6. Real Estate Investing - Live from Fordham

Welcome. This is Real Estate Investing Live from New York with James Nelson, the principal and head of Avis & Young's Tri State investment Sales Group. In this program, you'll learn about the world of commercial real estate and find out why it is one of the largest investment opportunities in New York and around the world. Now here is your host, James Nelson. Welcome to Real Estate Investing Live from New York. This is your host, James Nelson. Welcome back for our sixth show and have a special treat for you all tonight and that we are live from Fordham University. So I want to start off by thanking them and their team for hosting us. And our special guest and speaker, Hugh Kelly, who's the special advisor to Fordham, is here to talk about his new book, 24 Hour Cities. And then we've got a panel talking about lending and also the considerations that you need to know about from Fordham instructors and alums. So really exciting to be here. And we have a studio audience as well with some of the students here. And I promise we don't have applause signs or laugh signs. Anything you hear is going to be authentic. So although they have told me that we can't swear on air, I'm still not sure if that is actually allowed on Internet radio. So I guess the FCC will let us know if we go adrift. But enough banter from me. Before we get into the interview with Hugh. Let's go to the week in review. Powered by the Daily Beat Last year last week in New York, the Qatar Investment Authority has acquired five commercial condo units at 809 United Nations Plaza for $91 million. The Qataris now control nearly the entire office building, save for 16,900 square feet on the top two floors. Worth noting, the Qatari Sovereign Wealth Fund recently took Great Jo and outbidding Saudi Arabia for the Plaza Hotel. Elsewhere, Gary Siegel has acquired 2310 Queens Plaza south in Long Island City from Kevin Maloney's PMG holdings for 27 and a half million dollars. Siegel is planning to build an office building with a retail and cafe space of the property which spans about 135,000 square feet. Churchill Real Estate provided 29.75 million in financing with a 50% profit share agreement and then finally in the sales department. H Holding Group Enclosed properties have acquired 780 E. 135th St. In Port Morris from the backs for $17.5 million. This was a Bronx warehouse that spans 92,000 square feet. In lending News Cove Property Group and Bow Post Group have secured $724.2 million loan from Blackstone Mortgage Trust to refinance 441 Ninth Avenue. The Hudson Y property is located between West 34th and 35th street and a 65% lease. Their tenants include Peloton, which occupies 336,000 square feet, paying $106 a foot, and Lift, that signed a lease for 100,000ft at $87 a foot. The sellers paid 330 million for this asset in 2017, and the duo subsequently developed the 423,000 square foot property by adding 17 additional floors, increasing the size to 700,000. Lastly in real estate related news, according to the Wall Street Journal, baby boomers are getting ready to sell one quarter of America's homes over the next two decades. The problem is many of these properties are in places where younger people no longer want to live. So, Hugh, this sounds like this is going to be a good segue to your book. But lastly in real estate related news, Black Friday, brick and mortar sales, and this is according to a CNBC article, fell by 6.2% compared to last year. The pullback corresponds with a 19.6% increase in online spending, which hit $7.4 billion, the largest online Black Friday total ever. And Cyber Monday is on track or did as of today did break records with a reported $9.4 billion in sales in one day. Is that unbel.

That's a lot of cash.

Yes. Yes. So Hugh, thank you again for coming in and joining us. Our friendship goes way back. We're fellow members of the Councilors of Real Estate. You just received their distinguished Landauer White Award, which was very fit having starting your career back then and also now, as I had mentioned, Fordham is very lucky to have you as their special advisor for their master's program that they they have developed here. So would love to talk to you about your new book, 24 Hour Cities Real Estate Investment performance, Not just promises. And Hugh, I gotta start by saying I really appreciate the time and effort that you spent in this book because this was not fluff. You really went in, you did the research, you did the data, you looked at hard numbers. These weren't just softball. I think cities are where you want to be. You really proved out this concept for.

The first 10 years that the 24 hour city concept was out there. It really was no better than I know it when I see it.

Right?

And by that time, several billions of dollars had been invested on the theory of 24 hour cities, but without any hard data to support it. So that was either a great opportunity or it was a disaster waiting to happen. And so I thought it would be good to try and put some metrics to this. And it turned out to be a fascinating bit of research. One of those things that I like to say. There's no point in doing research unless you're willing to be surprised. And I was surprised.

Right. So did you actually have a preconceived notion of what cities did qualify as 24 hour cities before you started, or did you actually have to do the research to determine which of these cities actually qualified and what does constitute a 24 hour city?

Okay, so the discussion about 24 hour cities in emerging trends in real estate had come up with a list that they regarded as the best. So I used that as a hypothesis and then tried to get a set of cities that were not on that list, but that would have characteristics in terms of population and dispersal around the country that would make it a fair comparison to the 24 hour cities. 24 hour cities were the obvious ones. You know, they were the New Yorks, they were the San Franciscos, they were the Bostons, the Chicago's, Miami. And someone said you have to have Las Vegas in there. Right, because it's open all night long. And so I had a set of seven cities to look at. And so then I got another set of cities that were equivalent in the aggregate in population and were as dispersed from coast to coast, north to south. And those included places like Philadelphia and Minneapolis and Atlanta and Dallas and Phoenix and so on.

So again, to qualify as a 24 hour city. So it's 3am I'm starving. I need a cheesesteak. Can I find it?

Yes, you can. Although that was a hard thing to quantify. But I was able to quantify what the density of 24 hour drugstores were within 10 miles of the city center. And it seemed to me that if a city could support small retail establishments like drugstores, that that was a good sign that it wasn't just the bright lights big city center, but that it also encompassed the city as a whole. That meant it had to be safe enough. And so low crime became a metric that we looked at. You know, I thought it important to accommodate both commuter traffic, but also the kind of automobile traffic that is so prevalent, you know, across the country. And found interestingly that in the 24 hour cities you actually have more, more automobile traffic 9 to 5 than you do in the 9 to 5 cities, except that it's 9pm to 5am wow.

Wow.

And there's a definite threshold at about 13% of the overall traffic that comes in those late night hours in the New Yorks, the San Franciscos, the Chicago's and so on. Which teaches us something about productivity and infrastructure because you always build roadways for peak rush hour traffic. But if you don't have any traffic in the middle of the night, that's investment, that's going to waste. Whereas if you have that kind of productivity more through the 24 hour cycle, you're getting more out of your infrastructure. Right.

So infrastructure, I know, it's so critical to the growth of cities. And if you look here in New York, Hudson Yards, which didn't even exist what five years ago and is now 20 million square feet, I mean that is the size of the Denver office market. We, I won't take credit for it, but yeah, related. Oxford, Brookfield added 20 million square feet. And what really started that off was that 7 train. So you had to have, you had to have the ability to get people there.

Yes, it is a number 7 train, no doubt about that. But also, don't ignore Penn Station. That's right. They're one of the gateways into the city from the New Jersey suburbs. And it makes the point that 24 hour cities are not either the CBD or the suburbs. It is something that functions throughout the metropolitan area and the energy of the center city is the best possible thing for those suburbs.

Got it. So for our aspiring investors who are listening in right now and they're trying to find what is the next 20 hour city? Where do I, where should I be looking? What are some of the trends? How can you, is it possible for these cities to convert to 24 hour cities? How long of a period does that take?

Well, yes, yes they can. And again, New York is a prime example. You know, of course I got out of college at the end of the 1960s and so my first 10 years out of college, New York City was a disaster. The watchword here was last one out, turn out the lights. You know, we lost 800,000 population, we lost 600,000 jobs in New York City over a 10 year period of time. So New York became a 24 hour city over the course of the 80s, 90s and into the 2000s. And sections of New York, for example, downtown became 24 hour places despite being somewhat abandoned after 5 o' clock in the 70s and the early 80s. And of course Brooklyn, Fort Greene, Williamsburg, Greenpoint, Bushwick have evolved into 24 hour places. You can repeat that in San Francisco, you can repeat that in Boston. Places that were tough places to be in became Attractive to live, work and play.

And is it in that order though, because you mentioned downtown. So financial district was always central business hub, but they always said 20 years ago was a ghost town before 8am and after 6pm everyone went home, they cleared out. So in that case it was the jobs that led the frontier. Then afterwards it was people coming in, living in the area. And when a lot of these older office buildings were converted to residential, and then once people are there, then they need places to shop and to eat. So then the retail comes. So is that typically the.

I think, I think it's a major misconception of city planning departments around the country that there is some kind of list of ingredients that you have to put into a place to make it a 24 hour location. I think it's more a recipe. How do those ingredients work together? And so what really I think transformed Lower Manhattan was the new plan. By new, I mean in the 1980s for Battery Park City, that instead of making it a fortress the way the original 1969 plan had it, integrated it into the landscape of the city and began to provide residential opportunities in walking distance of those office buildings. The city did a bunch of really smart things. They took their best high school, Stuyvesant High School, and moved it from the Gramercy area and put it right at the north end of Battery Park City. They got two brand new elementary schools and middle schools. Put one right in Battery Park City, the other up in tribeca. And so you gave the people that lived in those residential units a place to send their kids to school. That was a very high quality to anchor them in the neighborhood.

And is population density, is that the end result you're looking for? Because in your book, I think you talked about population per square mile. And looking at that incredible density, I mean, in a city, we have 8 million people here.

8.7 million now.

Right. Compared to, you know, if you go an hour outside the city. So you've got the density and what does that do to real estate values? Because this is really where, you know, I was excited from the, you know, from the first couple pages. But when you started saying that, okay, based on these demographics, this is what happens to real estate values. And in this book you do a side by side comparison of non 24 hour cities versus 24 hour cities. And what was the result on values.

And there's a threshold in population density of 9 to 10,000 people per square mile. The 24 hour cities well exceed that. New York citywide is about 28,000 per square mile Manhattan is up over 60,000 per square mile. You know, and that's why we go vertical.

Right, right. And you looked at sale prices in a defined period of time and your research, and I can't remember the stat off the top of my head, but it was compelling. If you made it. If you invested in a dollar in New York City versus a non 24 hour city over a 10 year hold, it was. The increase in value was substantial.

It's incredible. The metric that I like to use is return on investment total returns. And I use the National Council of Real Estate Investment Fiduciaries data because that goes all the way back into the 70s. And I found from 87 for the following 25 years or so that for office buildings in 24 hour metros, you had about a 60% spread over the national average for 24 hour cities. And for the core cities for the CBDs, that was up to 75%.

Right. So, and I want to talk about kind of where the next wave is because you mentioned the suburbs and you know, sure, I mean there's suburbs with the suburban office park, but you also think about cities like White Plains where you can hop on Metro north, you're into Midtown Manhattan in 30 minutes. RXR is making a huge bet there. They're building 5 to 6 million square feet. So I'm sure they are counting on that becoming a 24 hour city, if.

It'S not already, of course. And of course New Rochelle as well.

Right? Yes.

So, yes. In this year's edition of Emerging Trends in Real Estate, I called them hipsterbias.

Right. Okay.

And they are in and around New York for sure. And it goes back to Joel Garou's Edge City book where the cities that we identified as 24 hour cities had the most edge cities, most prosperous edge cities. I think of place like Tempe, Arizona as being one of those hipster areas. I was just down in Atlanta and looking at some property in Alpharetta. It's like that.

Yeah.

And Evanston, Illinois, where Northwest Northwestern University is, you know, universities I'll put in a plug for Fordham here. Right. Are a real driver for vibrant cities. And why is that? Because it attracts young talent.

Wow.

And young people and university students in particular are not nine to five people. You know, they're, they're active well into the night and they love the urban support that a vibrant center gives them.

Perfect. Well, Hugh, this has really been fantastic. And appreciate all that you do for the industry and for Fordham. And I know you're going to be sticking around because we're going to have a chance for our live studio audience to answer to ask questions at the end of the show. So we'll look forward to hearing maybe some more commentary towards the end of the show.

Super. Always a pleasure. Thank you very much.

Perfect. So now onto our panel, which is going to be the lender's perspective. And on it we have Sadie McGowan, who is CPC's head of construction lending and initiatives. In this capacity, she oversees the company's construction lending and sustainability initiatives as well as operations of its regional field. She also currently leads CPC Mortgage Company, a full service operation focused on Freddie Mac, Fannie Mae and FHA lending products. We also have Marty Gilligan, who is a senior real estate executive with over 21 years experience, currently senior director at Agon Asset Management, formerly was at AIG where he sat on the Global Commercial Debt Committee and originated in excess of $4 billion. And lastly, we've got to have the developer's perspective as well. So Serge Reda, who teaches here at Fordham, works in the Acquisitions division of Cedar Realty Trust, a publicly traded reit. He has a broad and deep experience in the real estate industry, ranging from development and construction to finance and technology. And so thank you all for coming back to Fordham tonight to share your thoughts.

Thank you.

Thank you. Perfect.

Thanks for having us.

So Sadie, let's start with you because and I want to make sure that our audience takes down this information because this is a really tremendous resource. So the CPC put out a guide called Start Small A Guide to Financing Small Multifamily Building Projects. And I think this is a really great introduction for many of our listeners who are thinking about doing their first real estate deal. How do you approach a lender? What are you all looking for? For? So before we get to that, maybe you could just give us a little background on what the CPC is and what you all do.

Sure. Thanks very much for having me. It's great to be back at Fordham. I'm an alumni, so it's great to give back to the real estate school. So cpc, the Community Preservation Corporation, is a not for profit mortgage company. We started lending in New York city in the 70s. So you know, the Bronx is was burning at the time and neighborhoods needed a lot of investment. CPC was created to share risk for banks so that they could make investments in some of the more distressed neighborhoods and create an environment where investors would come in and buy property and redevelop it and bring back neighborhoods. So we have a real focus on neighborhoods and with that, a real focus on a lot of the smaller properties and the smaller borrowers and the smaller owners who buy real estate, they're contractors or they're, you know, they've been in a family that owns real estate, they're interested but they don't quite know what to do. So one of the things we do at CPC is we really help enable those first time borrower owners to get into the business. And you know, we wrote this guide because we would have all of these people come in and ask the same questions over and over. And so this was a great way to put it all down and hand it to somebody so they don't have to remember everything we tell them.

And they can find this on your website. So if you go to Community Preservation Corporation, what's the website?

Www.communityp.com and you can download the guide. So from a lender's perspective, what I like to say to people is, you know, it takes the whole person. So you need a brain because you need to be smart. Real estate to be successful, you have to, to be smart you have to have a heart because at the end of the day you're housing people. At least in our business we're not commercial real estate, we're multifamily. So you're housing people. So a heart is important. And then you need a stomach because it's real estate. And something is always going to happen, something's always going to go a different direction from what you had anticipated. So when we have a customer come in the door asking for a mortgage, as a lender you look for some very basic. You want to make sure they have cash, they need capital to be able to purchase a property. We never do 100% financing. Lenders don't do 100% financing. Not in multi family real estate. You need cash. Equity in a deal shows that you're invested and your feet are to the fire. You don't want to lose your own money, so you would then not lose the bank's money. We'll look at your credit, want to make sure that you are credit worthy. So one of the first things you should do is check your credit score. Make sure you're up over 700 these days. And if you're not, what's the good reason why you're not? And then what is your plan? So you really have to have a plan. Where do you want to buy a property? What is the property? What is your experience? A lender wants to know that if they're going to make an investment in a property and in a person that they have the wherewithal, both financially but also, you know, the plan to get through the development. Lots of the deals that we finance are buildings that need renovation. Just buying real estate is one thing that's hard enough and managing it. But taking an asset that's distressed through the construction and renovation process, perhaps in our case, doing it as an affordable deal where you're layering in all kinds of subsidies and tax benefit programs, it's complicated. And so you really have to have a plan, you have to know what you're doing and if you don't, you have to surround yourself with good people. So if you're not going to manage the property, you're going to bring in somebody that has that experience. If you don't know about historic tax credits and you want to use them because you're renovating a historic property, you better find an architect and a consultant that can help you through that process. If you're not a contractor, which lots of our customers are contractors, but if you're a plumber, you don't do electric, you need to have that, right, that proper team so that you can get through. Because what the lender is looking for is at the end of the development, the collateral is there, it's worth what we projected it would be worth. And you can lease it, you can get to the, you know, co certificate of occupancy, you can occupy that building, season it, and then I can pay back my construction loan with a long term mortgage. So we want somebody that has everything and if they themselves don't, they have a team that does.

Perfect. Well, that's a great way to set the stage and kick things off. So I love the fact that the CPC is there to get you started on your first loan, whereas Marty can take us all the way to some of the largest transactions. So maybe you could tell our listeners what is a portfolio lender? Is your approach different or is it the same fundamentals when you're going for 100, $200 million loan as if you're going for a 500,000 loan?

Yeah, I think, you know, Sadie, you know, we all look for the same things. The sponsor is very important, the team being assembled is very important. You know, you want to make sure you have a team that can build what the product is going to be built. You know, even if it's a smaller deal, you're still going to be focused on the sponsor. Do they have the cash? Are they using the right team? I think, you know, from, you know, I was speaking to your colleague Gabby before. You know, it depends on what part of the market cycle you're in. I mean you can do non recourse construction lending that comes with a completion guarantee. So you're focused on, you're focused on how much the hard costs are. Do they have enough budgeted in, you know, in that hard cost budget? I was talking to someone today, you generally want to see a contingency somewhere between 7 to 10% in hard costs. If a project does go out awry, sometimes you can get away with a lower amount. But you focus on that on the budget side and then on the GC side you're focused on is this GC able to build the product you're going to do? Are they overstretched? At certain points in the cycle you do see certain GCs taking on too much risk and that becomes a problem. I would say the, the main thing is also on the takeout. If it's a floating rate deal, you want to make sure the deal pencils and you have a lot of room to take out your loan. There's not much concern in the market today because there is abundance of capital on the takeout side. And as a portfolio lender, you're not going up the leverage stack. You're generally going to be cutting off at 60% LTC, 65% LTC, which is about 60 to 55% of the of value. So the takeout's not the biggest risk, it's more, as Sadie mentioned, you want to make sure the project gets built right because lenders do not want to build properties.

Agree? Yes. Yes. So Serge, from the developer's perspective, so what do you look for in a lender and how do you choose what type of lender you're going to go with?

Yeah, that's a good question. I think that there's a perception from the developer side or the sponsors side of the business that you know, any lender will do so long as they can provide capital to the project. And I think that that couldn't be more, more of a misconception. It makes me think of something that one of my early mentors and current mentors actually today said to me once. He said there's really two things you have to know about in real estate development and that is the first of all is to keep your board of directors happy. And the second thing is to always have your banker on speed dial. And what that really means is that what you really need to do is build a long term relationship with your lender or A number of lenders that, that understand your objectives and essentially can help you reach those objectives for the projects that, that you're doing. And in return, completing a project with certainty, it's building that relationship that I think is, is absolutely important. And I would say that lenders are naturally skeptical of sponsors, but I think sponsors need to be equally skeptical of lenders in order to find that right fit. Two groups that understand each other yet sit on the opposite side of the negotiating table until of course, the loan documents are signed and the project is funded, at which time they actually become partners in the deal.

So I'm really glad that you brought up that it's not just about the rate and can I get an eighth of a point off here? It's really, you are choosing a partner in the project and we'll talk a little bit about construction lending a little further in. But in those cases, I mean, if the project's a success, it's not going to make it or break it on an eighth of a point. But how quickly your lender funds when you make those requests and how you, you know, when there are going to be problems, there's going to be things that come up and if you don't have a lender who you've got a good relationship with that you can work through some of these challenges, it's going to be a lot worse than, you know, just kind of whoever's given the best rate in town that day.

Yeah. And just, if I could just add one more thing. I think, you know, everybody talks about the idea of risk, but in a development project, risk exists in every corner and under every rock and under every piece of paper. And I think that for a sponsor, you know, a borrower and a lender that are at odds with each other, there's risk in that too, you know, so eliminating as much risk as possible by building relationships and doing your homework and understanding the market, et cetera, just are those things that can reduce risk.

Perfect. Sadie, the pamphlet entitled Start A Guide to Financing Small Multifamily. Any reason why you suggest starting off with a small multifamily as opposed to mixed use retail office? What are the advantages on starting off with a residential project? Are you talking about a 4, 5 family? Do you think it's a good idea? Some of our listeners maybe live in one of the apartments and collect rent from the others. I mean, for a first purchase. What's a good place to start?

Well, we think that multifamily residential is a good way to start because people live in Housing. Right. And maybe they live in a small multi family building.

So you're saying it's E commerce proof. There's no way that you can buy an apartment, stay on Cyber Monday, find a place where I'm going to stay tonight for a discount.

Well, I'm not going to say that it is real estate, but people are familiar with it. It's in the neighborhoods they grew up in, they walk by it every day, they see it, they shop in the retail in a mixed use building. And so it's familiar. So that's the first thing. The second thing is it's expensive to buy real estate estate and you have to have real cash in the deal. So most people don't have a lot of cash and so they're putting whatever they can scrape together into the building and then maybe they're asking their father or their uncle or their neighbor or their cousin to put money in too. And so when you're putting other people's money at risk, you want something that's manageable. And I think the smaller projects tend to be more manageable when they get larger. If you buy say a garden complex that has many different buildings now, you're dealing with not one roof but maybe 10 roofs or you have five or six different boilers. There's multiple systems, it gets a lot more complicated. So when you start small, you can know the whole building like the back of your hand and that's what you really need to do to learn from the ground up what it takes to purchase, renovate, occupy and manage real estate. Every part of the process has its own complexity.

Right. So Marty mentioned for the big commercial deals, you know, 60, 65% loan to values and that put you on Spox. I'm not shopping for rate right now, but if our listeners are looking, maybe they're not working with a ton of capital right now and they are trying to get the most advantageous loan. And I don't know if these are some of the loans that you deal with, but I believe for four families and under, if you occupy one of the units, there's a government program where you can get up to maybe 95% financing. Is that available? Is that something that you would get involved with or recommend?

It's definitely available. It's not something we do. We don't do owner occupied because that comes with a whole lot of other regulatory requirements that we just don't do that kind of lending. But we do go 80% loan to value projected as completed, which can be up to 90% of cost. Recognizing that in smaller deals and in tougher neighborhoods, you need to lend more to get capital into those communities. In addition, we are also expert at helping you figure out what other sources are available in the capital stack to make a deal work. So in our world, which is primarily affordable housing, you know, you could layer in two or three or four or five sources of subsidy. In some cases, we've had more subsidy in deals than units in the building. Right. So that complicates it even more. But it's a way for you to get other capital into the deal so that you can put less of your own cash in. Now, with that other capital come requirements that from a lender's perspective, keep you, you know, keep your feet to the fire in a different way. So we're happy to have other sources in a deal because you're bound to those sources as well. So, you know, we will leverage a little bit further. Obviously, larger real estate, larger players, more cash, more capital. They have access to equity funds, they have access to other sources that, you know, mom and pop don't. So this is really more of a mom and pop guide. And it's a very different world. The fundamentals are similar, but access to capital is very different.

So I was speaking with one of the Fordham students before the show and she was saying that she's looking to make her first investment. And that's really during your programs and you talked about these subsidies that are available. So even for a first time investor who has never applied for a historic tax credit and they might not know the first thing about it. I mean, when I think about applying for subsidy, I think about, you know, 100 page application and, you know, all these approval process and if it can be very daunting if you haven't done this before. So is it realistic to think that someone who has not invested in a property before can qualify for some of these subsidies?

Yes, if you go to the right lender.

Okay, so you're telling me there's a chance, you gotta help?

There is a chance. And I will say that the municipalities, like New York City's Housing Preservation Development, hpd has lots of programs for first time developers. So they'll put you through, particularly a group of minority and women owned businesses. They're always trying to elevate that group of developers. So they put you through a whole series of classes to prepare you for that so that when you go for your first subsidy, you're ready.

So, Marty, I'm going to ask you the question in a different way because you're dealing with much larger transactions. But what you both agree on is the importance of sponsorship. So let's say at this point we're dealing with an investor who's been at this. Now, maybe they worked at a big shop, they're going out on their own, they're trying to do their first 20, 30, $50 million deal, but they've never, never done something of that size. They can say, well, while I was at this big company, I was involved in this deal, I was involved in that deal. Maybe they've done some smaller transactions with friends and family, but this is the first time they're doing something of this magnitude on their own. So is that immediately a strike against them if they haven't done it on their own? And if so, is the advice, hey, maybe for the first big one, partner up with more of a name brand. What do you say to that?

Yeah, I think definitely in this cycle, I think in the previous cycle, prior to 2008, you did see some rookie developers come into the mix, and there was plenty of capital for those people.

How did that play out?

Yeah, not too well. A lot of folks were working out borrowers during that cycle. But yes, no, today, you definitely, it's your first go around. You're not. From an institutional lender's perspective, it's going to be very difficult to get to. I would say you go to your regional bank and give them X amount of deposits. But the capital markets, as you know, James, is changing daily. There's just so much capital coming to the system. You have the fund lenders now, so they're willing to take on some of that risk, kind of what we saw in the previous cycle. So I wouldn't say you can't do it. I think the market hasn't come to that point yet. But I wouldn't be surprised if certain rookie developers get capital. And it's a risk. I mean, as Serge mentioned before, a mentor of mine always told me, once you do construction lending, once you close a loan, it's a workout because, you know, the GMP you closed with, the loan documents you close with the construction schedule you close with, they all can change during time. And, you know, we all know that. And especially doing business in New York, it's, it's, it's not an easy town. So. And, you know, you know, we were talking about residential. You know, you can also have other market forces that impact a delay in a project. You know, condo product. You know, that's all over the news today in New York. Obviously, it's not as Buoyant as it used to be. But when that market stops, you have, you know, outside construction risk, you have a market risk that you didn't expect. So there's, there's, you know, multiple things that can happen. But I don't think as a, as a today there's not that plentiful capital for, you know, unfortunately, James, if you want to go out and build a building, Right, maybe you could, but we'll see.

Well, well, I think the advice would be to find a qualified partner if you're, you know, for those of our listeners who've been doing this for a while now and they're looking to take their game to the next level and do an institutional size deal, even if you have to give up some of the economics. Cogp with a name brand developer who has that track record, those capital relationships become a part of it, even if you have to give up some of the economics, right? Yeah, absolutely. Serge, what advice would you give for first time investors getting into the game? Do you think they go work with a big shop to start off with? Do they try to go it on their own? What advice would you give?

Yeah, and I'm sure there's no shortage of advice out there, so I'll try to do the absolute best I can here. You know, one thing that I will say about real estate development is that it is scalable. You can start on a small project of your own, perhaps a small multi unit project or maybe a small retail center or something that's manageable from a capital intensity standpoint. But the process that you experience and learn along the way of starting and completing that project is absolutely scalable into much larger projects. Now, it's not to say that you can start with a small project, then all of a sudden do a $300 million redevelopment of an entire neighborhood. But the process is generally the same. It just grows in complexity and intensity and the number of parties involved as time goes on. So what I would, I would absolutely recommend actually doing both. I did that myself. I started out my career in real estate development working for a company that did at least the project that I was working on at the time was a conversion from an office building into condominiums as a project manager. But shortly thereafter I did some of my own small scale developments too, with friends and family like Sadie was talking about here. The truth is that there's really no way to learn about real estate development entirely except to do it. And I thought you were going to.

Say except at Fordham University.

Well, except that, well, a couple of Weeks ago, Marianne Gilmartin was on your show and she said that very thing. And I couldn't agree with her more. In my class here at Fordham, in one of the classes I teach, the real estate development feasibility study class, I tried to make that as close as possible to reality as it's going to get without actually coming out of pocket and purchasing something. But the reality is, at the end of the day, like any thing with regard to education, that in the real world there's certainly no substitute for it. I would recommend trying to do both. Getting your feet wet at a company that is doing development and also once you've gotten the basics under your belt, understanding how to build relationships with lenders, how to talk to lenders, what it is that they're looking for, possibly cobbling some money together and doing a small project on your own because that will increase your experience to a whole other level. But there's one other thing I want to say to offer some advice to the students here and those that are listening that may be looking to do their first project. Whether you're looking to purchase an existing building that you might want to do some renovations to or a large scale project that's more on Marty's scale and Cedar Realty Trust's scale, the things that we do, some of those neighborhood transforming type projects. I think one thing that's really important, and we've talked about it here, alluded to it at least, is getting the story right. And when I say story, I don't mean just telling somebody's story and hoping that they believe you. I mean crafting a story that really explains the concept of the project, why people would want to be there, and how the project is going to have a path to revenue and value at the end of the day for not just you as somebody that may, as you say, may have to give away some of the economics and only end up with a sliver. But for all parties involved, great advice.

Thank you so much for sharing. Marty, same question for you at advice you would give to our listeners and for those who might want to get into the business through the finance side, because I would imagine going in through that perspective and understanding how these capital stacks work is a great way. I mean, I don't know if you see lenders turn developers, but any advice for people who'd want to get into your space?

Yeah, I think, you know, obviously I want to plug the Fordham Institute, but this is a great entry to it. There's plenty of opportunities to, you know, attend seminars or, or, you know, Come to Fordham and you know, doing a certificate classes or listen to real estate.

Investing live from New York and listen.

To James, you're the new Mike Francesca of real estate. But I think, yeah, you know, it's, it's just getting out there and you know, real estate's a very wide industry. I mean, when I first started, I started working with a mortgage banker, I didn't know what I was doing. We were selling loans to Wall street at that point. But now that I'm a little older, I see how just being educated, one thing I've always learned, the Fed really bucks the trend of how capital moves in this country. We have a very accommodative Fed right now and reading the Wall Street Journal, keeping apprise of that because, you know, capital is global and just being aware of industry kind of cycles. I mean, you know, I think a lot of developers and you see now they've kind of not got concerned with interest rates moving higher. You know, we're after cutting rates three times and, and we're an accommodative policy. So I think, you know, just knowing that kind of background and then on the real estate side, it's, you know, you got to, you got to, you, you might not pick the right spot. You know, Serge mentioned you worked for a developer. You might start working for a mortgage broker or you might start working in a, you know, a middle office job and an investment bank and something pops up. So I would just always be proactive and ask people questions. You know, like we have this group here today and young people just don't be afraid to go up and, you know, ask them about their industry.

Perfect. Well, we're going to get some questions from the audience another minute or two. So Sadie, last question. Because again, the whole point of this show is to encourage the people to actually go out and do this and make a first investment. So let's say, you know, someone has that great deal, they've got that business plan, they're coming to you, they're looking for a loan. What do they need to give you? What advice would you give them to be successful, to have the best chance of getting approval so they get the loan.

I think they should be honest about, it's their first time and I think they should be transparent about what their plan is and what they don't know. I think for someone to reveal that they know what they don't know is very powerful because certainly at cpc, our goal is to help you understand and learn what you don't know and get you through that process. I mean, we're really known for our technical assistance and hand holding you through the process and being a one stop shop so you can get it all at cpc. But really being very honest, I think is the most important thing. And you know, from our perspective, starting small, there's a lot more opportunity in small properties. There's a lot more small properties. It doesn't have to be on the street you live in. It might be in another borough or it might be in another neighborhood. It shouldn't be too far away. So you want somebody that's got something that they can manage or that they're close enough to, but really. And being enthusiastic, really bringing energy and excitement to it. And then, of course, some cash.

Okay, all right. I like that in a briefcase or what's brown bag? Okay, good, good. All right, so we will open up the mics now. And I want to remind our audience, to our audience who's listening on the Voice America Business Network that you can email your questions into jnradiovisonyoung.com so we can answer those questions on future shows. We haven't figured out yet if we're going to give out a T shirt or something. For those who email in, we got to think of something good. Maybe we'll give you knowledge now. It's not, you know, we've got to come up with a trinket. Okay. All right, so any questions from the audience for either Hugh, myself, this has been a really great panel, and I love the fact that this show is really about teaching you all how to actually do this. So any questions out there from the audience? Yes, we've got one in the back there. We got a mic over there if you want to step up to the table. Great. Should they pick up the mic? Is that okay? Yeah, you may touch the microphone. Good, perfect. Who are you and where are you from?

Jasmine Guerreri. I'm a student at Fordham University for the master's program.

Great.

Also paralegal at Pillsbury, Winthrop Shaw Pittman.

Awesome. And I had a question for Serge.

How do you suggest one makes those.

Very necessary connections one needs to gain.

The real world experience that you need.

To make that first deal?

Great question.

How do you do that? That is a really good question. Well, one thing for sure is that like many other industries, but I think especially in the real estate industry, as I said earlier, it's really all about relationships. And as Sadie said earlier, you know, real estate is something that we, we live our lives in. You know, it's not something we can choose not to be in or around or know something about. So my point in saying that is that there's always going to be somebody around that knows something about real estate one way or the other. The first thing I would say is to think about what it is that you or that person would like to do. You know, are they looking to do something a little bit more development intensive or are they really looking to time and investment, right, where they can purchase a building, maybe do some very light renovations or none at all, and timing the investment right for the market to grow and therefore increase the value of the investment. But how do you go about meeting the right people? Well, Marty sort of said it a little bit. There's plenty of events and opportunities here, especially in New York, but certainly in every place in the country that somebody could go to either as a student or as a novice and simply just start, you know, doing a little research about who are the people you'd like to meet, understanding a little bit about what they do and just walking up and talking to them about their experience and how you might gain some experience as well. One thing that I think is true in life, people like to talk about themselves and giving them an opportunity to do that is a learning experience. I've been in this industry for a little while now. I've done a many things. But one thing I could tell you is that there's always something to learn. And so whether you're a novice or somebody with a little experience, I would say first thing to do is figure out where you are trying to go, you know, what type of investment you're looking to do and, and targeting those people either at events or at university or through somebody else that you know. But networking is absolutely essential.

I would add one thing that's a great response. A lot of our panelists mentioned having a good mentor. I think so critical. I have a lot of college students asking career advice and it's kind of a one shot. They call. They're, you know, I don't want to say expecting, but they're looking for me to kind of give them a sense of what the business is all about. And that's okay. I mean, no one expects you to know everything start with. But I think the more prepared you are to kind of already have done some research so you can ask some good questions, but then actually follow up with the person. And I'm not saying call them every single day, but maybe a week or two goes by after you find out what they do, send them an article, send them something. Hey, I was at this panel, I heard something show them that it's a two way street. When you're a mentee, you don't want to be in the position where you're just looking to take free advice. You want to show someone that you bring value. You want to help them, that you listened and that you're out there looking for them. And you know the number of calls that I get asking for career advice, who actually then go afterwards and follow up and I hear from them again, you'd be surprised. It's probably less than 5%. So just something to think about.

And I just want to add very quickly to that. That's so true. And following up is important, but following up with what your progress has been, even if it's a little progress, I think is very valuable.

Okay, we got another question. Do we have any other questions from the heading?

I'd just like to make one other point. Like Serg, most of the faculty here at Fordham are active in the business. So for the students, read the faculty bios, find out what they're about, you know, and use that. And secondly, there's an opportunity for you to connect with a mentor in the industry. And then James advice is great. And James Firm, I think has contributed five mentors to our program.

There you go.

I would add one thing on the, to contribute to this is your students internships are great. So you can intern across a variety of different types of, of companies to get a sense of what you really want to do. Property management, lending, development. You learn a lot by being an intern and that's an opportunity for you to really dig in and ask a ton of questions and impress people. And that's really, I think, a very important piece also.

Perfect. Do we have time for another question? Anyone else? One more question. Anyone? All right. How's it going? Matt from New York. Hey Matt, welcome. First time investor is looking for a lender. What would you guys say is the main thing to look for when looking for lenders? Well, I think yes, Serge, you did a good job answering about that lender who's not just the best rate, but also someone who's a true partner. But maybe the question is how do you know? I mean, if you're not, if you've never gotten a loan before, how do you know? I mean, every lender is going to tell you that they are the easiest lender to work with and they're the fastest. And how do you actually find out who delivers?

Yeah, yeah, I guess I'll take that one. Being on the borrower side, you know. Yeah, that's, that's a great point, James. And in an environment like today, like we are in an economic environment, like we are in today, you know, there's a lot of capital chasing a lot of deals. So I would say that I think the first step is to approach the lender that is, is appropriate for the type of project that you're going to do. If you want to buy a three story, you know, residential building, I doubt you're to going, going to go to Marty, you know, you'd go to Sadie instead. So I think understanding really what their competency is, is key there in the same way that they're assessing you for your competencies. But once you've found that, you know, of course you're going to find out that there are a number of lenders, I think that it definitely goes beyond the term sheet. It's not just about dollars. I think it's in my experience, experience. The, the one thing the lenders that I've had the best relationships with are the ones that actually ask me questions, kind try to probe my story a little bit and try to try to really understand exactly where I'm trying to go. And I think that shows that they're interested as much as you are in.

The perfect right under the wire because it's 7:57. We're going to break. Thank you all. This has been an incredible show. Let's get a round of applause so everyone can hear. We do have a packed room here. Please tell your friends about this show. Please tell your friends about Fordham University. Thank you all. Please tune in. Subscribe to our show. Rate it. Keep your questions coming and please tune in next week. This is James Nelson, your host from Real Estate Investing live from Fordham tonight. Next week, live from New York. Thank you and good night. Thank you for tuning in this week to Real Estate Investing live from New York. Join your host James Nelson for another program next Tuesday at 7pm in New York, 4pm Pacific Time on the Voice America business channel. All shows are rebroadcast Wednesday mornings at 7:00am Eastern Time, 4:00pm Pacific Time, as well as always on demand. We'll talk again next week. Hi, I'm Mark Rose, global CEO of Avis and Young, the world's fastest growing.

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