1) Why Blackstone is Investing in Production Studios

The demand for content is at an all time high and we can’t get enough.

The average adult, every day, spends 400 minutes online, 201 minutes on TV, and 146 minutes on social media. That’s 12 hours a day that we spend on screens!

In a bet on content creation and streaming services, Blackstone is putting their dollars behind production studios.

Blackstone recently announced a $350M deal with Hudson Pacific Partners and Vornado Realty Trust for Sunset Pier 94, a 266,000 SF production and soundstage development.

Here’s the lay of the land for production studios:

• Currently 12M SF of soundstages across the US, mostly concentrated in LA, Atlanta, and NY.

• Rising land values in these key markets make it expensive to finance new studios.

• There is a growing demand from investment grade tenants, such as Netflix, Hulu, and Disney.

• Tax incentives are available in several North American markets.

• Occupancy has been north of 90%.

Key Insight →

Everyone’s jumping on the content train. Consumers today are spending more time than ever before on their digital devices streaming content. The demand is insatiable and studios are clamoring to create more. Seeing the demand for new content, short supply and high occupancy of these studios, investment firms like Blackstone are taking notice and jumping on the content production train.

2) Inside the Billion Dollar Business of RV Storage

Gary Wojtaszek, like many Americans, bought an RV during the pandemic, and he soon noticed a problem.

Where do you park a vehicle this size??

Unlike many Americans, Wojtaszek was the CEO of a leading data center company, CyrusOne, that recently sold for $15B. Noticing many similarities in the models, and seeing this unmet need, he got to work on a new venture - RecNation RV and Boat Storage.

The company currently has 53 locations in 6 states. Wojtaszek plans to deploy $2.3B over the next 5 years and scale to 350 locations. Current competitors in the space are largely mom and pop operators.

With his first mover advantage and experience in scaling a real estate business, Wojtaszek believes this can be a $7B company in five years.

Here’s why RecNation is the next billion dollar business:

• RV Usage - RV owners only use their vehicle between 20 and 25 days a year

• Storage shortage - storage for large RVs and boats is hard to find

• Competitors and Management - competitors in the space are largely “mom and pop” operators, many considering this a passive investment with a lack of operational efficiency

Key Insight→

There are still massive opportunities to scale traditionally overlooked “mom and pop” businesses. The model of rolling up small businesses at scale has been done time and time again with everything from rental homes to self storage to mobile home parks. RecNation found a unique niche with opportunity to scale and has the added first mover advantage with an experienced founder.

3) Are We in a Real Estate Doom Loop?

Some reports have called the current real estate climate a “doom loop”.

Jim Collins introduced the term “doom loop” in his 2001 book Good to Great.

The doom loop occurs when one negative action triggers another negative action that causes the first factor to worsen, and this causes a continuous, self perpetuating negative cycle.

Here’s the current reported scenario:

1) Interest rates have risen, real estate transaction volume has slowed, and prices have started to decline.

2) Banks are writing down their assets and have tightened lending.

3) Tightened access to credit causes a rise in defaults, leading to forced sales at lower prices.

4) The cycle continues, and in a true doom loop scenario, this ends with real estate prices collapsing.

What’s the reality?

The WSJ estimates there is $3.6T in commercial real estate exposure, estimated to be 20% of deposits. Banks are pulling back and commercial sales have dropped off.

As RXR CEO Scott Rechler put it recently, “The plumbing is clogged right now.”

Regarding the state of bank health, Moody’s reports that lending fundamentals are better than they were in the downturn in 2008 and holds up in stress test scenarios. There is also an estimated $247B in dry powder on the sidelines that can be deployed as “rescue capital” in special situations.

Key Insight →

Doom loops are self reinforcing but can be remedied with positive intervention and action. The doom loop is an attention-grabbing narrative that we believe is overblown. While prices will likely continue to fall to a healthy equilibrium, the fed has moves in its tool kit to adjust rates and there is capital on the sidelines that can be used to help rescue projects in need.