All posts by Keith Thompson

Deep valleys of life

In life, there are many times we go through a slow periods or down cycles that at the time, seem like they will never end. These could be personal, financial, relationship, business or social. We all have had these periods in our life, but the question is what to do when faced with one.

The answer is I don’t know, or at least I don’t know what the answer may be for you. All I can tell you is my experience. When I went through one of the darkest valleys in my life back when I had the restaurants, I didn’t need motivation from books, sermons, speeches etc. I didn’t want to hear some quote from people in the past. All that is good and noble, but it wasn’t what I needed or depended on.

All I needed to get through the period was the eyes of my wife and my two daughters who believed in me. When I came home and saw their faces, that was all I needed. They loved me and believed in me and that my friend was how I got through the restaurant phase in my life. Side note, if Chick-Fil-A offers you a store, say yes. If you want to invest in some other form of restaurant, the answer should be three words. No thank you. Ha

When you’re in the dark hole in one of life’s valleys and can’t see out, it is there that you really find out who you are and what you believe in. I remember (still makes me cry) telling God if he would get me out of that situation, I never again make the same decision and would forever give him the praise for it. He did his part and I have always given him the praise. It changes a person when you go through a deep valley. You come out much more wise, thoughtful and grateful.

That is what worked for an uneducated hotel broker that stutters. It keeps you humble knowing how close you came to losing it all. In conclusion, it was the belief my wife and daughters had in me, that helped me see out of the valley and get through the rough spot. KT

When we get older, things change

Presents – When you are a child, you get big presents like a gym set, bicycles, basketball goal, play kitchen or a battery power car to ride in. The older you get, the presents for birthday and Christmas get smaller. Later in life it may be a tie or a pair of socks but regardless, it will fit into a little bitty box. Side note – For our older children and son in-laws I still like to buy them at least one toy to relive their childhood.

Clothes – For guys (not ladies) the older you get the less clothes you need. Guys could go on a four-day trip with two changes of clothes. We just seem to wear the same ones several times before washing them. When we all were in high school, you had to have something different on every day to mix it up. You never got caught wearing the same shirt two days in a row. When you get to be an older guy (again, not ladies) we can wear the same jeans four days in a row and the truth of it is, we don’t care what other people think.

Food – for guys, when we find something we like, we can eat it every day for a week and love it as much at the end of the week as at the beginning. Older folks do not like their restaurant server to be new and in training because the order usually comes out wrong. Elaine and I have this thing we say when this happens, and it involves my brother in-law.

Technology – when you get older you just want it to work. You don’t care about all the new functions in your latest update. We just want to do what we want to do and let the young folks figure out all the bells and whistles.

Entertainment – A guy may watch reruns of Andy Griffith. Jesse Stone and NCIS multiple times and be as happy as can be. Guys can read the same book several times and enjoy it as much the 2rd time as the 1st time. All we want is for Prime and Netflix to work when we push the button. We don’t care about all the new categories and favorites etc. We go to the “continue watching” section and we are good to go.

Standing in line – as we get older, we don’t like standing in line at the Starbucks behind someone ordering 10 different drinks with five adjectives each for their office staff. We want to walk in and go straight to the counter and get our coffee. No flavors, no whips or swirls, toppings etc. Just coffee. We like to use the terms, small, medium and large, not the fancy names the store wants you to use. I had this barista one time that made it her mission to make me use the term “grande” instead of medium. I told her to look at the three cups and with her own wisdom, pick the one she thinks is the medium. She gave me a Venti just for spite. Ha

Traffic – it is a fact of life if you drive, but older people seem a little more relaxed and acceptant because we are not in the same “hurry up” phase of life as when we were young.

Love and family – As we all get older, this is the area of our life where we like to spend more time and more focus on. Our spouse, children and grand children take center stage in our life and in our hearts. The older we get the more important family becomes because we are not thinking about business with the same intensity we once were.

There are many advantages to getting older. Social Security, lower insurance cost through Medicare, driving an old truck without trying to impress anyone, eating what you want, watching what you want, taking naps when you want, more free time and living life to the fullest. Age has its advantages and hopefully everyone reading this blog over age 60 can relate to some of the content. KT

Ronald Reagan quote

In 1985, President Ronald Reagan gave a Veteran’s Day speech. In that speech he quoted a sentence that made headlines. He said, “Some people spend an entire lifetime wondering if they made a difference. The U.S. Marines don’t have that problem.” 

I loved that man and the American example he stood for.

I was not in the Marine Corps, but it sure felt like it. I was in the Navy and the unit I was assigned to spent half of our time dressed in a Marine uniform with Navy insignia and drilled with the Corps. It was like I was in both.

As the country observed Veterans Day this past Saturday, November 11th, civil and global unrest was covering the news. Knowing that we have service members like the Marines, Army, Navy and Air Force out there keeping the US safe, it should humble us that we can live freely at home, spend time with our family and go to a public place of worship without persecution. Those are the freedoms many people seem to overlook and take for granted.

If you see a service member, thank them. Retired or active duty, it doesn’t matter. KT  

When the pendulum stops swinging

I have been a hotel broker for 33 years and during all past cycles, the markets would simply swing from being either a seller’s market or a buyer’s market and then after a correction, swings back again. Using a swinging pendulum as a metaphor for the hotel real estate market today, the pendulum has almost stopped swinging. In my history as a hotel broker, the only time the pendulum almost stopped swinging was just after 911 and this new interest rate cycle we all find ourselves in today. In 2023, new transactions in the hotel space are down 50-70 percent depending on the brand and the market.  

Today it is neither a buyer’s market nor a seller’s market. Debt interest rates today are double + what they were mid-2022 and depending on who you listen to, I believe we are in this heavily elevated rate cycle though 2024 and possibly beyond. Those hotel investors that are waiting for interest rates to return to pre-cycle levels will be waiting for years and possibly never. We are in a new normal. I hear people talking about the 25-year interest rate averages in an attempt to lessen the impact rates are having on commercial real estate now, but those arguments are not filtering down to the investor level.

The whole inflation cycle is complicated to fully understand but all will agree that it is not transitory as some people wanted us to believe. If you own a restaurant, your prices today are 50-60% greater than pre-pandemic levels and, in many cases, double. Hypothetically, if rates returned to 2019 levels and inflation was tamed, ask yourself, will that same restaurant owner return his pricing to pre-pandemic levels. The answer is of course, a resounding, no. Same with homes, housing, rent, utilities, property tax, prescriptions, and food to just name a few areas. We are in a new marketplace today, that in my humble opinion, has significantly shifted.

The era of cheap money and free money, I fear will have a very long-term effect on the national commercial marketplace and in particular, hotel real estate. In most cycles in the past, a buyer could purchase a hotel for a cap rate roughly 300 bps over his debt interest rate. If the buyer’s interest rate was say, 4%, the buyer could buy a hotel in the 7% cap rate range on NOI and make money. With interest rates today, that puts disposition values in the high single-digit to low double-digit cap rate levels not seen since the mid to late 90’s. There is a gap spread today between value expectations with sellers still wanting 2019 values and buyer’s only willing to pay today’s value. On average, hotel values nationally are down 15-25% due solely to the cost of the debt stack. I personally believe this gap spread will close in 2024 as many hotel loans are coming to term and owners must decide to refinance at today’s rates or sell. The problem with waiting, it could be a 3–5-year decision or possibly longer.

Over the past 30 years there have been six down cycles in hotel real estate. Until recently, once a down cycle stabilized, there were generally five to eight good years before the next thing happened. Starting with the pandemic, tough economic cycles seem to be happening in a much faster sequence. While we all hope for a fast return to economic stability, given the current threats to our economy and global unrest, recovery from this down cycle may extend well beyond the current estimates. KT

The grass sometimes looks greener on the other side of the fence

In houses, cars, jobs and relationships and many decisions in life, the grass isn’t always greener on the other side of the fence. It just looks greener from a distance. Every patch of grass has holes, dead spots, rot and insects. The reason it looks greener is because you can’t see it up close.

I love old hot rod cars. I really really do. If Elaine would let me, I would have 25 right now. Hot rod cars can be a good metaphor for what I am talking about. Some look great from 20 feet and 5 feet while other look good at 20 feet and are a dog when you get up close. It is the same way in life when something looks better than what you currently have. The problem is you know what you have now but really can’t see up close what the better (greener) option looks like.

Not always, but many times, the best thing you can do is water and fertilize the grass you already have. Its much simpler, costs less and who knows, could be better in the long run.

There is a story from the 1800’s where a young man left his home farm to search the world for diamonds. After a few years, broke, sick and defeated, he came back home to his farm. On his mantle was rock he had found on his property some years before and thought it looked unique. A diamond expert friend of his was visiting his home and after dinner they went into the family room to sit and talk. The friend noticed the rock on the mantle and got up and walked over to it. He picked it up and said to his host, “do you know what this is?” Long story short, it was a large diamond and his farm at the time became the largest diamond mine in the world.

He looked out and thought if I could just go there (greener grass) I will find what I am looking for when all along, he lived on the largest diamond mine in the world.

The grass is not always greener (better) on the other side and sometimes we just need to stay on the side we are already on and water it. KT