Income Over Yield with Patrick Nessenthaler

The Deal Scout

I'm thrilled to share with you some highlights from my recent podcast episode where I had an engaging conversation with Patrick, a seasoned professor of commercial real estate finance and the founder of his own consultancy.

1. The Hustle of Real Estate: Patrick's journey in the real estate business is nothing short of inspiring. With two decades of experience, he's seen it all - from mastering the income aspect of deals to understanding how to put debt and equity together. His story is a testament to the fact that every day in real estate is different and exciting, with new deals and opportunities constantly arising.
2. The Power of Dry Powder: In our volatile real estate market, Patrick highlighted the importance of "dry powder" - capital that can help navigate through the ups and downs. He believes that his expertise and connections can be particularly beneficial in less sophisticated markets.
3. The Potential for Change: We discussed the possibility of a massive market shift, similar to the 2007-2008 financial crisis. Patrick believes that distressed funds are actively looking for opportunities to buy non-performing loans, and there's a need for recapitalization due to the spike in interest rates.
4. The Role of Risk and Big Data: Patrick shared his insights on how he incorporates statistical analysis and big data analytics into his work. He emphasized the importance of capturing tail risk and using tools like Monte Carlo simulations to make informed decisions.
5. Niche Asset Classes: Patrick believes that niche asset classes such as data centers, student housing, and charter schools offer less volatility and a non-cyclical income stream. He's excited about the potential of infrastructure capital and its penetration into these esoteric asset classes.
6. Consultancy Services: Patrick's consultancy, Nest and Associates, works with owner operators looking to scale their businesses and raise funds from institutions. He stressed the importance of scalability, geographic presence, continuity of the executive team, and a defined investment strategy in attracting capital.
7. Apropos Podcast: Patrick's podcast, "Apropos," covers topics relevant to finance and the financial markets. He plans to invite guests to discuss data centers and diversity, equity, and inclusion in the industry.
8. Research and Collaboration: Patrick is currently collaborating with CFA New York and conducting research at a university, exploring the relationship between the space market and the transaction market in commercial real estate.

I hope these insights spark your curiosity and entice you to listen to the full podcast episode. It's filled with valuable lessons, ideas, and curiosities that I'm sure you'll find intriguing.

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Chapters

1. Income Over Yield with Patrick Nessenthaler (00:00:00)

2. Mastering the Numerator (00:02:21)

3. Mastering the Denominator (00:03:40)

4. Analyzing a Potential Deal (00:05:29)

5. The cash flow and appraisal challenge (00:09:09)

6. The impact of climate change on insurance (00:10:09)

7. The availability of capital and distressed funds (00:11:57)

8. The Underrated Profession of Teaching (00:18:14)

9. Movies and Inspiration for Becoming a Professor (00:18:29)

10. Capturing Tail Risk in Real Estate Decision Making (00:21:32)

11. The equity gap and distressed deals (00:27:47)

12. Non-performing loans as an acquisition opportunity (00:29:59)

13. Diversifying income streams with esoteric asset classes (00:33:18)

14. Challenges in the senior housing market (00:37:14)

15. Engaging with a consultancy for a $100 million real estate fund (00:37:38)

16. Criteria for scalability as an operator (00:39:57)

17. The DCIM World (00:46:34)

18. Collaboration with CFA New York (00:47:32)

19. Research on Space and Transaction Market (00:49:15)