Chris Tokarski

What’s the one thing you wish you’d known in March 2020 that you know now?

That the government bailout would be so large and have such a long tail. Unfortunately, it seems that the amount of capital that has been pumped into the market has created a large bubble as the investment community applies a multiple to what should have been a one-time hit.

Pick your poison (and tell us why you’d drink it): retail or hospitality?

Hospitality is a bigger opportunity as the percentage of the overall sector that will recover over the long term is much higher. Hotels are not a shrinking asset class and the billion-dollar hotel recovery vehicle we launched earlier this year speaks to our confidence. That being said, people are more scared of retail, so while it’s a smaller overall opportunity it will generate higher rewards. 

Where are you seeing the most competition for deals today? What’s the greatest weapon in your bidding arsenal?

The most competition is in light rehab and stabilized multifamily. Lenders are ignoring long-term fundamental underwriting principles as we see loans getting written at stabilized debt yields in the 5s with very little risk premium in the pricing. They may be right if inflation turns out to be where we think it is, but they are not getting paid for the risk. Our greatest weapon is to be able to think outside the box and lend to a wider array of opportunities. I would not want to be constrained to making multifamily loans right now.

New York City: “I want to be a part of it”?

Be very careful. Between politics, unions and ground leases, there are opportunities; however, you need to remain disciplined and stick to your due diligence and gut. The city is not going away, it will always be one of the greatest in the world but it can be tough to navigate. The unions make it difficult to own hotels and the government has made multifamily more risky than it needs to be. We generally avoided New York over the last six years largely because other lenders were too aggressive and we could not win deals where we thought they made sense. With very low exposure and resetting valuations, it could be an opportunity for us to step in.

What’s your favorite secondary market and why?

Austin and Nashville. Direct flights, taxes, music and BBQ.

Are you adding life sciences deals to your loan portfolio? Why or why not?

Yes, but very carefully. For many it is the new “creative office.” Every poorly located or tired office building should not be a life sciences asset. It is obviously a growing market, but there may not be enough lab workers to fill the square footage being built. Pick your assets, locations and sponsors carefully. We have done deals around Boston, San Francisco, Raleigh-Durham and one in New York.

Is SFR here to stay as a CRE asset class? Why or why not?

Yes. For most suburban families a house is a better option than an apartment. Not everyone can afford nor wants to own a home. It is no different than renting an apartment from the renter’s perspective — except you get more space and better product. With proven demand, it becomes an asset class.

How prominent do you envision C-PACE financing becoming? Is it here to stay?

It’s difficult to predict. I do think it is here to stay, but it is mispriced and won’t be very profitable for the originators in our space. It likely only works as part of a larger mortgage lender offering, given the cost and friction to create it. It is pitched to customers/borrowers as the miracle cure: cheap equity. It is really just overpriced debt with a long maturity date that reduces the remaining debt capacity and complicates the transaction. The pricing needs to reflect its position in the capital stack, which will eliminate the profitability for lenders. No lender wants to allow more expensive debt in front of them, let alone without compensation. The embedded senior portion of the mortgage is already cheap, so why do we need to create the complexity for already-liquid assets? It will find more success in non-traditional assets that trade and get financed at higher pricing.

What keeps you up at night?

If you had told me we were about to have a two-year pandemic that would lock down travel and most of the economy, I would have predicted that asset values and my personal net worth would drop by at least 30 percent. Now, after two of the most challenging years of my career, where it was hard to spend money, many large investors have seen a 40- to 60-percent increase in their portfolio value. I know this period was good for Amazon, Zoom, Apple and many other companies, but should the vast majority of all asset classes be up as much as they are? Is our investor community putting a multiple on government stimulus dollars? Not sure how we got to where we are, but it does not feel right nor seem stable.

Lightning Round

Stabilized or transitional assets?

Transitional.

First work trip post-COVID?

Never stopped traveling.

Fast-food guilty pleasure?

Chick-fil-A.

“Ted Lasso” or “The Morning Show”?

“Ted Lasso” (if I only had time to watch it).

Peloton bike or outdoor cycling?

Both.

Last book you read?

“Billion Dollar Loser: The Epic Rise and Spectacular Fall of Adam Neumann and WeWork,” by Reeves Wiedeman.

“If I hadn’t pursued a lending career I’d be …”

A wrestling coach.