66: Raising Capital With Joel Breitkopf

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This is Real Estate Investing Live from New York with James Nelson, the principal and head of Avis and 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's one of the largest investment opportunities in New York and around the world. Now here is your host, James Nelson.

Welcome to episode number 66 of Real Estate Investing Live from New York. This is your host, James Nelson, principal and head of Tri State Investment Sales for Avis and Young. Thank you again for joining us and really appreciate as always, your sharing with your friends, posting your comments on itunes, Spotify and subscribing. That's how we continue to spread the word. We're now over 115,000 downloads, so we've been on a real roll.

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What an interview last week with Philip Michael. Incredible story coming to the US under $100 in his pocket and building out his own real estate empire. Just really inspiring for all of you looking to get in the game and start out. And today's show is no exception. We are teaching you what it takes to succeed in this market. And I've been getting a lot of requests from you about learning more about how to raise capital. It is such a big part of getting a deal done. You can find the opportunity, have the know how, but without the capital, clearly that is a key component to getting things done. So with us today we have Joel Breitkopf, who is one of the principals with Alchemy Properties and also Alchemy ABR as their office acquisition arm. And I asked Joel to speak on this topic because he is just phenomenal with understanding how to create meaningful relationships with capital partners, how to structure deals, how to arrange the process. So I know you all are going to get a ton out of it. So we're going to have a brief word from our sponsor and we'll be right back with that interview with Joel. Thank you.

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You are listening to Real Estate Investing live from New York. To find out more about James Nelson or avison young, visit avisonyoung.com now back to our show. And now it's time for our Investor Spotlight. And with us today is Joel Breitkopf who is principal of Alchemy Properties. He's been in the real estate industry for his entire 35 year career. Alchemy Properties is one of the most active and reputable residential development companies in New York City, having developed or redeveloped over 30 buildings in the last 25 years. They have also recently completed the residential conversion of the national landmark Woolworth Building tower to luxury condos. Joel is involved in all the aspects of Alchemy's developments and investments from acquisition, finance, design, construction, marketing and strategic planning and is also a principal of Alchemy ABR Investment Partners, which acquires existing commercial buildings in select major markets. Prior to this, he was a VP of acquisitions for Himel Marinoff and and was also on the lending side, having worked at Chemical bank and as an analyst at Lasell Partners. He's also we're going to get into this with the interview. He's got an incredible passion for music which he has also brought to the charitable world, having started a musical therapy program for veterans with PTSD called Healing Our Heroes. So we're going to get into a really great conversation here. Joel has again, incredible experience, having financed over 2 billion worth of transactions, acquired 3 and a half million square feet, and he's lectured at Yale, Wharton and now here he is with us on real estate Investing live from New York. So Joel, thank you so much for joining us.

Thanks James, for having me. Great to be here.

So Joel, as you probably know, we've already had your partner Ken Horn on the show. So I hope you've listened to his podcast or at least you've probably heard it, you've probably lived it. So my first question is, and I would encourage you, encourage all of our listeners to go back, Ken, such an incredible person. He's got an unbelievable story, but his start in New York was opening a gelato stand. So Joel, how did you guys meet? Did you start off, you know, scooping gelato for him or how did you all come together?

That was always my dream to scoop gelato for Ken, but I didn't Know him at the time. So, you know, sometimes you don't know your dreams. No. I was working at a bank, Commercial bank in New York back in the early 90s, and the market was really bad at that point. I knew I wanted to start my own company. And what I knew at that point in my life was finance. Having worked at Chemical Bank Realty with some great people. I had a lot of friends who were in their upper 20s and 30s who were not so happy with their jobs and they had kids. I'm thinking to myself, if I get married with kids and I'm not happy with my job, I'm forever stuck. So I said, I got to get out of banking. I had learned a lot, but I wanted to do something more entrepreneurial. And so I decided I was going to start a mortgage brokerage company of some sort. And I was talking with a couple of potential partners and I had met Ken because we were both working together on working at Apple Bank's portfolio at the time with Robin Thompson, who still runs it, who I work with over at Chemical Bank. And Ken was such a great. At the time, he was quite young. He was 31. And basically he was such a great guy. Said, listen, I need your advice. We were having noodle lunch on third Avenue, as I recall, and I need your advice. I have these two offers, and over lunch he says, why don't we do something together? And I said, great. And we actually cut the deal over the noodles before the check came. And it couldn't have been more fair. And Ken was incredibly fair and reasonable. And that was it. And so we quit the job and we started working together at the 783rd Avenue, the former Wang building. And it was just Ken and an assistant and then an empty office. And that was my office. And that's back in 93. And so we've been partners for, I guess about 27 years. We started working together on other stuff before that, I guess, back in 1991. So he was a mensch back then. He's still a mensch.

Absolutely. No, it's such an amazing story. And I remember Ken started off as an attorney and he was working on these condo and co op plans. And I remember hearing about the first deal that you all did where you bought the sponsor package, where I think it was 70 or 80 units, and you sold 10 of the units, which paid for the whole deal. And so, you know, always great when you can start something off with a home run that will put you on your way. So. But just, I'd love To hear kind of what got you into finance before that? Cause I know you went to Wharton and you had an economics degree. I mean, even thinking back, you know, high school, were you always good at math? I mean, were you. You said you also had this kind of entrepreneurial spirit. So was there anything going on at school where you know, kind of attract you to, you know, to finance in the first place?

You know, when I was younger, I was. I was a tennis player. You know, it was pretty good for a very short window. Probably I peaked at 12, I guess. But, you know, I was thinking about tennis, and then I really had no idea what I wanted to do. And when I went to Penn, I was looking basically for a summer job. And I turned to my fellow tennis player, kind of older brother, Steve Berliner, who was at Helms and Spirit. He says, you know, join me for internship. So I became the first intern at Helmsley Spear, summer intern in 1985. And I ended up doing, like, three leasing deals that summer, just doing research in different magazines, what have you. But in those days, you could. You could canvass an entire building. He'd say, you go. He'd say, go to. Go to 205 Madison Avenue. And you literally walk up and down and walk into everyone's apartments, offices and get thrown out. And I realized that maybe afternoons are better than mornings. And then I realized that maybe doing research about companies was better. And then I did three deals. I'm like, I think I want to try something more on the investment finance side. So I was fortunate enough to get a job at LaSalle Partners, which became Jones LaSalle eventually. But I remember when I was at school, I had 110 note cards sent out, 110 resumes. There was no fax machines back then. There were only phones back in 86. And I had a desire to speak to every single person that I sent resumes out to. And I did. And if it took 25 phone calls, I got through, I found there was one. There's one famous guy, no names, who. Pretty funny. He refused to answer my phone calls. I finally got up. I got up at the ungodly hour of 8 o' clock in the morning, which for college is hard as a senior. And I called him at 8 o' clock in the morning. He answered the phone, and I said, hi, it's Joel Breitkopf. I sent you my resume. He goes, stop calling me. And he slams the phone. And I was in his office a number of years ago. I did not mention the story, but he's One of the better known guys in New York City real estate. It's pretty funny. Wow.

Well, I love that persistence and I'm sure that stuck with you throughout your life. And we're going to get to talking about capital raising and not taking no for an answer, I'm sure is part of it. But it also reminds me of I'm a big fan of Ryan Sirhan's course and some of the advice he gives. And one of his unknown secrets on how to hire is he intentionally ignores the initial two or three attempts to call him because he feels that if you just make one phone call and give up, you're not the kind of person who he wants to work with. And so hopefully I'm not giving away any of his trade secrets. But the fact that you were relentless about following up is no doubt, I'm sure, a big key to your success.

It was actually misplaced confidence.

So I'm sure having this finance background and understanding the numbers, but also having, you know, canvassed up and down buildings, I mean, it's rare that you get someone who has an appreciation, you know, for both the physical bricks and sticks as well as the numbers behind it. So I guess when you set up shop with Ken, what was the division of labor? What were you tasked to do and where was he spending his time?

We were focusing on underlying co op loans and also defaulted underlying co op loans. So we, you know, I spent a lot of time, you know, reaching out to management companies. And Ken knew the all the lawyers pretty much in that part of the industry. So back in those days, you could easily get information, obviously about when the loan was due, et cetera, et cetera. And Ken had been working with a lot of defaulted co ops, which is what his principal business was, which is really working out defaulted co op buildings where lenders had taken back unsold condos, unsold co op shares. So he was sitting on about 100 different boards and working through that process. So he knew everyone in the industry. So as I uncover a deal, we could call the management company and try to refinance the mortgage. And we got opportunities to work out. And it was actually really nice to work out a lot of middle class co ops in Queens or in the Bronx that were in danger of foreclosure, which was crazy. We would sit with the co op boards and try to actually stabilize their finances. So we're actually working with some really super nice people and super scared people back in the mid-90s who thought they were going to lose their homes and their life savings. So to be able to refinance with Freddie Mac and kind of work out loans, earn a living, but also help people in that process was really, really great. And it's helped us further in our careers as we become, we became developers back in the mid-90s.

So how do you go about your underwriting then? I mean, that's remarkable. You've been doing this for 35 years, so you've seen probably three cycles where certainly along the way I'm sure you bought at the top and then had to survive a downturn. So especially if you can't predict everything. But how do you underwrite? Because most of these investment models, it's a ten year analysis and you make assumptions, but who the heck knows what a property is going to be worth in five to 10 years? So how do you start to make these future assumptions which clearly it's worked out well for you all. So what are some of the guidelines that you think about when you sit down to figure out what you can pay for a property?

Well, I think it starts with obviously the location and what you're legally allowed to do from a zoning perspective. And then, okay, can you differentiate yourself from, from the rest of the market? And what does that mean in terms of value? And as you differentiate yourself, what does that mean in terms of cost? So you have to kind of weigh all those things together. What we've been pretty consistent at is first of all not overleveraging. So we've worked with our, we've had some wonderful, wonderful capital partners, institutional partners as well as family offices. And we will tend to put a little bit more equity in the deals and not put ourselves in a position where we're forced to sell as much. We have less flexibility in terms of selling, so we're less likely to be bringing up the cap stack to 80 or 90% on the debt side and then having equity for the balance. Our assumptions, we try to be conservative every step of the way without destroying our chances to get deals done. So it's a balancing act. And there were times when the market was super, super hot and we were being outbid. I remember actually I think it was, I'm not mistaken, it was a massie knackle deal that was on, I think it was West 77th Street Euro Firm and there were 26 bidders and I'm proud to say we were 22nd out of 26 bidders.

The horse carriage?

Yes, I think so. No, it was, yeah, I think it was right across the street from the fire department. So that made us feel good that we were so low in terms of our number that we were being disciplined. But of course, at one point, we hadn't bought anything for three years because we felt things were not penciling out in terms of our formula and discipline. So it can be frustrating, too, in the sense that if you're too disciplined and you're too pessimistic and cautious, you won't get anything done. So we try to balance that, but generally speaking, we've been, you know, we'll do anywhere from two to six projects in different stages at a time, depending on where the market is.

So take us back to the first five years of raising investor capital, because I'm sure for a lot of our listeners who are thinking about doing their first investment, the biggest hurdle is capital. So they might be seeing great opportunities. They might even have the expertise, but they've never raised money before. So if I remember Ken's story and your story correctly, the first couple deals, you were lucky to find some high net worth who kind of already knew your business, and that kind of got you on your way. But maybe talk to us about kind of growing that investor database. I mean, there's always that expression, friends and family. So was it within a couple years after you could show a track record that Suddenly you had 25 investors? Was it 100? Could they write $5,000 checks? $100,000 checks? Like, how did you build your network of investors?

Well, one thing we've been very careful about, when you go into a development deal, when we go into a development deal, you can't always get the equity. You don't know what the equity is going to want. So, for example, we, generally speaking, will never tie up a hard deposit on a development deal unless we are doing it side by side with a capital partner and actual the LP, the 90%, 95% capital party. Because I think New York City is littered with stories and quashed careers of guys who tied up development sites with their dentist uncle and then couldn't perform and then lost their dentist uncle's. They're out of the will and of course, don't get the deal done. So we'll only go into those deals side by side with the capital partner. So when we were doing deals back in the late 90s and mid-90s, many of those were Credit Suisse versus Boston. And then we started doing deals with a number of smaller capital partners. And it's really getting them involved early. And it's really just, you got to keep your word and you can't exaggerate. And whatever you say in writing or verbally, you have to back up. So as aggressive as you might want to be and as eager as you are, you cannot oversell because you got to undersell, you got to under promise and over deliver. And actually you can do that in a rising market. It's harder to do that, obviously, if the market's falling. But we also had good timing. We started really in earnest back in the 90s when things were terrible and we made a lot of mistakes. Don't get me wrong, we had a lot to learn. Our construction contracts, construction management contracts, were 14 to 16 pages back then. They're now about 800 pages. And those 800 pages represent a lot of lessons learned and just more confidence. So we learned a lot. One thing we had going for us was that we were honest and hardworking and somewhat intelligent, but there's a lot we didn't know. And so we ultimately realized we had to surround ourselves with consultants that were. We started off with the small architects and to save money, not so smart. We started going with larger architects who had a bigger staff and a bigger bench that could actually support us. As we were small, we didn't have the resources. That's one of the things that we learned that lesson in terms of raising the capital. It's just a matter of really just going out to a bunch of people and listening and trying to, you know, to hit their expectations and not over promise and, you know, and working really hard and communicating. And it used to be that you could communicate with these partners once every two weeks, once a month. And then now that world's changed, obviously, and we're on the phone with our partners multiple times a day. So back then it was, it was much more hands off. Now it's much more hands on. And I think I, you know, there's downsides to talking, having to talk to your partners every day. But thankfully we've had good partners and we actually, we're friends with a lot of them, so that works out okay. But I think the key is to be super careful and not be too aggressive on the first few deals and frankly, never be too aggressive. And even if things go sideways, and they do go sideways, as long as you're communicating about why it went sideways, and so long as you're not incompetent in that process, I think people will be forgiving.

That all makes a ton of sense. And it's clear that's why you have such an incredible network, is because you do right by your investors. And a deal leads to more deals. So before you got to kind of the institutional sized investors, so I mean, Credit Suisse, I mean, clearly you're in the big leagues. I mean, were there a dozen deals before that where you were doing them with your dentist uncle before you could actually show them a track record and say, we know what we're doing. And fast forward to today. If you bring the Carlyles of the world a transaction, if you can't show them 10 other things that you've done. Again, for our listeners who are trying to do their first deal, how do you get there?

Well, I think we got lucky in the sense that the deal at 2 Tutor City Place, where Ken bought those 70 apartments was done with just family and friends, so to speak. But we had, you know, the opportunity, you know, Ken was actually brought in by someone who had a relationship with First Boston to kind of oversee the conversion of some office buildings in Chelsea back in the mid-90s to, you know, condominium, when the condominium market started to blossom again back in 96 or so. So we actually got lucky to land on the doorstep of First Boston. But back then, those guys were being a little bit more open checkbook for a lot of different people. And it worked well with us. And maybe some other folks didn't work as well. But I think that one word of advice would be if you do have a great, compelling deal that really underwrites, and if you stress the numbers out and still underwrites, joint venturing with an established developer that you feel comfortable with is probably not a bad way to start because you're always going to have issues of completion guarantees or sometimes principal recourse. So a balance sheet is important and something to consider. So not all limited partners want to put their balance sheet to support the developer. Some do, some don't. And there's also the temptation of people saying looking for the best promote. If you're looking for the best promote, then I can assure you you're looking for the highest risk situation. So the guy that's going to give you a 50% promote over an 8 or a 10 is the guy that's not going to ever help you in terms of recourse or will not be there for those capital, those inevitable capital calls when the budget starts to creep up. So you have to balance your, your big eyes for the dollar signs and the promote versus what's realistic and making sure that when things go bad and they will go bad and things never go to plan, that your partner is there for you. So the Promoter is not as important as your downside risk. And going bankrupt at age 25 or 30 is not a good prescription for career success. So I think it's more important to make sure that deals get done and you can, you know, do it, have a track record as opposed to trying to make a lot of money in the first few deals. Because I think that that's a recipe for disaster.

You said so many good things there. And to start with the idea of, especially if it's your first deal, to bring in a partner. And look, sometimes you think you found something that's too good to be true and you feel like if you bring someone in, you're giving up a slice of the pie. But sometimes, you know, first of all, if you don't look at it as just that one shot deal, it could be a start of a relationship, it could be give you the credibility. I mean, I remember very early on in my career I found an eight family on West 22nd street, one of the best blocks in Chelsea, for $550,000. And it was so cheap that I said, I'm going to do this myself. And you know, trying to figure out, you know, how to cobble the money together and borrow it. And of course by the time I thought I had it figured out, they sold it to some guy who just wrote him a check. So I got, you know, I got 100% of nothing. Whereas if I had gone in there with someone and said, hey, let's buy this, you know, together, then that would have certainly parlayed into other things. So certainly finding a partner also not always just going for the best economics. And that can also be said for a lender, whether or not you can get a cheaper rate by a quarter 50 basis points, but that lender is not going to perform or they're going to hold you up at the closing surety of execution and you're really taking on a partner makes a ton of sense. So how do you though figure out what type of promote that you're gonna ask for? And I know it depends on, cause you do ground up development, you do office, you know, cash flowing. So I know it depends. But you know, what would be a fair promote for an office building that's fully leased, that you're gonna hold it for five years, maybe you're gonna reposition it some sell it. What would that look like as opposed to like a ground up condo?

I think it really depends on where you're on the market. You know, sometimes those answers change when there's very little Equity for, let's say office buildings in Manhattan, for example. So right now, if you're buying an office building, existing office building in Manhattan, and it's a B building in the 30s and you've got a small lobby and small elevators and you're in the middle of a pandemic, the promoter will be not so favorable. I would say, generally speaking, if you're looking at a core plus type situation, you're looking at again, if it's institutional versus family office versus pass the hat, is it 20% over an 8, is it 20% over a 10 and then with increments thereafter or is it 25 over a 10 year capped? It really depends on the situation. Also depends on, on if there's completion risk. So for example, if you're buying that office building and you've got to renovate, it's 40% vacant, your lender is going to want a completion guarantee of some sort. So that all kind of factors into it. You have to think about. There's also the fee side of it. So we've made the mistake in the past where we work really, really hard on these transactions and I would say we probably overstaffed to some degree to make sure we have redundancy, that things are unmist and we will have smart people thinking about things and that's kept us out of trouble. But that also costs money. And so from the point of view of overhead, it's important to make sure that your fee is covering overhead, not as a profit center, but really just to cover overhead so that you can manage the process to the best of your ability on behalf of the partnership. So I think you have to take into account all that stuff. And if someone is simply not looking to pay fees whatsoever and they're disincentivizing you from, you know, staffing properly, we're never, we're never, you know, going to staff improperly. So we're always going to make sure that we have, you know, the proper coverage and the right team. So if we have a, if there's a partner saying we're not paying fees, they're not going to be our partner because they don't understand what it takes to have a successful, you know, partnership.

At least how would you break down those fees? So we're talking about, you know, many developers will say, okay, I'm going to charge an acquisition fee and when we do a financing, there's a fee for that. And I mean, what about the construction management? I mean, what would be reasonable for you to charge?

Yeah, it's all a balance. So your partner and your lender want you to have skin in the game, right? So that means typically, cash and having some responsibility for the completion guarantee is also a skin in the game. But if you're putting, let's say, a million dollars in your fees of $5 million, that ratio does not work. So you have to kind of balance how much you're putting in as a operating partner versus yes, there'll be an acquisition fee, particularly if it's off market. And yes, you have a general partner developer fee, which really covers your staffing and some principal time to make the business plan work. And maybe there's construction management. Generally speaking, we don't feed things to death. There are people who have more of that approach. We're just looking to cover overhead and not be hurt in the process as we try to make it successful for our partnership. But from the point of view of the partner, you want to make sure that you're focused and that you're properly staffed and you have skin in the game and your attention is on their asset. And so you have to make sure you never lose sight of that. And part of that balance is making sure that you have cash invested, but that you're covering your costs as you go through that process. So these are kind of the things that you negotiate and talk openly with. And if there's a lot of strife when talking to your partner up front about some of these things, then it'll only get worse when things go sideways. And they always go sideways because, you know, at the point where you haven't, where they haven't put any money at risk and they want to do the deal, that's you're the most attractive at that point. And if you're already in bed with them and something goes sideways and they were too tough at the beginning, it's not going to be great, you know, down the road. So you have to choose your partners really carefully and do your deal. You know, they're doing due diligence about you as a. As a young developer, let's say you must do due diligence about your partners as well. I will. We made that mistake many years ago and we'll never do that again. So that's very important.

Again, such incredible advice and things for our listeners to think of. So, I mean, when you run a process, if that's what you want to call it, of selecting who that partner is going to be, I mean, do you kind of. I mean, you have your investor presentation, you know, I don't know if you're sharing it with a couple investors or if you kind of cast the net wider. But you know, what happens if two or three of them say, great, Joel, we love you, we love the deal, let's do it. Then you're in the position where you have to tell, you know, somebody know, or do you say, hey, all three of you come into this deal and each take a piece. How do you manage that while still keeping everyone happy?

Well, you know, a lot of the deals we do are with. They're highly structured deals. They're with families, and they're with institutions. So most of the transactions we've done over the last 20 years, believe it or not, are people who have had ownership of real estate, you know, corners of Manhattan or what have you, that have been in families for 30, 50, 60 years, or religious institutions that have owned real estate for a lot longer than that. And so our kind of our niche has been working closely with people as partners to go through a process of trying to help them add value to their real estate and maximize that value in a way that's most important to them. So those are complicated transactions, and they take some time. Sometimes they take six months. We should be so lucky. But usually they take years. And so while we're going through that process, we have plenty of time to talk to capital partners about that. So usually, as we start putting more dollars in at risk in terms of design or what have you, legal, we'll bring it out to a bunch of our partners. But one of the things that's interesting, we work so hard on securing these transactions that we're not going to go for the cheap, fast money because we've had too much at risk with too much invested. So we'll go with people we've developed relationships with, whether we've done deals with them or not in the past, but people that we know well, because as we built up our credibility and our relationship with the family or the religious institution, we're not going to blow a year or four years worth of work on someone who we don't trust. So it's. So while we're putting the deal together and going through the whole process, which is always complicated, always very interesting intellectually as well, we want to make sure that our partners understand exactly what the deal is, and at some point we'll select a partner and they'll be with us the rest of the way. And through the serpentine process that happens, no doubt, but it is a process. It's all about communication. And our approach is as an Aside, and I think one of the keys to our success is that we look at really solving the problems of the family. In terms of the real estate. We're not looking out for ourselves first and foremost, like some developers, perhaps we're looking to solve their problems, focus on their issues, and then if we can attract capital and make money based on what they need, then that works out. That's a win win.

Love it. No, that makes so much sense. And I know you've done a lot of work with not for profits out there. And if it was just being the developer is just completely profit motivated, you're not going to get far. So I want to go back to what you were saying about and for those of our listeners who are thinking about taking on a partner who they have not dealt with before. So you're at the point now where you've done multiple transactions with equity partners out there. But let's say you do have a new group that you're looking to vet and are they credible, will they perform? What do they like to work with? How do you go about vetting them?

That's a great question. Well, we will. I'll go back to. Sometimes it's gut. So I'll go back to. We had this amazing deal with Xavier Church high school on 15th Street. It was 2011, 2010, I believe the market was just starting to get back after the Lehman crash. And I remember a lot of it is chemistry. You want to get along well with your partner. And so I remember Ken and myself and our other partner at the time, we had lunch with the guys at Angelo Gordon. So it was Adam Schwartz and Ronan Katz. And I think Danny Rudin was there as well. I'm not sure, but I think it was Adam and Ronan. And we sat down at. What's that place in 47th Street? What's the fish house in 47th street in the famous place. I'll start, I'll start over again. But you know the Greek fish place.

Oh, Amos or something, or Avra.

So anyway, what did you have?

Did you have the, the, the Bronzino? They always say it's the special.

I'm going to back up. There's really. So part of the issue of choosing a capital partner is chemistry. Obviously, you know, you have to do your due diligence play. But I want to talk about chemistry because that's really important because you work really hard on these deals and you work quite closely with your capital partners. And I remember we had this amazing deal potentially with Xavier High School and Church on 15th street to build a church extension, which is great. And also 55 condominiums with amazing views with lots of air rights. Back in 2010, when the market was just recovering from the Lehman crisis. And we met with. I called up Adam Schwartz. I'd heard his name. Angelo Gordon knew nothing about him. And I said, we have this deal. We'd like to maybe have lunch with you. And he goes, great. So we met at Avros at 47th Street. We met with Adam and Ronan Katz, may he rest in peace. And we sat down, Ken and my other partner and Adam and Ronan. And the first five minutes of the conversation was just cracking jokes and literally bowled over laughter, all of us. That's how it started. I said, we knew that these guys would be amazing partners and amazing friends. And that was. I mean, that's never happened since, by the way. But that was just like, a gut feeling that these guys are amazing. And so a lot of it is chemistry. And I can't emphasize that enough. And then, of course, you still have to call, like, other people they've done business with to get a feel for that. And even if you think it's a waste of time, it's still a good thing to go through. They're going to do it. They're going to do their accrual report on you, they're going to do the background checks, all that stuff. But it's still important as a discipline. Even though you might know people in common, you still have to go through the discipline of doing your background checks and your references on subs, partners, you name it, because it's just good to know. Even if there's an issue, it's good to be able to say, hey, I found this out about you. Let's talk about it. And I think that open communication is really important, and it's a key to any relationship, obviously.

No doubt, no doubt. So I know on the show we talk a lot about what it takes to acquire and how to find the opportunity, but I would think that probably a lot of the time, I mean, yes, finding it, courting the relationship, but then structuring it and figuring out how to put that together. Is that what you think Alchemy's Secret Sauce is, How to put the deal together? Or is it the execution? And if you had to put together a pie chart of how much time you spend on acquisition, structuring, and then the actual swinging hammers, what's the. The division of labor?

Well, it's myself, Ken, Alex Saltzman, and Brian Ray. So us four partners, we pretty Much know all that we're working on. And depending on the flow of something, the division of labor becomes obvious. Or if it's more legal, maybe I'm more involved. And if it's more design, maybe Alex is more involved. And if it's more acquisitions, Ken's more involved. And Brian, you know, it's more, you.

Know, hanging out on a beach down.

In Florida, leasing and management and, you know, dealing with.

He's buying stuff down there, so I know his phone never stops ringing.

Yes, he's an animal. But. No, but we're really. We're looking at a lot of stuff, and we're very disciplined. And yes, we spend a lot of time in acquisitions, but at the end of the day, you know, we're not deal junkies. You know, you have to look at a lot of different things. You have to go through a lot of processes in terms of acquisitions and underwriting. And even if it's not happening in terms of the actual acquisition, you're at least learning a lot more about that particular sub market. And that's always an advantage and developing those relationships. I would say that it's probably one third acquisitions in structuring and what have you, and then it's two thirds, you know, making sure that everything gets designed and built properly. Because acquisitions are super important, obviously, for the growth of the business. But, you know, we can't afford. You know, our point of view is that, like, we cannot afford not to succeed. So there's some developers who are quoted saying, yeah, I'll do 30 projects, and if we lose four buildings to foreclosure, that's okay because 26 are good. And to us, that's completely unacceptable. We have to be successful. We may not be as profitable or even lose money from time to time, but it's not because we have lost focus. It's because typically market conditions. But we do not want to be in a position where we made a colossal failure in terms of the buy side or in terms of execution. So we're super careful. So I would say we spent a lot of time in execution and we get involved with minute details. We really do, which is fun. It's good to be big picture. But it's also, as Steve Marengoff emphasized many years ago, the devil is in the details.

No doubt. So we only have a couple minutes left. And I want to talk about advice you would give to an aspiring investor, but I'm going to ask it through a different lens, because now you've built up this incredible organization. You have all that Expertise in house, you know, what would you say to that person who wants to jump in and try development? What would your advice be to them?

Well, you know, development is a kind of a culmination of a lot of experiences to be successful. I guess we have hired a lot of people out of college, believe it or not, really smart people, and then taught them the business, which is kind of an anomaly. But to be a good developer, you have to know a lot about a lot of different things, whether it's zoning, design, construction, acquisitions, finance, you name it. Right. Market conditions. But to be really successful, you need to do one of three things super well. You need to either be able to raise money, find deals, or build. Right. Design. Build, right. So if you architect coming into this, you know how to build something, that's great. And then if you have a partner who can raise the money, great. And you have someone else who can find the deals, that's great. But you have to be really good at either finding the deals, financing them, or building them. So we're really good at finding the deals. I guess we're good at all at this point. I mean, thankfully over. That's not to say that when we started out back, like I said back in the 90s, we made so many mistakes and I think we were saved by the market going up. We probably loves when I say this, we probably squandered more money just not knowing that this is the way insurance works at the time or whatever the case was 25 years ago. But we've learned a lot. And so when we have our projects and they finish, we have a lessons learned, painful reliving of our projects. So we try to make sure that we don't make the same mistakes twice. No one's perfect, but we try to be really careful to not make the same mistakes twice. We try to uncover new mistakes, but really it's again, trying to anticipate problems. And we do have one philosophy, which comes from Reagan and Gorbachev, which back then was during the Strategic Arms Limitation Talks to reduce weapons. And it was always trust but verify. In our business, it's don't trust, semicolon and verify. So don't trust that a third party is going to file that. Assume they're not going to file it and then get proof that they actually filed it. Because it's amazing when you do a development and someone misfiles something or doesn't file something that you can. Your three years worth of work now has to wait six months because something wasn't filed properly. So we have a level of paranoia about things, and it served us well. It makes for a lot more work, but it keeps us out of trouble.

That certainly goes back to what you were saying about the devil being in the details. So I guess if you had to just a couple words as keys to success, and no pressure. This is like naming a cologne or something. But if you had to give me a couple words, the essence of success, what would it be?

Well, I'll tell you this. I have. Personally, you're already up to seven words. I'll digress. And I'll say I've done all the hiring over the last 25 plus years, and I've gone through 14,000 resumes at least. And I will say this about that. And when we lecture at. And I lecture at colleges, I tell people that they kind of give these blank stares. But you have to make sure that your resume is perfect. Like, and you'd be surprised how many typos are on resumes or just bad syntax. If you can't on one page, represent yourself perfectly, how can you represent me or Ken or Alex or Brian in our organization? So I think the word of advice I would give is, particularly for a young person in their twenties, read all the time. Read everything. It's not just doing your job and you should be reading on weekends. I used to sneak into the Lewis Brous NYU Library on weekends in my 20s and spend hours going through all these really cool real estate publications, which sounds kind of nerdy, but it really gave me better vocabulary and better understanding holistically of real estate. So that when I was pulled into meetings with Arthur Cohen back then, I was by far the youngest person in the meeting because I actually knew what they were talking about because I had done my homework. So it's super important to read everything for the first 10 years of your career. Obviously continued that as well. But also, I think it's a matter of just always keep your word. And even if it's not economically appropriate for you and you cut a deal and then someone comes along with a better deal, keep your word.

Okay? I'm hearing knowledge, I'm hearing trust, I'm hearing integrity. So this has been fantastic. Joel, before we break, I've got to ask you about your passion for music, because you were telling me before, so. And explain to the audience. So you help create songs, and this is for musicals, this is for shows, and you've got a very interesting way that you go about composing. So maybe share with us the creative process.

Well, I love music, and I was I had this, well, two aspects of it. I have this passion for veterans issues and music. And I stumbled upon the Music Conservatory of Westchester and started a music therapy program, scholarship program for veterans with PTSD, which is a. Since 2013. It's going great and I've met some amazing people and there's going to be a documentary about the program which is really cool. But I was also, you know, with my friends playing guitar etc, etc and learning other people's music. And as I was doing that I started to get, you know, I guess with the iPhone you can, you can do these memos. And I sometimes get music in my brain, particularly when a water's running, if you can believe that. And so I have all these musical ideas that come to me that flood to my, my brain. And so I started working with my guitar teacher who is a producer. And we've been writing music together for the last seven years and got a whole bunch of songs done. I haven't yet gone on Spotify, but all types of songs. You'd be shocked that they're not as bad as you would think.

Have any of them debuted yet? Can we find them? Have they been produced? Are there any shows or is this.

Well, actually one of the songs is going to be in this documentary and some of the songs, there's quite a few songs done at this point. I have to get them up on the web at some point. But this is like a part time, part time thing. I'm also a husband and a father, so Wednesday nights I typically spend a lot of time working on songs, but it takes forever because you can't do anything badly, you have to do it right. But it's been a lot of fun. It's a whole different side of the brain. It's really hard to write lyrics sometimes and it's really hard to come up with musical ideas. But it's been great and you'd be surprised. Some of them you actually might like, you know, rock and roll and whatever.

It's great to hear. And you never know, maybe for the next season, real estate investing live from New York. You know, maybe we need some new background music.

So.

No, we'll definitely keep your number on speed dial. And it's. Thank you for sharing your story. It's really appreciate your diving in and what you've done to kind of give back not only by being on the show and teaching, but also with your charitable work there. So, Joel, thank you again for joining us today.

It was my pleasure. James always available for you.

Wonderful. This is your host James Nelson of Real Estate Investing Live from New York. Please remember to subscribe Itunes, Spotify Leave your comments Connect with me at James Nelson NYC on Twitter, Instagram, LinkedIn and until next week, thank you again for listening. All the best A Different Approach to Putting our Clients First Avis and Young's Tri State Investment Sales Group sells multi family office, retail development and specialty sales.

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Sam.