Working Capital The Real Estate Podcast
Success in Commercial Real Estate with Jon Love|EP53
May 12, 2021
In This Episode
Jon Love is the founder and CEO of KingSett Capital, Canada’s leading private equity real estate investment business co-investing with institutional and ultra-high net worth clients. Jon was formerly President and CEO of Oxford Properties Group. In 2018 Jon was appointed a Member of the Order of Canada and for those who are outside of Canada that is a fellowship that recognises the outstanding merit of Canadians who make a major difference to Canada through lifelong contribution. He has navigated through several recessions in his career and now draws from those experiences as we find ourselves in a unique time – 2021 today.
In this episode we talked about:
- Jon`s father and his impact on his career today
- Filling the shoes of your mentor. How does it feel?
- Transition from retail stock broker
- Sale of Oxford Properties Group
- Transition from Oxford to KingSett
- Aspects of KingSett that John would tackle differently
- The idea of thinking globally first for Canadians
- Interaction with provinces
- The response to the pandemic
- Obligation of business people to engage into political debates
- Jon`s view on where the economy is heading
- The future in terms of the Canadian outlook for Real Estate. Areas with opportunities over the next year.
Jesse (0s): Welcome to the working capital real estate podcast. My name is Jesse Fragale. And on this show, we discuss all things real estate with investors and experts in a variety of industries that impact real estate. Whether you’re looking at your first investment or raising your first fund, join me and let’s build that portfolio one square foot at a time. All right, ladies and gentlemen, welcome to working capital the real estate podcast. I have a special guest today. John Love. John is the founder and CEO of King set capital Canada’s leading private equity real estate investment business.
John was formally the president and CEO of Oxford properties group, Oxford businesses invest in develop and manage over 150 million square feet of office. In 2018. John was appointed a member of the order of Canada. And for those of you outside of Canada, that is a fellowship that recognizes the outstanding merit of Canadians. And I believe non-Canadian who make a major difference to Canada through lifelong contribution. He’s navigated through several recessions in his career and now draws from those experiences. As we find ourselves in a unique time in 2021 today, John, how are you doing?
Jon (1m 9s): No. Great. Thank you for having me.
Jesse (1m 11s): Thanks for, thanks for being part of this show. Like I said before, the show, I heard a few different podcasts that you were on. Obviously, you know, we’ve met in person before through, through your various roles. Something that really stuck out to me was, was your background in the real estate industry, starting with your father. So maybe for those that aren’t familiar, you could talk a little bit about, about your father and kind of his impact on your career today.
Jon (1m 39s): So my father founded Oxford in 1968 in Edmonton and with an idea, no capital and some skills, you know, built quite an outstanding platform. He was a great entrepreneur. There were several times where, you know, he would give me a piece of advice that really resonated. And I’ll just give you one example. When I started my business career as a retail stock broker, and, you know, I’d started, I was out doing my thing two or three months in, and of course it’s slow.
He says to me, one night he says, so how’s it going? And I said, well, it’s a bit slow. And he said, well, maybe when you see someone, you should have an idea. Now that single moment then imprinted, you know, my understanding of value to someone else, which is you have to have something to contribute to the conversation. You know, out of that, I built a very successful practice as a stockbroker. And then ultimately to my Oxford knocking seven days, it always resumes resonates with me.
Then when I see someone else, I should have an idea or God forbid to
Jesse (2m 56s): Right on in terms of your, in the business. I think you’ve mentioned before your, your father was a developer of, of businesses and that had an impact of you. What is it like coming from, you know, shoes to fill that are, that are large like that? You know, there’s a number of people in various industries that are filling, you know, shoes of their mentors, of their, of their fathers, their mothers. What was that like?
Jon (3m 20s): So, so I would say he was primarily a developer people because what, where he had an outstanding talent was in recognizing where someone might have skillsets applicable to a job, moving them along, perhaps faster than many people thought, but he built some great leaders in our industry, through his tenure as for the child of a successful parent. You know, I’d rather be the child that a successful parent than the other way around or in other words, not be, and be a child of a non-successful parent.
I think there’s many things that are great lessons there. And there’s also some things you have to learn yourself. And the most important lesson that I did is I had to go do something on my own, not to prove to anybody else, but to prove to myself that in fact, I, I have values and an individual. So as a retail stockbroker, you were graded every day because every day you got your commission statement from the day before, and it was, you know, hyper, you know, you eat what you kill, right? I mean, so you know exactly where you rank and I had the good fortune of being in the right place, right time, Edmonton, late seventies on a gas boom, so on and so forth and ranked nationally quite well at a very young age.
So when I left Scotia, McLeod and went, worked for Oxford, I can do so knowing that I didn’t have anything to prove to anybody and I wasn’t competing with my father, I had already proved to myself and therefore it didn’t have to prove to others that I, I was okay as I was. So I focused at the job at hand and, you know, people were, you know, I started at the lowest rung humanly possible, which is, you know, the right thing to do. And, and after a very few number of weeks, people sort of forgot the fact of what my last name was because I was focused on getting the job done and I was no different than anybody else.
And I didn’t want anything special and I just wanted to get the job done. So there are ways that we can all make that work.
Jesse (5m 24s): So from retail stockbroker, you, you come back into the real estate full fold. And I believe as a client coordinator, if correct me, if I’m wrong and what was that transition like? And how did that, how did that launch you into the trajectory that that was real estate?
Jon (5m 41s): So red state, I started being a retail stock broker. The most important thing you need to learn is how to communicate to other people in, in with varying levels of sophistication and bearing in mind that as a 20 something that I knew, less half of my clients. So it was about providing service, building relationships, listening to opportunities and so on and so forth. So it was a tremendous training ground. When I started leasing space as a leasing coordinator, you know, the biggest adjustment was how long it took for someone to actually commit to a piece of space because I was in a world where I would talk, I’d pitch a stock idea to you.
And you’d either say yes or no on the phone. All of a sudden here, I am trying to do leases. And sometimes they take a week or three I was to on, but you know, that, that intensity and I even actually played pretty well for them. So it got me off to a very solid start and I love leasing. I still do leasing today. It’s terrific.
Jesse (6m 39s): Yeah. Yeah. I, I tell, you know, regardless of if you’re in capital markets or other areas in our industry, I find leasing it’s, it’s definitely the, the bread and butter of, of our business in a lot of ways. Absolutely. So you come into, into this real estate side and what are the first few years, you know, coming out of that role as, as a coordinator and doing larger projects and larger deals, how did that evolve into kind of where you ended up in your career? Because at that time I would assume it would have been now in the eighties, you know, who would have thought, what was bound to happen 10 years later?
What was that, that next chapter like?
Jon (7m 16s): So my, my early days I started in 1980, where you know, was, was leasing and I was fortunate enough. My first leasing assignments were small buildings on Bay street in Toronto, and all the customers were 500 square feet. And because they’re a 500 square feet, I was kind of let the let to go on my own. Well, I learned a ton of lessons because these were all sophisticated, thoughtful people, and that was a tremendous start. And then I was leasing larger things then into some development role. Then I’m, you know, a time in St. Paul, Minnesota, down in Calgary.
And having that done that I got into sort of senior leadership in, you know, back in Toronto, setting up for, you know, the, the real estate collapse of the early nineties, which was a terrific time. If you had three things, which I had, one is you had to be relatively naive. Second is you had to be young enough to have the energy. So you knew that, you know, nothing fatal is going to happen.
And, you know, the third thing we needed was optimism. And you know what, we’re optimistic, we can make, you know, a good situation out of a difficult situation. So it was the, you know, the workout, the work around the work through, cause we didn’t really work out the work through the 91 to 94 period was, you know, some of the highlight of my career.
Jesse (8m 44s): And what, what was it about that time or individual maybe deals or restructurings? Was there something specific or was it the general environment that you knew you were going through something unique? When was, it was the lessons
Jon (8m 56s): Of the day a B it was, it was, you know, triangulating, you know, unemployment group of 250 people whose livelihoods were depending on Oxford and Oxford was, you know, smallish relative to the other peers and heavily discounted as someone who could survive. And in fact, we were able to navigate our way through the chicane without a CCW or whatever, because we were able to get a team who could motivate an organization to do the best we could do and through transparency and, you know, honoring commitments and all these, you know, values based actions, you know, we got our way through it and got to the other side.
And it was, it was a great experience in my business partners at the time we’re talented. We worked together really well, and his is a key to the success of that strategy.
Jesse (9m 53s): So clearly not every company fared as well as, as your team at that time. And I think you mentioned an anecdote before about, you know, going to lenders. And I think it was your time at Oxford where you said, there’s, the lenders told you that there’s three type of people they lend to, maybe you could expand a little on that.
Jon (10m 10s): So the first time that we didn’t have enough money to make the mortgage payment, and you know, this is pretty terrifying. And, you know, I told this story before, but you know, I got in a cab to go to Midtown Toronto. It was 36 degrees or warmer. I was all sweating walk in the office of the CIO, sit down. And I said, look, you know, we, we can’t make this payment for these reasons, but we could do this. And if we could do that, could we do this? And, you know, we sort of thought we had a creative idea.
It was the best we could, we could do as I’m leaving. He said to me, thanks for coming by. And of course, thanks was not the response that I had expected. So I stopped and I said, thanks. And he said, look, we’ve got three kinds of barks the first time borrows money and pays it back. We like them the most second time borrows money and is either not open with us or dishonest with us or doesn’t respect us or whatever. We will go out of our way to hurt them a third time. And people that have a problem come in and tell us they have a problem, propose some solutions.
We work with them and we’ll work with you. And that set the tone and strategy for Oxford to work through the difficult times.
Jesse (11m 25s): And do you see parallels over the last year with, with that aspect, just given the fact that, you know, we are in a situation where, depending on where you are, which vertical you’re in, you know, there’s a lot of people hurting there’s, you know, defaults, although haven’t gone up, particularly as definitely not as much as back then, but do you see those parallels? And if so, what would you, you know, what would you, how would you navigate that as a, somebody that was maybe where you were at that time today? The facts on the ground
Jon (11m 54s): Today are totally different. The facts there were, it had led up to a significant oversupply of commercial real estate and that ultimately crash rental rates went from $36 to $3. Yeah. I mean, like it was, it was Armageddon today. We have a health crisis. The secret to working through the nineties was building relationships and making sure that everybody was informed on what’s going on. Did any, you can’t even see somebody. Oh, we also know that, you know, when the health crisis is over, we’ll be back to some semblance of what we were doing before, because they’re not excesses.
I mean, obviously the government has got substantial fiscal excesses that it’s got to deal with, but that’s another story. The, the fact is that if you look at the real estate leaders, you know, like most people are paying rent. Some people aren’t, we’re helping all sorts of smaller tenants, you know, get through this period. You know, most renters, you know, apartment renters are paying rent. I mean, so there is no obvious dislocation. The dislocation is not as much in the real estate space, as it is in a lot of small businesses, particularly when people like the restaurant business who have been told, you can open, you can close, you can open, you can close, you can open these rules now let’s change those.
So those like that is very, very difficult space. And, you know, for those people, I would say they, you know, to the extent they can, they’ve got two stakeholder groups, they’ve got their shareholders, which may be themselves. They’ve got their lenders, their bank, and they’ve got their landlord. Who’s also their bank. And the ones that are talking to us and say, look, I’ve got a problem. I have a plan. I’d like your help. We’re working with them. And you know what people that are being difficult or whatever, you know, what we’re not working the most, but people that can think forward and say, I need your help.
Jesse (13m 54s): So I want to talk a little bit about kind of the current state of the economy, but before we do, I’d love to hear just the, you know, in the early two thousands, when, when, you know, there is the sale of Oxford that experience leading up to it. I know that, you know, you’ve mentioned before that you took some downtime after that and then came back after some, some dis disconnect from electronics. But yeah, maybe you could talk a little bit about that sale. What was that like that experience for you?
Jon (14m 22s): So, you know, Oxford had grown, you know, beyond what we might’ve thought and to the point where it was limited by competition, act for expansion in sort of big integrated downtown complexes in Canada. So we had a basic decision to make we, and we, we, we call it, we had to go along or you had to go wide. So had to stay in Canada and go to other asset classes or had to go to other geography in the same asset class.
And it was my view that I wasn’t the right CEO for either strategy. So we went to effort, a bunch of reasons. So we went to Domers and see if they would engage in a transaction. And, you know, that took a period of time. And ultimately in the August long weekend of 2001, we, they made an offer. We made a deal, all good. It went from and binding on September 10th, 2001.
And, you know, one day later the deal would have been off. Hmm. Anyway, it was, it was, you know, a highlight in many respects, you know, everybody was happy with the deal. And I was quite pleased. I think we had done our job over the previous six or seven years coming out of a very difficult period of time to creating a billion dollars of shareholder value, which, you know, we were very proud of, you know, the management team basically stayed.
I felt it was right for me to move on. My shadow was not helpful. And so I did that and we, my wife and I kind of went dark and disappeared for six months at a terrific time. He came back in the spring of Oh two and started Kingston
Jesse (16m 12s): Right on. So we’ve had other CEOs come on on the show and owners, and they’ve talked about this idea of, of wanting to be invisible, to a certain extent as the CEO of a company like run properly. But, but it shouldn’t be their face. Is that a view you subscribed to
Jon (16m 30s): Well, to be invisible? I’m, you know, like I’m hardly invisible. I think, I think that it, I think the differently, which is, you know, there is a role that as a CEO, you play and every CEO likely has a different role because they have different skills and aptitudes. I I’m very good at very low and that very little I focus on and, and I’ve got a great team that is very good at everything else, which makes the machine work.
Jesse (17m 4s): So the transition from Oxford to King set was that, you know, just having, having talked to or heard the story before, you know, to me, it, I feel like any person that does something for so long and is passionate about what they do, that’s what they find their joy in. And once that’s gone, was there a void at that time? Is that what kind of prompted you to get back into, into one of those roles?
Jon (17m 28s): Well, what you quickly realize is that, you know, every spare moment, you know, for the last 20 years, I would have been thinking about an Oxford problem, but now there’s no more Oxford problems. And so your mind as well, I get to go think about something else because you have the same amount of creativity, energy that you had before. So I channeled that in a diary. So I’d never written a diary before. And I started writing in a diary and, and started doing other things.
And, you know, but after the six months off, it never, I was 47 at the time. It was never in my screen that I would, you know, retire in a conventional sense. I mean, I had the financial say, you know, situation I could retire, but that would be pretty boring. So hence the idea to start a business, which of course, it’s terrifying. You guys remember in the Oxford platform and the larger it gets, you know, you need a cell phone, you call someone, you have a cell phone, you know, and, you know, travel, you call so many trout, all of a sudden you’re on your own and you have no people and you have no infrastructure.
And every decision is the only decision being made that day. So it’s, it’s starting, starting with a blank piece of paper shuttling between two coffee shops is a much different construct than running a business, which at the time of 3000 people and blah, blah, blah,
Jesse (19m 0s): Did the, just the backup in terms of the, the Oxford, was it, there was an actual statute on the books. It was, it was a competition act challenge that basically meant you had to go longer go wide.
Jon (19m 12s): Well, we were at the point where our market share was we had 25% of the office in Toronto, 40% at Edmonton, 30% in Calgary, et cetera, et cetera. So, you know, increasingly there was kind of no obvious way to have a meaningful growth strategy for the business, unless it was going away from office or away from those cities. And, you know, we had worked for 10 years to get better and better at less and less until I th I felt we were very much best of class in running integrated downtown office complexes, but it’s not that easy to then snap your fingers and say, okay, now we’re going to do with these other things in other geographies and other asset classes.
So the machine, and I was really proud of the machine that the guys had built was very effective at doing that. And that had been our sole focus. And I think part of the reason we were so effective, but to then change that strategy was tricky. So that, that sort of gave rise to moving on.
Jesse (20m 18s): So what was it at King set that you did that you maybe thought that you wanted to do more, that you maybe weren’t able to do at Oxford, or were there aspects of King set that you were going to, you’re going to tackle differently and you had the ability to do so.
Jon (20m 34s): So when you start with a blank piece of paper, the advantages, the sheets blank. So, you know, it starts with, you know, going back to the relationships I’ve had at Oxford, trying to where there might be an opportunity to collaborate and so on and so forth out of that came the idea to create a, an opportunity fund, what we call it, a growth fund. And, and that had the scope to, to really be a lot freer. I said a few things. I mean, we had a very narrow strategy.
I said, I’d never have more than 12 people, you know, and, you know, life happens, but it, it, with, with the kind support of those stakeholders, you know, we’re able to put together a powerful team of people capital and, and, you know, start to build a business.
Jesse (21m 25s): So when you talk to Canadian companies today, like just a thing, it was on a podcast recently with clear bank, and they were talking about the idea of thinking globally first and just understanding the implications of, of starting a business and being global with Canadian real estate. I find that it seems to be maybe it’s changing, but somewhat different in that a lot of it is localized. I mean, real estate is in general, but for larger Canadian companies, is the future staying within Canada? Is it going, you know, exposing yourself to the States or globally, what’s your view on that?
Jon (21m 59s): So, you know, I don’t think there’s one answer, but I’ll tell you that I’d start with that real estate amongst every business is the most dramatically local business and as local because the facts on the ground are critical to interpret correctly and are so different, even in our own country. You know, if you look at downtown Montreal, downtown Vancouver, downtown Toronto, totally different, and they’ve got totally different drivers and so on and so forth.
Now, you know, there are obviously global real estate businesses. They are few and far between. And because typically, you know, if you look at the U S you know, many businesses, most businesses are regional for the same reasons. It’s when I, when I look at what we think our competitive advantage is, it’s micro market knowledge and intense relationships, both of which, you know, you leave, if you cross a border, because, you know, I, I have a lot of access to a lot of things in Canada.
I’m a total stranger in the webs. I, the, the access with the, we have the capital here is quite significant in the us. No one cares. And so it goes, and as far as for market knowledge, you know, I’ve heard of Columbus. I’m just not sure what state it’s in. Whereas, you know, if you think in, in terms of the Canadian market, you know, someone in our office as managed, owned, leased, appraised, or valued every building over a hundred thousand square feet in Canada.
So it, it, it’s, it’s a totally different set of facts. Now, often people say to me, you know, why don’t you look at the U S and it’s sort of, it’s a bit set in, in the context of, because surely you can’t be successful. You just stay in Canada. And, you know, like I’m a short, fat kid from Edmonton. It doesn’t really matter to me. So the, the, you know, the, the key thing is that you really have to think through where you think you’ve got competitive advantages, and then you’ve got to press those.
And there are 52 smarter guys in Chicago than we would ever be. So why would we compete in that market? That was so lots of smart guys in Canada, but, you know, we, we’ve got a big strategic platform here, which, you know, can create a lot about, so that’s what we’ll do. I think, you know, globally, you’ll continue to see, I think the most success in real estate, the national French companies or French companies, British companies, or British companies. And, you know, there’s, there are Canadian enterprises in, in, in Europe and they’ve done great business.
So it’s not that it can’t be done. I just don’t think is typically the norm technology is different technology. Doesn’t recognize borders. Technology doesn’t have borders most, most, or many consumer products. You know, can’t rely on a Canada only strategy because there’s not enough scale. You know, so other businesses do, you know, have to think about different capabilities and different competitive moat. Whereas the competitive moat for Canadian real estate is access to deals and capital, which is a huge moat, which is why you don’t see a lot of, or really any, or you don’t see many non-Canadian operators in Canada.
Jesse (25m 28s): You know what, like I said, before the show, I follow some of your posts on LinkedIn, and I wanted to ask you, then I got the chance here to over the last year, you know, we’ve seen the relationship between us and the us, and we see some of the implications of PPE and Keystone. And I think one of the posts, or, you know, the topic was just in regard to how we don’t interact with other provinces, as much as we should, perhaps you can expand a bit on that.
Jon (25m 59s): Well, I break them two pieces. First of all, the, you know, the nationalism that we’re we’ve faced with our American neighbor is, is regret. I mean, there was a time where, you know, we were much closer and integrated in, in all sorts of our lives. And, and that, that is, you know, dissipated, not just under Trump, it was also under Obama and before. So, so this is an ongoing trend. One of the issues Canada has to think about them is that, you know, we, we, we need food security, energy security, and as we know, healthcare security, and we don’t have any of those because we have regional trade agreements.
Food goes North and South and the West and the East. So we export in the West and we import knees. Same thing with energy. Well, both are, you know, are, are, are suspect, or, you know, can be potentially interrupted by a foreign actor. And the reason this happens is we don’t have free trade in Canada. We’ve got freer trade with our American friends than we do with our Canadian neighbors, which makes no sense. And, you know, if, if we could do, if we could accomplish one thing, we would say three things.
Let’s have interprovincial free trade. Let’s have national food security. So food going East and West, and then let’s have national energy security. Let’s build an energy corridor on Canadian soil that moves electricity from the East to the West, moves uranium and better chemicals from petroleum products from the West to the East. Let’s I don’t know why, you know, Alberta, we’re selling natural gas to our us friends for dollar 80 and MCF.
And our maritime provinces are buying it for six to $8 from their us neighbors. How can that possibly make sense? And Ana goes, and here we are, we have governor Whitmer in Michigan threatening to close down line three and British line three, which we just know that gas comes to a gas, comes to Ontario from, from Alberta. Well, if that gets shut down, like that’s a real problem. We may complain about a lot of things, but you know, there’s only three day food supply.
And when Cargill is shut down high river in with COVID, we were one day away from having beef shortage in Eastern Canada. You know, we’ve seen in the last year propane shortages where, you know, virtually parts of Eastern Quebec in the Maritimes, we’re one day away from running out of energy. When you don’t have food and energy security, when you’re in a country with massive abundance, it’s an infrastructure failure. And that would be a big national project, free trade, and let’s move goods and services back and forth across our great country.
Jesse (28m 49s): Yeah, the West and East side, I’ve heard this time and time again, I, in another life I worked at Embridge for a number of years and, and that was definitely part of the conversation. And it it’s demystified in a lot of ways or, sorry, misdefined in a lot of ways in terms of our reaction. If we, if we step back, sorry, step forward to 20, 20, 20, 21, our reaction initially to, to the pandemic, the lockdown, our response, what was, what was your view generally as a country? How do you think we did?
Jon (29m 21s): So, you know, I’d say that, that, you know, it was, you know, unprecedented has been used an unprecedented number of times, but, you know, I’ll, I’ll, I’ll say that the, I think we all need to give our political leaders a lot of, a lot of leeway in those, or particularly the first six months, because it was nobody, nobody knew what to do about anything. Okay. I think that as we find ourselves today, you know, my frustration is we have a private sector, vaccine delivery system that has delivered flu vaccines while we all a flu shot to 20 plus million Canadians for 20 or 30 years, why don’t use that distribution chain to distribute the vaccine?
Number one, number two is we’ve shown the challenges in public sector procurement with all the difficulties of health Canada, trying to buy vaccines and apparently not having perfect contracts. So why don’t we, why don’t we again, encourage the private sector to give a hand, to help procure these vaccines? Cause we need to get more and we need to get them in arms faster because to get ahead of the variance, everybody’s got to get vaccinated once because you’ll have to get vaccinated again in the fall and we can’t be still doing the first time.
So, and I think vaccines on a annual maybe, maybe twice a year basis are here with us are, are with us for some time. So we have an infrastructure, the existing drug drug store pharmacy infrastructure can administer today, 3 million Canadians a week that infrastructure exists. I don’t know why we need the federal government or the provincial government to replicate that infrastructure. They’ve got the systems where you can book online and they’ve got all the outlets and know they’re all set up.
They just need the vaccine. So the federal government in my view should be laser focused on getting more vaccine faster. And the provincial government should be focused on getting it in the hands of the, you know, the shoppers, the rec stalls, the IGA, whatever, and just let them go out so easy for me to say, these are tough choices. You know, it’s a very difficult set of facts, but my biggest issue is we have private sector infrastructure that knows how to do this stuff and we should use it.
Jesse (31m 44s): And w what do you think, is that a, what do you think they’re missing there on, on that piece? Is it, is it just, is a coordination problem at this point?
Jon (31m 54s): Well, you know, I mean, the fact is that there is a great set of skepticism at the senior healthcare health bureaucrats of the private sector. And you know, that, that is, that leads to them to say, well, we have to do it our way, and our way is different. So, you know, it’s just in a crisis, our number one job should be put needles in arms full-stop and no matter how fast we can do it, it’s not fast enough.
So, you know, lockdowns and all these other things, you know, they’ve proven themselves to be ineffective. We’ve had them before you cannot lock everybody down, unless you put a guard in front of everybody’s house. And, and so, you know, it is, well, you know, obviously premier, Ford’s got himself in a hell of a mess because he said, he’s going to have random police checks. And the police said, well, we’re not doing that. And then he’s like, you know, we’re not going to, you know, shut down playgrounds. And people say, well, we never said that.
So it is, we’re now in this, whatever, what happened in the first six months, I give people a lot of leeway whatever’s happening to them. I’m a little bit more tough to get along with. So I think, you know, the message should be listened to the scientists, leverage the private sector.
Jesse (33m 17s): Yep. And on that note, you’ve talked before about how you think it’s, I’m not going to put words in your mouth, but I think, you know, comes off that business, people have a duty or an obligation to engage in, in the political debate or at least put forward their views. So, you know, labor does it in, in, in a way. And, and we often see that business, people are a little bit shy to do it, and I was, you know, why do you think that is? Why do you think as, as business people, you know, people that are leaders of these great companies in the U S or Canada, don’t step up on some of these fronts.
Jon (33m 50s): So leaders have a lot of the big public businesses, you know, run a bit of a tight meaning. They’re always operating with some relationships with government. They’ve got consumer groups and unions, employee groups. They’ve got customers that think, you know, on the left, right. And, you know, they’re kind of anxious not to upset anyone, but I think, I think there is a role of business leadership to sort of outline a thought process, which, and from my perspective, I, I’m not, I’m not trying to convince someone that I’m right or wrong.
It’s not the point. I’m trying to get another perspective. So at least someone can say, that’s interesting. And I can think about that. And if you think about vaccine rollout and why doesn’t the government leverage the private sector health, the vaccine distribution system that already exists, you know, so people can say, well, they can say whatever they want. Right. But at least I think that’s important. And I think you’ve seen the bank CEOs over the last year. So then more vocal about issues that are important to them.
And we’ve seen business leaders in the past when, you know, the, the elections that were basically bought on GSD. And then the second, you know, second money election was bought on free trade and may have had that backwards, but either way, you know, a lot of business leaders, it lean in heavily there and say, here’s what we think this means to us as Canadians and to you as, as citizens. And I think increasingly, you know, we have to, as, as, as business leaders express or express, hopefully as nonpartisan as possible.
And I mean, for me, I voted liberal, I’ll go to conservative. You know, I haven’t quite crossed the line to NDP, but you know, it, it, it’s not in Boston. So because I, you know, I feel responsible to policies, not partners. And, and that’s why I’ve moved around. So I’d like to say for me, I’m a bit of a sentence because I think what’s in my personal best interest is that every Canadian has the opportunity to have access to reasonable healthcare, reasonable education, and has a reasonable prospect of achieving what their dreams were because people with hope are great names.
Jesse (36m 12s): So I want to be respectful of your time. We’re coming to the close here, but I’d like to step back and talk a little bit more on the real estate front, just from a macro perspective, I’m gonna ask you to get out your crystal ball here as best as possible. But basically I wanted to hear your, your view on, you know, where we go from here over the next year or two, obviously, you know, we’re, we’re getting tapped out from a monetary stimulus standpoint. I don’t think that we can keep interest rates. I mean, we’ve said this for five years, but at a certain point, I feel that at least with my clients and speaking with individuals that there’s this sense that we keep going down this road and then the debt load will just be too high.
So I’m curious, number one, your view on where our economy is heading and, and the best steps forward and the impact of that on, on real estate, generally speaking.
Jon (37m 3s): So, and now at the advantage of seeing the liberal budget, which was delivered just yesterday, I think what you’ve seen over the last 15 months or so is this significant transfer of debt from individual balance sheets to the government balance sheet. And by that, if you look at visa balances, if you look at savings rates, mortgage rates and so on and so forth, individuals are way better off. And the government’s a bit of a trend.
Now, the, the bet the liberals are making is to say that the revenge route will be powerful enough to generate the tax revenues, to get the ship back in order. And, you know, it remains to be seen it’s not totally long. So here’s what I see with the revenge era. Is it, most people, not most people have spent much less money salary. People have earned more or less the same, those that are rely on working out of the home, either been able to do that as an essential worker or they’ve got crews or other programs not perfect, but as a society, there’s been massive accumulation of disposable income.
And the day that we’re told we can get out of jail and go see our friends, our family, our neighbors, and our friends, God forbid a hockey game or a concert. You know, people are going to be pretty anxious to do that. And I think out of that will come all sorts of economic activity that will be perhaps quite sharper than people think as for the monetary drivers. I think central governors are going to be extraordinarily hesitant to do anything. And you’ve seen in the U S the fed has said, they’re moving from an inflation target to an average inflation term.
And, you know, we don’t really know what that means, and they’ve intended that. So you don’t really know what it means, so they can be flexible to make those decisions as they go. I think you see, you know, Canada’s basically signaled the same thing. So I, I think that, that we obviously then, you know, the difficult fiscal time we went through in the early nineties, most of your generation, either, it wasn’t, it wasn’t there, it didn’t connect. You know, so my generation was there.
I was paying 59% tax. I was seeing program Todd’s like I went to, but we did that as Canadians, knowing we had a common objective, which was to balance the budget and you know, what we did, and then taxes came down and the period under the, you know, Moroni set it up with HST and then Gretchen and sorry, manage progression and a man, you know, and then, and then a managed all that. Well, well, you know, we sorta built up a great balance sheet and, you know, we’ve, you know, squatter now let’s, let’s hope that this growth that I’m talking about can help stop the bleeding.
And then, you know, we’ll have to ultimately say, we’ve gotta figure out how to write substance. I was happy that there wasn’t massive tax increases in the latest budget, because all that does is put people back into the foxhole and it probably doesn’t raise much money, but certainly curves a lot of economic activity. So I’ll give the liberals credit there. And, you know, I think the child tax credit is an important initiative because, you know, freeing up spousals to work freely is I think, you know, a really fundamental thing to get it done.
So I thought, and you know what, it’s, we’re all gonna have to work on this together, but the key is vaccines in arms and let’s use everything we can to get it done. And then, you know, why don’t we use the greatest strengths of this country and get interprovincial free trade energy self-sufficiency and Boone self-sufficiency
Jesse (41m 9s): For sure. And I guess where we could leave off here is, you know, the future in terms of the, the Canadian outlook for real estate, obviously this is, this has all happened, different verticals in different ways, whether retail office industrial multi-room has, where are the areas that you think there will be opportunities over the next year or two, and further as a result of, you know, this, this last 12, 15 months we’d been through.
Jon (41m 37s): So, you know, the greatest challenge we’re facing is we’re going to have to have be more aggressive in competing for immigrants and keeping the ones that we have, not just immigrants, keeping all the Canadians we have. So let’s not think that’s a layer, which it was under the previous us administration. So that’s number one number. Then if, if we can achieve our goal of 400,000 new Canadians every year, the basketball home have skills jobs and are contributing, then, you know, there’ll be a lot of demand for every kind of realistic across the system.
So whether you’re in residential or industrial or officer retail, you know, there’ll be lots of renewed demand. So I think there’s opportunities everywhere in the opportunities largely fit inside. Someone’s experienced base. And so I don’t think, you know, someone should leave their experience-based seeking opportunities. They should find opportunities in that base because once we get, you know, back at it, I think you’ll see lots of opportunities. Things will be different, but it’s mostly trend trends that were in place anyway, and they’re being accelerated and you know what, it’s always there.
So that’s okay. But Canada’s like, we are such a phenomenal country. We’ve got so much going on. And sometimes we have to get out of our way and, and if we can really work together so that all Canadians can, can achieve their potential, we’ve got a great set of facts.
Jesse (43m 7s): It’s a great place to leave it off. My guest today has been John Love, John, thanks for being part of working capital.
Jon (43m 13s): Thanks, Jesse. Have a great day.
Jesse (43m 22s): Thank you so much for listening to working capital the real estate podcast. I’m your host, Jesse Fragale. If you liked the episode, head on to iTunes and leave us a five star review and share on social media, it really helps us out. If you have any questions, feel free to reach out to me on Instagram, Jesse F R a G a L E, have a good one take care.