Subscribe
Share
Share
Embed
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 (01:22)
All right. Welcome to another episode of Deal Flow Friday. I'm your host, David Mogavum. And today we got Jason Koch. Great to have you. Absolutely. in sunny L.A. Fresh off a flight right
Jason Koch (01:28)
Thanks for having me.
It's beautiful out.
More early morning flight, 24 hour trip. I needed a little bit. It was an early morning.
David Moghavem (01:38)
You got the energy drink.
Every time I see you, you already have enough energy. I don't even know why you need it.
Jason Koch (01:45)
You gotta keep it going. Yeah, the market's busy. It's no, you know, got to get it
David Moghavem (01:48)
I know.
It's busy, but is it it transacting? don't know. We'll see.
Jason Koch (01:53)
We'll
find out. I feel like you got to start on the front end of it right before you see the closings. And you could tell it changed in February. Big time. Like everyone started talking about in January, but February, like we put a deal in our contract every day last week, for example. I think we put eight or nine on our contract as a whole in February. And I think we listed another seven or eight as well, which was a huge delta than any month that in 2025.
David Moghavem (02:20)
Usually you're like, we have a lot of BoV activity, but it's like not translated. ⁓
It's different this year. It definitely feels different. You're making the rounds in LA. You're here for that. That makes a difference too. Welcome back. Thank you. Thank you. Listen, was the big move. I got to be careful what I say, right? Because of tax status. Thank you. Thank you. It's a big visit. No, I actually haven't moved. I still have some term in my lease in Miami. ⁓
Jason Koch (02:32)
Shake hands see you. Back to LA by the way.
I
have it,
David Moghavem (02:57)
I haven't
signed Ulysses yet in LA, you know, so you know on paper. Yeah, it's like you have to know like when are you able? As soon as I sign my lease, I'm going to switch. I'm going to switch status.
Jason Koch (03:01)
It's really funny. ⁓
That's smart though.
I might overtake your lease and buy me if that's cool.
David Moghavem (03:13)
Yeah, I mean, I already have some friends that are self leasing right now and they're like, can I? Jason back to business. So big great having you a quick intro. Jason is managing director of MMG. This is actually like full circle for you, right? Because you started at Unique and then you started your own shop with Adam ⁓ Nexus. And then you really grew that.
Jason Koch (03:18)
On the list. I'll suddenly sit down. I could use it.
David Moghavem (03:42)
platform out credit to you guys. Thank you. And then got absorbed by capstone and then now you're wearing the MMG banner. Yeah. And so back to having the brand and would love to also dive in maybe later on of like just how it's been going from, know, you've ran the gamut now. ⁓
Jason Koch (04:00)
Yeah,
it's been a trip. Yeah, it's been an absolute trip. mean, I was with Unique for 10 years, right? So was just at one shop for a long time and it was great. Like it was nothing to complain about there. It was a great run. The market was fantastic. I learned a ton from everybody there. And they're still going and they're still doing their thing, right? And so that was fantastic. But we had a big team there and we had a lot of success and the market was on fire. So we're also in the right place, right? Time and fairness. We had a great team, got exposure to a ton of deals, right? We were closing.
David Moghavem (04:16)
And they're still going.
Jason Koch (04:30)
At our height, on our team, were doing 100 deals a year in closings, let alone underwritings and deals we didn't get close.
David Moghavem (04:37)
I
boutique smaller market type of stuff too, right?
Jason Koch (04:40)
No,
at the time, yeah, at the time it was anything from like a million to 10 million. Right. And those are two to 20 million dollar deals today. But but the values. Yeah, it was generally around that range. We were just cranking them and it was it was a blast. It was fun. The was on fire. Denver was changing a lot. So it was exciting. Yeah. To be a part of that, like we really went through different iterations of like who owns multifamily in Denver. Yeah. As coming out of the GFC, it was all local players who just knew.
David Moghavem (04:45)
And you just did all of your just.
Jason Koch (05:09)
price per pound, this is a good spot or good location or whatever, right? And then in 2015, 14, whatever, we got more on the map from a population, et cetera. so, yeah, it got institutional. New York started calling, Chicago, Boston, bigger players from California, that sort of stuff, right? And so that changed. And then I think it was 17, 18 is when we pivoted to Nexus and just something dumped, it fell apart. We had a big team, a lot of moving parts fell apart.
David Moghavem (05:20)
You institutionalized.
Jason Koch (05:38)
So me and I decided to kind of give it a go on our own right now See if we could build build a better mousetrap and that was a blast that was an absolute blast It was exciting the market was still helping yeah fairness right and good time. Yeah, so it was good time He was like no that was fun. Yeah, and so we had a blast doing that ⁓ we grew We had like two ten twelve people got back to a very similar transaction volume and all that fun stuff
David Moghavem (06:02)
more middle market stuff too. Yeah. Yeah. You guys had some good.
Jason Koch (06:05)
We
grew into that. Absolutely. Good memory. ⁓ And so that was good. Learned what it is to manage more employees and processes and back of the house, which had its... The fun part of that was it was a different job. Like, I'd really been doing the same job for 10 years, right? Just kind of straight-up brokerage, where now you learn how to manage people and processes and all the other things that just kind of go into it. And so I enjoyed that from, the challenge aspect. Right.
But it's more on your shoulders and more like you're still trying to broker, but then you're trying to manage people, manage a process, manage expenses. Yeah, there's all the other things you want to do,
David Moghavem (06:36)
Brokering and now you have to run a company. Yeah, to do it HR. Yeah
Jason Koch (06:40)
We
want to loop net lead, know, more responsive loop. They're like, well, that's another 500 bucks. Let's talk about it. Like you're you. It's just such a different perspective of it. Right. But it was very successful and we had a lot of fun with it. And then we really always wanted to have more of a regional presence. Right. We'd add more value to our clients by having a bigger banner, more connections, especially out west. Right. And so we tried growing that and turns out that's really hard to do. We always say we
pursued this one broker in Oklahoma and he was the closest to doing it. And, but he was really leaning on us like, Hey, what does the Nexus brand bring to me in Oklahoma? And our answer wasn't very good because it didn't bring a lot of value to him as a reality. Yeah. You know, it was like into the day, much. So was rough pitch to be honest. And so we had built a relationship with capstone prior. That was, we just got to know him.
David Moghavem (07:20)
It was like a local.
Jason Koch (07:31)
by NMHC running into him. think we actually tried to recruit like one of the owners, brothers, not knowing. And so that didn't go well. ⁓ but we ended up building this like, we don't really compete. And so let's just share ideas and get to know each other. And that turned into, hey, why don't you guys help us grow west? Because we're really the East Coast, you headquartered in Charlotte, stuff like that. And so why don't we just kind of join forces here and you guys can help us grow west. And so that worked out and that was very successful.
Like that was totally value. No regrets in doing that. Got exposed to a lot of great brokers, great ideas. And that was probably the biggest benefit for me and Adam directly is we had started a local shop. We were both trained by very similar people. And so we very much were on the same page of what the mousetrap is and how it works. And turns out there's a lot of ways to do this business and a lot of just different exposure to guys and how they approach and how they do a presentation or underwriting all that stuff. And so that was the biggest value for us. It's been like
Wow, like we do it this way. Look how that guy does it. Like that's really good. That's really good. You're really good at like meeting with other principals, right? Like how do you guys approach the business? How do you underwrite deals? How do you finance it? Well, all the things, right? And so that was a huge benefit to us. The market was good too. And so we got to do even larger deals and get exposed to new principals and all that fun stuff. And so that was a blast in its own right. But very new, right? Got to learn a lot during that time. And that was fantastic. And then
when the market turned, essentially when the rates went up and volume went down, It's over, right? know, the water goes out, you find out he's not wearing pants. And Capstone was wonderful, but they didn't reinvest into their systems and processes as much as they should have. And if they were sitting next to me, they'd say the same thing. And so the systemically, there was a struggle if you viewed them long term. And that became a problem for the brokerages at the shop. And so we pivoted there.
we got connected with MMG and they were all the processes we were looking for, right? They were the foundation, they were the collaboration where it still has the heartbeat, the soul of a boutique shop, but much more the resources and the branding of a much larger flag. And so that's been a fantastic pivot. Now, conversely, the other three, the market was really good when we became those other ones, right? So we're able to just come out of the gates running. Here, the transition was much more in a much down market. And so it's becoming a lot more exciting now.
just because the market's starting.
David Moghavem (09:57)
And you're planting the seeds now and like you're going to start to see the fruits of the benefit reap from that.
Jason Koch (10:03)
Yeah, for sure. And the connections are way better. ⁓ And then everything, I think everyone's just excited for the market to get going again. Yeah. Right. And so the you just tell the energy and everything's back. Now, granted, we have a lot of Midwest offices. They've been back for six to nine months from a volume standpoint. Like we're on these calls and they're like, we had 30 offers and 50 tours and 200 CAs. We're like, we're not getting that in denver yet. So it was we're excited from a local standpoint to be kind of transitioning into that.
David Moghavem (10:31)
about that. Like now we're starting to see, you know, the bottoming of Denver a bit and starting to see it maybe back a little bit like glimpses of hope. Like what are you seeing? Looks like deal volume wise, you might be starting to see a little bit more activity. Operationally wise, I don't know if you're seeing as much of a glimmer, but I think maybe from some of these deals trading hands, someone has a better way of like recapitalizing the deal and getting it to where needs to be. Like where do you see Denver?
Kind of heading.
Jason Koch (11:01)
Well, let's flip it on you. Like, I mean, how are your your guys' operations for a little bit? Yeah, mean, I think too much, but.
David Moghavem (11:07)
No,
no, mean, out of all our markets, Denver is the toughest right now. For sure. So we're just pretty jaded in that way. And we just feel like pricing hasn't really reset yet enough. And I think like you and I, when we were talking, when we saw each other in Salt Lake City a couple of weeks ago, you were like, you think GFC, like everyone's like, GFC was harder than this. And like maybe in some benchmarks, yes. But as a broker, it was like a slow bleed. ⁓
Jason Koch (11:36)
It's like a dimmer switch.
David Moghavem (11:37)
of a light switch. And so I that really resonated because I feel like it's hard to reset basis and like it's a bandaid. Like you just got to rip it off. Right. And the GFC, like the lenders got the deals and they're like, all right, sell it. And they would sell it. And then we can like reset the basis and get back to doing value add and business plans. Here it was very much like so many false starts. And I feel like Denver.
has even like got to experience the worst side of that. Why? Because from a supply standpoint, operationally made it really tough. And then there's some other reasons why it could have been tougher too on top of supply, but supply was the main reason. And then capital markets. So the two forces really hit Denver more than any other market I've seen.
Jason Koch (12:29)
I would totally agree with that. for, on the GFC, like, it was a hard reset, right? And if you're part of the reckoning, it obviously was terrible for you and you're out of the business or whatever, had a total reset. But if you weren't part of it, you were salivating to get into it on a reset, right? And on the sell side, the banks, whoever took over the properties, they were sellers at market clearing prices, right? That was part of just how the government dealt with the banks and all the different reasons, but they were relatively ready to sell.
And that was a huge difference where in this market, we don't have that. Like even if a deal goes back to a bank, like it's going to the bridge lender, it's going to the prep, it's going to the LP, it's like all these different layers. And most of them are saying, if I can't get my dollar, I'm just going to hold it. And holding it wasn't an option during the GFC. Or here they're like, I believe in the asset. I got a good asset was in Denver, so like all these different markets. And so I'm just going to wait and I'll wait a year, I'll wait two years, I'll wait three years, or I'll work with my sponsors. My sponsors have put together sponsors, good operator, whatever.
And the working with the sponsors more common on a bigger bank standpoint, where like the bigger bank doesn't want the property, they don't want to operate it, but yet they don't want to take a hit to the dollar. And so like, you know, instead of taking a hit, we're just going to work with a sponsor and maybe we lose on the margins, but we don't take 70 cents on the dollar and have to write off this loss. So maybe we lose on the margins in the meantime, but we'll wait one, two, three years. And instead of getting 70 cents, ideally we get our full dollar back or we can get 95 cents, whatever it is.
but economically it makes more sense to simply work with the sponsors. The sponsors have put together sponsor, they're good at managing it, all that fun stuff, much more so than if we took it back. Like if we take it back, we're gonna be a crappy manager. And so why not just have this person manage it? And the benefits-
David Moghavem (14:10)
That's why the optimism is kind of like getting the lender.
Jason Koch (14:15)
And everyone kind of believes in the story. Like GFC was also a little bit like the world's crumbling. I don't know what it's going to look like in two years. Here, there's a lot of optimism. Like, hey, just given the supply wave going away, this has to get better. Right. The majority of people believe in that story. Yeah. So they're able to forecast the future of the much more confidence than you did in 08. You know, in 08, you're like, I don't know what's going to happen.
David Moghavem (14:37)
I mean, I believe I definitely believe in Denver long term, right? Like I do feel like it really yes There was a few things with Denver that were specific that may have deterred operations more than supply Some of the migration patterns like with ice I feel like there was a little bit of that in like specific pockets of Denver, but it wasn't Denver as a whole and ⁓ I feel like once that supply is absorbed. You're still having a lot of inbound migration. You're still having a lot of
people there's an appeal to Denver wanting to live there with the mountains and ⁓ if they can just get there, guess like, you know, giving the right tools for landlords to succeed and not making it so cumbersome to operate, think Denver will be in a much better place.
Jason Koch (15:24)
that's gonna change, because we've been making it harder on landlords for a little bit.
David Moghavem (15:28)
Yeah, I, I, we broke into Denver because we liked how it was the best of both worlds of being a purple state, right? Uh, you had, um, fiscally conservative, socially liberal. was like the Denver. Like now you're at store and it had that cache. Now it's almost the worst of both, right? At least in some of the blue States, there's, there are a little more supply constraint.
or in the red states, they're a little bit more landlord friendly. Here it's like supply and tough landlord political obligations there.
Jason Koch (16:08)
We've certainly seen groups that it's finished because there's there's groups that are new to the market that are saying, hey, from what I'm leaving, this is still way, better than what I'm trading out of right from an operations standpoint. But then other groups are saying, hey, I bought into this market with operations being this hard. Now they're this hard. I'm no longer a player in the Denver market. Right. I'm now pursuing Kansas City or other other markets where that are more landlord friendly. So we've certainly seen capital that Denver was on their list saying we're no longer part of their list, or at least for the time being.
until soon things can work out.
David Moghavem (16:40)
And
we're actually kind of zagging when everyone's digging that regard with our management because we're finding that out of necessity, we got to manage our way out of some of these ⁓ operationally troubled assets. we're looking on paper and we're like, wow, we're actually outperforming our rent comps. so our strategy now is, hey, while pricing is still working to get reset, like my take is that Denver pricing still needs to reset. It's just not there just yet. I think this is the year it could happen. But point being,
we can manage for some of these operators that are struggling that are like, hey, I'm done, I'm done with the operations here and we'll come and we'll help them and maybe there's a play there to.
Jason Koch (17:21)
Because you guys are getting more into the third party at this
David Moghavem (17:23)
Yeah,
exactly. So we're going from self-managing to now third party for others and Denver being like a perfect market for that.
Jason Koch (17:30)
In fairness, management for Denver is absolutely in flux just because it's got changed so much in terms of being a manager is. We had one management company come to our office. This was probably even a year or two years ago. And he brought in this booklet and it was like 10 pages. He's like, hey, these are like the laws we got to know as managers, just be aware of with our tenants. And then he put out this giant book, a thesaurus, right? He's like, this is what we have to be aware of today. We have to be like...
David Moghavem (17:37)
HB109
Jason Koch (17:58)
halfway a lawyer just understand all this stuff. And so in fairness to managers, because management's really struggled in the different Metro and like who's the right group to go to and who's doing a good job. And it helps when you're bigger or smaller and all that fun stuff. it's Yeah, it's certainly in transition to kind of who's the players in town. Yeah. And in fairness to them, managing is a totally different game than it was five years ago in the market. But in front, but it's absolutely the new value add. It's the new priority. It's the new model.
David Moghavem (18:10)
It's interesting.
You're not getting saved by rank growth anymore.
Jason Koch (18:28)
painting units and doing lipstick on it and raising rents. You're just managerially on top of it. How quickly do you turn it? How do you market it? How do you feel? feel good. People like all that fun stuff is really the new value add to a property today.
David Moghavem (18:40)
Yeah, the management upside play is very real now. ⁓ And I do feel like Denver is transitioning because it is in a flux because of some of these regulations. So it was a lot based on market and now it's based on who's the operator and who's the manager. And you're starting to see the good ones from the bad ones.
Jason Koch (19:00)
Yeah, we got one deal, let's talk to an owner, and he was saying they were whatever, they're 93, 95 % occupied. The asset next to them, which in fairness is a better asset, not drastically, but it's a better asset, and they're 40 % full. Yeah. And lower, and their rents are lower, and they're still 40%. That's not a market. It's a total, I was like, that's not the market issue, that's a management issue. And it's just drastically different.
David Moghavem (19:21)
Yeah, exactly. So your team has maybe out of necessity, like diversified listings outside of Denver at this point. Like I see Adam and others in Austin, other people's on your team, they're looking at Wyoming, they have deals with Salt Lake City. like, is that, like, how did you guys get to diversifying into these other markets and like building the team geographically?
Jason Koch (19:46)
Right, great question. So to a degree, yes. mean, much more so the last one or two years in terms of just because volumes just tanked, especially the Denver Metro and Cardiff Springs have done a lot in Cardiff Springs and volume down there is just totally tanked. so you had to chase yields. So that was the Wyoming market. ⁓ But we've also been doing a lot of land. And so that brought us into Montana in furnace. And so we've gotten to build a lot of really great relationships in Montana. And that like if you can get something in Montana, especially the go to cities.
there's a huge market for them on the back end. That deal is going to trade to somebody, right? If you got a dealer there. And then we have a local office in Salt Lake. And so that is really worked by Will and Alex in Salt Lake. And I oversee that and I'm a part of that. And we chase Salt Lake as we've used Salt Lake is kind of a similar story to Colorado Springs, right? You got to have the local presence, but there's a real story that Salt Lake's really bifurcated in that you have the big shops have been there a long time. And then you have a lot of local brokers that are even doing like 20, 30, 40 units, which in Salt Lake, especially in the good times with
1970s 30 unit was like 300 a door right and so it's like there's a lot of opportunity here to come in and and be that shop and take some of that market share and so it diversified our efforts with the MMG platform it really helps because we're connecting more dots and owners where you talk to an owner is like hey I own in Denver but I also own in Salt Lake or I also own in Montana. there a lot of
David Moghavem (21:03)
Yeah, I feel like there's a lot of synergies like if someone's putting on their list like I want to chase Salt Lake City, they probably have Denver on their or vice versa.
Jason Koch (21:13)
Yeah, Denver and Salt Lake talk to each other for sure. You know, the Montana, the Boise even, is a little different because it's smaller, right? So you got to get the group that's okay with a little smaller population investment, which only certain groups are, certain groups aren't. But Salt Lake talks to Denver right away. Yeah. Right, in terms of the style, the investment, the people they're going after, the mindset. Salt Lake's a lot what people were investing in Denver in 2017 mentality. The hurdle with Salt Lake is most people know that, and so the cap rates at Salt Lake are lower than Denver.
And so you gotta kinda pay to play. Everyone loves the market, but everyone loves the market. And so there's a lot of competition in Salt Lake. If you get an asset that people want, there's a lot of demand for it.
David Moghavem (21:54)
You look at a report for Salt Lake City and you see it's really popping off the page, inbound migration, jobs, people moving there, birth rate increase, having a lot of babies. A lot of babies.
Jason Koch (22:07)
They
don't leave. They stay. And I don't think they should. It's a beautiful city.
David Moghavem (22:12)
But then you go deeper and you're like, okay, now I want to buy a deal and you start underwriting it and you're like, what cap rate like a sub five for this 80s vintage deal like in a workforce market. So that was, there's definitely a scarcity premium. That's one. It feels like the volume of deals is just not as there. So when there is a deal and there is a listing, everyone wants to get in and they're looking at it beyond the numbers on the page. They're looking at it for what it could become.
Jason Koch (22:41)
For sure. mean, we had, we just took out or we've ran the process for the last 30 days and it's a 140 ish unit converted motel, 1970s build. I mean, it doesn't check a lot of boxes physically, but it's big enough that someone can have on-site in certain boxes. I mean, we had 120 CAs. We probably had 50 interested parties that asked for numbers, had another 10, 20 people look at it. Like the activity on it was fantastic for an asset that physically doesn't pop out.
Right. And people still looked at it. So then you go get a newer build or a town or something like that. It's it's competitive for sure. Yeah. People want to be there.
David Moghavem (23:18)
So going back to Denver a bit, you guys have a few listings out and you could talk your book, you could not talk your book, whatever, but what do you think is the best sub-market to invest in right now in Denver?
Jason Koch (23:31)
Gosh, great question. It's funny, we get asked that a decent amount of like, you where's the opportunity? And my answer to that a lot of times is I've seen people crush it in the worst parts of Denver. And I've seen people miss when buying in Cherry Creek. Yeah. Right? And I know people love to say location.
David Moghavem (23:51)
That's not true. That loan is not going to save your deal.
Jason Koch (23:55)
It's
not. No, maybe if you have a 20 year plan, then I'd rather buy in Cherry Creek than North Aurora. Like, you know, at some point location does help, obviously, but especially today, it's the value add is buying the right price per pound relative to the market. Right. Are you buying 90 a door in North Aurora or you buying 130 a door in North Aurora? Similar to Caterpillar. I right now it's a price per pound play. That's a new value add. Are you buying the deal that you're able to get at the right price?
Do you believe? And that's not, and sorry to catch off, that's area agnostic right now, right? mean, certain areas are hurt more and so you get a little bit more of that motivation, but everyone's feeling the pain, just a little bit in their own way, right? Whether it's some of the workforce housing stuff, they got their own problems, but the new builds, they're giving away concessions. And so a lot of the problems are much more related to how that capital stack got structured than what happened to be in Wheat Ridge versus Lakewood. That's not as much the issue is I'm over Leverwood and got dead in...
you know, this time period versus that I locked for five years instead of 10 years, whatever, right? I got bridge instead of fix for 10 years. That's more it's driving those motivation factors. And so we're the stuff we're running into that's opportunistic is very not area specific, right? Versus much more just that's how they structure that capital stack. And so if you can be present at those deals when they come to market, right, work through them. And a lot of times the deals that are trading
We'll get calls saying, hey, I would have bought that. Right. The deal trades for a dollar. I would have bought that. Well, the deal didn't go out at a dollar. They went out a dollar 30 and it had to be discussed. And then it was out there for three, four months. Gotta say, offers at a dollar 10 and then a dollar five. Well, now they're at a dollar because your N.Y. got worse and stuff like that. So you got to be around the hoop and you got to massage it. It's not just the deal hits the market at a dollar and you sell for 99 cents. You know, that's just not the flow of a deal today. And so you got to kind of be around the hoop and work through it and be aware of it and be
present when it's ready to strike.
David Moghavem (25:51)
market has to speak on these deals and that takes time. So some of these deals that launched a couple of years ago that wanted yesterday's pricing, you as a broker have to deal with that more than ever. It's about, this is where the market spoke. Then maybe a year from now, they're like, let's test it out again. And it's maybe operationally a little bit tougher. Capital markets a little bit more stable. Market speaks again and again and again until the seller might be...
ready to meet the market. ⁓
Jason Koch (26:22)
It's you know, people say it's not easy to take that hit. You know, if you got a dollar and you're going to get 50 cents, that hurts. Yeah, it's not an easy decision to take. And so you want to fight for you, want to believe that there's a reason to get 80 cents back or 90 cents back or whatever, instead of just being like, well, my broker said 50 cents, so let's just do it. It's like there's a lot of reasons that go into that. And there's a lot of problems that creates for that person, whether it's for his investors or the money that person has or net worth. I there's problems. Yeah. So it's not just an economic
hey, this is the value of the day, so let's just do it. It's not an easy decision to make. So you got to work through it a little bit and have someone truly believe that what changed today is people don't push back as much when we say, let's say something's worth a dollar and they want it at a dollar 30. There's not as much of that push back in terms of I don't disagree with you that the value is a dollar. Maybe a dollar two, nine, eight cents, whatever. the discussion isn't about the value. The discussion is strategically within my ecosystem as an owner.
Does it make sense to take that dollar today or not? Should I refinance? Should I just wait for it to perform? Should I raise money and put capital into it? All the things that they could do, but it's not as much of a discussion. In 24, early 25, it was a little bit of more of a, this should be worth $1.30. And what changed was in 24 and 25, if your NOI in 23 was, let's say, a dollar, in 24 and 25, maybe it became 98 cents, 97 cents. But it got a little worse, but wasn't that worse relative to...
the buyers had dropped significantly on their valuations because the interest rates went up so much. Right. So interest rates are 50 percent, but otherwise are down 2 percent. You know, so from a buyer's standpoint, their mortgage just skyrocketed. But from an owner is like, well, my mortgage is still the same and my analyze down two cents. So I'm not moving on my price. Then Q2, Q3 had really for the country, let alone specifically Denver and analyze went from a dollar to 80 cents, 70 cents, you know, depending on where you're at. Well, son, one, they
say, well, let's play the same cap rate to 80 cents. Now we have much less of a gap in terms of buyer seller, right? And then two, as the seller, it becomes a lot more painful to right? When you're at 80 cents, instead of cash flowing your capital calls, you're not cash flowing, you don't got money for capex, your cash out refi is now cash in refi. So you have a lot more problems in waiting. And that's what we're seeing come to fruition now is waiting is painful. Instead of having five options, I have two options, seller, cash in, you know, whatever.
Typically option B is write a check one way or another. so, and some people can do that, right? You're betting on your asset, right? And certain assets, totally should do that. And that makes sense. Like, Hey, this is a great asset. Throw some money, wait. That makes all the sense in the world. You should do that. But other assets, you're like, you know, someone else should come in here with whole flesh capital, fresh debt, fresh whatever. You should probably move on, right? Certain deals are more of a lemon than not.
David Moghavem (29:10)
And a lot of those buyers weren't expecting to be in it for three to like longer than five years, right? Was not that. So now they're in like uncharted territories.
Jason Koch (29:15)
Yeah ⁓
and their LPs want the money back or they got to fix maybe another problem that's even worse. you got a lot of, there's just a lot more problems. And so you're trying to juggle that instead of everything's doing just fine, man. I know you got the interest rate problem, Mr. Byer, but that's not my problem. Well, now it's kind of your problem, you know, cause your debt's come and doing all that fun stuff.
David Moghavem (29:36)
I want to, you know, you mentioned about cap hill, briefly cap. It was interesting to me because when we entered the market pre COVID, it was such an amazing vibrant, ⁓ and, it still is, like, don't want to rip it too hard, but a, the supply I feel like has, ⁓ taken some of that renter pool and B I feel like it may not just be as, I don't know, like you tell me, but I could just not be as like have the same.
energy as it once had maybe. Yeah. That's going to come back.
Jason Koch (30:08)
It's lost it for sure. became, it was
the absolute darling my entire career. And then the people that trained me, right, they were in the market 10, 20 years prior to that. It was a darling for them, right? So it's been the darling 30, 40 years.
David Moghavem (30:21)
beautiful property still like so charming so nice but like a I think the supply the new product the branch
Jason Koch (30:29)
They
totally would rather live in a new build with a pool. Exactly. And all the beautiful new stuff than the asset that's 100 years old. Yeah. Right. And so that's pulled them for sure. And yeah, I don't know. There's just a lot of operational difficulties of it. They're harder to manage because most of them are sub 50 units. Right. And so I think that's been the other big mess. You got the pull from the supply, right? So you're naturally are less attractive, right? You're trying to compete on rents.
And then to the quality of the management is far inferior to the big boys. And so just how to run them and how to deal with them, how to attract tenants, it's been the money to bring that tenant in and hit the rent number that you got to hit to get them in the door. Economically, it makes them really tough. I those values are are absolutely down today. They're starting to trade again. There's very, very little trades in capital in twenty five. Yeah. Like record setting low.
David Moghavem (31:16)
I mean, that's like really peak to trough. Like that might be the biggest drop in Denver.
Jason Koch (31:20)
It's probably the biggest thing.
Yeah, I totally like it's probably it's absolutely up there. One of the biggest capital that used to turn over and trade and whatever. And it's been super light. I think there was four or five trades this month and even last week, I think there was three or four going through it our meeting. And so it'll start trading again. I mean, it'll just be a reset basis. It's a hundred or it's one twenty a door. I it's a big swing.
David Moghavem (31:43)
You think there's an opportunity there? I guess it goes back to...
Jason Koch (31:47)
It goes back if you can operate it. Like there's a lot of deals that you would just point out saying, oh, maybe I can get off five, 10 % of that value, but that value I believe in, right? I like that price per unit. I like the asset, I like the whatever, but how do I run it? How do I finance it? And the other thing on these deals, if you're under five million bucks, you're trying to buy some smaller deal in Cap Hill, the debt is not very good. You're at 6%. Well, I'd kind of like to get positive leverage on this deal. Well, now I'm at a six and a quarter cap on this depressed NOI.
And so that really hurts. Like for this stuff that's under 10 million and really, especially under five, ⁓ none of the boxes are being checked today. So those are just totally dead. So like the deals we're working that are 10, 20, 30, 40 million. Those, the boxes are checked so much better than on the smaller stuff that used to really trade throughout the city.
David Moghavem (32:37)
Right. I guess let's talk a little bit about capital. OK. OK. So you're here in LA making your rounds, talking to owners. Max right now, I telling him, in New York. He's raising capital in New York right now. it seems like you got to go outside of your market.
to find who's gonna buy the next deal or who's the next listing ⁓ and how these deals getting capitalized. guess based on your conversations with the meetings in LA you're having right now or whatever you're going to meet owners, how are they expressing to you like that we're gonna get this deal done and how are they capitalizing deals right now?
Jason Koch (33:30)
Gosh, how are people raising money? It's probably a tale of two totally different worlds. If it's people that are buying, let's say, 20 million and up, they typically seem to be good to go. Whether they already have the fund or they got their investors lined up because there's no lack of capital out there. It's just lack of capital necessarily ready to write the check for your deal. That's true. But it's not like they don't have the money. They're just not ready to give it to you.
David Moghavem (33:56)
It's a lot of
liquidity, but it's like, is it for that deal?
Jason Koch (34:00)
for that deal. like, no, we have money. We're just not going to give it to you right now. OK, cool. Yeah. Oh, which is very different than oh, nine, 10, 11. Right. And we just don't have the money. Right. And so it's a very different story. But if you have those assets, if you check the boxes, if you're 1990s, 2000, decent area or newer value add, you're getting agency debt. Right. The biggest thing to the size is you're getting agency debt. So the leverage is so much better. And I make all that stuff. You're generally finding the money, right. But generally finding the money in different pockets. When you get subbed that it's tough.
But really the people that are making it and being more aggressive, they're playing with new money, right? And one of client that always seems to be ahead of the curve said it really well. He's like, I can't go back to the LPs that I've been using the last five years. Because if they invested with me and they invested with 20 other people, their dollars now 60 cents, 50 cents, 40 cents. And so one, one, they don't have that money back yet. Two, they're going to get back less than they had. And so they're probably not my investor. One, they're a little burned. And then two, they may not be interested at all anymore.
They don't have the money to invest in the first place.
David Moghavem (35:00)
And that's the case with a lot of that retail capital.
Jason Koch (35:02)
Absolutely,
absolutely. And so he's like comparatively and he gets a lot of exposure to Phoenix and LA and different spots. He's like, yes, multifamily and commercial, let's focus on multifamily has gotten crushed last three, four years. But there's this other world that if you're in real estate, maybe you're not as exposed to, if that makes sense, that has printed money for the last two, three years. If you bought Nvidia stock three years ago, you have a lot of money. If you bought Bitcoin, if you bought gold, if you got all the big seven, you made a lot of money in the last three, four years.
And he's like, so those are the people I'm going after says, hey, I bought Bitcoin for 5,000 a coin. Now it's 80. I'm going to sell 10 of them and give you a million bucks and now go invest in a better basis in real estate. Yeah. And so there's a lot of money out there. It's just who's finding the people that made a bunch of money prior. He says, hey, you know what? At 80 grand, maybe I'll sell my coin or I'll sell my gold or I'll sell Nvidia at a four and a half trillion dollar market cap. Take some chips off the table and then diversify it into other things. And we're starting to see that in terms of money loosening up. Right. But if you're making
XYZ on Nvidia in 24, 25. You didn't want to hear about the pitch about, go get me money and make 8 % as an LP. You're like, no, I'm doing nothing and just printing money here in this other bucket. Stocks are murdering it right now and I'm not taking any of the risk. so a lot of that capital got tied up. And we are seeing how today that capital is loosening up because now they're trading at such high metrics. Money's coming out of that a little bit and starting to diversify. And then obviously values and the story has helped.
where our world's getting a lot more stable, where the floor is a little bit more established, rates are more established, the new world order's more established in our space, right? So you're not investing in a falling knife, maybe as you maybe proceed in 25 or 26, you're like, maybe I'm bottom, maybe I'm not, but I'm close enough that I'm willing to step in and take a shot.
David Moghavem (36:50)
I have a lot of friends outside of the real estate industry that are investing in stocks and ⁓ they're just trading on their phones. They say if my investment's on my phone, I don't want it.
Jason Koch (37:02)
Right?
They're like, give me 25 grand. They're like, no, I'm doing this. Yeah.
David Moghavem (37:06)
But it's actually the tone is shifting with a lot of them because the mainstream thought right now for some of those investors is that you're seeing, know, AI is like the top one, two and three subjects, right? And they're seeing how AI is starting to take jobs and tech companies are starting to cut human capital and their earnings are shooting up. And when their earnings are shooting up and their stocks are
are rallying and they're getting, you know, gains on paper. What happens is that you're now starting to hollow out some of that, the renter base, the middle class, some of that. And the take right now, like if you talk to them and you're seeing it on Twitter is we're gonna actually see some sort of like an economic weakening in the labor market. And what's the Fed gonna do? They're gonna have to actually like cut rates or bonds are gonna rally again.
And who's going to sit pretty when that happens? Real estate. Because there's no supply right now. And then you're going to get cheap debt. And as you said before, maybe your NOI instead of like a dollar is maybe 98, 97 cents. Denver a little bit lower, 80 cents. But when that supply burns off and maybe you start to see bonds rally and you have cheap debt, real estate is going to look really good right now. And so this is like a time where if you're out of
the CRE market and you're investing and you're looking at your phone and you're saying like, wow, why would I invest in CRE? The smart ones are saying, no, you know what? It's smart to diversify because this could be a good play now where the market's heading, where CRE is gonna be on top.
Jason Koch (38:49)
We're certainly seeing new money get in the market. I that's the reality. And it's really...
David Moghavem (38:54)
And it's not your typical ⁓ institutional partner that you're going to jay-view with. It's like guys who have their own ⁓ investments outside of real estate or they have their own business that's been printing money, the attorneys, the doctors.
Jason Koch (39:09)
People are changing. like we had 10 offers on the Salt Lake deal. Nine were out of state and I think seven did not own in Utah yet. Yeah. For example, like they were new to it. Not maybe they weren't new to the game totally, right? But they were new to the market and we're seeing that across the board. It's just a total shift. And there's always, there's these changes where the experience like, you've in the business a long time, you know everybody and that's totally true. However, to be in this business, your relationships
take a pretty heavy reset about every five to seven years. The GFC total reset, who was your client in 07 was not your client in 2010. Your client in 2010 was not your client in 2016. Your client in 2016 really changed at COVID. There's kind of the pre-COVID buyer and the post-COVID buyers who just embraced, the COVID writing and were all in and others were more conservative. That changed everything. Now with rates up, who the buyers are today is totally different than who the buyers were pre-rate.
So you really reset those relationships and who's at the table and not all of them. It's like at least half kind of get reset every like five, six, seven years, it seems. And who you got to deal with and not as a broker, not how long you've been in it. You gotta pick up the phone. Yeah. And I'll hear back to the you want to sell your building? You like you're back to the basics like every five, six, seven years. Like ideally you're better at it, you know, or maybe they heard your name before, but the basics never go away. One guy that trained me at Unique, he's like, as soon as you stop making cold calls, it's
David Moghavem (40:21)
process.
Jason Koch (40:36)
the day you retire, you just, no one knows it. But you always gotta make the new relationships ⁓ all the time. It doesn't work.
David Moghavem (40:44)
Yeah. So I guess to wrap it up, ⁓ piece of advice, I actually want to know from you specifically a piece of advice for someone that wants to break into Denver, right? because you're seeing how, how it is maybe like we talked about Salt Lake City, how you guys had a deal and you have all these out of state buyers and I feel like you're going to have the capital that's new to the game saying, I know Denver's great longterm.
but it's bottoming right now and I wanna break in, like what's your piece of advice to them that's trying to break in?
Jason Koch (41:20)
you will have a competitive advantage if you figure out the management piece. If you are confident in your management, you're confident in how you can raise the rents, keep expenses good, keep the operations tight, you will have a competitive advantage who you're competing against to win those deals. And the bigger you get, the tighter that gets, right? The other big boys, they got management pretty dialed in too. And so you gotta find a little bit more of those opportunistic scenarios, but you gotta have that management answer with you, because that's the biggest crux of it. But if you can have that,
then you will outperform the other people you're competing against. And management's the really, the hardest part right now.
David Moghavem (41:54)
Totally. I think that's our edge right now. Yeah. South Maine. Totally an operations game and makes us harder maybe to lean into a deal with everything you're seeing, but definitely makes you feel a bit better once you're in it of saying like, okay, we can outperform what we've expected. So harder for us to maybe raise equity on that. But it's like, we're in it, it's like, we know we will do better.
Jason Koch (41:56)
It's an operations game these days.
David Moghavem (42:22)
than what we under out because we're already doing it.
Jason Koch (42:25)
Absolutely. Yeah, if you can figure out the management play you can be very competitive and do really well is there's a lot of inefficiencies in our market right now. Yeah This is awesome. I'm so happy to do this
David Moghavem (42:32)
Yeah, well Jason, great having you. Fantastic.
You only have like a couple of days here and I'm glad you covered it out. Dude, absolutely. And we'll keep it going. Absolutely. get something on the board this year.
Jason Koch (42:40)
I'm always happy to see you.
Awesome. We will. Awesome. All right. That was fun. ⁓
David Moghavem (42:49)
That
was great! Good shit!