#391 - Chad Lavender - President of Capital Markets, North America @ Newmark

Chad Lavender: So took a job, interned in Dallas with Harwood International, then took a job with them out of Alabama. And it was a ton of fun. And all I wanted to do was build high-rise office buildings all over the world for some reason. We're building the highest-rent building in the world, St. James Square in London, had just built the Rolex building at the corner of Cannon and Wilshire in Beverly Hills. We're building the Harwood district in Dallas, which was probably a little ahead of its time, given what's happened now from a momentum standpoint in Texas. So, it was a ton of fun, but it was wrong timing. I mean, I started my illustrious development career in 2008, which honestly was the most beneficial thing that happened to me in my career because I got to see the good, the bad, and the ugly of development, of capital structures with lenders, kind of everything. And it was all hands on deck because like every developer, your staff was flexing with the amount of projects you had. So, I was kind of doing everything, it felt like, from weed eating the buildings to negotiating with lenders and tenants to come into our buildings. So, it was a ton of fun and a great learning experience. 

Chris Powers: Okay, two things. Do you recall, I know you were young, like I remember as ’08 was hitting, I owned a few rentals at TCU, but that was like the extent. Do you kind of remember seeing it coming, or did you just like walk in one day, you were probably young, and they're like, hey, by the way, the world's falling apart?

Chad Lavender: Yeah, I don't think I saw it coming or really the full extent of it. And in college, I had started a T-shirt sales company with a couple of guys and was making real, real money in college and thought just making money was easy. You just go find something that people want and you sell it. And I had this crazy bonus package negotiated at Harwood and thought I was going to make a million dollars my first year out of college. And bonuses were hard to come by in the commercial real estate industry. And I was like, I want a low salary and bet on the ups. And lo and behold, there weren't any ups for a lot of years. 

Chris Powers: All right, real quick. You're from Alabama. I tend to be reading more and more about Alabama, especially as it relates to real estate and just the impact of that state kind of on the country. Can you just give a little bit- I don't think I've ever asked this question, like what's going on in Alabama? Why is it becoming a more important state to the overall country? 

Chad Lavender: Yeah, I would say that's a great question. So really, you have two great universities. It's hard for me to say that Auburn's great, considering I'm an Alabama grad and fourth generation Alabama grad, both sides of my family. My mom worked there for 35 years. But two great institutions. Alabama has a fantastic real estate finance school where you can get a major in commercial real estate finance. Then Auburn has a building science program that I think is second to none. So, you have LIV, which is a big multifamily developer, Arlington, and a lot of developers out of Alabama. And I think it really stemmed from, in 2006-7, four out of the top ten banks in the US were located in Birmingham, Alabama. So, you had a lot of debt liquidity in that market to go drive development volume across the country. 

Chris Powers: Is it affordable? 

Chad Lavender: It is affordable, yes. 

Chris Powers: And isn't there a lot going on in logistics and industrial in Alabama? 

Chad Lavender: Absolutely. I mean, they just deepened the port in Mobile, which increased, I think, the amount of shipping terminals and whatever the things that lift the containers, you probably know being an industrial guy. So they've spent a fortune on that port. And you have the I-20 corridor as well as the I-65 corridor, so your kind of linkage to Florida, Texas, Georgia, then all the way up the Eastern seaboard. And Savannah also sends a lot of stuff down I-20 to Texas or various markets around the country. And then you have the connectivity to Memphis as well. 

Chris Powers: We'll tease some of your friends for a second. Is Alabama going to beat Texas this year? 

Chad Lavender: Absolutely. 

Chris Powers: By how much? 

Chad Lavender: It will have to be an SEC championship if we play each other in the playoff. I think it's too early to call the score, but I would say I'm going to take the over on the game no matter what it is because I think both teams will have great offenses, great quarterbacks, great skilled players. Texas got us once, the last two games, but it's not going to be three.

Chris Powers: Not this year. You heard it here first. All right. Office ’08 hits. You're in the luxury development world. That turns quick. Then what happens? 

Chad Lavender: So I set up 82 meetings in about six months with commercial real estate people in Dallas, and I would cold call like legends of the industry. A lot of people say ignorance is bliss, when you're not old enough to know that you shouldn't pick up the phone and call Bill Duval, a property company. But I called Bill, called Harlett Crowe, called anyone that I could find their name that was leading a business in Dallas. And I went to them not asking for a job because I knew no one was hiring. I went to them and said, can you introduce me to two more people that I can have a meeting with? Because the answer was, we love you, but we're not hiring. And that was probably a convenient way of saying you may not be good enough either. But it was an easy out for them. And luckily, they kind of all followed through. So, the only thing that was trading in 2009-10 was multifamily. And you kind of saw increased transaction volume. So I wanted to be in the transaction game because the development cycle was closed and not opening for the foreseeable future. And it was honestly a little slow being young. And I wanted to do a bunch of transactions. So, we went or I went and met with Brian O'Boyle, who led Apartment Realty Advisors, and said, if I could go be an analyst, that would be great, but I also want to figure out how to be a broker and learn to be a broker. He was the top multifamily developer sales guy in the market and just a great guy and mentor. So he let me work. He said, I need eight hours a day from you as an analyst at a minimum. Whatever you do in the meantime, that's your time. So, I'd get in at five, work till eight, and then from eight to five, I'd cold call all these Class C apartments that had bullet holes in the windows and go try to convince these guys to let me sell their properties. And I had a little bit of success early, got lucky, and would bring them to the meetings, obviously, because I didn't know what I was talking about, but I could get a meeting though. So that worked out pretty well. And then Ryan Maconachy, who's still my partner today, he was starting a seniors housing sales business at ARA. And the demographics were great. The performance through the GFC outperformed every other asset class. And we could see institutional capital building in that space and thought it was going to have a trajectory to a lot more sales volume. So, we started a senior housing brokerage team. Again, ignorance is bliss. You're young enough and dumb enough to make a decision like that. My parents both said, no way you do this. You're going to get a full commission at 25. Like that's the worst decision you've ever had besides buying your condo out of college with the money you made from the T-shirt company to start your illustrious real estate career. This is another bad idea. So luckily for us, we grinded hard. It took us a while to kind of get momentum. And then Starwood gave us a portfolio. We sold one of the assets to AEW, set a price per unit record, and another asset that set a cap rate record, one in Palm Beach, one in Naples. We sold them two or three times since then. So should have named my kids, one of my kids Carlyle probably, because they put us in business. So, that really got us going. We kind of had a track record then, but the thing we lacked was the ability to finance our customers. Because a lot of the right answer was, you're not ready to sell yet, but you should refinance. So, our whole business model was have your client's interest ahead of your own, and over time, that'll pay off because you're the true advisor in the space, not the guy just telling them to sell. And we also couldn't win the assignments at the time, so we're building loyalty by telling people to refinance instead of sell. So we went and pitched HFF on starting a healthcare business, which is MOB sales, senior housing sales and financing because they were financing and selling commercial real estate and all the other big companies kind of had a senior housing team. So, we went there and kind of built- it kind of doubled every year. Two years later, we were number one in sales and in the seniors housing business, and kind of have been since that move. 

Chris Powers: Okay, so you're 25, you go to- and at the time, you're at ARA, and you're like, we're going to start a seniors housing division. Okay, what did you actually do to get that launched? Is it as easy as like, okay, I have my partner, we have a desk, we have a computer, a phone, and a Rolodex of who owns all this stuff. Who do you have to pitch at ARA? Like, how do you actually form a group? Because I bet there's a lot of brokers within these bigger teams that are like, we want to start a group. 

Chad Lavender: Yeah. So luckily, Ryan had already done the dirty work, so I got to show up where there was already a shingle for ARA senior housing. So I didn't have to do the dirty work, but it's a highly entrepreneurial company. Newmark has subsequently bought them. So, I got back to reunite with all my partners when I moved to Newmark in 2019. 

Chris Powers: We'll go back to that real quick. Was your trajectory ARA to Newmark, or was it ARA, JLL, Newmark? 

Chad Lavender: ARA, HFF for eight years, and then Newmark. I think Newmark bought ARA in 2016. And then when HFF was selling to JLL, we thought it was best for our team and our clients to go to Newmark. 

Chris Powers: Okay, we got to spend a little bit of time on this. This is an interesting story. So, you launch this group, you make some calls, Starwood and Carlyle give you a shot. Were you pitching something at the time that not a lot of people around the country were pitching? Like was a senior housing group novel to ARA, or was it already kind of...? 

Chad Lavender: No, the big bulge bracket groups had already established teams. Most of those people had been in the business 20 or 30 years. So, we were the young, hungry, we're going to outwork everyone. We'd go tour all the comps, know everything about the market, know everything about the financials, and really just give that energetic everyone knew we were going to outwork everyone. Everyone knew we were going to push for the top dollar because it's more fun. You want your clients to be happy and deals have babies. So every time you do a deal, you're generally going to get another one or maybe two or three, depending on how many kids you want to have. We wanted a lot. 

Chris Powers: Johnny, that's our clip. Deals have babies. Okay, so that's growing. At what point was it established and you had kind of cemented yourself that like this is what we're doing? Because that was like your first big lick in your career arc. 

Chad Lavender: So probably when we did the Starwood deal, we knew we were in business. Before that, it was a little dicey. We were kind of selling cats and dogs and bank-issued stuff and stuff that was scratch and dent only, and that put us in the Class A game. We've always run the spectrum from C to A, but that got us at the top end of the spectrum and really cemented what we've done the best, which is dominant market share deals at the time above 50 million. Deals have gotten bigger, so I'd say that has maintained itself, but really high, high market share deals over 100 million, take privates, any of the complicated stuff, selling operating companies, kind of ran the gamut from an advisory capacity. Anything you wanted to achieve, we'd go figure out how to do it. 

Chris Powers: Okay, so let's do the operating company thing. So you go from I'm going to build high rises at Harwood to a few years later I'm going to help sell healthcare operating companies. Did you learn to do that or did you just go hire someone that was- it's almost like investment banking at that point. How did that practice get going? 

Chad Lavender: Well, we had advisory experience, and also just like we do at Newmark, we had an advisory specialist that, I guess, excelled in that space. The first one we worked on, we worked with a boutique investment bank. So they kind of took us to school on how to go execute on that, how to value it, how to talk about it. There's a company called Summerbee Senior Living, and we sold the Opco, the assets, developer, and we're selling a deal that's publicly announced for 4.4 billion Canadian right now. That'll be the largest senior housing trade over the last five, six years in Canada. And it's the assets, development sites, developer, kind of the whole, it's the whole business. Yeah, the whole fee stream vertically, which I know you know a lot about. 

Chris Powers: Yeah. Okay. Ever since I've been in the industry, like every year, it's kind of like seniors is great because people are getting older. And like 15 years later, it's like seniors is great because people are getting older. Is anything even different today in 2025 that was different in 2012? I know your skill set and your view of the world has changed a lot. You're obviously a lot more experienced. But like, is the pitch still the same? Is the strategy still the same? 

Chad Lavender: Well, the pitch was early. 

Chris Powers: So that was early? 

Chad Lavender: Yes. So now the baby... 

Chris Powers: Now they're actually old. 

Chad Lavender: Your average age of your independent living resident is 82 and a half... Yes, exactly right. So now your baby boomer leading edge is now 80. So you're kind of- in the low 80s. So you have that huge demand there today, and it's growing for the next eight, nine years materially. And kind of penetration rates across the country have kind of maintained their rate and haven't increased, but it's amazing the resilience of this industry and how it's kind of recovered out of COVID. 

Chris Powers: And maybe you know the answer to this, maybe you don't. Is our senior housing industry in America like similar to other countries, or like culturally we just handle seniors differently than other countries? 

Chad Lavender: Yeah, it's a great question. So it's very different in every country. Germany probably has the closest, most akin seniors housing, I guess, landscape to ours. And then like in the UK, it's all care homes and it's a little different. In Canada, for instance, their penetration rates are much higher. So that's just a part of life. You move on to a senior housing community. And it's different kind of region by region, state by state even in the US. Like your highest penetration rates are in the Northeast and Pacific Northwest. 

Chris Powers: Really?

Chad Lavender: Yes. 

Chris Powers: It's not Florida? 

Chad Lavender: No. Well, Florida is different. And no, it's not Florida.

Chris Powers: Why? 

Chad Lavender: I'd say people are generally in condos a lot of times. So, they're bringing care in, or either as they age, they go to senior housing or go to where their kids are to get cared for. So they don't necessarily stay in Florida for the rest of their lives. 

Chris Powers: Is there any trend, just everything's becoming more expensive, where seniors are going to start living more with their families rather than going into these or there's no sign of that? 

Chad Lavender: We've seen the opposite. The baby boomers don't want to do that. The silent generation was kind of good in a little studio. You put me wherever, I'm happy. The baby boomers want one, two bedroom units. Price is the last question. It's all about the amenities, the community, and who the residents are with. 

Chris Powers: Okay, what matters- I guess it's different, but let's take like independent living. What amenities matter the most? 

Chad Lavender: Food, A, B, and C, they're eating three meals a day on the property. And then I'd say the activities side. So, what kind of workouts, wine dinners, and all those type things. Really, the people want to be there because of community. People who move home, most of them end up moving back to a senior housing property or they move in with their kids, they end up back there because they want to be with their people and their friends. 

Chris Powers: Oh man, we could spend all the time on this. We might be back in here. Is over 55 considered seniors or does that still fall in like the multi? 

Chad Lavender: Yeah, we call it active adult adult. We've sold more of it than anyone. We partner with our local multifamily brokers to go sell that and kind of cover the seniors housing buyers and the multifamily buyers. So, you'll get way more CAs than you get on a traditional multifamily deal. You'll get way more CAs than you get on a seniors because you have this overlap. And the business is interesting. Your average length of stay is five years versus turning over 60% of your multifamily building a year and the average length of stay in senior housing is two and a half years. You keep your resident for five years, your average age of your resident is 73.5. So you have this young senior that's ultra active that wants to be out and about all the time. And it's a great business. I think Carlyle owns more of it than anyone in the country, and it's their best performing sector in all of their holdings and all their funds. 

Chris Powers: Assuming capital's not the constraint, you've seen, and again, this is kind of a broad brush because I know there's different types of senior housing, and assuming capital's not the constraint, what do the best do really good? Like you've seen an average operator, a great operator. Like what characterizes the great operators outside of just having enough capital to perform? 

Chad Lavender: Yeah, I think it's mostly that they have a care mindset and kind of a care first mindset. And they also have someone on the team who's a businessperson because care and costs intersect at a point. So, it's the people who reinvest and invest heavily in their talent at the properties to have the best executive directors and the best people on the ground. 

Chris Powers: All right, so you're at ARA and then you go to HFF. What moved you from ARA to HFF? 

Chad Lavender: It was the ability to do financing because ARA was just a sales shop at the time. And so we wanted to be able to offer our clients anything through our team and really go execute for them instead of just telling them to go find someone else to finance it. So, I think it was just kind of cradle-to-grave helping our clients end-to-end however we could and could walk in and be an advisor. 

Chris Powers: Maybe we need to give a little ode to HFF and Mark Gibson. So many of the talented capital markets groups, brokers came out of HFF. What happened during those years? I know they're now part of JLL, and I love Mark, and Mark's been a great mentor to me. But like, almost everybody I respect, not everybody, but they came out of HFF. What happened? 

Chad Lavender: Yeah, I mean, it was just a great- it was small. So, I mean, it was, I think when I got there, 150 to 160 highly talented advisors. So, you were just small, very connected, and we shared information well, and tried to make each other better. And I think we're doing that at Newmark now. We're I think about 282 brokers across the country. So, our whole motto is to do more with less and have the greatest people on the field to go execute and give them more white space or blue water, whatever you want to call it, to go execute for their clients versus watered down talent. 

Chris Powers: We're going to talk about this. So, did you leave HFF straight to Newmark? 

Chad Lavender: Yes.

Chris Powers: Okay. And Newmark has just been in the news. I feel like every time you open LinkedIn or one of the publications, it's like new brokerage team landing in. So what was your initial job at Newmark? 

Chad Lavender: We came to start the alternative assets platform at Newmark. So really, we saw capital matriculating through student, seniors, medical office, life science, storage, data centers, all the kind of weird parts of the market and the creases in the market, manufactured housing. And we thought if we could stitch it together and have the best in each of those sectors, we would be better informed for our clients to know what capital, because capital in our student housing, then go do a medical office deal then a seniors deal. So, we kind of stitched that together when we came, and we're number one in all those sectors. So, we have the best data and we're advising and getting clients into each business as they matriculate through the alternative asset classes. 

Chris Powers: And how did you stitch it all together? Is it people? 

Chad Lavender: People, yeah, just great people and partners with, I think, no egos all around. We all did it together. It wasn't just Ryan and I. It was Ryan Lang and Aaron Swerdlin and all our partners. They wanted to be better, and we all made each other better. So, it was really easy to do. 

Chris Powers: How does data flow through the organization? 

Chad Lavender: We have a platform called Ideal where you can see every offer, every NDA, every tour, and we kind of have, I guess, a proprietary system that really recommends buyers based on what they've been doing in our system. So it's just data and being very transparent. We're small enough where we can share data pretty efficiently. And we think we have kind of the best of all brands. So, we're a cultural melting pot of a lot of different high-performing teams from all our competitors, and we take the best from all of those and try to cut the worst parts of the organizations. 

Chris Powers: Are we going to announce today the team that's about to be in? Are we going to do a live breaking announcement? 

Chad Lavender: I thought we would have... It may have to wait until tomorrow. 

Chris Powers: You might have to wait. Stay tuned. Real quick, I've asked some people this, and this is a really nuanced question, but it's something that gets brought up a lot. Typically, the guy or gal that is incredible at out-generating business, what makes them great at that makes them less great at going into a computer at night and logging in everything they just did all day. 

Chad Lavender: Are you talking about broker ADD? 

Chris Powers: ADD. But the best companies have found a way, like you just said, where it's all getting logged. How do you do that in a way that doesn't burn out brokers, doesn't make them... I would argue, most of them would say like it's the least fun part of my job. Do they have a counterpart? Do they just know I got to do it every night? Like how do you build that into a company? 

Chad Lavender: To be honest with you, it's normally not the brokers, it's their support team that's kind of pulling that in, or you're doing data extraction where you're automatically, you can upload the LOIs, you can upload calendars and see tours, stuff like that. 

Chris Powers: Okay, that's a fair answer. Okay, so you get there. At what point did the position for becoming president of basically the entire company come about? 

Chad Lavender: Probably in 2022, maybe late ’21, our leaders kind of approached me for it, and I kind of laughed, thinking, why me? And I'm very happy doing what I'm doing, and we're pretty decent at it, so I was having fun. I wasn't looking for a new challenge or a new job by any means. But I had recruited a lot of people to Newmark just because I thought it was the best platform and want to get more people you like and that you know they're going to excel like Chris Murphy, Robert Hill in Dallas, who you probably know, and Gary Carr. We had CB and JLL matched them up and now they're the number one office team in Texas. I think it was just kind of that was just an organic mindset by me that we're at the best place. I want to share it with as many people as I can. And we believe that our advisors make the brand, not the brand makes the people. So, every time we get stronger in a region, even if, like the office business has nothing to do with our business, but every time we get stronger, we all get better because we have better data. We have better connectivity with the institutions and the developers. And we get more knowledge of what people do great at other places to go meld that into our Newmark special sauce. 

Chris Powers: My first Newmark experience was Steven and Dustin calling and they're like, we're leaving JLL and we're going to Newmark. I was like, oh my gosh. Then that all took place and it was, I mean, I remember that was like earth shattering. 

Chad Lavender: It was. That was fun... Yeah. So, I worked with Bailey at HFF. We're good friends and stayed in touch and had made a friendship with Voles. And I know I met with you with them right after they joined... And their careers have gone like this, since they've come over, because they've gotten more territory and been able to execute for their clients in more geographic locations. I mean, they're probably the best debt or equity team in the country, very good on the sales side, understand capital markets soup to nuts, and are a quick study on any geography. 

Chris Powers: It's awesome. So, what does your job entail now? 

Chad Lavender: I mean, it's recruiting, covering institutional capital and the large owners of capital, and going to help these people pitch business and win. So we're trying, we don't want to be the biggest, we want to be the best. So, I mean, we want to have the highest revenue per head. So it's pretty easy to identify who you want, but it takes a lot of time, effort, and energy to get them over. I mean, with Bailey and that team, it took a couple of years. It wasn't like it was one meeting and done. 

Chris Powers: Okay, let's talk a little bit about that. You have been in charge of now hiring arguably some of the best brokers in the country. It takes a while. What's your tips on recruiting? 

Chad Lavender: It's the same as winning a deal to go sell for someone. You got to show passion, you got to show the vision of the future of how they can excel there. If someone is thinking about making a move to a platform, the only reason to make the move is so you can grow your revenue substantially. So, we have a lot of case studies that that's proved out with brokers coming over, that they've grown their revenue by multiples. So, that really helps. And it's kind of passion and persistence and figuring out what's important to them. We're not a one-size-fits-all company. We're highly entrepreneurial. So, we're happy to structure things in different ways that fit for both of us and with quick feet and like to move fast. But a lot of the larger deals I've worked on in my career, like the Canada opportunity, I’d been working on that for nine years trying to get that business. So it's the same thing. It's just with talent. 

Chris Powers: So, we'll take, we'll pick on Steven and Dustin. So first call, they're like, no, we're good. So then do you just let some time go by? Do you call them immediately after? Like nobody says yes on the first date. 

Chad Lavender: No, it's exactly like that. You're dating a girl and a lot of times that's out of your league and a lot prettier than you. So you got to do- pull out all the stops to make them fall in love. 

Chris Powers: Okay. That nine year deal in Canada, when you say we've been working on it for nine years, is that just like getting to know the ownership more? Is that sending them comps and information about their business just incessantly? Like what happens over nine years that you go from dream to reality? Because I think a lot of people enter the industry and they're young and they're like, why does Chad always win all the business? But they don't really realize like, yeah, he's been working on this for nine years. So, what are like the highlights of what happened over nine years? 

Chad Lavender: We took two trips a year to Toronto to see them, knowing, hoping at some point that something would come out of it. They're great people, so it's people you want to be with. One of the guys loves wine, so he's always opening a bunch of great wine, and he's a great time to be with, fun to play golf with. But also, help and advise them and show them what's happening in the US live and really showing them what we're doing on a monthly basis, sending them comps so they can value their assets. They have quarterly board meetings like most groups, so we'd help them with that information quarterly and really just stay on them, build trust, show them our execution capabilities, and show them we're the right group to go maximize value for them on starting a company 11 and a half years ago to selling it. 

Chris Powers: So they picked up the phone, they said, Chad, it's time? 

Chad Lavender: That's exactly right. And I said, can I be there tomorrow? They said, we're not in town till Monday. So we'll be there Monday. 

Chris Powers: Congrats. That's awesome. All right. So you're recruiting and then you've just said this multiple times, but I think diving a little bit deeper in here, you've clearly built a skill set and the people that you have hired have built a skill set of winning business. Sometimes that could take nine years. What are like the- if I say, what does it take to win business and be great, what's the answer? 

Chad Lavender: The most amazing thing about the advisory kind of brokerage business is that people do it so many different ways. Some people do it because the room is lit on fire the second they go in because they have such a big personality, so much energy, and so much knowledge of the assets. Some go in and they just know everything about the asset, the market cold, and they're just the trusty guy or girl that you know will cover the market, get you the best price. And a lot of the best are thinking about things that you need when you're not asking. So they're introducing you to capital sources. They're bringing people to your office. They are trying to add value to your business, whether there's a fee involved or not. So when you're working for free, I think people appreciate that. And you're a true advisor to their business. I know like Bailey is for you. He's kind of under the ten on most things. 

Chris Powers: He's like part of the company. 

Chad Lavender: Yes. So I think that's the goal. The best people figure out how to be, whenever you're at a crossroads from a decision standpoint, you're calling them whether they're involved or not, and they're going to give you the best advice, whether it's in their best interest or not. 

Chris Powers: All right. how many brokers do y'all have? 

Chad Lavender: How many people does Nordmark have? 

Chris Powers: Yeah. Like not report to you, but underneath you. 

Chad Lavender: A couple thousand. 

Chris Powers: How do you prioritize your time? Because you're in New York, you're in Dallas, you're all over, in Toronto. How do you know where you need to be and... how do you prioritize your week? 

Chad Lavender: It changes. It's a very fluid week, every week. I think that's the fun part is no days are alike, no hours are alike, and I'm on Zoom, Teams, phone all at the same time, controlled chaos, running as hard as I can. I'd say weeks get reprioritized every week as clients' needs change. So we try to be nimble and quick-footed to respond to what people's needs are. 

Chris Powers: Clients are never needy, are they? 

Chad Lavender: It's the fun part. I mean, it's going to solve a problem for them.

Chris Powers: I want to move into just kind of like what's happening in the market. You are about as influential and knowledgeable of like what's going on in different- We don't have to go through every single asset class. We kind of already talked about seniors to a degree. I kind of wanted to start with like the data center world. When we talked last, that's kind of where your head was at on that call. What's going on? Like, it's a big, broad question. 

Chad Lavender: I mean, it's a modern-day gold rush, I mean, in the data center world, and the gold is power and water. So, wherever there's power and water, data center coming near you more than likely. 38% of the data centers have been built in the northern Texas and Virginia markets, so it's kind of bifurcated in those locations. And what you've seen is, we worked on two big projects in Abilene, I don't think I can name the names, but Oracle has led the deal. And they have power and water and land availability, so it kind of works. So we've put together, I think last year we closed on a little over $20 billion of data centers, both financing, equity, sales. Last year, trailing 12 months, I think there were 8,500 megawatts of data centers under development. Now, there's close to 14,000. So, the amount of growth in that industry is wild. I mean, the hyperscalers own about a quarter of the market and are really driving demand. 

Chris Powers: What is the financing that y'all are providing covering? 

Chad Lavender: The construction costs, the actual equipment and their properties. A lot of times we're financing the infrastructure. So, like if they need to build a new substation or they need some type of infrastructure money, and that's kind of another new intersection of what we've seen as infra money converging with commercial real estate. 

Chris Powers: And explain the difference. 

Chad Lavender: Infrastructure money's really been more core type capital that's lower cost of capital and that has steady returns. So, think of investing in the power business in general. So you can have steady returns that grow over time and should beat inflation. And so we've seen those converge, which has been great for this boom. It's good timing because the size of the projects are so large. 

Chris Powers: So, are you getting money from two sources in that case? So, the debt is construction, land, everything to build. You said it's some of the equipment? So if you had to say, what actually goes into the infrastructure portion though? 

Chad Lavender: Both. I mean, it's going in, it's flowing. I'd say the lines have blurred from both sides of the investors. 

Chris Powers: Got it. And on the equity side, are y'all doing equity or just mainly data? 

Chad Lavender: We're doing a ton of it. It's fun. And we've done a ton of powered land as well. So it's been a lot of fun. We're involved in a Fermi project that's a hundred billion up in Amarillo. So we're kind of all over the country on this. We're having a lot of fun doing it. I think we have the smartest advisors in it because we've done more of it than anyone. So being the tip of the spear in any industry, you just have this knowledge base that you're able to go monetize and help your clients in any geography. 

Chris Powers: And right now the pipelines are full, like you're just seeing it everywhere, the demand is huge?

Chad Lavender: We are. We are. And I think we're also able to see at this point, like if your land really is powered land that works for the hyper-scalers or if it's not. And we're doing everything from $80 million financings till we closed a $7 billion deal this year. So, kind of across the board. 

Chris Powers: Okay, if you're going to do a $7 billion deal, is that usually syndicated amongst a lot of banks? Do you all do the syndication piece as well? 

Chad Lavender: We do. We work, we partner, so we'll go get term sheets and try to get as many on the board as we can, and then we'll match make in the process. Most of the banks have syndication desks we work along kind of hand-in-hand with. 

Chris Powers: And is it the same players usually showing up once you get to a certain size or it's all across the board? 

Chad Lavender: It's all across the board because you're seeing a lot of offshore capital credit flow in as well. So, it's really a diverse group of capital, and that's been the amazing part is the depth of the capital. But the capital demand is huge. But if you look at the announcements, I don't know what's true or what's not, $10 trillion is going to be spent from offshore capital into digital infrastructure and advanced manufacturing. So the wave of capital is just kind of beginning and the runway seems to be very, very long. 

Chris Powers: And are most- because it's a relatively new, I mean, it's not new, there's been data centers now for a while, but like the proliferation of how many of these companies are starting to spin up. Are most of the CEOs or most of the people leading these coming from the data center world, or is it...? 

Chad Lavender: It's a mix. Some of the people are recovering office people or industrial. 

Chris Powers: Everybody's a recovering office person right now. 

Chad Lavender: But it's back hot again. 

Chris Powers: We're going to talk about it next. 

Chad Lavender: People are from everywhere and it's amazing that a lot of the people making the decisions are much younger because they're in that tech, digital world. So it's been fun to kind of meet a new cast of characters that are newer to the real estate game and some people who've been in that are super prolific in other asset types. 

Chris Powers: Okay, you said the magic word, office. When did it turn? 

Chad Lavender: I think probably January of this year. 

Chris Powers: Was there a catalyst or just...? 

Chad Lavender: Enough data from a leasing fundamentals perspective to prove that we kind of hit bottom. Everyone knew what rents were, enough sales where people kind of knew what values were, and we've seen our institutional capital in our bidder pools kind of double since January. So, office was a four-letter word. It's not anymore, thankfully, at least on the Class A high-end side. And a lot of the Class B stuff you're seeing as a covered land play for industrial or multifamily, or if the market improves, they'll keep it office. So, a lot of people are buying those at great bases where they have optionality. 

Chris Powers: Is there still a lot of stuff, though, that's just untradable? 

Chad Lavender: No, everything- 

Chris Powers: Everything's trading. 

Chad Lavender: Everything's trading. But some of the pricing compared to peak is, it's pretty wild to see the difference. 

Chris Powers: Have the banks- let's take the stuff that's been more challenged. Have the banks taken it back or they don't even... There's so much of that product out there that... What are they doing? 

Chad Lavender: I'd say every lender is different and every deal is a snowflake. So people treat every lender, because their borrower is different, the asset’s different, the market's different. Like we sold Signature Bank for $60 billion, I guess, a year and a half ago for the FDIC. And that had a good bit of office in it, had a lot of rent controlled apartments in it. And the depth of the bidder pool for that was crazy deep. So what we're seeing on anything that's lender-facilitated, you have a constructive seller that's generally selling at market. So, you're seeing a lot of activity there. A lot of groups are still extending loans. We have $2 trillion of debt maturing in the next three years. I think on our numbers, 20% of that, there's valuation impairment on the loans. We're seeing that improve every day when fundamentals get better, though. 

Chris Powers: On the Class A side, what's happening? 

Chad Lavender: I mean, rents just keep running higher. I mean, it's amazing. I mean, I think vacancy rates in most of the markets that have any tenant growth and demand are super tight, and rents are record highs. 

Chris Powers: So a return to office at the high end. And it's been around for a while. It's not really new. 

Chad Lavender: That's right. You can't train your talent if they're not in the office next to you. And all the young people, for the most part, want to be in the office. 

Chris Powers: What's going to happen to all these government office buildings? 

Chad Lavender: That's a great question. 

Chris Powers: Is Newmark going to get those? There's so many of them. 

Chad Lavender: I think, I mean, we're certainly, hopefully in the conversation. We had the number one investment sales platform in office the first half of the year, so I would think we'd be involved. But some are starting to trickle out. I don't think there's a clear directive from the government yet exactly how it's going to play out. 

Chris Powers: But do we- can you describe the situation? ...What do they have? What could it be? 

Chad Lavender: Yeah, I mean, it's enormous volume of offices, and it's different for each department, what they're going to do with the office. It's different what they're doing with their staff in each department. And some of the staffs are trying to spread out throughout the US versus keep in DC. So it may mean their DC office is going away, but they're going to pop up in Memphis, Tennessee, or somewhere else. So we're seeing a lot of that as well. 

Chris Powers: I don't even know if this is a question. Somebody was asking the other day, like what is old Parkland worth? And I was like, I don't even know if you could value it on a... like the actual tenant base itself is worth so much. And you're starting, you talk about the Class A office, you're starting to see these like, maybe they've always been around and I'm just getting more- they're just becoming more exposed to me, where like the tenant base itself is iconic. Like you can't recreate just that. Is there something you could expand on there? Are we going to start seeing more of that? 

Chad Lavender: We've seen more of it. I mean, you see them vertically, too, like one Vanderbilt, for instance. It's getting top of the market rents in New York and in the US. And like Harwood International in Dallas, where I started my career, it's kind of created that same kind of synergistic bond between the tenants where they all hang out and meet with each other. And there's more business to do within the district. So I think that's helpful. But I mean, old Parkland, it's its own animal. I mean, it's the most fantastic piece of real estate. There's obviously no ceiling of what you can charge for rents. Most of the spaces are smaller, too. So, you would think, if you're boosting rents, it's not that big a number to these people. 

Chris Powers: BTR, what's going on BTR? 

Chad Lavender: BTR is out there fighting the good fight, trying to stabilize. It's a fantastic asset class. You've seen the rent-to-own spread go from a $404 historical average to $1,200 with how rates are and how expensive homes are. So the case to rent is in a lot of times not because people want to rent, it's because they have to rent because the spread's so high. And there's not a lot of homes getting built in the US. There's not a lot of apartments and there's not a lot of build for rent. I think we had the largest absorption rate over the last 12 months. I think it was 4% of the total supply, and multi-housing was absorbed. I think the market's a little over 96% occupied. So the market's super tight. There's still some excess inventory that needs to get filled in some of these markets, and you'll start to see rents grow. 

Chris Powers: Are there any bright spots on the how we're going to get things building again, that spread coming in? Is it all a function of interest rates or is there other components? 

Chad Lavender: No, it's cost as well. Like we've seen costs in some of the central markets, Florida markets come in 8, 10%, so that's helpful. Obviously, the interest rates is another big driver, just so people can build it cheaper. But it's all math. Like, everyone wants a multifamily development deal to be a seven yield on cost plus, and they're penciling mid to upper sixes. Or you need rents to grow. The easiest way is for rents to grow and interest rates to come down, because the costs seem to be pretty sticky at this point. 

Chris Powers: It just seems to me like rent growth right now is going to be hard to achieve, like this massive rent growth story. I could be wrong. 

Chad Lavender: But you don't need that. 

Chris Powers: But things are already expensive... Okay. Great point. How much do you need? 

Chad Lavender: I mean, if you're growing rents at a 3% clip in your model, for the foreseeable future, not 0% in year one, that compounded growth really makes a difference in a development model or acquisitions model. 

Chris Powers: Do you ever talk to anybody at the Fed? I mean, you're obviously in one of the best firms dealing with capital markets. Do you talk with those people? 

Chad Lavender: We have. 

Chris Powers: What are you telling them? 

Chad Lavender: We're telling them that – 

Chris Powers: The chairman of Newmark is Howard, isn't it? 

Chad Lavender: He was the chairman. 

Chris Powers: He was. Now that he's in the government, he's not. How often do you talk to the government? 

Chad Lavender: Well, we can't talk to Howard for a year and a day from him joining the government, so I haven't spoken to him. But I would say that hasn't changed. We talk to government. Our CEO is ultra piped in with some of the senators and congressmen as well as a lot of us in the firm. So, we're always giving them kind of constructive criticism, and I know they have Turner, the HUD Secretary, he really wants more affordable housing in the US. And part of it is regulatory restrictions that are different in every municipality. Part of it is obviously the cost of construction, interest rates, your cost of equity to go in it. So, I think they're trying to be creative to see if they can create some more programs to go stimulate more housing development in the US. 

Chris Powers: What's just something that would be on your mind that would be interesting that's going on in real estate? What sector, something that's top of mind that maybe is not as obvious? 

Chad Lavender: We've seen a lot of demand in the cell tower space and kind of this new resurgence for the advanced manufacturing boom. We're seeing a lot of interest there. So we're doing a lot of site selection, a lot of financing, equity, and debt. And it's coming fast. Very. 

Chris Powers: Why is cell towers making a resurgence? They've been around forever. 

Chad Lavender: I know. There's just a lot of sales activity and M&A activity in that space. 

Chris Powers: So, a lot of consolidation... Let's talk about Texas for a little bit. Is it still the cat's meow? Is this where we want to be? 

Chad Lavender: Yeah. Y’all’s street is on fire. I mean, we're seeing tons of corporate relocations. I mean, just with Tesla and everything that's happening in Austin, that's its own microcosm from a tech incubator perspective. Then you had Goldman who moved their second headquarters to Dallas. There's rumors of several more coming to Dallas as well. I think it's a finance boom and a tech boom in Texas. I think it's the deregulatory environment that is driving a lot of that plus I mean, most of those executives make a lot of money, so the no state income tax doesn't hurt either. 

Chris Powers: Yeah. Somebody was saying, just to get into like a private country club right now in DFW in Dallas, it's like 20 years, and the Goldman people haven't even arrived yet. That's going to create a huge conundrum. 

Chad Lavender: It already has. That kind of started in 2020 when kind of the leading edge of people from LA and New York moved in. I don't see it stopping. There's no more land in town for high quality country clubs. 

Chris Powers: I mean, I've heard that Goldman's gone out and offered a million dollars per executive to get them in, and the clubs are like, no, we're good. That's going to be an interesting setup. 

Chad Lavender: That's a high-class problem to have. 

Chris Powers: That is a high-class problem to have... All right. Debt seems to have been maybe more comfortable over the last few years in the space. Obviously, they're more conservative and deals have to pencil. Equity seems to have been like interested, then not interested, interested, then not. It's just been this start and go for a while. From my seat, it feels like we're finally entering a space where activity is starting to normalize. 

Chad Lavender: It is. 

Chris Powers: Is it? 

Chad Lavender: Yes. I mean, from a debt perspective, the first half of the year, debt's up 49%, so there's a lot more lending activity. It's still below the 2017 to ’19 levels though. So there's more liquidity on the debt side than there are opportunities. So, the banks are back lending in a big way. They have super healthy balance sheets, a lot of excess deposits. So they're really being aggressive, and that's kind of been the new trend over the last couple quarters. The debt fund liquidity is endless. Life companies are trying to put out as much paper as they can. And Fannie and Freddie have been the most constructive lenders, have never gone away in the housing space. So you have a ton of liquidity on the debt side. On the equity side, a lot of them have been kind of tiptoeing their way in. And if they don't love it, they're not buying it. And they have to love the price and the asset. And I'd say that's changing. The animal spirits are back. People are getting aggressive. And scale transactions are getting more prevalent. Like we did the ROIC take private for Blackstone. And that was a hotly contested $4 billion deal, and we're seeing a lot of large-scale portfolios, there's a ton of capital for that versus one or two, and you're not going to like the pricing this time last year. 

Chris Powers: So pricing is going up. Again, I know you can't tell the future, but that's your forecast? 

Chad Lavender: Well, we believe you make more money on your assets, not just from interest rates. It's all GDP growth driving fundamentals. So you have a stabilizing housing market that had a supply overhang, kind of same in the industrial side, that picture's getting clearer by the day, I think. And on the office side, I think people have all realized and CEOs realize we have to have people in the office from a productivity standpoint. And then the retail side, nothing's been built over the last 10 years for the most part. So, there's an insatiable amount of demand for retail assets when it was ultra out of favor five years ago. 

Chris Powers: Yeah. Retail's not dead. 

Chad Lavender: No, it's alive and well. 

Chris Powers: Have you ever seen the guy, he's a good friend of mine, strip mall guy on Twitter? Yeah, he's been preaching it forever... I mean, you can't find good retail locations anywhere. 

Chad Lavender: Yeah, we're selling a big portfolio of strip malls. We're recapping a big portfolio of strip malls from a company based in Denver right now, and the amount of interest we have is pretty mind-blowing. 

Chris Powers: Really? So where will debt come in on something like that? 

Chad Lavender: I mean, spreads will be slightly wide of multifamily and industrial, but super tight. 

Chris Powers: All right. We have to just say industrial. I know there's class A, there's class B, there's iOS, which I feel like that's all I read about now is another iOS site. But like in general, how's industrial doing? 

Chad Lavender: I think every market's created, they're not all created equally. So, like the fundamentals in Texas are pretty strong. I'd say we're kind of outperforming the rest of the markets. It's been very slow on the coast and the ports because they're, I think, as companies, they're trying to figure out how they're changing their supply chains. They're trying to figure out how they're going to deal with their industrial properties and demand for the most part. 

Chris Powers: And on the iOS stuff, I've never- I get it. I know a lot of people are doing it. 

Chad Lavender: A lot of people made money doing it. 

Chris Powers: A ton of money. It seems to be the gold rush within industrial right now is the iOS sector. Are the leases matching up with all the activity of buying and selling, is all this stuff getting leased? 

Chad Lavender: For the most part, yeah. I mean, it's still location, location, location and what your drivers are. But I think the people who know what they're doing in the space, the answer is yes. 

Chris Powers: Okay. Is there anything I haven't asked about the markets that we should know? 

Chad Lavender: I mean, obviously, everyone wants to know what's going to happen next year. And I think it's all dependent on GDP growth and fundamentals in the economy that are going to drive growing your NOIs to create alpha from your operations on the asset level. 

Chris Powers: Are you in the camp that we will get a rate cut at some point between now and ’26? 

Chad Lavender: I mean, I would say yes, but everyone's been wrong 100% of the time the last 36 months. And our kind of advice to our clients is that hope isn't a business plan, like your asset’s going to be worth more tomorrow if you can grow the NOI. So if there's a business plan to make it more valuable, don't sell. If there's not, probably the right time to sell. 

Chris Powers: And is it fair to say like, okay, so a lot of stuff traded in ’21, ’22. If you're on a five-year note, that means ’26, ’27, your 3% interest rate is coming due. What is your advice to people that are maybe a year away from debt maturity, maybe the property is performing, but they're going to go from a 3 to a 6% interest rate? How are you telling clients to prepare for the next 18 months, irrespective of like NOI, more just like the amount of loan coming due? That's probably going to create a lot of activity in the market regardless. What should people be thinking? 

Chad Lavender: I mean, I think it's a great time in the market to be a seller because there's just not enough product for the amount of equity in the market trying to buy assets. So you're getting more eyeballs on any opportunity that's in the market. And I think you could have done everything right and buy something in ’21 or ’22 and that cap expires and it's wrong. So, I know, I think there's a lot of forgiveness and understanding from investors that, bad timing, we're in the market at the wrong time. So most of those people at this point have a pretty sober view of the market and are being pragmatic for what's best for their investors. We're seeing a lot of investors choose liquidity over trying to wait it out and get more value and want to go reinvest that liquidity. We're seeing some people hang on and try to pivot on the business plan front and start negotiating with their lenders now for extensions. And a lot of those, your best lender in most cases has been your current lender. 

Chris Powers: All right, Chad, this has been great. 

Chad Lavender: It's been fun. 

Chris Powers: Thanks for joining me today. 

Chad Lavender: Absolutely. It's great to see you and spend some time with you. 

Chris Powers: Good to see you, too, man.