What are some market conditions that people should be looking for when they’re looking at doing new developments?
It doesn’t matter whether it’s new development or anything. Michele Tecchia is not actually a real estate person, per se. He really thinks of himself more as a business person. “When you talk to real estate people, explan Tecchia, they tend to get wrapped around the axle talking about things like comparable sales and things like that. And that’s useful, but it’s not the whole picture”. He’s a much bigger believer in the fundamentals of the very simple law of supply and demand. If you’ve got an excess of supply and a shortage of demand, you can predict what’s going to happen prices are going to fall, if you have a shortage of supply and an excess of demand and those conditions are going to persist, you have a really robust market from the point of view of an investor or developer, because there’s going to be always upward pressure, on prices, upward pressure on rent, upward pressure on valuations. And that’s what I look for. So I want to find markets. And when I say markets, I really mean micro markets, micro markets, where those conditions persist, they exist, they’re not artificial, they’re going to be there for a long time. For some good reason, I’ll give you a simple example.
Michele Tecchia is developing portfolio in an area that’s inside or just outside the boundary of a national park. And because the tourist attraction is the National Park, and there’s a moratorium of development, inside the National Park, there’s not going to be really any new construction, but visitor ship to the National Park keeps growing day after day after day, year after year. And so prices keep going up. Some of the short term rentals we have just in the shadow of this national park, are pushing upwards of $600 $700 $750 a night. And when we went into it, we were thinking we were going to get much less than that. But we knew that we were going into the market with the right conditions, because there was that excess of demand, the shortage of supply, and there wasn’t going to be a ton of new development inside the Riviera.