scenario like that where you're having to offer that concession to keep your retention rates. All right, so, so more on that if you're curious. Now, we talked about this last week as well, the implications for budgeting if you want to really prioritize renewal, trade out. It's going to come at the expense probably of higher turn costs, higher vacancy loss and of course more turnover as well. So obviously want to do that math. All right, this next one comes from actually a tweet from Lance Lambert who runs Resi Club, a media outlet focused on housing. And it says seven of the eight largest institutional significantly landlords are currently net sellers according to partial Labs data. So I just wanted to share this because you know that for all the noise around institutional investors are buying up all the houses. You know, those same voices tend to ignore the part where institutions sell a lot of houses, but that's just the reality of today's SFR market. We talked about this in the podcast in the past, but you know, a lot of groups that are recycling capital focused on being net sellers of existing scattered site homes and putting more capital into new construction and btr. All right, next headline. This comes from Politico. It says home builders push new frontier for Fannie and Freddie construction loans. The policy has had industry interest for years, but recent Trump posts may add momentum. All right, so obviously this would be a game changer for both home builders and for apartment builders right now. As many of you know, the gscs, Fannie and Freddie, they could only lend on completed homes and unstabilized apartment deals. And so we've talked about this in the past on this podcast. We've had the former heads of both Fannie Mae and Freddie Mac as guests and this was a topic and you know, good people can disagree on this and I think there are some valid reasons to oppose this. But the upside is this, that it would likely make construction lending somewhat less cyclical and more liquid. Make construction less, more liquid and you can, you can tap into the existing network of agency lenders for potentially favorable financing without having to deal with with HUD and all the red tape associated with that. So obviously this is a complex issue, a lot of details to work through, but I am curious to see where it goes and I do think it's has could be a true positive for increased supply. All right, next headline Biz now apartments are a hot commodity, but rent growth doesn't show it. All right, so this is a good story. Tells us what we already know for those of you in the industry. But I appreciate an article that captures facts over the doomsday narratives. Lots of good demand, even more supply. So no rent growth. And there's good commentary in here from Sam Tannenbaum at Cushman heads up multi yearly research over there. And he said, we've delivered more units than any time in history. We need time for the market to catch up and lease up those units. So well said, Sam. And our last headline comes again from the Wall Street Journal. This one says renters are conning their way into luxury apartments. Atlanta, where up to half of the rental applications contain fraudulent information, is the epicenter of a national surge in these scams. All right, so first of all, kudos to the Wall street writing about the rise in lease application fraud. It's a huge issue. It's gotten sparse attention until recently. There's been a few articles now on this topic. I talked about this previously as well. Obviously, for those of you in the industry, you've been talking about this for years, really dating back to Covid. And we're finally starting to see attention around this topic. And it's important because it ultimately backfires on honest renters via higher cost, reduced availability, more cumbersome application process, et cetera. Now, I appreciate the article, so I nitpick it too much, but I do want to point out one thing which is there's this narrative out there and the article kind of picks up. It was saying, hey, all the construction is focused on, on luxury, top of the market. And so there's a, there's a, there's a shortage of affordable housing. And so therefore these, this, this fraud is kind of like a Les Miserables situations, moving up to, you know, upmarket just to find a place to live. And I think that's, that's actually incredibly wrong. And, and part of it for this simple reason, which is that there's actually plenty of availability especially in place like Atlanta in class C, lower rent apartments, you know, we have very high, especially these last few years. I mean, obviously during COVID everything was with limited availability, but you know, since the, for the last three years, you know, we've had pretty good availability even in class C. And so you can certainly find more affordable apartments than, than trying to lease a, a brand new luxury apartment building that this article talks about. But I think if, if you're going through the headaches of if you're going to commit leasing fraud and you're using Tick Tock, you know, buying a 1500 service off tick Tock to do it, why not target a nice property? So, you know, there you go. But anyway, kudos to Wall Street Journal for bringing light to this. All right, let's come back to our rental housing trivia question of the week. The question was the nation's first all female architecture firm became Known for designing more sanitary and better ventilated tenant buildings in New York city in the 1890s. Who are they? The answer is Gannon and Hands. Mary Gannon and Alice Hands. You know, most of us probably don't know their name now, but it's, it is a big name in architecture history. Their designs were featured in Harper's Bazaar magazine and in Vogue magazine. So two, you know, kind of, you know, even back then and names that we have stood the test of time obviously from then to now. Let me read something. An architecture historian named Bethany Gene Laskin said, she wrote, rather than the long, dark corridors of past tenement designs that were considerably dangerous and isolating, Gannon and Hands tenement created an openness that provided a greater sense of safety and community. And then Sir Sydney Waterloo from London, he said this the best. He called Gannon Hands plans the best plans for single tenements I have ever seen. The most clever and ingenious. And so some of these ideas around open airflow, natural lighting, you know, corridors and courtyards, you really became the foundation for the modern, you know, wrap apartment buildings and garden apartment properties that we see today. And so hats off to Mary Gannon and Alice Hands and not only being the nation's first female architect or architecture firm, but also being a major disruptor in how we design apartment buildings. With that, that's going to take us to today's interview. Today's interview is sponsored by funnel, the AI and CRM software trusted by four of the major REITs and many leading operators like BH and Cortland. To learn how Funnel can help your property centralize operations and automate everyday tasks, visit funnelleleasing.com and today's guest is the founder and CEO of Middleburg Communities, Chris Finlay. Chris is also the founder of Entryway, formerly known as Shelters to Shutters, which is helping those who struggle with homelessness get on the job training and find jobs working in apartments. Had a chance to talk to Chris in Virginia, in Middleburg, Virginia, which is the namesake of his company. And so hope you enjoy my conversation with Chris.
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Hi, welcome to the interview portion of today's podcast. I am honored to be on location in Virginia with the founder and CEO of Middleburg, Chris Finlay. So, Chris, thanks so much for having me.
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C
No, thanks for, for having me here. It's been great.
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B
Yeah, I'm excited. So before we get into it, tell us the story of Middleburg, how you got it started, what you're doing.
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A
Give us the.
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B
The background.
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C
Wow. All right. So, yeah, so look Got started in the early 2000s. Research based acquisition firm, you know, really kind of rode that through to the gfc. And then coming out of the gfc, we recognize that really to drive value in real estate, we needed to build more capabilities. So we added development, construction, enhanced property management, enhanced our investment management capabilities. And that's really, you know, what's brought us to where we are now is this fully integrated, still research foundation, but, you know, fully integrated. And, and our, our emphasis has clearly shifted more to development, construction and operations, investment management than it has from, from acquisitions. And it's really just a. Being able to drive value ultimately is how we got here.
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B
So are you still doing acquisitions or you.
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C
Not really. Not really. We, we're.
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A
We.
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C
We just have a hard time finding value in acquisitions. Look, I think there's the. Having the ability to do it is great, but really we're more focused on the, on the investment and the development side.
- [33:54]
B
So I want to ask you more about those first. So what markets part of the country, mostly Southeast.
- [33:58]
C
Yeah, so currently we focus on the high growth markets in the south East. You know, we're based here in Northern Virginia, offices of Charlotte, Orlando, Atlanta, and then expanding into Dallas here this year as well. And really just trying to capture those big employment driver type markets in the, in the Southeast and ultimately into the Sun Belt.
- [34:16]
B
Yeah, so. So Chris, I'm sure you hear a lot of time, you know, I think it's interesting you say that it's hard to find value in acquisitions because a lot of times I'll talk to investors, they say we can't find value in development. It's cheaper to buy than build. And so people come to you. I'm sure you talk to investors to say, you know, Chris, like why do I, why should I develop right now? I can buy cheaper, at least on paper.
- [34:34]
A
Right.
- [34:34]
B
How do you respond to this?
- [34:35]
C
Well, first of all, I don't really think you can buy cheaper than today. Look, you know, development has certainly a, some, some sort of impression of incremental risk to acquisitions. I don't know that I agree with that. I think people think they can buy at the bottom today when, when there's a concessionary market and with the supply that's been delivered and, and gain value as concessions are eroded and we move into more of a rent growth model. Look, we still are very bullish on the fundamentals around rental housing in general. We think that there is a, with, with kind of the fall off in supply and the continued growth in, and demonstrated growth in demand for rental Housing. We still think that anything you start today, deliver 24 months from now is, is really well timed.
- [35:22]
B
Yeah, yeah, I agree. And I think the other thing, I think a lot of investors even still overestimate how much distress, like great deal they can find for the type of, you know, class A product you could build.
- [35:34]
A
Right.
- [35:34]
B
Because most of that distress, as you know, is not going to be, you know, in the type of product that you and your competitors are building.
- [35:41]
C
Yeah, exactly. I, I mean sure, there will probably be some distress around the edges and at the margin and some value adds, some over leverage deals, but you know, we're really not seeing it. In fact here at our Middleburg Housing Summit, we've talked to so many, you know, so many different investors here and there was a lot of discussion about distress and really nobody is seeing any sort of meaningful distress either on the bank lender side or on the, on the investor side. I think it's attributable to a couple things, right. There's a lot of liquidity in the debt markets, particularly private credit, which has allowed people to kick the can down the road, particularly on the type of deals that we do. Kind of more the class A institutional quality multifamily deals. Yeah.
- [36:24]
B
To your point, one of my favorite stats is, you know, you'll see these numbers. There's $81 billion pensionual distress. People don't realize the two plus trillion dollar multifamily debt market. So you're at three something percent.
- [36:34]
C
Right, right.
- [36:35]
B
The potential interest.
- [36:36]
C
Right, Yeah, I, I mean, look, we heard this during the gfc. I mean we, you know, we had our family yesterday on btr and, and I was thinking about it in the context of, you know, that whole segment really kind of grew out of the, out of the great financial crisis and all of these big private equity firms raising money around the distress of multifamily which never fully emerged. So they ended up buying single family homes and creating this new asset class, if you will. And so I think a lot of that is actually the case now. But we didn't have the leverage in the system, you know, now that we had then. So I really just don't anticipate seeing the same, same sort of.
- [37:09]
B
So that makes me, I'm curious then, do you think some of the capitals and raise relatively distressed acquisitions are going to eventually shift in the development?
- [37:15]
C
Well, I think that's kind of the, the normal cycle, right. I mean people start getting into, into the acquisition side, struggle to get their core plus returns or even their opportunistic returns. And they're like, I need more, more yield. So they, then they start looking at development again. And we're, we're actually starting to see that happen in the, you know, 12 deals or so that we're doing this year. We're seeing more and more activity on each incremental deal from an LP standpoint, which I think is an interesting tell in terms of where we're going.
- [37:44]
B
Absolutely. So as you're doing construction today, how much you having to adapt your model to make things pencil out today in terms of floor plans, locations, amenities, construction efficiencies, what are you having to change, if anything, to make new construction still work in today's environment?
- [38:01]
C
Yeah, so, so look, we, we have kind of an interesting approach to development and like I said, you know, fully integrated, we have a fully integrated business. And what we like to say is we like to control the entire value chain. And what that really means is that we're leveraging research to identify locations, we're leveraging an internal land team to go find off market sites. So we're not paying brokers for marketed sites at top dollar in house development, in house construction, in house management. Kind of taking all these little components of margin out of the equation, which is helpful. But then to take it to the next level to build efficiency and cost visibility, it's things like prototyping our architecture and trying to re, you know, leverage the reuse of the same plan so that we can dial in costs, you know, at our scale, doing 3,000, 4,000 units a year. What's really nice is that we are able to make the decision conscientiously to use the same kind of manufacturer on every single project so we can negotiate the best pricing with those manufacturers directly and it allows us to bring our cost down. So, you know, not only is the cost lower, but we get greater visibility upfront. So when we're looking at a potential project, we know right up front what it's going to cost. In fact, one of the statistics that I really like, and our construction team has dialed it in so much that within a year we can keep our cost within 1% so we can make an estimate and then a year later we know that price within 1%, which is a tremendous advantage when you're out looking at sites and you're trying to make deals work. We can dial it in up front and that makes a huge difference in today's market and making sure we can deliver quality product at the right price.
- [39:40]
B
So are you building the same product in different locations?
- [39:42]
C
For the most part yeah, we have a, we have a handful of different prototypes. So we have what we call our luxury prototype which is a very high end class a four story elevator condition corridor, typically surface parked product. Then we have a more of a value product, larger units, a little more utilitarian, only ones and twos. And then we have our BTR product as well. And then we have a variety of buildings to, to pick from within those kind of subsets. And so we're able to go into a project and really put the, put the buildings together in a thoughtful way, add different clubhouses, amenitize it a little bit differently to dial it into the market. But it allows us to be way more efficient in terms of just architectural and from understanding where our cost is.
- [40:29]
B
So you talked a couple times about knowing where your cost is. I think the perception outside the industry is that with tariffs that's not possible. But I talk to people like you and I hear the same thing. But I just, I have to ask you the obligatory question. Tariffs, immigration policy, how is it impacting you?
- [40:42]
C
Yeah, so, so actually not really impacting us adversely at all. And you know, like I said, we've been very active in, over the last two years and you know, we're, we're pricing about $1 billion worth of construction this year, actively going to GMPs and buying out contracts and our actual cost and you know, from the beginning of this year to the end of this year, less, you know, we're down like 2% across the board. So our cost has actually declined this year. When we look at our labor on site across our properties, it's incredibly stable throughout the, throughout the entire year. So we've had no real interruption. Look, you know, at the level that we're operating and constructing, we're not getting a lot of undocumented workers. Right. I mean we have pretty significant standards in terms of underwriting our subcontractors under, you know, and it's a, it's a different level. We're not a home builder, right, where, where you're picking up guys, three guys to frame a house and you're doing it kind of on a, on a piece basis. So a little bit of a different model. So we've been fortunate to be able to see consistent employment in labor on site. We've. And you know, I think that when we try to quantify what the real impact of tariffs are on our projects, I would say that the total impact is, you know, about 2% of our total materials purchase really are impacted. And it's just, it's almost, I mean, look, when you think about the bigger items, even our appliances now, except for microwaves, are built in the U.S. you know, lumber is coming domestically. A lot of these materials are already domestic domestically produced. So we're not seeing a lot of tariff impact at all.
- [42:19]
B
Yeah, that's interesting. And you said you're crossing on 2%. What's driving that? Just that the subs are now have more bandwidth, they're more competitive on pricing.
- [42:27]
C
Yeah, I think that's exactly it. I think what's really happening is subcontractors are tightening their margin in order to keep their forward job jobs going. You know, they're seeing supply drop off. They're not seeing as much opportunity for new work. So they're tightening their margin to win bids.
- [42:42]
B
Do you think, do you think we won't see or. Let me rephrase it. Do you think we could see construction labor issues later as this, as the, once the cycle ramps up again?
- [42:52]
C
Oh, look, I always think that there is the potential for labor issues if we go back to building a million units a year. Right. I don't think we will get that high. But my point is, I guess it's conceivable if we have a very restrictive immigration policy and we really start to see supply increase dramatically. But I mean, quite frankly, I don't foresee either of those two things in the near term. So not something we're particularly concerned about.
- [43:19]
A
Fair enough.
- [43:19]
B
Now you mentioned you're building luxury, you're building workforce, you're building btr. So imagine you love all of them. They're all your, all your children. But if. What do you like best right now or what works best right now?
- [43:30]
C
Well, so it's interesting. I think there's always a. I think we all always need to be conscientious of affordability.
- [43:36]
A
Right.
- [43:36]
C
And I think that when we, you know, it's. When the market is, is really rolling, everybody's looking forward at rent growth and saying, hey, I'm going to build the nice stuff. Because I think rents are going to grow and we're going to see all this demand. Ultimately, I always default to the, to the value product. I think that being able to deliver something at a very low cost basis where we can undercut kind of prevailing class a rents by $100 or $150 a unit a month and then also give them more, give, give the resident more space, I think is, is a real winning combination. It's interesting how, you know, some people are dialed into that kind of attainable affordability. Story that, that middle market approach and some are just more resistant to it. But personally I think it's a, I think it's a great play and I think that's really where more the demand is. And I'm sure you know, in your research you look at, you know, where you know, stratifying demand from an income standpoint as you go down the ami, the kind of the AMI schedule, you get more and more demand as you, you, as you move through that.
- [44:34]
B
Absolutely. Especially for quality units that are better price. I think that as you get down the quality stack or the scale the spectrum it starts to. The demand drops off or inferior product. But older stuff. But let me, I'm curious. When the workforce product is that are you. Do you get much competition with heavy lease up class A luxury stuff, does that, that impact your demand at all?
- [44:56]
C
Not, not. Well, it does. But you know, again I mean our, we, we size that to, to really undercut the rents.
- [45:02]
B
And even with the concession.
- [45:04]
C
Even with the concession, yeah, we're really in. And the theory being is that we will see rent compression to much closer to class A rents as the, as the cycle kind of moves through. And so you may start at $150 and you end up at 50.
- [45:16]
A
Right.
- [45:16]
C
And, and as the, as the market expands and look, the average unit size is 150 square feet bigger than you know, the other, other properties. So you're getting a lot of, I mean to why we call it our value product because you get a lot of value. You're getting, you're getting good storage space, you're getting laundry rooms, you're getting extra square footage, you're getting more, you know, more utilization. It's kind of like back in the 80s when people started doing sunrooms in the garden style, right. They started to recognize that people don't really want a balcony. What they really want is they, is they want more space. And particularly when you're in the suburbs and you're looking for value, that extra space carries a premium.
- [45:54]
B
All right, so you're building a lot in tertiary markets or I would call maybe like outlying suburban areas. How much that is? You really like these high growth spots or how much of it is, hey, this is what pencils out right now with land costs. Like what's, what's your strategy there?
- [46:08]
C
Yeah, I mean, look, I would tell you that the vast majority of the projects we have under construction today are not in the exurbs or even in the tertiary markets. We do have a couple that we look at opportunistically okay. Really, our investment strategy is ground in this idea that we go into these high growth markets in the Southeast, right. That are demonstrating not just current but future employment growth. And then our, our strategy is focusing on where those employment nodes are. And I have this saying that people drive to own, but they don't drive to rent. Right. You know, the concept is that somebody will drive an hour to go buy their first house, but nobody's driving an hour to rent anything. They want to be approximate to employment. Right. And so if you go into these high growth markets, you have to be where the jobs are actually being created. And most southeastern markets, that is not the urban core, that is first and second ring suburbs. And so we focus on those suburban locations primarily. And then we build product that is responsive to what that employer can, or what those employees can, can afford. You know, what that employment growth is driving in terms of rents. And, and then the second piece of it is, you know, what our consumer wants on top of that. And how can we make those two things fit to be responsive to what it is they, they need? And, and that's our strategy. So that drives us into some locations that are, you know, maybe not as obvious. I mean, we got into Myrtle beach back in like 2015, before everybody is like, oh, Myrtle beach is a hot spot. I mean, the benefit of having research, right?
- [47:34]
A
Yeah.
- [47:35]
C
Saw an opportunity, we got in there and then ultimately got overblown and never went back.
- [47:38]
A
Right.
- [47:39]
C
And, and so, you know, there's some, there's some deals like that that we've done. We've done a couple deals in Wilmington, North Carolina. Been a hot market, seen a lot of growth there. One of them was more opportunistic. One of them is more of a. We just thought there was a real demand on the BTR side there. So, you know, we try to be really thoughtful about where we go. I would say 80 plus percent of our deals are in major markets, not secondary, tertiary. Particularly today when we look at our pipeline, we are really pushing. I mean, it would have to be an incredible opportunity to go into a secondary or tertiary.
- [48:13]
B
Oh really? Why is that? Just because of the supply in some of these spots right now or.
- [48:16]
C
Yeah, I think, you know, I think there's a lot of supply. I think these smaller markets are more, you know, more impacted by supply. I think when you think about cycles and we talked about this, you know, the, the recovery from kind of the, in this current asset, you know, valuation cycle, the capital is going to flow back to the bigger markets first. Right. I mean, it's kind of the historical trend. And so we want to be in those bigger markets. Those are the markets that kind of recover from an employment and supply equation as well. I mean you take markets like Charlotte have a tremendous amount of supply but overwhelming amount of absorption and demand.
- [48:50]
B
No one talks about that.
- [48:51]
C
Nobody talks about the demand side. Right. And so we want to be in those markets that are going to recover faster because they just drive so many jobs.
- [48:59]
B
Absolutely. And by the way, I do have to give a shout out to your research team. You mentioned that several times. And you guys, I think invest much heavier in research than most shops out there. So kudos to you for that.
- [49:08]
C
Well, you know, it's, look, it's been our foundation since 2000 and actually even since before that, you know, and, and it's, I think that it's amazing how many people are making these multi billion dollar a year decisions and relying on other people's research. And, and I think that's fine, but we really think it's the foundation of our business and, and not drinking our own Kool Aid. Right. We want to make sure we're challenging ourselves and asking the difficult questions and making sure that we're, that we're being thoughtful as we make investments.
- [49:36]
B
I find it crazy sometimes where you know, say you spending hundred million or at least you're building a project be worth 100 million plus and people get apprehensive about spending $25,000 on a, you know, research subscription to something. So. Right.
- [49:47]
C
I mean it's, it is a little crazy, isn't it? So, and you know, we talked in the, in the mid-90s, we used to talk about the changing risk profile of investing in real estate because of the amount of time series of data and the availability the public dissemination through the Internet. You know, and this also was this private to public transition. You had CMBS coming, coming of age, you had the public REITs that were really kind of growing with all the upreach transactions in the mid-90s. And you know, the theory was, you know, risk in real estate is changing. There's visibility of data, there's the ability to actually forecast trends and to understand what's happening. And yet, you know, here we are, you know, 20, 30 years later and people still aren't taking advantage of that information. So we try to be thoughtful about that.
- [50:31]
B
And I'll go back to something else too. You mentioned that like a lot of times in the Sunbelt, the jobs aren't downtown. And this has been a pet peeve of mine because a lot of times people who are from a place like New York, they don't understand that it's just different. And so I'll give you an example. Like I saw you read these stories about like I'm based in Dallas, you know, and places like Salina, Melissa, they're like, well, this is like an hour and a half from downtown. It's like these people aren't commuting downtown, right. If they're going to Frisco, McKinney, like there's a lot of jobs in these spots. And, and I think if you don't, if you don't understand those markets, you don't get that.
- [51:02]
C
No, that's, that's exactly true. And, and we actually heat map employment nodes and we have a, our research team has, has a, they have an index that they have a job proximity index that they have actually calculated so that when we're looking at sites, we're looking to score the job proximity index and making sure it's at a high enough level. It gets back to the same thing. We, we are trying to focus on that 20 minute rush hour drive time. To us, that is kind of, that is the renter bubble. We try to target and then from there we try to, we, we want to make sure that we're looking at that supply demand equation within that, within that 20 minute rush hour drive time bubble. And it's, you know, proximity to employment is really everything. And, and I just think that you're right. When, when the folks from the, the big coastal markets, if you're in New York or Boston or even D.C. everybody assumes all the jobs are downhouse. That is just absolutely not the case in Southeast.
- [51:57]
B
Absolutely. No.
- [51:58]
A
Well said.
- [51:59]
B
With the research you guys have, in your experience, what makes a good market? Like if you're looking at a new market, what are the drivers or attributes attributes you're looking at to say, hey look, we, we like that we're going to, we're going to, we're going to roll the dice here, right?
- [52:09]
C
So I, I think it comes down to two things. One, one, we're really trying to focus on employment growth. What are the markets that are creating jobs? But more importantly, not just, you know, it's not just like looking at service jobs. What we're looking for is stratifying the incomes of the jobs. Are the jobs being created in the kind of higher strata of, of incomes from an employment standpoint or are they on the lower side? And the reason for that is the higher income jobs being created really creates kind of a secondary employment impact. As high income jobs move to a market then that creates more, you know, retail and service jobs to support that. And so that's kind of what we look for. It's, it's really trying to, trying to identify those markets that are growing the right type of employment. And look, it's not an unusual theme. I mean this is why we've seen places like Austin grow so much or Dallas or, or Nashville or Raleigh, Charlotte. I mean they're all kind of creating these higher income jobs which has kind of further resulted in more supplemental growth as a, as a result.
- [53:10]
B
Yeah. So let's shift gears to what I know is a big passion of yours and that's the non profit entryway. Some people still know it as shelters to shutters. You've rebranded it?
- [53:21]
C
Yep, we did rebrand it partially because the mouthfall shelters to shutters was just the alliteration. Seemed great at first and then it's, you know, a bit of a mouthful.
- [53:29]
B
Well, I sometimes said the opposite. Like I said the, you know, shutters to shelter, you know, thinking they're going to shelter. But no, it's a great name either way and great cause. In fact, I'll be speaking at one of your events in Dallas, French UA in November. So excited about that. So it's a great cause, serving individuals experiencing homelessness by providing housing and mentorship and employment opportunities in the poverty management space. So how did you come up with this? Like what was the story?
- [53:53]
C
Yeah, really kind of a fluke story. So I was hanging out with my wife, she was shopping. I picked up one of these kind of outdoor magazines, Blue Ridge Outdoors, started flipping through. There was an article in there called Homeless for the Holidays. And the editor of the newspaper actually went homeless on purpose for a handful of days to try to understand the situation in this town. And you know, what I think struck me about that article was how all these individuals had really kind of had some sort of financial catalyst, wanted to work, had been working, ran into some sort of difficulty. All they wanted to do was get back to work. And in fact if they were out there panhandling or looking for money, it's, it was really just so they could get a meal so that they could or go get a day rate motel so they could get cleaned up, get changed and, and go for a job interview or try to get back on their feet. And you know, I had always envisioned homelessness as, you know, the person who's, you know, mentally ill or chemically dependent, you know, living under a bridge. And what I learned is that that really is a very small percentage. That really is kind of the most visible tip of the iceberg. But. But 85% or 83% of. Of all homelessness is more the situational. And, you know, one of the statistics that I find so staggering in America is that, you know, about 65% of Americans live paycheck to paycheck and have less than $1,000 in savings. And so when you think about that, that is, you know, one medical issue, that's one car issue, that's one, you know, one really small impact. I mean, what we think of as small impact away from being in, you know, a really uncharted circumstance. And so. So. So, you know, when. When you think about homelessness, look, I think it's the sort of thing where there's a lot of people out there, you know, fall on difficult times, whether it's personal choices or just bad luck, almost irrelevant, but they find themselves in a bad spot. Entryway is really so uniquely positioned in our industry, is so uniquely positioned to have a positive impact. And the idea was quite simple. It's like, if there are people out there that want to work and don't have a place to live, well, our industry kind of satisfies both those things, Right. It's very typical for people who work on site to get discounted housing at the property that they're working. We encourage it and we offer benefits and on the job training, et cetera. And it's a real career path. And so when I read the article, I said, wow, this is something that our industry can solve. We piloted. It's been now 10 years. We're in, like, 15 cities continuing to grow. It's been really remarkable. The biggest change I'd say we've made is we've invested more on the training side so that our candidates can be better prepared for employment in the industry as they kind of graduate our program. But it's exciting. It's exciting to see it continue to grow. So I appreciate you being involved and.
- [56:36]
B
Yeah.
- [56:36]
C
Down there in Dallas.
- [56:37]
B
So I'm just curious to ask you touched on a little bit what kind of impact the program's had in terms of, you know, any stories you could brag about the successes?
- [56:45]
C
Well, I mean, look, we. We have people that. That have been homeless and within three years are now property managers.
- [56:51]
A
It's, wow.
- [56:52]
C
Unbelievable. Unbelievable how people have, you know, look, I mean, there's two things I've come to realize. One is, you know, when people, you know, struggle with financial circumstances and end up in a spot, doesn't make them a bad person or incapable of success. Right. It's an unfortunate circumstance and a lot of these individuals have become so self aware and so motivated to never go back there. I mean, think about it, you end up in a shelter. I mean, the first thing is I never want to go back there. So I'm going to do whatever I have to do to take care of myself, my family, to never have to experience this again. And so you have this level of motivation to really pull yourself out of that situation. And it's really about opening the door. As we like to say, it's a hand up, not a handout. It's an opportunity to crack the door and saying, if this is something you're interested in, we can offer you a path. And there's been several people that have really, I mean, seen tremendous growth as a result of it. And you know, there's all sorts of stories. I mean, one of our, our first candidates, you know, she had two sets of twins that were like under four. It was a domestic violence issue. She escapes with the kids and you know, became an assistant manager, was a lead leasing agent for us and within 12 months and then assistant manager within 24. And you just, you just see folks just take such, such a grasp of that opportunity. What I also think is fascinating is our candidates have, have tripled the tenure of your typical entry, entry level employee.
- [58:22]
B
You know, wow.
- [58:23]
C
Which albeit is not really long, but you know, typically the, the turnover is like every six months. Right. For entry level employees. And we're doing, you know, north of 18 months.
- [58:32]
B
That's great.
- [58:33]
C
Which is terrific. So it's a great, great way for the industry to great, get fantastic candidates, great for the communities, great for these individuals. Really. It's a, it's a win all the way around.
- [58:43]
B
Yeah, absolutely. Great cause. And, and, and that's, that's fantastic. So. Well, Chris, thanks for your time today and really enjoy picking your brain.
- [58:50]
C
Yeah, no, thanks for having me. This has been great. Thanks. Thanks, Jay.
- [59:12]
A
And that's a wrap on episode number 57 of the podcast. Big thanks to Chris for being our guest and my host for this, for this week's episode. Also, big thank you to jp, thank you to Madera Residential and thank you to Funnel for sponsoring today's episode. And thank you to all of you for spending part of your week with us. We'll see you next time.