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How the Instincts That Got You Promoted Can Hold You Back

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Opinions expressed by Entrepreneur contributors are their own.

Key Takeaways

  • Executives tend to view managers as more prepared than managers feel themselves, revealing a significant gap between confidence and actual readiness for leadership challenges.
  • Leaders must move beyond being the person with all the answers to coaching others, delegating decisions and developing their teams’ capabilities.
  • Strong leaders set clear goals, establish guardrails and give people ownership of outcomes — building organizations that thrive when they aren’t in the room.

Confidence is running well ahead of readiness in the executive ranks — just not in the way most leaders assume. A Careerminds study published in August found that while 98% of people managers and 97% of HR professionals believe managers are prepared to lead through what’s ahead, fewer than half of managers feel highly prepared across the specific challenges now defining the job.

That overconfidence gets worse the higher up you look. Executives consistently rate managers as more ready and better supported than managers rate themselves, with 66% of C-suite respondents calling managers very ready against just 42% of those closer to the front line.

That gap has a name, and it shows up earliest for leaders who were promoted for their expertise. The instincts that made someone the best engineer, the sharpest analyst or the most reliable operator in the room are individual-contributor strengths. At the enterprise level, those same instincts are no longer compatible with teamwork.

Having coached executives across industries, I’ve watched that same gap open in almost identical ways, and it never announces itself as a crisis. It shows up first as a small, specific moment. Recognizing it is the difference between leaders who make the transition and leaders who stall inside it. Here’s what that moment looks like, and what to build once it arrives:

1. Catch the tell before it becomes a habit

Moving from managing a team to leading leaders is a change in both scope and attitude. Kristin Whitley-Smith, president of Mooring USA, a nationally recognized provider of best-in-class commercial construction and disaster restoration solutions, described it this way: “As CFO, my value was in having the answer — the number, the analysis, the recommendation — ready before anyone asked. As president, I noticed people were still waiting for me to just hand them the answer, and I realized that if I kept doing that, I was crowding out the people I needed to develop and rely on. The shift was learning to sit on my hands, ask what my team thought we should do and let them own the outcome, even when it took longer or looked different than what I would have done.”

That’s the clearest early signal it’s time to reconsider old habits. Results now depend on how well other experienced professionals do their jobs, not on what one person can personally deliver — and the instinct to jump in and fix something in a meeting, because the technical background makes it easy, is a reflex from a job you no longer have.

There’s a related reflex, and it’s easier to miss. It shows up not when you volunteer an answer, but when someone else asks you for one. Elsbeth Johnson, a senior lecturer at MIT Sloan, found that the real block usually isn’t a skills gap. It’s an inability to say “no.” Leaders keep absorbing requests for help because turning them down feels like a failure to be useful, according to her research in Harvard Business Review.

Both reflexes only change once they’re noticed. Track how often you supply the answer before anyone asks and how often you say yes to requests that aren’t yours to carry anymore. Build the opposite habit deliberately. Ask what someone thinks before offering a view, then let the decision play out within clear guardrails instead of correcting it in real time. The ratio says more about readiness for the next level than any review ever will.

2. Redefine what “valuable” means before the transition stalls

The measure of a leader at this level is how well the organization performs without them in the room, and leaders who don’t redefine “valuable” around that standard tend to struggle. McKinsey research has found that one-third to one-half of new CEOs are considered to be failing within 18 months of taking the role, and more than 90% of them later admit they wish they’d managed the transition differently.

Author Liz Wiseman’s research offers an explanation for that gap. She calls the two types of leaders Multipliers and Diminishers. Diminishers drain intelligence and capability from the people around them by insisting on being the smartest person in the room; Multipliers extract more capability from the people they lead than they contribute themselves, not by directing the work personally, but by coaching the people responsible for it and treating a mistake as a data point instead of a failure to correct. Her research across 150 executives in 35 countries found that Multipliers effectively double the available intelligence and output of their team compared to Diminishers.

That’s the standard “valuable” needs to move toward. In practice, it starts with something concrete. Define three to five outcomes that actually matter for a given initiative, such as revenue, retention, a launch date or a quality bar. Everything underneath those outcomes stops being where your value lives. Measure yourself by how completely the team hits them without you, not by how much of the thinking behind them was yours.

3. Set the conditions, then get out of the way

Microsoft’s cultural shift under Satya Nadella remains the clearest example of this posture put into practice. Jeffrey Snover, Microsoft’s CTO from 2019 to 2022, recalled in an account reported by Entrepreneur that Nadella told a room of senior executives to manufacture success with the resources they already had rather than ask for more, and to be bold even though they might fail. The only real requirement, Nadella said, was intellectual honesty: having a clear theory of success, allocating resources against it and adjusting as new information came in.

That is the system-shaping posture in a single meeting. Set the standard and the conditions, then let people own what happens next. Give a team the outcome and the constraints, then step back far enough to let them fail small before they succeed big.

A different way to measure yourself

The identity built on having the answer does not disappear the moment a title changes — it has to be deliberately replaced. Leaders who make that trade build organizations that function well without them in the room, which is the only measure of leadership that actually scales.

The next time the instinct to jump in and fix something shows up in a meeting, treat it as information instead of a habit to indulge. That moment, more than any title change, is where the real promotion happens.

Key Takeaways

  • Executives tend to view managers as more prepared than managers feel themselves, revealing a significant gap between confidence and actual readiness for leadership challenges.
  • Leaders must move beyond being the person with all the answers to coaching others, delegating decisions and developing their teams’ capabilities.
  • Strong leaders set clear goals, establish guardrails and give people ownership of outcomes — building organizations that thrive when they aren’t in the room.

Confidence is running well ahead of readiness in the executive ranks — just not in the way most leaders assume. A Careerminds study published in August found that while 98% of people managers and 97% of HR professionals believe managers are prepared to lead through what’s ahead, fewer than half of managers feel highly prepared across the specific challenges now defining the job.

That overconfidence gets worse the higher up you look. Executives consistently rate managers as more ready and better supported than managers rate themselves, with 66% of C-suite respondents calling managers very ready against just 42% of those closer to the front line.

That gap has a name, and it shows up earliest for leaders who were promoted for their expertise. The instincts that made someone the best engineer, the sharpest analyst or the most reliable operator in the room are individual-contributor strengths. At the enterprise level, those same instincts are no longer compatible with teamwork.

GAP (PAC) Q3 2026 Earnings Call Transcript

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GAP (PAC) Q3 2026 Earnings Call Transcript


Image source: The Motley Fool.

DATE

Tuesday, Oct. 20, 2026

CALL PARTICIPANTS

  • Investor Relations – Maria Barona
  • Chief Executive Officer – Raul Revuelta
  • Chief Financial Officer – Saul Villarreal

TAKEAWAYS

  • Passenger Traffic — 18.4 million, representing a 1.4% year-over-year decline driven by weakness in international leisure destinations.
  • Revenue (Ex-Construction) — up 13.2% year over year, supported by the consolidation of Cross Border Xpress and growth in directly operated businesses.
  • EBITDA — MXN 6.1 billion, representing 19.2% year-over-year growth.
  • EBITDA Margin — 67.8%, representing an expansion of 3.6 percentage points from 64.2% in the same period last year.
  • Domestic Passenger Traffic — up 0.6% year over year, with Guadalajara performing as a primary driver.
  • International Passenger Traffic — down 4.5% year over year, reflecting inconsistent recovery across leisure markets.
  • Guadalajara Passenger Traffic — up 8% year over year, supported by a 13.1% increase in international volume.
  • Puerto Vallarta Passenger Traffic — down 11% year over year, primarily due to a 24.8% decline in international traffic following security concerns in the region.
  • Los Cabos Passenger Traffic — down 6.8% year over year, reflecting softer leisure demand.
  • Montego Bay Passenger Traffic — down 23% year over year, due to the impact of Hurricane Melissa on hotel capacity and connectivity.
  • CBX Revenue — MXN 775 million, supported by approximately 1 million passengers using the facility in both directions.
  • CBX Capture Rate — 32.4%, up from 29.7% in the third quarter of 2025.
  • Mexico Aeronautical Revenue — up 5.3% year over year, driven by the implementation of approved maximum tariffs for the 2025 to 2029 period.
  • Jamaica Aeronautical Revenue — down 12.7% year over year, reflecting lower traffic volumes and the translation effect of a stronger Mexican peso.
  • Nonaeronautical Revenue — up 37% year over year, supported by the integration of Cross Border Xpress and directly operated business lines.
  • Cargo and Bonded Warehouse Revenue — MXN 674 million, representing 20.7% growth driven by electronics and artificial intelligence manufacturing in Guadalajara.
  • Operating Expenses — up 3.8% year over year (excluding IFRIC-12), driven by higher personnel and maintenance costs.
  • Technical Assistance Fees — significantly reduced following the internalization of services, providing a structural benefit to the cost base.
  • Master Development Program Investment — MXN 8.6 billion during the first nine months of 2026, representing the company’s largest infrastructure expansion cycle.
  • Dividend — MXN 20.80 per share, to be distributed in a single installment following an update to the outstanding share count.
  • 2026 Passenger Traffic Guidance — reiterated at a range of negative 3% to 0%, requiring improved performance in the fourth quarter.
  • Projected Maximum Tariff Fulfillment — approximately 95% for 2027, following a compound tariff increase of 7% planned for the first week of Jan. 2027.
  • CBX Average Revenue Per Passenger — $43, compared to $42.80 in the second quarter of 2026.
  • CBX EBITDA Margin Target — 72% to 73% in the long term, supported by commercial synergies and pricing strategies.
  • Passenger Capacity Expansion — planned 60% increase in total terminal square meters across the network by the end of 2029.

Need a quote from a Motley Fool analyst? Email [email protected]

RISKS

  • Revuelta stated, “we do not view this stabilization as a sign of broader base recovery across all our markets as of yet,” regarding the slowing decline in passenger traffic.
  • Revuelta warned that “international leisure traffic is recovering at an inconsistent pace due to several external factors,” citing ongoing volatility in demand.
  • Revuelta noted that “airlines capacity limits and weak leisure demand may persist longer,” impacting the timeline for traffic normalization.
  • Management reported that international traffic in Puerto Vallarta declined by 24.8% due to “security concerns following events in Jalisco in February.”

SUMMARY

Grupo Aeroportuario del Pacífico, S.A.B. de C.V. (PAC +7.05%) reported third quarter results that showed the contribution of business diversification to offset a 1.4% year-over-year decline in passenger traffic. Management stated that the consolidation of Cross Border Xpress and the internalization of technical assistance services provided a structural benefit to margins despite softer demand in international leisure markets. The company confirmed its full-year passenger traffic guidance and reported progress on its 2025 to 2029 Master Development Program. Management indicated that revenue growth was supported by the implementation of maximum tariffs in Mexico and performance in directly operated business lines such as cargo, advertising, and VIP lounges.

  • Integration of Cross Border Xpress: Revuelta noted that “this is still the early stage of CBX integration,” with plans to expand commercial offerings such as food and beverage by late 2027.
  • Internalization of Technical Assistance: The company eliminated technical assistance fees by internalizing services, a shift management expects to support long-term profitability by retaining more operating value.
  • FIBRA GAP Establishment: Management reported that the process for establishing FIBRA GAP is advancing and expected to be completed during Nov. 2026 to broaden funding alternatives.
  • Airline Industry Dynamics: Revuelta indicated that 2027 traffic expectations of mid-single-digit growth already account for the potential impact of airline mergers and capacity adjustments.
  • Future Capital Expenditure: Revuelta stated that the next Master Development Program cycle starting in 2030 will likely focus on “reposition of equipment rather than additional capacity” following the current infrastructure expansion.
  • Jamaica Capacity Recovery: Management reported that seat capacity in Jamaica is expected to recover to approximately 90% of original levels for the upcoming winter season.
  • Cargo Strategy: Revuelta noted that the growth in cargo revenue is driven by an “increase on semiconductors” and AI-related manufacturing in the Guadalajara region.

INDUSTRY GLOSSARY

  • Cross Border Xpress (CBX): A pedestrian bridge connecting the Tijuana International Airport and a terminal in San Diego, California.
  • IFRIC-12: An accounting standard for service concession arrangements where the infrastructure remains the property of the grantor.
  • Master Development Program (MDP): A five-year regulated investment plan agreed upon with the Mexican government that defines capital requirements and maximum tariffs.
  • FIBRA: Fideicomiso de Inversión y Bienes Raíces, a Mexican real estate investment trust designed for financing real estate and infrastructure.
  • Technical Assistance (TEA): Fees paid to a strategic partner for management and operating expertise.
  • Capture Rate: The percentage of total airport passengers that utilize a specific facility or service, such as CBX.
  • Maximum Tariff: The regulated upper limit of revenue per workload unit that an airport operator can charge for aeronautical services.
  • VFR: Visiting Friends and Relatives, a specific passenger segment distinct from business or leisure travel.

Full Conference Call Transcript

Operator: Good morning, and welcome to GAP’s Third Quarter 2026 Conference Call. [Operator Instructions] Now it’s my pleasure to turn the call over to GAP’s Investor Relations team. Please go ahead.

Maria Barona: Thank you, and welcome to GAP’s Third Quarter 2026 Conference Call. Prior to introducing the management team, I would like to take a few moments to mention forward-looking statements as described in the financial report. Please be advised that any comments made today may not account for future economic circumstances, industry conditions, the company’s performance or financial results. As such, any information discussed is based on several assumptions and factors that could change causing actual results to materially differ from current expectations. For a complete note on forward-looking statements, please refer to the quarterly release issued yesterday. Thank you for your attention.

It is my pleasure to introduce our speakers from GAP who will be discussing with you the operational and financial results for the third quarter of 2026. They are Mr. Raul Revuelta, Chief Executive Officer; and Mr. Saul Villarreal, Chief Financial Officer. Mr. Revuelta, please proceed with your opening remarks.

Raul Musalem: Thank you, Maria. Good morning, everyone, and thank you for joining us today. I want to start with the fact that GAP delivered a solid financial performance in the third quarter of 2026. Despite persistent challenges across our airport network, demonstrating the valuable and increasing contribution of our diversified business model. Passenger traffic declined by 1.4% compared to the third quarter of 2025, which was a significant improvement versus the 5.6% decline experienced in the second quarter of 2026. At the same time, revenues, excluding construction services, increased by 13.2%, EBITDA grew by 19.2%, reaching MXN 6.1 billion, and the EBITDA margins expanded by 350 basis points to 67.8%.

These results are the result of 3 distinct drivers: First, the consolidation of Cross Border Xpress; second, the structural benefit from the internal — internalizing of GAP technical assistance services; and thirdly, the growth in directly operated business together with the gradual implementation of the approved maximum tariff. Excluding CBX, revenues from aeronautical and non-aeronautical services increased by 3.4%, while EBITDA grew by approximately 8.3%. While these figures highlight the strength of our operating model, they also indicate that underlying passenger demand remains challenging. We are prioritizing working on the factors we can control such as strengthening our airport network, while at the same time building complementary business that diversify earnings and expand our capacity to create long-term value.

However, we are aware that international leisure traffic is recovering at an inconsistent pace due to several external factors. Let me begin with the passenger traffic. During the third quarter, GAP’s 14 airports handled approximately 18.4 million passengers, representing a 1.4% decrease compared to the same period last year. Although our overall traffic stayed below 2025 levels, the third quarter decline slowed compared to the previous quarter. However, we do not view this stabilization as a sign of broader base recovery across all our markets as of yet. Domestic traffic increased by 0.6%, while international traffic declined by 4.5%, primarily reflecting the continued weakness at certain leisure destinations throughout Mexico and Jamaica.

Guadalajara, on the other hand, remained as a primary performance driver with an 8% passenger traffic increase, supported by growth in both domestic and international volume. It is worth noting that international passengers in Guadalajara grew by 13.1%, reflecting the resilience of the airport diversified passenger mix across visiting friends and relatives, business and leisure segments. During the quarter, traffic in Guadalajara declined slightly by 0.5%, while CBX users increased by 8.4%, reaching approximately 1 million passengers during this period. Additionally, CBX capture rate improved from 29.7% in the third quarter of ’25 to 32.4% in the third quarter of ’26.

These results highlight the growing importance of cross-border connectivity and the strategic benefits of integration of CBX into GAP’s airport network. Puerto Vallarta, Los Cabos, however, continued to experience softer demand with passenger traffic declining by 11% and 6.8%, respectively. International traffic at Puerto Vallarta remained weak, declining by 24.8%, primarily due to the security concerns following events in Jalisco in February. To counter this, we are actively co-working with airlines, tourism stakeholders to promote connectivity and passenger demand in the region. Montego Bay continues to navigate the aftermath of Hurricane Melissa with a 23% decline in passenger traffic during the quarter.

While hotel capacity and tourist activity is recovering, the normalization trend remains tied to the hotels reopening and international airline connectivity. Looking ahead, we remain cautious about how quickly traffic will recover. We anticipate that airlines capacity, passenger demand and the restoration of tourist infrastructure will return at different speeds across our destinations. The traffic disruption caused by Hurricane Melissa should lessen as conditions normalize. However, airlines capacity limits and weak leisure demand may persist longer. We are addressing this challenge by working closely with airline partners and touristic stakeholders to strengthen existing routes, enhance connectivity and support sustainable traffic growth. Turning now to our financial performance. Aeronautical services increased by 2.6% compared to the third quarter of 2025.

At our Mexican airports, aeronautical revenue grew by 5.3%, primarily due to the gradual implementation of the maximum tariff approved for the 2025-2029 regulatory period. This growth was partially offset by the 7.5% appreciation of the Mexican peso versus the U.S. dollar, which negatively affect dollar-denominated international tariffs. In Jamaica, aeronautical revenues declined by 12.7%, reflecting lower passenger traffic and the negative translation effect resulting from the stronger Mexican peso. GAP regulated tariff framework contributes to the revenue resilience during periods of softer passenger traffic. However, it does not completely offset the impact from lower volumes or exchange rate movements. Non-aeronautical revenues increased by 37% compared to the third quarter of last year.

This performance was largely supported by the consolidation of CBX as well as the continued growth in the several business lines operated directly by GAP. Excluding CBX, revenues from directly operated business increased by approximately 13.7%. Cargo operations and bonded warehouse business grew by 20.7% reaching approximately MXN 674 million in quarterly revenues. This performance deserves particular attention because cargo and logistics represents an important growth platform beyond passenger-related activities. Advertising grew 18.2%, convenience stores 11.6% and VIP lounges by 5.6%. The results show that our diversification strategy is producing measurable contribution. We see opportunities to expand our logistic services and our directly operated businesses subject to disciplined investment decisions and execution.

Meanwhile, third-party business faced a more challenging environment, particularly those categories exposed to the international tourists and foreign exchange fluctuations. For example, duty free revenues declined by 12.3%, reflecting the continued international passenger traffic weakness, especially at certain destinations. Despite a temporary setback, we anticipate that business lines will benefit from the gradual recovery of international traffic. Let me now provide an update on the Cross Border Xpress. During the third quarter, CBX generated revenues of MXN 775 million, with approximately 1 million passengers using the facility in both directions. Average revenue per passenger reached $43 compared to the $42.8 during the second quarter of ’26. Therefore, CBX contributed MXN 558 million to our consolidated EBITDA during the quarter.

[indiscernible] financial contribution, CBX is an important cross-border mobility platform, user grew by 8.4% despite a slight contraction in traffic at Tijuana Airport, driving the capture rate up from 29.7% in third quarter of ’25 to 32.4% in the third quarter of ’26. These positive trends underscore clear opportunities to deepen customer penetration, advance the commercial integration, optimized pricing strategies and expand complementary passenger services. This is still the early stage of CBX integration. As such, our priority is to convert these opportunities into sustainable revenue growth while maintaining the operational discipline and strong passenger experience that we value at GAP. Moving on to the operating costs and profitability.

Excluding the effect of the IFRIC-12, total operating expenses increased by 3.8% compared to the third quarter of 2025. Cost of service increased by 12.6%, excluding the contribution from CBX operation, primarily driven by personnel, maintenance and security experience across our airport network. Personnel expenses increased mainly due to additional operating staff, the integration of technical assistance employees, salary adjustments and benefits. This increase, together with the consolidation of CBX were partially offset by a significant reduction in technical assistance fees following the internalization of the services as well as lower concession fees in Jamaica. Internalized technical assistance services represent a structural change in our cost base, allowing GAP to retain more of the value generated by its operations.

As a result, consolidated EBITDA increased by 19.2%, reaching MXN 6.1 billion, while the EBITDA margin excluding IFRIC-12 expanded from 64.2% in the third quarter of ’25 to 67.8% in this quarter. At the net income level, the stronger operating performance was partially offset by higher financial expenses associated with our investment program and the CBX transaction. That said, we continue to closely monitor our cost of debt, maintaining our financial flexibility and cash flow generation while executing our capital program.

Regarding our investment program and financial position, we remain committed to executing the infrastructure projects included in our 2025-2029 Master Development Program in Mexico and the capital development programs in Jamaica with a total expenditure of MXN 8.6 billion during the first 9 months of 2026. Our current investment cycle represents the largest infrastructure expansion program undertaken by GAP’s concession framework. These projects are designed to increase airport capacity, increase operational efficiency and support the long-term development of our network. Although traffic was below our initial 2026 expectation, our regulated infrastructure commitments address long-term capacity and service requirements. For discretionary growth projects, we continue to evaluate expected returns, execution risk and capital needs before committing resources.

The expansion of the Guadalajara, Puerto Vallarta and Tijuana airports along with additional infrastructure improvements across our network will position GAP to accommodate future growth while improving passenger experience and service quality. We expect that these expansion projects will generate continued commercial opportunity as new terminal capacity comes online over the next few years. Our focus remains on disciplined capital allocation, distinguishing between nondiscretionary concession commitments and strategic growth opportunities. In this manner, we effectively balance our infrastructure demand, financial structures and shareholder distributions. Regarding dividends, as approved at our annual shareholders meeting in April 2026, we intend to distribute a cash dividend of MXN 20.80 per share in a single installment.

We are currently in the final stage of updating our outstanding share count within the bank. Once this process is completed, we will formally announce the payment date. Regarding our full year 2026 guidance, we are maintaining our previously announced passenger traffic range of negative 3 to 0. Achieving this range requires a meaningful improvement in fourth quarter traffic relative to the year-to-date trend. And it goes without saying that our outlook remains subject to capacity, demand conditions and the pace of recovery in our leisure markets. Before concluding, I would also like to provide an update on FIBRA GAP. We continue advancing through the process required for the establishment of FIBRA GAP.

Based on the current progress, we expect that transaction to be completed during November. FIBRA GAP is part of the long-term capital strategy. We view it as a potential tool to broaden funding alternatives, improve capital efficiency and preserve flexibility to finance our airport investment programs. The transaction remains subject to the applicable process and conditions, and we will communicate in definitive terms when appropriate. We will continue to keep the market informed as the process advances. Before opening the line for questions, I would like to emphasize 3 key messages: First, our third quarter results demonstrate financial resilience even while passenger traffic remains under pressure.

We are not assuming that recovery will be uniform or immediate, and we remain focused on improving connectivity and competitiveness across our airport network. Second, diversification is delivering measurable results. CBX cargo and logistics directly operated business and the internalization of technical assistance are contributing to a broader and more profitable earnings base. Third, our long-term vision remains unchanged. We continue to execute airport infrastructure investment, expanding our commercial capabilities and strengthening our position in cross-border mobility, all while maintaining disciplined capital allocation. Passenger traffic is fundamental to GAP. At the same time, our third quarter performance illustrates how a more diversified infrastructure and mobility platform is able to strengthen profitability and reduce reliance on any single growth driver.

Thus, our focus remains on execution, operational efficiency and the creation of long-term value for our shareholders. Thank you again for your time. Operator, please open the line for questions.

Operator: [Operator Instructions] Our first question over the phone today comes from Rodolfo Ramos of Bradesco BBI.

Rodolfo Ramos: Congrats on the results. I have a couple, if I may. The first one is on traffic. I mean, you talked about the challenges that the industry is facing. Just wanted to get a little bit more sense, a little bit more color on how you feel within that guidance range that you just reiterated since as you mentioned, this implies an important uptick in traffic in the coming months. So just if you can talk a little bit about how you see perhaps the winter season shaping up this time around. And the second question is a bit on CBX.

When you think about the pricing actions that you’ve taken there since taking control of the asset, how much more uplift you think you could see to the current $43 per user especially since you’re also targeting to increase that capture rate. So it will be useful to see how you see that panning out in 2027.

Raul Musalem: Talking about the traffic, what we are expecting for the winter season is, for sure, a really important increase on seats for the case of Jamaica, I think that just on the last week of October, it was 1 year ago, Jamaica was hit by the hurricane. So the recovery of the hotel infrastructure has been pretty good. We are seeing an important comeback of seats for this winter season. So what we want to have for Jamaica is on one hand, a really important recovery, I would say, almost 90% of the total original seats that we used to have 1 year ago, will be in place for the winter.

But sure also, you will have like a softer compare base as soon as you get on the last week of October. So that is one key driver for the recovery of the fourth quarter. And on the other hand, we are seeing that for Puerto Vallarta and for the case of Cabos, an increase of number of seats that are offering for the winter season just after the Thanksgiving Day. So we are really optimistic about — for the good or really good winter season for the case of these both airports. Other airports will be interesting to talk about the new openings of routes of international routes on Guadalajara, mainly from Volaris.

We just begin the — just began the operation of Washington and Nashville. So it’s the beginning of something that would look like a really interesting winter season also for Guadalajara Airport. Going to CBX, we are still working on the pricing actions here. We are continually increasing the capture rate through marketing efforts in some specific routes. But also what we are seeing is that we will begin to work with different pricing strategies in terms of the low season and high season in the infrastructure, we know that all the services and the big difference that is crossing to the U.S. to CBX has a really important value for our passengers.

And we also understand that in particularly high seasons, the demand will be more, I would say, we will have the chance to increase on strong dollars on that specific tariffs for the season. So what we are expecting is for the coming year, an increase on the revenue per passenger on CBX that will come for sure mainly from pricing actions, but also for commercial development. We are working in a new food and beverage area for CBX that it would be in place at the end of the coming year. But I will say that we are already working on that.

So in general terms, we are seeing like high potential on the increase on the revenues for CBX, bringing some of the new developments on the commercial side, the food and beverage mainly, but also in the price strategy.

Operator: Thank you, next question comes from Fernanda Recchia with BTG Pactual.

Fernanda Recchia: Just 2 follow-up here from my side. The first, talking about traffic, so maybe if you could elaborate a little bit further on the outlook for next year. You had provided an outlook for the winter season. But looking for next year, can we work with maybe mid-single digits of year-over-year growth? Is this feasible. And the second on the CBX, looking at the 9 months figure, we already saw that the division is running with close to 70% of EBITDA margin, which is above the high 60 when you announced the transaction.

So we already see some synergies from the integration, but maybe looking forward with this commercial activity that you mentioned, what is a running EBITDA margin that is feasible for us to assume looking to the medium to long term in CBX.

Raul Musalem: Thank you, Fernanda. This is Raul. I mean, talking about the 2027, we don’t have like all the visibility because some of the — I mean, the airlines are still putting for sale. But I would say like in a first glance, we’re expecting somewhere in the middle of mid-single digit for sure, and the numbers we’re going to have like some effects on weaker comps. When we talk about the February of ’26, for instance, for all the security matters of Mexico. And on the other hand, we’re also going to have, we say, easy comps on Jamaica for almost all the year.

So in our really first view, we will see something on the mid-single digits, for sure for coming years. For the case of CBX margin, yes, we are beginning to see some of the synergies that the group is bringing. What we are looking for the long term is something will be close to the 72% to 73% is what we think that it would be on the pretty first moment achievable for CBX. For sure, it will be even higher if we could deploy some of our commercial efforts in a really quick time. But I will say that this number between 72% to 73% will be like the natural number that we are expecting for CBX.

Operator: From JPMorgan, we have Guilherme Mendes.

Guilherme Mendes: I have a follow-up on the traffic for next year. Just wanted to understand how are you guys thinking about the Volaris and Viva potential M&A conclusion. If this is concluded by later this year, this mid-single-digit traffic that you were projecting at this point should be impacted by this? Or is it something that you already take into account when think about traffic into next year? And the second one is a follow-up on the initial remarks, Raul, you mentioned about the investments and the CapEx plan. You mentioned that you continue to evaluate the expected returns, execution risks.

Just wondering if you have any flexibility on the investments, given the traffic has been relatively weaker than what it was expected when you signed the MDP plan.

Raul Musalem: Thank you, Guilherme. In terms of the traffic, the traffic and the possible merger on the new group of Viva and Volaris, it was already taken into account on the numbers that we say. Let me put it this way. At least from the summer of this year with the beginning of different — the price of the oil, and they were in year-end, what we have looked is a really important change on the offer of seats from Viva and Volaris. So what we are seeing is that part of the possible effect on decrease on the offer, it’s already happening.

So on the number that — on the single digit that we are expecting, we have already taken into account some of that effect of the possible merge. In terms of the CapEx plan, I will say that we have flexibility for the case of not committed investment as it could be on commercial new services or a new hotel or these kind of things that we are, I would say, reviewing the correct moment and the correct profitability. But for the case of the committed investment we don’t have, at least for the moment any change on the plan.

Seeing that for instance, our concession contracts in Mexico, it gives us a chance to open the master plan for some cases, but one of that is a decrease of the GDP of Mexico of at least 5%. We are far, far away from that. So for the moment, we don’t have like, I would say, any kind of option for change in the original plan from — of CapEx for the committed area of the master plan in Mexico.

Operator: Next, we have Jens Spiess of Morgan Stanley.

Jens Spiess: Yes. So my first question is on tariff increases in Mexico. So when do you expect to do the next implementation of an increase and by what amount? And what’s — your compliance versus maximum tariff would increase to what level after such an increase?

Raul Musalem: Thank you, Jens. Well, we are expecting this to increase the tariff on the first week of January in the coming year. We are expecting around — I mean each airport will change in different ways because the fulfillment of the tariff is — it’s airport by airport, but I will say that we will have a compound increase around 7% is what we are expecting. With that put in place we are expecting a 95% fulfillment of the tariff for the coming year. But what is important to have in mind that the appreciation or the depreciation of the peso has really — a really important weight on the final fulfillment on the maximum tariff.

But at least what we are foreseeing today is that the coming year, we will be around 95% of fulfillment on the maximum tariff.

Jens Spiess: Okay. Perfect. And on your full year traffic guide, do you still feel comfortable with the minus 3% to 0% growth or is there some downside to that number, given like the year-to-date performance and how flight schedules are looking like?

Raul Musalem: Yes. Now we are still in the same guidance for this year. For sure, there is like a lot of noise and a lot of adjustments on the offer from offer seats of the airline. But at the moment, we are still comfortable with the same guidance on traffic.

Jens Spiess: Okay. Perfect. And just one last question, if I may. On the internalization of the technical assistance fee, I mean, all else equal, when you’re negotiating your MDP with the regulator, this results in a lower cost, right? So would it, all else equal, result in a lower tariff? Just keeping everything else equal?

Saúl García: Hi, Jens. This is — okay. This is Saul. Jens, you are correct. We have already the internalization of the TEA and is already included in the calculation of the maximum tariff in our — if they don’t change and I’m referring to the authority, if they don’t change the basis for tariff regulation, we will continue including the TEA as part of the calculation of the maximum tariff. So obviously, if this is not included, we won’t be able to include it as part of the of the maximum tariff and won’t be recovered through the maximum tariff. It doesn’t represent that we won’t be able to collect because we will continue providing the service.

So probably it won’t be as part of the TEA, but it will be part of the operational expenses of the airports and will be included as an operating expense.

Operator: Next, we have Pablo Ricalde of Itau Unibanco.

Pablo Ricalde Martinez: Maybe thinking about the synergies on the CBX. I don’t know if you can provide an update on how much — now that you have consolidated it, how much do you expect to achieve from synergies coming from the CBX and when do you think synergies will be tangible on the P&L.

Raul Musalem: Thank you, Pablo. I mean the synergies have begun to pass through CBX. It will be gradually, I would say, for instance, the maintenance of the elevators, we have like a common contract for all the network of GAP and will be included in that contract. But it will be gradually because you need to wait until the finalization of the contract that has in place today CBX. But what we are expecting is to fully implement all the possible synergies on the coming 24 months. It will be like when we are thinking that everything will be — I would say all the plans will be in place in the specific case of the synergies.

Operator: Next, we have Anton Mortenkotter of GBM.

Ernst Mortenkotter: Just a quick one. It’s related to the removal of restrictions from the U.S. in the Mexico City Airport and the AIFA. I mean, does this have any spillover effect on your operations? Maybe this will negatively impact because they capture some routes or maybe it improves because of more connectivity, if you could give us your take on this.

Raul Musalem: Thank you, Anton. No, for the moment, we have not seen really any change or any impact on our net. I mean I think that it’s a really good news for all the industry in Mexico, but we really don’t see any kind of impact. We — our capture areas and the different airports of GAP are really strong. The economies around, for instance, Jalisco are doing pretty good. So we really think that we will not have any kind of impact for this renewal of route restrictions.

Operator: Also from GBM, we have Enrique Cantu.

Enrique Cantú Garza M.: Duty-free car rentals and several other commercial categories remained weak this quarter. Beyond lower international traffic and currency effects, are you seeing weaker spending per passenger?

Raul Musalem: At the moment, we are not seeing like a change of the trend of the spending. But for sure, the volumes on this kind of business line like could be duty free or car rental are really important. So when you see an airport that is purely leisure has to be Vallarta and even Cabos, the effect on those — on these specific lines that could be duty-free and car rental are really deep and really related with the volume for sure.

And in the second half, we have some effect on, as you say, of the appreciation of the peso because all the contracts of duty-free are based in dollars and also in some of the cases, for leisure, [indiscernible] the Vallarta and Cabos are the car rentals also denominated in dollars. So we have the 2 effects, but I would say that the biggest effect is the volume of — the volume decrease on international traffic, mainly for Vallarta.

Operator: From UBS, we have Alberto Valerio.

Alberto Valerio: I had a couple here. The first one about the potential downgrade for Category 2. We had the good news this month that Mexico was downgraded, but FAA asked some measures to authorities, and we should have a new appraisal in December. How is your expectation for this new appraisal in December? You see that it’s possible to do what U.S. are asking for Mexico? And how is your expectation again? And the second one about the — I know it’s far away from now, but the next MDP, how should we see CapEx for the next one? We should see more maintenance CapEx or you think there’s still some room for a small growth CapEx?

If you can give some numbers per passenger, MXN 60 per passenger or MXN 90 per passenger or MXN 120 like the other one would be very helpful.

Raul Musalem: I mean related with the potential downgrade of Mexico. Last week, the U.S. government communicated to Mexican government that they have some results from the audit process. And it gives 90 days to the authority to fix those specific observations from the audit process. The Mexican government and the Civil Aviation Authority has made like really strong work on the last month, they [presented] changes on the aviation law, on the airports law. They are trying to modernize all the legal framework from security, safety process and operational process. So at least in my view, I think that Mexico or the Mexican government are deploying a really great effort to avoid any kind of potential downgrade in the coming year.

So in my personal view, I think that there will not be a problem, the downgrade on coming year. In the other question related of how could look the CapEx on the new master plan? For sure, it’s really early to think on that, but I will say that for 2029 on the last year of this master plan, we will put in place an expansion of 60%, the number of square meters in our terminals in Mexico. Saying that, I will say that the capacity will not be a problem on the coming master plan.

So for sure, we think that it will be a master plan much more related with [indiscernible] or reposition of equipment rather than additional capacity in our airports. We are just ending the biggest or this master plan ’25-’29 will be the biggest master plan in all our concessions, the biggest one in terms of the expansion of all the facilities, all the square meters on the terminal building and for sure, all the capacity. We are doubling the capacity of Guadalajara. We are doubling the capacity of the terminal building on Cabos. We are increasing almost 45% of the capacity of terminal building in Cabos. We are almost increasing 40% of the capacity in Tijuana.

So saying that what we are expecting for the coming master plan will be more reposition rather than capacity. I would say that for sure, it’s early, but it’s like the general view today.

Alberto Valerio: Very clear, very clear. So just a follow-up. We should expect something half what we did in the past, MDP in real terms. And remind me what is your exposure on international routes to the U.S. from local carriers?

Alejandra Soto Ayech: Sorry, Alberto, can you please repeat it?

Alberto Valerio: Sure, sure, sure. The first one was just a follow-up on the second question about the MDP. If you could expect half what we deploying CapEx of previous MDP 2025. Hopefully something close to MXN 20 billion for the next one in real terms. And the other one is if you could remind me of your exposure for the U.S. routes done by local carriers.

Operator: Raul, your line is open.

Raul Musalem: Sorry. Yes, I was saying that for the case of the master plan, again, it’s really early to talk about these numbers. I would say, ballparking with the information that we have today, something that goes between 50% or 60% of the master plan that we are doing today could be a number that makes sense. I mean there’s like a couple of years to see how would be the demand on that moment. And in some ways, it’s difficult to put in perspective what could be the size of investment.

But let me say that with all the capacity that we are putting right now on the airports, it sounds that the master plan would be — so the new master plan could be something like that could move on the half or a little more from the master plan that we are doing today. In terms of the exposure of the routes done by Mexican airlines, I mean, in general terms are big numbers, around 40% of the total passengers on the network on GAP comes from international traffic. I would say that from that, around 40% coming from Mexican airlines and are really focused on VFR markets, mainly in Guadalajara, [indiscernible], but going mainly to Southern California.

So that would be like the general numbers of the exposure to U.S. routes by Mexican airlines.

Operator: We have a follow-up question from Rodolfo Ramos. All right, hearing no response, we’ll mute the line. And we’ll proceed with the online questions. So I’ll turn it over to Maria.

Maria Barona: So the first question is from Gabriel. He asks, “how does the current interest rate environment effects GAP’s funding and capital allocation strategy?”

Saúl García: Gabriel, this is Saul. Well, obviously, we have seen rate increase in U.S. dollars. Our debt position in U.S. is pretty low, it’s around 10% of our total debt. So basically, in Mexico, the interest rates are stable. So we don’t foresee any kind of risk or affectation in terms of interest rates. Obviously, we have been increasing our debt for CapEx program and for the CBX acquisition. So we feel very comfortable with the rates and the debt strategy from that. In terms of the capital allocation, we will continue looking for future inorganic growth, but we will continue also delivering distributions to our shareholders according to our results and according to our growth of our results.

With the integration of CBX, obviously, we are expanding our debt, our — sorry, our net income. And obviously, we will be expanding our distributions. So that’s our position on that.

Maria Barona: Okay. Good. And then the second and final question is regarding cargo and free trade zone. “How much of the strong growth is coming from existing customers expanding versus new ones? And how long are the contracts typically?”

Raul Musalem: I mean in terms of the cargo facility the results come from Guadalajara Airport, the GWTC company — sorry, it’s an important increase that comes from electronic industry the AI industry is really going really, really fast on Guadalajara area. I would say the manufacturing — traditional maquila companies manufacturing in Guadalajara is bringing like a lot of additional manufacturing related with AI. So what we are seeing is 2 things happening in Guadalajara, an increase on the volume that goes around 6% on volume, but also — and the most important is the increase of the value of the cargo.

It is important to have in mind that the invoicing or the revenues from our cargo facility is directly related with the volume — the value of the cargo that we are moving. So as this increase on semiconductors continually — continues on the coming months and years to Guadalajara, we will see a continued increase on value and for sure, an increase on the revenue on this facility. There’s no like — I would say, the contract that we have with the government for cargo facility typically comes from 10 years plus an extension of additional 10 years. And that would be like the typical concession duration on this kind of business.

Operator: We have no further questions at this time. Raul, over to you for any additional or closing comments.

Raul Musalem: Thank you, everyone, for joining us today. Please contact our Investor Relations team with any additional questions you may have today and thank you for your attention.

Operator: That concludes today’s meeting. Thanks, everyone, for joining. You may now disconnect.

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The “2nd Wave” of the Commercial Real Estate Crash Is Close

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Dave:
I’ve been looking across different asset classes, both in real estate and across the entire economy, whether that’s residential real estate, commercial real estate, gold, cryptocurrency, equities, and one asset class continues to stand out as the best opportunity for the next five to 10 years. And I’ll just give you a spoiler. I think it’s commercial real estate because if you look at residential real estate, it’s great for a lot of reasons, but the prices are high. If you look at equities, prices are high. If you look at commodities, prices are high. But in commercial real estate, prices have already come down at least 20% and in some sectors like in office, up to 50%. And I personally think that those declines could increase giving a perhaps once in a generation buying opportunity for investors. And today, to test this hypothesis, I’m inviting back investor Brian Burke, who is the smartest person I know when it comes to multifamily real estate.
Brian always gives it to us straight and he’s got one of the best perspectives on how to view the multifamily market and how to take advantage of what’s coming next. This is On the Market. Let’s get to it.
Hey everyone. Welcome to On the Market. I’m Dave Meyer, and today I’m selfishly bringing on Brian Burke because I want to talk about commercial real estate. I look at the market and I think, man, there’s going to be quite a buying opportunity here in the next couple years. There is a lot of distress, which stinks. I don’t root for that, but it just is. It is inevitable. I’ve said this before, but I kind of think that 27, 2028 could be to commercial real estate what 2007 and 2008 was to residential real estate. The drop and the correction could be that big. And a lot of people kick themselves now for not buying into residential in 2010 and 2011. And I think a similar dynamic might exist in commercial real estate a couple years from now. And so to test this theory and to just hear how to take advantage of it, because I do invest in multifamily, but I am not as experienced as some other people, I’ve brought on one of our favorite guests, frequent guest, Brian Burke, who will forget more about multifamily than most people will know in their lifetimes.
He’s always a very fun person. He always gives it to us straight. So let’s welcome on Brian Burke. Brian Burke, welcome back to On the Market. Thanks for being here.

Brian:
Thanks for having me back, Dave.

Dave:
I am excited to have you here because you are an expert in a lot of things, but today I really want to talk to you about what I see as a real disaster brewing and also maybe an opportunity, and that’s in the multifamily space. So let me just ask you straight up, how bad is it out there? How ugly is the multifamily market right now?

Brian:
Dave, are you just now telling me that you see a disaster in multifamily? No,

Dave:
I

Brian:
Will. We’ve been talking about this for months. Remember when I described it as a traffic collision in a four-way intersection two years ago on the show?

Dave:
You’ve been right, but every time you’ve been on for years, I’ve been like, “Why hasn’t it happened yet?” I thought the distress would be sooner. I feel like we’re kind of there. I don’t know. At least the sentiment in the industry, the people I talk to, people are finally coming around to this inevitability that the market sucks and it’s probably going to get worse before it gets better. At least that’s what I hear and I think too.

Brian:
Well, I was on a call earlier and somebody asked me, “What do you think about the multifamily market?” And I said, “It sucks ass.” So I think this is a family show. I probably shouldn’t say that. Yeah, this

Dave:
Is why you’re here. No, it’s great.

Brian:
But I kind of think that’s exactly what’s happening. I mean, it’s a complete disaster, but it’s been a disaster for a long time. And I don’t think that it’s necessarily anything that’s brewing now. I think this has been brewing. It’s been the old proverbial frog boiling in the pot, right? I mean, at first it doesn’t really feel anything. And then all of a sudden the frog’s a boiled frog and there’s a lot of boiled frogs in the making out there and they’ve been boiling for a couple years. It’s only now that the water’s starting to boil over and people are realizing like, “Hey, wait a minute, we got a real problem.”

Dave:
It just has seemed so obvious that this was going to happen, but were people just assuming wrongfully that the Fed was going to cut rates and come in and save everything?

Brian:
Well, maybe, but if they were, they were also not understanding how this economic system works. The Fed isn’t in charge of anything. The Fed is in charge of overnight borrowing, interbank borrowing. The Fed is not in control of the 10-year bond, and that’s what’s setting debt rates in multifamily. Now we’re seeing how it’s kind of triggering this whole second wave. The first thing that happened is the Fed actually did raise interest rates on overnight borrowing, and that triggered increases in the SOFR, the secured overnight financing rate, which is what a lot of floating rate debt is tied to. So that was problem number one, and that kind of set this whole collision in motion, so to speak. Now what we’re seeing is the 10-year bond is going up. Well, nobody’s in charge of that. So nobody made some decision and said, “Hey, let’s increase the 10-year bond.” But what does that do?
That increases the rates for long-term debt. So now anybody that was hoping like, “Oh, I’ve got this awful short-term debt that the interest rate doubled. I’m going to refinance out and go into long-term debt,” is now finding that that very long-term debt they were coveting is more expensive than it was, and now they’ve got a real problem. So they can’t solve the other problem with long-term debt because it’s just too darn expensive. And I think that kind of sets the next shoe to drop, which is something I’ve been saying for a while is cap rate decompression. You can’t sell real estate at four and 5% cap rates in a five and a quarter treasury market. The numbers don’t work.

Dave:
Literally before this call, I was checking my email and I got an email from a broker in Denver where I invest and they were just pushing these used class B properties in this market at a 5.3 cap. I’m like, “You’re calling me a fucking idiot if you think I’m going to buy that. That is a worse return than even a 10-year treasury right now with a lot, lot more risk in one of the worst markets in the country right now. Denver’s absolutely collapsing.” What do they think they’re doing? Are people just naive or is this the greater fool’s theory where they’re just trying to find someone dumb to buy it before the next shoe really drops?

Brian:
Well, I don’t envy the position of a broker right now because really what they’re doing in all fairness is they’re trying to appease their client who is the seller. And this is the classic real estate conundrum, is that in an increasing market, the buyers always want last year’s price and the sellers want next year’s price. And in a decreasing market, it’s the other way around where the sellers want last year’s price and the buyers want next year’s

Dave:
Price. Right, exactly.

Brian:
So the broker is employed by the seller and the seller wants last year’s price. In fact, they want five years ago’s price is what they really want. So the brokers are trying to do their job, I guess, which is representing the seller and getting the best price possible. But the piece that’s getting missed is that nobody wants to buy that trash. I mean, you don’t want to buy into negative leverage. And negative leverage means if your cap rate is lower than your interest rate, that is negative leverage because where you make money in commercial real estate is the space in between what it costs you to borrow money and what the property throws off. And if that’s an upside down relationship, by definition, you’re losing money and no sane person wants to buy it.

Dave:
People were over the last couple of years, but I guess like you said, no sane person wants to buy it. So there’s a lot of insane behavior out there.

Brian:
And why were they doing it? They were buying it because investors were funding it. And why were investors funding it? Because they just really weren’t paying attention. They didn’t know better. They were just throwing money at real estate. They were thinking hard assets, that’s better than stock market. There were reasons for that to happen, but now that people are awakened and they see what’s really going on, the investors are not funding that. And if they’re not funding it, that means no one’s buying it.

Dave:
Well, it’s good that they’re not funding it. This correction needs to happen, at least in my opinion. So I mean, we’ve talked about this at length, but just for people who maybe haven’t heard you on the show before, Brian, can you give us a quick rundown of why this is happening right now? What were the conditions during the pandemic that sort of primed the market to face this kind of correction in this kind of rate environment?

Brian:
Yeah, I mean, I can describe this best the same way I described it on this show probably a year ago, which is that this is a traffic collision in a four-way intersection. All the lights were green. From one direction, you had cap rates, from another direction you had interest rates, from another direction you had rent growth, and from another direction you had occupancy, and all of the lights were green, and then all of a sudden everything collided in the middle of the intersection, and now none of those things are working. There’s no rent growth, interest rates are higher, occupancies declined, concessions increased, all these things happened, and then you had this massive collision of real estate and there’s a big mess to clean up. Really, what does all this mean? It means that buyers were overexuberant. They were irrationally exuberant and were buying real estate at any price without paying attention to the fundamentals.
And the fundamentals at the same time have been eroding. People sometimes dismiss the demographic impacts to real estate, but look at a few demographic pieces here. Who is your primary renter on apartments? It’s the 18 to 30 demographic, right? Well, birth rates have been falling for 18 years. That means there are more 18-year-olds today than there will be at any point in the future for at least the next 18 years. And so therefore the number of potential renters is declining. You also have population growth that is at historic lows. I think it was 2022 was the lowest population growth since World War II. It came up a little bit in 23 and 24, but because of international immigration. But now you look at what’s happened to international immigration in 2025 and 2026, sharp decline. So you don’t have a lot of new people coming in, but at the same time, builders were building apartments like there was no tomorrow.
I mean, take a look at what happened in Austin, Texas. Denver is right in there with Austin, Texas, maybe not quite as bad, but you’ve got this whole demographic and supply and demand dislocation where the left hand and the right hand aren’t coordinating with one another. And that’s kind of what’s created this situation that we find ourselves in. Everybody wants to blame it on, oh, well, the Fed raised interest rates and all that. That’s not the only story. That’s just a piece of it.

Dave:
It absolutely is. Well, I want to back out and sort of talk about what happens from here and then we’ll talk about opportunity, but we got to take a quick break. We’ll be right back. Welcome back to the On the Market Podcast. I’m Dave Meyer. I am here with Brian Burke talking about the four-way traffic collision as Brian described it, that’s going on in the multifamily space. It seems to me, Brian, it sounds like you agree that the rubber is starting to hit the road, but does that mean this is going to be a crash quickly? Do things fall apart in the next few months or is this kind of going to be dragged out over the next couple of years?

Brian:
Oh, this is going to take a couple years. There’s no question about it. I think I’ve said before on here that the only people that make money at a traffic collision are the ambulance companies and the tow truck drivers. These are the people that are kind of cleaning up the mess and trying to make things right, right?

Dave:
Yeah.

Brian:
That’s the same thing that’s going to happen here. I mean, you’re going to have people that are going to come in and buy some of this discounted real estate and they’re going to make a lot of money off it. There’s absolutely an opportunity to be had, but you don’t want to be in the opportunity too early because you can have a steep trough and you could say, “All right, we’re at the bottom. It’s time to buy because I want to buy at the bottom and I’ve got to get in at the very bottom when prices are the lowest.” But you don’t know how long this bottom is going to be. Nobody knows how long… This could drag on like this for years. I remember in 1992, property values fell about 10% and did not move until 1997. So for five years, property values were completely flat, and then it took a couple years just to get back to 1992 prices.
We could see something like that where these prices are down for five or six years. It’s already been like four, so it won’t take much longer for us to beat that. Another piece that I think people don’t appreciate fully is that this is the third time in the last 50 years that there’s been a double digit decline in commercial real estate prices. It’s the third time. The other time was in the 1980s after a tax law change, and then the time after that was in the 2008, 2009 great financial collapse. Subsequent to both of those previous double digit declines, we saw a multi-year bull run that lasted longer than a decade. So I think the important thing for people to realize is that you don’t have to get in at the very, very bottom. You can wait for the evidence to show that the bottom is clearly behind us and still take advantage of a decade long bull run.
There’s no rush to get in.

Dave:
Yeah. The point is get in somewhere near the bottom, somewhere in the trough, which could be, I think you’ve said on the past, it could be a window open for several years, right?

Brian:
I think so. And I think there’s just no rush. I mean, I’d rather be a week late than a day early because when you’re a day early, you don’t know. You’re taking on so much additional risk for how long that bottom’s going to scrape along. But if you get in after the bottom has clearly been formed and you’re starting to see an uptrend, you get in then, it’s a lot less risk and you can still capture a lot of upside. Okay, maybe you missed a couple percent, big deal.

Dave:
Yeah, but you’re taking so much risk off the table.

Brian:
Yeah.

Dave:
That makes a lot of sense. All right, so how do we do it? How do you take advantage of an opportunity like this?

Brian:
Well, I think first you keep your eyes open and you wait for the right time. I am a believer in employing some degree of market timing. I know a lot of people think that that’s kind of not very smart, but it’s worked out well for me.

Dave:
Well, I tell people not to do it, but I also do it myself. I just do the hypocritical approach.

Brian:
Well, there you go. I mean, that’s one way to do it, but you’re a podcast host, you’re supposed to do stuff like that. The thing that really matters is what are you actually doing because that proves who you really are and you’re really an investor. I mean, you’re really thinking about this long-term because that’s what you want to do. You want to be watching the market really closely. And I’ll tell you, it’s always darkest before the dawn. So when it really sounds like everybody is just completely pessimistic, probably tells you you’re getting close to the bottom. But the things I’m looking for is I’m looking for declining rates of concessions on new move-ins.

Dave:
Oh, like rental concessions. Rental concessions. Yeah. Okay.

Brian:
Rental concessions. I mean, that’s how things are priced. I mean, income property is really priced off the income it generates, so that’s what you need to be looking at. Forget about the price of the building. Look at the income the building generates. When rental concessions are declining, that’s a sign that there’s some strength. If lease trade-outs are positive, meaning that the new tenant that moved in is paying more rent than the last tenant that moved out, that’s a positive factor. Right now, it’s not. The new lease trade-out is negative in a lot of cases. Look for vacancy rates to be declining. Look for rent growth in the market. These are the things that you want to see, and when you see those positive indicators, then you know that maybe you’re a little bit past the bottom and making an investment will make a lot of sense.
Now, if you’re a long-term, long, long-term investor and you’re thinking like, “I’m going to buy stuff now that I’m going to hold the rest of my life, and that’s my retirement plan. It’s 30, 40 years out,” the timing doesn’t matter. You can buy it any time. But if you’re buying large multifamily buildings with investor capital and you’re raising money and all that kind of stuff, that is a whole different game and you need to really time it right.

Dave:
But shouldn’t you still try and time it even if it’s your retirement? I’ll just be honest, I’ve told you this in the past. I am thinking about and actively making steps to try and consolidate my own portfolio, selling off some residential, not because it’s performing badly, because I see opportunity in multifamily and I want to buy exactly what you just said. I own older buildings, I want to get rid of them. I want to buy purpose-built multifamily, 20 units, something like that, a couple of those, and hold onto them for the rest of my life. But I still want to buy it for the best possible. I know I could buy it today, but I’m still trying to at least identify the bottom because I think it will just help my cash flow, and obviously getting it at a lower basis helps performance for the rest of your life.

Brian:
Yeah, I think that’s absolutely true, but no one piece of advice works for every investor. And if you’re a new investor who maybe can buy one property a year, that’s a different position than somebody that might say, “I’m going to buy four properties a year, so instead of buying four this year and four next year, I’m going to buy eight next year because I think I’m going to get a better deal.” That’s a different position than somebody that’s like, “Hey, I can scrape together enough money to buy one property this year. I’ll scrape together enough to buy one property next year.” That investor, it may work better for them to sort of dollar cost average and buy things over time. I

Dave:
Think that’s true. Yeah.

Brian:
I think you can’t go wrong waiting. I mean, there’s certainly, in my opinion right now, there’s going to be just as good of deals next year as this year and probably the year after as well. I feel like there’s no rush, but if you see the right thing come along and you can buy something at a really good basis because it’s a distressed property with a distressed owner, et cetera, et cetera, and now’s when you found that deal and it’s the one deal that you can buy, I would say you’re probably better off jumping on that opportunity as opposed to just saying, “Yeah, I heard Brian on a podcast. I think I’m going to wait another two years.”

Dave:
Right. That’s kind of the advice I’ve been giving in both commercial and residential right now is that you just got to make offers and look for the distress. And right now, at least in residential, the distress isn’t acute. There is some distress, but there’s very little forced selling going on in the residential space. But in multifamily, that’s only going to increase, in my opinion. It sounds like you agree. So yeah, if you can find the distress now, but there’s going to be no shortage of it per se.

Brian:
There will be no shortage of it in a lot of markets. Now, everybody’s market is different too, and we got to be aware of that, that some people might be in markets that may not see a lot of distress, and therefore the advice to them changes. I’m not buying any multifamily. I’m completely pencils down on multifamily. We’ve been buying a lot of senior housing, but all the stuff that we’ve been buying has been that kind of a situation where you’ve got this retiring owner, been in financial distress since COVID, and things aren’t going very well, and they’re trying to figure out how to get out and we can buy something at a really, really attractive basis. Buy. If you can find those kind of situations, that’s fine. But if you’re just playing the market and saying, “Hey, I’m going to pay full market value because I think the market’s going to go up,” you’re pushing a string uphill at least for the next couple years.

Dave:
So what would a good multifamily deal look like to you this year in 2027? What are the numbers and the rates of return that you’re looking for?

Brian:
Well, primarily, I’d have to see positive leverage and really a couple hundred basis points of positive leverage, which means that if it’s costing me 7% to borrow money, that would be a 9% cap rate. And I don’t even see Class F properties asking 9% cap rates. I

Dave:
Know, it’s crazy.

Brian:
Yeah, it’s just not there. So we’re buying senior housing at nine, 10, 11, and 12% cap rates. Wow. To me, that makes a lot of sense because you’ve got that spread. I have not been able to find that spread in multifamily yet, and I don’t expect that I will until one of two things happen. Either the distress gets really acute and the sellers just have to get out, or the banks are the sellers and they’re just getting out, or the cost of capital has to go down, meaning interest rates need to decline. I’ll tell you one thing for sure, I’m not betting on that one.

Dave:
Is that just your read of the geopolitical environment or is it just a policy of yours not to bet on interest rates going down because it’s out of your control?

Brian:
Well, I think it’s both that we don’t control interest rates, so therefore make an investment plan that’s kind of agnostic to that. I mean, I’m more of one where if I’m buying something and I’m thinking about interest rates, I’m thinking about the rate being higher than where it is currently because then I get pleasantly surprised if it isn’t versus betting or hoping that the rates are going to fall because it’s just unlikely and if it does happen, then it’s just lucky.

Dave:
Yep. I always say on the show, I love to underwrite to profit when I’m wrong. That’s my favorite thing to do, because if you’re really pessimistic about rates or any other thing happening, then if you’re wrong, you’re like, “Oh, awesome. Things went better than I was expecting.” I made

Brian:
More money than I thought it was going to make. What’s wrong with that?

Dave:
Yeah. Any investment that needs everything to go right to succeed is a bad investment.

Brian:
Yeah, that’s right. I agree. And right now, I don’t see anything that is pointing towards rates going lower. People say, “Oh, the Fed this, the Fed that.” Again – It doesn’t matter. No the Fed. It

Dave:
Doesn’t matter.

Brian:
The high 10-year rate is really being triggered a lot by inflation. That’s one. And people can say, “Well, inflation’s going to come down, so that’ll help.” Or there’s going to be a recession, then inflation will come down, and then interest rates will come down. Maybe. But there’s another piece to this, and that is just supply and demand of capital. One of the reasons why the 10-year is going up is because investors don’t want to put money into 10-year bonds. Why? Well, in part because government spending is out of control, but also another part is they have options. Now you’ve got really high quality companies that are borrowing billions upon billions of dollars for AI infrastructure build out on bonds, and people are saying like, “Hey, I can invest in a Microsoft bond and get very creditworthy borrower and a little bit better interest rate than treasuries, so I’m going to do that instead of investing in 10 years.” So then the 10 year keeps going up.
So part of it is just supply and demand of money.

Dave:
Completely agree. I think the AI debt thing is something that people are completely overlooking. I am very worried about a situation where yields stay high, even if we go into a recession. I think there’s a lot of risk right now. People are saying that rates are going to go down because AI, I don’t know if you’ve heard this logic, but people said AI, one way or another, either it blows up and then we go into a recession, mortgage rates go down, or it goes so well that it’s deflationary that mortgage rates go down. I can’t get behind that. It’s such a speculative thing. And what about the scenario where the stock market plummets, but inflation stays high because inflation right now is not demand pull inflation, it’s supply push. It’s because of supply shocks, which does not get solved by a recession, and it’s not all of a sudden going to cause people to flug into bonds in the same way that they usually do.
So I just think there’s a lot of wishful thinking when people talk about mortgage rates. It’s been going on for four years. Every six months, it’s a new reason why rates are about to come down and why you should go date the rate, marry the house and do something dumb. But I think hopefully now people are realizing and getting used to this idea that rates are just going to be higher for longer.

Brian:
I think so too. And this is a situation where even interest rates can’t fix those supply shock inflation. So there’s really no fix to it other than letting it play out and letting it play out is kind of the very thing that’s causing all this strife in real estate. So you just got to wait it out, and that’s why I say there’s just no rush to get in because this is going to take a while to work its way through the system. I think we’re in for a little bit of a long haul.

Dave:
Well, I want to talk to you a little bit more about a playbook for people who do want to start monitoring this market and maybe getting into it over the next two or three years. We got to take a quick break though, but then we’ll hear from Brian how you can capitalize on some of the distress that’s going to happen in commercial real estate. Stick with us. We’ll be right back. Welcome back to On the Market. I’m here with Brian Burke talking about the multifamily market. We’ve talked about how things are going to be pretty ugly for the foreseeable future, but there is a window, a window that’s just starting to open and potentially will stay open for a while in the multifamily space. Brian, you told us about a couple of things that you’d be looking for in terms of deals. How does an investor get in front of the best deals right now?
Because I think a lot of us, I mostly invest in multifamily as an LP, I’m not super familiar with outside of CoStar and outside of the MLS. How do you find this distress? Because to me, what I hear is it’s going to the lenders and they’re bringing it to their preferred buyers, but is there a way we can all see this distress and these good deals first?

Brian:
Yeah, but it’s not going to just come to your inbox or knock on your front door. I mean, you have to go out there and go find it, and it’s not necessarily easy. When we had the foreclosures that happened back in 2009, 10, 11, 12, I was buying foreclosed multifamily properties back then. I mean, hundred unit type stuff from banks and none of it was on the market. Part of the way that I was doing that was going through my property management companies. And so if you align yourself with really good property management companies, those property management companies are probably going to get hired by asset managers and lenders who have properties on their books that they don’t have an asset management team, so they need an on-the-ground property management company in that area. They’re going to know about that stuff long before even brokers will know about it.
So I would always start there with property management companies that are being used by lenders and, “Hey, who’s calling you about the next property they’re about to take over that went into receivership or whatever that you guys are going to need to manage and are they going to want to sell it?” So that’s one way. Another way is just getting in front of owners, and that means landlord associations or going to conferences, talking to people and that sort of stuff. But it also, I’ll say the B word, it also means brokers.

Dave:
That’s good. Yeah. They have access to deal flow.

Brian:
They have access to deal flow. They are calling constantly talking to owners. I still own about a thousand units of multifamily. I tried to sell it all before the crash and sold three quarters of it. I stuck with the other quarter of it, but I get calls all the time from brokers asking about our properties and, “Well, what are you going to do?” And I’m like, “I’m good. I got five more years on my loans. I’m not worried about it at all. I’m sitting and waiting.” They know that. They know I’m not a seller, but when I am a seller, they’re also going to know that too. And so brokers know, even not just getting listings and stuff like that, they know the situations of the various owners in their markets and what they’re thinking and what their constraints are and what their problems are and when they’re really going to need to solve those problems.
So I would start there, property managers and brokers. It doesn’t sound all that creative, but it’s a recipe that’s worked for a long time.

Dave:
No, absolutely. I mean, it’s not crazy. It’s just a relationship business. I think commercial is probably more of a relationship business than residential just because there’s fewer transactions and they’re bigger transactions, and so there’s fewer players, and so you need to get to know those players in the markets that you need to operate.

Brian:
Without a doubt.

Dave:
In addition to just getting in front of these deals, Brian, you also need to be a good buyer and be in a position to solve a problem because I think that’s what we’re going to see. A lot of these distressed properties are either going to be owned by the banks and the lenders or threatened to be owned by the banks and the lenders. And so how does a buyer position themself to be able to be a good Good solution to the distress because that’s how you land these deals.

Brian:
Yeah. I mean, you’ve got to have access to capital. I mean, that’s really what it comes down to because anytime a lender makes the decision that it’s time to offload a property, that’s a decision that they want executed with certainty. It’s like, we got to get this thing off our books by the end of the quarter because if this is in the next quarterly report, my job is on the line. So they need a buyer that’s going to perform, and that means that they want to know that that buyer has access to capital in some way. So if you want to be that buyer, you’ve got to figure out how to get your capital lined up ahead of time so that when those opportunities do present themselves, you can demonstrate to those sellers that you have the capacity and the ability to perform.

Dave:
And do you need to have capital lined up at the time of an offer?

Brian:
Yeah, I would. I mean, it doesn’t mean that you have to have a proof of funds and the money in the bank. It just means that you have to have a very viable path for having those funds ready for closing. And so you’ve always got to be looking and talking to your investors, looking at your investor base, figuring out what you’ve got, get people lined up, get people at least soft committed to way more than you’ll ever need. If you talk to your potential investors and you think that you reasonably have $20 million that you could raise at the snap of the finger, then you could probably execute a deal that needs $5 million worth of equity. And you could probably demonstrate to the seller there’s a real high certainty that you’re going to be able to close because you’ve got quadruple that amount and potential soft commitments.
Puts you in a much better spot than, “Oh, well, I got 10 million in commitments now. I know I need 20, but I think I can get the other 10.” And it’s like, “Yeah, okay, next buyer. We got this guy over here that’s got a blank check.”

Dave:
Yeah. Okay. One last question here. So if you find these deals, you network, you line up your financing to be a good buyer, what are the types of debt that you recommend people use? Because so much of what’s happening right now is because people used inadvisable debt products.

Brian:
Well, they use inadvisable debt products for the wrong reason at the wrong time. That’s what got them into trouble. If you’re at the very top of a market and you’re using high leverage bridge debt because you don’t have enough investors to raise enough money to use low leverage fixed rate financing, that’s all the wrong debt for all the wrong reasons. If you’re buying a highly distressed property at the bottom of a market for 50% of what it sold for a couple years ago, and you’re using bridge debt because the property won’t qualify for agency financing because the occupancy’s too low and all the other stuff, then that’s probably a different story. And that’s using that debt as a tool.

Dave:
That’s fine.

Brian:
So I would love to sit here and say like, “Oh, you should only be looking at 10-year fixed rate financing.” I think that you should be looking at long-term fixed rate financing as a takeout and a long-term solution, but you may need to be open to the possibility of considering other debt options in the interim while you get that property fixed up, stabilized, out of a foreclosure distress situation into a performing asset.

Dave:
And do you just use traditional banks for most people or how do people find the best debt products?

Brian:
The best debt products I’ve found come through debt brokers that specialize in the type of assets that you’re financing. So if you’re looking at 50 units and up multifamily, you want a debt broker that specializes in 50 units and up multifamily. If you’re looking at 20 unit multifamily, you want a debt broker that’s in that smaller balance commercial space because they’re going to know who all the lenders are. Every deal is different. It depends upon the performance of the asset, the purchase price, the loan to value ratio, the market that it’s in. That’s all going to dictate who the most ideal lender is going to be. And it may not even be obvious at first. It may take quotes from multiple lenders before an obvious winner really shows up. And that’s where the debt brokers really earn their keep is that they can present like, okay, here’s the five most logical choices for this asset in this market and this condition.
Get the quotes from those five and you go like, well, one is clearly better than the other four and there you go. There’s a lot of different choices that are out there and each circumstance is going to dictate which one is going to be the best fit.

Dave:
All right. Well, any last advice other than debt and being a good buyer and deal flow for people who want to get in and take advantage of this opportunity in the next few years, any last advice on things they should be working on now to prepare themselves?

Brian:
Yeah, they should be working on building their investor base. They should be working on building up a business plan. They should be working on relationships with people that are going to provide them with that potential deal flow. They should be building a buy box of exactly what it is that they are looking for and what their plan will be once they have it. Anybody that goes into this without a plan, without a really targeted approach is just going to find themselves in this paralysis of analysis or deals that they can’t jump on because they were ill prepared for it. This is a time for preparation. It’s a time to build your systems and your business so that when the opportunity is there, you’re ready for it and you know that it’s time to make the jump.

Dave:
Great advice, Brian. As always, thank you so much for being here. We always appreciate your candid take. And don’t worry, it’s not actually a family show. We’re all adults here. You can say that it sucks ass.

Brian:
Yeah. Well, it really does. So yeah, if you don’t want to do the same, then just watch what you’re doing.

Dave:
But for buyers, it could be good soon, right? It could be in the near future. And I’m going to keep asking you every six months to come on here and tell us, is now the time.

Brian:
I will be here to tell you because I will say this, and I’ve said this before, chaos breeds opportunity.

Dave:
Oh, for sure. And the

Brian:
More chaos you have, the more opportunity there will be. And every six months that passes between my visits to this show is nothing but chaos in between those visits, which is just breeding even more opportunity. So when the opportunity shows up, it’s damn well going to be good.

Dave:
Brian, thank you as always for coming, giving it to us straight and just being so much fun as a guest. If anyone wants to check out what you’re up to, where should they do that?

Brian:
Check out our website for Praxis Capital. It’s praxcap.com, P-R-A-X-C-A-P.com.

Dave:
Awesome. Well, thanks again, Brian, and thank you all so much for watching this episode of On the Market. We’ll see you all next time.

Help us reach new listeners on iTunes by leaving us a rating and review! It takes just 30 seconds and instructions can be found here. Thanks! We really appreciate it!

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Limited Time Venture X Business Offer: Up to 300K Miles + $1,000 Travel Credit

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Limited Time Venture X Business Offer: Up to 300K Miles + $1,000 Travel Credit


Limited Time Venture X Business Offer

Capital One Business has launched a limited time offer for new cardholders, with an advertised value of up to $4,300 in travel value across bonus miles and credits through Capital One Business Travel.

Beginning October 20, 2026, eligible new Venture X Business cardholders can earn:

  • 150,000 miles after spending $40,000 in the first four months

  • An additional 150,000 miles and $1,000 Capital One Business Travel credit after spending $120,000 in the first four months

  • $395 annual fee
  • OFFER LINK

Together, that’s up to 300,000 miles total, and with an additional $1,000 Capital One Business Travel credit for spending $120,000 in the first four months in addition to an annual $300 credit for bookings through Capital One Business Travel.

Additionally, cardholders can receive their fourth night free at select Premier and Lifestyle Collection hotels when they book a stay of at least four nights through Capital One Business Travel, a complimentary travel booking platform designed specifically for business owners.

About the Card

Venture X Business is designed for business owners who want premium travel benefits paired with straightforward rewards. In addition to the limited time offer, Venture X Business features for primary cardholders include:

  • Unlimited 2X miles on every purchase, everywhere
  • 10X miles on hotels and rental cars booked through Capital One Business Travel
  • 5X miles on flights and vacation rentals booked through Capital One Business Travel
  • Receive a fourth night free at select Premier and Lifestyle Collection hotels when booking an eligible stay of four nights or more through Capital One Business Travel
  • A $300 annual travel credit
  • A 10,000-mile anniversary bonus
  • Complimentary access to Capital One Lounges and Capital One Landings
  • No preset spending limit, providing purchasing power that adapts to business needs
  • $395 annual fee

Cardholders also have access to Capital One Business Travel, an all-in-one digital travel portal which enables businesses to track travel spend, manage expenses and policies, while accessing preferred rates and 24/7 dedicated travel support.

Mortgage Rates Move Lower Thanks to Record Low Pending Home Sales

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Mortgage Rates Move Lower Thanks to Record Low Pending Home Sales


Mortgage rates are a little better today, but it might not be worth celebrating.

The reason isn’t great, as it typically isn’t.

This time it’s pending home sales, which just hit a fresh record low going all the way back to 2001.

That pushed bond yields lower on the day, which will translate to slightly lower mortgage rates as well.

In other words, the soft housing market is somewhat ironically leading to lower mortgage rates, which is arguably soft to begin with because mortgage rates are so high.

Pending Home Sales Just Hit a New Record Low

Pending home sales, which are contract signings on existing homes that haven’t closed yet, fell 7.3% in September to their lowest level on record per the National Association of Realtors (NAR).

The data goes back 25 years to 2001 so this is the worst sales environment we’ve seen this century.

Home sales were only forecast to fall about 0.4% on the month, meaning the report was much, much worse than expected.

They were also down 11.3% from a year ago, which makes sense because back then mortgage rates were more than a full percentage point lower.

As expected, the folks at NAR blamed the quick run-up in mortgage rates, and it’s hard to argue with them this time.

A year ago, the 30-year fixed was averaging around 6.25%. Now it’s closer to 7.50%.

Affordability was already bad before rates rose, and this latest move might be the straw that broke the camel’s back.

Is Bad Housing News Good News for Mortgage Rates?

Strangely, it can be, at least for today.

Like other weak economic data, cooler-than-expected housing data can help push mortgage rates lower.

Though it’s important to point out that this doesn’t exist in a vacuum, nor is the movement sizable by any stretch.

Ultimately, bond yields are only a few ticks lower today, so mortgage rates might just fall a few basis points as well.

Weak economic data helps take pressure off bond yields because it means inflation concerns ease, which are an enemy of bonds.

If you get enough weak data, it makes the Fed less likely to keep hiking, which can also help bond yields move lower (or at least not keep going up!).

And as we all know, when bond yields go down, mortgage rates usually follow.

The 10-year yield is currently down about 3 basis points to roughly 5.10%, thanks to both pending home sales and a weaker-than-expected September housing starts report.

It’s not massive, but it does ease the pressure and ensure rates don’t start rising again after enjoying a nice, lower week thanks to the AI-selloff.

[Compare mortgage rates and monthly payments side by side with my mortgage rate calculator.]

Not a Great Way to Achieve Lower Mortgage Rates

Unfortunately, mortgage rates tend to like “bad news.”

It’s why they drop when unemployment rises, or jobless claims increase, or in today’s case, when housing activity sputters.

But if you want mortgage rates to go down, a collapsing housing market probably isn’t how you want to get there.

At least if you’re a lender, real estate agent, home seller, or another industry participant.

Conversely, those looking to buy a home might be winning twice here.

Fewer buyers could mean sellers will likely need to get a little more flexible on price, which would be a double benefit.

A lower mortgage rate and a lower sales price.

But with rates already hovering at near-term highs, it’s probably awash for a lot of would-be buyers.

And sellers might have little interest listing their properties in the current sales environment, which reduces supply and keeps pressure on prices.

So it’s not a massive win for anybody really, but it is yet another way to keep mortgage rates from going any higher, for now.

Colin Robertson
Latest posts by Colin Robertson (see all)

ESPN Producer Quit After 24 Years Over Sports Betting. The Fallout Could Get Worse

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ESPN Producer Quit After 24 Years Over Sports Betting. The Fallout Could Get Worse



The network is increasingly under fire for its frequent promotion of gambling.

Social Security benefits could be cut 22% in 2032—and one fix would mean a 40% payroll tax hike

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Social Security benefits could be cut 22% in 2032—and one fix would mean a 40% payroll tax hike



Millions of Americans are getting a raise from Social Security next year. But the bigger story may be what happens a few years later, when the program’s main trust fund is projected to run dry.

The Social Security Administration (SSA) announced a 3.6% cost-of-living adjustment (COLA) for 2027 on Oct. 14, raising monthly payments as the program faces a long-term funding shortfall that could trigger automatic benefit cuts in the early 2030s.

The adjustment, which takes effect in January 2027 for nearly 72 million Social Security beneficiaries, will raise the average retirement benefit by about $75 a month, to an estimated $2,170 from $2,095, according to the SSA’s 2027 COLA fact sheet. Higher payments for about 7.3 million people receiving Supplemental Security Income (SSI) will begin on Dec. 31, 2026. Some people receive both types of benefits; in all, the agency says the increase will reach 76 million Americans.

COLAs are designed to help Social Security and SSI payments keep pace with inflation. The adjustment is based on changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), as measured by the Bureau of Labor Statistics. Still, some retirees and advocates say this year’s bump isn’t enough to cover rising costs.

When Social Security’s trust funds are projected to run out

The increase comes as the program faces mounting financial pressure. According to the 2026 Social Security trustees report, the Old-Age and Survivors Insurance (OASI) Trust Fund, which pays retirement and survivors benefits, is projected to run out of reserves in the fourth quarter of 2032.

At that point, incoming revenue would cover an estimated 78% of scheduled benefits—effectively a 22% cut—with that share projected to decline to 62% by 2100 if lawmakers don’t change the program’s financing.

The combined Old-Age and Survivors Insurance and Disability Insurance (OASDI) trust funds are projected to be depleted in the third quarter of 2034. At that point, incoming revenue would cover 83% of scheduled benefits, a share projected to decline to 65% by 2100.

Trust fund depletion would not mean Social Security stops collecting payroll taxes or paying benefits. Instead, without additional revenue or legislative changes, the program would only be able to pay the share of scheduled benefits that its incoming revenue covers. Budget watchdogs have warned that the program is on a “collision course toward insolvency.”

Social Security commissioner says the program will last another 90 years

Social Security Commissioner Frank Bisignano, who also serves as CEO of the IRS, said the program would continue for decades despite its funding challenges.

“This is a long journey. It’s 90 years old, and it’ll be around for another 90 years. The president has promised to protect and preserve and that’s what we’re doing,” Bisignano said in an Oct. 12 interview with CNBC’s “Squawk Box” ahead of the COLA announcement.

Bisignano, a former Wall Street CEO who has been overhauling how the agency operates, also said SSA was working to fix erroneous records. “When you have 30 million records that are wrong, [the job] is fix the place,” he said, adding that the agency had cleaned up about 10% of them, according to Fox.

He declined to discuss potential changes to benefits or the taxes that finance the program.

The trustees’ projections underscore the challenge facing policymakers: without congressional action, the program’s incoming revenue won’t be enough to cover all scheduled benefits once its reserves are depleted.

How Social Security benefit cuts could be avoided

Congress could close the funding shortfall through higher revenue, benefit changes, or a combination of reforms. The trustees’ report does not prescribe a specific solution.

One option would be to raise payroll taxes. Social Security is primarily financed through a 12.4% payroll tax on covered earnings, split equally between workers and employers at 6.2% each, up to an annual cap. That taxable maximum will rise to $192,300 in 2027 from $184,500 in 2026, according to the SSA.

An analysis by Advancing American Freedom, a conservative advocacy group, estimates that maintaining scheduled benefits through higher payroll taxes alone would require a combined rate of 17.3% in 2034—a roughly 40% increase from the current 12.4%. Acting sooner would cost less: Raising the rate immediately to 16.65%, a 34% increase, would prevent any benefit reductions, according to the group.

The organization also estimates Social Security faces a $29.3 trillion long-term funding shortfall, or about $215,000 per household.

“Social Security’s $29.3 trillion shortfall ($215,000 per household) won’t fix itself,” said Rachel Greszler, a senior research fellow at Advancing American Freedom. “Lawmakers can either allow automatic 22% benefit cuts in 2032 or enact gradual, targeted reforms now to protect lower- and middle-income retirees, strengthen the economy, and demonstrate fiscal fortitude before markets force abrupt action.”

The estimates illustrate the trade-offs lawmakers face as they weigh how to shore up the program’s finances while ensuring future retirees continue to receive benefits—a debate that’s growing more urgent as the national debt climbs past $40 trillion.

LONG TERM INVESTING – MYTH | TRUTH REGARDING LONG TERM INVESTING |#youtubeshorts #viralvideo

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LONG TERM INVESTING – MYTH | TRUTH REGARDING LONG TERM INVESTING |#youtubeshorts #viralvideo



LONG TERM INVESTING – MYTH | TRUTH REGARDING LONG TERM INVESTING |#youtubeshorts #viralvideo

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New Bill Would Pay College Tuition For Children Of 20-Year Teachers, Police, And Firefighters

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New Bill Would Pay College Tuition For Children Of 20-Year Teachers, Police, And Firefighters


Key Points

  • The Public Service Educational Assistance Act would cover tuition, fees, and books for up to four years at public colleges for dependents of public servants with 20 years of full-time service.
  • Teachers, police officers, firefighters, EMTs, and social workers would qualify, and dependents must be under 26 and attend school where they get in-state tuition.
  • The bill has a Republican cosponsor and police union support, but it carries no funding, and it dies if Congress doesn’t act before January 3, 2027.

Rep. Shomari Figures (D-AL) introduced the Public Service Educational Assistance Act (H.R. 10551) on September 24, 2026. The bill would pay for tuition, fees, and books for up to four academic years for the dependents of public employees who complete at least 20 years of qualifying service.

It works like a civilian version of the GI Bill benefits that military families use for college, though the sponsors don’t make that comparison themselves.

Figures announced the bill with Sen. Cory Booker (D-NJ), Rep. Jahana Hayes (D-CT), and Rep. Mike Ezell (R-MS). A Senate version (S. 5566) was introduced the same day. Booker said the goal is that the children of these workers “can go to college without drowning in debt.”

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Why It Matters

Four years of in-state tuition and fees at a public four-year college costs about $47,800 at today’s prices. The College Board puts 2025-26 in-state tuition and fees at $11,950 a year, up 2.9% from the prior year. That’s before books, which the bill would also cover, and before housing, which it wouldn’t.

Our breakdown of the average cost of college in 2026 shows housing and food often cost more than tuition at public schools.

The number of potential beneficiaries is large. The Bureau of Labor Statistics counts about 3.2 million elementary, middle, and high school teachers, plus roughly 824,200 police officers. Those totals include private-sector workers, so the eligible group would be smaller.

Many of these same workers already rely on Public Service Loan Forgiveness for their own student loans, and this bill would effectively extend a benefit to the next generation.

How The Benefit Would Work

The bill text (PDF File) sets out these rules, which differ in several ways from the Post-9/11 GI Bill’s transfer rules:

  • Who earns it: Full-time public employees (40 or more hours a week) with 20 years of service, counted in total rather than consecutively. Eligible fields include first responders, public K-12 educators, and government-employed social workers in mental health and child welfare.
  • Timing of service: The worker must be serving when the law takes effect or join afterward. Public servants who retired before enactment appear to be left out.
  • Who receives it: A dependent under age 26, using the tax code’s definition of a dependent with the age limit raised from 19 to 26.
  • What it pays: Tuition, fees, and books, with no dollar cap, for up to four academic years.
  • Where it applies: Public colleges and public training programs that lead to a recognized credential, in a state where the student qualifies for in-state tuition. Private colleges are excluded.
  • Other aid: Students could receive the benefit alongside Pell Grants and federal loans, and the benefit would be exempt from federal income tax.

The in-state rule matters for families near a border. A student who wants a flagship across state lines would lose the benefit, which reinforces the math in our look at why out-of-state colleges cost families thousands more.

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Public Service College Benefit Vs. GI Bill Transfer
Rule Public Service Act (Proposed) Post-9/11 GI Bill Transfer
Who Earns It Teachers, first responders, government social workers Military service members
Service Required 20 years of full-time public service 6 years, plus agreement to serve 4 more
Who Can Use It Dependents under 26 Spouse or children under 26
What It Covers Tuition, fees, and books Tuition, housing allowance, and books
Length Up to 4 academic years Up to 36 months
Eligible Schools In-state public colleges and training programs Public and private schools
Status Proposed Current law
Source: H.R. 10551, U.S. Department of Veterans Affairs. The College Investor.

Who Would Benefit Most?

Families where one parent has a long public-sector career, and a child plans on a public college or trade program, would gain the most. The bill covers training programs that lead to a credential, so it would also pay for programs at public technical colleges.

That mirrors how 529 plans now cover trade schools and certificate programs. A student at a public community college could stretch the benefit further, since in-district tuition averaged $4,150 in 2025-26.

The 20-year bar is high, and it rules out a lot of teachers who have children younger. A teacher who starts at 25 reaches 20 years at 45, when many children are already in college or close to it. The age-26 cap on dependents means some long-serving workers would hit the service mark after their kids age out.

Families in that spot should still look at state tuition waivers and loan forgiveness programs, several of which target teachers and first responders.

The bill also differs from existing state programs. Alabama’s Police Officers’ and Firefighters’ Survivors Educational Assistance Program pays only when a parent dies in the line of duty. H.R. 10551 would reward a long career instead, and that’s closer to the state benefits for military dependents that many states already offer.

How This Connects

Congress has spent the last two years cutting federal borrowing limits, and the changes to college financial aid put more pressure on families to cover costs without loans.

Recruitment is the other argument. The Fraternal Order of Police endorsed H.R. 10551 in an October 1 letter, saying the bill would help officers stay in the profession during “a critical recruitment and retention crisis.” The International Association of Fire Fighters and the National Association of Social Workers also back the bill, according to Figures’ office.

What’s Next

H.R. 10551 went to the House Education and Workforce Committee and to the Ways and Means Committee, which handles the tax exemption. The bill has no authorization of appropriations, so it doesn’t say how the benefit would be paid for or what it would cost.

With midterm elections on November 3 and only weeks left in the 119th Congress, the bill would have to be reintroduced in 2027 if it doesn’t move. Watch for a Congressional Budget Office cost estimate and more Republican cosponsors.

In the meantime, teachers and first responders can lower their own costs through the student loan forgiveness programs open to public servants.

Editor: Colin Graves

The post New Bill Would Pay College Tuition For Children Of 20-Year Teachers, Police, And Firefighters appeared first on The College Investor.

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