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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.
David Moghavem (01:34)
All right, welcome to another episode of Dealflow Friday. I'm your host, David Mogavum. And today we got Chris Urso, managing partner of URS Capital Partners, fellow multifamily operator who's also vertically integrated with a strong proven track record across the Southeast and beyond. ⁓ Chris and his team and Trion and our team, we've done a few transactions together. They're a great shop.
⁓ generally play in some of the Southeast markets. So I'm really excited to talk shop with you, Chris. It's really great to have you on.
Chris Urso (02:08)
Yeah, great to reconnect David. I appreciate you having me on. Very excited to ⁓ kind of share some of our stories with the audience.
David Moghavem (02:16)
Definitely excited to share the stories, share what we're seeing out there. Quick tidbit of URS capital partners track record, 37 deals acquired since 2009 for ground up around 6000 units, 23 assets sold, 269 investors, a billion plus in transaction volume and continuing to grow. ⁓ Also Chris, great and a lot of care along the way. Exactly, exactly.
Chris Urso (02:41)
A lot of gray hair along the way.
David Moghavem (02:48)
Especially after the rate hike three years ago and kind of where we're at now. So, segwaying into that, how have you seen 2025 play out for you? Is it what you expected and what are you seeing out there right now overall in a macro perspective?
Chris Urso (03:04)
So I do think, I mean, listen, it's an interesting time, right? Just to, for those that aren't in our space, and I have to remind our investors of this a lot of times and folks that we talk to that aren't in our space every day, like you and I are, we've been in a pretty deep recession for the last three years now in multifamily. You the rest of the world might not have been, but we've been in a recession for the last three years.
David Moghavem (03:21)
Yeah, it felt.
100%.
I feel like, I was always saying, it feels like everyone around me is rich but us right now, people in real estate. It's painful, it's painful.
Chris Urso (03:32)
Yeah. ⁓ yeah.
But I think for us, you know, we do a year end, ⁓ like big report to our investors where I kind of my thoughts on the past year and then looking forward and I have to constantly pull that back up because it reminds me that 25 has really played out exactly how we thought it was going to be. ⁓ We thought it was going to be a really challenging year operationally. We didn't feel like we were on the other side of supply.
I listen to all the big read earnings calls every quarter just to of get their pulse. And when you were listening to Q3, Q4 of 24, they were all calling peak supply in all the markets. And 25 is going to second half of 25. We should be back seeing light at the end of the tunnel. We felt in our markets that supply wasn't, deliveries weren't going to really be peaking till probably Q1, Q2, if not Q3 of 25. And it's really, it's played out that way.
You know, we've been very active on the buy side, but we've been telling our investors like, hey, we're expecting the first 12 to 24 months to be a challenge. But we think there's good opportunity out there. If we can muscle through this, we can get to the other side. We feel like once we get to back half 26, 27, 28, 29, we're going to start to see that normalization. But long answer to a short question. know, we 25 really kind of has played out almost thematically how we expected it to.
You know, we're starting to see a little bit more on the buy side. Some exciting stuff come to fruition where it was like a weird, we saw opportunities, Q4, Q1, then Q2, Q3. I thought I was never going to buy another deal. And then all of sudden in Q4, it's like we were seeing these pockets of motivation slash distress slash dislocation starting to show their face more frequently. So I think there's some more of that to come here in the next kind of couple of quarters as we move into 26.
David Moghavem (05:28)
Yeah, I think the supply wave was really hitting in the deliveries in 2024, but that doesn't mean it all gets absorbed so quickly, right? And we're still chopping wood with absorption. And so where does that translate to? It translates to a little bit lower occupancy levels, a little bit of concessions that you have to work through. think, you know, I actually enjoyed listening to your quarterly updates and I think you gave a
Chris Urso (05:38)
The absorption, 100%. 100%.
Thank you.
David Moghavem (05:58)
a pretty good term of earning your occupancy every day. Because that's really what it feels like. It feels like you're competing for occupancy. And the good news is I feel like there's light at the end of the tunnel, right, in some of our markets, maybe some more than others in terms of that supply glut that hit. And I think that might be where you're saying we might be seeing some opportunities. Talk to me about kind of where are the markets that you're most bullish on, maybe even starting from a supply standpoint.
Chris Urso (06:01)
Yeah.
100 percent.
Yeah, I mean, I think we look at that closely on the supply side. You know, we're tracking completions, right? Cause that's really what we're up against in the near term. As you know, the data on ground up development is still so ambiguous in our space. Nobody's gotten it really right in terms of being able to see what's coming in the future clearly. But what we can track is what's coming out of the ground and what's going to be delivered.
So we really look at completions kind of in the next 12, 24, 36 months as kind of a key short-term metric, keeping an eye on the whole plan perspective and entitlement pipelines within our respective markets at the same time. But I'd say for us, we're seeing big drop-offs in Charlotte for one of the larger markets. I think you're going probably from around like 30,000 units in 25 to like 10,000 in 26 that are forecasted.
and think 5,027, that's pretty.
David Moghavem (07:27)
And
from a percentage of total supply, that feels pretty good too, right? Because it's such a large market. Yeah.
Chris Urso (07:32)
Absolutely. Yeah, it's one of the larger markets. Exactly.
When you start to get down to that single digit thousands range, you're talking about a couple of percentage points in a market like Charlotte of inventory. ⁓ know, Nashville is a similar theme. think everybody's been following that for years. It feels like they've been digging out of the supply dump down there. But we really love not to get too deep, but from a sub market perspective, Murfreesboro, Tennessee, like we tend to play more in the 30 minute rings of like the mate. Yeah, you know,
David Moghavem (07:58)
Mm-hmm first ring suburbs and
yep
Chris Urso (08:01)
burst
kind of close in. ⁓ Sorry, I didn't know.
David Moghavem (08:06)
No, I was going to say that's, you know, and that's very similar to where we play. And I think that's why we've, we've crossed so many paths so many times. We like those first ring suburbs. And I think what you're finding is the supply glut and I don't want to overgeneralize obviously, but some of these primary markets, there are a lot more on like the urban core or, or by, or by like the belt line, like in Charlotte, for instance, where there's a little more supply insulation in some of those first ring suburbs that
Chris Urso (08:24)
Sorry, concentrated.
Mm-hmm.
David Moghavem (08:34)
that your group and our group like to play in. Yeah.
Chris Urso (08:37)
100%. I think
a great example for us, like we are ultra bullish on Murfreesboro, Tennessee. You know, we've owned down there now for almost five years. We're buying another deal. It's closing in January down there. It's within Rutherford County, fast growing County in Tennessee, major like barriers to entry down there. Population growth has been tremendous. I think they're delivering one deal in 26, 300 units. And it's a market of, you know, 170,000 people just in Murfreesboro.
And then you couple that with kind of a $500,000, a 500,000 person, you know, county. You know, that's, it's almost immaterial and zoning is a challenge. we look for things like that from the sub market side, but you know, we're seeing new starts down, right? I'm sure you guys are tracking that, which is a positive. Everything takes more time in our business. I think then people realize to see, to see the effects for better or worse.
So we're not gonna really see the benefits of these new starts that are dropping to kind of decade low levels ⁓ for another two, three, four years potentially. As we're seeing the effects of 50 year high supply, two, three, four years after these deals were started. ⁓ So I think, again, from the market side, to kind of wrap that up, it's like Charlotte, Nashville, we own in Leland, Wilmington, we're buying another deal down there. That was a really...
heavy supply hit area, but you're going from in a small market, 3000 units to like less than a thousand units being completed next year versus this year. So I think it's, you know, got to, you got to muscle, we said, muscle through, but you know, as I follow Howard Marks, I don't know if you follow him at all, but he has, you know, a great podcast where he kind of does his memos. Now he's turned into a podcast.
And he's, he has one of the best lines ever, right? That, the best of deals are made in the worst of times and the worst of deals are made in the best of times. And when times are good, yeah.
David Moghavem (10:29)
Mm-hmm.
The fear greed, the fear
greed analogy that, you know, Buffett always, yep.
Chris Urso (10:36)
It is, and it's also as simple as like,
you know, when times are good, you tend to forget that times can be bad. And when times are bad, you tend to forget that times could be good again. So it's just trying to make smart decisions in good markets that you want to be in for the long term and understanding the dynamics of not just the market, but really the underlying sub markets, which are critical to our business.
David Moghavem (10:57)
Yeah. speaking about the different sub markets or different MSAs, you and I, both play in these primary markets, the Atlantas, the Charlottes, the Nashville's, and then we play also in these secondary markets like the Charlestons, the Savannah's. And I don't know about you, but what I'm definitely seeing is some of these secondary quote unquote markets are pricing tighter. They're pricing a little bit. They're a little bit more.
Have a little more cache right now from an investment perspective because maybe they didn't get hit with the supply Glut that maybe some of these primary markets saw are you kind of leaning in on those secondary markets right now where you're Seeing that okay because it's a little bit less supply. I'm a little more insulated It might be a little bit of a better play longer term or are you kind of capitalizing on these high supply areas that you're saying? All right. This is a blip.
truck through these next couple of years, and then when supply eases off, we're gonna see the benefits.
Chris Urso (12:02)
So I think it's a little bit of both. I'm definitely biased to Charleston. I'm one of the guys that definitely loves Charleston as many, many do, but we'd been investing in Charleston since 2012. mean, pre airport Boeing had one facility. We had about 1100 units at one point at the peak down there between 2012 and call it. think we sold our last asset in December of 22 in Charleston and we just reentered back in in Somerville.
David Moghavem (12:08)
Mm-hmm.
Chris Urso (12:30)
⁓ We bought a fairly newer deal from a developer, a two-year-old deal. We want to continue to expand there. do feel like, again, out of all the quote, secondaries, guess, Charleston is probably the most mature and has the best underlying fundamentals with real barriers to entry ⁓ from just geographic challenges and wetlands, of that, anchored by water every which way, plus just the ⁓
the density of development that's gone on there, but it's got real jobs, it's got real population, it's got diverse employment. And you're really truly seeing a path to the supply dump being kind of complete here in the next 12 to 24 months and total normalization. But it's tight to your point. There's a lot of money that have that same thesis.
David Moghavem (13:20)
Yeah.
Chris Urso (13:24)
So it takes a lot of work. It's always been a market that you have to put the time into, much like some of these other boutique secondary markets that have good fundamentals, you have to put the work in. ⁓ we do like them. We won't go beyond kind of the Charlestons and Savannas. We do own in Asheville. That's probably as kind of like secondary tertiary that will go. We do really like playing in the
to Charlotte again, that 30 minute ring, Charlotte, Nashville, Raleigh, Atlanta has been a primary focus for us to reenter that market. We do think that it was probably one of the first hit and hardest hit. that is starting to really, from the deals that we're underwriting, you're starting to actually see positive trade outs in certain sub markets. Bad debt is down to low single digits versus high double digits. ⁓
David Moghavem (14:14)
Totally, completely.
That's
Chris Urso (14:21)
which was interesting. Yeah. And
David Moghavem (14:21)
not like something great to be proud of, but yes, exactly. It is getting better. It is getting better.
Chris Urso (14:25)
I think you do that to your example there because of the size of the market. And we track the transaction volume really closely. Atlanta quarter over quarters, hands down, you know, it's obviously the largest market, but you know, most amount of transactions, most transaction volume there given the size. But I do think that's where you can sneak in in one of those larger markets, like the primaries down there and get some really good relative value because it
David Moghavem (14:50)
for sure.
Chris Urso (14:51)
It is a larger market. There's a lot more opportunity and there's a better chance to kind of sneak in on something that somebody misses where a deal comes out in Charleston. You have 100 sets of eyes on it the first day it comes out. ⁓ Because only yeah.
David Moghavem (15:01)
Exactly.
Exactly. Like the macro, the macro
stuff we were talking about on Charleston, you have the barriers to entry, the tight supply. You also have on the demand side, like huge inbound migration, I think from a percentage percent of population, it's one of the fastest growing MSAs. So you'll see that and then you zoom in, you see, less velocity trade velocity, which leads to more competition. So at what price are you really getting into Charleston? Then you look in at Atlanta.
Chris Urso (15:16)
huge
Mm-hmm.
David Moghavem (15:34)
And Atlanta has been ridden off by a number of institutions because they got burned, justifiably so. Coming out of COVID, bad debt got off the rails and there was no path to working through that. It was a market situation. wasn't really operationally specific. Now what you're seeing is Atlanta is in the last innings of that issue, whereas all these other markets that we play in are only in the first inning of these bad debt issues. And so I think you're seeing
a really good risk adjusted return in some of these first ring sub markets in Atlanta.
Chris Urso (16:09)
I completely agree. And I think you have the ability to trade up, right? In terms of like vintage and quality to where, you know, in the past cycle, it just wasn't accessible. If you were looking for value, I mean, people were paying 200, 210, 250 for 90s vintage product or 80s vintage product. And in some instances where now, I mean, we're seeing deals, you know, 140, 150 for late 90s, early 2000s vintage. And some of these outer
David Moghavem (16:13)
Mm-hmm.
Chris Urso (16:38)
suburban sub markets where supply has pretty much come to a halt. It's all got to make sense at the end of the day. Yeah, absolutely. Yeah.
David Moghavem (16:44)
Diversified economy based too, right? Good jobs, strong jobs. ⁓
So like sometimes at some of these secondary markets, it's a little bit too employment specific and a little too reliable on one employer. Whether as like in Atlanta has I think some of the biggest numbers of Fortune 500 companies, right? And so it's diverse, it's not just leaning in on one employer to drive up the rent.
Chris Urso (17:03)
Yeah.
And the smaller markets are much more exposed to, you know, when you do have pockets of supply, right? They don't have the, it's, it has a meaningful impact on your operations. You know, we own in Beaufort, we bought a deal down there. We like it a lot for the long-term great market, but all of a sudden, like to the reporting side on new development, you know, we did all the pipeline work, pre-purchase. There was nothing, nothing, A year in, all of sudden guys putting a deal up down the street, 400 units.
David Moghavem (17:23)
Great market, great demos.
Mm-hmm.
Mm-hmm.
Chris Urso (17:38)
400 units in a market like Buford, everybody feels it. It's Atlanta, that can get picked up and it's kind of gets blended through and nobody really has a material feel or implication from that. So I think that's one thing that you do have to pay attention to when you move into some of the smaller markets and the sub markets where supply even two or three deals going up can have a meaningful impact for 12, 24 months, if not 36 on your assumptions.
David Moghavem (18:05)
Yeah.
Yeah. So I actually want to get back to how you guys, you know, again, similarly, we both kind of attacked these first ring suburbs. I'd love to hear from you. And I could kind of give my take to you of like, how did you fall into that strategy? Because it's I think through cycles at this point with dry on, we've always found ourselves getting into those first ring suburbs. Now, as much as people say, ⁓ return to core, everyone wants live work play or ⁓ it's COVID everyone's moving to the suburbs.
We've always kind of stuck still to that first ring suburb and we've always found it to be a great place to play. I would love to hear kind of from you on your thesis through cycles, how you've guys gotten comfortable with the first ring suburbs.
Chris Urso (18:48)
Yeah, and I think that's really much like you guys. That's when we look back, that's really been kind of where we've we've ended up for, you know, for better or worse. And I'm very happy with it. I think for us, it's you know, we're opportunistic by nature, both in kind of sub market selection and asset selection and profile. And we look for areas that are kind of moving in the right direction, but aren't quite there. They're not the best schools.
but they're very good schools. Population is growing. Schools are good. Crime is good. There's access to major CVDs inside of 30 minutes that are growing that we can draft off of. When you look at it, like we've done Murfreesboro 30 minutes outside of Nashville, Rock Hill 30 minutes outside of Charlotte, Somerville. Back in the day, it was North Charleston. Even Atlanta, we kind of went around that wheel.
and played in and around that 30 minute side. For me, it just felt like it was trying to find the areas that had positive momentum that we can get into before they were fully priced by the Knowing that it may take a little bit of time, but this is an area and a location that I'm comfortable being in, that I'd be okay if we were here for the next five or 10 years. ⁓ Yeah, I think that's probably the number one driver is finding the
David Moghavem (20:00)
Mm-hmm.
Chris Urso (20:15)
the access to the CVDs that are growing and where is that growth pattern going? You know, how is it, what are some of the other sub markets that have already been priced to perfection and have exploded to a point where they're inaccessible? Is this the next one for that gray collar employee? You know, it's a lot of what we focus on in that 30 minute ring stuff is really gray collar housing. Like I don't call it blue collar or white collar. It's kind of that, you know, 55 to a hundred thousand dollar household income demo.
you know, that you can provide them. You know, maybe the schools are six out of six out of 10. They're not nine out of 10. Right. Your your crime is almost non-existent. You have access to national retailers and you're going to commute, you know, maybe 35 minutes versus 25 minutes or 15 minutes to be closer in. But you're getting a 20 percent, you know, cost of living savings for being in this being in the sub-market.
David Moghavem (20:51)
Mm-hmm.
You're getting cost of living savings for bigger space than the urban core. You're getting, usually what I've been finding is like you're getting, you know, with the great caller families where there's a little bit more stickiness, there's a lot more retention. And if you're running a nice, well-run property, they'll stay, they respect the property as well. You're not getting a lot of people that are coming in, coming out, coming in. The renters buy necessity for the most part. I think that's really big. ⁓ Whether as sometimes when you even buy
Chris Urso (21:33)
Yes, yep, yep.
David Moghavem (21:38)
high demo areas, they're choosing between buying a house or renting out your apartment, that could get a little tough from, even though it's a great demos, it might not be the easiest operation.
Chris Urso (21:52)
Yeah, and we've seen that. We play in new development also, right? So it's kind of a double-edged sword where you're getting great demos. Like these are the people you want, but we're looking at our turnover and it might be at 50, 51 % retention versus some of our kind of what I'll call gray collar workforce plus deals are running at 60, 62. And I'm like, why are we losing people? It's not because they don't love the place. They love the community, they love the location, but nine out of 10, it's buying a home, buying a home, buying a home.
So it's kind of a little bit of that double-edged sword where these are the demos you want. They're great tenants, they pay their rent, they take care of their community, but they're gonna be more inclined to go out and purchase. But yeah, we love that 50 to 55 to $100,000 household income to your point. It's a nurse, it's a teacher, it's a cop, it's a store manager.
for better or worse in our world where we are right now, they're less inclined to be able to go out and buy a home.
David Moghavem (22:53)
Right. And I think wage growth is also strong in some of that gray collar sector too. we're starting to even look at what is most exposed to AI right now in terms of job replacement. And I think the gray collar is actually the best place to be in regards to that. It's always very hard to predict, you know, of like, there's just so many forces, but that's our thesis at least of like that gray collar space is, ⁓
Chris Urso (22:56)
Yeah, yeah, there's a little more elasticity.
Yeah, us too.
David Moghavem (23:22)
is a good place to be. ⁓ Yeah, you know, we both self manage and you're finding that in this cycle, I think it's more important than ever, at least pre-rate hike. If you didn't self manage or you weren't a great self manager, you could get saved by rank growth. Now you got to really be on the ball and you got to really be sharp with weekly occupancy updates and
Chris Urso (23:24)
Yeah, I don't disagree.
David Moghavem (23:50)
where are your bad debts looking like and just be proactive. So tell me a little bit about how it's been self-managing in this cycle. What are some of the lessons learned? How have you guys been improving your self-management ⁓ heading into this down cycle?
Chris Urso (24:06)
Yeah,
yeah, I mean, I think it's critical and we've always operated quasi self-managed. We became official, I think the end of 22. So it was kind of a good segue for us. We ended up getting fired to some extent by our management, they're good friends. And they basically came to us and said, you're never going to be happy until you have absolute total. We've let you kind of operate in a silo for
David Moghavem (24:26)
Mm-hmm.
Chris Urso (24:34)
you know, for as long as we have for five, six years. when we added development, they asked us to use their new development team. And it became very contentious because their team just couldn't move at our pace that we demanded of our people. So when we hit that point, they kind of came and said, you know, we manage for private equity, institutional and syndicators alike, 50,000, 60,000 units. You guys are the most hands on. You're never going to be happy. Just take the front.
David Moghavem (24:48)
And
Manage the manager.
Chris Urso (25:02)
Yeah, just
David Moghavem (25:02)
Yeah.
Chris Urso (25:02)
take the front end of the business and we'll continue to support you on the back end. So which was amazing. I was like, so you firing me? He's like, no, I wouldn't be offering you this if I was firing you trying to set you up to just don't talk to us. We'll support you on whatever you want to do. Just do what you want to do on the front side. So it was great because 22, 23, we didn't buy anything. So we were coming out of selling. We sold 13 assets between 2019 and the end of 23.
We really didn't buy much. 21-20, we bought one deal in 22. We started one development in 21, I believe we're 22. Then we were down to five or six properties going into 23. It was a good year to segue and transition. Then came 24 and we turned the faucet on and said, okay, we want to start buying and start accumulating.
And we woke up at the end of 24. I'm like, oh my God, we have like 50 employees now. We just added another six properties to the portfolio. We now have a real management company. And I've spent a lot of time over the last year and a half in that business. I'd say probably more than 50 % of my time has been on that side of it until as of late, we've just brought on a fantastic COO. And for us, there's no other way to go about it.
I mean, we're two hands on. We really work to build a culture of one, meaning we're one team, we're one vision, we're one goal. Like I spent a year breaking down the us-versus-them mentality that property managers have with ownership. I think that was a critical path forward for us. I didn't want our site teams looking at our investment team as owners and, the owners are coming. I would hear that way too often.
everybody's getting nervous. The owners are coming like, whoa, we're all in this together. There is no us in them. I don't want to hear my investment team saying, well, they did this or they didn't do that. And I don't want to hear the manager saying the investment guys are too aggressive. They didn't think about this. ⁓ 100%. 100%. Third party, there is no doubt you're them when you're an owner. You're always going to be treated as them.
David Moghavem (27:05)
And you could only accomplish that from self-managing, by the way, right? Like, yeah.
Yeah. Yeah.
Chris Urso (27:18)
⁓ as an owner and third party. ⁓
David Moghavem (27:20)
And their goals
for third party is like, hey, let's make occupancy as high as possible, but maybe not push rents. Or hey, let's try to offer concessions right away so we can get to that occupancy level instead of saying, hey, no, we need to actually try to prove out the upside here. Don't just give these out. there's just so many, such a different strategy with the space we play in and self-managing is critical rather than.
just giving it out to third party where the alignment of interests is completely different.
Chris Urso (27:54)
Well, I think you saw it, right? mean, if you look at everybody was a great manager in, know, 2020, you know, 21, 22, and, you know, anybody with a heartbeat was getting their rent raised, you know, 10, 15, 20%. And it was easy to buy deals. I think what people are starting to realize is it's very easy to buy deals. It's not very easy to operate deals. And we've seen more, oh, there's a management issue or it's a management place story deals in the last
24 months than I saw in the last 15 years because things got hard again. And now these third parties had to actually start putting the time in to figure things out. It's been a challenge, but for us, we are really hands on. I know my service managers, I know my leasing people. I'm on team chats with all of them. I see the updates. I get daily updates, weekly updates. I do site visits personally if a property is struggling.
David Moghavem (28:24)
Yeah. Yeah.
Right.
Chris Urso (28:49)
I've conveyed that to, you we have a key team in our office in New York on the investment side, about seven of us. And everybody understands that that's, that's how our business operates. Like we're all in this thing together. So if you have to do something, you get down there. don't care if you have to go help, you know, turn a unit from an extreme example, we're going to go do that. And we're going to be side by side with the ops team. But you know, in today's world, it's, you have to be covering every aspect from renewals to providing great service to.
Curb appeal, cleanliness costs nothing. That's what I reinforced to our teams on a daily basis. And we try to get our managers and our regionals to think like CEOs of their assets. the end of the day, they're running a 30, 40, $50 million business. They're responsible for daily activities. So you need to think like a CEO of a $60 million business. If you were running a $60 million business and you walked through the parking lot and saw a piece of paper on the floor, you pick it up.
David Moghavem (29:47)
Yeah, take ownership.
Chris Urso (29:48)
That's how you need to think. And we've tried to do things a lot different than the archaic ways to on like bonus structures and recognition on integral things when it comes to the investment plans, where I think when you're talking about third party and the way some other folks do it, it's more like, okay, this is how it's always been done. This is how we're going to do it. We sell a deal, they get two weeks pay or whatever it might be.
Here's your standard bonus structure. No, we want them to understand the proformas, understand the occupancy goals, the NOI goals. And when you achieve those and we win, everybody wins. And you win much bigger than you would have by just getting paid for activity and leasing units or getting renewals. ⁓ So yeah, it's a never-ending, it's tough. Staffing is tough. It's really tough. ⁓ But we wouldn't be able to have it any other way. ⁓
David Moghavem (30:41)
Tough.
Exactly.
think it's our core. It's our core competency, ⁓ just like it is yours. I think another thing on our side, and I'm sure you're going through this too, is we get to have control of our tech stack as well, because I think with all ⁓ these issues and headwinds that you're seeing in managing multifamily, you got to be ahead of the curb on tech. And that includes fraud detection tools. That includes
Chris Urso (30:48)
So yeah, 100%.
David Moghavem (31:15)
⁓ pricing software and revenue management. So sometimes when you have like a third party manager, you're kind of at their mercy of what they're using for tech. Whether as self managing, you can actually make the decisions and be on the front lines of it to make sure that your property is ahead of the curve, ahead of the competition.
Chris Urso (31:38)
Yeah, 100%. I think there's two components. The tech stack is real. We leaned in pretty hard. I'd say the beginning of this year, we explored all the top five revenue managers at great length and we rolled it out portfolio wide. ended up going with Rentana and it's been an absolute huge value add to our portfolio.
⁓ extremely happy with their technology, their updates that they do, they're constantly evolving, their support has been tremendous. And it was a massive rollout and undertaking, but we had the whole portfolio migrated over literally in one quarter. And we've seen tremendous results from it. It's taking so much of the emotional and it's funny, you know, talking about this because you talk to some other owners that have been around a long time. I was away with a couple of guys and
that are much bigger than I am and have been around much longer. And he's very bearish on the world. What are you saying? When is it going to get better? It's terrible. Is anybody's portfolio running over 90 %? I'm like, we closed out Q3 at 96.1 across our portfolio. And he said, what? He's like, what do you mean? I'm like, we're 96.1%. He's like, well, what's your bad debt? I'm like 1.3.
And he's like, there's no, no FM way, you know, like, what are you doing? I'm like, do you use any sort of revenue management? He's like, you mean like LRO or yield star? I'm like, the world's evolved a lot since LRO. It's not just about daily pricing. It's about managing your expirations on a go forward, educating your teams, tracking your traffic, tracking your comps. And this is all done real time on a daily basis. It's working. It's pulling every piece of data from yardie.
on a daily basis and showing our teams how to lease appropriately today. Right. We're overexposed 12 months from now in the month of November. So you know what? We're leasing the next five apartments on 10 month leases at this price. And if somebody demands a 12 month lease, they're going to pay $150, $200 more for that lease. And we're going to get paid for that overexposure on that. And then the same goes for renewals. We're going out ahead of time. We started working December renewals in June.
David Moghavem (33:53)
Mm-hmm.
Chris Urso (33:54)
because
I learned from last year, had a really, Q4 and Q1 was rough, end of last year and beginning of this year. So we learned from that and we started working our exposure. But Rentana has been a great fit. We have all the snapped and all that stuff on the site level. ⁓ We're actually working with a firm. One of our investors has been in the PropTech space for years and he's created.
David Moghavem (33:56)
Especially in the winter, yeah, winter's tough.
Chris Urso (34:21)
an AI platform that's dedicated to asset management where it's, I mean, the amount of data that I'm getting updates daily that they're loading into this, it's all of our ERD reports, all of our loan documents, all of our construction budgets is all getting loaded into this whatever large line. I'm not an AI guru, but call it a large language model that's catered to us that we can then go in under same chat GPT type functions on it.
I'm on quarter over quarter. want week over week of this and it's spitting out reports and we can constantly add whatever we add additional assets to it. ⁓ I think it's going to be game changing for our regionals. It's going to be game changing for asset management. We're kind of one of the first beta users for it, but I'm happy to share that in a couple of months with you because I think it could be really interesting for our space because there's a lot of companies that say that they do that.
David Moghavem (35:06)
Mm-hmm.
Yeah.
Chris Urso (35:14)
But these guys have a deep experience in all things like PropTech that's dedicated to multifamily over the last decade plus. And he understands that they're investors first at the end of the day, which is critical when these guys are building this stuff out. They understand what we're looking for. So that could be really interesting.
David Moghavem (35:32)
Yeah, and it's about, you know, and once you do that, it's about getting everyone on board, right? Like sometimes the pain points can be tough getting on sites on board, getting maintenance staff on board and then getting people, you know, in the back offices on board. But I think once you can get everyone to buy in, which again, going back to having the team on your, you know, under one umbrella, you can control that and dictate that better and choose the right talent.
embracing that technology instead of shying away from it.
Chris Urso (36:05)
Yeah. And it takes time. And that's what, you know, I ended up putting, you know, my buddy in touch with Rentana and he had, he's like, this is exactly what we need. And I just, reiterated to him exactly that. like, the rollout part is easy. The compliance is where the secret sauce is, is how the secret sauce is made. Right. Because it's garbage in garbage out. You have to ensure that someone is going to be the lead on this.
David Moghavem (36:21)
Mm-hmm.
Chris Urso (36:30)
day over day, week over week, managing the compliance of this because the info is not put right into Yardi and the machine's pulling from Yardi every day. It's going to throw everything sideways, right? If the tours aren't being put in, the applications aren't being put in, the denials, the comps aren't being put in appropriately, it's going to throw it sideways. you know, we have compliance checks every week. We're getting a report on compliance across all the sites. And that's where...
I think the differentiators come in in terms of there's a lot of tech out there that we could all spin our wheels with, but it's how do you really apply it and execute it for the long term.
David Moghavem (37:07)
Yep. I want to, I want to switch gears really quick ⁓ for the time we have together. You know, the tough, the toughest part I would say of this cycle has been capital raising, I would say, you know, in some regard of, of just the type of capital that used to be in the, in the market, pre-rate hike versus now the capital that's not there. The institutions feel like they're out or being selective. The high net worths are out there. And so it's all about.
Chris Urso (37:11)
Sure.
David Moghavem (37:36)
kind of sticking to your guns right now with the investors that I've invested with you through cycles, which has been amazing for us. Talk to me a little bit about how you're capitalizing deals today ⁓ and how that investor sentiment has maybe changed and how you're kind of working through that.
Chris Urso (37:51)
Yeah, you know, I think for us, we've really kind of maintained our same structure, you know, through the last 15 years. We haven't deviated. ⁓ We didn't lean in and go the institutional route ⁓ when we probably could have. We really continue to focus on our private capital relationships. And that's a combination of ultra high net worth, high net worth, single family office and friends and family.
We probably have about 300 active investors at this point, close to $300 million of equity under management. And the last, since January of 24, we raised a little over $100 million, all private capital, to do the eight deals. And I think we've just raised, we have two more deals that are coming up and closing, and that'll probably be about 27 million across those two deals. And it's been our investor base that's been with us for
many since the first deals we did back in 2009 to the majority that have been with us for more than five years and a handful of kind of new relationships that were introduced over the last like two, three years. Our investors, think fortunately, we sold a lot leading up to this to kind of prepare for it. We didn't know when it was gonna happen, how it was gonna happen, to what extent it was gonna happen, but we were net sellers. ⁓
And it was hard for two years, really three years. We were net sellers and kind of watching others kind of blow past us on unit counts and transactions. And thankfully, we didn't really kind of drink from the firehose on the equity side and try to grow during that time. We sat idle, we sold deals, we returned, we didn't do a lot. So when we were ready to lean in, our investors were there and very grateful that, you know, they followed us back in and they followed our lead and understand that
We're maintaining our disciplines and we're trying to recalibrate. sold all of our 70 stuff. Our product profile now is probably average vintages in the 2010s-ish between our new development and everything we've bought since 2004 has been 1999 or newer, as new as 2023 vintage across the eight or nine deals that we've bought to date. We've reshuffled the deck. The messaging to our investor base has been...
We want to buy good assets on an attractive basis, take advantage of the dislocation that's in the market. It might not be distress. just might be seller timing. Whether it's a family that's second generation that just wants to sell and they're not trans actors. So they're just going to sell in this market and meet the market. And that alone right there is going to create some value because as my good friend Sam Zellier's book on my desk all the time says, liquidity creates value. And right now there's not as much liquidity as there was.
David Moghavem (40:22)
Mm-hmm.
Chris Urso (40:43)
five years ago. So we feel like this was a good time to be buying and our investors get it where we've kind of gone in with the thesis of, we're going to buy good assets, good markets. We can have a clear path with realistic assumptions to get to a 6 % 8 % cash yield inside of 24 to 36 months, depending on the opportunistic nature of the transaction. We feel like we have a free call option on when to sell that asset in the future. We'll wait as long as we can wait, want to wait for the market to tell us to sell.
We have three underlying core values as a last-cut check is, we want to be in this market for 10 years? Do we want to own this asset for 10 years? And are we capitalized appropriately to own it for 10 years? We can't say yes to all three. I'm not doing the deal today. ⁓ And our investors, thankfully, I gave you a long answer, but we've stayed true to private capital. We are having a lot more conversations right now than we've ever had with family offices and smooth. ⁓
mid-sized private equity. I'd say funds that are kind of in the $100 to $250 million range that write $5 to $15 million checks. I don't think there's been a ton of groups in our market specific that have been as active as we have been over the last 24 months and been able to actually get deals. We've done some deals in 27 days from contract to close, all cash purchase, $22, $23 million deal.
So we've been able to, when we pick our spots, we lean in aggressively to get those deals done. If we feel like they're checking all the boxes that it's willing to take the risk in today's environment and our investors have followed suit. And, you know, if we can continue the path that we're going on and add one or two strategic partners in the family office space or private equity space where we can marry up our 300 plus relationships with, you know, some programmatic one or two strategic partners, that's really kind of
our ideal pathway for the next three to five years. I have no desire to really go the institutional route on equity. You know, we're a family kind of run business entrepreneurial and we want to maintain our roots there and not have to pivot from that.
David Moghavem (42:53)
Yeah, and I think the pros with that strategy ⁓ is you can go against the herd a bit, right? Because some of these institutions, they're just paid to take a very specific type of risk. And that specific type of risk, if everyone's kind of doing the same, very hard to find asymmetric returns, very hard to find outsized returns. so it can only really, these type of out of the box strategies can only really be accomplished with some of this private capital. I shouldn't say only, but it's much easier.
Chris Urso (43:00)
Yeah.
Yeah. ⁓
you
Yes.
David Moghavem (43:23)
to talk to someone who might either not be in the industry or is a family office that has invested through different cycles that sees where you can go against the herd and go against the grain in order to find outsize returns. So I think one of the interesting parts on our side is our shift in investment strategy of used to looking at ROI and return on cost.
and now kind of really focus, like you said, on cash yield and day one cash yield today. And it's a matter of protecting downside and kind of letting the upside come rather than trying to chase or make a deal work. ⁓ Rent growth has been flat. ⁓ ROI on rally you add deals are not what they used to be. And your group and our group, we cut our teeth like renovating the kitchens and
Chris Urso (44:11)
Yeah.
Yeah, that's what we did.
David Moghavem (44:18)
That's what we did. was our M.O. And now you're finding that you got to switch the strategy a bit. I'm interested to hear, has that strategy switch resonated with your investors that have invested with you and say, Chris, like we used to buy things at very low caps and we're going to increase that in a way by 100 percent.
Chris Urso (44:36)
Yeah.
David Moghavem (44:41)
What's going on? Like, what's the play? Like, how have you been able to kind of resonate that with your with your investors that have been investing with you time after time?
Chris Urso (44:42)
So.
I think that's a great question. We do have some of our old school investors that have seen us and know us as like, this deal is an absolute nightmare that we're going to present to them. And that's when they get excited. Like you said, it's vacant. It's a disaster. We have to do a $10 million renovation. And they're like, ⁓ this one's not ugly enough for me when we show them a 23 vintage deal. And that's when I have to sit down and be like, okay, but we're still opportunistic in nature. We're buying this deal because there's a loan maturity. There's pressures. We're buying it.
David Moghavem (45:00)
Yeah. Yeah.
Hehehehe
Right.
Chris Urso (45:19)
at a significant discount to not just replacement to what anything's traded for in the last 24 months. And we're hitting a risk adjusted return at 60 % leverage of a 14 or a 15. So let's take a look at this. Just because it's not ugly doesn't mean it's still not a great deal. Yeah. Yeah.
David Moghavem (45:37)
Crazy, crazy how conditioned we've been from like the 10 year bull run of every time we see
a dilapidated asset, we just get so excited. Like, wow, so much opportunity.
Chris Urso (45:46)
And
absolutely. I could put out tomorrow a vacant deal with the same return profile as a brand new deal and probably be oversubscribed in five minutes on the vacant deal and have to make some calls and explain why we like the nice brand new deal at the same return profile. ⁓ So that has adapted a little bit, but I think as our investor base too has kind of shifted upward, we have a lot of very ultra high net worth guys and gals that
David Moghavem (46:04)
Right.
Chris Urso (46:15)
that we've been fortunate enough to build a great relationship with and they've been great partners for us. I think they really understand it and I think that we're able to be a little more long-term greedy in our approach on things as well. And they tend to like that, where they're okay if we want to look at a deal on a 10-year horizon, knowing that we're still opportunistic sellers, the same we're opportunistic buyers, but they're okay if we say, hey, you know what?
We want to hold this deal, look at it, maybe refinance it in five years, hold it for another five. We're really bullish on the market. They like that. ⁓ They appreciate it. They like the idea that they don't have to get their capital back necessarily and redeploy it again in three to five years, that they're getting good tax-efficient cash flow. ⁓ But they also know that, and we're sharing with them, that we're not just out there buying the first deal that hits the inbox. I mean, I think we're up to probably like 247 deals this year that we've fully underwritten.
David Moghavem (46:58)
Mm-hmm.
Chris Urso (47:13)
to get to the four deals that we're ultimately gonna close out by January for this year. ⁓ Actually three only. So they appreciate the effort that's going in and they realize that we're still buying value no matter what at the end of the day. ⁓ And just in a different dress, I guess. Yeah.
David Moghavem (47:34)
In a different form, yeah,
exactly, exactly. So I guess wrapping it up, 2026, what's your prediction? What do you think it's gonna be? I'm gonna probably circle back with you at some point and play you the recording and say, you are right, you are wrong. So let's hear what are some of your predictions that you're leaning in on for 2026.
Chris Urso (47:47)
Yeah.
Yeah, we want to continue to buy. We definitely want to continue to buy through this until the market tells us otherwise. I think we're going to see a little more distress and more urgency for the better part of, you know, 26 because of, you know, some of the things that we touched on, but these loan extensions have run their course on some of the floating rate debt that was originated in 21 and 22, and it's time to meet the market. So I think we're going to see some more of that.
I don't like to get involved in calling macro stuff. It's just way above my pay grade. But in our world specifically, I think it's going to be a rough Q4, Q1, Q2 on operations because of some of the macro headwinds that we're facing from an economy perspective, the supply absorption that still needs to happen. But I think we start to see some of the light at the end of the tunnel by the time we hit Q3. ⁓
David Moghavem (48:31)
Hehehe.
Chris Urso (48:55)
Outside of that, we're prepared to kind of muscle through till 28 if we have to. So we're keeping expectations tempered. I don't think we see organic rent growth in 26. I really don't, as much as I want to say, yes, I don't think we see it.
David Moghavem (49:12)
Yeah, and we're obviously doing like a broad brush on the market. So some might turn positive more than others, but I think you're right. I think we're seeing the shift from cap stack distress to operational distress and operational distress, the cracks really starting to show and the cap stack distress now forming into sales where before the past couple of years, that cap stack distress didn't necessarily translate to sales. They got a loan mod.
Chris Urso (49:17)
Yeah.
David Moghavem (49:41)
They got some sort of prep equity to kick the can down. think now you're seeing that you're going to see some assets realized due to just the runway being up.
Chris Urso (49:54)
I totally agree on that. think one segment of sellers is, you know, we're seeing the kind of shadow distress start to come to light via pref equity, forcing sales, especially on some of the newer development where we've been, you we've been tracking all the maturity data and the profiles of deals that were bought, you know, very, very closely since the ad nauseam, since, you know, kind of the end of 22, 23, I've had all kinds of maturity lists hammering our guys.
And it's been nothing, nothing, nothing, or very little bit. In the last kind of 90 days, we're starting to get a lot more calls on, hey, pref is done. They're forcing the sale. They're pushing the developer out. And those are great deals because they weren't over levered. Like some of the existing value add deals that were bought, you know, with this bridge money where even at the debt levels, it doesn't make sense. These were done with bank debt, but then they slapped on a piece of pref.
David Moghavem (50:44)
Mm-hmm.
Chris Urso (50:51)
So if you can take out the bank debt and the pref on newer deals, a lot of times that's, you're talking about a 190s basis on to 200, maybe 205 on product that's.
David Moghavem (51:01)
And the prep probably got
it. Yeah. The prep probably got to like a five, six debt yield, which I think is like a reasonable cap rate, right. ⁓ Depending on the asset.
Chris Urso (51:08)
Yep. Absolutely.
And they don't need the up. They don't care that the developer is getting wiped. As long as they're getting their minimum multiple that's required and hitting their return, they're out. So it's making sure before we spin our wheels too much, who's really in control of the sale because there's a lot of wheel spinning in those deals, right? Because the preface putting pressure on saying, I want to sell, sell, sell.
David Moghavem (51:13)
Yeah. Right.
Chris Urso (51:35)
We hit a number to take out the prep and all their accrued and pay off the loan. But now the developer is arguing with the prep and we're stuck sitting here saying, just spent a month on this deal and nobody can get on the same page in terms of actually being able to sell. But we're starting to see some of that come to fruition more. And I think we're going to see the bottom of the barrel stuff also really come to a head at this point from what we're hearing from some of the debt funds that they're just done. They want this stuff off the books.
David Moghavem (52:04)
Yeah. And I think like you said, once you start playing in these spaces where the value is starting to change from being below the debt to above the debt or from below the prep to above the prep, that's where you just start to see the transaction volume start to actually move. Whether as before, it was harder, who am I talking to? Who's the one in control? That's what blows up the deals end of the day. Even if the value is the value and someone's motivated to sell,
there's another party that you probably haven't talked to yet and you just need time.
Chris Urso (52:35)
Yeah.
Yeah, we had a fun one the day of closing. Pref came in, tried to block the sale because they were even getting wiped out. And the sellers had legal confirmation that they had the ability to sell and screaming, yelling, threatening to sue everybody and their mother the day of closing. And I'm like, why didn't you guys just tell us about this? We knew this was going on. Now we're getting blindsided. Tidal's getting freaked out. ⁓ But we got it done. Pref wasn't happy. So.
David Moghavem (52:44)
my God. Yeah.
Fun times, yeah.
Fun times. Looking forward to ⁓ seeing what 2026 has in to play. Chris, it was really, really great having you on. Thanks again. Love Talking Shop with another ⁓ GP, another operator, and as we're both in the thick of things. So appreciate your time.
Chris Urso (53:09)
It's interesting.
Likewise, David, really appreciate it. Thanks so much for having me.
David Moghavem (53:29)
Thanks.