March 29, 2022

Real Estate x Crypto

How did you first discover crypto and then Galaxy Digital?

I found out about crypto from my son, who learned about it in college in 2016. He first bought ETH that March, then bought BTC starting in May of the same year. I started buying in May of '16 with less than zero knowledge. I was fascinated by the concept and possibilities. I didn't find Galaxy Digital until the fall of 2020. I happen to know a few people in Mike's circle. His family members and a former partner in Fortress have been clients but none of them had ever mentioned GLXY, and still haven't to this day, but I respected Mike and knew there was something to bridging the institutional investor-crypto gap. I started buying at $4 and haven't stopped. The rest is history.

How long have you been in real estate and what are some of the most significant changes you've witnessed in the market over the years?

I've been in real estate for 20 years. The most significant changes I've seen revolve around the evolution of buyer & seller psychology and savvy. People are much more savvy now in terms of information because there's so much more readily available data. That has tightened the gap in terms of educating buyers & sellers, which is beneficial and makes markets more efficient. The psychology of more educated clients is an evolution that has happened recently in the industry due to greater transparency, which is a positive. But psychology, as in willful blind spots, still remains as the Achilles heel for many smart players who shoot themselves in the foot. That aspect hasn't changed and it still frustrates me to watch that happen.

Real estate is clearly an excellent store of value. Bitcoin has a strong store of value narrative, has grown rapidly, but still has a long way to go as an asset class. Do you think Bitcoin, or crypto in general, will absorb any market share from other major SoV asset classes, primarily real estate and gold?

I do think that crypto will absorb some market share of SOV asset classes, but gold more so than real estate. Real estate has value on multiple levels, not just as an asset class. Bitcoin does share some of that emotional pull, but a home is tied to lifestyle dreams in a very direct way that BTC is not. One's home is one's identity to a large extent. And the alternative to owning is renting from The Man, so to speak. Historically, high quality real estate has shown itself to be the high ground to keep dry powder. High quality real estate is generally the most resilient and quick hard asset to bounce back from hard times. So, I see BTC and other crypto as a complement to one's real estate portfolio, rather than a SOV to replace it.

What does a well-balanced portfolio look like to you; roughly what percentage should be allocated towards real estate, crypto (GLXY included), and other investments?

I'm truly no expert regarding a balanced portfolio, but real estate should definitely be in the mix in a big way, along with some triple A stocks that are relatively safe, and a large proportion of crypto - especially Galaxy Digital - and more especially GLXY if you don't have either the time or the inclination to closely follow the nuances of crypto and Web3. I'm also a big believer in investing in what you know and understand (which I definitely did not follow when I first invested in crypto, but I believe in my son, so I guess that counts for something!). So, don't forget what's right in front of your eyes, including your own entrepreneurship.

Real estate is becoming increasingly out of reach for the average North American. Do you believe housing will level out eventually or will the market stay hot indefinitely as investors look for safe havens to park their cash?

I think that real estate will stay hot, and that it will virtually always rise in value, even though there will always be cyclical dips. Value will be impacted by things like geopolitical instability, localized changes like when crime rises, and natural disasters. But these dips are short term and present opportunity. That said, the best way to get in, even while real estate stays hot on the whole, is to find and create value. Buy what others don't want in a solid location. These gems are found by having vision that eludes others, and creating value by upgrading a diamond in the rough. If you're willing to delay gratification and do a smart renovation over time, you'll find something you can afford that will exponentially increase in value. I've never lost a penny doing this. I've done it multiple times and have been very successful. It's not brain surgery but like most value creators it does require vision, patience, and work. The other way to go is to get in early on someone else's vision by buying into a new development as soon in the process as possible. The sponsor almost always needs to hit a hurdle of a percentage sold to satisfy lender requirements...and demand is less before something is built. I have clients who are serial early buyers in new developments and they do very well 99% of the time - if they buy quality. You can often flip the property soon after closing when it's move-in ready and do very well. That's a safe haven to park cash even in a frothy market if you're smart about it.

Galaxy Digital has an extremely diverse portfolio within the crypto space. Is there any particular investment or sector that excites you the most?

In GLXY's portfolio, I'm excited about Luna because I think the Terra ecosystem is brilliant. I'm also very excited about their NFT ground floor holdings because I believe that NFT's and smart contracts will inevitably tie into everyday life in the future. But I'm most excited about GLXY's perfectly orchestrated positioning to bridge the "normie"/ institutional investors to crypto and Web3. BitGo is also exciting. It will be interesting to see how GLXY's market share evolves on the 1, 3, and 5 year horizons of crypto and Web3. I'm obviously bullish.

How would you pitch investing in Galaxy Digital to the real estate crowd?

I pitch GLXY as a well-managed, fast growing, well-hedged, early-in crypto investment company. GLXY provides exposure to the best, most diversified crypto assets through people who know a lot more about crypto than most of the real estate crowd and than most people I know, actually. Everyone needs crypto exposure, in my opinion, but most people (including me for the most part) don't have the time or inclination to study and absorb the details and nuances of crypto, how it's going to change the world, and how it's already changing the world. To me, that makes Galaxy Digital the smartest and safest crypto investment for most people.

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