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The Real Estate Addicts (REA) podcast is a must-listen for anyone interested in real estate development, investment, construction and entrepreneurship. Each episode dives into a wide range of industry topics and features conversations with savvy, successful entrepreneurs who candidly share their career paths, challenges, breakthroughs, and the stories behind the remarkable companies they’ve built. Expect big personalities, thoughtful insights, and conversations that both educate and inspire.
Co-hosted by Ray Hurteau, Dan Rubin (Instagram: @rhinvestgroup), and Marc Savatsky (Instagram: @choose_boston)
Follow the Real Estate Addicts Podcast on YouTube: @RealEstateAddicts
00:01
You know what's crazy now is like, you guys noticed in your, your like, uh, your maps? Do you see my post the other day? Like my apps, my, it told me to go to karma. Really? Like my phone, it must be because I go to karma for lunch a lot, but I got in my car after a meeting and it was like, the map was, would you like, would you like to go to karma? Oh, I think I saw you And I was like, I had nothing in my calendar to go to lunch there. Yeah, it will suggest.
00:24
Maybe, maybe has paid for like Google's offering like a, people who come by a lot, send them reminders to come here. Yeah. That's an op. That's dangerous. Yeah. You it's tough as the Uber eats when it gives you the tax and it's like, you deserve auto pizza. And I'm like, you're, fucking right. uh So welcome back to the real estate addicts podcast.
00:53
We are bringing back Ricky Melvue from Volnay Capital, Evo Real Estate Group. Correct. Third time. V10 development, V10 development. What else did we miss? That's it. it, right? table. Oh yeah, Volnay Property Management. And the developer round table. Hell yeah. Nice. No, thanks for having me back, guys. You know, things have been shifty over the past couple years since I've been on, but. Yeah, I think the last time we met was
01:22
pre-interest rate hike, interest rate hike, Yeah, it was probably right before we started Cove. I think we were in the process of starting Cove. Yeah, I think you finished the 600. Yeah, the project out in Worcester. Yeah, the 173 units on the outfield wall at Polar Park, and we were getting in the process of getting that deal started, and that's a crazy story in itself that we can get into on the funding of that and all that went in with the interest rates hikes.
01:48
Yeah, we've been busy. We're still working on the Volney Capital stuff where we're doing single families up to about 50 units, mostly for sale. V10 just finished our project in Worcester, 173 units, about 75 % lease now. And we have other projects we're trying to get capitalized, but in this environment, it's just almost impossible to get large scale multifamily going. The brokerage is going great. We're up to about 40 agents. We actually are just opened our new office back into South Boston. So now we'll have a Southie office and an Everett office.
02:18
going really well there, continuing to grow that. And then the property management business is about 850 units now, a combination of condo associations and rentals. And we've really made an emphasis on growing both the brokerage and the property management business through this period of flux in the real estate market. does your organizational hierarchy look like at a high level? you're obviously the commander in chief, but
02:43
Do you have heads of each department or are you kind of de facto heads there or like co-heads? How does that work? Yeah, no, I think, you know, a lot of people ask how I can run all the different things and it all comes down to the great teams. Right. So the first employee I ever hired was Chris Pruill. He runs the Volney Capital developments from a day-to-day basis. So anything on the, on that end, he's working with me directly. If he has anything, he'll reach out. The management company, I have Dan who runs the management company.
03:11
He's been with me now almost five years. So, you know, he reports to me with anything that's going on, but overall day to day he runs that. then my good friend, Joe Parrish, who actually went to Northeastern University with, he joined me about a year and half, two years ago to run Evo. He's been in the industry over 20 years. He had his own brokerage for a long time, and then he came back on to run Evo for me. So three kind of pillars of each company and that I have one direct point of contact. So it allows each business to scale on its own. That's great.
03:40
Makes, makes scaling is hard. Yeah. When it's just you. You're also an award winning developer. Much like we're an award winning podcast. So the last time we, you, you joined us was July of 22. And I think, at that point the interest rates were going wild. Yeah. one knew where the top was going to be. The award winning thing. Yeah. The backstory there, I'll give a shout out to David Lank, but our mutual friend. He told me that he had a friend who's very big into like.
04:10
What you say, like optimization for social media? And that his friend in that marketing space said that if you write award winning before whatever tagline bio this, that the algorithms go nuts. Really? It's interesting. At which point we became an award winning podcast. Right. The award winning thing for the developments is interesting because like right now we're, going through the whole award season for Cove and we just, we've won three awards so far and we've got another, we're on the docket for.
04:37
like multifamily of the year and stuff that's both local and national and in the end, what does it really matter? But like, I think from the standpoint of track record, it's important to be able to say that you did win those awards and also for the building's value to be able to have, you know, whatever it is, three to 10 different multifamily housing awards linked to the property. think it does add future value. you get nominated for that stuff or who did you have to apply? Like how does that?
05:00
Yeah, so the way those worked, typically you're nominated and you have to put yourself into the different, all the different awards. So our management company out there was Wynn. They handled a lot of the submissions. NEI handled all the submissions that are construction related. And then the architectural team was the architect on that project. So they handled any of the submissions that are architect building specific. So kind of three different marketing teams handling all the submission processes. Interesting. It's kind of a scam though.
05:29
But it's, was going to say, so is that self submission? But you still have to get vetted though. It still goes through a process. I'm not going to take anything away from it, but like I worked at a construction company where like every other week there was some new award and it's like, yeah, marketing group like works very hard on finding awards, submitting our projects. It's like a combination of PR and marketing and as well you should, but like there's the slightest bit of like top agent magazine. um
05:56
There's some crossover in that vendor. It's a little different than you can't just pay. It's not pay to play. Like you do have to submit and be awarded, but it is also the fact that it's like relationship driven. Like let's just say maybe our property manager is a lead sponsor of some of these publications. And if you look at who the award goes to, maybe a lot of them go to their buildings. So little pay to play for sure. A little bit. Yeah. Interesting. But it is cool to get recognition either way and get the medal and You get my work. Yeah.
06:26
I love like O'Kane, Adam and his brother, and they've been doing that. We were one of the first. Yeah, we were the first. So it's like a top age, top developers to follow 2020 was Brian, me and Ricky. And every year since they've come out with this. And it's just like our two friends who have a basically a blog, like a website, and they call you and interview you. But I got more phone calls, texts. Like my mother in New York was like, you didn't tell me you got this honor. That's awesome.
06:55
Yeah. That's awesome. Did the building get like lead certifications or any of those? No, we didn't have to do, we didn't do any of that, the special, you know, type of, you know, stuff for the property, but you know, overall we're really happy with it. The way it came out, we're about 75 % lease. just hit our year mark. It's a really, really cool thing. I was going to say it overlooks Polar Park, right? Where the Wusox play. Yep. How many units total you said? 173 units. How many have a view of the stadium? Probably about 40%.
07:24
That's not bad. That's really good. And then, you know, when we designed the property, we really made sure that the amenity spaces were, you know, located in a way that everyone could enjoy the field and the views. So anyone who lives in the building can, you know, have fun and enjoy that space. Was there any questioning or leveraging or pushing by the Wusox to be like, Hey, you know, you might need to pay if you want to have a view all the time.
07:50
You're not getting tickets, that sort of thing. No, they were just excited to see something coming to the area. know, anything that happens around that stadium is going to be good for them, but also they aren't our butter. The city of Worcester owns the stadium. So the Wussox actually didn't have any legal standing over what we did. Oh, interesting. That's cool. But yeah, heading into that project kind of crazy story. So that was right when I was here and then rate started climbing on us. And, you know, we were looking at getting started on that and.
08:17
Luckily for us, we were able to fix our rate at 5.9 % with our enterprise bank, who was our lead lender, but they did cut our proceeds. And so heading into closing, when we were doing the groundbreaking and all of that, they cut our proceeds by 9 million. so- And proceeds as in like construction- funding. Yeah. So we had to bring nine additional million more to the closing. And so we took the shot and we ended up breaking ground, cutting our contingency budget.
08:44
and moving forward project even without fully capitalizing it. And we backed in and raised $9 million in the first, you in the next few months until we ran out of equity. you got the rate was fixed through construction. Still fixed at five nine. Still fixed. Whatever your term. Where'd you find $9 million? Was it like dumb and dumber with the IOUs in the briefcase? It's actually, don't lose that one. That's the Lambo. It's actually a crazy story. So my general contractor out there,
09:12
He, this is a true story. So he was, he was actually going to play golf and he, he had to reschedule the tee time with one of his, with one of his good friends. And the guy joking around sent him a screenshot of his calendar. And when he sent him the screenshot of his calendar, it was to say, Oh, Hey, look, I have nothing going on. Cause the guy just sold half of his company for $130 million. And after he sold, he got a six month break before he had to go back and run the company again. The only meeting on the calendar.
09:42
was meet with financial advisors about opportunity zone deals. so my GC saw that and said, what is that? And he said, oh yeah, I'm back from my vacation and I got all these gains to deal with. And they want to talk about my JP Morgan guys want to talk to me about opportunity zone deals. Literally put me on a text that day. I hop on the phone with them. I run through the deal pro forma, talk through with everything. He's like, all right. He's like, I'll give you $3 million. And I was like, amazing.
10:11
And he's like, I'm meeting with JP Morgan on Thursday. want you to join me on the, on the zoom. Let's go through it in more detail, but I should be in for three. Incredible. Thursday comes around. I get on with JP Morgan, run through all the deal, the model, the performance, everything. They go, how much is left? And then up until that point, I had already raised 4 million. So I had 5 million to go. were the financial guys? Yeah. Oh boy. And they're like, how much is left? And I was like, so well, there's five total. He's, he said he would do three and they're like, he'll do five. Wow. Done.
10:40
So in a whirlwind, seven days went from being short 5 million to fully capitalized. That's great. about the whirlwind of emotions, finding out. Cause when did they tell you? Were you like at the closing table and they dropped that nuke on you? Like that's not an easy. We were promised to share. We were concerned heading into the closing, knowing that the rates were no longer 5.9. Right. That was when the fed was raising rates. So.
11:10
We knew based on our current terms with them that if they wanted to, could have, they could have said our rate was like going to be six and a half and the project would not have happened. We couldn't have done, we couldn't have financed it at that rate. That 0.6 % big deal. wouldn't have worked. So luckily they held the number, but then they said, but we're going to cut your proceeds. So you're going to have to figure out bringing in additional capital. So it was like a little bit of a relief that they weren't going to walk from the deal and they weren't going to raise our rate.
11:38
But then there was also the stress of saying how are we going to capitalize this with a foundation starting in the ground. And the thought was, this is such an exciting project that if I'm able to show people a foundation going in and bring them out to the site with the stadium in the back, I'll be able to sell and raise the money, raise it out. Nice. Well, that's pretty impressive. Yeah, very interesting. And ballsy. But you did it. Stupid.
12:02
All's well that ends well. I mean, what was that? No, but at least your eyes wide open about the risks you take. I think that that's the difference between stupid and an entrepreneur. It's like, I see a lot of guys who get away with stuff and they just think they're like, God's gift, I'll say. But it's like, you have no idea how close you were to disaster.
12:22
Like you don't appreciate that at all. Like walking on a tightrope. Yeah. Over a million. Well, yeah. What was the opposite side of that? Like what was at risk if, for some reason they said, oh, it's going to be six and a half. And you're like, well, we're out. there's gotta be some. How far could you have gone without needing that money? So we had, we had had to do different commitments to be able to try to figure out ways to fund it. So before we actually put shovels in the ground, I'd already gotten a few million in of commitments. And then there was still a gap that needed to be filled.
12:50
And that's when we had to go, okay, zero dev fee, right? So we had to put $3 million of dev fee into the deal if we hadn't raised it. want to just explain developer fee? Yeah. So the developer fee is the fee that you're paid month over month throughout the process to pretty much your salary for doing the deal. And so we would have to pledge and say, we will leave that in the project as equity if we're not able to source the deal. Also, our general contractor was willing to put in some of his fee.
13:16
to help make up the difference. And then we had a few other people that were able to pledge, even though they didn't want to put it in, they were able to say, if in a scenario you aren't able to capitalize it, I will put in more money. see. That was like your backup then basically. And none of those people wanted to put in additional capital or none of us wanted to put in our fees, but it was enough to get the lender comfortable to then close the loan. sense. Nice. Yeah. I mean, something like that, they want either, they've got a lot of mouths to feed too. So you want to get that done and at some point they'll get paid.
13:46
everybody gets paid. Yeah, I think everyone was looking at where the environment was and it was like, we knew we'd probably be one of the last major developments out of the ground because rates were climbing that fast. And so we were confident that if we were able to deliver, we knew we would be the only one for a while. And if you look at now, there's no deliveries coming up for a while in Worcester. So we got no competition coming in the short term, at least in that area. Which is great. Right.
14:15
Yeah. I mean, yeah, it's a very unique, one-of-a-kind asset. So that's awesome. So one thing that I thought was interesting that you started kind of pivoting to since the last time we met and talked was you started kind of doing some single-family projects. And I don't think that kind of was your bread and butter prior to kind of, I guess, increased interest rate environment. So kind of what led you to starting some single-family work and
14:44
Kind of want to talk about that a little bit. Yeah. So the first single family that I had actually done was on G street in South Boston, which was for my own family. Right. So I bought that for five or 600,000 got renovated it, you know, I think put in about 600,000 plus into the renovation, lived there for a few years and ended up selling for about one eight or one nine back in 2020. Right. And so that was, although it was not a flip, it was a very profitable project, sold it.
15:11
500K profit and no taxes due to the fact that it was my primary residence. I'd done another single family in South Boston as well, but that was also just, we had moved into there for a little while. was kind of a temporary thing. And then when I got up to Winchester, I bought my house, which was like an 1850s, 7,000 square foot house in Winchester, renovated that for my family, kind of got into the whole idea of, know, these multifamilies we do are pretty, they're exciting, but they're also pretty boring from the standpoint of like there's
15:40
You're pretty much set on your finishes. It's kind of you're on a certain budget there. It's always the same over and over per unit. Whereas on these single families, you can be more, you know, design thoughtful and kind of create something special. So after I did my house, was like, oh, higher price point, higher price point. can, know, you can get more creative. then after I finished my house, I was like, let me get into a few of these single families. So I ended up doing a single family in Winchester, you know, very profitable project, which then started the idea of like the single family market.
16:10
I like the market where it's in the higher price points. Like I don't understand how you can do these single families when they're in the under $2 million sellout, because there's just not enough margin. So all the projects we've done have always sold for mid threes to close to 5 million. Just listen to bigger pockets. They'll tell you how to flip a house in Ohio for $190,000. Right, you gotta do 50 of them a year, you know? Yeah. I mean, it is pretty insane that we're talking about like,
16:39
three to $5 million sell outs when it's like, lot of people can't grasp that amount of money. It's, Yeah. You did a cool subdivision too. That was an interesting kind of corollary. Yeah. So I, this, there was a, there was a subdivision, there was a large parcel land in Winchester that was being marketed as a 40 B and it was going to be like 60 townhouses.
17:03
And of course there was rumors about it and the neighbors were up in arms and everything. And I showed up and talked to the seller, sat down with him and I said, how about this? Give me time. And I'm just going to permit it for three 7,500 square foot mansions, like houses on big lots. And I was like, my pitch to the neighbors was support me because if you don't, there's a good chance this goes 40 B.
17:26
And what happened, I was able to get all the neighbors up in that community to be supportive of the fact that I'm not going to 40B it. And I just wanted to do a subdivision. was able to, you know, it took me about a year, but without a lot of pushback was able to approve it for three large lots that I was planning on building. And then I ended up receiving an offer for significantly over what I had it under agreement for. And so I was able to just sell off the full approval. it was three friends who wanted to live on their own cul-de-sac together.
17:55
Yeah, that was the buyer. It was actually one of the butters approached me and he came to me with a couple buddies, other Winchester guys, and he said, hey, what's the plan? And I was like, build the houses and they're like, well, would you just sell it to us? Like we want to each, we're going to take one and then we'll build our houses eventually back there. And I sold it to them. So I think that would be so cool. Yeah. Unless until you're not like friends with someone anymore and that's awkward. Was there, was there any like flack about that?
18:23
part of it because you had just gone through this whole process. No, it's single family. don't care. know. It's not the same as like, I'm going to do this building and in the end, was no plan street buildings. The houses weren't designed yet. All I had done was the, the design of the subdivision plan, the street plan, the lot layouts, that different stuff. The, you know, everything that happened on each lot from a house design, civil stormwater still hadn't been done yet. Got it.
18:49
That's a pretty cool story. mean, we've had one where we've sold permitted approved plans and there's something to be said for like, you said it took a year, mean, to invest a year, right? And then to build it, that's at least another year and a half before you can reasonably sell it out. I mean, to go from two and a half years to one year. I think the really rational way to make that decision is to ask yourself if you would buy it for the price that you can sell it for at the point at which you've now secured your approvals.
19:18
And if you look at that price and you go, that's nuts. Like I would never buy that project permitted for that much money. And you can really get that on the open market. You should, you should think very. Yeah. think that when they look, the looking at what they offered me, they really offered me end user land price. Right. And so if I was able for me as a developer, I wouldn't have paid what they paid, but for them, they're looking at it from the standpoint, they're getting three beautiful lots, Boston skyline views, and they paid, you know, what it would be worth for each lot. Yeah.
19:47
And they get to on a block. I was going say they live next to each other. We're doing a, our brokerage team is selling a project oh in Newton and it's a subdivision and there's six homes and like we're coming up with our marketing strategy. my take is that like, I think there's a non-zero chance that six friends buy them and want to live there.
20:10
For the same reason. It's just like such, or a family, you know, like. you selling the approved subdivision or is it going to be built? The houses are built. Oh, the houses are built. Okay. We're definitely friends, right? I mean, we're seeing this in Dorchester in our project there where now units are under agreement and friends of people who are under agreement are coming to see and they're like, Oh, my friend already has one these under agreement. You know, maybe, maybe I'll buy and you're starting to see that. So it'd be like the same idea. Kind of cool. How is, I was at 22 High Street. Yeah.
20:38
Is that the crown? Crown on high. Yeah. Talk to us about that. oh Can I say, like, I say this affectionately, but it was, was over designed in my humble opinion, beautiful, to anyone listening, I'm saying that means it's beautiful and like maybe in some respects over indexed on design in certain areas of the building, but hopefully that helps you sell it.
21:01
If it hurts your ego a little bit, I'm sorry. No, no, I think you're right though. But I also, you know, I think from the standpoint in hindsight, looking back, like when that thing started, we were in a different world. Right. And rates were low construction costs hadn't ballooned when we were starting our process. I think now in looking back, we're doing similar projects like that size and we're like, how efficient can we make this like simple boxes, nothing complicated, but now we're also delivering units and we're, you know, we have our penthouses over under agreement for over a million dollars.
21:31
In an up and coming area of Dorchester, where if this was just a box in this environment, are those under agreement for a million bucks? You know, probably not. So, but yes, definitely a complicated build took way too long to do. And I think, you know, looking at future projects, it's like, no, no, no. Like we got to find ways to be much more efficient. Yeah. And I mean, just- Are you done? Is it done? I just, yeah, final inspections right now. Nice. I mean, the things that I see from afar that the roof line is complicated.
22:00
the roof deck area, there weren't many easy wins even as far as like the continuous extra insulation, the window bucks, how those were to be clad, the steel in the garage underneath, was, you know, there was no like back of the building where it could be like put on hardy plank and blow and go. Yeah. I think the windows has been a nightmare, right? This whole, the whole like complicated metal protrusions where they're sticking out around the windows. You had to get that custom fabricated and done on site and
22:29
That's, that took just so much time, so much money when it's like, you look at the building, it looks cool, but no one is paying an additional price for that complicated window design. If those had just been standard windows popped in. Sounds like Lynn. That's a pet peeve of mine right now is architects who make notes on plans that just say like bend metal to be fabricated in field. It's just like giving someone the middle finger and like you figured out. Yeah. It doesn't get bent in the field just so you know. I mean, it can, you can have a break.
22:59
and a guy who's like an origami expert doing basically like. pretty much what we did. Yeah. Origami expert. I mean. It's true though. But I think those types of decisions like lesson learned on that is like, yes, it's really cool, but it's not those, those decisions aren't adding value to the bottom line. Bingo. Right. And I think you have to make decisions in these. There are things you can do in a unit that will get you the higher dollar point. But like, you know, I do think in that building, one thing we did was like the floor to ceiling windows, right? Like.
23:27
They're really tall, oversized windows. But if we had just done those and they had been standardly wrapped and easily to install, you don't spend that much more for glass. So I think maximizing those bigger windows would deliver a higher price point. But then the decision of how they're done was... I think a lot of exterior detail that architects love and pay attention to don't matter to an end buyer.
23:57
Well, architects aren't going to like that comment. No, well, mean, they're just like, just like you're trying to get building awards. They want to get their awards too. So, I mean, it makes sense. I would take that one step further and say that the glass sill should be 18 inches above the floor to avoid tempered glass and then carry it to the ceiling. Yeah. Yeah. Because, yeah, but I hear you point taken. Yep. Agree. It is appropriate on like bigger towers and skyscrapers, right? Like there's always that aspect of it, but not on something that size.
24:26
So one other thing, I think we were talking when I saw you last week, you were saying that you haven't entitled anything in Boston in a while. And maybe we can kind of get into that and maybe understand reasons why and maybe where you are looking or concentrating on. Yeah, I mean, I think it's pretty crazy, right? Like we were arguably the probably...
24:51
one of the most, if not the most active entitling companies for a lot of years there. Like I think in the past few years, I was the number one permit polled for new construction, only capitals permit polled for new construction. you were going crazy. Especially in East D and Yeah, East Boston, Dorchester, even stuff that we would entitle and then we'd sell the permits. So we were, we were definitely in the top five of people entitling and permitting projects. But then, you know, it's just become to the point where I just got so frustrated with the timelines with the city, the neighborhoods, the negativity.
25:20
I couldn't take the, the just, put a good project forward and everyone just hates it. And I had done that for so many years, so many meetings and it was worth it when there was enough margin on it. But then when you start to look at deals and you're like, Oh, I'm to go through this whole stress of entitling to make like, to increase the value by like 50 to 150 grand. You're it's just not worth it. know, so the last project we took forward was actually on Addison street.
25:46
And that was the project that was a battle with the city. And we ended up going forward without BPDA support to the ZBA because it had just been dragged so long by the neighborhood and so long by the BPDA that it ended up being the only decision that was left was to take it to the ZBA directly. And what happened? It was approved. Boom. So you're getting more into like the affordable housing space now or dabbling in there? Yeah. So we're just looking outside of.
26:15
Yeah. So actually another project that I did take through the process was a really complicated approval that was in Dorchester. I bought a junkyard and it was actually three parcels that I was able to acquire. And then there's three abutting parcels that were owned by the city. And so I approached the mayor's office of housing and asked them to issue an RFP to be able to purchase the city land. After going through the process, working with the local community leaders, I was able to get
26:43
The mayor's office of housing to move forward with an RFP process to sell me the city land. They, that's a very complicated, long journey. The nice thing is there was no other buyer because I was the only buyer that could buy the properties. were, they were kind of intertwined with mine. Went to the RFP, was awarded the RFP and then received my BPDA and ZBA approvals. Sorry, were there any provisions as part of the RFP that you like affordability component? So it's 20 % affordable. Okay.
27:12
Yeah. So it had to be 20 % affordable. And so when you start to look at it and this project's been going on for five years, I bought the land for 500,000, 50 unit project. If I was to say that to you, you'd probably say that sounds amazing. Yeah. No spreadsheet. Yeah. Right. I don't care how it looks. It's in Boston. It's Boston. Essentially it's free dirt. Yes. 500 grand for 50 units. The crazy thing in today's world, that project does not pencil as market rate housing. That's crazy. For free dirt.
27:42
And so looking at the pro forma and running it, we're just about a six return on cost using honest, true figures. And in today's world, what's the value of that if it was built? Maybe a five cap. So there's not enough spread for investors to want to do that project. So I was debating on what to Was that going to be a rental? It was a rental. So my options- Is there a for sale opportunity there?
28:07
You could, but it's in like an up and coming area. So, you know, in the end, you're maybe selling these for, you know, mid 500s to low 600s. You're building them for high 400s. Right. So there's not a lot of margin. So the options really were, do I sit on this and wait for the market to turn? Or do I go out and try to find a partner to be able to do this, you know, in the world of affordable housing? I ended up connecting with Benji at Axe Urban. Arks. Arks Urban.
28:33
And he, he had a group out of Manhattan that had been looking in the area. So him and I kind of compiled it and he presented to them as an option for them to partner with me. So we formed a joint venture and we are now doing that as a hunt, 90 % affordable. So there's a few market rate units and I get to ride along and be on the emails, attend the meetings. I've it's like, I'm getting, I'm getting paid for a lesson in affordable housing from, know, not just some local experts, but from.
29:01
The other thing you get is sort of to be known in that space. What makes affordable housing really tough to break into, believe it or not, super competitive. So you submit, they call it your one stop in Massachusetts. It's a binder, it's 300 pages. And if they don't recognize the name on the cover of the binder, you're not getting that allocation of tax credits that year.
29:25
Good luck. There's two different allocations. There's, I forget what it is, three and a half percent, nine percent. Yeah, because you did a presentation a few years back. I mean, I sat on the board for a community development corporation for a number of years that did nothing but low income housing. The capital stack is just like, it's like a seven layer lasagna. Well, we had those folks on, remember a while ago? And it like, seemed insanely complicated. Yeah, it is. And it's all about the financing. It is an alphabet soup of financing sources.
29:53
And like you said, the timing. And the requisition process is not just like send your spreadsheet to Hingham Savings Bank and later that week they'll fund if it's appropriate. Yeah. And I think one thing, you know, I'm learning through this process though, is if someone does have a property in this environment that won't work as market rate development in an area that might not pencil, there is an opportunity to say, you know, hey, could this work if it could be 20 to 50 units and
30:21
What I would do differently is I would have, instead of going through the headache of going through this RFP process as a 20 % affordable, I would have just started years ago with an affordable housing partnership and then taking it through a hundred percent affordable and probably flown through the process. And so I think if you do have an opportunity that you're looking at and you're like, oh, this won't work market rate. Maybe I could get more density if I go a hundred percent affordable, you know, look.
30:47
to the market and say, is there affordable housing group out there that would be my future partner? And kind of start from the beginning and permit it in the idea that it's going to be handed to them. Yeah. The other creative angle you can take is, so we just talked about LIHTC, low income housing tax credits, but you can also look at HITC, historic tax credits. so company I worked for, this was just slightly before my time, but going into 2008 crash,
31:15
They had just purchased a jail in Salem, a historic prison where witches were burned. was a crazy place. The before photos are wild, but they bought it for $1. And similarly, you know, if I said you can have this piece of prime land in Salem, you need to do an adaptive reuse on a really cool prison. You'd think like, cool, let's do it. It would not finance. So they pivoted to their credit to historic tax credits.
31:43
And so the rules around them are interesting. I'll share just a few, but one that they go to rentals because you can't, have to hold it for five years minimum. Hmm. The accounting process is super complicated because what you're getting back are tax credits and you need to find buyers for those. So there's a market and companies like Coca-Cola might have a huge tax debt and they will buy your $1 of tax credit for 90 cents for 95 cents, depending on what the market is. And that's how you're making your money back.
32:13
So you hold it five years. And the other weird one was about the volume of space. So if you've ever been in a, a rehab building, maybe it was a school and the cafeteria had 30 foot ceilings and you're like, dude, why didn't you enter floor and have three levels of living in this gymnasium? You can't, if you want to historic tax credits, not only do they purview over the outside, but the volume of the spaces inside matter to your application.
32:37
Yeah, think, one thing luckily for me, since my project had to go through an RFP of Mayor's Office of Housing, they had already made me do a lot of their requirements on the unit layouts and the building layout. Cause it actually really helped having that in place when moving it over to this new partnership, because you do have to follow certain criteria to get the credits. And we were partially on our way there. And so that was helpful, but we still had to follow now like certain criteria of unit square footages.
33:06
Like you can't have laundry in unit, like which is an interesting thing. There's a bunch of different things you can't have. Like there's only so many bathrooms. There's a lot of different requirements that are fixed if you're doing affordable projects. probably need radiant heated floors, towel warmers. I don't know. I assume like creer marble countertops throughout. I mean, in this world of affordable housing being front and center, like why is it not easier? Because at the end of the day, we can all build.
33:35
Right. It's just the capital stack. That's the hardest part to solve. So why, why, or maybe the government is going to be working on this with their current changes going through, but why is it not easier to get these kinds of things in there? Cause I guess there's only so many dollars, right? Yeah. I mean, I think that, you know, the problem is when they're looking at these affordable housing projects, they're saying, you know, the, idea you're going to fix it with a hundred percent affordable housing is going to be very difficult. Right. Cause there's only so many dollars that can go into that.
34:04
What I think they need to be looking at, and I think Boston has actually started doing this in some fashion, is like, how do they increase affordability on your project by providing capital to you to put into the equity stack? And so if the city was able to lower your cost of capital and make projects financially feasible for you and your investors, there'd be a highly likelihood that you could afford to build projects with more affordable units. The question is, how does the city figure out a way to use their bonding
34:32
to raise enough capital to then help you fund deals. I know why, I know how, just tax people more. Well, I mean, at the end of the day, yeah, if the city or the state wants to do it, it's different than these other tax credits are all at the federal level, right? Yeah. Yeah, so I mean, I guess I mean more at the federal level if this is the priority and obviously the states, especially here in Massachusetts, they're always beating their chest about it. But the reality is like,
34:58
A dollar to us to make something affordable is still a tax on somebody else and it's just distribution of dollars. So if we do have those dollars to spare, then how do we better get them? If you look at our large projects, right? One of the main things we're trying to battle is the equities, the equity investors required return on their capital. And then these deals now you're talking about, you're only getting 50 to 60 % LTC on debt. So that means you need to bring a massive amount of equity.
35:27
And that equity group investor is looking for a return of somewhere between 15 and 18%. Right. makes the deal less, less ideal. Oh, it crush. That's why the project gets crushed. Right. When we were in the higher, when we were in the ZERP era and it was higher leverage environment, it was easier to satisfy the investors. Now we're being asked to bring more equity to the table at a more expensive rate, which is why nothing, nothing works. So what you're saying is that the other capital stack on the other end of the equation with the city or the state or the feds.
35:57
Their return on capital is much lower is what you're saying. If a city stepped in and was able to say, okay, this deal, say using a large project needs 40 million of equity and we're going to step in and we're going to put in 30 and our expectation is a six, right? Cause our, our rate we can, we can borrow at is a four and they're still making a 2 % return and you're able to then give some additional affordability to that project. That would change the game. I mean, I'll, I'll take the other side, which is to say it needs to be a federal.
36:27
solution because, you know, in the cities, we can't even afford to fund our subway system or our buses. Like we have tax base that's probably going in the wrong direction right now. And every time I see the city offer money to developers, it's like, that's not going to do a whole lot. I think the difference could be though. It's like, instead of it being a gift, it could be something that needs to be paid back.
36:51
Yeah. Right. And so it's, is them making a revenue, right? They're, they're borrowing money from the fed at four. They're lending it out at six. They are making 2 % on that capital. And then there's also some type of repayment process of making sure that upon the refi, goes back into the fund. Or some kind of deferred or could be some type of long-term ownership in the entity. It's very complicated, but it doesn't have to just be a grant. Yeah. mean, if I'm rolling my eyes, it's only because I don't trust that it can ever be executed well and that they'll end up.
37:20
with the everything bagel problem again, you know, where it's going to be like, sure, we'll give you that money. But here's what we need to see for it. Passive house standards. Your team needs to go That's exactly right. think what's going to happen is they'll figure it out some way or another, but then the ask is going to get more and more. That's the problem, right? It's like, we'll do it, but now we want 50 % of Yeah, we want the whole building solar panels, full roof. lead, like it's just not... They're just so scared of a headline.
37:50
that could somehow be politically damaging. Like, you you gave somebody money who didn't hire all the right local businesses and they have an energy hog of a coal-fired pizza oven in their retail space and the city was behind it. So like, I have some sympathy for the politicians too because those headlines in our local rags will run. mean, at the end of the day, wouldn't you want the headline? 10, you know, 100 new people with roofs over their head? I don't know. Well, I think it is shocking everything you just said.
38:19
You know, at one side, they're saying, we need more housing. We need to make this, we need to fix this. And then every decision that's made makes it harder to deliver new housing. Right. And then even like using like these, you know, Cambridge for an example, right? So yes, Cambridge up zoned. Right. But then they also increased their affordability to 20%. Right. And so now I think they're starting to backtrack on that because they're seeing, we're not seeing the number of permits pulled they'd hoped. And so like you make one decision to improve it.
38:46
but then on the next side you make passive That's exactly right. Right, it's like all these different decisions. So where are you looking or focusing on now? Obviously the single family stuff. You're growing the brokerage. Yes. Growing the property management. Yeah, exactly. So I mean, think one thing that, I was actually talking with a few different large institutional developers over the past few years, and one thing that I had always...
39:10
hadn't really given fully credit to was the idea of like the, especially the property management side, but then the brokerage of them both being, there are not just separate businesses. Like this is one conglomerate that can all really add value to each other. And like Greystar is a great example, like talking to them, like they, their property management business is a massive backing to their development company. Right. And so it's not just a side business. These are two very,
39:37
intertwined businesses that allow the development company to work because they're collecting massive fees on the property management side. So really looking at both the brokerage and the property management company and saying, how can these continue to grow to help the development company, you know, as it continues to grow? Right. It's like related Beale. had some friends who worked there and they basically described it as like a financial institution who also does development.
40:05
And they make, they have funds and the funds make a ton of money. And there's a lot of guys sitting in New York. And if you were the project and fashion, then, then, but if you were like a project manager being promised a bonus based on the performance of the job, it's like, there's not on paper much left because the institution and the property management got paid a bunch. then you're like, Oh great. My bonus is nothing. But yeah. Yeah.
40:29
No, think, you know, a lot of the, when you start to look at these large institutions, that's exactly how it is, right? It's a lot of fee based business, right? You're, you're, you're having, you're taking over the property management at three or 4 % on top line revenue. You're then overseeing the asset for a 1 % to 2 % on, on, you know, and then, now you're collecting all these fees and the investors are still getting their returns, but there's not much left after that, right? More of a feats, fee style business. Yeah. a lot of meat on the bone. No. Interesting.
40:58
Are you seeing any activity on like disposition side of things or foreclosures? Oh yeah. Just in general, guess. I guess I'm seeing an uptick on foreclosures. It's a state of the market. So multifamily trades, I mean, everybody's been, was told survive to 25. Now it seems like it's more like get to 26. I think there's blood in the streets. And then I'm hearing like 50%. I'm hearing that like 50 % of listings are coming off and that's why the supply is still low. They're just not getting their number.
41:27
What are you, what are you seeing or hearing out there? I mean, I've definitely, you know, there's definitely been low transactions, right? There's just nothing happening from the standpoint of, know, on the, both from the brokerage standpoint, like you have never seen transactions at lower numbers. I was looking at a chart. Pre-COVID even. Yeah. Well, I was looking at a chart and the number of transactions the past three years, if you were to go back to like 1970 or something, it was like almost even with today and the population is 250 million higher in the US.
41:57
So we're even with 1980 in transactions, but the population's 250 million higher. So it's crazy. But I, you know, I think from the standpoint of looking into the future, I don't think this is a change in mentality. I think people do want to buy. I think people do want to sell. I think there is a pent up demand that will come back. Both sides on both sides. And I think it's just a matter of time. And think, you know, is it, was it 20, 25? No.
42:24
Is it 2026? We can predict that it might be, who knows, but I think there is a time when all of these people are going to be back into the market. I toured a building in the Anthem in Everett. I was talking to the manager there and she's like, yeah, it's crazy. Like I've managed properties for over 30 years and I've never seen more young families living in my rental. And I walking through, I'm seeing baby strollers and like you're there's young families that have just stayed in these rental buildings. But.
42:53
I don't think that that's a long-term play for them. I think it's a temporary play until rates come to a point that they can make a decision to execute. I think on the selling side of things also, it's like you have the baby boomers. They're like, they're all staying in their houses because they don't wanna trade for, they either have no debt or super low rates and they don't wanna trade that for, you know, 6%. But a lot of their kids have moved home.
43:22
Yeah, but there's a lot being written about like the younger generation not even this pirate. Yeah a little bit more nomadic type. Yeah, like I You know, I can dream of owning the house like oh cool. I'm gonna rent my whole life. Yeah, I'm gonna I'm gonna Disagree with you there because I saw something about that exactly people saying I'll never be able to afford a home But in reality homeownerships around like 65 % which is higher than what it was like 40 years ago when it was like closer to 55
43:48
50%. I actually, was, I was one of my agents that came to me and he has a seller who he's representing a condo that he sold to them three or four years ago. And he was asking me, Hey, like Rick, like I just ran the comps. I think it's worth about what they paid for it. And I, and I looked at him and I go, I was like, yeah, I mean, that's, know it's, it's, that's probably true. And I, and I was like, let me run the numbers for you and show you.
44:17
the difference, right? And so I think they paid 550,000. And so what I did is I go, let's look at the mortgage rate back in 2020 when they bought. And I said, their current, and we backed into their current payment. And I said, based on their current payment today, for someone to buy this house, it would be $160,000 less than they currently bought it for to have the same mortgage payment. Right? So even though they're selling for the same price today,
44:44
the new buyer would actually pay $160,000 less for that $150,000 condo to keep the same payment. If they had bought it at today's rates, they would have paid 800 back in 2021. Yeah. So the challenge that I'm seeing in brokerage part of my business is that sellers aren't adjusting to that. And developer colleague like Piers too, it's like such a fallacy to think that like you can make the market. You know, I will sell my condo.
45:10
for that because I bought it three years ago and inflation has been 7 % a year. So put this list price on it. Like, great. It's going to sit. The price is what the market. That shouldn't be such a novel idea, but somehow it is. think people's mind, you know, we're looking at a, a generation, especially in Boston, where we've never seen prices go down. Sure. Right. I even through Oh eight prices were flat. I think they're still up.
45:36
Even certain certain micro markets were up. Yeah. So, but, know, even so for, for Boston right now, when you're trying to make the adjustment and tell someone that their place is worse, worth less than it was, that's a once in a generation thing to have to tell somebody. I think we're getting there. Yeah. It's tough, tough out there. What else we got? are you seeing on the construction side? Are you seeing.
46:01
You know, we're, haven't priced anything recently. We're just, have a 14 unit in Dorchester that we just are starting site work on another big, uh, fun blasting project that we're working. I'm not sure there's an accolade you ever wanted. Well, the nice thing on, on at least on these two is you, we knew what we were getting into, right? You hear the horror stories of projects where people find ledge. Oh, we knew ledge.
46:25
You know, so we budgeted for it. you know, on the project we're doing right now, it's that we, it's going to be a four month process to get ready for the foundation, but we knew from the start. Also pick your poison. mean, in Boston, you either are sitting on like urban fill, which is basically like tires and scrap metal and old mobiles and going down 140 feet. Yeah. Piles. Right. maybe you find some legs. At least that's good bearing. You know, so we got that one. We've got a six unit that we just got started, but from a pricing standpoint, what are you seeing out there?
46:54
Are they coming down and is it because materials aren't coming down. So are, is labor willing to adjust? that, is that electrician willing to tell his employees they need to take a lower hourly rate because there's no work? Yeah. I mean, certainly anecdotal, but my experience lately on the construction pricing has been that firms are going back to their A-teams. So they are not, there's not a glut of supply.
47:20
because starts are down and because firms are all the same size and there are more firms competing for less work. The firms are smaller. Like you're seeing any number of the fat. Yeah. Like a carpenter shop who used to have 11 vans might now run with four and they're all their best guys in those vans. And they're not looking to have a hundred carpenters on their payroll right now. Half of which, you know, could be taking naps at any point in the time. love the, some, I love the subs that show up and
47:49
they are in and out and they understand that it's like get in, get out. Like we had a great sub work up in Naha at the house and I met with them on a, it was like a Tuesday and it was a site work. He was doing all the landscaping, the sod, the driveway, the patio. And he go, and he was just like, yep. He's like, I'll do everything. And I was like, I'll be done by next Monday. And I was like, the whole thing, driveway, patio, re, sod the whole yard, sprinklers, everything. He's like, yep. Showed up. He had like 40 guys.
48:19
running around doing all different tasks and within one week he had done the whole acre site. Either super efficient or he just had nothing else going on. But he was in it. you know, he in a fixed price contract. Yeah. mean, mean, I'm sorry. Chris McGew, I think, is the king of that. So Chris is a good friend, our site utility contractor, we use a lot, but when Chris sends the troops in, like, they are not screwing around. It is peddled down. Yeah, he wants to be in and out. Yeah. He doesn't want to, there's no dilly dally.
48:49
Which I mean, it's the only way to make money in as a developer and as a sub is like to have efficient work in front of you and to execute. then you see the other subs go the completely other direction where they show up one day with like three guys. They work a half a day, you know, they're heading to the next site and then they end up dragging you for weeks with just working, you know, three hours a day. I know. And it's not their preference either. I'm sure they just oversubscribed to work. Yeah. Yeah. They're trying to figure it out. it's an imperfect.
49:17
And I think from afar, a lot of people think construction is like, you know, running a supermarket where there's barcodes you can scan an inventory and it's like. Right. The truck shows up every day with exactly what you need. Yep. I know. Right. It's yeah. It's been, it's been a challenging couple of years. What are you guys working on now? We're doing a small three unit conversion in Dorchester. And then we actually just closed on a building up in Amesbury.
49:45
six residential units and then two floors of commercial. So it's like a little mixed use building and we're gonna. Renovate that. Yeah, we're gonna do. We're gonna condo the residential units and the goal is to potentially keep the commercial and lease it out, rent it out. Yeah, I do think, know. Sorry, the value, we're seeing that the numbers on, you know, the rental or apartment, the value add stuff, there's still some potential there.
50:13
versus the ground up. Value add is right. Like new construction, you know what you are out of the ground there. But value add. been looking and nothing. Some sellers have started to be realistic with their pricing. It also helped that we were the third one into that deal and helped it limp across the finish line at the very end there. Yeah, we've seen, not in the short term, like nothing real recent, but we've had a couple good deals over the past few years where we were.
50:39
We've bought multifamilies, you we bought one in Dorchester, was like a 25 unit multifamily. The rents were, you know, 900 for a two bed. And the plan worked out, it really worked really great, right? We came in, we slowly turned tenants, right? It was just like, we went in, we raised their rents, some could stay, some couldn't. And then as units would turn, we would get in, do a renovation, take the rents from 900 to 2,100, right? Just massively undervalued rents. And, you know.
51:07
It's annoying, it's a slow process, but you can create a lot of value if you're willing to get in and go unit by unit. You just got to find the right property where you're able to buy it at the value of the current rents that the seller doesn't think, oh yeah, just because the rents are 900, they should be 1800. So pay me this price. I always love seeing the OMS where it's like current cap, potential or future cap. And then you run the, you back out the number and it's like,
51:37
They're selling the price at the future cap rate. was like, what is happening? The question is if they want to, if they want the top dollar, then they've got to do the work. So are they going to give us new tenants with higher rents? That's the problem. Most of the time they're selling it based on that future, trying to get the future value without doing the work. But going back to the affordability side, I mean, we, what we kind of like about this place is that there, there are more, you know, smaller units like ones and twos or no, they're all twos, excuse me. But they're.
52:04
going to be more on the first time home buyer side. So we think that'll be a pretty nice fit for folks. Bigger pool, bigger pool of buyers. Yeah. The price point on those residential units. We're talking like, yeah, low, low fours. So it's like, have one, a property in Dorchester right now. And we ended up deciding, we just were listing a bunch. had a fund where we bought a lot of units over the past five years and we acquired multifamilies, that 25 unit, a bunch of six families, three families, and then
52:33
we're getting ready right now to start listing the properties to sell. And one of the multifamily I was looking at, we actually had two units go vacant and it's in Dorchester. And I was looking at the numbers in their two bed units. And I was looking, it's probably only worth like 900,000 as a three family. And I, so I was like, but the units are nice. Like we did a light renovation to them. So we're going to list those as 400K two beds. That's awesome.
52:59
Nothing's on the market for a two bed for 400. Yeah, they're gonna flop. And I so I will be interesting at trial run here is like, okay this building we bought it for 725 we put in I want to say like 75 K in a lipstick Renault, and now we're listing them for you know, 420 a unit and We'll see if it if it works or not. Yeah, could be it could be a new temp like a new good model to go by
53:22
If you can, right? If you buy a decent three family for a million bucks and then you're able to just clean it up and then list them for 450 as is, you know, it's not big money, but it creates some affordable housing for home ownership. Yeah, right. Absolutely. Where obviously is there's like the city starved for that type of product. You know, I'll go offer one more cause for optimism. I would say I expect rent prices to increase and it's part to do with the fact that no one can afford to buy.
53:52
And that more people than ever are just deciding that they're going to rent and continue renting and maybe even move with their kids into a rental building. And as that trend continues, it's going to, it's going to drive. I'll kind of, I don't know if that's good news or bad news. depends on who's listening. I'll play devil's advocate for at least this year. think this year we had a couple of vacant units and we felt that the rental market was a little bit soft this year.
54:22
on kind of Well, thanks, Dan. I was trying to make people optimistic and happy. No, soft is good. Well, renters are happy. guess it always depends. Yeah, so, but no, but it was, I thought it was interesting because I think, I mean, I think that obviously with everything going on and I think there's, you know, there's a lot less international presence this year in the city. And so you're kind of seeing the effects of that. This year.
54:48
We managed a decent number of units. own a large rental portfolio and I, we had not had a single vacancy coming into nine one. Wow. Ever on my portfolio. Holy shit. Right. Like my, cause there are a lot of them are college rentals and like South Boston rental of these, you know.
55:04
We'd always been like, you know, all of them are on the 831 cycle. Right. We're leading up, we're discounting, we're discounting. It's always been filled. Yeah, when banks make me include vacancy rates, I'm like, why? They're never vacant. Exactly. So we'd always had them, even if they rented in August, we always got them filled. This year was the first year we had vacancies past 9-1. See? And so there's, in 13 years. there's something that happened that's Something happened, yeah. I think a lot, what was interesting is I think there was a big,
55:33
I think everyone that was trying to lease over the summer was waiting for that August 1st kind of flip over. brokerage bill. The brokerage thing where they don't have to pay brokerage fees. So I think we saw, it was interesting because we had some vacancies and then the second, the second, August 2nd, basically the demand shot up. So I think a lot of people were waiting. So it was a little delayed, but then to your point, there was like a lot of like bargain hunters and like, was, it was weird this year. There's also, are, we did just see
56:03
the deliveries happen of the low interest rate environment. So if you look at all these large scale multifamilies, I said, Cove Open, we were closing when rates were just climbing. So anyone who started um six months before me, they locked in their rate or started their project in the low rate environment. And so there's this massive amount of deliveries. If you look at the CoStar report for Boston deliveries, as in last year and this year,
56:33
to the roof, right? There's massive amounts. Everett, all these multifamily markets, like Everett has had over 3,000 units delivered in the past, you know, 18 months. And then 26, zero. like that. Right, so it's like, if you look at CoStar report, it's like massive, Boston's massive deliveries, then this year, massive deliveries, and then next year, it's zero until 2030. Wow. So what Mark said, we haven't felt it yet. Yeah. Because...
56:58
of all the deliveries that just happened. once the absorption happens, it's, it's, it's big trouble ahead, right? Because there was a big influx and it's going to zero till 2030. And so you're going to see that average rent, know, rent in the greater, in 25 years, the average increase about three and a half percent across the whole greater Boston market. The past couple of years has been flat, but once these deliveries fill in, that's going to shoot back up. And although I say three and a half percent, it's not been a straight line.
57:27
Like the girls over at who's the girl who the TB, TC, TCC. Yeah. Yeah. TCC. She, the collaborative company, collaborative company, she had a Sue Hawk. She had a great report that she has and it showed the 25 years of Boston and it shows rent growth. And it says, you know, there's years, it was seven, then there was years, it was two and one. then, but on an average line, it's been three and a half. And so like, when I talk to investors, I say, I point back to that. say, guys, just cause we're flat right now, most likely next year, seven.
57:55
Yeah. Right, because it's 25 years of data. Yeah. Right. It's gonna come back around, so. This is your finance background coming out, I like it. Yeah. Well, dude, this has been awesome. Yes, thank you so much for coming back on. Three Pete. Yeah, thanks for having me, Anyone wants to reach out? Ricky Volney on Instagram. If you're not already following Ricky. Who is it? Thanks, guys. All right. Be good. Thank Thank you so much. Cheers.