The Silent Killer That’s Slowing Down Commercial Real Estate Deals in 2024

Aviva (00:16)
week's listener of the week is Mike Warner. Mike, thank you so much for leaving us a five star review. And for those of you listening, if you leave us a five star review below, you might be next week's listener of the week, week, week. This week on commercial real estate secrets, we have Kamyar Rezaie. Kamyar is the president of Wembley Real Estate. Kamyar, thank you so much for being on the show today.

Kamyar Rezaie (00:45)
Thank you for having me.

Aviva (00:47)
coming out of Calabasas, California. Kamyar, can you tell the people who you are, what you do, and how we got here today?

Kamyar Rezaie (00:56)
Sure, so I'm a commercial real estate broker. I focus on commercial real estate loans and helping buyers find properties. I started as a broker in 2004. Originally, I started in the residential arena during the loan modification era about 2009, 10, started switching to the commercial focus and...

throughout the 10 up to today, I've been building up my client base and helping mainly clients get a lot of different kinds of financing based on the commercial properties that they're buying and I'm continuing to do so.

Aviva (01:38)
Tell me about financing in 2024.

Kamyar Rezaie (01:42)
So financing in 2024 mainly consists of owner user properties. It's not much investment and or any other type. It's mainly owner user buildings and or people who have 1031 exchanges that need to find another property to replace to defer their taxes.

Aviva (02:04)
If the listener was a fifth grader, can you explain why to a fifth grader that we are in an environment right now that you're only seeing owner user or 1031 deals get funded?

Kamyar Rezaie (02:17)
Well, one of the reasons is there is not that many properties on the market because of when during COVID when the rates were low, people got very low rates. So there's not that much inventory. And number two, it's because the rates are high. The cap rates are rather high and people are just, it doesn't pencil. if in certain circumstances, on an investment property, even if you put up to 40 % down,

You know, your cash flow can be negative on a monthly basis.

Aviva (02:51)
So for the listeners, there's something we call, know, essentially there's an inverse effect to interest rates and cap rates. When interest rates go up, cap rates come down. When interest rates go down, cap rates go up. I assume you're seeing that in the Los Angeles market. Whereabouts Los Angeles, Calabasas, you're talking about a big piece of ground. Whereabouts do you transact mostly?

Kamyar Rezaie (03:19)
I transact here in Calabasas area and in the West Lake, West side area mainly.

Aviva (03:24)
Okay, West Side being.

Kamyar Rezaie (03:27)
Brentwood, know, Beverly Hills, West Los Angeles, in that arena.

Aviva (03:33)
Okay, is that a high competition area? So how do you beat the competition?

Kamyar Rezaie (03:37)
very high competition.

To be honest, the majority of my clients are referral-based and in order to really grab the competition, it's based on customer service. You know, being there for them at all times.

Aviva (03:53)
So you own Wembley, so you obviously have a grasp on that, just that, being there for your clients and maximizing their experience. What does a full service brokerage mean to you and look like to you all over at Wembley?

Kamyar Rezaie (04:12)
It means when you are introduced to new client, make sure you're available for them on a phone call. doesn't matter if it's a weekend or a weeknight. Make sure you respond to emails. Typically it's within 24 hours. I like to get back to emails within three to six hours and being able to answer all questions, even if they're not looking to purchase or do any transactions within the next three to six months, but being there for them, answering all their questions so when they are ready, they know who to come back to.

Aviva (04:39)
Absolutely. think it's really interesting. find, you know, I own a boutique brokerage as well. And I find so many of my clients have dealt with what I call the big box brokerages and they have just felt like a cow in a slaughterhouse. And they want to find this more boutique hands-on experience, which we at the warehouse hotline prioritize.

You know, I've never worked in a big box, big shop. I call them big box brokerages, but I really enjoy that concierge experience on the brokerage end, helping our clients from day one far past when the building is sold or the lease is signed. You know, I'm going to give you all my contacts.

I've, you know, meet you on, if you're out of state, go take pictures of the site, play property manager. It's fun. I find the more you give, the more you get as a broker. And I think in the boutique firms, we're able to really cater to that experience.

So is there a product type you all deal with more?

Kamyar Rezaie (06:01)
We mainly deal with the only user, let's say the office building, the smaller ones, retail, multi-family, industrial. Those are the top four that we deal with.

Aviva (06:11)
Okay.

What are you saying for the office environment in your district?

Kamyar Rezaie (06:20)
The big office environment, it's hurting, hurting a lot. But the owner user office environment is rather hot because people can buy and they can take advantage of depreciation and owning their own building.

Aviva (06:34)
I just read an article of a group here in Denver, a building sold, I want to say 10 years ago for 40 million and a group just bought it here for 9 million. And it's a really interesting opportunity. I think there's an element of risk, but risk and reward and great real estate is great real estate specifically if you got cash. So,

What are you finding with the industrial?

Kamyar Rezaie (07:05)
Industrial on the smaller scale, smaller buildings, again, those are a lot of the owner users. So again, those are very hot, people wanna move into them, but the bigger spaces, know, square footages, it depends on the area and the demand. But majority are, I would say, occupied today. You do not find a lot of industrial, even on the bigger scale, empty baking.

Aviva (07:33)
Yeah, story of my life. So do you all work with a lot of buyers over at Wembley?

Kamyar Rezaie (07:40)
Yes, we do. We mainly deal with the buyers that, you know, if they want us to, you know, accommodate them with the buy side on the brokerage along with the loans, but we majority do a lot of the loans.

Aviva (07:52)
Okay, so you are a brokerage, you also have a lending arm within your brokerage. fascinating. So it's, so yeah, it's really in-house full service brokerage.

Kamyar Rezaie (07:57)
Correct, as part of my brokerage, exactly.

Yes.

Yep. That's where the concierge comes in. We were able to, you know, handle up both aspects. It kind of makes it easier for the client. They're not dealing with two different people.

Aviva (08:16)
Sure. Are you seeing SBA loans getting through the finish line?

Kamyar Rezaie (08:21)
A lot of them. Majority of the owner user buildings are SBA loans because of the 10 % down requirement.

Aviva (08:28)
Okay, so this is like a broker to broker question. So we're seeing SBAs go through the finish line because I've heard horror stories recently where people will get under contract, do their due diligence, and then the lender is pulling the plug at the finish line because of financing. Are you seeing any of that or is it more?

Kamyar Rezaie (08:50)
I have not seen that, but what I do recommend for clients is before you even go into contract, let's look at your documents and your financials, give it to a lender and make sure they're good with it. Kind of a, kind of a prequel, you know, trying to do that while going to escrow is, it can be dangerous. Like you said, cause now you're putting, you know, you're 3 % into escrow. And if you sign off all your contingencies, you know, you're at risk of losing.

Aviva (09:18)
Sure. So let me ask you, how do you find your clients? How do you build your clientele? It's a really competitive market. What are you doing aside from having the lending arm that differentiates yourself?

Kamyar Rezaie (09:33)
So a majority of my clients are referrals, that's based on past clients, but I also deal with a lot of COIs in terms of CPAs, attorneys, and business managers.

Aviva (09:43)
that's cool. Who do you find to be the most valuable of that group? CPAs?

Kamyar Rezaie (09:50)
CPAs, right? Because they're the ones that are dealing with the tax returns. And they see like when they have clients that are, you know, leasing for their businesses and they can see how advantageous it would be if that particular client buys a building.

Aviva (10:03)
And why is that?

Kamyar Rezaie (10:05)
Because you know, they get depreciation expense and if they get an SBA loan that's over 25 years and they're, you know, they're open for that loan, they can pay off the building and own it outright.

Aviva (10:18)
There's just nothing better than a building own outright. So tell me you started in residential real estate. When was that?

Kamyar Rezaie (10:21)
best feeling.

Correct. That was in 2004.

Aviva (10:31)
Okay, so you cut your teeth in residential and then you switched in the craziest time in real estate, 2008 or 2009? Okay, okay.

Kamyar Rezaie (10:41)
We're on 2009-2010, a year after the economical apocalypse.

Aviva (10:46)
So what was your aha moment to go from residential to commercial?

Kamyar Rezaie (10:50)
You know, is dealing with, you know, higher echelon clients that have helped some save their homes via low mods and everything. And they were owners of a multi, you know, commercial properties. And they're like, you know, if you jump into the commercial space, you know, we'll become your client and it will be the start for you to enter that sector.

Aviva (11:10)
Was it a hard transition from residential to commercial?

Kamyar Rezaie (11:14)
I wouldn't say that hard, was just customizing yourself with the verbiage, with the loan docs and with what the banks require.

Aviva (11:21)
Sure. I heard someone say recently in commercial real estate, you learn 80 % of the business in your first year and then 20 % the rest of your life. Yeah. Which is cool and humbling and exciting all at the same time.

Kamyar Rezaie (11:34)
the next 30 years.

Right. Definitely. No, it's very fun. It's very, you know, when, you have a client that owns you buy them a building and that they're a couple of years and then they call you, they thank you, you know, the business has grown and you know, it just, it's a very good feeling.

Aviva (11:55)
So we only managed a number of warehouses here in town. One time we turned a gentleman down. He wanted to open an auto body shop. Auto body can be kind of rough. He was just starting out. He went and bought a building instead of renting from us. And because of our, we declined him. He, just so happened he bought a building in

Kamyar Rezaie (12:19)
Mm-hmm.

Aviva (12:23)
what would become a huge epicenter location that was underdeveloped when he bought it and has exploded since. And I see him, because we work in the area and we keep in touch, and he always says, it's because you guys turned me down that I bought this building and look where I am today. it's the power of patience in commercial real estate is...

It's powerful and it's impressive and it's fun to have those relationships and although it was awkward in the beginning, it's just smiles for miles now.

Kamyar Rezaie (13:04)
Yep, absolutely.

Aviva (13:06)
How did 2008 play into your transition, if anything?

Kamyar Rezaie (13:12)
You know, was very interesting year. You know, at the point I was in the residential, mean, you know, would say 75, 80 % almost of the competition went out. People didn't know what to do. The banks didn't have money necessarily. People didn't have money. And it was just very scary times. And, you know, the only way to make money is if you have certain clients that you know were

weren't affected much, they still have the tax returns and so forth to be able to refinance and or buy property. One. Number two was, know, of all with all the loan modifications, helping people save their homes and having a roof over their head. You know, and so, I mean, it was, you know, that was just survival. It was just survival. And, you know, luckily I was able to, you know, help a lot of people save their homes.

And then I got introduced to a certain amount of clients in the West side that had to hire low amounts, four or five, $6 million loan amounts, bigger homes. They had the same issues, but again, at that time, those were not conventional, the regular loans, were the jumbo loans. But the banks were kind of mandated, no matter the loan amount, to help people save their homes because of the balance sheets and the laws and regulations that were going on at that time. And when I helped them, they were all very happy.

Aviva (14:16)
Sure.

Kamyar Rezaie (14:30)
They're like, you saved our family's home, you saved the roof over our head, and how can we repay you? that's where they told me, go into the commercial space, we'll be there for you.

Aviva (14:41)
impressive.

So having been in the commercial space for a long time, a lot has changed in terms of technology. What are you seeing being the primary changes in commercial real estate from when you started and how are they helping you today?

Kamyar Rezaie (14:51)
Yes. Yes.

The primary changes is mainly the web. Everybody can go on the LoopNet. They can see what are the properties for sale. They can do all their research. They have all that at their disposal. Versus in the beginning of 2009, 2010 when I got into it, it was just you. They found that address. They called you. You sent them an address. You had to provide everything to them. But now clients have a lot of different resources at their disposal.

which helps. nowadays, I'm a part of CoStar, so for any property, a majority of the properties, I would say you can do underwriting reports, which is like 130 page report, which the banks use as part of their underwriting as well. And you can provide this to the client and they can get all the information they want prior to submitting an offer.

Aviva (15:47)
That's scary.

Wow. I said that's scary because sometimes I know the information given to co-star is false. So if people are underwriting based on whoever is giving that information to co-star is terrifying, but I digress.

Kamyar Rezaie (16:13)
They try to keep it as up to par as possible.

Aviva (16:16)
They do try, they do a pretty good job.

They are our industry leader, so we don't have a choice. Right. So what makes you happy with what you do in commercial real estate?

Kamyar Rezaie (16:26)
Yeah, absolutely. Yeah. They also own loop net.

What makes me happy with what I do is, as I mentioned previously, when I have the first time buyer buying a building where they're to move their business into, a lot of the actual SBA loans that we do, when they do get the loan, we also get a construction aspect to it so that they can change the building with the features and the layout that they want. And so when they move into here, they feel good. the majority of them, their businesses grow.

growth, grow. having those people, when they give you a call back and they thank you, and majority of my clients that I do the SBA loans for, I put them on 25 year fixes, amortized over 25 years. SBAs are the only commercial loans that you can do a full fixed period for throughout the whole loan. especially during the COVID era, when the rates were in the twos and threes, they're never gonna touch those loans. Those rates might never come back to us.

Aviva (17:27)
Wow.

Sure.

Kamyar Rezaie (17:37)
So, know, just, and then people are just very happy, you know.

Aviva (17:41)
Amazing. Like I said, the more you give, the more you get. Kamyar, where can the listeners of commercial real estate secrets find you, follow you and contact you?

Kamyar Rezaie (17:55)
Best is either my website, www.wembleysinc.com, W-E-M-B-L-E-Y-S-I-N-C.com, or my office phone number, 818-703-9337. And if they go on my website, all my social platforms are there.

Aviva (18:12)
Boo yeah. Thank you for being on the show today and for everybody listening. Yeah, for everybody listening. We'll see you next week.

Kamyar Rezaie (18:15)
Thank you for having me.