Announcer:
Welcome to the global investor podcast, a show that focuses on helping foreign investors and, or the lucrative us real estate market host Charles Carillo combined decades of real estate investing experience with a professional background in international banking to interview experts in all areas of us real estate investing. Now here’s your host, Charles Carillo.
Charles:
Welcome to another episode of the Global Investors Podcast; I’m your host Charles Carillo. Today we have Beau Beery. Beau has been in the commercial real estate business since 1999. He has consistently ranked as the #1 multifamily producer in Florida for the Coldwell Banker Commercial brand and among the Top 5 in the nation every year before starting his own private multifamily brokerage firm in 2021 and just wrote a book called “Multifamily Investors Who Dominate” So thanks so much for coming on the show, Beau.
Beau:
Yeah, man, this is awesome. Then looking forward to this for weeks.
Charles:
So how have you you’ve been involved with commercial real estate for 20 plus years. What was your professional background prior to joining Coldwell in 2011?
Beau:
Sure. So I graduated from university of Florida with a master’s in real estate and, you know, a lot of my colleagues were going off and getting these cool jobs that 80, $90,000 a year at 20 something years old. And I hadn’t met my wife in the program and she wanted to stay in Gainesville. Right. So I knew that my, my options were a little bit more limited than being able to go all over the country. So I, I got a job with the AMJ group, which actually happened to be the number one development and investment firm. They were based in Gainesville, but they bought all over. I bought and developed all over the, primarily the Southeast. But now acquire stuff all over the country, but I was with them for 10 years at a college. And what I did was I brokered and managed a pretty diverse portfolio of office retail, industrial and apartments. And the second half of my time there, so the last five years I did a lot of the acquisitions with the main principle and the great thing was I was able to master sort of the buyer and the seller side of the transaction. And more importantly, I learned, you know, what brokers do to be most valuable to a transaction, which is basically to provide like a perspective and help each party learn empathy, you know, sort of see the other sides constraints and be able to come together. So it was really good to learn from the principal side of things.
Charles:
Interesting. That’s awesome. What markets in size properties does your firm cover now?
Beau:
So I covered the Northern half of Florida. So that’s, that’s Orlando, winter Haven Lakeland Ocala Gainesville, all of the Lucia County on the East coast. So Daytona Deland, Noosa, Myrna Ormond up to St. Augustine up to Jacksonville all the way over to Tallahassee Lake city in the middle. And any of those other little Podunk towns in the middle, I do all that stuff. And mostly it’s everything that’s I do anything over 10 units, right? And most of my deals though are between 50 and 200 units. That’s kind of where I play ball. Most of the time I’ll do a lot of 20 and 30 unit listings and I’ll do a lot of 100, 150 unit listings. But most of it’s between 5,200.
Charles:
Okay, cool. So number one thing I hear from investors is how difficult it is to find deals at pencil, for investors you work with, how are you advising them to find deals in such a competitive marketplace?
Beau:
I get asked this a lot about, you know, how to find deals in this market. And, you know, frankly, it’s almost, it’s almost the wrong question. What, what, what we should be asking is how do deals find me, right? So the greatest investors that, that I, that I’ve worked with in the past, they don’t, they don’t go and find deals. They are flooded with deals that come to them. Right? So in the book I wrote the multi-family investors who dominate, I talk about this thing called love factor, right? So the love factors in the equation, here’s the equation. The love factor is the number of deals that you were shown by a broker, by a seller, whatever divided by the number of deals that actually closed. So for instance, if I showed you that in the Northern half of Florida, there were, you know, 86 are listed, let’s say let’s use round numbers. There were a hundred closings of market rate deals over a hundred units of a certain age. And I showed you that list and you looked at it and you were like, you only saw, you only remember seeing like 10 of those, then you have a really crappy love factor. Your love factor is 10%. I mean, you only got at bat 10 times, but there were 90 other deals, right? And so it’s not, it’s not one thing an investor can do that. The elite investors that I write about, they have like this sixth sense for developing a reputation over a long period of time that employees, brokers to bring them deals first, usually weeks ahead of everybody else. They’re the masters of human motivation there. They’re building a reputation before and after a transaction, not just during it.
Charles:
Okay. Yeah. The reputation is a huge thing because I mean, commercial real estate being such a small industry, have you leveraged the buyers or sellers reputation in order to close a deal?
Beau:
So the, the best way a broker can leverage, let’s say like a strong reputation buyer is, is, is, is if I can provide a seller, you know, the buyer’s bio, like, you know, information about them, their history, you know, their, the traits that make them good at this industry, a list of the assets they owned, you know, with, with, with addresses when they acquired them. And big time is his letter of as a recommendation from brokers and lenders that you’ve worked with. So the most elite investors I see when they turn in offers, they try to get these recommendations from the brokers and the lenders they work with. And you can, as you can imagine over time, you know, you turn a letter of intent and a half dozen letters of recommendation from both brokers and lenders. That’s powerful. And, and, and and of course, any deals that that brokers have done personally with buyers, that’s like the best thing you can possibly do, right? Because then I can talk to sellers. Hey, I transacted with a dude. I did two deals with this guy. He was great. He didn’t retrade several things came up during the transaction, but he was awesome to work with. He didn’t see the trees through the forest. He saw the forest of the trees. And so, and then on the seller side, as for seller, like being able to assure the buyer that the seller is reasonable that he takes good care of the assets that he takes. First-Class care of it, that he actually is a seller that he’s not going to just pull back and then refi, or he’s just testing the market. Being able to say that he has empathy, like he can see both sides as things come up. Being able to say that the seller has impeccable records, Hey, Mr. Buyer, when we signed a contract, I’m going to give you a drop box full of everything you need. Right. Like it’s, it’s all there. They got great records. And you know, when sellers and buyers, frankly, are transparent, like that’s big time as well. Those are those that really helped me when you have great reputations on both sides.
Charles:
I imagine you’ve had buyers and you’ve guys have walked away from a deal because of a seller’s reputation. Is that a normal thing? Or does that happen once a week?
Beau:
Well, yeah. I mean, it’s not, it doesn’t happen as much on the seller side. What happens is, is they were maybe difficult as a seller, or they made it very hard for the buyer or they put their foot down a lot. And so even if we close on a situation like that with a difficult seller, I actually, I’ve just had a scenario very recently where I took a 300 unit listing to market. This was, I don’t know, maybe three or four months ago, and one of the top buyers that I’ve, I’ve done a lot of deals with. He’s a great buyer, pays big prices, closes quickly. Wouldn’t even look at it because five years prior, those two did a transaction together that I broker, and it was a really transaction. Right. It was really tough. Now, listen, I still sold the deal. There’s still going to be multiple offers, but wouldn’t you like to, as a seller, have another offer from a great buyer, right?
Charles:
Yeah. No, for sure. Definitely all the offers you can get, if an investor reached out to you and I was interested in investing in properties or buying properties that you might have, what could they do to show you that they were a, a serious investor that warranted your time?
Beau:
Yeah. Good question. So, you know, reputation, isn’t something that just happens, you know, in an initial phone call or even the first several contacts, right. It happens after repetitive action, not words. Right. So I have plenty of esters that, that talk a good game. Right? One of the things that gives brokers chills is when the guy, you know, he’s introducing himself, we never retrade. We always close. We always bake Ash. You know, anytime if I go to contract Bo, you know, it’s one word is bond. I’m going to close because it’s like the, it’s almost like almost every time someone says that, even though you would think it’s what you want to say. It’s rarely ever completely true when every single time they close. Right. So so the number one thing you can do is close on assets, but not just close, not just close, but close with an impeccable reputation, right? That, that earns you letters of recommendation over and over again. And so the more of those, you do, the more closings that went well, that you do, the more deals you see before anyone else and on the onset at minimum, if you can provide sort of proof of financial capabilities and experience and letters of recommendation, those are the big, those are the big ones.
Charles:
Okay. So that’s going to be the ones where you’re, once you provide that to a broker and you start building that relationship, that’s when the deals are going to start flowing to you other than you going out and trying to search for them. Yeah.
Beau:
Yeah. So it’s, you know, if you haven’t done a deal with a broker it’s, it’s maintaining frequent contact with them, letting them know that you have the financial and experience capability to do it. And then when you, and still, even then lots of people have that going for them, right. It’s when you do a deal that you’re now on the radar of every broker, right? Because every broker is tracking. Every closing, we look up who the buyers and sellers were like, for instance, I track who the hottest guys are and trailing six months, right. I know some owners that own 30,000 units, but they haven’t done in five years. So I can’t waste a bunch of time on those guys because their parameters have obviously changed. I’m following the guys who are doing lots of deals right now. So when you do that first deal, that’s a big deal. You do another one pretty soon. And then you do another one, six months later, a year later. Now like every broker you’re on there, you’re on their radar list.
Charles:
So are there specific underwriting guidelines that you work off or a ones that you advise to buyers, maybe a few preliminary points that need to work before going through a full underwriting process?
Beau:
I’m sorry. Say it again,
Charles:
Like if a deal comes in or you’re looking at something and a, buyer’s asking you questions about how to underwrite a deal. And is there certain preliminary things that they should be looking at? Number one, before going into say a full 12 tab underwriting, maybe they do a 20, 30, 45 minute or review of the property first. What are those things that they really should be looking at at the property level?
Beau:
Yeah, for me I placed a lot of importance on the national apartment association, income and expense report, right? So it’s you know, it’s a huge package, but they actually do a summary oftentimes as well. It’s only like 15, 20 pages where they do, they survey something like 4,000 apartment complexes and they break it up by different divisions within the U S and you can see what the average metrics are for income, other income taxes, insurance, utilities, repairs, and maintenance, contract services, all this stuff right now, most of those are for larger complexes, 150 plus units, but you can, you can make adjustments downwards for smaller deals, right? So if bigger deals have amenities and common areas and all that, for instance, like right now, the overall expense per units is between 50 $506,000 a unit per year. Right. Well, I know if I’m selling something, that’s 30 units that doesn’t have an onsite office and administration building and gym, and all these grounds, those are running between 3,540 $500 a unit, right? So learning the metrics ahead of time of what things of what assets run on, on, on, on average, so that when you get an offering memorandum and you’re looking at it and the broker has in, you know, $2,800 a year, total, when you add up all the expenses, a unit that away that right away says, Hey, there’s a total disconnect here. It’s almost going to be impossible to make this work if it was priced on something like that. So to me very quick, underwriting can be done on just learning the metrics of income expenses in the industry. Okay, awesome. There’s a lot of other stuff, right? Those are like high level, 30,000 feet. I can, I can look at stuff in like 35 seconds, new offering memorandums and determine whether or not I even need to waste my time when,
Charles:
When they say a seller comes to you and they’re talking about pricing their property, are you giving them the BPO on their property and you’re going through, and that’s what you’re looking at initially and kind of telling them what I mean, we’re in a really hot market now. So normal. I mean, how does that, how does that change now versus if you years ago?
Beau:
All right. So here’s the inside scoot, man. This is how, this is how I’ll, I’ll tell you two or three ways of how this thing works. Right? So it’s, it’s very, very rare that that the broker was ever given full ability to actually price this. Right? What happens almost all the time, especially over 50 units is that most investors who assets are sophisticated, they, they, they track this stuff. They have a fairly good idea of what things are worth. Sometimes they’re a little bit behind, right? Like they may think, Hey, my property is worth 80,000 and you talked to a broker and they could probably get a 95, but for the most part, it’s pretty close. Right. And so what happens is a seller will call Bo right? And seller says, Hey, my partners and I were thinking about selling, we’d love for you to do a BPO. We think it’s worth 105,000 a unit somewhere in there, but right. And that’s usually what happens. And so I’ll do the underwriting. And I may come up with a best case scenario of like 85 or 90, right. So Bo now has a choice. Bo can either come back to the seller and say, Hey, Mr. Seller, I know you’re thinking one Oh five. You know, I can’t even with the best pro form I can come up with, get past $90,000 a unit. I’m sorry. I mean, unless you come down to my price, I just want to take a list. Right. I could do that. And I’m going to lose the listing, right. Because there’s plenty of other brokers who are going to tell them five, or I could take the one Oh five and I can say, Hey, I think we could get one Oh five. I think, I think we definitely won’t be leaving any money on the table. I think it’s way out there. That my job is to get you, that I think offers will come in between 80 and a hundred, or I’ll say 90 to a hundred, whatever it is. And I take the listing. And oftentimes the hope of brokers is that we will let the market tell the seller what it’s worth, right? So sometimes sellers just have in their head, whatever the reason may be, see that it’s worth one Oh five. But if I bring them 13 offers that ranged from 90 to 94 door, that seller’s going to do. One of two things, see these are going to be so cocky or org just out of his mind and say to me, no, the hundred and 30,000 people, you just sent them listening to. And the 150 people who signed to CA and then 192 P or the 120 people of those CAS that rejected the asset and of the 22 offers got, they’re all wrong. Bo, my property is worth one Oh five that rarely happens ever. Right? What happens is they see that the 13 offers the 22 offers, whatever it is. And they’re like, okay, Beau, great job. You exposed it to the model. You know, this is what it’s worth. Then they need to decide whether or not they’re gonna accept or not. And most of the time, so very rarely I would, I would not put much blame on brokers when you see big prices. Now, a lot of when the brokers do the BOVs, if the seller didn’t give them their number and the broker comes up with the value, oftentimes it’s a value that’s higher than the seller thinks, right? And they’re super happy. And they list the thing is, is that the brokers almost always get the price, right? So one of the, one of the pet peeves of most brokers, and one of the worst you can do as a buyer is to, is to poo poo, the offering memorandum, the list price, the rental comps use the sales comps used because almost every time itself, when do you see assets come on the market and they just didn’t sell, right? It’s, it’s rare to small percentage of time. The correct way to do it is, is to let the, if it’s not something that works for you is let them know, Hey, great marketing package, nice looking property. You, you compliment the seller the way they took care of it and just let them know, Hey, listen, love the asset. Doesn’t work for my returns. Please keep me on your list. You know, I’ll let you know about it quickly. Right. But anyway, my whole point here is that, you know, oftentimes the seller is the one dictating the price. And even if I came up with the BOV with no instruction to the seller and it was too low and the buyer says, Oh, you said it was worth 90,000 unit. We were actually hoping you was going to be worth a hundred, 105. I’m still going to take the listing, right. Because I’m probably going to sell it. And the market is moving so fast and it’s so hot. And the whole thing is, ours are always thinking, you only need one person. Right. You only need that one guy to pay that. Right.
Charles:
Interesting. Yeah. Very interesting. So when I started multifamily like 15 years ago an older seasoned investor told me the first thing to do is get like an assistant. And what do you suggest to your clients to streamline their streamline, their underwriting and investing? Is it a certain team members? Certain software?
Beau:
Yeah. I mean, listen, assistant, I mean, you know, anyone who is in this business, that’s, full-time, that’s trading, you know, that’s, that’s in it to win it. Yes. An assistant, but that’s, but that’s more for like, you know, when I think of an assistant, I think of the folks who are going to handle your administration stuff, sort of that, that lower per dollar activity that, that keeps you bogged down from a 30,000 foot view, unless you have a partner level competence person working for you. That’s an underwriting. That’s, that’s someone that even has skin in the game. The very elite investors, I know they’re doing their own underwriting of a deal. This is their on the line. And what happens is larger companies have access to these non-partner, but very highly skilled acquisition folks. But those are pretty big salaries for most folks that are buying, you know, let’s just call it under 150 unit deals or under a hundred unit deals. Most of the guys, I see that transact tons of transactions per year six, eight, 10. I know some guys are doing 15 transactions a year buys and sells. They’re all. They’re the ones who are doing the actual underwriting and are signing off on the end, not acquisition teams, because you just can’t afford. I mean, unless you’re one of the big guys that have, have access to a tremendous amount of money for salaries, it’s tough. And a lot of times, a lot of these acquisition guys, especially the bigger the companies they’ve got these 20 and 30 year old guys that aren’t, don’t have their own skin in the game that are underwriting these. And there’s, there’s just a lot to understand and know about an asset and unless you’re the one who’s doing it, it’s tough.
Charles:
Yeah. It’s definitely great. Great.
Beau:
The way most of them use Excel, almost every elite in guy that I’m working with, they don’t trust the software programs. They want to Excel because you can see the inputs. Right.
Charles:
Yep. No, that’s, that’s great. The it’s like one thing for us, like when we’re ready to, if we’re like 90% sure to go through on an asset, we send our underwriting kind of what we’re thinking to a third party and the charges like 60 or $75 an hour to do an underwriting on it. But it gives you that level of certainty for someone that doesn’t have skin in the game, that’s actually maybe has done more deals in this area or underwritten more deals in this area. So it can be very expensive. Like you said, to bring on someone that’s actually underwriting, but I see most, yeah, most groups that are all doing it in house, it’s too expensive to do it out of house. And it’s also one of the things too, is that you have your own parameters of what you feel are going to pencil for your, for your deal.
Beau:
Yeah. And the other thing I’ll say this is sort of related, but a little off topic is that, you know, as again, some of these larger companies, what happens is the bigger they get. They have these acquisition guys that are in charge of both underwriting and finding deals, right? And the top thing you can do, if you’re large enough to bring on staff is, is hiring reputation first. So hiring, hiring these staff members, these acquisition guys who are also doing underwriting, you’re hiring the people who have good reputations themselves first, cause this is oftentimes the frontline to all the brokers, right? So I can name to you a lot of large companies that they’ve gotten large enough where now they have these three, four acquisition people, but they’re difficult to deal with there. They have attitudes, they have big egos or they don’t return phone calls. They’re not, they’re not quick. The response times are not the best. And so that’s, that’s the person I have to deal with, right. I can’t deal with the principal anymore. And so what happens is after two or three times, or having to deal with that, they just don’t make it to the, to the, to the listings list anymore. Right. They don’t get my listings anymore because I’m not going to be able to deal with the actual principal. Not the principal could be a phenomenal person, right. Someone who I used to like doing deals with, but now they have all these frontline members. So I always encourage some of these bigger companies with the acquisition teams, high reputation first, and then skills. I mean the skills have to be a baseline. They have to know how to do all this stuff financially, but really the skill part of this. That’s the, that’s the big thing.
Charles:
That’s interesting. I didn’t, I didn’t know that that’d be that much of an issue. I would imagine that they were, I guess it is. I guess if you’re, if you’re a cocky, I mean, it just you don’t have to, you don’t think you need to work with certain people to get deals. You can kind of do whatever you want. I guess
Beau:
Hockey is hockey is part of it. I don’t run into it a whole lot. It’s it’s the it’s never returning phone calls and being slow. Not giving feedback on what you did or didn’t like about an asset taking too long to underwrite something taking too long to get letter of intent, taking too long, to respond to red lines on a contract. Like these are these, the frontline people I’m having to deal with. And I get it. Some, some groups have just gotten so big that can no longer have the principal or the partners doing all the work. I’m just trying to encourage a lot of these companies to really take stock of the people they’re hiring. Because if they’ve seen their deal flow, go down and they can’t figure out why the hell that’s happening. It’s little things like this where, I mean, literally for a broker, it’s just a check Mark. I just remove the person from any future listings because it’s just too much of a pain in the butt. And there’s thousands of other investors out there with tens of millions of dollars in equity and tons of debt backing them. I don’t want to have to deal with slow, slow, slow. That makes me look bad. That hurts me from getting other listings from the sellers I’m working with. Yeah.
Charles:
It’s the same thing when we’re talking, when we’re dealing with passive investors too, when raising money and you know, you have someone that’s a pain or just like, it’s not going to work out. You’re like unchecked from the deal list. Yeah. Because the same thing as you’re working with so many different partners that you’re at the end of the raise and Hey, you know, what’s happening with John DOE over here? Is he doing this? And he’s not because we have someone we’re going to put in there and you know, it’s just kind of a thing. And you’re just like, ah, you can’t do go work like that when you’re trying to close deals and you’re on a time, especially now where we are in the market. Totally. What mistakes do you commonly see? Newer experienced real estate investors make?
Beau:
For the newer guys, I would say it’s it’s, it’s being a ghost. Like not knowing how to market yourself, not knowing how to provide B basically being unknown to anyone with, with attract. So you, you want to have that I talk about that bio, right? So you want to have a bio put together. You want to have those you want to have, if you haven’t had any transactions done, the best advice I give to these new guys is to hook up with syndicators or other bigger partners. Right? So there’s a lot of them out there, right? I mean, you, I mean, you guys obviously bring on investors, but you know, someone who doesn’t have experience, who doesn’t have tracker do that, doesn’t have a big balance sheet. They’re never going to win deals. It’s, it’s too difficult because every deal has multiple offers. And I did a video on this. If you go to my YouTube channel, I did a video on, on, on, on what my kind of like my secret back office looks like when I present offers to sellers, I do it in a spreadsheet format where I have the name of the buyer, the principal, the price price, a unit price of bed, price of first square foot, with all these things, they offer their due diligence period. The closing, you know, the closing period. And I have this note section and in the notes, I’m educating my seller about the buyer. And if this person’s a ghost, he can’t produce any information for me. It doesn’t tell me what he owns. It doesn’t tell me whether he’s financial capable to do this. It doesn’t tell me about the partners he’s hooked up with. I’m writing that in my Hey, this guy, I don’t know anything about this guy. Never done a deal with him. Don’t know if he has the financial capabilities. I don’t care if he paid full price or not. That’s what I have to write because I’m trying to help my seller make the most experience, the best decision on what the buyer chooses. Right? And then when I actually meet with the seller, either by phone zoom or in person, then I dive even deeper into the note section and going over these folks. So that one of the best things you can do as a new or inexperienced investor is, is hooking up with one of the syndications or one of these gurus that have a following. That basically when you bring them a deal, you guys can partner up together and you want to have that guy’s resume along with yours when you’re submitting offers and such. And that may mean that you have to give up a lot of equity on several deals until you learn how this has done. And if you want to break off later on, that’s fine. But if you’re just a standalone guy with little experience and you’re trying to compete against others that have lots of track record, it’s just tough, man.
Charles:
Yeah, yeah, no, I imagine we had a, our first deal years back in syndication that you had to find a sponsor and you bring them on and it doesn’t do anything really, but you know, you, you can use their experience for when you’re going to larger deals and sign on debt and everything else that you need when moving your business forward. So how can our listeners learn more about you and your business though?
Beau:
Yeah. Cool. So so three ways my website is Bo berry.com. That’s B E a U B E R y.com. Now, even if you’re not doing business in Florida, some, some, some cool stuff on there that I think if you look at this part of my website is how is the kind of information you want to obtain and master for your market? So for instance, when you go to the resources tab at the very top, there’ll be a dropdown that shows all the markets that I cover. And if you click on any of those markets, you’ll see a whole bunch of buttons and tabs that are like every sale in the market for the, for the last 24 months. And every metric on that sale, you can think of rents, occupancies, absorption, new construction stuff market economics, demographics, all this stuff. These are all the things that I want my investors who work in my markets to know like the back of their hands, right? So the reason when a new listing comes out, that there’s 13 offers in five days is two things. Number one, brokers are calling them ahead of time and giving them a heads up. And number two, these investors know the market like the back of their hand. They know already what things trade for per unit, how much their renovations are going to cost, what the rents can be worth later on. They know all this stuff and all the metrics I have per market in that, in that tab tells that second way is I’ve got a YouTube channel that is that I think is very resourceful, not just for young, for new folks, but, but even just kind of master level stuff, right. I go into how to buy more units, how to find them, how to sell for top dollar. I go over market analytics. The YouTube channel is BEAU knows B E a U Beau knows multi-family. And then I would encourage you to get my book. You know, I don’t make a bunch of money in a book, but I, I basically poured every secret, my entire heart out into the book. This is everything I’ve ever wanted to tell every investor on how to grow a huge business. And so every, a little bit of what we talked about today, I go into extreme depth. Step-By-Step on how to build a huge business and be flooded with deals, not finding deals, how all the deals come to the top elite investors. Awesome. Yeah. I have to say that the, your YouTube video or YouTube channels.
Charles:
Awesome. Lots of great information for new and experienced investors and then how to deal with brokers too, which is something that I don’t think most investors know about and they should, because that’s where your deals come from. And the other thing too, is get on a mailing and get on his mailing list because I get a lot of great information. Obviously I’m in Florida and I invest in Florida, not really in the North part of Florida at this point, but the information is fantastic that that you provide and get on it. And you kind of see what’s going on in different markets and information you should be getting from your broker in your own home market. So thank you so much for coming on today.
Beau:
Yeah, man, I appreciate it. Thank you for having me.
Charles:
Have a great day.
Charles:
Hi guys! It’s Charles from the Global Investors Podcast. I hope you enjoyed the show. If you’re interested in get involved with real estate, but you don’t know where to begin, set up a free 30 minute strategy call with me at schedulecharles.com. That’s schedulecharles.com. Thank you.
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Speaker 4:
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