WS1926 How To Invest During a Downturn | Liz Habib

In today's episode, our guest host Chris had the pleasure of speaking with Liz Habib, the head of communications at MPI Family Office. Liz shared her extensive background in television broadcasting and how she transitioned into working with her family's office, which collaborates with other family offices and high-net-worth individuals to manage wealth and investments.

Key Takeaways:

• Luck and Preparation: Liz believes that what is often perceived as luck in finding great investment opportunities is actually the result of years of preparation and being in the right place at the right time.
• MPI Family Office: The office started in the healthcare industry and has since expanded into real estate investments, including multifamily, senior living facilities, hotels, and more. They focus on creating generational wealth and employ various tax and wealth strategies.
• Investment Strategy: MPI Family Office traditionally focuses on multifamily properties but has diversified into senior living and hotel-to-housing conversions, particularly in response to the challenges posed by the recent market downturn and interest rate hikes.
• Market Outlook: Liz shared her cautious optimism for 2024, hoping for a loosening of the debt markets and a potential decrease in property prices. The upcoming election and the actions of the Federal Reserve are seen as significant factors that could influence the market.
• Future Strategies: Liz mentioned the possibility of taking advantage of market opportunities as they arise, particularly if interest rates begin to decrease. She also highlighted the potential for rescue opportunities where family offices could provide support to real estate operators in need.

Liz's insights provided a valuable perspective on how family offices approach real estate investment, especially during uncertain times. Her experience and the strategies employed by MPI Family Office serve as a testament to the importance of adaptability, preparation, and a keen eye for opportunity in the real estate market.

Remember to like and subscribe to the Real Estate Syndication Show for more insights from industry experts like Liz. Share the podcast with friends who are interested in becoming savvy investors.

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Transcript

Liz Habib: I believe luck is just that you've prepared yourself to be in the right place at the right time. And there it is, right? So it's taken years of preparation to be in the right place at the right time. So that when you hit a down market like this, all of that hard work that you put in for the last 35 years or 40 years pays off because you find a deal that's going to really work for you down the line. That's going to be a great investment.

Whitney Sewell: This is your daily real estate syndication show. I'm your host Whitney Sewell. Thank you for listening. My goal is for you to become a savvy investor by learning from some of the best operators and investors in the business. I'd like to hear from you. If you have questions you would like us to ask on the show, or if you have someone you would like me to interview, please let us know by emailing info at lifebridgecapital.com. Would you leave us a written rating and review? I would be grateful. Do not hesitate to let me know how we can best serve you at Life Bridge Capital. And now for an amazing interview with my friend, Chris Finley.

Chris Finlay: Well, Liz, you know, I know you're with the MPI Family Office and you're head of their communications. So tell me, how long have you been doing this? How did you get involved with this? Because I know your background, you have phenomenal background. I mean, I was hearing about it in television and a professor at some great schools and stuff. And what I didn't know was you were the first major announcer for a sports production. So tell us about you.

Liz Habib: Well, you know what, Chris, the bottom line with how did I do this? It's with my family. And you can never leave your family, no matter what you do, you're always a part of your family. And I love my family, right? So yeah, I have this background of 37 years on television, broadcast television. And I was the first woman to be the main sports anchor at a network affiliate TV station in Los Angeles, California, which you thought that would have happened, you know, 30 years ago, but it didn't happen until about 15 years ago. So I have all this background. I traveled the world. I covered big stories. I did all of these things. And for all of these years, my family always said, hey, listen, we want you to come and work with us. Come do the family. Come do the family. But I was really busy doing that. So eventually, when I got to a space where I wasn't as tied up with the everyday in and out of broadcast, I came to the family. And so I've come in as communications for the family, the communications director. for the family. So, you know, at MPI Family Office, we work with a consortium of other family offices and high network individuals. And I'm sort of the, you know, investor relations type person, communications, getting out all of our information to the people we need to get our information to, and then out networking with other family offices in order to continue to grow our generational wealth.

Chris Finlay: Yeah, interesting. Wow. So tell me more about the MPI family. So what does MPI stand for? And then you mentioned earlier, you work with other families to bring them into your platform, I guess you want to call it or whatever it is, and help them as well in managing their wealth. Is that correct?

Liz Habib: That's correct. That's it in an easy nutshell. I'll tell you a little bit about us. We're a family office. So I'm with my brothers. I have six brothers. Right. And in many ways, every one of us is involved in developing our business and moving forward. You know, now we're a family office that my brother started. Two of them got together and they're down in Florida. Right. So they're in Tampa, Florida, St. Petersburg area. My brother, Jim, Dr. James Powers, is an eye surgeon, and my brother Peter has built and run companies with Jim now for years. So Healthy Vision Institute. So it started in the healthcare industry and they've been able to build some wealth, some family wealth. Now we take our family wealth and we've got other brothers who are CPAs who come in and help us with tax strategies. We've taken the family wealth and we've gone out and we're saying, okay, we've got to invest our family wealth. And this is how we know you, Chris, right? We've invested with you in senior living facilities, We have a hotel with you. We invest in multifamily. So what we do is we're young. We're relatively young, you know, in the first generation, single family office. We, it's kind of organic, have a lot of other friends, relatives. who also have businesses, maybe they've amassed a certain amount of family wealth, maybe they've had an exit from a big company that they built, and so now they need to preserve that family wealth. So we have over the last 20 years built tax and wealth strategies that we use to do that. to create generational wealth and to continue to build that wealth for our children and our children's children. And it's a lot of work. It's a lot of work to do those things. This stuff doesn't hang around on its own. You've got to constantly, actively be working on your strategies, working on your tax strategies, meeting new people. So we have what we call the Consortium of Wealth. Those are the people who started organic. Now we meet them when we're out networking with other people. And we come together as a group. We share these tax and wealth strategies and health strategies. We like to call it the Consortium of Wealth and Health because we believe if you get to be 50 years old and you've been working your tail off, you should enjoy the fruits of your labor and have a healthy lifestyle, a green lifestyle. So we bring in other families and we invest together. We mastermind together. We share strategies together. We share some of our great experts. We have spent 20 years finding the people we believe get us to our goals. And we share all of these different strategies with people and amongst ourselves, right, so that we can continue to grow.

Chris Finlay: Wow, that's awesome. And do these other families Do they invest within the MPI family office or do they just have their own little family offices and you act as sort of the lead in sourcing investments or sourcing tax advisors or that kind of stuff?

Liz Habib: Both. It's both. OK, so, yeah, we will we act as just because we spent we call it a turnkey solution. Right. So we've spent so long making mistakes, by the way, over the years, we made plenty of mistakes and learning different strategies that can help us. And we call them our dream team, say tax advisors and wealth advisors and insurance advisors and and asset protection and this type of thing, that when other people come in, they might say, hey, who are you guys using for this? And what strategies are you using for this? And how can we bring that together to help each other out? Now, to deal flow, very, very important because we're real estate investors, to constantly have that deal flow, to if we have to sell a property, to take our money and put it into the next property or whatever. So deal flow is very, very important. So we go out actively and source deals. find different companies. And we like companies like you, Chris, that have a good track record, who have been around for a few down cycles, who understand or try to understand a cycle like the one we're in right now. I mean, I don't know that you can always understand it, but you can certainly have your history. You have been through some down cycles. You understand what might work and what might not work. So we like to work with people with really great track records. And then what we'll do is we may go out to some of the people in our consortium and say, hey, we're looking at this. We're investing in this. We've done our due diligence on this. Are you interested? Would you like to take a look at this? And because some of these people are still running their own companies, That's a really welcome thing. They're welcome. They're bringing that in and trust us as well. So we have, it's very important what we do to make sure we do proper due diligence.

Chris Finlay: That's awesome. That's awesome. So last year we just got past 23. We're now into 24. How did you, how did you find the market investment opportunities? What was your strategy and how did you do last year?

Liz Habib: What was the overall? If I'm optimistic, I'm going to be optimistic because I don't think there's a lot of optimism, enough optimism going around. But in a market where there are struggles, and we saw all of these increases in the interest rates, right? And it's just crushed everybody with their debt service, right? In a market like this, It's looking for a great opportunity, a great deal. If you've got somebody who's got 45 years experience out there, you know, and they they have enough boots on the ground, they know enough people from being around that they get that off market deal. For instance, we've got a deal like that going with you that we got in 20 right on a hotel in Texas. When you get so I don't even want to use the word lucky. I don't want to say that's luck. What that is, is horrible. I believe luck is just that you've prepared yourself to be in the right place at the right time. And there it is, right? So it's taken years of preparation to be in the right place at the right time. So that when you hit a down market like this, All of that hard work that you put in for the last 35 years or 40 years pays off because you find a deal that's going to really work for you down the line. That's going to be a great investment down the line. So those opportunities exist. They're not they're not a lot of them. Right. You have to know who you're talking to and where to go. But in the meantime, we're like everybody else, where we're holding on to see what's going to happen. And it's a little scary, right? Because you're not sure. Now we're going into an election year and everybody expects those rates to drop a little bit. So maybe it will ease a little bit. But we've held on. We haven't jumped into a lot. And frankly, Chris, we've had to kind of manage what we do own. We've had to manage the properties we do own because the debt service on those properties has increased so incredibly.

Chris Finlay: Right. You know, I knew you bring that up, and you're so correct, in my opinion, that look, when times get tough, that's when hands-on management counts, right? I mean, it's always fun to see things booming and going in the right direction, but when you have problems, then you need to focus on those problems, and you really need to do that. I remember during COVID, you know, we shut down all acquisitions. We just moved totally into an asset mode. And amazingly enough, our properties did really well. But I think it was because of that focus that and, you know, down times, that's what you have to do, you have to really get hands on and focus on, on these, these properties and projects. And, and they're tough. I mean, it's not easy. It's never straight up, right? It's up, down, up, down. But if you hold on, I tell people, if you hold on, you normally do pretty well. So now, as a family office, is your strategy more geared to recurring revenue? In other words, are you more focused on receiving cash flow on a regular monthly basis? Are you more opportunistic in the sense of, It may not be producing cash flow, but you may get a three X at the end of the deal or whatever, you know, how do you, how do you blend that? And do you do one or the other, or do you sort of play them all, play all strategies? What's sort of the strategy for MPI?

Liz Habib: You know, if I tell you this was a great year, we're chucking along, everything's great. We want cash flow. We want quarterly cash flow on all of our investments, right? But that's not the type of market we're in right now. So that's where you make the adjustment, right? And we're even looking at properties now that maybe we're not getting cash flow out right now. Because maybe we've got to have more money in the reserves. So there is no cash flow. Right now, it's a hold on cash flow. But if we could just hold on and we will hold on, you know, like you said, we'll focus, we'll tighten it up, focus more on the management of the asset. And then maybe down the line, we'll get a better return out of it. Maybe it doesn't look so good right now, but maybe we'll do even better performer than performer whenever we go to sell that property. That would be our hope. So would we love all our properties to be, we get in, we get cashflow, we get 3X on our way out? Sure. I mean, that's the dream, dream thing, right? That we all would love. Wouldn't we all. Right. That maybe everybody's, maybe a lot of people saw even over the last couple of years, but it's not like that right now because we're in unprecedented times. Never, Chris, would you ever expect the Fed to raise the rates so quickly so much.

Chris Finlay: I've been doing this for 40 years, never seen an interest rate rise that fast. I mean, when I got started in 1980, the prime was like 19 and a half percent. So I've seen rates way over what is current, but I've never seen them ramp up like they did in the last, you know, 12, 18 months, they just, you know, they went from nothing to, you know, about eight and a half. I mean, it was just unbelievable, the ramp up speed. And I think that really hit the market harder. So geography wise for your strategy, are you focused on any specific, you know, geographies or are you nationwide or what's the geography for your investments?

Liz Habib: We're nationwide except for California. so painful to me because I lived in Los Angeles for so long and I do love California, but it's just not a great place to do business. So that said, when you're investing in real estate, it's pretty, it's sort of typical where we are, right? Texas and Florida and Arizona. And we're starting up along the Eastern seaboard a little bit. We are not an upstate New York. But we would say nationwide, but in the states where it's very, very difficult to do business and during COVID, we saw just how difficult it is in multifamily in places like California, we stay away from those because the landlord just has really no, they'll take the landlord rights away immediately. Living in California during COVID, I saw people who were investors dump their properties because they were so afraid what COVID taught them was the government could come in and do whatever it wanted. So if it wanted to just freeze rents and tell people they didn't have to pay their rents, what did that mean to the business owner? And so that was very frightening for some investors in California. So we are not bullish on California. We are in the rest of the country like everyone else. Texas, like I said, the usual suspects, right? Some Midwest.

Chris Finlay: Interesting. Wow. And asset class, what's your number one, number two, number three, what's your top asset classes?

Liz Habib: Traditionally multifamily, that's where we are multifamily. But as the crisis in multifamily ramped up during the last couple of years, we said to ourselves, we've got to make some changes on this and see what the future will hold. So we have multifamily and we have storage, and we were very focused on that. And then we began to shift a little bit. And hotel, we had hospitality, so multifamily storage and hospitality. But then we began to shift. And again and again, and this is why we like Lloyd-Jones so much, we see the demographic like we do with the need for housing for seniors. So private pay in your living is something that we've gone into now. And the fourth place that we've gone into, that we face some challenges here, are hotel to housing conversions. So while multifamily, the rents were increasing and increasing and increasing, There was a group of people in there, a demographic, that couldn't afford those higher rents, that needed a little bit lower rent. And that's when we came in and said, okay, we're gonna do this conversion to housing. And we've yet to see how that's gonna play out exactly, but we are very optimistic about it.

Chris Finlay: Yeah, you would think that's a tremendous segment. I've watched that for years. And look, there is tremendous demand for folks that are, let's face it, they're your housekeeper, they may be your you know, whomever, valuable jobs, we have to have those folks. And it's so hard for them, especially anywhere near a major city, to live. I mean, so they either have to commute for an hour and a half or two hours on a bus each way. And let's face it, we can't run business without these people. So I think it's a great strategy. I just think whether it's an empty office building or whether it's an empty hotel or whatever that you can convert to this, you know, this, call it workforce housing or whatever. I just think it's gotta be a great strategy. I've sort of looked around the periphery, but I've never done it. You guys have actually invested in a couple, right?

Liz Habib: We have eight to nine properties. We have two big buildings in the Baltimore Harbor area that we're converting over. And they look great. You think of like, here's the way to do it, like an older, one of those hotels, maybe it's an old Radisson or something where there's these big ballrooms downstairs. And the unit itself had like a little kitchenette in it. So we go in and convert and make that little kitchenette. with a little granite countertop and we, you know, appointed very nicely. We take the big ballrooms, we put in, we call them class A amenities. We put in workout rooms, we update the swimming pools and make them look really great. We might put in rooms for, you know, work, work so that, you know, shared workspace, this type of thing. And it works really well too with younger people. I believe the average rent for a, for a, a place across the United States, this would be an apartment, is about $1,700. And a lot of the places where people used to rent at $1,700 are now $2,300, $2,500. So it's very, very expensive. These places bring that point down and then offer these amenities for people to have. in the Inner Harbor area in Baltimore. So they're in a really active area where it's close to you. Maybe you don't need a car. You can get right on the bus or get right on a subway. So those are the type of things we're looking at that do that. And Chris, I think you're right. I lived in Los Angeles and I have a condo there in a penthouse condo. It only had a galley kitchen. It only had, you know, it's a penthouse condo in a place, but it didn't have big living space. But I was super happy with the place. Great location. You know, you see the Hollywood sign in Beverly Hills, that type of thing. But I think, you know, that's what people want more of, especially even younger people.

Chris Finlay: Yeah, yeah. And I can guess, you know, you think of, like, I was thinking of that concept for places like Orlando and stuff where you're really sort of servicing the, you know, the entertainment world and, you know, the Disney worlds and all that stuff. But I would think it also works, just like you said, in these vibrant cities. where the young people go into there and they just can't afford an apartment by themselves or anything. It's so cool. Were you able to get any kind of government subsidy or at least some tax breaks on the real estate or something for some of these investments?

Liz Habib: We haven't gotten government subsidies on these properties, although I see they're starting to do more of these things, even in senior living. But that's a different topic. What we do, though, is get our what we always get in real estate. And those are the tax incentives that give us cost appreciation, you know, tax strategies that we could use. So we do like that, that that continues to be that is our number one sort of plan incentive, right, to get those tax incentives as we invest in real estate. and they continue to grow our wealth.

Chris Finlay: So you do the cost segregation analysis, and then you use that to improve your depreciation deductions and help on the taxes and all of that stuff. That's great. Yeah, look, I think that cities more and more have to realize that there's a large segment of the working population that just are priced out, right? They're priced out even in market rate apartments, And I would suspect there's going to be some support there in a lot of these communities where if you approach them, you can get some relief and or get some grant money or whatever. I just think it's such a great strategy and I commend you and your family office for doing it. I really do. Because we've got to create housing for for workforce in America. I mean, it's just a massive, massive shortage, and it's a problem. It's a real problem.

Liz Habib: It is. And you know what, Chris? It's not without challenge. And everything you're saying is very important. We do need help from the governments, because it's not without challenge. Even in Texas, where we've done some of these conversions, sometimes we'll struggle a little bit with the local codes or the local. And we're not saying everything should be safe and up to par and perfect, and we want really good quality living, right? But we also need some help. I don't know how to put this exactly. We don't want fire marshals stopping us from things. We want safe, fireproof buildings, but we need some input and some help. We do hit blocks sometimes, or things take longer, or it's harder for us to get through some of our work here. because we run into local governments that push back a little too much. So it's funny. On the one hand, the local governments and the state governments know they need the help. They know they need the change. They know they need the workforce housing. And then on the other hand, they're pushing hard on putting up roadblocks. So there has to be some give somewhere. There has to be some help.

Chris Finlay: A hundred percent. Couldn't agree with you more. That really is. So for 24 going forward, What do you see? What's your strategy? What's your sort of target profile of what you'd love to buy this year? And so what's your one, two, three for 24?

Liz Habib: Oh, that's a good question. Let's hope that things loosen up a little bit with the debt markets. Let's hope that that goes down. But we're always, always, and I'm not sure what's going to be out there. They say there's going to be a lot that comes out on the market, right? This this as of October of 23, it supposedly started where a lot of things are supposed to be coming out on the market now, and we haven't seen much of that. So the prices are still too high. So we're still waiting to see those prices come down in 24. I think all of us would say as we get closer to the election, how does that affect some of this? As we get into late 24, will things really start loosening up? So I don't know if I can give you one, two, three. We are always out there looking for multifamily. I don't know where we are with that right now in terms of loosening up. Most family offices are like me. Do we just hold on? You know, keep the dry powder, wait until things come open. So I still think we're in a little bit of a wait and see, Chris. And I think that that, so I don't know that I can give you, I mean, I'd like to just say everything opens up. It's really great. Things are loosening up. We're going to move forward. We'll get multifamily. We'll continue to invest with Lloyd Jones in senior living. But things have just so changed for us. I think when it comes to these conversions, we're going to wait to see with our buildings, our eight to nine properties now, how does this year, how does it play out for us because we have gone through some challenges now with those conversions and the debt out in the market. So so we're in challenges now with those things. So we just kind of have to work our way through 24 and be optimistic that things get better because it's been tough. It's been tough.

Chris Finlay: Yeah. Well, look, everybody's been impacted. Nobody's you know, nobody's gone through this unscathed. Believe me, the biggest, the smartest. They've all they all have their challenges and Look, it doesn't go on forever, and I'm optimistic. I think you're right. The election is an interesting component of all this. The Fed is, to me, the biggest component of all of this. So I think if the Fed gives a sign that they're going to ease off, and obviously, who knows? But I just think there's such a I've never seen such a a huge amount of capital on the sidelines. And, you know, we talked to a lot of family offices like yours, and, you know, we talked to the big guys in New York and California and all over, and everybody is sort of sitting on their hands on the sidelines, sort of waiting to pounce. But there's so much money out there to pounce that when it happens, I think there's going to be a free for all. I mean, I think it's, you know, I just think there's so much money out there to deploy. And I just think that it's going to be interesting to see what happens when this damn bursts, so to speak.

Liz Habib: You know what they always say in these markets, cash is king. So if everybody, if they're willing to go in, right, and the deals are that, you know, it's all about the It's all about the story, the property, the deal. So if the deal's there, cash will deploy.

Chris Finlay: Exactly. Yeah, exactly. Yeah. And we see some very big players going in all cash, which in my entire history, I've never seen such big players go in on big deals, 100% cash.

Liz Habib: And Chris, what do they plan to do with that? Will they go in all cash and then down the line? Of course.

Chris Finlay: Well, I think they're looking at a 12 or 18 or 20 month, you know, period that, hey, we're going to go in, we're going to get a discount. And, and, uh, you know, we're going to buy it at a substantial discount versus paying, say 8% on your, your financing. We'll, we'll, you know, we'll sort of, um, and imply an 8% cost for our money there and just get that discount and upfront price. See what I'm saying? So they're trying to buy at discount, in essence, pay themselves the interest instead of having to pay a bank. Get that kind of discount. Now they're locking up stuff. And I think that's actually a great strategy for players that can write those kinds of checks, right? Not everybody can do that. But if you can do that, I think it's a wonderful strategy. Because as I mentioned, when this turns, I think there's going to be a stampede.

Liz Habib: Here's a question. What does it look like? Where's the crack? When does it turn? When do we know those signs are coming that the stampede's about to begin?

Chris Finlay: Yeah, I think the first one or two cuts in the Fed. I think when the Fed starts really indicating that they're on a path to reducing these rates and that they're comfortable that inflation is under control and heading in the right direction. I mean, I don't think it's going to be fast. I think we're looking here at an 18-month, 24-month period. I don't think everybody seems to think, oh, this is going to be wonderful by September end of the year. Forget it. I think this is a much longer play, personally, and I think it's going to be a slower move. But, you know, look, if you think about it this way, if you're fairly convinced that rates are heading down, it would seem to me that if you're using floating rate debt, I don't know that I want to go lock in an 8% permanent rate right now, but I think if you can do floating rate and you're pretty darn sure that the rate's going to come down, you just float that rate down until you feel, okay, I'm either close to bottom or where I see the bottom and then lock in a perm, lock in a fixed. Right. Now you've got it for the rest of your whole period. And so, uh, so I think there's, there's some plays like that out there now. And I think there's going to be some, you know, for family offices like you guys that have, you know, have both the professional expertise as well as the money. I think there's some, some rescue opportunities out there. I think there's going to be some, you know, some, some real estate operators that are going to need some help. And I think it might be a really opportune time to come in on that, on that portion.

Liz Habib: Right. And we've already seen that. There's no, no question. We've already seen that and been approached on that level, but it's just not the time. It's not quite the time.

Chris Finlay: Yeah.

Liz Habib: We're hanging on.

Chris Finlay: Yeah, I hear you. Yeah, very smart. Well, listen, Liz, it's been great talking to you. We love doing business with your firm, and it's so great. And thank you so much for taking the time talking with us today.

Liz Habib: Chris, I'll talk to you any day. It's always a pleasure. I always learn something from you.

Chris Finlay: Awesome. Thanks so much. We'll see you soon. OK. Bye-bye.

Whitney Sewell: Thank you for being with us again today. I hope that you have learned a lot from the show. Don't forget to like and subscribe. I hope you're telling your friends about the Real Estate Syndication Show and how they can also build wealth in real estate. You can also go to lifebridgecapital.com and start investing today.