In an exclusive interview with Yahoo Finance, Grant Cardone, Entrepreneur and Author, discusses the recent surge in commercial real estate sales amid the Covid-19 pandemic.
ZACK GUZMAN: Welcome back to Yahoo Finance Live. In case you forgot, it looked like the sky was falling on commercial real estate last year. Malls, retail, apartments, office buildings, you name it. People were talking about commercial real estate never being able to make it back. And fast forward to now, we got investors scooping up a record amount of commercial real estate. In fact, deals in the third quarter topped $193 billion according to data from real capital analytics cited by “The Wall Street Journal.” That’s up 19% versus the same quarter back in 2019 before the pandemic began.
And for more on the resurgence there, happy to bring back on the big baller, the shot caller, Grant Cardone, founder of private equity real estate firm Cardone Capital. And Grant, you’re reopening your own fund to non-accredited investors. And we can get into that in a second. But first, just want to talk about what you’re seeing in terms of this rebound because everyone loves a comeback story. And the 180 here is wild.
GRANT CARDONE: Zack, look, when this thing started during COVID, we started buying more real estate. When everybody was like, nobody’s going to pay their rent, I told my team, I said, let’s put our heads down, buy as much real estate as we can. We had the biggest acquisition year we’ve ever had, over $1 billion worth of acquisitions, because the institutions got negative.
The analysts at these big companies, these young kids, they’re like, oh, my God, the world is coming to an end. The sky is falling. But the truth is, they were wrong. Every sector has recovered. Apartments, we had a 95% occupancy and a 98.8% collection rate during COVID. And it just got better since then.
ZACK GUZMAN: Yeah, I mean, that’s the thing, too, right? And I said malls and put that in there because that’s commercial real estate. It’s the bucket that people think about. Malls might be the one that has been dented, still 13% below pre-pandemic levels, hotel values down 4.2%. I know you focus in on apartments, though, and have focused in on that in terms of South Florida as well. I mean, why were you so bullish? I mean, what did you see in the apartments numbers? And what have you seen as we’ve kind of had this rebound continue that has you so confident?
GRANT CARDONE: Well, the interesting thing is, you know, we had renewal rates, a 50% renewal rate when somebody’s leaving a property. Let’s say the lease is terminating. A renewal rate is normally 40% to 50%. During COVID, couldn’t go out and shop your apartment. You couldn’t go to another deal. Our renewal rates went to over 95%. I mean, the people that were reporting the news on this, except for you guys at Yahoo, everybody was wrong because they don’t understand apartments. Like, office, nobody left their office buildings. The lease was for another eight years or maybe 12 years. You just can’t break a lease because of an event.
Now, retail got hurt. But retail has been weak for a very long time. And this was just the final blow. But apartments have recovered. Apartments are doing– the hottest– single hottest investment class in the real estate sector. When you print 40% more money, Zack, as you know, they didn’t make 40% more apartments. So rents are up, occupancy’s up. Fort Lauderdale and Miami are on fire. Florida is getting the benefit of New York, New Jersey, Illinois. We have more migration from the state of California than in the history of the state of Florida. So it’s just– it’s a good time to be a real estate investor.
ZACK GUZMAN: Yeah, I mean, I saw the rents move up myself. Man, it’s wild out there. But when you talk about reopening this fund here for non-accredited investors, talk to me about maybe the opportunity there as you see it and why you decided to make that swap, that change now.
GRANT CARDONE: So, on Friday– this is our 17th fund. On Friday, we got approval from the SEC to open a $75 million non-accredited fund. People can invest as little as $1,000. I announced this Friday at 4 o’clock. In 24 hours, we had $15 million of commitments from non-accredited investors that never get a chance to invest in a trophy piece of real estate, OK? This is a $260 million deal, trophy asset, institutional quality, cash flow, 99% occupied. And we’re giving the little guy, the everyday investor, a chance to start creating wealth $1,000 at a time.
This has never been done before. Institutional quality assets, as you know, are typically purchased by very, very wealthy families or multibillion dollar institutions. And at Cardone Capital, we’re making it possible for the everyday investor to not just buy the leftovers, a duplex, a fourplex, but to invest their money in institutional quality trophy assets in the best markets in the country.
ZACK GUZMAN: Of course, real estate, too, one of those areas of focuses for investors because of some of the tax advantages. And taxes has been a spotlight right now in terms of the discussion. You’re talking about giving the little guy some advantages here, some openings here. There’s been a discussion at the national level here in terms of taxes and maybe using taxes to level the playing field. We’ve heard that recently even from President Biden. Just want to play a little piece of what he had to say about this and get your reaction on the other side. Take a listen.
JOE BIDEN: I don’t want to punish anyone’s success. I’m a capitalist. I want everyone to be able to– if they want to be a millionaire or billionaire, to be able to seek their goal. But all I’m asking is, pay your fair share. Pay your fair share. Pay your fair share. And right now, many of them are paying virtually nothing.
ZACK GUZMAN: And Grant, you know, we’ve heard a lot of millionaires talk about wanting to pay more in taxes. You’ve heard other ones that would say, no, I definitely don’t want to pay more in taxes. I’m not entirely sure where kind of the upper classes sit on this one. But as a man who used to host “Undercover Billionaire” on Discovery Channel, I mean, what do you look at in terms of taxes and, I guess, kind of, some of the changes? Because Democrats aren’t even rolling back the Trump tax cuts that were put in place. So where do you think the US is on taxes?
GRANT CARDONE: Well, let me just say to Brandon– I mean Mr. Biden. You’re not a capitalist, you’re not an entrepreneur. You’ve never written a check in your life. And you don’t know anything about fair share. OK, last year, I paid $40 million in property taxes. I paid no federal taxes, and I’m proud of it. So I’ll do everything to make investments by the tax code legally to reduce my federal taxes and support my local county and state taxes and property taxes through my investments.
And this is what President Biden doesn’t understand because he’s never written a check, because he’s never run a company, and because he is not a capitalist. And he’s just checked out on this concept. And the fact that I employ 700 people, we own $4 billion worth of real estate, that’ll pay somewhere between $40 and $60 million in property taxes this year. Tremendous amount of interest, legal fees, and people are hired and paid employee taxes across those 700 people.
So I’m doing my part. But I refuse to give the federal government money to continue to waste and not, you know, reuse, reinvest in great schools. Our schools are in trouble. Our hospitals are in trouble. And our roads and bridges are just falling apart. So I’m not going to give them more money to waste as they have for the last 50 years of my life.
ZACK GUZMAN: I’m paying a fair share there, too. That’s what we’re talking about. It’s always interesting [INAUDIBLE].
GRANT CARDONE: I’m doing my part, man.
ZACK GUZMAN: Hey, [INAUDIBLE].
GRANT CARDONE: I’m doing my part. I don’t know that he’s doing–
ZACK GUZMAN: My part might be smaller.
GRANT CARDONE: I’m not sure that he’s doing his part. He’s got so much attention on jabbing people right now. He ought to be– he ought to have more attention on the economy and taking care of families at the local level.
ZACK GUZMAN: We’ll see what happens in terms of where these plans go. Obviously, a lot expected to come down in terms of being finalized. Grant Cardone, the entrepreneur and author here, as well as the founder behind Cardone Capital, appreciate you coming back on here with us. Thanks again for the time. Be well, sir.
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