Shane

All situation specific but nearly all urban center residential properties in Boston and NY wouldn't be close to collecting rent that would cover your fixed costs assuming 80% leverage. Rent is down 20% this year in Boston and it was already not cash flowing. So while possible I wouldn't be confident in it being probable over a 5-7 year period without rental growth.

I'm actually mulling the idea of buying an apartment in Boston right now and have been trying to get a handle on how the remote work environment might look after the pandemic for the obvious implications. I think you've probably come across more useful data/articles than I have been able to find. Can you explain or share some info on why you're so confident about his call on offices and retail in urban centers? I'm still a little worried demand might be lower for an extended period of time. Regarding offices - people have long-term contracts so it was never going to show up in a big way in the near term unless we got a ton of bankruptcies. Curious what you're seeing?

Did you continue to buy WFC as it declined into October/November 2020? I think that WFC still has room to go, much of the potential good news hasn't had an opportunity to show up yet.

I think this is spot on. I think they weighed the investment versus BAC and just prefer that business for the very long-term. It doesn't mean that WFC won't work out for holders today, but it doesn't fit WEB's framework. He's consistently avoided turnarounds and that is exactly what WFC is right now.

I wouldn't let that deter me if I liked the outlook for a business - liquidity can fix itself over the years if the business grows.

It's great, Imagine a life at 43, where there is no sex, because your spouse is already [& always] asleep when you jump into the hay. Am I missing something here???

Thanks for this - this point of view makes sense... but the trend prior to the pandemic was to increase density and that allowed many firms to pay increasingly higher rents... that trend looks like it will reverse and my expectation would be for rent to come down and therefore their investments to come down. Of course I agree offices aren't going away... but their headline insistence that it won't affect them long-term seems like denial. Here they are a little more candid saying that they don't know, but in other forums they play it off as if it is not a negative.

I'm just increasingly worried that BAM is exhibiting denial of problems instead of pragmatism. Perhaps it is my own bias - but their insistence that remote work isn't a long-term threat to office properties just sounds insane to me. Does anyone have a variant perception that agrees with them? I am a shareholder, but feel like they are displaying a lot of the characteristics from 'How the mighty fall'. I'm seeking out dis-confirming evidence - would be a big help to hear the other side.

As a banker who has successfully turned around a bank and lived through a failed one, I strongly believe in banking that outsiders are needed to shift the dynamic in a struggling banking organization. Maybe it is anchoring in prior views or truly mismanagement, an outside view and structure can bring failing strategies to light, institute new ones, and investing in strong strategies. The independence of prior problems and troubles allows for more flexible and new approaches to work through the major rocks needed to improve the company. We will see how this turnaround progresses. I have no position in WFC but think it is trading cheap, but I am not convinced yet that they have a firm grasp on the problem and have presented a viable plan to solve given the regulatory challenges faced. As someone who has been working with people and companies with Tribal Leadership now for almost 8 years, I can tell you that most failing strategies are a function of a culture not aligned with the strategies. Most consultants just do change management without any actual transformation and ontological work involved which is where the culture shift happens. Without ever having been in the company, I'd be 99% it's a culture issue and if the culture shifted, new strategies would be created naturally as a byproduct of that. ...this is the last bastion of low-hanging fruit alpha IMO outside of super tiny net-nets which will always have an advantage due to limits of position sizing. The truth is I could with maybe 3 other people come in and make more of an impact in Wells Fargo in 1 month than they have in the last few years. The level of amateur hour is funny but also kind of sad. When I work with people, they assume I'm just another consultant and then their world gets rocked within 1-2 days. Did you just use this post as a platform to market yourself?

Curious what board members might think of this criticism: by bringing in outsiders to right the ship, Wells Fargo is committing a common turnaround mistake. I believe it was the book "How the Mighty Fall" or "Good to Great" by Jim Collins (I can't recall) where it was found that the successful turnaround usually had brought people from within up to fix the company. Perhaps the idea is that if the corporate culture is so weak that there is nobody from inside who can satisfy the position and right the ship, that the job is too momentous to have a high probability of success. Thoughts?

I understand what you mean, but disagree that sourcing investment ideas from mandatory SEC filings should be characterized as theft. That's fair - I believe my point still stands that it isn't fair to the investment managers.

Well for marketing purposes the small firms can just send their holdings to prospects, unless you're suggesting they find clients who are perusing their 13F's? It's honestly a big problem in the industry that all of us steal ideas and don't pay for them. If you are a responsible long-term investor in quality compounders with low-turnover why would anyone pay you when they can just copy you? It is my opinion this should pass. Also I don't think companies would use 13Fs to see who owns them, I would assume they get that info from exchanges. Is that the case?

while claiming that purchases of retailers on life support has nothing to do with their retail real estate business - it's just an investment opportunity. And something along the lines of SPG is not a mall company. There is more than one way to go through life I guess. https://www.cnbc.com/2020/05/07/mall-owner-brookfield-will-spend-5-billion-to-save-retailers.html. It looks like the retail investment is more of a distressed call and will be through the PE arm.

I have to say... I find this to be concerning. I think it is emotionally difficult for anyone in an entrenched position to recognize secular shifts that work against them. How can this not be a negative for commercial office space? At my firm, we have found employees are just as productive if not more productive at home. Individuals with young children do seem to prefer coming into the office to get some peace and quiet, but the rest of the firm has now voted to come in ~3x per week on average even after the Pandemic is over. We've sent everyone printers and monitors to set up home offices recognizing that this is a very long-term trend. I hear the same from nearly everyone in my network. We won't get rid of an office, but we won't prioritize it as a cost anymore either and we will likely downsize. Additionally - aren't Twitter and Facebook permanently shifting to remote work? If everyone comes in at least 3 times a week, wouldn't the office space required be the same at least? Unless you guys plan to hot (hostel) desk? Yes hot seating for half of the office and it isn't everyone, we already had a few remote workers. I imagine we will have many more by 2021 as we now have the green light to live wherever we want. For those of you that have followed BPY closely - is this potentially a concerning trend? They've clearly not gotten the results they wanted out of the retail acquisition... and that MIGHT not be their fault given the circumstances... but now they seem to be at least somewhat in denial about commercial real estate. I agree with Xerxes - it's very difficult to know how it changes, but I have no doubt at all that rents will be under pressure.

I have to say... I find this to be concerning. I think it is emotionally difficult for anyone in an entrenched position to recognize secular shifts that work against them. How can this not be a negative for commercial office space? At my firm, we have found employees are just as productive if not more productive at home. Individuals with young children do seem to prefer coming into the office to get some peace and quiet, but the rest of the firm has now voted to come in ~3x per week on average even after the Pandemic is over. We've sent everyone printers and monitors to set up home offices recognizing that this is a very long-term trend. I hear the same from nearly everyone in my network. We won't get rid of an office, but we won't prioritize it as a cost anymore either and we will likely downsize. Additionally - aren't Twitter and Facebook permanently shifting to remote work? If everyone comes in at least 3 times a week, wouldn't the office space required be the same at least? Unless you guys plan to hot (hostel) desk? We will use up our current lease partly because we just expanded our footprint - so no hot seating this year. The long-term goal is to provide hot seating for 25-50% of the office given it is pointless to pay for desks people aren't using. Also keep in mind we already had a few remote workers, but that wasn't the norm. We've more or less been given the green light to live wherever we want now so I would imagine we have many more in 2021.