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Every Friday, join us as we dive into the latest in real estate multifamily with David Moghavem, Head of East Coast Acquisitions at Trion Properties. David invites top experts who know the ins, outs, and trends shaping the real estate multifamily market across the nation!
Whether you’re a seasoned investor or just curious about where the next big opportunity might be, Deal Flow Friday brings you the weekly inside scoop on what’s hot, what’s not, and what to watch for in today’s ever-evolving real estate scene.
Audio Transcript: Episode 37
[00:000.0] Paying it forward in business is really important.
[00:004.0] Communication is key.
[00:005.5] It's easy to get rich as long as you do it slowly.
[00:008.0] What differentiates you as a group?
[00:010.5] Our whole business is relationships.
[00:012.5] Be somebody who is easy to work with,
[00:014.5] be somebody who's honest, but also know your stuff.
[00:017.5] People ask me all the time, like, what are the red flags?
[00:020.0] If you can make it through the next, you know, this period,
[00:023.5] however long this lasts,
[00:025.5] you're just going to be viewed differently
[00:028.0] than people who didn't.
[00:049.0] The way we get to asymmetric returns is just by being patient.
[00:053.0] And, you know, the Buffett quote that I was about to refer to was,
[00:056.0] you know, it's easy to get rich as long as you do it slowly.
[01:001.0] And, you know, his quote goes on to say, like,
[01:004.0] no one wants to get rich slowly.
[01:006.0] Everyone wants to get rich quickly.
[01:008.0] Especially, like, the Gen Z generation, right?
[01:011.0] Oh, yeah.
[01:012.0] It's like it's amplified now.
[01:014.0] Absolutely. Oh, yeah.
[01:015.0] There's no patience, right,
[01:017.0] especially in the age of social media
[01:019.0] where you're just constant stimulation
[01:021.0] and you want, you know, everything fast.
[01:023.0] Right.
[01:024.0] You want your food fast.
[01:025.0] Instant gratification.
[01:026.0] Right.
[01:027.0] You want your media fast.
[01:028.0] You want to get money fast.
[01:030.0] Your returns fast.
[01:031.0] Your returns fast.
[01:032.0] So, yeah, we get to asymmetric returns or alpha mainly through patience.
[01:037.0] Making sure that we're disciplined, you know,
[01:040.0] we're recognizing where we are in the marketplace.
[01:044.0] Going back to a Buffett philosophy,
[01:046.0] are we getting value?
[01:048.0] Are we getting real value?
[01:049.0] Are we getting deep value?
[01:052.0] Or are we overpaying?
[01:055.0] And real estate investors historically have lacked patience.
[02:000.0] We're not a patient group as a whole.
[02:004.0] Even though real estate is slow.
[02:006.0] It's slow.
[02:007.0] And most real estate strategies require time, right?
[02:014.0] Especially when you're in development, right?
[02:016.0] You're talking now three years.
[02:018.0] Oh, yeah.
[02:019.0] You don't see a dollar until you get CFO.
[02:022.0] Three to seven year strategy.
[02:024.0] But even on your side, the multifamily value add, right?
[02:027.0] Those are three to five year strategies at best.
[02:031.0] And we're the quicker ones, right?
[02:032.0] I think there's longer hold periods out there.
[02:035.0] Oh, yeah, for sure.
[02:036.0] What differentiates you as a group?
[02:039.0] If you have a partner that's giving you,
[02:042.0] that brings to your desk a really quality industrial opportunity
[02:047.0] that you wouldn't have otherwise seen,
[02:050.0] I don't know that I really care what your management capabilities are.
[02:055.0] Because at that point, you're effectively an intermediary.
[02:058.0] You're a sourcing mechanism, not to dehumanize it,
[03:001.0] but you're bringing a deal to us that we wouldn't have otherwise seen.
[03:004.0] You should get compensated for that.
[03:005.0] But we don't really need you to be an expert at managing it.
[03:009.0] It's pretty straightforward to manage.
[03:011.0] And we have a very capable in-house management team
[03:013.0] on top of getting a property manager.
[03:015.0] And so from that perspective, your differentiation,
[03:018.0] it means nothing to me.
[03:019.0] What matters is what is the opportunity
[03:021.0] and does the opportunity make sense?
[03:024.0] And that's specific to certain product types.
[03:026.0] And the multifamily space is highly, as you know,
[03:029.0] highly operationally intensive and highly management reliant.
[03:033.0] And so your abilities and your capabilities
[03:037.0] and to the extent that you can drive return alpha
[03:041.0] by way of your management expertise, it makes all the difference.
[03:046.0] On top of just having there being less risk
[03:049.0] of there being something catastrophic that happens,
[03:051.0] which is its own consideration.
[03:053.0] And so when I'm spending time with a new operator,
[03:056.0] us an operator with whom we don't have experience,
[03:059.0] I'm trying to ascertain what is the thing
[04:002.0] that differentiates them from other groups?
[04:005.0] How can they return, you know, generate a return alpha?
[04:008.0] Like what is it about that group
[04:010.0] that is either different or exceptional?
[04:013.0] And that's a hard thing to do at times
[04:015.0] when there are a lot of operators out there.
[04:017.0] But I can tell you that not every operator
[04:019.0] has an answer to that question.
[04:020.0] And I'm not like putting them on the hot seat,
[04:022.0] but you can kind of gather through your discussions
[04:026.0] if groups are kind of out there
[04:028.0] just trying to allocate capital for the sake of generating fees
[04:031.0] or if they really feel like they have a predetermined,
[04:036.0] well thought through approach to managing real estate.
[04:039.0] And that goes a really, really long way
[04:042.0] because it is always easier to go with the thing that you know
[04:045.0] in order to go to a new product,
[04:047.0] and this applies beyond real estate,
[04:049.0] you have to feel like that new thing
[04:051.0] is so much better than the old thing
[04:052.0] such that you're willing to take the risks
[04:054.0] of taking, you know, on the relationship
[04:056.0] that has more unknowns
[04:057.0] than the thing with which you have experience.
[05:000.0] And so that goes a long way.
[05:002.0] That isn't the entire picture, obviously,
[05:004.0] but the opportunity has a ton to do with it as well.
[05:007.0] So if you don't bring interesting deals,
[05:009.0] then you're not going to do those deals.
[05:011.0] And so from a sourcing perspective,
[05:014.0] the capital markets folks out there
[05:016.0] do such a good job canvassing the market,
[05:018.0] and these days there are more off-market deals
[05:020.0] than in prior years.
[05:022.0] You know, we'll absolutely look at broadly marketed deals
[05:024.0] with partners,
[05:026.0] but we have a pretty good investment scene
[05:030.0] from a coverage perspective,
[05:031.0] so more than likely if it's marketed, we've seen it.
[05:033.0] We've at least screened it at a high level.
[05:036.0] So we should absolutely have those conversations,
[05:039.0] but I think the groups that can uncover deals
[05:042.0] that are not broadly marketed, A,
[05:044.0] and competitively bid, B,
[05:046.0] I think the likelihood of us doing those deals,
[05:048.0] to the extent they're interesting,
[05:050.0] excuse me,
[05:052.0] is just higher for those reasons.
[05:054.0] And so the more such deals that these groups can bring,
[05:057.0] I think the higher likelihood of us transacting.
[06:001.0] And then that's my universal answer,
[06:003.0] and then my personal answer is, like,
[06:005.0] just relationships and having a level of comfort and trust,
[06:010.0] and just, like, are you people that I like
[06:012.0] and want to spend time with and that I trust,
[06:014.0] and, you know, you want to, as I say,
[06:017.0] like, get in bed with.
[06:018.0] It's just I place a high emphasis on that personally,
[06:021.0] and others obviously do as well.
[06:023.0] So having those relationships,
[06:025.0] having that connectivity with the team and the people,
[06:028.0] matters a lot to me.
[06:030.0] For sure.
[06:031.0] I mean, I think out of all the podcasts that I've done,
[06:034.0] at one point everyone just mentions how
[06:036.0] this is a relationship business,
[06:038.0] and it's just so important,
[06:040.0] and life's too short to do deals with people
[06:044.0] that you don't want to do business with.
[06:046.0] So there's so many deals and opportunities out there,
[06:048.0] but you want to do it with the people that you trust
[06:051.0] and you connect with.
[06:053.0] It's a really important point,
[06:056.0] and I would say, I guess,
[06:059.0] stepping back a bit, what your universal answer was,
[07:003.0] you need to have an edge, right?
[07:005.0] And you kind of put it into two buckets.
[07:008.0] You put it into an edge on the opportunity itself,
[07:012.0] like finding the deal,
[07:013.0] and how are you going to, you know, what's the story?
[07:015.0] But then you're also talking about
[07:017.0] who you are as an operator, what your edge is.
[07:020.0] And so, you know, in multifamily,
[07:022.0] it's a very management-intensive business,
[07:024.0] so we have in-house property management.
[07:027.0] That's one of our edges, right?
[07:030.0] But then from a deal perspective,
[07:032.0] how are you sourcing deals?
[07:034.0] What's your thesis in investing?
[07:036.0] Just bidding on an on-market deal and winning it at market,
[07:040.0] it's just not enough for the cost of capital that we have
[07:043.0] and what you guys deploy as well.
[07:046.0] You need alpha, you need an edge
[07:049.0] to what typical returns are in real estate.
[07:053.0] You want to generate excess returns,
[07:055.0] and that's what we do as well.
[07:056.0] So having that edge, whether it's you as an operator
[08:000.0] or the deal itself with the edges
[08:002.0] on that particular investment,
[08:004.0] I think that's the universal theme.
[08:006.0] And if you can generate both,
[08:008.0] I think that's how you really break into
[08:011.0] forming those relationships
[08:012.0] and attracting equity and investment.
[08:014.0] I really believe in networking.
[08:016.0] I think that, and I've always loved networking,
[08:019.0] mainly because I love people.
[08:021.0] I think people are really fascinating,
[08:023.0] and I like places,
[08:025.0] and so understanding people, where they come from,
[08:027.0] what makes them tick, I'm curious about that.
[08:030.0] Being a first-generation Australian,
[08:033.0] when my grandparents are from Europe,
[08:037.0] my parents survived the Holocaust
[08:040.0] and ended up in Australia randomly.
[08:042.0] So Australia is made up of immigrants just like America.
[08:045.0] So I'm always fascinated by people,
[08:047.0] but I think what I always try to do,
[08:051.0] no matter what the market's doing,
[08:053.0] is go out there and network.
[08:056.0] Coffees, events, lunches, dinners.
[08:059.0] And sometimes when the market's really strong,
[09:002.0] people are like,
[09:003.0] oh, I don't need to grow my network,
[09:004.0] I don't need to go to that event
[09:006.0] because I've got too many deals going on.
[09:008.0] But then that can change really quickly,
[09:009.0] and then all of a sudden you're like,
[09:011.0] oh, I've got to get out there again.
[09:013.0] Whereas if you consistently just have a mantra of,
[09:016.0] I'm going to go to that annual real estate dinner every year,
[09:020.0] or I'm going to go to those,
[09:022.0] name your event production company's event every year,
[09:025.0] or I'm going to get together with five of my real estate buddies
[09:028.0] and have a dinner.
[09:030.0] Our whole business is relationships.
[09:032.0] For sure.
[09:033.0] And people are always on the move.
[09:035.0] People always got new strategies.
[09:037.0] And so if you are keeping up with that,
[09:039.0] that can create opportunity as well.
[09:041.0] A lot of people who I meet with are like,
[09:044.0] oh, we didn't know you do self-storage.
[09:046.0] I'm like, yeah, well, we do.
[09:047.0] So they're like, oh, I think I have a deal.
[09:049.0] Well, great, send it to me.
[09:050.0] So if you don't network,
[09:053.0] no one's going to know what you're up to.
[09:056.0] And it's also just fun.
[09:058.0] And so I try to always make time for that
[10:002.0] no matter what the market cycle is doing.
[10:005.0] Exactly.
[10:006.0] I mean, part of the reason starting this pod
[10:008.0] was the networking aspect,
[10:010.0] excuse to sit down with you for an hour,
[10:012.0] excuse to hear what other people are up to, great mind.
[10:015.0] I didn't know you were doing self-storage until right now.
[10:018.0] Now the world knows.
[10:019.0] Exactly.
[10:020.0] So it's just a great way to connect.
[10:022.0] And as you said, this is a relationship-driven industry.
[10:026.0] The numbers, the yields,
[10:028.0] everything we've been talking about for the past hour,
[10:031.0] it's nothing compared to who your partners are,
[10:034.0] what you're trying to do,
[10:035.0] what are the relationships,
[10:036.0] who you're going in the trenches with.
[10:038.0] And networking is a huge aspect of that.
[10:040.0] It's also a great way to pick market knowledge,
[10:043.0] see this is an industry where insider trading is legal.
[10:048.0] So getting that tidbits from other people
[10:051.0] on where things are trading,
[10:054.0] that's all through social and networking.
[10:057.0] Right.
[10:058.0] And it also comes down to trust.
[11:000.0] If you're out there and you've got a good reputation
[11:005.0] and people trust you,
[11:006.0] they're going to be more forthcoming with information,
[11:009.0] with ideas, with what's going on.
[11:011.0] And that just helps everybody.
[11:013.0] Because at the end of the day, we all want to transact.
[11:015.0] Our whole business is driven by transactions.
[11:017.0] Right.
[11:018.0] That's how our industry turns.
[11:021.0] And so in a down cycle, when transactions are harder,
[11:026.0] your network can be so powerful.
[11:029.0] You decide that you want to get into a new market,
[11:033.0] Savannah, Georgia.
[11:034.0] It's like, okay, I went there once.
[11:036.0] But it's like, who do I know that knows someone in Savannah
[11:039.0] that I can get a real answer?
[11:041.0] Hey, David, you guys have done something.
[11:043.0] This cross street, what's this area like?
[11:045.0] You're like, oh my God, stay away from that.
[11:046.0] Yeah.
[11:047.0] Whereas sitting behind a desk in LA,
[11:049.0] you're looking at a Google map, right,
[11:051.0] which is how you kind of start looking at deals.
[11:056.0] But ultimately, you always get a gap from behind the desk
[11:058.0] and go see the real estate.
[11:059.0] But being able to tap your network to understand
[12:002.0] something more local where you're not from, hugely powerful.
[12:006.0] You don't do that by not attending events
[12:009.0] and going for dinners and going to broker things
[12:012.0] and going to conferences and stuff like that.
[12:015.0] Paying it forward in business is really important.
[12:019.0] And when you can help somebody
[12:022.0] or do something for somebody unconditionally,
[12:026.0] sometimes you don't realize the ripple effect
[12:029.0] that that could happen, can have.
[12:031.0] Because when people, when you give something to somebody
[12:035.0] and they are able to grow and succeed and benefit from it,
[12:042.0] most people want to do the same thing for others.
[12:044.0] So paying it forward is a very important concept in business.
[12:049.0] And I've seen that in action where you help people
[12:054.0] be successful and they help others
[12:056.0] and there's a huge ripple effect.
[12:058.0] I believe strongly in the entrepreneurial spirit.
[13:002.0] And real estate people are creative.
[13:005.0] They're entrepreneurs.
[13:007.0] And I think believing in yourself and going for it
[13:011.0] is really an important element of diving in the water
[13:017.0] and taking a chance.
[13:019.0] But also, don't be afraid to ask for mentors.
[13:023.0] I think mentorship is so important.
[13:026.0] Getting advice from people that have been through
[13:030.0] different situations or call it the elders
[13:033.0] or people that, you know, in your industry
[13:037.0] or someone that you want to learn from.
[13:040.0] A lot of times, if you just feel comfortable
[13:043.0] and asking somebody, they'd love to impart that wisdom on you.
[13:049.0] And I think being able to surround yourself
[13:052.0] by great people and great mentors
[13:055.0] and then treating people with respect,
[13:059.0] you know, having a commitment to people,
[14:001.0] being honest, being full of integrity,
[14:004.0] builds that trust and relationships.
[14:006.0] You talked about relationships and I will tell you,
[14:011.0] business to me is about relationships.
[14:014.0] And I love talking to everyone.
[14:017.0] I love meeting new people.
[14:019.0] I love the power of connection.
[14:021.0] And I think it's a gift to be able to meet people
[14:026.0] and learn from people.
[14:029.0] You know, I believe in hugging everyone.
[14:032.0] I believe that, you know, you always want to look
[14:035.0] at the good in people and find the good in people.
[14:038.0] And so, you know, just and, you know,
[14:044.0] things aren't always going to work out on day one.
[14:047.0] So hard work and perseverance
[14:050.0] and having a never ever give up attitude
[14:053.0] is also extremely important.
[14:056.0] You know, we all have an opportunity.
[00:000.0] opportunity to put our mark in this world
[00:003.7] and make our world a better place.
[00:005.3] And I would also recommend that giving back to community
[00:011.0] and getting involved in charity.
[00:014.6] There's so many amazing charities
[00:016.4] and there's so many great causes
[00:018.7] and you can't forget to give back.
[00:023.8] We have the Last Charitable Foundation
[00:027.6] and we have a day of giving on our anniversary on June 15th
[00:033.6] and we're now making that a week of giving
[00:036.2] and we have so many last people
[00:038.8] that are not only giving money,
[00:041.8] but more importantly giving of their time and effort
[00:044.5] to volunteer and make a difference in people's lives.
[00:051.0] Our charitable foundation besides the United States
[00:054.4] also has helped people in seven different countries
[00:058.9] and thousands of people.
[01:001.0] We've been able to touch lives not just in this country,
[01:007.7] but outside of our country.
[01:009.9] Yeah, that's amazing.
[01:012.1] And people, by the way, wanna work with companies
[01:016.9] and with people that have a higher purpose.
[01:020.4] And I think it's really important
[01:023.2] for people to understand what your higher purpose is
[01:027.1] and what's your why.
[01:028.7] And our higher purpose is about creating opportunities
[01:032.4] to help people.
[01:033.7] And you have to live that vision
[01:036.4] and when you do, great things happen for you.
[01:040.0] Yeah, I think there's a misconception a bit
[01:042.9] when you can only be involved in philanthropy
[01:048.1] and giving back if you have the money to do so
[01:051.2] and in order to have the money to do so,
[01:053.9] you need to focus on your career first
[01:055.5] and then maybe you do philanthropy later in your life
[01:058.1] when you have the means to.
[02:000.6] I think that's a completely wrong understanding
[02:003.7] of philanthropy.
[02:005.0] It comes from a mindset from day one,
[02:006.8] which I've seen in you.
[02:008.9] And when you have that mindset and you have that purpose,
[02:013.2] it attracts others to work with you
[02:016.5] because they know that they're working with someone
[02:019.1] with a higher purpose and it breeds success innately.
[02:025.0] Philanthropy doesn't come from, is not a result,
[02:028.0] but it's part of the journey
[02:030.0] and it's part of also connecting
[02:032.4] and it breeds success through that higher purpose.
[02:034.7] So I think it's something that you just gotta have
[02:037.1] the mindset day one.
[02:038.7] And sure, over time as you make more money,
[02:040.8] you can maybe donate more than you were in the beginning,
[02:044.1] but it's a mindset from day one.
[02:046.2] If you can't give money, you give time.
[02:049.8] And you spread the word.
[02:050.6] And so there's so many ways to help
[02:052.8] and give yourself a purpose
[02:055.4] rather than just stroking a check.
[02:057.8] Communication is key, right?
[02:059.8] Just gotta communicate with everybody,
[03:002.0] be it your investors, be it your lenders,
[03:004.5] be it your brokers.
[03:005.4] When things are bad, the guys that fail
[03:007.5] are those that bury their head in the sand.
[03:009.3] The guys that go into the fetal position in the corner
[03:011.7] don't wanna deal with the problems.
[03:013.3] You can't be like that.
[03:014.3] You've gotta have courage, you gotta be brave.
[03:017.0] This life is full of ups and downs.
[03:019.6] It's peaks and valleys.
[03:020.4] Sometimes it's great and everyone's at the top of the world
[03:021.8] and sometimes you're at the bottom
[03:023.0] and you're like, how the hell did this happen to me?
[03:025.4] Keep lines of communication over.
[03:027.8] And that's, even on the acquisition side,
[03:029.2] let's say you're chasing a deal and things don't work out,
[03:031.9] don't put in an offer and then disappear, right?
[03:033.9] I can't stand guys that just disappear on you.
[03:036.9] Just keep communication open.
[03:039.0] Talk to your lenders, talk to your brokers,
[03:040.6] talk to your sellers, talk to your investors.
[03:042.3] If you do that, everything will be fine.
[03:044.2] Yeah, it's true.
[03:045.0] It goes back to what you're saying
[03:046.0] of like relationship business, right?
[03:047.6] It's not just about putting offers, disappearing.
[03:050.1] It's about keeping the open line,
[03:052.3] having the relationship, staying in front of everyone.
[03:054.9] You do, I think you do great at that.
[03:056.5] You're very communicative.
[03:058.0] Like we've chased deals from Hampton Avery
[04:000.4] and then the swing has happened,
[04:001.7] things have happened, your insurance has happened
[04:003.0] and you've never hidden from that.
[04:004.3] You've been always straight up and honest and I love that.
[04:006.4] That's the way to be.
[04:007.5] Say, hey, I love the deal.
[04:009.2] I want it to be here.
[04:010.1] My insurance came in at $2,400 a unit.
[04:012.0] That kills my cash flow.
[04:013.2] I can't do the deal right now.
[04:014.7] Can you help me with another insurance broker?
[04:016.3] Which we did.
[04:017.3] Talk to this guy or talk to this guy.
[04:018.9] So that is a critical factor.
[04:021.2] And I think a lot of younger people
[04:023.7] don't understand that.
[04:024.6] They just disappear.
[04:025.6] They go into the fetal position
[04:027.6] and that kills them for the future
[04:029.3] because then the brokers and the lenders,
[04:030.7] they don't wanna waste their time.
[04:031.5] Exactly.
[04:032.4] It's actually almost like everyone's working together
[04:035.4] in this environment to get a deal done.
[04:037.4] It's not even about competing.
[04:038.7] It's about like, hey, can we all work together
[04:041.2] to make a deal happen and get it done?
[04:044.0] And just what we were saying before,
[04:046.3] being honest, saying like,
[04:048.1] this is how I'm underwriting the deal.
[04:050.0] This is what we have going on.
[04:051.3] This is our fund.
[04:052.4] These are the returns we need to hit.
[04:054.7] And like, it is what it is.
[04:056.5] Let's get a deal done.
[04:057.6] Let's get a deal done.
[04:058.5] If you did some deals in 21, 22, we all did.
[05:005.0] If you can point to performance around that,
[05:009.2] working with a lender, if it got to that point on a deal
[05:014.0] and say to whomever the point of contact is
[05:017.6] at the fund you're trying to raise from,
[05:020.8] look at the asset management we've done,
[05:023.0] we've been able to do through the hard times,
[05:025.0] then you've survived and you've proven yourself.
[05:028.0] You're now a battle-tested veteran.
[05:030.2] It should be easier for you to raise money.
[05:032.2] I know it probably doesn't feel that way,
[05:034.4] but here in the investment committee room,
[05:037.5] we're saying, who are the people that made it through,
[05:042.2] who know how to buckle down
[05:044.6] and survive that OPEX increase,
[05:047.6] that rate increase, and got through it?
[05:050.8] You know, if you can make it through the next,
[05:053.6] you know, this period, however long this lasts,
[05:057.0] you're just gonna be viewed differently
[05:059.1] than people who didn't.
[06:001.0] You, yeah, you could show your battle scars, right?
[06:003.7] Exactly.
[06:004.8] I think-
[06:005.7] Investment committees dig scars.
[06:007.2] Yeah, 100%, exactly.
[06:010.4] Chick-stick scars, so does investment committee.
[06:013.3] I think what you're gonna see coming out of this
[06:016.6] is a lot of sponsors who have scars to show,
[06:021.2] but it's all gonna be a little bit relative, right?
[06:024.3] Some are getting wiped, some are going out of business,
[06:028.4] some have personal guarantees getting triggered,
[06:031.5] while others did not only good work, but honorable work.
[06:036.6] They saw that, hey, this might have been a loss,
[06:039.0] but we moved the NOI this much.
[06:041.1] We moved operations this much.
[06:043.0] We have this to show.
[06:044.5] We learned from our mistakes.
[06:046.2] We made some new hires.
[06:047.4] We have a strong asset management team.
[06:049.6] And I think a lot of allocators, I hope,
[06:053.4] can at least see through that and see,
[06:055.4] hey, this is a group that has gone through multiple cycles,
[06:059.0] including this recent one.
[07:001.2] We can work with them.
[07:003.4] That's right.
[07:005.1] The best thing you can say,
[07:006.9] maybe the best thing you can say
[07:008.7] on an investment committee call today,
[07:012.4] at least to my group, is we're gonna go see the deal.
[07:016.5] Me personally, the sponsor,
[07:017.8] I'm gonna be at the deal constantly, whatever that is,
[07:021.8] every week, every two weeks,
[07:023.9] where I'm gonna go live in one of the units.
[07:028.4] That's a little extreme, but some people do it.
[07:031.2] Some people do it.
[07:032.2] I don't know how they have a family and do that, but-
[07:034.4] Married to the game.
[07:035.6] Married to the game, yes.
[07:039.3] Because investment committee, before that call,
[07:043.6] just stepped out of an asset management meeting
[07:045.8] where they're probably upset at some sponsor
[07:048.5] who they bought 70s and 80s vintage stuff with in 21,
[07:052.8] who isn't, they feel like, paying enough attention.
[07:055.6] And so if you can massage that for them,
[08:000.2] I'd say it helps a ton getting a deal done.
[08:003.8] And I hope you'll also do it when the deal does get done.
[08:008.4] Right.
[08:009.2] People ask me all the time, like, what are the red flags?
[08:011.8] And I just don't think about investments that way.
[08:015.2] I think the only two red flags that I've published
[08:018.4] are the word guaranteed, because like,
[08:022.1] I mean, I have a whole article on this,
[08:023.9] but even if you're personally guaranteeing something,
[08:027.0] that does not mean it's guaranteed.
[08:030.9] And some other ones are like, no return of capital,
[08:035.6] clause, believe it or not, that exists.
[08:038.2] Like, I mean, it's like very basic stuff
[08:039.8] for any syndication, but I've seen deals that don't have it.
[08:044.2] Those two are like really like the only red flags, right?
[08:048.0] Meaning those are basically reasons
[08:050.1] to just like put down a deck
[08:051.3] and never speak to the GP again, in my humble opinion.
[08:057.3] Now, just like some simple feedback,
[08:059.3] like you would not believe how many decks I see
[09:001.7] that either don't have an address
[09:004.2] for the property at all in the deck,
[09:006.4] or it's just like extremely hard to find.
[09:008.8] You know, like sometimes I look for it for like three minutes
[09:011.4] and I'm like, come on, guys.
[09:012.5] Like, there's LPs literally passing on this deal
[09:015.3] because they can't Google the place.
[09:017.2] You know, just like basic stuff.
[09:020.3] Yeah, going through your GP LP match,
[09:023.4] it was interesting with some of like the check boxes
[09:028.6] that you had and said like, does your deck list all the fees
[09:033.6] that a GP is charging?
[09:035.4] I'm like, wow, how can you have a deck
[09:038.1] that doesn't have that?
[09:039.2] You know, of like what your fees are as a GP,
[09:043.7] like something simple like that.
[09:045.0] So I'm sure like those small items are probably turnoffs
[09:050.6] and it's interesting to hear from you
[09:052.1] as someone who's seen so many of those decks
[09:055.6] of what people are doing or leaving out.
[10:001.4] Yep.
[10:002.4] Yeah, it happens a lot.
[10:004.0] And I very intentionally like put the questions in that way
[10:009.0] because as I said, like many investment decks
[10:013.2] don't have fees.
[10:014.0] Many investment decks don't have an address.
[10:016.5] They don't have a sources and uses.
[10:017.9] You know, there's just like very basic things
[10:019.8] that I think decks should have.
[10:021.7] And you'd be surprised how many don't.
[10:023.8] When it comes to sponsor advice,
[10:025.7] I think transparency is key.
[10:027.9] Be somebody who is easy to work with,
[10:030.9] be somebody who's honest,
[10:032.8] but also know your stuff, right?
[10:035.7] Don't send somebody like, it's common sense,
[10:038.9] but I see so much business.
[10:041.0] And so when I say things that seem like common sense,
[10:045.4] I'm speaking because I see so much crazy,
[10:048.4] crazy things from sponsors.
[10:050.3] Know your stuff.
[10:051.6] Don't speculate in your underwriting.
[10:053.4] If you're showing somebody a business plan
[10:057.3] where you're like, I did,
[10:058.8] there's one thing that I'm comfortable
[11:001.0] saying this example out loud
[11:002.3] because I did directly tell the sponsor
[11:004.6] my opinion a few days ago.
[11:006.0] But if your business plan is literally based
[11:009.4] on interest rate movement, cap rate movement,
[11:013.2] like that's bullshit, right?
[11:014.4] You need to be able to find deals with good fundamentals.
[11:016.9] Focus on opportunities
[11:018.4] where you have healthy immediate yield.
[11:020.4] You wanna buy assets with a 6% year one cash on cash
[11:023.8] if you're going old pre-2000s maybe.
[11:026.2] If you're buying newer properties, core markets,
[11:029.0] great locations, a real class A lot, five's fine, right?
[11:033.4] But if your business plan,
[11:034.8] this is a really good piece of advice,
[11:036.4] honestly, for all sponsors watching
[11:038.1] who are smaller at least.
[11:040.1] If you're trying to buy an asset
[11:043.0] where you're a year one cash on cash
[11:045.5] is well below like a 5%
[11:048.1] and it's like a 1980s, 1990s property
[11:051.0] and your asset that you're under contract to buy
[11:054.2] is like 90, it's stabilized.
[11:056.4] And your business plan is to just push rents.
[12:000.0] That is a very tough story right now.
[12:002.9] It is extremely contrarian to equity.
[12:005.7] And that is, if I would as a sponsor wanna align
[12:009.5] with where there's the largest box of interest
[12:011.6] of investors to have the highest probability
[12:013.8] of getting a deal over the finish line.
[12:015.5] I have done deals gratefully that are contrarian.
[12:018.2] 1920s vintage, population of 50,000,
[12:022.2] the boondocks, right?
[12:024.5] There was a deal where the median household income
[12:026.9] within like a small radius of this asset was $21,000.
[12:032.9] We were just joking back and forth.
[12:034.5] I mean, they couldn't breathe laughing.
[12:036.5] So this is the first time I think in my career
[12:039.7] I underwrote a deal with this type
[12:042.0] of median household income, it's crazy, right?
[12:046.1] But so like people don't wanna do these type of deals.
[12:050.1] That is an illiquid transaction profile.
[12:054.4] I'm not telling you don't pursue
[12:056.0] if you think there's a good opportunity.
[12:057.6] I have contrarian investors, I've done it.
[12:059.9] But that's just, you're not aligning
[13:001.2] with the theme of the market.
[13:003.4] So your probability of just closing transactions go down
[13:007.5] if you don't know who those anomalies are, right?
[13:010.2] We only take an anomaly transaction
[13:012.0] because we know exactly who's doing that contrarian play.
[13:016.5] And it's fairly black and white for those folks.