That 2008 conference in Chicago that made me rethink cap rates

I was at a small CRE lender meetup in Chicago back in 2008 right when things were crashing, and an old timer showed me how he valued properties based on cash flow instead of comps. He pulled out a napkin and sketched out a simple DCF model that completely changed how I underwrite loans. Anyone else have a random encounter that shifted your whole approach to financing?

2 comments

2 Comments

the_susan4d ago

Gotta call BS on this being some life changing moment @lane.joel. People act like one napkin sketch from a random guy at a bar is some secret sauce but really it's just basic finance 101. Cash flow based valuation isn't some hidden knowledge, it's what any half decent underwriter should already be doing. Tom probably just needed to hear it from a stranger to actually pay attention. I bet if you pressed him on the details he'd admit the math wasn't even that different from what he already knew.

lane.joel5d ago

My buddy Tom had a similar thing happen at a bar in Denver back in 2015. Some random broker showed him how they looked at occupancy cost ratios for retail tenants and it completely changed what he thought was a good deal. He still brings it up every time we grab a beer, swears that napkin math saved his portfolio.