My Thoughts On REAL ESTATE, INVESTING & HOW TO SUCCEED In 2021 | Kevin O'Leary & Barbara Corcoran

I don't think these commercial properties are going to do well at all. In fact, I think they're going to lose a substantial portion of their value over the next six months to a year. We have companies where sales are down, but cash flow is up. Now, how did that happen? And he's working alone. As I went in for my coffee today, I said, "Hey, where are your employees?" He said, "I can't get them to come back, making more money on unemployment."

So, Kevin, what's going on? Where are you located right now? You're at...?

I'm at a lake. I'm at a lake in Canada. That's right, I'm going to spend a couple of weeks here. I just left Florida, Barbara, which was crazy, as you can imagine—just crazy. I almost lost you there; I was there for four months. I'm sorry, I was there for four months, and it was really nuts. It opened up, then it closed down, and it opened up, and it closed down. When I left, it was closing down again to a bigger close down than it ever was—no walking rights and all kinds of surprises.

I think they're doing the right thing because they got to nip this thing in the bud like other countries have done, and I think it's a little slow. Would you say that Florida is probably our best example of a slow on the draw, so to speak?

Yeah, I'm getting notifications every day from my building, and they say they're now testing twenty percent positive for everybody.

Wow, that's amazing! So, you got out of there at the nick of time, but you and your wife are healthy, right? Your children?

I did the whole test thing anyways and everything else. But I was just listening to you talking about real estate; I'm fascinated by that because I'm just wondering, because you're a real estate person, Barbara, what's going to happen to Triple A office towers? You know I own some of them through REITs. If people don't feel safe going up those elevators to the 70th and 80th floor, what's...I mean, what are the values going on?

I'll tell you what's going on in New York City. It's not just the elevators; nobody wants to get in a crowded elevator. But long before they hit the elevator, no one wants to commute to work. They don't want to jump on the subway; they don't want to sit in a car for two hours. They've had the unusual opportunity that they were allowed to work at home, and people are loving it. I think it's going to be a tall order to get people back to the workplace as we knew it before, and I don't think it's going to happen.

I know there's a new movement here in New York City where teams of people are coming in. Like your marketing department comes in one day, the next day your research department comes in. So they're rotating people, which means less desks are needed. What's concurrent with that is every landlord in town is hearing from every tenant; they're renegotiating leases. Even if they have five or ten years left on the lease, everybody is holding back on rent. We're going to see a bloodbath. I'm sorry to tell you, if you've been well invested in REITs, I don't think these commercial properties are going to do well at all. In fact, I think they're going to lose a substantial portion of their value over the next six months to a year.

So, can you get out, is my question?

Yeah, I have. I've reduced my exposure from almost 30 percent down to eight. I've also sold all the regional banks and the money center banks that own the mortgages. Obviously, I took some losses, but they've gone down significantly further since. So clearly, the market is figuring what you're saying. I'm just wondering, can the impairment be 25% to 35%? What do you think, two or three years from now? A building that used to sell for 100 million is going to sell for 30 off.

I had a guest, but you know what guesses are? They depend on the future. But I would say from where I sit, they're 30 off. But that's not the real problem. The real problem is, who's going to want to buy them? I don't think a lot of people are going to have an appetite for that, even at that steep discount.

Wow, well, just before we leave real estate, what about...?

Wait, wait, wait, wait! Kevin, hold on a minute; hold on! I'm interviewing you; you're not interviewing me.

Well, I figured if I can... Look, if I can learn something while I'm talking, he would get some value out of you.

Barb, it's the first time it's ever happened!

That would be great. That's my...

Kevin, just quickly on condos in New York, because you know I am shopping around by now or wait...

Oh, Kevin, you're not going to buy anything. You've been shopping around for four years; you're too cheap to spend the money!

I want to buy your condo, Barbara. I want your time!

50? You wouldn't open that wallet; I know you; you're too cheap!

Why can't I kick you out of your place? I'll take your place.

I like it; my place is beautiful, but I would never move out. You'll have to take me out in a coffin, and I'm afraid.

Yeah, yeah. If you want to spend, if you want to spend a lot of money right now on a brand-new condominium on serious dough, which again, I'd say you never will, you could get substantial kid discounting already—20% to 25%—if you work directly with the developers. They don't admit they're discounting, but any deals that are happening, which are so few, are steeply discounted.

The reason people don't know how bad that market is because many of the developers are built for the future, so they can't close yet. But when you see those closing prices roll out, you're going to say to me, "Barbara, I should have listened to...I should have bought back then because now look what I have to pay."

Now, but you won't buy then.

Well, my problem is I don't want to live—I don't want to live in hotels anymore when I go to New York when things get back to normal, whatever they're going to be, because I just...I don't want hotels, but I don't want to be around.

Yeah, you've been saying that for years. You're going to stay in the hotel because you don't want to put the money out.

Let's move on from right here! If I catch a cold, Barbara, I'm blaming you again!

Kevin, let me ask you a question. What advice have you been giving your entrepreneurs? We both invested a lot in businesses; some do so much better than others, some are dead on arrival, some we're questioning all the time. But nonetheless, we're in the position of an advisor, an investor. What advice overall have you been giving your investments as to what they should have been doing and still should be doing through this pandemic? I'm curious because I want to steal that advice if it's any good.

Well, the ones that have been successful, you know, I've got some that are involved in industries like the wedding industry, which has been decimated, and I've got some in restaurants, which has been killed. But the ones that are selling goods and services that have really been successful, and I just this morning got off the phone with two of them, have basically set up Shopify platforms. A lot of their products have been kicked out of retail, or they’re not selling retail anymore, so they've gone directly to their customers.

Now, here's the thing to note, Barbara. This is what shocked me today. If you were selling, well, you'll find this interesting, we have companies where sales are down but cash flow is up. Now, how did that happen? Instead of paying 50% to retailers and distributors, they've sold direct to customers. They've been able to capture back at full margin.

So you look at the success of a Love Pop greeting cards, which was 50% in retail, which is now basically all online at full margin; they're just killing it!

Yes, of course! I'm sorry, go ahead!

Yes, and I have another one, Bertucci pizza ovens, a deal I closed very recently. It's one of those rare deals where, because of everybody staying at home, sales are 400% ahead of schedule. I've actually made all my money back on that deal; it's only been five months!

Wow, that's terrific! What are you going to advise them as things return slowly to normal? They're not going to be selling that many pizza ovens anymore, maybe?

But what I've been able to do with them, as I said, if people are willing to buy these pizza ovens, we need more direct to consumer. So this morning, I just got a deal with QVC; we're going live in early August. We're going to sell a huge amount online, and I think you've got to make hay while the sun is shining on some of these situations.

And for me, the direct to consumer is not going away. I don't think this trend is going to stop. We're not going to sell as many ovens to retail anymore because we have to give up 40% margin, Barbara. I don't want to do that! Sell direct! And the consumer also gets accustomed to a lower price.

You're very familiar with my most successful deal from two years ago, the Comfy, which is an oversized sweatshirt. They were in a pickle the minute the pandemic hit; they couldn't sell through the stores. They had almost 30 million dollars in merchandise in stores that closed up. They got all that merchandise back; they didn't know what to do.

And exactly what you said, they sold direct to the consumer, and they've almost doubled their sales! I really prayed for the most nights, saying, "Are they going to go down? They're in trouble now." They just turned right on their heels and slammed it home on the internet, and they've been selling twice as many Comfy's; go figure it out!

So yes, I don't think that's the trend that's going to go away. I wholeheartedly believe the pivot to direct to consumer is a worldwide phenomenon, and I think, you know, when we get back to shooting Shark Tank, whenever that happens, we're going to see a ton of deals that are focused on doing just that. The old distribution model is going to change; I think it’s going to be more efficient.

I don't think retail is going to ever look the same as what it used to. I think there are all kinds of malls across America that are going to be changed into cloud kitchens or inventory for climate control for direct distribution; who knows? But wow, what a change! It happened real fast.

Do you think on Shark Tank you're going to shop with that in mind, like put your entire focus on those businesses that are direct to consumer and not invest in anything that is not? Because I'm sure we'll see our share of various kinds of businesses, as we always do.

Well, if your strategy is all retail, I'm going to pay a big discount for that because that's riskier than anything today because I'm not sure that... Alright, look at all the bankruptcies: Neiman Marcus. Who could have even thought they'd go bankrupt? They're worthless now—worthless.

And so, if you are selling through there, you're probably going to wait months to get your inventory back and all the rest of that stuff. I think at the end of the day, yes, I am going to look for companies that are going to do better online that have the savvy social media skills to tap that, versus ones that just tell me, "Oh, let's go sell through retail." That's what I think!

Yeah, well, I could hear your picture already; I'm sorry. You'll be talking to one entrepreneur after another and insulting them with a low bid and using that excuse again and again. You always come up with an excuse to pay very little and to beat those poor entrepreneurs into the ground.

And for those people who are listening, give me a feedback on that. What do you think about the way Kevin beats up on these entrepreneurs?

It breaks my heart! You know, at times I'm sitting on the set; you don't see it on the camera; I'm crying my eyes out!

I'm breaking...

Listen, Barbara, let's tell the truth, because we have to be honest; there's a reason they call me Mr. Wonderful; there's no false advertising here, okay?

Yeah, that's false advertising! Moving on from that, of course!

Hey, listen, what do you think other than direct to consumer are the big opportunities out there right now? Because we have a huge audience of young entrepreneurs struggling—some people moving ahead, but what do you think are the big opportunities for young entrepreneurs to take advantage of right now, other than direct to consumer?

Two areas that I want to focus on in and outside of Shark Tank. Number one is health care. I think people are going to be very, very focused on health, and I'm fascinated by better food groups. I think people are now having been locked at home and doing so much cooking on their own; they’re fascinated by food options, and I want to get into foods that are healthy, sustainable, good to eat.

I've been cooking like a banshee! Myself, Chef Wonderful! Gotta see!

Oh yeah, of course! Chef Wonderful has been a flower that's been blooming!

Just a Chef Boyardee! What I hope we see is a whole lot of health initiatives—things that help people live a healthier life. I'm not saying just exercise equipment; I'm talking about, you know, maybe more deals like Blueland. The thing I did with the disinfectants and detergent was crystallized; that was a big success for me.

There's another one, Barbara, that was a big rollout. If you recall, they were having—they were going to do a giant retail rollout.

Okay, we were just...I'm gonna push you one moment again, Kevin! Just for the sake of the people who are listening, whatever Kevin's saying, cut right in half! He grossly exaggerates his successes and he buries his failures.

Keep going, Kevin!

So let me tell you—this is twice as successful as I thought it was going to be, and you're full of...and you know, Barbara, you are so full of poo-poo; it's ridiculous! The only reason, Barbara, I want everybody to know that's here—

No, don't do it!

Yes, the only reason Barbara is where she's at is I bought her a new broom; that's how she got there.

Now, Barbara, let me tell you the story of Blueland. Talk about a pivot; wonderful woman entrepreneur. She was facing a complete shutdown of her sales because all of it was set to go into big-box retailers. She pivoted; she bought remnant cable time on Comcast, and she and I made a commercial for her and she made several others.

All we did was sell direct at full margin; she is way ahead of budget, and she hasn't sold anything for the retail!

Well, you know, she had to put that money out and take that risk; she deserves success.

Something new?

Yeah, buys detergent online now; everybody's doing it! That's the whole thing, of course!

Well, it's delivered to your door—not a bad thing and it's done quickly as well, right?

Yes, exactly!

Are you ready to take some questions from our adoring audience?

Absolutely!

Wait to ask your questions; let's go! Let's see what we got! I have quite a few good ones coming, and keep them coming in!

Okay, and the first one is: "Can my boss make me go back to work if I don't...?" Oh, hold on; look at that, Barbara, I'm back!

It depends. It depends what states you're in. Some of those are state mandates; some of them are municipal and county mandates. There's no federal mandate that determines whether you can go back to work or shouldn't. This is determined by where you're at because right now in Florida, I don't think anybody with their head screwed on right is asking you to go back to an office when 20% of the people walking around are testing positive.

So Dade County is effectively shut down; that's a good example. And there's other places like Vermont and even Boston now where people are going back to the office because they feel safe. Depends on the region.

Well, Kevin, this is for Marian in Florida— I realized Miami, actually, where you just left. What about there?

No, not a way to force her back, right?

No, no. In fact, in our building where we hire 21 people, we've had—you know, and I'm obviously close with them—we've had several meetings about people's comfort and we've gone to a full N95 mask protocol. Everybody in the building, outside of their unit, has to wear that mask and gloves.

They come in voluntarily to work; if they come in, they get paid. And so, they're all coming in because we have a really super safe protocol.

There's another question that's so similar; it's probably the other side of that, which is, if I go back to work and I'm not comfortable, must I wait? It's not really worded well, but basically the question is, can my boss insist I stay if I'm not comfortable?

Good question. You know, I'm telling everybody nobody is going to sue you for taking care of yourself, and if you're not comfortable, do what your heart says because you do not want to contract this virus. It's coming out clearly in the press lately that it's not a respiratory disease; it's a blood disease. It's affecting people's organs; it's affecting their heart rates; it's affecting their oxygen intake.

This is a nasty bug, and we don’t want to get it. Just do what you think is safe and don't be foolish. I mean wear a mask! Look at the countries that have got out of trouble: Switzerland, 8 million people, only 14 cases! Everybody wears a mask! I don't know why we're not doing that; we're nuts!

Oh, we don't particularly have people leading us in that direction, I don't think either, do we?

Let's get—let's not get into politics!

No, we're not going to get into politics. I'll leave that out, as I always do.

I ran into a shopkeeper this morning; he has a little bistro on Madison Avenue—a tiny little shop. The guy has three employees, and he's working alone. As I went in for my coffee today, I said, "Hey, where are your employees?" He said, "I can't get them to come back; they're making more money on unemployment than coming back to work." He said, "So I'm working the shop myself." He had a line of people that he couldn't keep up with! What do you say to a guy like that?

Yeah, I actually have some companies that said that's happening to us in my Shark Tank portfolio. 80% of my companies qualified for the PPP and got it, and the 20% that didn't get it didn't have their accounting and payroll records up to date.

So that's a new policy I'm going to make a change on; everybody's going to have to get an accountant before I close a deal because that was a big loser.

But what I learned is this: This person is absolutely right. In states like California, New York, Florida, and Texas, the unemployment is better than working, and we've got to fix that immediately because that's kind of stupid.

The PPP money was to give them, uh, and maintain their jobs, and we're finding they won't even come in because the unemployment's a better deal.

What's your advice to that guy?

My advice to him would be to go back to work. Go back to work; take the job because at some point that whole unemployment game is going to be over, and he'll be without a job. He should keep his memory intact with his boss and his infrastructure. Work safely, obviously, maybe remotely.

The difference is about 11%, Barbara, between which is a lot. I understand you're 11% better off with the unemployment than the PPP, but with the PPP, you have a job; you're actually employed. So you might have other benefits like medical and other and dental insurance and things like that.

It's really confusing; I have too many numbers. I'm getting a headache just listening!

Basically, take the job if you can get it; that's what I say!

Well, you know what? I'm going to share your advice, but I think he's already going to be taking mine. By tonight, I said to him, "Call your three employees and tell them as of Monday they're going to be replaced if they don't want to come back."

He said, "I'll do that; I'll let you know on Monday what happens."

And they call me the nasty one! Look at you, Barbara!

No, I mean, you just have to size—you have to give a deadline!

I think...oh boy, that's nasty!

Okay, one last one: I just graduated from college and I'm really worried about the job market. How do I stand out for the millions of people looking for work now?

Good one!

Oh, listen, I've had—I've been asked that question. By the way, it's a good chance for me to promote my Ask Mr. Wonderful—

Don't promote; just answer them!

No, no, because I answer this question every week on Ask Mr. Wonderful, my YouTube channel, and I'm definitely promoting it, Barbara. Why would I do this for free for you unless I'm promoting something? Are you kidding?

But anyways, the answer to that question is interesting because I've had lots of results from this now, having been doing it for five months. Write a letter, no more than three paragraphs explaining why you can help that person that you want to get a job at get their job done faster and ask to work for 90 days for free, for nothing, in an apprentice or internship position.

Just getting in the door is 90% of the challenge. If you deliver any value during those 90 days, you will get an employment. You will get a job because right now, businesses are freaking out trying to figure out how to do things, like how do I get online, how do I deal with social media, how do I communicate directly with customers?

If you're young and you know how to use social media, that's a skill that many companies that are old school are trying to hire for, but they don't know how to do it. So if you're willing to go do it for free for 90 days, you take over their social media, you show you can acquire customers economically, bang! You're going to have a job.

I see. Okay, well, I'm going to listen to that advice and share it and make it my own—say I came up with the idea! What do you think about that?

Well, Barbara, I'll show you immediately. That'll be good press!

You might know too that the job boards have gone up by almost 35% in the last week alone, so the number of job postings has skyrocketed! And of course, all types of businesses—so there are many, many people hiring right now!

I think it's almost the rumor out there is there's no jobs, no jobs, and you know better than most, Kevin, that whatever's in your head, your own attitude, what you envision, kind of comes true! So if you kind of think instead there's lots of jobs, how do I get the job versus it's not much going on, it's a much better posture to shoot from, don't you think?

Yeah, I agree. But you mentioned the platforms—the number one growth platform in terms of activity right now is LinkedIn. Make sure you have your LinkedIn page— you know, as they say, "Oh, courant!" In other words, go groom it!

And the other thing I keep telling people about that you—the whole LinkedIn thing—less is more! No one’s going to read 15 pages about where you went to high school and the name of your dog. No one gives a—you put down what you can do to help an employer be more efficient.

And there's so much demand around digital, around social media, around direct to consumer, around skill sets on Facebook or Shopify or any of these platforms. People are screaming for employees that know how to work that stuff!

What would you say to people who are just...?
A last question; I know I promised you the last one was the last...

Here's one more, I'm making this one up, but it's a theme that runs through so many of the questions I get. How do I keep my attitude up and ready? How do I keep myself above water? How do I keep myself optimistic? I'm starting to feel depressed, that kind of thing. How does somebody get themselves up? You know, Mr. Wonderful, what do you say?

Yeah, you know, I have lots of employees I've talked to this about because they have been working remotely now for almost five and a half months in some cases in very small condos and apartments. That's tough to do after a while. I mean, you know, and if they're single and things like that, the number one thing is not to run out of money.

You get—if you want to really get depressed, get to a place where you're basically bankrupt, because then people run out of money!

Yeah, I know. But the thing is most people, I found, because now it's a real-life situation, are able to cut their expenditures by 30%, even 35%, even 40% by just buying the essentials.

Many people have stopped paying rent; you mentioned that earlier. That's true! Landlords are being flexible because they can't sue every one of their tenants!

But you have to be careful that it doesn't trash your credit rating going forward. It's better to notify the landlord that you've lost your job than to surprise them by not paying them! Most of them are willing to take less when you're forward about it.

But—and the other thing I keep telling them is this is a chance in your life to reflect on things. Read the book you've always wanted to! Find a hobby that you—you know, learn how to play guitar or an instrument. Try do the photography you bought the camera for that you've never picked up!

Whatever that is, you've got to find something to do with your idle time or you'll just go nuts! Those are the things I recommend!

Those are the left-brain kind of things that I would hope you would recommend because you think so, so cleanly on all those types of issues! I'm going to give a little right-brain advice here, which is I think the best thing about us all wrestling through this terrible chapter has been it's given us pause to evaluate who we want to be when we grow up!

I don't care what age you are; it's also given us pause to actually sit and find our own confidences—our own confidence! And most of the people who are losing confidence right now, I find they're losing their confidence because they're not trying things.

Yet many people think you have to succeed to get confidence, but I find all the young people that get confidence in themselves more than ever get it by trying!

And so I'm a big proponent of just trying everything you can possibly try because what you wind up with as you come through this difficult chapter is more confidence than you went in with! And if you really want to get ahead in life, you know it, Kevin; I know it; confidence often comes out of failures and tries.

But it's the confidence that keeps with you for life! Look how cocky you are! I mean, how did you get that cocky? Not because you were successful at everything you did; I see you do many things that you don't succeed at, but boy, oh boy, do you keep coming back and trying! Would you agree with my kind of emotional advice on that one, Kevin?

Yeah, so I think that's great advice for anybody that's feeling down. I mean, everybody has to find that thing in life that they love doing, that they're passionate about, that they're willing to work 25 hours a day on.

And I've always said that you have to try a lot of things before you'll find out what that is; you can't know till you do it. Yes, I'm very concerned that colleges aren't going to have classrooms, people together anymore, which is why they're seeing record amounts of people moving back to the town that their college is in, even though there's only virtual classes because they need to be together.

And I think that's important, but the number one thing, Barbara, I think we should leave...

I'm not leaving on any number one thing you’re saying! I'm leaving this on the number one thing I'm saying!

Go ahead!

Well, I'm going to give some great advice here, Barbara, and then you should do exactly what I say, as you always should. You know, that's the key. I mean, thank goodness I'm there on Shark Tank; if I let you to your own, you would lose all your money; it's just ridiculous! Go ahead!

Anyways, here's the thing I've learned from all of this. It better be good! It is very good! You know, you have a certain responsibility to yourself and your family and your friends to start acting safely about this virus.

It makes no sense to me anymore that when you go outside, you wouldn't wear a mask, or when you go to someone's house, you wouldn't wear a mask. I don't let anybody come here anymore that isn't living by that edict. I have masks for them; I don't want anybody to get sick!

But I've now known many people that have gotten the virus. This is the difference from five months ago, and the outcomes in some cases have been horrific, including death. And so, I now note to end on—it's just a positive thing we can lick this thing if we all get responsible.

Florida's in the mess it's in because nobody was wearing a mask! I was practically the only guy going shopping at Fresh Market with a mask on! People were looking at me like I was a weirdo or something! Now look at them!

Yes, now they have to wear a mask, and I think that's the... I want to just give that note: Think safely, social distance, wear a mask; you don't want to get sick; it's crazy!

My last comment is, it's a wonderful time to start a business. Most of the most successful people I know started on the heels of a failure, a bad chapter because the whole world gets redefined. People are open to new ideas, new businesses, new ways of doing things.

So while you're listening, Mr. Wonderful, and putting your mask on, remember if you had a dream about starting a business, now is the time to get it going! That's it!

Don't say another word, Kevin! Don't!

No, Barbara, that's such good advice! I'm going to get you another new broom!

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