The Frank & Dave Christmas Show has been a holiday tradition since 2008. But 2023 is too serious a year to approach with lighthearted comedy and gift-giving. It’s hard to have holiday cheer when the U.S. is in such trouble as a nation. Instead, it’s going to be a year of a probable national recession and more upheaval than any period since World War II. A time of extreme pain and extreme opportunity for those who know how to navigate it. In that spirit, we’ve decided to change this year’s show to the Frank & Dave New Year’s Show. We’re going to be providing an analysis of the status of the industry, predictions for the future, and a host of other essential items.
Start your year off with a serious review of the mobile home park industry at a time when the nation has never been in more peril.
We hope you enjoy The Frank & Dave New Year’s Show! Let us know of any questions.
The 2023 Frank & Dave New Year’s Show - Transcript
Frank Rolfe: Welcome to The Frank & Dave New Year special. This is Frank Rolfe. Joining me is Dave Reynolds. Now, for many who might say, wait a minute, you guys did a Christmas special for the last 10 to 12 years? That is true, but the Christmas special was all based on holiday cheer, and it's really hard to be cheerful in America right now with so many bad things going on. So we thought it would be more productive rather than talk about things from the past to appear into that crystal ball more towards the future and talk more about the year before us, so 2023. So we thought we'd start off by going over some of the problems going on in America today, and then we'll augment that by talking about how that's going to impact, we believe, the mobile home park industry. So let's start off talking about inflation.
00:47
Frank Rolfe: As many people are aware, we have the highest inflation in the last 40 years in US history. It's only been higher one other time and that was in the days of Jimmy Carter. So that period it well went beyond 10%. Now in the US, it got up to 10% roughly, and now has declined slightly, but still, that's a big problem for all Americans. You know that when you go to the gas pump or the grocery store and you get that bill that might have been $50 before and now it's a 100 or it might have been a 100, now it's 150, I think every American feels the impact of inflation. It doesn't matter what walk of life you're in, where you live in America. Inflation's a real problem. And then we have the fastest increase in interest rates again in 40 years. It's been a horrific ride in 2022 with Jerome Powell, and now here in 2023, we're looking at rates that no one would've ever imagined. Dave, can you imagine the rates we are seeing today?
01:46
Dave Reynolds: No. I mean, I think all real estate investors had no idea this was coming and coming so quickly. So I think it is definitely a shock and hopefully something that is short-lived and we don't see any more shocking increases for sure.
02:07
Frank Rolfe: Right. It's kind of odd because under the Trump administration, they tried to raise rates just a little, just a tad. Dave, I don't remember if you remember how much they went up. I think they went up a point or something.
02:20
Dave Reynolds: Yeah, it went up a point.
02:24
Frank Rolfe: Yeah, then they immediately retreated because they felt the plane shaking violently and maybe the crash that they immediately put the foot off the gas. Now it is though the Fed is held bad on basically crashing the economy no matter what it takes. Whatever the news story is, they say, no, it's still not enough pain.
02:42
Dave Reynolds: Right.
02:43
Frank Rolfe: So it's become very strange right now. And meanwhile, we have the worst turmoil in Europe since World War II. We have this ongoing Ukraine issue. You have the risk of China attacking Taiwan. Just today we have the Brazilian revolt. The people in Brazil don't like the results of their election. They claim it's unfair, and they've now stormed the government buildings, not by the hundreds, but by the thousands to a mass turmoil. So basically, the world right now is really in a tough position, well, one that I don't recall seeing since Vietnam perhaps have I seen things so screwed up. Dave, what are your thoughts on that?
03:28
Dave Reynolds: Well, I didn't really see Vietnam 'cause I was just a toddler.
03:32
Frank Rolfe: True. [chuckle]
03:33
Dave Reynolds: Yeah, I'd say it's the worst that I've ever seen by far. And just like more and more news stories and events just making it even escalate to worse than we thought it was yesterday. So I think it's something that we're all aware of and we're trying to hedge our arrests for sure.
03:58
Frank Rolfe: Right. And then you have these strange workforce problems. They call it the Great Resignation. Call it what you like. Never before have we been a country of people who basically don't wanna work and it's kind of like COVID was a giant snow day for America, and now no one wants to actually go back to school. And so I don't know about everyone watching this, but I go to restaurants where they can only open a certain section of the restaurant because there's not enough workers to open the rest. So even though they have half of the tables empty, they're turning people away because they're full as far as their personnel. It's an alarming turn of events where businesses can't literally hire people and therefore they can't open theirs doors. I went to a Chipotle recently and they had to shut their doors. There was a sign in the window. Not enough people showed up that day to open the Chipotle, which is a fairly major brand. You would imagine that's impossible. So we have some strange workforce. Are you seeing that going down in Colorado?
05:05
Dave Reynolds: Yeah, yeah. We have the same things going on. I think probably more of that's going on on the Front Range, the Denver area, but I think there's one of the Taco Bells we go to once in a while, they close at like 5 o'clock and I think they're open from noon to 5:00. They don't stay open later. It's all only the drive-through and that's very common to see only drive-throughs open, no restaurants open in certain areas of Colorado, and I hope this gets better. People actually get off their butt and start working again because it makes it very difficult to find good people to take those jobs out there that we've seen kind of an overabundance of people in the past. So it's a very strange and I think new thing that nobody's experienced in the past.
06:03
Frank Rolfe: Right. And then you have the highest crime in history. I, myself had my beloved Dodge Challenger stolen right before me back during Thanksgiving, which was a real eye-opener for me. I'd never really been a part of a crime of that significance, but then only today, I was at a store with my wife where someone basically came in, grabbed a bunch of clothing and ran out the door with all the alarms going off. I asked the cashier, "Are you even going to say, hey or something?" And she said, "No. I was instructed to say nothing. Just let them go."
06:35
Dave Reynolds: Wow.
06:36
Frank Rolfe: So we've got become kind of a lawless country at this point where people pretty much do whatever they want and there seem to be no accountability, prosecutors who aren't prosecuting, and a system in which even if you do, people are let out almost immediately, and I've never seen that before. I think that is not a 40 or high. I think that's actually the highest crime we've ever had as a nation as far as I know.
07:02
Dave Reynolds: Right. Yeah. People don't wanna work. They wanna rob people. So not a deal.
07:08
Frank Rolfe: Right, exactly. Then you have the sleeper story, which people are gonna know the tough conclusion of soon, which is the great migration away from urban cities. You saw that coming with COVID and people said, "I don't wanna be around people coughing on me. I want more space." And then that accelerated with the riots of 2020 and people said, "Now I don't wanna be around people much at all." So millions of Americans are saying, "Forget the big city. Forget the urban downtown core. I want outta here. I'm gonna go to the suburbs and the exurbs." And I have not seen that. I know America experienced that back in the '60s and the '70s back when the nation had an unstable period back then. This one's unique because for decades people wanted to move to the city and you saw all those condos go up and big office buildings 'cause everyone wanted live in the heart of downtown so they could walk to the baseball game, walk to the theater, walk to the museum, and so it's kind of strange.
08:13
Frank Rolfe: I know Dave, you're a big believer in the exit. I know you like living out of the city as do I. I moved out of Dallas to a small town because I guess I saw it coming back in 2005. I saw that the small town living was the way to go now. Looks like most of America caught on that. And are you seeing people moving more to your town, Dave? I have people... A house that's been on the market across from me, a few months ago it sold to a couple from Honolulu of all places. Then a house sold diagonally across from a couple who came from Los Angeles with their kids. Are you seeing that out there in Colorado too?
08:49
Dave Reynolds: Yeah, I think we're seeing it in certain areas for sure. Where I'm at right now, the real estate market... General Colorado's really suffering, but right here where I'm at the market's held strong. There's still part lenient inventory on the market. It's because people wanna move out of the Denver area and go into the mountains. And so I am seeing that. It's not a ton different than it was before, but definitely you see more people talking about it. It's like, "Well, I'd love to get out of the city," type thing. And I think it's gonna continue and I think it is something to definitely keep an eye on for the future.
09:31
Frank Rolfe: Right. And then you have the collapse of the office. I'm sorry, Dave? I thought you were saying something. Then you have the collapse of the office market nationwide. Right now office vacancy is at 50%. Clearly you can't make office buildings pay the mortgage at 50%. So it's become a chronic issue. Here in the St. Louis area, that's the closest city to where I live, the largest office building in all of St. Louis sold recently for only $4 million. I think it's called the AT&T Center for those who say, yeah, but it must be chock full of asbestos. This was a 1980s building. It has no asbestos. The problem is no one knows what to do to fill it because it's primary tenant left. It's been on the market for years. Not a single person wants to move in. So now it's sold for $4 million to someone who wants to try and retrofit it into an apartment building and at cost of a $100 million for the retrofit.
10:34
Frank Rolfe: But we're seeing big issues on office and then of course on retail. I think everyone watching this knows of at least one major mall near them, which is somewhere between a quarter empty and fully empty. I know in the St. Louis metro, there's many of those malls sitting rotting where the anchors have left, and all you have remaining are a few mom and pop pet stores and things, and these giant a 100,000 to 500,000 square foot malls. And so it's become a chronic issue between office and retail of fundamental weakness and collapse. And I assume, Dave, you see that around when you're going around Denver and such.
11:10
Dave Reynolds: Yeah, I've seen the same thing. Very... We'd go into a mall or an office building in the past and it was just bustling with people and especially around Christmas time, you go to the mall and you have to park way away. And we went to the mall, right before Christmas and basically had like third row parking and there was probably nobody there. Just crazy.
11:39
Frank Rolfe: Yeah. And then of course everyone knows the stock market story. The Dow end of the year down 10% roughly, SAP 500 end of the year down 20% roughly, and the NASDAQ ended down 30% roughly. And that doesn't even take into account inflation. If you add inflation on, you have to add almost 10 points to each of those scores. So it's a pretty clear thing that the stock market has really hit hard times.
12:03
Dave Reynolds: That's right.
12:04
Frank Rolfe: And I don't know. Dave may know. I don't know historically. We all know the Great Depression in that October of '29, the stocks fell 25%. Well, I think it was the trigger of the Great Depression, but we're not really far off, particularly regarding the NASDAQ, which broke that at 30, and the SAP isn't far off at 20, and I don't know the inflation in 1929, but if you tack on inflation, for all I know, we beat that. So clearly stock market is in real trouble.
12:34
Dave Reynolds: Right. Absolutely.
12:36
Frank Rolfe: Right? And then you have the simple issue that there's pretty much zero confidence by Americans in our government at this point, whether it's the actual government or the elected officials or the Department of Justice or any of these groups. People are just skeptical about the effectiveness of what's really going on. And so at these troubled times when they look to somebody to help them, whether it's Jerome Powell or simply calling the police, it doesn't seem to be panning out for people. And so people are feeling really, really lost, really confused. They're just lacking confidence in the things that are supposed to bring law and order to America.
13:23
Dave Reynolds: Yeah, yeah. It's a very sad state. You can't have a conversation with anybody without coming up that you'll bite into this or that and it's just commonplace phrase against on the government and just how little faith people have anymore on anything that's being said or done or anything.
13:50
Frank Rolfe: Correct. So the bottom line when you add all these things together is, just about every economist that I've read and I read everything I can see that comes online and then read articles and magazines and newspapers. Everyone's predicting pretty much a big terrible recession sometime. They think in 2023. We don't know when, we don't know for sure, but everything we just described, the sum of all those things is a fairly likelihood of some kind of recession environment in this year of 2023. Is that kinda what you read, Dave?
14:27
Dave Reynolds: Yeah, that's exactly what I'm seeing and hearing and just the way things are going, man, it can't go any other way unless things change drastically.
14:38
Frank Rolfe: Right. So it's one thing to complain about where things are, but it's a whole another thing to talk about what the actual impact is, because if you know what the impact is, then you can make plans. You can try and mitigate these issues, you can try and be in the sweet spot of things. So rather than just gripe about them, 'cause I think everyone watching this probably knew everything I just mentioned. Let's go over some of the key items and the impact on the mobile home park business in particular.
15:05
Dave Reynolds: Right.
15:06
Frank Rolfe: So the first one is, the interest rate impact on financing and valuations because you can't have interest rates rise as Jerome Powell has done four and a half points in less than a year without serious ramifications. And everyone knows that, and everyone knew that. And the whole idea back when they took the interest rates down to near zero during a 2007-2008 great recession was that when they undid that it needed to be very, very gradual. You had to filter it in. It's like you went out and bought your kid a fish at the fish store. The first thing they tell you to do is take that bag of water the fish is in, and then just put it in the aquarium still in the bag so that the water temperature changes very, very slowly, and then you release your fish. But what Jerome Powell has done is basically he's gone and bought the little delicate fish at the fish store and just plopped it right into the water that's freezing cold. And that's gonna have a significant impact in all sectors of real estate on financings and valuations. Dave, what are your thoughts on that?
16:17
Dave Reynolds: Yeah, I think it does. What I have seen though is that lenders are still out there very eager to lend on mobile home parks. I can't imagine what would they would say if you said you don't wanna finance an office building or a retail center. They'd probably laugh at you. But I've not seen any real... Any lenders that are shying away from making loans on mobile home parks. The rates are up, obviously, but they're still very... They still feel like they're a very good asset class. We all saw what happened through COVID with mobile home parks, where our customer base and the demand to buy homes and fill lots grew. Rents were collected for the most part. Very low delinquency percentage and they went through COVID very, very well.
17:20
Dave Reynolds: And I see the same thing here. People are needing more and more affordable housing, but the interest rate while that'll make the valuation change a bit, it won't be in direct proportion to what the values can change. What we're seeing really is, with the doubling of interest rates, we're seeing maybe a 1% increase in the cap rates. It's not 3% increase in cap rates. It's just such a strong demand and people know that mobile home parks do weather the storms very well that will come through just fine with all the levers we can pull.
18:10
Frank Rolfe: Right. And one big thing for mobile home park owners, of course, is the ability to push rents to help offset and mitigate those increases. Obviously every mobile home park owner as the rates go up, first order of business is to raise your rents and then fill your vacant homes and then just cut costs where appropriate because we at least have the capability. Office building folk, don't. Retail people, not a chance. There was, I think, the Brooks Brothers store in St. Louis recently, the mall was obviously suffering mightily. They said, "Hey, we'd love to have you as a tenant, but we gotta raise your rent." Brooks Brothers said, "No. I'm hardly selling anything." And they left.
18:54
Dave Reynolds: Right.
18:56
Frank Rolfe: So that's the big difference in our industry, is we're a necessity. The people need an ability to push rents solid demand, but if you're in the sectors that don't, with this reevaluations from these interest rates, you have no way to mitigate it. So that's one huge value for mobile home parks.
19:12
Dave Reynolds: Yeah, and I saw...
19:13
Frank Rolfe: And another one... Go ahead.
19:15
Dave Reynolds: Kind of a case study. I saw somebody I think about six months or five months ago, he raised his rents by $300 a month and one would think, okay, somebody raises their rents that high which we would never be a proponent of pushing that kind of increase through. But he's still a 100% full and the homes in there are selling for 50,000 and above for 1970, 1980 homes. And so the demand is there and really mobile home parks, the lot rents are so reasonable and affordable and really under where they should be that there are those... That there's that ability to cover your extra cost, mortgage interest and inflation by raising rates.
20:13
Frank Rolfe: Right. And the next by-product of all those things we talked about going bad is skyrocketing demand for affordable housing as Dave just mentioned, and I don't see that slowing any time soon.
20:25
Dave Reynolds: No.
20:26
Frank Rolfe: Not now that mortgage rates have gone up a lot. Single-family homes are completely unattainable except for a select part of the population. So as you have seniors, you're trying to downsize and cut cost. Millennials who are trying to enter the housing market and can't possibly even dent the required down payment and income to get that mortgage on that 300,000 Stick Bill. I think the average Stick Bill in America, Dave, and correct me if I'm wrong is almost $400,000 as the average sale price. That is just a ridiculous barrier, and so the demand for what we do in mobile home parks, it's just going up. All these bad things combined are nothing, but a driver to make demands higher. Is that how you see it, Dave?
21:08
Dave Reynolds: Yeah, absolutely. And I think with home prices coming down again from the manufacturers just even puts us back into a better position than where we were. So I think it all leads to continued demand and improving mobile home park NOIs and occupancies.
21:30
Frank Rolfe: Right. And then you have something, which I saw back in the '90s, I think Dave you saw also, which was... They called it flight to quality. Of course, back in the '90s there wasn't a whole lot of quality. It's different today, but when you look at back in the '90s, you got in the business, I got in the business and Sam Zell did all pretty much within the same timeframe. I got in in '96, Zell got in in '95, I think. I'm not sure the year you were but...
21:54
Dave Reynolds: Yeah, about '95, '96.
21:57
Frank Rolfe: You're right. So we all get in there at the same time and of course Zell went after at that time what were the high quality properties. So he focused on that kind of senior lifestyle choice kind of product. You and I got into the affordable housing sector. Over the years, times have changed dramatically, but lender appetites today, as in all kind of instability, are to get to the better, better parks. And by better parks, I mean ones with good infrastructure, good locations, proper density. So, I think one ramification of all these bits of instability will be is when you're about there buying parks today, you wanna buy parks that have all those attributes. We always talk about infrastructure density, correct age of home, correct location. Those are more important today probably than in the past because lenders wanna see that solid material to make loans on. What are your thoughts on that, Dave?
22:53
Dave Reynolds: Yeah, in general, I agree with that 100%. I think lenders are focusing on the quality of it, but what I think they're focusing more on is occupancy and really what the financials look like. I had a recent conversation with one of the biggest Fannie Mae, Freddie Mac lenders, and what they said which is exactly what I've seen recently is that actually Fannie Mae and Freddie Mac are loosening their standards 'cause they are supposed to be making loans to affordable housing. And so in the past there's always, well, we'll do the... Kind of started, we'll do the four-star, then we go down. Oh, we'll do the three-star properties. And now I've actually seen them close on some one and a half star type properties that are in... Have great occupancy and they're very, very dense, but they're focused on trying to bring their program down to actually lend on these more affordable type mobile home parks. Not the four and five stars only. So I see it, I see it a little bit, but I think it's more of a shift to really what do the numbers look like? What's the occupancy?
24:14
Frank Rolfe: Yeah. It's kind of the focus is on investment grade assets today. By investment grade, things that make money every day that are stable. They don't have to be fancy, doesn't have to be all double-wide, doesn't even have to be new or single-wide, but things that banks feel comfortable with day in, day out, no surprises, steady money makers which is what I would call investment, Dave.
24:38
Dave Reynolds: Yeah, I Agree.
24:39
Frank Rolfe: Next, and Dave, you touched on this earlier, but the fact that rents are gonna go up significantly, not only with between inflation, but also just the market forces of higher single family and higher apartment. And for those who were in the business back in the 2007, 2008 Great Recession, that's one of the byproducts that you saw. If you went to, an MHI event in 2009, 2010, people would say, let's keep this recession going. It's great for rent because apartments were going up like crazy as we became a nation of renters. And probably the poster child of rents going up significantly yet occupancies remaining nearly full is right near where Dave is in Denver where I think rents today in Denver are what, Dave? Are we at the 1000 barrier? I'm sure you're over 800.
25:30
Dave Reynolds: Yeah. I mean, I think it's pretty much at that, 900 to 000 range, but there's properties over 1000, there's properties that are I think still down in the 600, 700 range. But in reality, if everybody was in 1000 or more, there'd still be very little, if any, vacancy just because [0:25:53.6] ____ for affordability is part of it.
25:57
Frank Rolfe: And Dave, what were those rents? You grew up in Denver. What would those rents... If we were talking today, but it was not 2003 or 2023, but let's say 2003, what were the rents back then in Denver by comparison?
26:17
Dave Reynolds: Oh, it's a long time ago, but I would say they were probably in that 300 range, somewhere in there.
26:25
Frank Rolfe: Right. Yeah. So what Denver kind of has proven is that you can take your rents from 300 to 1000 and still have a waiting list. And so what it means is we have to get out of this industry mindset that we have to always be the cheapest thing and follow in the footsteps of the moms and pops who often did not push their rents. So we need to base our rents based on market forces and compare ourselves to apartment and single family and say, okay, what is what we have truly worth? And not just where are we at, and let's stay the crazy ridiculously el cheapo thing that many of these parks are at 'cause I think the average US rent is about 300 a month. And I don't think that's appropriate in a world where the average apartment this year hit $2,000 a month. I don't know why we would have to be the 80% off sale. Dave, what are your thoughts on that?
27:20
Dave Reynolds: Yeah, no, I completely agree with that. I believe rents for mobile home parks are still lower than they should be across the board. I think the average rent, if I remember right, was like 335, somewhere in there across America. But in reality, I think that should probably be in the 400 to 500 range for the value people get and for people to maintain the properties, infrastructure and all of that stuff. So I think it's very... It's a tough thing to get the rents up there to 500 a month if you're down in the 300 month range. You don't wanna do it all at once, typically, but you're still... As long as you're providing a good value and maintaining your property, 500 a month is not out of reality. And if you already have 500 a month, probably it should be 600 a month. So I think there is a lot of room to go upwards in the rent still.
28:27
Frank Rolfe: Yep. Agreed. And then this next item which we're seeing which is kind of quiet, you don't see a lot of media on it, little bit, is that people are leaving those big urban cities going out to suburban and exurban markets. And the good news is that's where most mobile home parks are located at. So when you drive around to dense downtown, how many parks do you see? Hardly any. You occasionally see that 10-spacer or 20-spacer some guy built back in 1945, and he's hard scrabble, kept it in business, even though he probably should have torn it down and put something else on it. But most mobile home parks are right in the sweet spot as our nation does this huge shift that was decades in the making of people wanting to leave the big city and push out into the suburbs. The next ring outside of that, which is the exurbs, which is right where most parks are located. Are you seeing that trend, Dave?
29:17
S12: Yeah, yeah, absolutely. I think since I'm in really more of a small town now, I don't see it on a daily basis like it was in Denver, but there are no little parks in downtown Denver that I'm aware of. They've all been bought and then converted to something else. So most of the properties that were built in the last 20, 30 years are all outside here out in the... Not in the booties, but they're surrounding the city more so. And there's so many properties out there that are not in these major, major markets and most of those properties are not right in this smack middle town, but you still see them. But in reality, as long as you're within a reasonable driving distance of major market, you have good utilities and infrastructure, there's no reason you shouldn't be full.
30:25
Frank Rolfe: Right. And another thing we're seeing is that mobile home prices, which had been very reasonable back in the 2010 era, you could buy a nice single-wide to fill your vacant lot for 20 to 30,000. I'm talking the price from the dealer, not always installed. If you went to the Louisville Home Show back in about 2010, '11, you saw a company called TRU, TRU, which brought out a... He had a three-bedroom, two-bath model, which was all over the show with a giant banner, and it was two bedroom... No, sorry, three-bedroom, two-bath from like 19,999, and it was a big hit of the show. Everyone was gonna go over and look at it and wanted sales materials. And of course, post-COVID, home prices have jumped up a lot, often, including installation double and more from where they used to be. And even though home prices are starting to come down, most manufacturers are starting to actually aggressively let the world know that prices are down a little, might be down a few thousand, $5,000. They will start trajectory downward, but I'm not certain they'll ever be back to the levels they once were. Dave, what are your thoughts on that?
31:42
Dave Reynolds: Yeah, I think what we saw really across the board was about 2000... Late 2018, early 2019, we saw home prices just jump, and continued to jump for really a couple of years. I would say the average single-wide that we were buying was that 30 to 35 range and then it jumped up to probably 50 to 60,000. And now what we are seeing is that those are now back down in that 40 range. So we jumped up 25,000 and we've kind of jumped back down by 15,000.
32:25
Frank Rolfe: Right. And the next item you're gonna see, which hasn't gotten nearly the press that you would thought it would've had, and maybe it's because of all the political turmoil with the infrastructure bill, which passed, I believe, last year. And if you read up on the bill, and many people haven't bothered, they haven't looked at it, but it's very interesting how it plays out because it's like a bonanza for Rust Belt markets for Midwestern markets because what the government is gonna do is they're gonna come in and pour a ton of money into things like roads and bridges and all of these things. And if you look at it, most of the projects are in states like Illinois. And then most of the companies that supply the parts for those products are also in states like Illinois. For example, as part of the infrastructure, you're gonna have enormous orders from Caterpillar, John Deere, you're gonna have lots of orders from steel companies in Ohio, Pennsylvania.
33:34
Frank Rolfe: So it's kind of like a Rust Belt bonanza bill. If you read the bill, it's crazy. I don't know how they pulled it off because of course it was something that came through the Biden administration, but it didn't really favor those states necessarily in the manner you would think it would've done. It's a bill that everyone should probably look at because from a mobile home park hunter's perspective, it's a pretty good deal. You're gonna see a lot of the old factories and plants hiring, producing more of their products. And then you're gonna see all those products being delivered and installed pretty much in those same states. So it's kind of an exciting thing and again, it hasn't had very much press at all. I don't know when they actually start doing the stuff. I think right now they've been figuring out, giving the grants out, things like that. I know my own little town in Missouri is the recipient of one grant to replace the main bridge into town. So we're gonna score, I don't know, a million dollar bridge or something. But if you haven't looked up that bill, if you look up the infrastructure bill and you look at... They've already laid out where the money goes, and you can then see the industries that are most impacted. They're all really good mobile home park things.
34:49
Dave Reynolds: Yeah, no, I completely agree with that. I think it's definitely a... It will be a good thing for our industry.
34:56
Frank Rolfe: Right. And then you have the collapse of traditional investing, which we all saw happen firsthand in 2022, where the stock market delivered negative return. When you added on inflation, horrific return. That's just going to lead to more interest into alternative investing, one of which is mobile home parks. So I think long gone are the days of the average American with their 401k or their investments saying, "Well, I know the pathway to making money that's stocks and bonds." That was true. Historically, if you look at the graph, of course, if you look at the stock market graph, you'll see it's a little spooky, 'cause it was kind of an upward trajectory, but then it went almost near vertical in recent times.
35:48
Frank Rolfe: And as we all know, it has to equal out. It only has an average return of whatever has been historically, I think, a little under 10%. And on all those years where it was doing these crazy high returns, it will have some offset. It always has. So if you haven't ever looked, if you just google up stock market historical and look at that, you'll get a rough idea. Think of where traditional investments are and so I think you'll see a bigger focus on alternative investments going forward. It's just a natural algorithm that people... That you can't make money unless you can outstrip inflation, and you can't make money unless you can outstrip the taxation. So you have to have bigger yields than what you can get on things and the stock market particularly, you can't get anywhere negative yields. What are your thoughts on that, Dave?
36:37
Dave Reynolds: Yeah. No, I completely agree. I've never really been a huge, huge fan of investing in the stock market because it's just something that's really... A lot of it is just completely out of your control. I mean, you could buy and sell and the nice part is that it is liquid typically, but I've always had more faith in investing in stuff that I control and really understand and know that at least in my experience, that it's going to be a good investment long-term. Maybe it won't produce the greatest cash flow for one year when you do a lot of extra work to it or something like that, but overall, once you do that work, you're increasing the value of that investment and mobile home parks. That's why I invest pretty much all my money in mobile home parks that I have available and I just sleep a lot better at night not worrying what's gonna happen in those parks overnight than what may happen in the stock market the next day.
37:47
Frank Rolfe: Right. And then the final item is as we noted on the front end with office buildings at half occupancy, I don't know the retail national occupancy. I know it's dreadful. I know that a lot of industrial and commercial also is not doing very well, and those are huge segments of the real estate macro economy. I don't know dollar wise. I assume office buildings maybe the absolute top as far as total amount of capital invested. I mean, just a single building can easily be over a $100 million on one building, but as those kind of fall apart, we're gonna enter a new era where mobile home parks are finally going to get a whole lot more respect and appreciation because the industry has been kind of like Rodney Dangerfield forever. We can never get any respect. Now that our peers, all the other real estate sectors are just falling apart, I think it's gonna elevate mobile home parks into ultimately a mainstream investment. And I think Sam Zell had a lot to do with that when he started ELS. Sam has been a huge help in that.
38:53
Frank Rolfe: Many people along the way, UMH, others, they carried the flag saying, "Hey, we're not a joke. We're a real industry, we're worthy of investment." And now I think when people look at our industry and they compare that to our competitors, those other sectors, they're saying, what in the world? You look at Sam Zell himself and he was at one time America's largest office owner. And today, I don't think he owns hardly any. I'm not sure he owns any office buildings today, 'cause he saw it coming, I think. And so he's now the largest owner of mobile home parks and one of the largest of apartments. I don't think the largest, but I think this is the first time in forever the mobile home parks have a chance to really stand out from the crowd because no longer can people say, "Yeah. Well, you're the weak cousin to office and retail. Look at that beautiful big shopping center. Look at that towering glass high rise. What are you? Just a trailer park? You don't... You're nobody compared to that stuff." Now people are changing their tune. Are you feeling that also, Dave?
40:00
Dave Reynolds: Yeah, I think I've seen that happening really over the last, I don't know, three to four or five years. And even with interest rates, all the uncertainty out there in the economy, with us owning and operating nearly 200 properties, the phone is still ringing off the hook from investors, private equity groups, people that... Anybody in the capital markets. And there is such a giant interest still in the industry that I just don't see that going away. And I think as the word keeps getting out, especially how well we fared through COVID and how well we've faired through the various recessions over in the past years and I think how we'll perform in this probably coming recession, I think it's just gonna be greater and greater demand. And people... I can't imagine a lot of office buildings or retail buildings filling up in the near future or wherever, but I can see pretty much most mobile home parks being 100% full with a waiting list.
41:19
Frank Rolfe: Yeah. So the bottom line to it all is 2023 is gonna be a really, really tough year. I don't know of any wise person who would tell you to the contrary. I wouldn't listen to the folks claiming that it will have a soft landing or no recession at all. It doesn't align with any of the smarter people or articles I've read. So we think this year will be one of the toughest years America's ever faced, but at the same time, if you already own a park, key item, raise your rents, keep filling that thing up, cut your costs where appropriate and those that you can mitigate, the interest rate increases, but you'll have to work at it. If you're looking to buying a park, it's still a good time to buy parks. It has not changed at all. There will be some sellers out there who are still gonna be maybe unrealistic in their demands on price, but they'll ultimately give. It's happened before.
42:11
Frank Rolfe: It's a cycle the industry goes through, but the key is that despite all the boom and gloom in America that's always been good for the mobile home park industry, for the most part, we're contrarian, and so we can all handle and adapt to whatever America throws at us in the industry in the year of 2023. And we really appreciate everyone being here with, Dave and I for this, our first ever New Year's special as opposed to the Christmas. And again, we hope everyone had a happy holiday season, but there's a tough job ahead for everybody in 2023. And so we wanted to focus the show this year on that since we are in such a troubled time in American history.
42:54
Dave Reynolds: Yeah. Thank you everybody and happy New Year.
43:00
Frank Rolfe: Thanks everyone and we'll talk to everyone again soon.