Podcast: Play in new window
Subscribe: RSS
Lorne Polger, co-founder and Senior Managing Director of Pathfinder Partners joins me on this episode.
I’m happy to say that these conversations are starting to feel more natural, and I hope you enjoy our exchange.
After more than 20 years practicing real estate and environmental law at Procopio, in San Diego, and just before The Great Recession began, Lorne and his partner Mitch Siegler had the vision and guts to leap into the operator role.
Pathfinder is a vertically integrated real estate company whose funds deploy investor capital directly into Pathfinder’s projects, avoiding the double promotes associated with traditional equity funds. They play on the value-add and opportunistic side of the risk spectrum and tend to pursue smaller transactions than the largest real estate funds, though by no means are the deals small.
The firm is raising their 11th fund and has gone full cycle on about 100 assets and has acquired about 135 deals. Their funds target secondary markets in the western states of California, Arizona, Colorado, Washington, Oregon, and Nevada.
Lorne and the Pathfinder team are super sharp. As market conditions have changed over the last 14 years, they have re-direct the platform from distressed deals to value-add deals to pursue attractive returns. Once they set an investment thesis, they bring a high degree of discipline and topflight execution to bear.
Prior to earning a law degree from UCLA, Lorne graduated from Colorado College with a degree in Political Science.
Lorne’s got an incredibly deep experience base and a generous spirit. Hopefully, you can enjoy some key takeaways from the episode:
- Relationships in commercial real estate (as in all business) are central.
- Choose investment markets wisely. Look to job growth, diversity of job sectors, general market trends (tailwinds not headwinds).
- Colorado and Arizona look more favorable (at the moment) than Oregon and California where the political environment (rent control, uncertain property taxes) might suggest more patience and a wait-and-see attitude.
- Rely on principals to guide you, for example:
- Create alignment between investors and operator.
- Invest in your people (they offer equity to the team).
- Be transparent, do not hide or soften bad news.
- Act for investors as you would for yourself.
- Good buying opportunities are coming:
- 2021 will see hotel owners capitulate.
- Adaptive reuse for hotel to apartment should be viable.
- Buying at less than 100 cents on the dollar with ultra-cheap debt, for multi-family, will likely show up.
- This is a good time to be picky. Quality markets, assets, and deal structures.
- NODs (Notice of Default) and bankruptcies are just starting to tick up in the markets that Pathfinder Partners operates within. More will follow.
- Build an advisory board. They will challenge your assumptions, create accountability, and expand the vision. Their ability to be part of the team may be all the incentive that they need.
- Two tips for success: Work your passion. Be focused.
Where to Find Lorne Polger
LinkedIn: https://www.linkedin.com/in/lorne-polger-5122b2a/
Pathfinder Partners: https://www.pathfinderfunds.com/
Transcript
Kevin Choquette:
Good day. Thanks for joining me on Offshoot. Lorne Polger is my guest today. He’s a co-founder and senior managing director of Pathfinder Partners. Happy to say the podcast is starting to feel a bit more natural, and I hope you enjoy our exchange. Lorne shares quite a few nuggets of wisdom and insight with us. One thing that you’ll hear several times is how relationships are very central to all that he and Pathfinder do. He also touches on some guiding principles, such as creating alignment between investors and the operator, investing in your people, being transparent and acting for investors as you would for yourself. In the topic of distress, he and I agree it’s still coming as a result of COVID 19, 2021 we should see some capitulation across several sectors in particular hotel and retail. Adaptive reuse of hotel could be very interesting and he sees opportunities to buy for less than a hundred cents on the dollar with really cheap multifamily debt being a great recipe for long-term hold.
We talk also around building an advisory board, something that Lorne credits as an essential [inaudible 00:02:13] of the success of Pathfinder Partners. I think that the insights there are really valuable, I hope you enjoy that. And at the end, he’s got a couple of tips for the entrepreneurs out there. Maybe you’re starting up, maybe you’re in the depths of dark days, but in any event, I hope you enjoy the exchange.
Hello everyone. Thanks for tuning into my conversation with Lorne Polger co-founder and senior managing director of Pathfinder Partners. After more than 20 years practicing real estate and environmental law at Procopio, San Diego law firm. And just as the great recession began Lorne and his partner, Mitch Siegler had the vision and the guts to leap into the operator role. Pathfinder is a vertically integrated real estate company whose funds deploy investor capital directly into Pathfinder’s projects, avoiding the double promotes associated with traditional equity funds. They play on the value add and opportunistic side of the risk spectrum and tend to pursue smaller transactions than the largest real estate funds though, by no means are the deals small. Their firm is raising their sixth fund and has gone full cycle on around 70 projects, and has acquired about 110 assets, the combined value of the transactions falls right around $1 billion.
Their investors I suspect are quite pleased with having received a 21% net IRR. The funds target secondary markets in the Western States of California, Arizona, Colorado, Washington, Oregon, and Nevada. Lorne and the Pathfinder team are super sharp, as market conditions have changed over the last 14 years, I’ve watched them redirect the platform from distress deals to value add deals in pursuit of attractive returns. Once they set an investment thesis, I’ve seen very little style drift, a high degree of discipline and top-flight execution. Prior to earning a law degree from UCLA, Lorne graduated from Colorado college with a degree in poli sci. I don’t know if that’s, when he really fell in love with skiing or if it came before the college years. What I do know is that he’s been skiing since age five and just like me might drop a few meetings in favor of chasing good storm. So Lorne, welcome to the podcast.
Lorne Polger:
Well, thank you, Kevin. Great to be here and appreciate you including me in this new journey of yours and fun to be with you.
Kevin Choquette:
Yeah, the pleasure is mine. Thank you. So to start, could you just tell us a bit about yourself and Pathfinder?
Lorne Polger:
Sure. Well, I’ll update you a bit. Some of the stats are a bit stale, but that’s in part because we’re moving quickly these days. So we got started back as you mentioned, in 2006, the genesis of Pathfinder was a hot tub in Big Bear. And there’s a longer story to that, but sitting there with my longtime friend and then client Mitch Seigler and talking about where we were in the world and what was happening at that time. This is December 2005 or January 2006. And we both realized that there was going to be a significant dislocation in the financial markets and that real estate would be significantly impacted as a result. I had also seen back in my early career as a lawyer clients who bought bundles of bad loans from the RTC in the early nineties who really made lifetime fortunes by buying when there was blood in the street to quote Sam Zell.
And so that was the investment thesis. We realized the dislocation was coming, we realized that there were going to be some interesting buy opportunities as a result. We had no idea how bad it was going to be, of course. And certainly our predictions were for a bad time, but not nearly as bad as it got, but chaos creates opportunity and as a result we were able to jump in early build relationships and begin buying. And that occurred in the fall of 2006. We started with one institutional capital partner which just Mitch and I as the investors and one partner bought three defaulted loans on various multifamily projects initially in Florida and Texas, and that got us started.
Realizing that we would quickly soon eviscerate our remaining liquidity, we decided it was prudent to raise our first fund. And that was in the summer of 2007. And again, remember at that time we were just starting to see the first public signs of the distress and how deep it might be. So we kind of sat on the money for a little while as the deals kind of got better. First fund was small, it was 32 friends and family members, and that’s really what got us started. Bought a few deals and realized then we were onto something and raised a much larger fund in 2009. A couple of years later brought a couple of partners on and really began to hit our stride. Since that time we’ve actually raised, we’re just completing the raise of our 11th fund.
Kevin Choquette:
Oh, wow. Yeah, the website’s a little bit behind, you guys are moving fast. That’s great.
Lorne Polger:
Pathfinder opportunity fund eight, and I’ll talk about it during the conversation here, is a new fund that will hopefully take advantage of some of the distress in the marketplace coming up. But we’ve raised now as I mentioned completing our 11th fund, we bought about 135 to 140 deals since we got started. And we’re probably in the billion and a half range right now in terms of total acquisitions. So it’s been an interesting journey. And as you mentioned we’ve pivoted along the way when there was distress early on, that’s what we focused on and that’s pretty much all we did for about five or so years, five or six years recognized some interesting opportunities along the way as well, that were a little different than what we were doing.
In 2008 or 2009 we started to buy single family homes in San Diego and ended up acquiring about 130, 140 single family homes, which we kept long-term. We still own about half of that portfolio, as opposed to flipping them, we kept them for long-term rent. And that’s been over time a grand slam winner for us. We saw a unique opportunity in around 2014, 2015 to delve into the luxury space. And we backed a group up in LA that was flipping mansions in the Hollywood Hills and that was an interesting experience. Bought about 20 or so homes still have one left in that portfolio, but we stopped buying in 2016 as we saw the market changing. And then as you mentioned, the last few years, we’ve spent in the value add space and in the major markets in the Western U.S and focused on projects that were perhaps a little too small for the really big guys more of 100 to 200 units space and have done some fairly transformative value add in that space.
So we’ve been nimble and now the market is changing again, and we’re kind of smack in the middle of that and seeing where the opportunities may lie here over the next couple of years due to dislocation that’s happened as a direct result of the pandemic. And we’re just now starting to see some of the interesting real estate opportunities that may come as a result. My personal background, as you mentioned, I spent 20 years as a real estate lawyer. I had a focus over time in the apartment space and the condominium space, and got to know a lot of the players in the space, on the equity side, on the debt side, on the operating side, and still work with a lot of those relationships even today. Very happy to not be a lawyer anymore, I call myself a partially retired lawyer, but it was a great background for starting the company and doing what we do today.
My time is spent between San Diego and Vail, Colorado. Vail has always been kind of my happy place and second home. My parents owned a place there beginning in the late 1970s for about 10 years, and my late wife was from Denver and our first date was actually up in Vail. So it’s always kind of been a special place for me and fortunately a place where I get to spend some time when I’m not in San Diego. And one thing that COVID has shown is that you can kind of work remotely anywhere and it’s as good to be up there as it is to be down here. And I’m fortunate to be able to spend time in both places these days.
Kevin Choquette:
Yeah, absolutely. I think, well, there’s been some articles in the Wall Street Journal, Bloomberg, a few other media outlets talking about the phenomenon of not boom towns, but zoom downs and a bunch of people well and truly figuring out that their business actually can thrive remotely. Now, I don’t know what that’ll feel like 18 to 24, 36 months out from right now, but boy, some of those markets are just exploding with new transplants and real estate prices are moving quickly. Look, as I had explained with you, just prior to getting on the podcast video, it’s kind of free form conversation.
You’ve already brought up a bunch of places that we can go, but why don’t we just jump right into COVID and kind of, if you will, the chaos that’s coming from it. Where, I could just say this way, where the hell are we going? This has been an absolute surprise for all of us. We’ve seen really unprecedented monetary policy as a response, high level of accommodation on the lenders, especially in hospitality and retail assets, at least for the time being. A lot of the distance working taking place, but where do you guys see that sort of informing your worldview and directing you as it pertains to potential opportunities? That’s a huge topic, so feel free to take it any direction you like.
Lorne Polger:
Sure. No, I appreciate that. Well, the one thing we know is that it’s been fairly chaotic and however you thought about it in March or April, you’re probably thinking about it differently today, and that’s certainly the case with us. We spent a significant amount of time in the early stages of this just making sure that our company, our staff and our investors were in as safe a position as they could be both personally and financially. We didn’t know what was going to happen, none of us did, and this is a situation without precedent and at least in the United States in modern times. And so we spent a lot of our energy in that first 90 to 120 days [inaudible 00:14:08], in making sure that we had sufficient personal liquidity to ensure that if there was an increase in the level of the crisis, that we would be able to manage that. We did a deep dive on a property by property basis across our whole portfolio to make sure that we were going to be okay.
We’re a light levered shop, we’re about 50% leveraged across the portfolio. So we weren’t necessarily worried that we were going to have a problem meeting a loan payment per se. But it still required us to do a deep dive on each individual asset to understand how our tenant base would be effected by the pandemic, what potential level of unemployment we would see, what potential percentage of tenants might not be able to pay their rent either on time or at all. And as a result one of the things we did is we kind of stopped all funding of construction projects and renovation projects, just to make sure that we would be okay. And that worked out fortunately for us as I think it did throughout generally speaking the multifamily sector and whether that’s because of some of the stimulus that was provided, the $600 weekly checks, the state checks, who knows combination of all of the above.
But for those of us at least in the multifamily space, we’ve been able to collect very close to what we were collecting percentage-wise before the crisis hit. And what’s been remarkable to me is how consistent that number has been. Our percentage collections in April, May, June, July, August, and September were within 1% of each other, we never had a dip below it or a spike above it. And that was pretty surprising to us. So we kind of planned for the worst, but hoped for the best and over time that’s where it played out.
Kevin Choquette:
Where does it go going forward?
Lorne Polger:
I think it really depends on the sector. And as you mentioned, the two that I believe have been hardest hit and will continue to be hardest hit, and that’s retail and hospitality and correspondingly as a result, that’s where I see opportunities for savvy opportunistic investors.
And I was listening to a webinar about a week or so ago and somebody, and I’m not suggesting that this statistic is accurate but it was an aha moment for me. Someone said that 65% of hotels in United States today are currently insolvent. Think about that for a second, 65% of hotels in the United States today are functionally insolvent. But think about it, if you look at some of the hospitality numbers, it kind of makes sense because we’ve gone from averages in the 70% range in terms of occupancy down to the 30% range. So you’re not going to be able to make debt service payments with 30% occupancy. I guess you can feed it but you’re certainly not going to do it from cash flow. And the question is, how long can you feed it or will you feed it?
Kevin Choquette:
That’s right. And I had a guest on the show last week who’s one of the bigger opportunity funds with a real interest going into hospitality. And they’re saying if we just take an asset as a $1 value, they’re seeing things that are not pricing anywhere near the appropriate level of discount, because the amount of uncertainty to get from today where you know you’re feeding debt service and, or in a sort of maintenance and management and operating expenses to the property on a monthly basis back to at least a breakeven occupancy level. Nobody knows is that four months, is that 14 months, is that 20 months? And they think it’s probably got to get to like 65 cents for things to be from their view, attractive, but they’re not seeing it right now. So it’s a very interesting time in that regard, is that an area that Procopio, I keep saying Procopio apologies, Pathfinder is going to focus? Are you guys interested in the hospitality space, or are you looking at it as a sort of a value added rehab and change of use?
Lorne Polger:
We see it in the context of a change of use, we’re not hotel people, we’ve only bought one hotel since we got started back in 2006, which was a note purchase on a newly constructed Homewood Suites. And that’s been our only hotel deal. So I think for us we view it in the context of conversion and adaptive reuse of hotels potentially to rental housing. And I think with a focus on kind of the long-term state type properties of [crosstalk 00:19:41] because the physical construct of those properties lend themselves better to a potential conversion. But we’re only starting to see it. And I think that speaks to one of the other issues specifically on timing. As you know, I’m a part-time banker I was a co-founder of Endeavor Bank, a local community bank here in San Diego.
We opened our doors in January of 2018 after three years in the application process with the feds. We were only the fourth new bank in the United States to open our doors at the time we did since the great recession. And I’m on the board of directors and I also chair the loan committee of the bank. So kind of my part-time job is as a banker. And I could tell you from wearing that hat that the mantra from the regulators has basically been, when the crisis hit, work with your borrowers and it made sense. Work with your borrowers, we don’t want to have a complete financial collapse here. And the way to do it is to try to make sure that your borrowers can get through this in the best way possible.
And I think that was a prudent policy at that time. Unfortunately though, that policy can’t last forever, and so we’re now starting to see how that’s going to change. Now a lot of folks, a lot of small to medium-sized businesses got through the crisis with the PPP loans. It ended up to be a massive boom to our bank because we were able to pick up a lot of clients from some of the larger financial institutions who just were not being served well by them. And in fact, it almost more than doubled the size of our bank in a very short period of time, which is great. But that kept a lot of people afloat. We would have seen, I think, a dramatic collapse, financial collapse had the PPP program not existed.
But that was then, this is now most people who were on the edge have used those PPP dollars up and I think are looking for the next rescue. And I don’t know if it’s coming, it may come tomorrow and it may not come and it may come three months from now, or it may not come. No one knows because that’s playing guessing games on politics and that’s a whole nother rabbit hole we probably don’t want to go down. So it’s tough to say, but I can tell you at some point banks and whether that’s community banks or money center banks or non-regulated financial institutions and debt funds, at some point they begin to enforce their loans when they’re not being paid. And that time, I believe is starting to come basically now.
So I’m tracking notices of default across the markets that we work in and only in the last 30 days are we starting to see an uptick and in ODs, starting to see some bankruptcy filings. And I think it’s the beginning, it’s a trickle today, but I think the trickle is going to turn into a stream. I don’t know if it’s going to be a raging river like it was in 2008 and 2009 and 2010, it may not be. But there’s going to be water and as a result, there’s going to be opportunity for opportunistic buyers like us. It’s different today than it wasn’t in 2008, 2009, 2010. First of all, there’s so much capital today on the sidelines and you know better than I do, how staggering the amount of capital is.
There’s also, because this was not a banking crisis unlike last time, there’s a lot of liquidity at the lending level too, so it’s going to be easier for equity players to buy, it’s going to be easier to get projects financed, whatever they are at most likely reasonable leverage. So I don’t think the crisis will ultimately be nearly as deep or as pervasive as it was back in the great recession, but I do think COVID is going to create opportunities. So that’s kind of on the investing side of it. There’s so many other elements though, of the pandemic that touch real estate. And one of them is just the functionality of how we all work and live together. And the big question in a lot of people’s minds is in the office sector.
How and when are we going to get back to work sitting together in the same room? And if you would have asked me in April, I would have said, “Well, later in the summer,” if you would ask me in the summer, I would say, “Well, hopefully by fall.” It’s October 21st today and maybe it’s the spring, maybe it’s next summer, I don’t know. And the more people I talk to about this subject kind of have the same feeling, we don’t know. We all hope it’s going to be sooner rather than later. I think a lot of us miss the comradery elements of being together in the same physical space. I think we miss some of the creative elements and collaborative elements of being in the same space, but that’s a big unknown today. And I think one thing, it feels a little bit like 911, where 911 was the penultimate shock to the system and after 911 things changed.
And in some cases they changed for good, whether that’s walking through a metal detector to go into a Padre game or obviously enhanced security through airports or, there’s 100 different facets you could look to. I think we’re going to experience a similar kind of situation post COVID where things are different. Over time, they’ll feel more normal but in terms of the physical work environment, I believe that some of that over time will result in kind of a permanent difference than where we were before. And how that’s going to impact office, I don’t yet know, except I believe that ultimately we will probably use less square footage as a business universe, we’ll probably work from home more than we did before then this all hit, even post vaccine. I think that’s going to be a more permanent change.
Kevin Choquette:
And what do you think about the geographic nature of the workforce given that you spend time in Vail and I’ve been spending a lot of time up in Tahoe, these places are not subtly shifting. There’s more than a handful of folks coming up from the Bay Area here and looking at the home prices and saying, “Hey, let’s just buy something here, we’ll call this home because if I don’t have to be on the peninsula, I’d rather be in the mountains.” And I think June or July was 200% of the sales volume home prices are up 25% in like three months.
That’s one of the ones I look at and go, okay, is that a moment in time where it feels like you can advance your career and you can be a part of the company just as effectively from Lake Tahoe as you can from downtown San Francisco, or is that a long-term trend where… And I’m sure we don’t have the answer, but you’re up in Vail, I suspect some of the same things are unfolding there, but if you were to kind of think about is one of the changes from COVID going to be that some portions of teams are now just dispersed permanently?
Lorne Polger:
I think so, Kevin, I think people realized through the crisis that you don’t have to be chained to the desk to call it equally as productive. And in fact, maybe you can be more productive not spending whether it’s 60 minutes or 120 minutes a day commuting in your car. So yeah, I think that some of those changes will continue depending on the nature of the company. I’m talking primarily focused on the office space, not manufacturing or other things where you need hands and bodies physically and in place, of course. I think if you look at apartment rents today, I was reading an article this morning on Globe Street, the markets with the greatest declines right now, San Francisco, New York, LA and Chicago, well, there’s a reason extraordinarily expensive cities to live and work in.
And I think the effect and I’ve seen it from frankly, the stories from, my kids are 26 and 24, and I hear it from the stories of them and their friends who were living in those gateway markets and who have moved out while maintaining their same positions. I hosted a few of my son’s friends here in the early fall for a few weeks and they were all working in downtown San Francisco paying oodles of money for rent. And they decided that they could… They were all working in their apartments anyway, so they said why don’t we just move down to San Diego for a month or two and hang out there while we’re working. So I think that new found element of mobility that really wasn’t in place before.
Sure, some companies had a work from home policy or a part-time work from home policy, but it was really more the exception to the rule. And I think over time my guess is it’s going to be more the rule than the exception, not full-time per se, but more enhanced flexibility. And that’s going to change things, it’s going to change as I said, how much office space we use, how we work together. And it’s not without its challenges too, I think about it in the context of culture. And this is something I’ve been part of a CEO group for seven years now, and it’s an ongoing discussion that we have in our group is how do you preserve culture in an organization when you’re not physically with each other?
And it’s not just the physical element of working together, it’s also the socialization element of grabbing lunch together, getting a workout in together, going for a run together, having a beer or a glass of wine after work-
Kevin Choquette:
Yeah, building a real relationship.
Lorne Polger:
Exactly. And that’s missing. And I think we’re all trying to continue to get that in as much as we possibly can with people and learning how to do it now in the newer environment. But it’s not easy and you have to make a conscious effort to do it. So how do you do it at the company level? We’ve had since this all started, we closed our physical office in March when the crisis hit and we haven’t opened back up yet, but we do have a weekly zoom meeting and for a long time, I think every week for four months in a row, we played an interesting or creative game together really just to continue to try to build and keep the culture going.
And now we’re actually hosting guest speakers who may or may not have any connection to real estate just to kind of again keep people engaged and have them interested in what we’re doing. I try to get on the phone and actually talk to people, call people as opposed to just emailing. Because one thing that I’ve noticed since the crisis hit is my already fairly staggering volume of emails, which is kind of the bane of my existence and difficult to keep up with. I can’t tell you whether it’s gone up by 20% or 30%, but it’s to the point where it’s fairly mind numbing at this point. And so kind of managing that and trying to be in contact with people in other forms other than just email is I think a key element of kind of trying to maintain some type of cohesive culture.
Kevin Choquette:
Yeah, totally agree. And it’s ironic and well-timed that Microsoft’s Teams product has come out right during COVID. I don’t know if you guys have started to utilize it. We’re finding to your comment of increased productivity, I don’t know that I am more productive for taking a shower and putting on my business attire and driving to the office and parking, going up in the elevator and all that, or just finishing a workout, sitting down at the desk and throwing up the screen share with a colleague and going through the work in that manner. But I really do think a lot of people are like, “Well, I’ll just say this, I have found myself much more productive in this setting than I ever would have anticipated.” And I would have thought the distraction and the other things associated with being at home would outweigh the benefits, but it has for sure gone the other way. So it’s going to be an interesting phenomenon for us to all continue to live through. But if I may, what game were you guys playing in terms of the zoom meeting?
Lorne Polger:
That’s funny. Well, we rotate it. So everyone on the team had to come up with their own game. And we did, I think someone did a jeopardy game, I did a treasure hunt where I gave people a list that they didn’t have before and they had to go find certain things around their house. So everyone came up with something different that we could share through some type of zoom mechanism. So it was fun, we enjoyed it. I thought it continued to build a comradery and give everyone, we could all laugh at each other which was great. And that certainly helped to build culture.
The other thing that has gone on is at least brought, I think not just in the multifamily world, but all aspects of commercial real estate now transaction activity basically went grounded to a standstill for a period of time across all sectors. And it’s only in the last 30 to 45 days that we’re now seeing a pickup, at least in the multifamily sector, we’re actually in the middle of five deals right now. And from March through August, the number was zero. So it’s a pretty significant change back to kind of a normal level of deal flow.
The deal flow is now reengaging our teams, so everyone is back at it and working away and grinding hard and we’ve got stuff to do and to do not just in the triage mode, but to make money for our investors and find opportunities and sell stabilized assets. I find that the market is pretty interesting right now, we’ve received more unsolicited offers on buildings than we ever have before ever. And I think that speaks to the fact that people are gearing back up again after this period and saying we are going to be okay, it’s going to be bumpy and lumpy. It’s a new normal today, but there’s a lot of capital sitting on the sidelines that needs to go find some yield. And-
Kevin Choquette:
Well, and if I go back to your analogy on the stream, the trickle whether or not it’s a river of distress like it was during the great recession, I couldn’t help, maybe it’s because my two year old daughter is obsessed with bears, but I couldn’t help adding to that analogy that you got some bears on the side of the Creek, eating the salmon as they go up. And in the great recession, that moment of the log jam of commercial transactions was very long, it was probably a solid year of just nothing and nobody wanted to eat the fish. And there weren’t really any bears at the river trying to eat the fish. And I think you already alluded to it here, there’s a ton of capital i.e there’s a lot of bears ready to eat these fish.
We’ve just been talking to a client out in Colorado $68 million asset, 220 unit apartment project, brand new construction. And they’ve got a comp that’s a 422 cap sale on 50% occupancy, proforma NOI. It’s not their asset, but it’s in the same neighborhood and I don’t know, I’m curious what your view is. This is all sort of COVID related as well because of what’s happened with monetary policy, but the HUD rates are on the floor, like a 2.1% base rate. Fannie Freddie, if you stay low leverage and high debt coverage I think is as low as maybe 2.7, maybe 2.65 that spread between the cost of debt and what have been historical cap rates. Maybe we have to go back to January to decide what a historical cap rate is, is pretty much an all time high the gap between that prevailing cap rate and the cost of debt. So curious if you think that’s catalytic in the unsolicited offers and how do you guys think that’s going to impact multi on a go-forward basis?
Lorne Polger:
Well, that’s a great question. I think if rates were where they were pre COVID, call it 100 basis points higher or more, we wouldn’t be seeing anywhere near the level of activity that we’re seeing in the last 60 days. So yes, I think that the low fixed rate interest environment has been a catalyst for deals. And I agree with you, I haven’t seen the spreads as high as they’ve been. That said, that doesn’t mean you can buy anything so I think it’s a good time to be really picky.
I think it’s a good time to stick to quality, that doesn’t mean you have to go buy a brand new building, but quality in the sense of market dynamics, physical construction, the physical plant, the sub market, all of those things and be picky with what you’re looking at today. Because we don’t know what again, what lies ahead it may not be as bumpy as it was in March, April and May, but it could be heaven forbid if we have additional lockdowns and what that may do to the market and to assets. We just closed a deal last week on the acquisition side and got a GSE loan fixed for 10 at around 2.8.
And interest only for 10 years, I would never ever have imagined money being that cheap ever in my life. And it’s pretty astonishing, but even at higher prices, it makes deals work. And not a time that I would want to be in a floater, I think it’s a great time to fix, but there’s another side of it too, which is that if you bought something two or three years ago and you go, “Wow, maybe it’s an interesting time to sell.” The problem is if you went and put seven or 10 year money on it, your prepay today is so-
Kevin Choquette:
Than your maintenance.
Lorne Polger:
You can’t do the deal, you’re not going to make any sense. So I think a lot of us in our business are kind of looking at it out of two sides of our mouth, on one side I go, wow, it’s an incredible time to buy, rates have never been this cheap. If you’re a an experienced borrower with relationships, whether it’s the bank level, but GSE level, it’s just a great time to borrow. The problem is it’s not an easy time to sell. So-
Kevin Choquette:
Well, and it’s also, I think to your point of being careful or being picky and finding good sub markets and good quality, there’s still some uncertainty around what collections will be. I tend to agree that your early report of high ninety, well, you didn’t put a number to it, but I’ve been hearing like high nineties kind of collections across the board with a few outlier assets where the incumbent management had a poor enough tenant base in there that the things start to erode because you didn’t have a good tenant base to start with. But you don’t know where rents are, you don’t occupancy, there’s still a measure of uncertainty. Maybe we can look in the rear view mirror and say, “Hey, we’re through it and let’s be full speed ahead.”
But I don’t know that that’s the case. And I think you could still see some state and local governmental distress, there’s been no meaningful reduction in force in any of those levels that I’m aware of. And that could come because it’s clear that tax revenues are going to be way down. And I guess my point is I completely agree, it’s a good time to be picky because not all markets are going to perform the same as we get into the the longer paragraphs of the COVID story.
Lorne Polger:
I agree. And look at California, in addition to those elements, we have various measures on the ballot, which could dramatically increase the cost of operating real estate. And on top of everything else that we have to deal with and across different types of property types. So that adds a whole nother level too, in terms of thinking about where you want to buy, where you want to own longterm. And I’m picking on California just because I’m living here, but I’m sure there are other things in other States too, that are causing people to have some measures of concern on that particular subject too. So it’s an interesting time.
You could certainly wouldn’t be criticized if you decide to just kind of huddle in your cave and sit on the sidelines for a while. I think that’s what a lot of folks are doing. I think we decided to take the position that we think there’s going to be some interesting opportunities. We’ve just finishing the raise of a new fund to take advantage of those opportunities. And I think that the opportunities will be plentiful. They’re not here yet, but I think beginning sometime in 2021 we’re going to see some really interesting, good, long-term buy opportunities that we will be able to acquire for less than 100 cents on the dollar and finance with a very inexpensive debt. So that’s a good recipe for a longterm buy.
Kevin Choquette:
I agree. Pathfinder has always from the outside struck me as an organization that’s very methodical about setting strategy, choosing your markets and using data demographics, income permits, employment in particular employment to permit. So I remember you guys speaking to that ratio at some length years back, how do you guys approach… You have a methodology that I’ve watched you utilize in the past that has put you on certain markets, and then you sit and wait for the opportunities that you like within those markets. How are you using that same skillset today within the context of everything we’re talking about?
Lorne Polger:
Well, we have giant dark boards set up in each of-
Kevin Choquette:
Right, perfect. One of the games you guys play with your zoom meetings.
Lorne Polger:
Yeah. And it happens that we end up on the same city. Yeah, I think at times of distress data becomes even more important. And we’re looking at it in the context of doing fairly deep dives and what concessions are being granted across markets, employment numbers are obviously critical. Employment sectors are critical, like you said, markets that are perhaps less broadened employment orientation, how strong is that? We have bought and sold in Las Vegas before, I would not touch anything in Las Vegas today. That may change six months or 18 months from now, but outstanding growth in other elements beyond tourism, I think a market like Las Vegas essentially still today is a one trick horse and absent conventions coming back, which I don’t forecast anytime soon that market will remain in a troubled position for a very long period of time.
Now, you contrast that with Phoenix, look, how Phoenix has changed over the last 10, 15 years. Phoenix was also I wouldn’t say it was a [inaudible 00:47:51], but how the population and the base has evolved, how industry has evolved, how you don’t have the same economy based solely on construction and housing, but the number of Fortune 500 companies with back offices in Phoenix is astonishing. So it’s no surprise that of all the markets that we planned so far Phoenix has been the best in terms of its resiliency through COVID because of the employment numbers and the population growth and demographics and all those types of metrics that we look at on a regular basis. So it’s different.
So we’re continuing to do a deep dive on that data. And some of the markets that we’re in we’re frankly, a little reluctant to play in today. And other markets we feel better about, and today I put Colorado and Arizona on that list as the States where we’re feeling kind of best about things. And I’d definitely put Nevada at the bottom on the negative side in terms of how we’re feeling. So it’s evolved and I think it’s a constant evolution as we look at things,
Kevin Choquette:
Have you guys been up in Reno, have you ever done business up there?
Lorne Polger:
We’ve made offers on properties there, but we have not bought anything there.
Kevin Choquette:
Yeah. A bit of an aside, but what do you think of that market? I look at it and think, well, maybe 50, 60 years behind either Denver or Salt Lake, but kind of have similar fact pattern in terms of water, proximity to natural amenities and of course the fact that it’s a 0% state income versus the highest 13 in the state line, that’s only 10 miles away seems pretty enticing, but it’s also a very small market. How have you guys viewed Reno?
Lorne Polger:
I think that’s what has scared us about markets like Reno and Boise in the past have been their size. When things get tough, my sense is the smaller markets get hit harder, and it’s harder for them to bounce back. Maybe that changes over time as places like Reno grow, and I understand and I don’t disagree with your thoughts about why it could grow more over time. When I moved to Denver in 1978 from Canada, it was a medium sized town but so different than the city it is today 42 years later-
Kevin Choquette:
Denver has become huge.
Lorne Polger:
It has, it’s enormous. The MSA, I don’t know what the population of the MSA is today, but it’s significant. It’s probably more than double what it was when I moved there in 1978. So-
Kevin Choquette:
Well, I don’t know the name of the Hill, but that classic view as you’re coming from the mountains back into town. Just use that, look at what that looked like 42 years ago versus now, it is huge.
Lorne Polger:
Yeah. And now it’s changed dramatically and so has San Diego. You think about what San Diego was, I moved here in 1988, 32 years ago, and it was a pretty sleepy town back then, but technology and biotechnology in particular have dramatically changed the landscape of San Diego and look how it’s impacted real estate prices. And it’s not the bargain it was in terms of buying a home or obviously commercial properties or anything like that. So those things have changed for different reasons, San Diego was kind of a quality of life play as well as a technology play. I think Denver was also dealt with issues of quality of life and as the employment sector kind of grew broader, it changed things similar to the Phoenix story.
So I’m a little wary of the places that kind of have a more singular focus in terms of their employment base, going back to which markets we like and we don’t. I like the broader based markets and I like the markets that have more tailwinds than headwinds. But the concerns are really a lot of it on the government and regulatory level. I’m concerned about Oregon, I’m concerned about California, I think the regulatory issues in both States, which from a standpoint are significant headwinds. And I think it’s a good time to be patient in those markets and not overly aggressive. So it’s a bit different for each place that we do business in.
Kevin Choquette:
In California in particular is always a story of kind of love hate, it’s very difficult to get things done and that persistent barrier to entry has created a lot of what you’re talking about. What I’m about to say is many years old now, but it was some number of years back, the city of Houston had the same number of building permits. This is in the SFR space that the entire state of California had, if you extrapolate that across all new development projects and the difficulty with bringing new supply. The regulatory environment is difficult, but it’s so hard to bring new product that a million dollar house in San Diego is like the value play. And of course, that’s not the case in Texas because you can build houses. So that love hate, it persists, I guess.
Lorne Polger:
No, I agree. And we’ve under-supplied at least in the San Diego market, we’ve certainly under supplied housing for an extended period of time. And part of that reason goes to the regulatory environment. Part of it is our land constraint too, but a big part of it is the regulatory environment, the extraordinarily cost to build housing here. I haven’t looked at these numbers in a couple of years, but I recall from looking at studies from the BIA that it was call it 65, 70K in permit fees before you swung your first hammer on a single family home in San Diego at a time when we’re in desperate need of affordable housing stock. So it just doesn’t make sense, but if you own something today, you feel pretty good about it.
Kevin Choquette:
That’s right. Well, look, let’s switch gears a little bit. Pathfinder, is it a really remarkable success story? There are very few, especially relative to the not so distant past, small funds and getting that “first time fund” done is a very significant challenge. If we went on to Preqin or any of those kinds of fundraising portals for institutional investors and looked at how many new funds stood up each year, and then how many actually have a successful raise and get into business, it’s literally all about that first fund. And once you can sort of establish that track record and get going, things can happen from there and now you’re on your 11th fund. So I was off a bit on the intro there, but what do you attribute that to? Building a company period, very difficult, starting a [inaudible 00:55:28] investment fund, it’s very challenging and I don’t think a lot of people appreciate how easy it is to fold up shop and not succeed in that endeavor. So any of your thoughts around that would be welcome, congrats for getting it done because it’s very difficult.
Lorne Polger:
Thank you very much. I appreciate it. I’ll tell you, it’s an overnight success story. It only took 14 years, but there’s a lot of things that I can attribute it to, first and foremost is having great partners. And one of the things that I learned from that experience is you got to know your strengths and you got to know your weaknesses. And I had certain strengths and I had certain weaknesses, and I could say the same for my partner, Mitch, in terms of our business experience. And we ultimately over time realized that in order to build a successful company, we were going to need to bring on people who had strengths that were different than ours, that back-filled the areas in which we were weak or had less experience.
And that was a key element to doing so. And as part of doing that, you have to learn to kind of give up certain elements of control. And I don’t mean the big picture control, but I mean, control over certain day-to-day elements that… Look, the first couple of years where we started, Mitch and I went to every meeting together, we were on every phone call together. We used to joke on Mondays, I was the chief cook and he was the bottle washer, on Tuesdays we just switched our hats. And we did that for a couple of years because that’s what we needed to do to start the company, it’s different today. And so a big part of that success is bringing on partners and team members who have different strengths than your own.
And ultimately that builds a successful foundation upon which to grow from. I’d say one of the best things that we did over time was to bring on a board, and my belief is that you can never believe your own BS too much, and it’s good to be challenged in how you’re thinking about things and your methodologies and both your big picture strategies as well as your execution. And so in 2009, we assembled a board of advisors of six people who brought different experiences and different successes into the mix. And that board is still around today. And I think one of my greatest feelings of professional accomplishment is keeping that group on board and active and they continue to provide us with great feedback.
They’re not afraid to express their opinions, we’re not afraid to pivot. And frankly when we exit those meetings most of the time we end up going in saying, “Okay, guys, I think we’re going to zig here.” And then at the end of the meeting, three hours later, we’re zagging because they’ve challenged us on how we’re thinking about a certain strategy and it’s made us pause and rethink how we approach it not all the time, but some of the time. And I think that’s been for us a phenomenal experience and a big part of our success. So I think that’s an important thing. And frankly, these days I also spend some time mentoring younger folks. And that’s one of the first things that I tell people is you got to be careful about not believe in your own BS and you can be a salesperson, but it’s really good to have wise elders around you who can provide some input along the way, if you’re willing to accept it.
And in addition to my dad who was a real estate lawyer turned investor, I had three other kind of a senior mentors in my business life. And I still have dinner with one of them about every six months or so. And after every dinner, I always walk away with an aha. So even today I think it’s an important thing to still have. So I think that’s a big part of how we were able to grow. And then you have to certain formulas tried and true formulas, act for your investors like you would act if you were an investor, be transparent in your communications. Communicate often, when the news is bad, let people know right away, don’t try to work your way around it, or not communicated about it.
You just be upfront with it and deal with it. Pigs get fed hogs get slaughtered, don’t be a hog. There’s plenty of money to be made in the space without being greedy about fees or promotes or those types of things. Create investment vehicles where your interests are aligned with your investors not where they’re against your investors. And thy are simple rules, but it’s shocking for me to see us as an active investor in other deals as well, how many people don’t do that in our business. It’s really shocking to me actually.
Kevin Choquette:
Yeah. Well, you’re talking about guiding principles and it’s so critical at the end of the day, that one in particular, tell me how you’re paid, I’ll tell you how you behave. In the short term, there may be some variations around that in the longterm, everybody figures out “Well, if that’s how it works, I guess I’ll put my energy here.” Well, let’s drill down. I totally understand what you’re saying within the context of understanding your weak spots and then building a team around those so that you can have a stronger collective offering, but do you have specific tools or mechanisms that you have used to kind of get an explicit understanding of your weak spots or your partner’s weak spots? And similarly, do you have tools that have allowed you to know, “Hey, if I bring in this new executive, I know categorically he’s going to fill in this weak spot.” Is that done on a kind of a gut level, or do you have tools that you feel are reliable to assess those things?
Lorne Polger:
Well, I think one of the things we started doing many years ago was kind of offsite deep diver treat once a year to just kind of make those assessments, do we have the right people on the bus? Are there gaps? If there are gaps, where are they, how can we fill them? And so it’s not a unique assessment tool per se, but physically being, at a time when we used to be all in the office, physically taking a day away putting your laptops and cell phones away and just talking about kind of the big picture, stuff that doesn’t get talked about as part of your regular weekly onslaught of emails and calls and deal flow. So I think that’s important.
Investing in your people is important. One of the things that I think has contributed to our longterm success is we’ve had very little turnover of our staff. And I think that speaks to the fact that people enjoy what they’re doing and enjoy the atmosphere in which they are working. One of the things that we did fairly early on is give folks an equity stake in what we’re doing. And I think that’s been a very important motivator for keeping folks with our company. And that was a very easy decision to make. And I guess some companies do that, not all companies do it, but I think it was important thing for us to do. And I think our staff feels very motivated and attached as a result of it.
Kevin Choquette:
Well, further underpinning the notion of alignment, right?
Lorne Polger:
Exactly. Yeah-
Kevin Choquette:
I haven’t looked on the website for your board of advisors and it may be out of date, but I’ve heard a lot of people talk about an advisory board without giving away keys to the kingdom. I imagine you have some very capable, talented, busy individuals, how do you compel someone to be a part of your success without… In a public company where you’ve got sort of stock option plans and you can throw big board salaries at them and the prestige and some stock options and things like that, I think I kind of understand the mechanism of putting a board together, but in the context of, dare I say smaller, I don’t know if that fits to you guys anymore, but a private company with a small closely held group of owners, how have you been successful in getting the right people to say, “Yeah, Hey Lorne, I appreciate what you’re doing. I’m happy to support it.”
Lorne Polger:
Well, you can’t discount the importance of free trader Joe’s peanut butter pretzels, and-
Kevin Choquette:
There you go.
Lorne Polger:
It’s tried and true. It’s been tested now for 11 years with us. And I think that’s the greatest investment that we’ve made from the snack department. Joking aside, we started this group in 2009 and we really didn’t initially do anything for them. Ultimately we did provide some type of economic reward for their continuing participation. But I think people enjoy being part of what we were doing and seeing us grow and the intellectual element of providing us with strategic guidance in an ever-changing environment. And I think that more than anything else and the fact that we invited free willing discussion, we invited feedback both positive and negative, we invited criticism of our strategic thought process. I think that’s really what kept people along the way engaged and kept it interesting. And that’s been a big part of it-
Kevin Choquette:
Safe to say that in the following manner, being a part of the forum, being a participant in the collaboration and the direction of the company was enough for them to sign on.
Lorne Polger:
I think so. I haven’t had that discussion with any of them specifically, but as I said, the group has remained together now since 2009 or so, and so we must be doing something right. But I think that’s part of it is really keeping them engaged and knowing that we’re going to listen to the honest feedback that they have and will continue to provide us as we move along. And I think that’s been important and over time there’s comradery that builds out of that. And we have great comradery with our board and not that we necessarily agree on every issue because we don’t. But that’s true with my business partners too, we don’t necessarily agree on every issue, but we’ve got great comradery and we’ve built a great team and a great culture, and that culture leads itself to ultimately a strong organization.
Kevin Choquette:
Well, I think action in the face of disagreement and the acceptance of a disagreement is a really healthy mark of an organization. Not that you try to get consensus, just agree to disagree, make a decision and move forward.
Lorne Polger:
I agree. And whether that’s in real estate or other areas of business, I think that’s a good recipe for long-term success.
Kevin Choquette:
That’s great. So a little shift here, you’ve already provided a ton of insight and appreciate the candor on your daily routines. In my view of life is if I can get today, if I can really be organized and effective and execute on long-term goals, however that manifests today, I’ve got a really good chance of nailing it, if you will. I’m curious for you, how do you think about personal performance and daily routines or practices that might help you excel?
Lorne Polger:
Well, I think there’s pre COVID and post COVID, right?
Kevin Choquette:
Right.
Lorne Polger:
For all of us, many of our daily routines have shifted a great deal. For a long, long time I was very hard charging and I would measure my, I don’t want to say happiness, but happiness or success on a daily basis by how productive I was. And when you’re in the law world, it’s easy to do that because you just look at the time sheet, you see how many hours you put on the sheet and you’re going to be rewarded on an hourly basis for how many hours you put down, so it’s mathematical almost. It’s different outside of the service business, because I could spend 20 hours at work and do nothing, or I could spend a very successful 20 minutes.
So I think when I changed gears in 2006 and moved into the real estate side of the world, my personal philosophy changed a bit too. And I no longer measured my productivity based on how hard I was working, but really more about how smart I was working. And that changed things too in terms of daily routines, exercise has always been very important to me. And I’ve changed up how I do things over the years, just because my soon to be 58 year old body, doesn’t do things in the same way it used to but spending time every day doing something hopefully both physical and outdoors is really important to me for my physical health and maybe even more importantly for my emotional health.
And so I just make a point to do that every day. And sometimes it’s not much, since COVID hit, I’ve actually walked more than I probably ever have my entire life. And so a lot of times I live near the top of Mount Soledad and the [Hawaiian 01:12:07], a lot of times it’s simply a walk up and down the Hills of Mount Soledad. And that’s enough for me, that’s usually actually a time when I catch up on my phone calls or personal calls while I’m walking and it’s being outside and it’s being in the fresh air and just getting out. But that’s an important part of my daily routine. I spend probably a couple hours in the morning just reading and I have found that to be critically important.
I read from a variety of different sources. I read the Wall Street Journal every day, I read a lot of industry related materials but I try to get up around 6:30 in the morning and I probably spend my first two hours just reading. And I find that preps me well for the day to feel informed and hopefully a little bit smarter about things that are going to affect me during the workday, so that’s an important part of my day. Relationships are really important to me, they always have been it’s part of who I am. But I think it’s really important in business. And as I look at things today a big part of our deal flow over the years is relationship oriented.
And it’s long-term relationships that we have had with brokers, with influencers, with owners, with operators. When COVID hit one of the first things I did was create an email dialogue, regular email dialogue with a bunch of other owners in the business. And I won’t go into the details of who they are or anything, but we compared notes as to what everyone was doing and how they were doing it, even though we were competitors. And I just kind of put together my list and a few people dropped off the list over time because perhaps they didn’t want to share information as much as I did, but I have found that that group still a couple of times a week, we continue email each other about best practices, how we’re doing, how things are shifting in the marketplace.
So I can’t stress enough how important I believe relationships are, which is why I never try to burn a bridge under any circumstance, which is why when we approach negotiations, we don’t do it in the context of a win, lose type of thing, or try to get the very last nickel out of any deal or anything like that. It’s all about the long-term play and creating meaningful relationships and some of the best friends that I’ve had in the business are those that I continue to do business with across the table from us. So that’s just kind of been my philosophy on how I do it. I think that the challenge and I alluded to it earlier, one of the biggest challenges for me is the flow of noise, and noise in particular for me is emails. In 2019, I think I averaged 802 emails a day, receiving. And it’s hard to keep up-
Kevin Choquette:
That’s impossible.
Lorne Polger:
It’s hard to keep up. So I’ve tried to create systems where when I need to get something done, I just shut outlook off so it’s not bugging me all the time, but that’s my biggest challenge. And frankly, I spend some of my time on the weekends just playing my weekly catch-up, Sunday afternoons or Sunday evenings for me are my typical catch-up time where I could crank through it. It used to be because I did spend a fair amount of time on the road, that would be my three or four hours on an airplane where I’d shut off the WiFi and just kind of crank through the emails and do a catch up then.
But managing that is definitely challenging. And we all are pinged with so much stuff in our inbox, whether it’s text or calls or emails on a regular basis from so many different sources today. So I’ve tried to reduce that on a regular basis, as much as I can and realize that I don’t have to read everything all the time. And I can move a lot of things off my plate in order to be effective. And I’m not as effective if I’m deluged every minute with information. So that’s part of the new normal these days.
Kevin Choquette:
Yeah. Agreed. And does Pathfinder use Slack or any other channel that’s alternative to email?
Lorne Polger:
We don’t. We started to talk about it a bit, but so who knows, maybe that’s somewhat of an initiative for 2021, but right now we don’t.
Kevin Choquette:
Yeah, we don’t use it either. And I think part of the, at least perceived value for me is every package comes in your inbox, they all look the same. It’s just an email and you don’t really know what’s in there unless you give it a quick open and look at it. But if you had a whole separate channel where everything that came in was the Slack channel, i.e they’ve got a position that merits them being able to deliver to you at any time, it can beat that back. We haven’t done it either, but I feel the anxiety in myself raised when you start talking about it, because I similarly find that time on an airplane is oftentimes the best time of a whole week, because there’s nothing going on that distracts my train of thought from getting into more kind of a productive mindset.
Lorne Polger:
Yeah, I’d call it back to kind of mindfulness, really being able to pay attention and to be mindful when you’re in that time spot and the more distractions you have, the less mindful you are able to be. And so I’m someone who can’t be highly distracted, it’s just the nature of how my brain works. I’ve always been a big fan of multitasking and that’s not a bad thing, but it does take away from mindfulness. And so part of the personal stuff that I continue to work on is being more mindful and being more in the moment on whatever I’m working on, not just on a personal level of course, but in business as well. And that’s something I suspect as I continue to go through this journey that that’s something I will continue to work on.
Kevin Choquette:
Yeah. I think that’s a very sage advice. So I think we can move towards wrapping it up, but if you have something or several things you might want to share with entrepreneurs who might be listening maybe they’re on the precipice of starting the great journey, or maybe they’re in the middle of a storm six years in and kind of finding themselves fraught with doubt. But perhaps something that you wish you would have learned sooner or a kernel of advice that you find you can come back to and find some guidance from anything that you’d share with that kind of community of entrepreneurs.
Lorne Polger:
Sure. No, it’s a great question. I guess I have two pieces of advice. One is just focused on your passions, you got to love what you do, and if you do, you’re going to be good at it. So focus on your passions, be focused and I think that’s generally speaking a good recipe for long-term success. The other thing is never be afraid to ask for help. You know what you know, you know what you don’t know but really successful people are good at asking for help along the way, and whether that’s having an advisory board or again, bringing on service providers or team members that are better at certain things than you are, or fill certain gaps, but increasing your bandwidth and getting help, I think is a very important element to a successful long-term play.
Kevin Choquette:
Fantastic. Well, Lorne thank you for taking the time. Thanks for the candor. I wish you much continued success with Pathfinder Partner, you guys have been on a turn, I suspect this next season will be one where high achievements rather possible. So best of luck to you guys.
Lorne Polger:
Thank you, Kevin. I appreciate it. And look forward to seeing you on the slopes.
Kevin Choquette:
All right. Take care.
