The Benefits of Vertical Integration in Real Estate Syndications

Now, Mortar is a vertically integrated company. Let's talk a little bit about that term. First, can you define what that means? And second, talk about the challenges and benefits of being a vertically integrated company?

Sure. So for us, vertical integration is just having different facets of the business inside your office, being able to make the decisions and execute the plan in house, you know, without outside consultants, outside cost, and at a faster pace. So, like for us, part of our integration is we have the architecture team, the construction administrator, and the owner or the developer. We're the same. So we can sit down at a table with the three parts of our office or the team sitting there and we can look at an issue that a project has. Instead of having the owner call out to the call the architect, who will take two weeks to respond, and then he's got to talk to the contractor about the cost, which takes another two weeks. Or it could be a four to six week process. Within five to ten minutes we can decide, okay, what's the cost of this, of this issue? What's the impact on the project? How do we make it work? What can we value engineer to balance out the offset that this thing has created. And then we can make a decision within 30 minutes and we're done. And then we give everyone else outside their marching orders on how to complete successfully. And that's really, that's the, for us, the main piece, you know, there's different aspects of vertical integration that you can add on and there are different parts that we incorporate, whether it's property management or the investment management. But for us, it's the combination of the owner, designer or the technical team and the construction. It's those three together save a lot of time and a lot of headaches and a lot of, you know, there's a lot of cya. Sometimes when you're dealing with all these different parties, so you've got, you cut right through all the bowl and you get right to the answer and you just, let's keep going. We make our best decision we can at the time. And if we have to adjust, we can adjust faster than most can. I think that's kind of one of our specialties.

Are there any downsides to being vertically integrated? I mean, why doesn't everybody do this?

There's a cost. For me, I'm an architect. I came from that background, so I came from the technical side and I wanted to be in development. So it just became part of what we do. And then construction and administration, once you're doing those two elements was pretty easy. Add on. So earlier in my career, I had worked for other developers that didn't have this aspect to it. And then that's why when I kind of went to create Mortar, or the first version of Mortar, I felt it was more important to do that because we can find value as an architect or as a construction administrator that sometimes the owner might miss. And traditionally, if an owner or a developer hires an architect, the architect's object, or the contractor's objective for that matter, is I want to make the most money and I want this job off my desk as fast as possible. For us, there's a value where it's okay. How do we squeeze every last ounce of benefit, whether it's square footage, the price per square foot to build, how do we make our use and our time and our technical background as good as possible to benefit the project? So for me, it was just kind of natural, just kind of given my background. But for larger firms, it gets a lot more complicated and it's trickier to do. There's a lot of firms that have different models in New York, especially whether it's build and developer or strictly developers or real estate professionals. And then there's some that have this blended group, but they usually tend to be firms like ours. There's a handful of them that have the similar idea.

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