The Nevada Real Estate Market & Distressed Opportunities with Chris Beavor

Chris Beavor, CEO of CAI investments, discusses the differing impact of COVID-19 between Las Vegas and Reno and the rest of the country.
Chris Beavor, CEO of CAI investments, discusses the differing impact of COVID-19 between Las Vegas and Reno and the rest of the country. As observed in other parts of the world, trends experienced prior to the pandemic accelerated; technology advanced quicker and firms who were projected to shut down closed their doors sooner than anticipated. However, what sets these Nevadan enclaves apart from the rest of the nation is the fact that they are island economies much like Manhattan and Breckenridge.

Eighty-eight percent of the Nevada’s land area is government owned, leaving these cities as isolated pockets of public economies spread across the Nevadan landmass. In addition, Las Vegas is a business essential market despite the common belief that their economic prosperity is reliant primarily on casino gaming. Due to these factors and more, Beavor has found himself busier than ever in the weeks following the COVID-19 outbreak.

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Ryan Morfin:                    Welcome to Non-Beta Alpha. I’m Ryan Morfin. On today’s episode, we have Chris Beavor, from CAI Investments out of Las Vegas, Nevada, talking a little bit about the Nevada real estate market and where he sees opportunities in this distressed landscape. This is Non-Beta Alpha.

Ryan Morfin:                    Chris, welcome to the show. Thanks for coming on.

Chris Beavor:                   Appreciate it. A pleasure and thankful that you have me.

Ryan Morfin:                    I assume you’re calling in from somewhere in Nevada?

Chris Beavor:                   Hotel capital of the world. Las Vegas, Nevada.

Ryan Morfin:                    I know many Americans are really longing for the day that Vegas opens back up again. That’s going to be a wild party. I wanted to have you come on, talk tonight a little bit about what’s been going on in the real estate market. You’ve done some really interesting real estate deals over the last few years. We’ve been able to participate in those, and want to hear your views about commercial real estate, what’s changing, and where it’s going from here.

Chris Beavor:                   Okay, great. Just a little bit of background for your viewers, I have been practicing real estate in Las Vegas, Nevada as a principle and as a broker since 1993. I hold several licenses. I have an auctioneer permit, which is a privilege license. Two commercial brokerage licenses, one corporate. One individual.

Chris Beavor:                   I also hold a specialized property management permit here in Nevada. I’m considered by our local news media, and some others here, to be, quote/unquote, an expert in our local market. I grew up in northern Nevada, up in the Reno-Tahoe market. I’ve been here my entire adult life here in southern Nevada. I am a true Nevadian.

Chris Beavor:                   The macro on what’s happening right now is unprecedented, if we talk about today. But we have to look and have to zoom out of the 30,000, 60,000 foot level sometime, and we have to go back, and we might not have the exact data or data points that we’re looking for, for this COVID experience or epidemic, or pandemic. We can look back to some similar events.

Chris Beavor:                   Today, of course, the immediate preserve cash, preserve your business, the entire world and the economy has closed as we know it. If you still have Reynold’s wrap or Hefty garbage bags, there’s still a viable product and a viable business in the marketplace, whether that’s product, business, or service, when the economy … And not if, but when, moves on, it’s still going to be a viable product.

Chris Beavor:                   There will be some winners and losers. Of course, without vision, as a developer, myself and a sponsor, we need vision. We can’t put our heads in the sand and deny what’s happening today. It will … I think some of the trends that were already happening and had been happening, whether you were a retailer that was on a slower death, in a closure trajectory, if technology that was … And services were going to be by way of that technology was already en route, it might have sped up certain either closures or sped up certain advances in certain medical fields, technology fields.

Chris Beavor:                   What does that mean for the macro? You and I talked a few weeks ago. Here, we are based here in Las Vegas. We’re based here. It is the hotel capital of the world. I have black and white photos of pictures of Las Vegas, going back to the turn of the century, up to 1908, 1918, when we had the Spanish Flu pandemic, which Las Vegas had about 8000 people.

Chris Beavor:                   I have a black and white photo on our walls on our conference rooms of downtown Las Vegas, with a welcome to fabulous Las Vegas archway over a dirt road, 1930. I actually have some photos of atomic mushroom clouds in the background of Las Vegas, when they used to light off actual bombs, nuclear and atomic bombs. People used to come to Las Vegas in the 1950s to, actually to the Atomic Lounge. There was a bar called The Atomic Lounge. People would watch these atomic explosions going off. Just imagine coming to Las Vegas to watch these mushroom clouds being launched.

Chris Beavor:                   We’ve gone through world wars, we’ve gone through atomic, nuclear clouds. We have gone through Vietnam. We’ve gone through the Gulf War. We’ve experienced 9/11-type terrorist events. Starting there, it’s some of the most recent similar data of what’s happened.

Chris Beavor:                   New York was hard hit, obviously, 9/11. Crippled New York. It was sudden and fast, although the 9/11 event was significantly more sudden. This was pretty sudden. It happened over a three to four month period. When we look back to some of the data, somehow Las Vegas … Not somehow, but we have become the ninth densest MSA in the United States. We are the largest hotel market in the world, despite the last 100 years of some of the aforementioned events that have taken place, with less information, less technology, less … When we say technology, that goes all the way into healthcare service providers or Zoom meetings.

Chris Beavor:                   What I like to everybody when they ask me, as an expert wearing my Las Vegas expert hat, when I’m in my conference room, I point to that individual, looking down at a dirt road, in my black and white picture in 1930, and say, “That person, at that moment, probably thought the 10 acres that he purchased was the worst 10 acre investment he’d ever made in his life.”

Chris Beavor:                   But the show does go on. We’ve grown to over two million people here. Hundreds of thousands of hotel rooms, over 55 million visitors. That trend … And again, I’m talking macro, the show will go on across all spectrums. There will be winners and losers, like I had mentioned.

Chris Beavor:                   That’s a little bit of back road. You’ve got to keep me on point.

Ryan Morfin:                    No, no. I think Vegas is a growth market. I’ve been to your office before. You really said something that left an impression, was that you’re kind of an island economy. Not a lot of people think about that, but maybe you can talk a little bit about why you are in Nevada, and in Vegas, in particular.

Chris Beavor:                   Well, Nevada’s the smallest state in the United States. 88% of our entire state is owned by the federal government, in some fashion or form. I call the Nevada the Sea of Nevada, surrounded by millions of acres of water and millions of acres of undeedable land.

Chris Beavor:                   That leaves two islands in the Sea of Nevada, and that’s the island of Reno, the base core … Basics of real estate, of course, is location, location, location, and supply and demand. When you have great locations and significant limited supply and high demand, you have a recipe for valuation.

Chris Beavor:                   We see these islands, the island of Manhattan in New York, we see this in Oahu, we see this in the small islands of Vale and Breckenridge, Colorado that are surrounded by millions of acres of forest land.

Chris Beavor:                   When you’d mentioned, are we in an island? Absolutely. Nevada Forward, and I’m also a board member of the economic development authority here in northern Nevada. I was just speaking with Tesla on Saturday, when they announced potentially moving to Texas or Nevada. They actually asked me, probably around 11:00 on Saturday, if … How far along my projects were, because they actually needed my buildings, my multi-units, my office, my class A office.

Chris Beavor:                   I’ve actually … Here, in Nevada, we’ve never been busier in the last eight weeks. We had our target, just for Reno alone, in these two cities of our state, which is Reno and Las Vegas, location intake calls, our targeted goal per year is 16, which we’ve achieved.

Chris Beavor:                   Just in the last eight weeks alone, we had over 45 corporate relo headquarters. There’s lots of trillions of dollars being handed out, although some citizens in America might think those are free, somebody’s going to have to pay for those trillions and trillions of dollars.

Chris Beavor:                   If you’re a company now that is taking a step back, these are CEOs that have looked at Nevada, have looked at coming here for our taxes, our no state tax, our great weather, the no storms, the no floods, the no tsunamis, the no oceans rising. The United States does have the most significant natural disaster cost of doing business in downtime.

Chris Beavor:                   Companies, what we found just in the last eight weeks, have CEOs that are taking the time in their busy schedules and saying now is the time to rethink, retool, and remove. I’ve actually been inking 65,000 square foot office projects in downtown Reno. We’re looking at filling 1.3 million square feet and actually running out of space. We are next to the sixth largest economy in the world.

Chris Beavor:                   California, whether that’s Reno’s going to get the benefit from the San Francisco bay area or Las Vegas gets a global boost, but from Los Angeles. When cities like Los Angeles elect to keep their cities shut down for another 90 days, those business people are looking harder at moving out of there.

Chris Beavor:                   Last October, when the fires hit and there was rolling power outages in the sixth largest economy in the world, people start to look to Nevada. We’re going to be one of the benefiting states, in two of our cities where myself, as a sponsor, have multiple offerings in both of those cities. That’s a turn that we’d be talking about.

Chris Beavor:                   If you have any feedback, sometimes … You’ve got to keep me on point here.

Ryan Morfin:                    No, no, no. People are dialing in to hear you talk. I think you brought up a great point, though. You’re next to California. California’s taking a certain response to the crisis. Nevada stands to benefit tremendously from these company relos. What does that do the local market? You’re going to have to build more apartments, more houses? More healthcare is going to increase the demand.

Ryan Morfin:                    States like Nevada could bounce back from just the migration of people.

Chris Beavor:                   Yeah. I think the growing trend, right? Low tax environment. We’re also … Whether it’s Phoenix, as you know, we have a Westin hotel we’re building in Tempe. Our demand generators in that market are waste management, intel, State Farm insurance. We have technology forces, because we’re next to Silicon Valley and Seattle out west.

Chris Beavor:                   There are markets here, that are our feeder markets, that are doing quite well. Stocks of Amazon in Seattle, and the Bay Area, technology-based economies are doing quite well. Their stocks are holding up. A lot of our investors that are in those markets are calling … For us, as a sponsor, March was our largest [inaudible 00:13:01] project. We’ve been very fortunate to be here in the West Coast.

Chris Beavor:                   But Nevada, and just talking about … Nevada is a state that is in the midst … Some people will go by a neighborhood and see a blighted home or a blighted office, and look at repositioning that asset. Some people will take a little step back and look at a neighborhood or a block of a community, and reposition a block.

Chris Beavor:                   Nevada, as a state, is actually repositioning itself and gaming. Let me talk about … A lot of people viewed Las Vegas and Reno, 10, 15 years ago, from the 2008 crisis, as a gaming leisure market. That’s just not the case. Gaming today is a global technology, global industry, that already now is half the size of the complete global auto industry, in terms of revenue and projective growth.

Chris Beavor:                   From 2000 to now 2020, you might have perceived … When I say you might have, the general populous might have perceived New Jersey, Atlantic City, and Las Vegas as a gaming market. Today, Las Vegas is what Detroit is to the auto industry, to a global gaming technology industry that spans over 40 countries, is on every cruise ship, is on every smart phone, six billion smart phones around the world.

Chris Beavor:                   Technology companies like Scientific Games, Boston Scientific, Ainsworth, Kenobi, all here in Las Vegas. We have Tesla growing here in Las Vegas. They’re one of the largest manufacturing plants up in northern Nevada. All of our growth … We have not built or delivered, or opened a large hotel casino in over a decade in Nevada.

Chris Beavor:                   And so, it’s quite different. A lot of our growth … I can tell you too, as a sponsor of BSTs, we have a couple projects, like Boston Scientific. We have some stuff … We’re purchasing global headquarters of Reynold’s Wrap. I’ve been flying around over the last 12 months, as you do, and versus 2008 versus today, when I fly to Reno, I don’t see … The big growth in 2006, 7, and 8 were casinos.

Chris Beavor:                   There was a casino in Missouri, a casino in Mississippi, a casino in New Orleans, a casino being built in San Diego, Phoenix. Most of our growth as a country, when you looked at those last few years, was this gaming growth.

Chris Beavor:                   Today, I got up the Tesla … I was just at the factory with Chris Reilly, walking and touring the factory with Chris. I actually was just in Bloomington, Indiana first week of March with Boston Scientific, looking at a 200,000 square foot medical facility expansion that they pulled out of Vietnam for supply chain.

Chris Beavor:                   I was in South Carolina at the Mercedes-Benz and Boeing factories. When I go around as a sponsor and as an American, ’08 versus today, I’m seeing factories, and growth, and high-tech facilities across our country. I think that, not only … That’s what was driving true growth. We weren’t hanging our hats on gaming growth, and building buildings for gambling. This is a true, solid recovery that will pick back up.

Chris Beavor:                   I think the supply chains … Going back to the story of Nevada, coming back into my lane here, those 45 companies up in Reno and in Las Vegas, we have significant supply chain and logistic companies, manufacturing companies, in the medical fields that are all looking to relocate. Or not all looking, they’re mandated and coming back to our countries, and they’re going to be looking for environmentally disaster-proof economies that … You can’t be responding to a disaster and be stuck in a snow storm or an ice storm, or tornadoes, or you can’t be somewhere where there’s hurricanes. Although there might not be a direct hit of a hurricane, when they shut down the coastline 10 miles in for two to three days, and people are evacuating.

Chris Beavor:                   That’s one of the advantages Arizona and Nevada has and why companies are flocking here. In both of my markets that we’ve placed ourself with our offerings, whether that’s Phoenix, whether that’s Intel, Microsoft, building some of the largest facilities in the world for their respected spaces here, like Tesla.

Chris Beavor:                   That’s the growth we’re seeing here in Nevada. When that button flips back on, that’s going to continue. I also want to let your viewers know, Las Vegas is a business essential market that literally has zero competition, on a global scale. Nevada, Las Vegas, in 2002, which was right after the 9/11, our airports were shut down. The airlines went into bankruptcy. Global travel had stopped in its tracks the last quarter, very similar to this quarter.

Chris Beavor:                   I was on the strip in October of 2001, and you could hear a pin drop on the strip. It was very similar as today. Everybody froze up. Everybody thought it was the end of the world. People didn’t know what to expect. Right? The fear of the unknown.

Chris Beavor:                   What had happened was, the builders and the developers, the visionaries, everybody paused and just stopped. That was a mistake. What had happened was, the home buyers that were in Las Vegas and across country, builders weren’t putting in their thousand permits in this market per month, which was required just on big berth alone.

Chris Beavor:                   Seven, eight months later, when we got into the second quarter of 2002, when people realized it wasn’t the end of the world, when we realized the show must go on, there was about 8000 penned up buyers that all hit the market with low interest rates, government easement, and we all know what happened. By 2003 and 4, we had rapid appreciation. We had … Whether that’s housing, office, all markets in real estate, we saw that.

Chris Beavor:                   I think we’re going to see a little bit of that today. But I’m jumping around there. All I can do is … We can look at data, but one thing I wanted to point out with Las Vegas and the hospitality sector, there is no other market that can host the … There’s only 52 weeks out of the year.

Chris Beavor:                   We’re a convention market that still is the best value in the world in conducting business. Some of the biggest, largest business deals happen in Las Vegas. Relationships are made here. I love this Zoom meeting. I think this is much needed. But I’m going to talk about some points here, just for some discussion purposes. We’re never as bad as we think we are and we’re never as good as we think we’re at.

Chris Beavor:                   Las Vegas, in 2000 … Right now, Chicago might be able to have some large conventions, but the other 150 businesses that are set up in downtown Chicago have business interruption when larger conventions come into a market. We’re the only market in the world that literally can do a 200,000 person group, roll up an entire industry, put it into one city, and have no impact. That’s what we’re designed to do. There’s no other city in the world that’s like that.

Chris Beavor:                   What you’re going to find, our occupancies in 2002 dropped to 88% occupancy. In 2010, when the economies had stopped the Great Recession, our city-wide was at 83 and a half, which took in limited select services, neighborhoods, neighborhood communities.

Chris Beavor:                   If you actually went to the touristic zones, the strip, the convention areas, in 2010, we were still close to 90% occupancy. That’s amazing. I’m not talking this month, or last month, or the next 90 days, or the forward looking three to four, five months. I’m talking about when there’s a vaccine here and people get back to living. You have to look at we’ve grown to two million people here in the last 80 years. We’ve weathered significant world wars and pandemics.

Chris Beavor:                   There is, for cost, as we know in the broker/dealer space, one of the efficiencies is Zoom. But if I get onto your platform, I still need to build a relationship and I still need to be able to go … If you have 2000, 3000 advisors in 50 states, it could take me two to three years to go out and build those relationships.

Chris Beavor:                   Zoom, or this platform here, has been here. This was here last year, it was here five years ago, it was here 10 years ago. I also like to point out that … And being able to come to Las Vegas and have 100,000 people, whether it’s lawyers to an industry, if you’re an aircraft, or CES, and you’re a lawyer to technology, or a marketing company to technology, or you’re technology-based, from a global perspective, to bring an entire industry into one market, where if I’m here for two or three days and I have appointments hour for hour, not just at one hotel, but going from the Aria, to our convention centers, to numerous hotels and dinner events, there’s no other market like this.

Chris Beavor:                   When I go to Palm Springs or I go to an event, or San Diego, and I do the smaller groups … Seattle, name a market. It’s typically hosted at one hotel. You go there, you check in. Here, in Las Vegas, you’re rolling up hundreds of thousands of people. You’re rolling up an entire industry. The efficiencies here, you just can’t beat the efficiencies.

Chris Beavor:                   What would take me, as a business owner, to go meet 2000 reps, to have a dinner meeting, to have breakfast, to get that feel, that one on one communication, and touch and feel the product. People still need to … We have the construction world of concrete convention, 150,000 people.

Chris Beavor:                   I still need to touch the product. CES, men’s apparel. We only have 52 weeks in a year. That means we only need to fill our city with 52 events, whether that’s NASCAR at 120,000, whether that will be Super Bowls, all of the large group and conventions. Nobody else can do that. Nobody else can do that at the efficiencies and the cost.

Chris Beavor:                   I’m very bullish now. And now, looking at a macro spectrum, down turns like this limit competition, limit growth, and we have the infrastructure 20, 30 years, and billions and billions of dollars, of gaming dollars. Before the entire world received those gaming revenues, those billions and billions of dollars were flowing into one city and creating some of the … You know, number one international airport, in terms of surveys.

Chris Beavor:                   We’re not going anywhere. We’re going to be … The short-term, we have a short-term pause. It could take 24 to 36 months to get back to pre-COVID levels, but the show will go on and we’ll continue a trajectory upwards.

Ryan Morfin:                    Well, that’s a long time, 24 to 36 months. You’ve invested and run hotels. Does the outlook for the hotel industry just seem terminal to you? Will a lot of these hotels change hands, given that a lot of them are operating businesses? Either they have to mothball or they need to … Operating at 20% occupancy is going to put a lot of them permanently out of business. What are your thoughts on the recovery curve of the hospitality industry?

Chris Beavor:                   Again, I can speak to where we’re at. CAI, we have a Delta Hotel by Marriott, here in Las Vegas, that we are starting to construction. We have this on your space.

Ryan Morfin:                    Mm-hmm (affirmative).

Chris Beavor:                   Again, CAI, we identify voids in the marketplace. In any market or any market you go into, you can create efficiencies and identify voids. Las Vegas, it’s 95% strategy, who you’re in business with, your long-term strategy.

Chris Beavor:                   CAI, what we do, is we partner … We create revenue and make our revenue off of publicly traded companies, publicly traded brands, or very strong national or regional brands in tier one growth markets, for the purposes of taxes, disaster-proof, great weather, you name it. Pro-growth communities. That’s a start. Start one.

Chris Beavor:                   And then once we find those markets, we look for voids. The largest void right now in the Las Vegas market is we have evolved … We have UNLV, one of the top hospitality schools in the world. We have the largest convention market, hotel markets, event markets.

Chris Beavor:                   That being said, a lot of the hotels were designed by gaming companies, not hotel business. I just explained to you earlier that we are an essential part of the global business structure, bringing entire industries into one city, to touch, feel the products, demonstrate the products. To have those conversations and build those relationships, one on one, and to do it in an environment …

Chris Beavor:                   But one of the problems that the 55 million visitors that come here, on a global scale, complained about, the void, was that it took us 45 minutes to leave. If we were on the 50th floor of the Bellagio hotel, and we needed to … And again, Las Vegas is unique, that when there’s a group or a convention in place, you’re moving around a different … You have appointments every hour to two hours. You’re not just parking your car or parking your Uber, your Uber left at one hotel. You have to be transient here.

Chris Beavor:                   The biggest void was, if I’m paying $1200 for a fancy [inaudible 00:28:25] lawyer out of Washington DC to come out for a convention, I’m on the billing as soon as they walk out the door, the cross the threshold. If they’re on the 50th floor of the MGM or the Bellagio, and it takes them 40 minutes to get off property … That’s to get down the hallway, that they’re all the way at the end of the hallway, to get down the elevators, to get through the casinos, which were designed as a cruise ship model, to confuse the guests, give the free drink. Remember, these were gaming companies that wanted to capture every dollar. To get into a valet line and to get off property. If there’s a fountain show out front going off, and traffic is backing out, it can take 45 minutes.

Chris Beavor:                   I was actually speaking last year at the ICSC convention. I was giving a ride home to the mayor of Lake Elsinore, California, and a couple of other mayors that had asked our company to help them with the development plan for their cities. I was eating dinner with them at the Las Vegas Country Club, behind the convention center. I offered them to give them a ride to their hotel after delivering the speech on the inefficiencies of Las Vegas as a whole.

Chris Beavor:                   Sure enough, I said what hotel are you staying at, when they got in the car, and they said Bellagio. And sure enough, we hit at the street light and the fountains start to go off. If it was somebody that I knew, I would have said, “Hey, get out of the car. I’ve got to-“

Ryan Morfin:                    Outside of center, if you look at the rest of the country though, and other markets, putting your real estate lens on, I’ve heard some tallies that could be 15% of hotel keys across the countries could get shut, I get that Vegas is a different animal, because it’s got all these different demand drivers.

Ryan Morfin:                    But as a real estate investor, do you think that the hotel industry is going to have some dramatic restructuring?

Chris Beavor:                   That’s real estate across the board. I think if you are an owner ready to retire, if you were not a well-run company or a well-run business, even in a good economy, this is going to expose you. There is a thinning of the herd here, across all spectrums.

Chris Beavor:                   Again, if you’re not running a business and you don’t have your capital reserves, or you were a business that was just hanging on during the good times, there’s a reason for that. That’s why we have a capitalist economy. They’re going to go to the wayside. They’re going to close down.

Chris Beavor:                   If you are a business or a brand, and we’re talking specifically hospitality, and you have a solid business that was there, you’re a great operator, you’ve partnered with the right brands, you’re going to pick … You’re in the right place, in the right market, and the right city, with the right management, you’re going to pick back up and work out with your partners, because they … This is the tides have dropped and the tides will rise.

Chris Beavor:                   Like I said, I’ve never had a bad real estate deal. I’ve only had bad partners and bad lenders. If it’s the right deal, like I mentioned, you’re all going to come together and work something out. But if it’s a product or a hotel that shouldn’t have been in the market, or an operator that shouldn’t have been there anyways, that was taking the benefit of the tide rising, and the tide goes out, they’re going to be left high and dry.

Ryan Morfin:                    Well, it’s interesting, we’re still seeing people allocate capital. We’re still allocating capital to hotel development projects, because it’s counterintuitive, but if the recovery curve’s 24 months out, some … A good portion of hotels could die. You’ll have less keys to compete with in the future, as some of those get reshuttered or become distressed.

Ryan Morfin:                    Switching gears a little bit, you guys did a deal and closed a deal last year in cold storage. Given your view into that industry, in the food supply chain, are you at all concerned about food supply, going forward, in the US economy? What are your thoughts there, given you guys aren’t a huge warehouse that does that?

Chris Beavor:                   You’re talking about our Coatesville facility in Coatesville, Pennsylvania that supplies probably between 500 McDonald’s and close to 100 Chick-Fil-As in the northeast there, in between New York and Philadelphia.

Chris Beavor:                   We’re still receiving our rents before they’re due. It’s a good product. Remember, I’m also … CAI, we partner with publicly-traded brands and we build, and develop, and operate some of those brands as franchise. In the fifth largest metro market, I’m the franchise operator for Del Taco, which is a publicly-traded brand. My stores down there in the QSR business have never made more money than the last two months. The only supply chains that have come down is that we’ve increased our orders.

Chris Beavor:                   One, we just went through one of the largest economic expansions in 10 years. People have credits available. A lot of people are coming in. There’s Food Network restaurants. It’s always been, at this time of the cycle, people come into the restaurant industry. That’s why we stick with brands like Del Tacos and McDonald’s strong brands. We’ve built for Chick-Fil-As.

Chris Beavor:                   These are when companies actually expand, become more profitable, labor comes down. That’s a significant cost in the food chain. Transport cost, oil and gas. You, being from Texas, have seen some of the oil markets and pricing of fuel coming down. Less than mile. Sorry about that. I have my dog barking.

Ryan Morfin:                    No worries.

Chris Beavor:                   Transport cost has come down. Transport, oil, gas, commodity prices have come down. In the short-term, the QSR sector is doing quite well. We’re shutting down our dining rooms that we make no money on. 65% of our revenue comes in through the drive-through anyways. Dining rooms are our loss leader.

Chris Beavor:                   We’ve been drooling and chomping at the bit, as an industry, for Uber, Grub Hub, all the deliveries. We were about 5% pre-COVID with our brand, so now we’re … Whether it’s the seniors, or the people that have not taken that step, now they’re taking that step. Our delivery’s up to 25%. We’re now shrinking the cost. I have new store and building on Scottsdale Road, in Webber, next time you come out to Scottsdale.

Chris Beavor:                   But in the QSR, we just shrunk from a 2500 square foot floor plate to 1800 square feet. I’m going after these older lots now that were just too small for the brand. Now, between an Uber drive up, pick up, to drone delivery now, that will be an ongoing in the QSR business.

Chris Beavor:                   I like companies like McDonald’s. We peel back the onion in any asset, and we say, “Who’s really paying our rent?” When we say who’s paying our rent, it’s always the people. We the people. How does that dollar get to us on our Coatesville facility? They go to McDonald’s, they go to Chick-Fil-A. They order McDonald’s, and a portion of that dollar cheeseburger finds its way into paying our rent.

Chris Beavor:                   And so, we’ve seen little to no impact whatsoever. I know some of the one-off smaller brands, the no drive-through, the lower quality location, food and beverage, they’re suffering and will continue to suffer. But for us in the industry, in the QSR, you named it. We’re eliminating, a lot of competition’s going to go to the wayside. The cost of land is going to go down. It’s been really expensive.

Chris Beavor:                   That’s what CAI, one of our mantras is, is that we make okay money in a good economy, and we make really good money in a bad economy. We do that across all of our brands and development. We buy right. Labor comes down, transport comes down, competition goes to the wayside, and we’re able to grab great pieces of land, in great locations, at great bargains.

Chris Beavor:                   Did I answer your question?

Ryan Morfin:                    Yeah. No, no, you did. I think it’s … No, no, it’s going to be interesting to see, also, how retail changes in the coming months, and maybe years ahead. As we’re coming into this, call it second wave at the end of the summer, most likely, your view, you’re optimistic, it seems. Do you think we’re going to have a U-shape or V-shape recovery, or is this going to be a potential to slip into a depression, on a national scale?

Chris Beavor:                   Yeah. We obviously are in a depression. Right? The true definition, we’re laying off millions of people. It’s how we handle it. Going back to that saying I said earlier, I’ve never had a bad deal, I’ve just had bad lenders and bad partners.

Chris Beavor:                   As the American economy and the American people, our partner is our US government and our municipalities, and of course, our lending force. They’re very strong. In ’01 terrorist attack, into 2002, with low oil prices tumbling, and 2002, a global war, you saw the government that said, “Hey, we’re here. We’re ready to stand by you.” Versus an ’08 collapse, which was driven from greed, fraud, misrepresentation. A political new change that came in, that understood the economy.

Chris Beavor:                   I think the macro … Of course, this is downturn. There’s no default here. There’s no evictions happening in Las Vegas. Banks are on stand-by to modify and adjust. I think macro, I don’t think it’s going to be as bad as everybody thinks, just because I think everyone’s going to be … I think some of the mandates from the government, and you see they say we’re standing by to do whatever it takes to shore up our economy. I think we’re going to take some of these trillions of dollars China’s going to pay, whether this is tariffs, you’re going to see lots of capital flowing.

Chris Beavor:                   You think the United States is bad, it’s going to be such a humanitarian shame when 30 million people globally die of starvation. Some of our supply chains, some of the smaller companies in Central America, Africa, but I’m telling you that there’s global capital that are going to be penned up, looking to find its way into the United States to shore up our capital needs. Our supply chains are going to come back. True manufacturing supply chain jobs by the end of this year.

Chris Beavor:                   Technology jobs, as you saw, whether that’s Instacart … You might be shutting down a JC Penney’s, but you have two more jobs. Amazon’s hiring. Don’t underestimate that when there’s 500 Instacart people that haven’t been able to hire in Las Vegas through technology and there’s 100 layoffs in JC Penney’s, that’s still growth.

Ryan Morfin:                    Yep.

Chris Beavor:                   There’s going to be opportunity. There is short-term pain. It’s going to take some time to adjust. Where are you going to get zero interest rates, a dollar a gallon gas, a government throwing trillions of dollars out, and it’s going to be quite interesting to see, being in an inflationary business like hospitality, that’s one reason why we’re in the hospitality game, to hedge that inflationary upward trend that we’ve predicted.

Ryan Morfin:                    Chris, what books are you reading right now, or what have you been keeping yourself busy with, hobbies-wise, when you’re not watching the news or doing real estate deals?

Chris Beavor:                   Well, I might be a little embarrassed here. I’m reading day trading books. That’s why the stock market’s holding up right now. You’ve got a lot of day traders. Every time I bought a stock … I know real estate and I know business, but just don’t have the time, so I’ve been reading up on the day trading. It looks like the stock market and about 40 million other Americans, that’s what they’re reading. I have about five different books right now on stock strategy trading.

Ryan Morfin:                    Any book stands out that you’re reading right now that you like, on the day trading side?

Chris Beavor:                   I’m just on 101. That’s the name of the book.

Ryan Morfin:                    We’ll send you some reading recs then, for sure. Chris, I appreciate you joining us. What’s that?

Chris Beavor:                   Actually, I need some good referrals. I’m sure you guys have some great advisors. I truly am … I’ve invested all my money and time into my business. If I’m going to get into a strategy into the stock market, this would probably be one of the better times to do so.

Ryan Morfin:                    Well, we’ll get you diversified for sure. That’s a promise. Chris, thanks so much for joining. I appreciate your time. We’d love to have you back in the coming weeks and months ahead, and stay in touch.

Chris Beavor:                   Okay. Thanks.

Ryan Morfin:                    Thank you for watching Non-Beta Alpha. Before we go, please remember to subscribe and leave us a review on Apple Podcast or YouTube channel. This is Non-Beta Alpha. Now you know.

Ryan Morfin:                    (music plays)

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