Commission Impossible: Fire and Water

Welcome back for episode two of Commission Impossible! On this episode, Chad and Troy sit down with J.R. Howa and chat about consumer habits, the Utah wildfires, the water situation we have going on, and AI in commercial real estate. 

Transcript

SPEAKER_00 0:00

I'm convinced cats are the devil on it.

SPEAKER_01 0:03

I hate cats. Let's go. We've been rocking. Welcome everybody to the pod. This pod is the second commission impossible that we are doing. We had this idea a couple weeks ago to do a variation or a riff on the Mountain West pods. So it's kind of a sub pod, but already has had great reception. It's the number two pod of everything that we've done so far. So maybe we're on to something. We're excited about it. And we'd love to keep delivering great content. So with that, I would like to introduce our two guests for this pod. The first one, Troy Hardy, who really at this point has become a regular, although we didn't technically invite him back. But when we started at uh the time, he was already in the seat. So at this point, he's in a he's a regular. Welcome. Or maybe you should be doing the intro at this point.

SPEAKER_02 1:06

No, I'm I'm honored to not be doing the intro. Thank you.

SPEAKER_01 1:09

That's perfect. So no intro needed by Troy. Nope. But we also have J.R. How has been on the pod before on the multifamily segment and gave us a bunch of great industry insight and multifamily, but he's here now to uh hang out with us a little bit and talk about whatever we're going to talk about.

SPEAKER_00 1:26

Love it. Look forward to it.

SPEAKER_01 1:28

Would you like to introduce yourself?

SPEAKER_00 1:29

Uh J.R. How here at Newmark Mountain West with these two fine gentlemen and others and uh just stoked to be here, man.

SPEAKER_01 1:37

I love it. So we got a lot of crazy stuff to talk about today, and I think we just jump right into it. Um, Troy, you want to go first? What's your topic, de jour?

SPEAKER_02 1:46

Yeah, I want to talk about cats. Cats. Cats. Thunder cats. I don't want to talk about cats. Uh yeah, so we, you know, we we started talking about this a little bit earlier prior to this pod starting, but um, there have been a bunch of restaurant closures in Salt Lake City over the past few years. And I don't have any of the answers, but um, I have some questions that I'd love to pose to you guys and and our audience. But um, as far as I understand, 18, at a minimum, 18 restaurants have closed in in Salt Lake City over the past few years. Among that number, most recently, uh, we we saw the uh the news of Market Street closing downtown and Kachina, uh Tescana closing. Yeah. Um just like exactly. Um, so you know, I started doing a little research, like why is this happening and why is Red Lobster continuing to be open? You know, what it we know that's why why do bad things happen to good people, right? And uh and so what I've what I found is that you know, not only are rents increasing, we talked a little bit about that, occupancy costs have gone up, um, but it it it's very evident that labor costs are up now almost 40% since the the kind of the beginning of COVID. And um, you know, even just food costs are now up, approaching 35, 40 percent. So this seems to be completely unsustainable. Um, I think we're gonna see more restaurant closures, which is really sad. So if if you're if you're you know a fan of a restaurant, um, for us, you know, it's it's uh we we go to the same like four restaurants and they they know that we love them. Taco Bell del Taco, Taco Time. We've talked about this. So so Taco Bell doesn't classify as a restaurant because it doesn't have a kitchen, but it's a great place to get warm warm food product, right?

SPEAKER_01 3:38

Um no, we we're at we're yeah, we're do you think it's just like is it is it the end of these great local mom pop restaurants as we know them?

SPEAKER_02 3:48

I genuinely think consumer habits have changed, and I think Utah is is known far and wide as a lover of the mediocre.

SPEAKER_00 4:00

Yeah, we've not been known for our culinary pursuits, which is really interesting because I mean you look at a lot of the great restaurants that have have um adopt that are locally owned, and the culinary expertise is actually pretty impressive, right? You know, and it's unfortunate to see them struggling, you know, where you've got the chains that just seem to continue to be crushing it.

SPEAKER_02 4:20

And there are some success stories, right? There are some chef-driven concepts that have found a uh a home in Utah and have had success, but it's just it's just sad every time you see one of these guys close, someone who's been around 30, 40 years. Yeah.

SPEAKER_01 4:32

And then how do you who backfills that? You know, who backfills Marquistry, who backfills um the other ones? It's like you never get the same quality of restaurant or even a restaurant. Yeah.

SPEAKER_02 4:42

That backfills. They just turn into data centers and you just move on.

SPEAKER_01 4:46

Micro data centers.

SPEAKER_00 4:48

Micro data. Well, maybe they're permitted. I don't know. Yeah, they could, they could be. They could be.

SPEAKER_01 4:53

So your vision, your thing is it's just rising costs all the way through.

SPEAKER_02 4:57

Yeah, labor costs, food costs, um, you know, and then obviously occupancy costs. So so everything is is is basically you know pushing against the small business owner and the restaurant owner. And and these guys are just to the point where they're living like you know, week to week, paycheck to paycheck. Why, why do you continue to choose that lifestyle? We already know that that owning a restaurant requires, you know, 80 hundred hour weeks. Yeah. So you better doing that, doing that for nothing, yeah, yeah, it just doesn't make sense.

SPEAKER_00 5:25

Well, and I think too, I mean, not only from all the all that perspective, but then you also just look at like consumer debt, right? I mean, how how often are people actually still eating out? Are they still going out three, four times a week? And then you've got DoorDash, which you can get it delivered right to your door. And you know, if you're choosing between going to a local restaurant in the city or sitting on the couch and ordering DoorDash, that local restaurant might not be there, right? And so you just like I have four regulars on my DoorDash that I just click reorder, reorder, reorder, and uh, that's part of probably part of the problem. Yeah.

SPEAKER_02 5:59

To your point, like if you're ordering through DoorDash, a smaller percentage of that order, that that cash actually ends up in in the pocket of that business owner, right? I mean, pricing is is different for a DoorDash customer. And there are many uh groups. I was talking to a fast food concept just the other day that have now canceled their DoorDash uh affiliation. Yeah, they they can't sustain the DoorDash orders.

SPEAKER_00 6:22

And are they losing money on the DoorDash?

SPEAKER_02 6:24

Or is it I yeah, it's a good question. I he didn't say they were losing money, but he said it was it no longer made sense.

SPEAKER_01 6:31

They make they make less money on that, yeah, on that order. Yep. And so at some point there's a diminishing return where it's not worth even doing it, right? Which probably then feeds the cycle of death that you just referred to because you have your four go-to's and the fifth one dropped off and you can't find it, and then it's just like dead to you.

SPEAKER_00 6:48

Right. Yeah.

unknown 6:49

Yeah.

SPEAKER_00 6:49

I mean, it's interesting. I look back in my time, you know, uh owning a restaurant, and I honestly like I sit back and I go, why would anybody ever do this? Right. Like, to be totally honest, you know, and to all the same things you said, you know, also you I on the real estate side, you think, hey, if someone's coming in and they're redoing the gas line or they're redoing the road or they're putting in bike lanes or you know, doing whatever it is, like all of those have consequences down, you know, down the line that I'm not sure that people actually think about that.

SPEAKER_02 7:20

I'm glad you mentioned that. That's the other thing that was cited in the story is that you know, there's so much construction that's been happening in in downtown Salt Lake City over the past few years that it just it it's just damaging our these restaurants' ability to do business. Yeah.

SPEAKER_01 7:33

Um yeah, it's funny, like the Ninth and Ninth Corridor or Ninth South Corridor was under construction for years, and people would always say, Oh, it's it's only eight months or whatever for your segment. Well, eight months for a mom-pop restaurant is life or death. Yeah, it might not be for Del Taco or whatever, who can sustain it with all the other units they have, but they have one unit and one restaurant, right, and they pull just so much money out of it. And if you're out of commission for eight months or your sales are half for eight months, you're done.

SPEAKER_02 8:03

Yeah, it's amazing we haven't seen more closures in Sugar House with the all the construction that's occurred there.

SPEAKER_01 8:10

Yeah. Yeah, that's that's really interesting. And also, I think I just think restaurants in general, the food supply in general is just kind of becoming so formulaic that you order your food from Cisco and or whatever the food supplier is, and it's all the same. Yeah, and so you know, a Costa Vita or a Cafe Rio, which I like, both those restaurants go to them all the time, like they're all getting their food from the same place. No one's sourcing food from farmers anymore. Right. These local restaurants are, and these mom pops are, but that's increasingly harder to do, it's harder to source, it's more expensive. Like, why am I going out and busting my tail to get fresh tomatoes from some guy that grows them in Cash Valley when Cisco can just deliver it for me?

SPEAKER_02 8:54

Especially if the majority of the customer base can't tell the difference. Yeah, yeah, right.

SPEAKER_00 8:59

Yeah, that's I think and and oftentimes you can't, right? Yeah.

SPEAKER_01 9:04

Okay, well, that's depressing.

SPEAKER_00 9:06

Thanks for uh yeah, so sorry guys. So no more DoorDash. Go to Logan. That's the takeaway.

SPEAKER_02 9:14

Yeah. And I'll stop going to Taco Bell. I'm sorry, everybody. Deal.

SPEAKER_01 9:19

All right, I'm gonna jump into an interesting topic that is kind of near and dear to my heart. It should be near and dear to every Utah's heart, and it is. Well, first of all, the wildfires have been crazy. I woke up this morning, I stepped outside, felt like I was in the middle of a campfire, and you know, it's 90 degrees already in the morning. You can't see more than a mile. It's brutal.

SPEAKER_00 9:41

Yeah, it's a awful season.

SPEAKER_01 9:43

So it got me thinking, how bad is this season? And I had none of the info on this, but I looked it up. You know what the worst season was? Fire season in the state of Utah was 2007. 600,000 acres burned. Wow. Which is crazy. But already this year, we have burned more than 100,000 acres. And so we're not off to a historic start, but we're off to a very, very bad start.

SPEAKER_00 10:13

We're drier than we've ever been. Yeah, right.

SPEAKER_01 10:15

We're drier than we've ever been. It's it's brutal.

SPEAKER_00 10:17

Well, it'd be interesting. Like how much of those 6,000 acres were kind of like wilderness fires, like away from residents? Because it seems like the fires we've been hearing about in the last like two weeks have been bright and densely populated urban areas.

SPEAKER_01 10:32

You you know this intimately.

SPEAKER_00 10:34

I do.

SPEAKER_01 10:34

Almost burned your house down a couple weeks ago.

SPEAKER_00 10:36

Yeah.

SPEAKER_01 10:36

Yeah. Well, that's a good question. I I as far as I can remember, I don't recall a time in which the fires were were just right in the valley. You got one in Toila right now, you got one two that were in Salt Lake. Um, there's that huge one down south that I just read something as I was walking in here. Saudi Eureka. That the ski resort, um, that private ski resort outside of Beaver has been totally decimated.

SPEAKER_02 11:01

Oh, that's a different one. Yeah.

SPEAKER_01 11:02

So yeah, I I don't understand the the urban side of it though. It's hard to most of those are men are started by man, right?

SPEAKER_00 11:11

Yeah, I I think, you know, I I mean, you get on X or anywhere else, you kind of hear mixed things, but you know, you had the one behind the Capitol, you had the memory grove one, and then you had the University of Utah one, and you know, you look on the the fire report and it says all three were human-caused.

SPEAKER_01 11:27

Yeah. Which What does that even mean? What does that mean? How who how do you start a fire? Unless intentional.

SPEAKER_02 11:33

Quick quick disclaimer. I've I know where all my kids have been for the past three weeks. Like uh, and we don't own any fireworks.

SPEAKER_00 11:40

Go ahead. Well, I mean, I I don't know. I I think you know some of it stems from you know encampments. I think some of it is probably malicious. I think some of it's probably accidental. I mean, we know the one in Memory Grove, they arrested someone um for that fire. So obviously there's got to be a reason to believe there was some sort of it's just a guy with a lighter. I don't know if it was a lighter, I don't know if he had a cigarette and he flicked it and it lit on fire. You know, luckily they were able to get it out. And you know, like someone that's been so close to it, I have to give Salt Lake City Fire massive props because like they show up in like three seconds and they just kind of go running right into it, you know. So, but I don't I don't know. Like, I think that that's the scary part is anybody that has a gripe or a grudge or you know, unfortunate like mental instability, like is just like, I feel like I'm gonna light this hill on fire and you know, massive consequences and and super, super scary. I mean, it takes so many resources away from you know everything else that's happening in the city.

SPEAKER_01 12:41

Well, it's funny too, because it it just seems sort of removed. I mean, not for you, because you literally had a fire steps from your house.

SPEAKER_02 12:49

I feel like we're doxing JR right now. Should we just tell everyone where he lived?

SPEAKER_01 12:53

Well, it's one of the 12 fires that was going to He lives in Beaver, everybody. But where it becomes real is like what happened in California, where it where it spills over into actual houses and commercial, and then you have billions or tens of billions or hundreds of billions of dollars of you know real damage. So um really what I wanted to talk about was was water and how that relates to commercial real estate and everything else that's happening in the state of Utah, but the fires are kind of the gateway drug into the water situation. And the water situation is tough, it's brutal right now. It's it's the worst I think I've ever seen it in in my lifetime. Um just looked up a couple stats before I walked in. The reservoirs in the state of Utah are at 65% capacity right now in June, which is really, really early in the season. Um that's 18% lower than they were last year at this time of year. Uh Lake Powell is at 24% capacity. So, you know, we we definitely need a big snow year this coming year. But this is where it gets interesting. I drove by as part of my preparation for this, both of your houses, you know, just to get a check on what things look like. Do you guys have any idea how much the average Utah uses per day in gallons of water?

SPEAKER_02 14:22

Are we talking about my neighbor or the average Utah?

SPEAKER_01 14:25

Average person in Utah uses 207 gallons of water a day. So you're like, cool, what does that mean? We are third in the nation for water consumption.

SPEAKER_02 14:39

That's that is scary. Right above us.

SPEAKER_01 14:42

We just have a lot of kids, right? That's uh that's all it is, is long showers. Right above us is Wyoming and Idaho, and we're pretty much all the same. Depends on the year, we kind of bounce back and forth. But those three states are the highest per per capita users of residential, culinary, domestic water.

SPEAKER_00 15:02

And that that's wild that it's just r residential culinary. Yeah, because you then you start thinking about the use it or lose it.

SPEAKER_01 15:09

Yeah.

SPEAKER_00 15:09

And the with the farmers, like that's gotta be massive.

SPEAKER_01 15:13

So let's I'll get there.

SPEAKER_00 15:16

Okay.

SPEAKER_01 15:16

So what percentage of the culinary water is used for landscaping in the state of Utah? Take a guess.

SPEAKER_02 15:26

Thirty percent. It's it's gonna be a low number.

SPEAKER_01 15:30

Sixty-five percent.

SPEAKER_02 15:31

So I was right.

SPEAKER_01 15:32

Sixty-five percent of the of the culinary water is used for landscaping in the state of Utah. And so you drive by Troy's house and he has this palatial, you know, mansion with three acres of lawn that's literally as green as you could ever imagine. Yeah, it's not. And we all have laughed about it over the years, right? It's like, oh Utah, we have lawns. But I think we've reached an inflection point where it it's just not sustainable at this point anymore. We all know we live in the desert, the high desert, so does so is Wyoming, so is Nevada, so is Idaho, many parts of Idaho. But like it's the gig's up.

SPEAKER_00 16:13

Do you do you think do you think that shifts if the pricing of water changes? Because I mean, Salt Lake City's obviously talked about that. Like, how do you because I mean I've thought it's a terrible idea, just saying I don't think I'm not saying it's a good idea. But you know, a couple years ago, we thought about redoing the landscaping and going to Zeroscape, but then we had the massive fire behind us. Yeah, yeah, and we were like, no, we need landscaping because we need fire suppression or sprinkler system, whether it's green or not, like we have to be able to turn on the water. And you know, I just I'm with you. I mean, I look at you, I mean, you drive people are watering their yards at three o'clock in the afternoon, probably not the right time to do it. Like, how do we how do you think we solve it?

SPEAKER_02 16:59

So the city has a scale, and and and the more you use, the more you pay.

SPEAKER_01 17:05

It's a it's it's a it's it's actually punitive. So over a certain amount, it it it uh charges you more and more and more, right?

SPEAKER_02 17:13

So so there's certainly an incentive to to not water, and and obviously during the day and other times when it doesn't really have any positive impact. But I think there's a bigger problem here, and you touched on it, which is the culinary water that we're using. So there are other cities that use a lot of water, but that water isn't culinary, it's secondary, right? And the city of Salt Lake, to my knowledge, does not have a secondary water system.

SPEAKER_01 17:39

Well, the city of Salt Lake actually has great water um culinary water. Well, well, they they own most of the water all along the Wasatch and parts of the back.

SPEAKER_02 17:50

Right.

SPEAKER_01 17:51

So they got a ton of water. The problem is there's just it's a finite resource, right? Yeah, sure. And so you said something about what if we just increase the cost. The cost of water in Salt Lake City has gone up 100% in the last 10 years. Yeah. And it's scratched that idea. Yeah. Well, I don't know.

SPEAKER_02 18:13

I mean, at some point, it's kind of I feel like it's it's been the tool that the city has had at their disposal, right? Like we'll just keep raising costs. But what happens is the consumer just keeps using the water.

SPEAKER_01 18:23

Yeah. Um the problem is we can talk about impact fees too. So, like, that's a huge thing that's happening right now in commercial real estate in the state of Utah. For the first time in a long forever, we actually have uh water connection fees that are substantial. Yeah. Like you want to do a you want to do a Walmart development as an example or a grocery store development as an example in Salt Lake City, you're probably gonna pay between $100,000 and $300,000 to the city for a water connection fee. You go to Towilla, Towilla's, you know, infamous for not having enough water.

SPEAKER_02 18:55

Right.

SPEAKER_01 18:55

Same thing there, Walmart, grocery store, whatever, it could be $300,000. Yeah. A bank, you know, do you want to do a freestanding bank out there or a or a freestanding restaurant? Could be $100,000.

SPEAKER_00 19:07

Well, how long ago was it when Salt Lake City, I mean, because there were still properties that had water shares, and they basically rolled all the water shares in just in the culinary and said, Hey, give us your water shares. We're gonna we'll supply you with unlimited water. How long ago was that?

SPEAKER_02 19:23

Like what that's been within the last no, no, Holiday City still does shares. But that was like within the last 10 years.

SPEAKER_00 19:29

And that's what I mean. Like you look at Toila, like Toyota, you gotta go out and buy the water shares, which Kennicott or or Toyola City owns most of the water out there. Yeah. Which reduces a lot of the water usage. I mean, because they're just sitting on it.

SPEAKER_02 19:43

But can you imagine? We're we're Sugarhouse Park. We are watering that park with culinary water.

SPEAKER_01 19:49

Yeah.

SPEAKER_02 19:49

Yeah. Culinary drinking water.

SPEAKER_01 19:51

Yeah. And just to step back and look at the overall Utah picture, which is this is really brutal, but 75% of the water in the state of Utah, so both culinary, any water, any and all water, 75% of it is used for agricultural.

SPEAKER_02 20:10

Right.

SPEAKER_01 20:11

Which is, you know, alfalfa farms or whatever.

SPEAKER_02 20:15

And that's a a third rail type comment, especially among farmers. Yeah. So I I recently had the great opportunity to help uh a longtime multi-generational farmer sell a farm in Bok in Boxelder County of all places. And uh, you know, when farmers talk about land, there's there's the irrigated land and there's the non-irrigated land, right? And you can you can almost not put a value on the unirrigated portion of farmland. It's worthless. But the irrigated farmland is of immense value. What's the difference? Those water shares, right? And so uh as you as you hear people you know have the conversation about the box elder data center, it's not even it, it's never been about the land, right? It's never been out of the it's it's all it's always been about the water.

SPEAKER_01 21:04

Yeah. But I think that's that's why the data center, or one of the reasons why the data center was such a hot, white hot or is a white hot topic, is because we're grappling with all these massive water shortage problems, and the cost of water is skyrocketing, and we're all being told conserve, conserve, conserve, and then suddenly it's like, okay, we're gonna pump eight Lake Powells into this data center. I'm being hyperbolic. But yeah, you know, I think that was part of the problem there.

SPEAKER_02 21:34

But if you're a farmer and you own watershare, and you've drilled the wells, you've spent the money, you've you're accessing water from that, you know, that groundwater aquifer, whatever it is, um, that water is is watering crops and then returning back to the groundwater to some extent, right? A data center is very different. And and obviously our gray water is very different, right? It needs to be treated and and before we send it down the line of air.

SPEAKER_00 22:01

Well how do you like okay, so like take the the irrigated part of the uh the land. They just they they flood it, right? No.

SPEAKER_02 22:12

Yeah, those are the the older farms still use flooding or irrigating.

SPEAKER_00 22:16

So they flood it. Like, does the state or the counties like go and try to give some of these old farmers like incentives to put in actual sprinkling systems or something and to kind of reduce that water? Because sometimes you just see them completely. To my knowledge, if if you have those watershares, you use them.

SPEAKER_02 22:37

Right.

SPEAKER_00 22:38

So I guess my question is is there a mechanism that the state should look at of, hey, how do we, you know, instead of the use it or lose it, incentivize the farmers to potentially put sprinkling systems in and remove the use it or lose it and just say, hey, you always have access to it, but if you don't use it, like there's some sort of tax incentive. I I don't know. That's above my pay grade, but a way to kind of help preserve that. Because I wonder how much of it people would or how much it and maybe they wouldn't. I don't know. Um yeah.

SPEAKER_02 23:11

You're talking pivots right now, man. Pivot pivot, you're talking to the pivot king. I'm talking about pivots. I love talking about pivots.

SPEAKER_01 23:18

I guess my my take is just that uh water is we know it's everything in Utah, but we have had the luxury of using any and all amount of water that we wanted to for our entire history.

SPEAKER_02 23:35

But we are those days are numbered.

SPEAKER_01 23:38

Yeah, I think they're over already. And so if you're in commercial real estate or you're in real estate in Utah, you are going to be hearing about water nonstop more and more and more. It is going to be an issue that's at the forefront. Cities can keep charging larger and larger impact fees or connection fees, and that's great because that money goes to reinvest into the water system in that city, but that's not fixing the problem. The problem is we are very poor users of water. We use way too much, we live in the desert, and it's gotta stop. And if it doesn't stop, then natural forces and market forces will make it stop. And that's gonna suck for everybody.

SPEAKER_02 24:20

Drain your pools, boys.

SPEAKER_01 24:21

Yep. Both of your pools.

SPEAKER_02 24:24

Yeah, I'll drain both of my pools. You guys drain your pools.

SPEAKER_00 24:27

Yeah, I I just use my neighbors. Okay, smart.

SPEAKER_01 24:30

What you got, Jarr?

SPEAKER_00 24:31

You know, I I mean, this is not really on the real estate side. I mean, I think it's just it's more so just like market in general. You know, I mean, we had uh the largest IPO ever in the history of the world, you know, a couple of weeks ago with SpaceX that just kind of skyrocketed value. I mean, crazy. I I remember growing up being like you'll never see a trillionaire. You now see a trillionaire. And I heard I read something really interesting as I was just kind of Googling. This this blew my mind. The average American's net worth is closer to Jeff Bezos than Jeff Bezos' net worth is to Elon Musk.

SPEAKER_01 25:09

That's ridiculous.

SPEAKER_00 25:10

Isn't that insane? Yeah, are you serious? Yeah.

SPEAKER_01 25:13

Because Bezos is probably worth like 200, 300 billion, and I don't know what Elon is, but 1.2 trillion, one, whatever it is, 1.4 trillion.

SPEAKER_00 25:23

Yeah. Isn't that wild?

SPEAKER_01 25:24

Yeah, that actually makes sense.

SPEAKER_00 25:26

And so I was just kind of looking through and I was like, man, like this is crazy. You know, what it was doing in the market. And, you know, I was looking at the close of the SP yesterday, and over the last five days, we've basically seen like a 12% drawdown on the SP. So I kind of went back and I was like, okay, like how often does that happen? Going back just to 2020, it happened during COVID. And it happened again in the trade wars last April with uh on the tariffs with Trump and this week. And I'm I've it's crazy because like I felt like COVID, the tariffs, everybody was in like a full-blown panic. And everybody, like, even on the real estate side, you know, everybody's like, hey, what is this gonna have? What is this gonna do to our real estate? Like liquidity, how do how do we navigate this? And this week it's just like it seems like a nothing burger. It seems like no one's really all that worried because it's just is gonna bounce back. I don't know if you guys are seeing the same thing or like what your takes are, but it just doesn't seem like there's the mark is on both the real estate and the equity side, like there's much concern right now.

SPEAKER_01 26:29

I just yeah, you're a hundred percent right. I just feel like we're desensitized to some extent or another. We were talking about this on another pod, but at the beginning of the year in January or February, whenever Trump went um all in on this Iran thing, markets basically froze, the commercial real estate market froze, investment sales essentially ground to a halt. We're finally seeing those happening again. But I felt like that was like the one of the last times where people really genuinely paused and were like, you know what, we're just gonna let this situation pass and see what happens. Now it's like market drops 12%. Yeah, sounds good. What are you guys doing for lunch? Yeah, should we go get steak and frites? It's it's just crazy.

SPEAKER_00 27:13

Yeah, and I don't I don't know if it's just like a tech thing, but it felt like I remember last year and even during COVID, it was like everyone you were talking to was in like a panic.

SPEAKER_03 27:25

Yeah.

SPEAKER_00 27:25

And now it's like, oh, the market dropped 12%. And to your point, it's like, oh, okay, well, what are we having for lunch?

SPEAKER_02 27:30

It's like easy come, easy go, right? The market was up 20% three days ago or whatever it was, right? It's just like, yeah, it's it's gonna do that right now. Yeah, where this is insane what we're seeing.

SPEAKER_01 27:42

I mean, everyone keeps talking about a bubble, and it's you know, you can keep talking about it until you're blue in the face, but it just keeps happening, it keeps going up. Goes down a little bit, goes up higher, goes down a little bit, goes up even higher. Yeah, and commercial real estate in a lot of ways has been the beneficiary of an incredible run the last uh since COVID.

SPEAKER_00 28:03

Yeah. Which I I think this is kind of you know the other thing I started thinking about is I was looking at just like the tech stocks. And this I think relates to the real estate side, is the AI and the data center stuff. I mean, we don't need to talk about Boxella County and like the wall, but I was just looking at the amount of usage the AI is getting. Like, I'm just curious, like, how often are you using AI and like on the real estate side? Like, what are you kind of seeing? You know, are your clients using it? Like, how how are we navigating like this AI? Because honestly, honestly, like I get emails from people and I'm like, I don't know if I'm talking to like one of the AI models or if I'm actually talking to a client.

SPEAKER_01 28:44

Well, it depends if she wanted to go on a date with you. And it's probably AI.

SPEAKER_00 28:48

Yeah, well, no, no one's no one's wanted to do that for quite a while.

SPEAKER_02 28:51

So it's definitely gonna be uh I think we're using it so often now, just in our daily, you know, just daily tasks that it's starting to become discernible. I I have a funny story. I have a a friend of mine who um received a call from a another friend who was up in Boxhelder and said, Hey, can you help me with a petition for this data center? And he used AI to draft the petition. I mean, that's that's that's without even really thinking about it, right? Um so it I I I mean, my my kids are using it every day, I'm using it every day, you're using it every day. We're all using it every day. I think it's totally ubiquitous, and I think it's it's just become part of it, it's come it's become part of our lives now.

SPEAKER_01 29:37

Yeah, I think I I use I use it obviously for spreadsheets and for modeling and for IRRs or whatever, and that's immensely helpful. JR in particular is is really invested in that and is great at that. I also just use it every single day, probably 50 times a day for menial tasks. Like I need to do a mortgage payment, I need to um you know figure out what restaurants open, what restaurant close, whatever. Yeah. And it's it's probably I would guess it saves me a couple hours a day, you know?

SPEAKER_02 30:13

Um but what do you do with the extra time?

SPEAKER_01 30:16

I look at I doom scroll. Yeah, I just look at them.

SPEAKER_02 30:20

I just doom scroll. You ask AI more questions, yeah.

SPEAKER_01 30:24

But I think what's interesting is commercial real estate is very slow to adapt and very boring and the opposite of all things tech.

SPEAKER_02 30:34

Yeah, right? It's a slow burn.

SPEAKER_01 30:36

And so I don't, I don't I'm slowly coming to the opinion that it's it's gonna be hard to disrupt commercial real estate with AI or with tech or whatever. I I really think it's gonna be super supplemental. If your job in commercial real estate is you're working for a fund and you're doing analytics and you're running proformas, that's a tough place to be.

SPEAKER_00 30:58

Yeah.

SPEAKER_01 30:58

It's a tough place to be.

SPEAKER_00 30:59

Do you do you think it is negatively affecting like the younger generation that are coming into the real estate world and them not fully understanding all the nuances of this business and kind of like really understanding how a deal gets put together because they're just relying so heavily on AI, or do you think it's it's helping them?

SPEAKER_01 31:19

Yeah, no, I I can't remember where we had this conversation, but I don't know if it was on a pod or somewhere else. But I was talking to people about this very subject, and all of us grew up in the business or any business that you're in, and you struggle and you have to research something and you make mistakes and you learn about it, and that's how we become experts in our field. But what happens if you can skip first and second base and just go to third base? But you don't have any of the experiences of first and second. You're kind of faking it. It's like the fake it till you make it, but you never learned anything. But does it actually matter? That's the question. Yeah. Does it actually matter? Does it actually matter that you don't understand what an IRR is and you never put an IRR formula together from the ground up? Does it matter?

SPEAKER_00 32:06

Yeah, I mean, I I would say it only matters is if in that spreadsheet it does a wrong formula and you don't understand why. Yeah.

SPEAKER_01 32:13

You know, people like us will become, we'll be dinosaurs in 10 or 20 years when younger people are running RRRs and running, you know, whatever formulas, and we say, Oh, well, what uh wait a second, let's crack that open. They'll be like, Oh, okay, here's the old guy. I want to come like you're better than the AI model. Okay, man.

SPEAKER_02 32:35

It goes back to that comment that you know AI isn't going to take the jobs. It's people using AI who are going to be taking the jobs, right?

SPEAKER_01 32:41

Yeah.

SPEAKER_02 32:42

And that that certainly is true when it comes to commercial real estate.

SPEAKER_01 32:45

It's that's in a lot of ways, I think there's a dumbing down. It's like that movie. What was that movie, Idiocracy? Have you guys ever seen that?

SPEAKER_02 32:52

I don't think so.

SPEAKER_01 32:53

It's you by the way. It's a terrible movie.

SPEAKER_02 32:55

Your your movie polls are so bad. Niche, dude. They're so bad. Somebody who's watched every Rambo movie a dozen times. Yeah, those are the greatest movies.

SPEAKER_01 33:06

Convinced 1986 was the greatest movie year in the history of mankind.

SPEAKER_02 33:10

But 84 was the best year.

SPEAKER_01 33:11

It was also a great year. Yeah. But uh idiocracy, the whole premise is is like people just became dumber over time, and some guy got into a time capsule and woke up in like 50 years or something, and everybody was an idiot. Like literally, he was the smartest person on earth. And it's kind of the same thing. Like, if AI starts doing everything for us in 50 years from now, what do we know? Or does it even matter? Is intellect even a currency anymore? That's the that's kind of the debate that's happening right now. Is intelligence and education even a currency?

SPEAKER_02 33:50

I'm not smart enough to even process that thought right now. So I'm I'm having a lot of things. I would, but I can't reach it. There's a microphone in it.

SPEAKER_00 34:00

Well, I mean, not only that, but like you think about driving, right? Like, I mean, when I turned 16, I couldn't wait to actually go out and drive. In 20 years, you're not even gonna need a driver's license.

SPEAKER_01 34:09

They'll be like, grandpa wants to drive again manually. Okay. We'll be so that'll be so weird.

SPEAKER_02 34:15

I'm teaching a kid to drive a stick right now. It's so gratifying. Like to watch your kid struggle and like you know, kill the car seven times a slight uphill incline. It's so great. I can do that.

SPEAKER_00 34:27

I'm trying to figure out he can't do. I'm trying to figure out if you're like the patient dad that's like, hey, it's okay, or if you're like the you know, frustrated, like, why can't you figure this out? I would I would love to be a passenger in the troy hardy car. I don't have the answer to that. I don't know.

SPEAKER_02 34:41

I don't know which one I am. I have to ask my kid. You'd probably say I'm a total jerk. But uh we're we're it's fun to learn these things. And I think to your guys' point, like these these are gonna be our archaic uh practices, right? Like no one's gonna be doing certain things, right?

SPEAKER_01 34:58

But that's where we're we're gonna be so wise. I really have become more bullish on AI's um the benefit of AI and commercial real estate. I think when all this stuff first started happening a couple of years ago, everybody was nervous about every industry and everyone's job was at risk. But I really feel like what we do in particular, brokerage or development, um commercial real estate in general, I just don't think there's a lot of ways to intrude and disrupt that. I think it's really supplemental AI to what we are all doing. And so I'm increasingly more bull more bullish about that whole, you know, AI and commercial real estate.

SPEAKER_02 35:41

I'm glad to hear you say that. I I've been feeling that way, but I've also felt like maybe it was just my own bias that's telling me that, like trying to help soothe me through this transition of AI usage, but I agree with you wholeheartedly.

SPEAKER_01 35:55

Yeah, not in in 10 years from now, that could be totally different. No one can see past three years, it feels like at this point. Yeah. But it's exciting. It's a cool time to be alive, and it's fun to fun industry.

SPEAKER_02 36:09

Can we talk about something really serious? On our last pod, we talked about that wakeboard park. Yeah. Point of the mountain. Yeah. And now there's a surf park being announced in Draper. I'm all in. What is it called? Is it gonna be called called to surf? Yes. No, there's already a call to surf. That's true, there isn't. Is that still around shops at Riverwood? I why would why would it go away? That's true. How much water are they gonna use? I don't know. Come on, man. Water is a yeah, don't worry about that. Um, no, I'm I'm really excited about this. I saw it. And they said they're going to be training the U.S. Olympic team. First of all, U.S. Olympic team why surfing oh would train at this facility.

SPEAKER_00 36:52

Is the ocean no longer viable option?

SPEAKER_02 36:54

The ocean is rented out, the ocean's free, the waves just keep coming for free. Guys, I didn't I didn't write it. Anyway, so pretty, pretty stoked on that. That's coming to you, Tom.

SPEAKER_01 37:07

So is it uh I saw I saw the release on it, but I didn't look into it. Is it a master plan community where there's gonna be homes around it?

SPEAKER_02 37:14

I don't know. I just was just looking at the the glossy pictures of the wave. It's like an eight-foot wave. Huh. It's gonna be cool.

SPEAKER_00 37:21

I'm all for it because there's gonna be no sharks. Yeah, like that's that's the greatest thing. I can still drown, but I'm not worried about drowning. I'm always like if I just I am worried that like back to the movie reference, I watched Jaws when I was way too young. Yeah, and so every time I get in the water, I'm like, I'm just gonna get eaten by uh.

SPEAKER_02 37:40

I've always kind of thought of you as the as the predator, the apex when you're out there.

SPEAKER_00 37:43

Maybe on land, but not in the ocean.

SPEAKER_01 37:47

Yeah, I so this will be the first surf park in northern Utah, right?

SPEAKER_02 37:52

Yeah, I mean we've got a handful of these uh wake surf parks and you know communities that have been built all along the Wasat front. Um but yeah, this will be the first one. This will be the first wave park.

SPEAKER_01 38:04

What was the place called up in Ogden? I'm sure it's still there. Wave Rave Wave Rider or Wave?

SPEAKER_02 38:09

Oh, oh yeah. Um didn't we have Flow Rider?

SPEAKER_00 38:15

I mean you're you're basically just on a Didn't we have somebody in in the office that fell doing that and blew out his ACL?

SPEAKER_02 38:23

I think multiple people I think if you've been there during that activity, you there was more carnage in that two hours. I mean it it was horrific. We were much younger then, we couldn't do it today.

SPEAKER_01 38:34

It was almost as bad as even the go-karting thing we did where where multiple people had like neck injuries that have ruined their life.

SPEAKER_02 38:42

And by the way, you're fast on a cart. Yeah, I actually remember you were you had some elite speed back then. You should we should probably do it again.

SPEAKER_01 38:51

We should. I've gained 25 pounds since then, so probably gonna have a hard time.

SPEAKER_02 38:55

I feel like you slipped the dude at 20, you got a slightly faster cart, and then you just rubbed it in everybody's faces. That was a lot of fun.

SPEAKER_01 39:02

Couldn't move for three weeks after that.

SPEAKER_02 39:03

It was fun, though.

SPEAKER_01 39:04

All right, gentlemen. Well, uh, it's been fun, been real. Commission Impossible episode two is a wrap. Thank you for joining the pod, and uh see everybody next time. Thanks.