Schnitzer said it right after Levy admitted he dislikes cap rates because a single number tells you too much and too little at once. Levy disagreed on the spot, arguing that small bay industrial is thousands of tenants' livelihoods and cannot be run like a commodity. Schnitzer then narrowed the claim to the level of where big money flows, not to how buildings are operated.
…them look like they were pretty smart. But today, anyone assuming rates are going to go back down to 3% or 2.5%, I think is being wholly unrealistic. And if you're buying real estate on that kind of exit cap rate based on that kind of debt, then I think your investors aren't going to do very well.
I don't like cap rates. And the reason I don't like them is they tell you too much and they tell you too little in one number. Fair way to put it?
You bet. The marketplace, I mean, look at real estate. The public companies years ago, Euras company in New York that the Reichmans bought, the stock analysts could never understand because they're consumed with price earnings ratios. And we know in our business, the government's been nice to bless us with depreciation. And therefore, the best real estate companies tend to show less taxable income and more appreciation of the underlying assets. Look, real estate is a commodity, no different than gold, silver, copper, lumber, whatever you want. And the market goes through cycles of those with big money, with whatever level of money, whether you're someone investing $50,000 in a 401k or whether it's a huge state or international fund. And that money flows around to where they think the higher returns are. Overall, I watch all that, but real estate is our business.
Jordan, I hate to disagree with you in your own house here, but I'm going to disagree with you. Part of the reason why I love commercial real estate, particularly your asset class, is it's not a commodity. I mean, when I say your asset class, I'll be a little specific. Jordan specializes in small…
Absolutely. What I meant by commodity is at the highest levels, day to day. It's interesting. Growing up, my father had a philosophy of some geographic diversification, buying things outside of Portland, and property type diversification. No different than probably a stock account today that people…
And this is sense of arrival at a flex industrial property that some people might say is gritty. Some might say it's manufacturing light. But sense of arrival is a concept you would see in office or you might see in condominiums. Is that a fair way to do