77: Hard Work Pays Off With Martin Nussbaum

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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 77 of Real Estate Investing Live from New York. This is your host, James Nelson. I am principal and head of Tri State Investment Sales, Avison Young. And welcome. As always. Thank you so much for listening. It means so much to me. I really appreciate the support. I actually had the pleasure of teaching guest lecturing for both Columbia masters students yesterday morning as well as NYU Master's students in the evening. And what was wonderful to hear was how many of the students had said that they had already been listening to the podcast and getting so much information and advice from these shows. And it's really wonderful to hear. And my hope is that this show is really a benefit to not only aspiring investors out there there, but maybe college students are looking to get into real estate. Maybe they're master's students. Maybe you've been at it for a couple of years at a big shop and you're thinking about going off on your own, building out your own investment sale platform, as well as maybe you brokers out there or architects, people who are in the real estate business. But you're thinking about now jumping in and investing. And this show teaches you how to do this and by listening to these incredible stories, not just the keys to success and what allowed these individuals to be tremendously successful. But I also, I love hearing about those early stories and I love hearing about their first deal. And this show is no exception today where we're going to have Martin Nussbaum with us who is founder of Slate Property Group. And he's going to talk about those early days. He's going to even go back before his real estate career.

And I didn't even know that he.

Was a medical student at one point. And he said that that was really what instilled with him hard work, which is what we are entitling this show today. But you'll hear about some of his early deals and how he parlayed them into dozens of successful investments and now how he has grown his business. And for those of you looking to tap into the institutional world, just one of the many ventures that Martin has been a part of, Slate Property Group partnered with the Carlyle Group to launch a $750 million real estate lending company focused on the New York City market. So in addition to investment development, he now has a lending arm. So an incredible story. I know you all will get a lot out of this. So we're going to have a brief word from our sponsor and we'll get right into that interview with Martin. Before I do, let me just remind you one more time, if you haven't already, please connect with me at James Nelson NYC, whether it's on Twitter, Instagram or on LinkedIn where you can send me messages which I'm happy to answer on the show. And if you haven't checked it out yet, also go to Clubhouse on Thursdays at 12 noon Eastern Time. I'm hosting a show there called Real Estate Investing and we've had some great guests on and it's a chance for you to come up on stage and ask your questions as well. So definitely give that a listen. So we're gonna have a brief break here and we'll be right back with an interview with Martin. Thanks again.

Hi, I'm Mark Rose, Global CEO of Avis and Young, the world's fastest growing real estate services firm and we are proud supporters of Voice America. With over 5,000 professionals in 120 offices in 20 countries, Avis and Young delivers local expertise in partnership with global reach. Because we are principally owned, Avis and Young prioritizes client success over shareholder profits through our open architecture. Our firm's experts provide value added client centric investment, sales, leasing, advisory management and financing services to clients across the office, retail, industrial, multifamily and hospitality sectors. Our culture is the bedrock for collaboration that enables each assignment to benefit from the collective intelligence garnered from a company wide database. Partnership Performance Learn how we deliver different@avisonyoung.com to learn more.

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 I'm thrilled to have my good friend Martin Nussbaum who is the co founder and principal of Slate Property Group. He has over 20 years of experience buying, developing and operating real estate across the US and with a focus on multifamily and mixed use properties, Martin leads the strategic repositioning, ground up, development and conversion projects. Prior to co founding Slate Property Group, Martin served as the co Founder, Managing Partner of Silverstone Property Group, a full service real estate owner and operator in New York. While overseeing Silverstone, he has purchased more than $1 billion in real estate assets. And he's got a great background and management experience before that that we're going to get into during this interview. So, Martin, we welcome. Great to see you and thank you for joining us today.

Thanks so much for having me. I really appreciate it.

Awesome. So tell us a little bit about your story. Maybe you can begin with where you grew up and let's go from there.

Sure. So I was actually born in Johannesburg, South Africa, and my family moved to America when I was very little, about 2 years old, and we somehow landed up in New Jersey. So I grew up in New Jersey and probably one of the only people that we know, real New Yorkers, who loves New Jersey. I still praise it every day. I had a great upbringing in New Jersey, grew up in a small town called Cranford, New Jersey. Spent my summers at the Jersey Shore, like real. Really enjoyed that upbringing. And then when it came down to college time, my family had relocated to Long Island. So I decided to go to a SUNY school and ultimately land up in SUNY Albany, which was a pretty interesting spot for me. It was kind of outside of my. My world, but spent four years there having a good time and ironically studied medicine with the intent of becoming a doctor, which I'm looking back on all those years. I'm not sure why I dedicated hours and hours to organic chem when ultimately it served no purpose in my future, but decided in between graduating college and going to medical school to take a year off to just get ready for the eight to 10 years of studying that I was going to need to do. So I took the year off and went to work in hospital administration because I figured it would be at least a good spot to understand the business side of how hospitals work and still stay in the medical world, which look good for my resume and all the kind of things that were relevant to becoming a doctor and getting into medical school. About three months into that process, I realized there was absolutely no way I was going to become a doctor. I just didn't have the same love and passion that I saw for medicine that I saw the nurses and doctors had and just immediately knew I was down the wrong path. And begrudgingly, after all the work I put into it, decided to pivot. You can imagine that didn't sit well with my parents at the time. They had this vision of their first son being a doctor, and it did not turn out to be what ended up happening. So at that time, all my friends were in investment banking. There was no hedge fund World, and it was all investment banking. So I put on a suit and tie for the first time in my life and put a resume together and put my resume out there and try to find an investment banking role with zero experience in anything having to do with finance business, nothing. And ironically, I just got lucky. I mean, pure luck. I found the firm called Wells Hill Partners, hit it off with a couple of the guys there, and got hired as an analyst in investment banking. And frankly, at the time, I didn't know the difference between real estate investment banking, or finance investment banking. It was just like I was so happy I was an investment banker for whatever that meant. And that's how I fell upon real estate, very honestly, is I happened to have found an investment banking job and that investment banking was in real estate. So I spent the next three years really being a numbers guy for an investment banking firm. It was a boutique firm in Manhattan. And that's where I cut my teeth on really starting to understand the financial side of real estate. And that was the genesis of how I got into real estate.

Wow, that is amazing. And Martin, we've known each other definitely over 10 years, and yet what you just told me, I had no idea about you. So, you know, the fact that you came from Johannesburg and that you were pursuing a medical degree, really, really interesting. My brother's a doctor, and I always say, you know, thank goodness he's trying to save lives and I'm sitting here doing real estate. I can't kill anyone, because you definitely have to be wired for that and you certainly have to have passion for what you do. But Martin, let me ask you this, that background, because I believe that, you know, we all bring experience from different walks of life to the table. I mean, you know, all that time doing pre med and even doing rounds at the, at the hospital, do you think any of that helped shape you as a person and prepare you for real estate?

You know, I think the one thing that I look back on all the time is that when you're pre med, the amount of studying and like, routine education that you have to go through and to set yourself up to be organized because it's a huge workload. Like, it's one thing I learned, you know, because I had friends who were in all different kinds of, of study courses and they just didn't have the workload that me and the. And that I had. Right. They just didn't. And I think learning to manage my time at a pretty young age and learning to like, meet hurdles and re. Meet deadlines, I Think it does carry weight with me still today in the sense of how you need to. Even in real estate, right. It's very different. Right. Again, we'll put the doctors at the top of the top of the poll. But like, what we need to do, we need to manage a lot of different dynamics and different parts of the business. And you have deadlines and you have requirements and you got to get things done in real estate and to win deals, to operate a building, to sell an asset, to, you know, like there's a lot that needs to happen that's very deadline driven. And it's really stuck with me that like, I very rarely will miss a deadline. I may not be the best at it, you know, but nonetheless the deadlines get met. And it's something that I have carried with me since, you know, since school. So I think that has helped a lot in my career. But really where, where I cut my teeth and really learned the business on the financial end was in those first three years of Wells Hill. And I had a couple really smart people working with who I was working for. And they were painful at the time because again, I was pulling 16 hour days for years and it was painful, but I learned a ton and I learned hands on how to put models together. And still today I can work my way through a model even, you know, 25 years later. You know, I'm sure things have advanced significantly, but nonetheless, like when, when my analyst or associate sends me a model, I can flip through it and understand how it's working and manipulate it and get to, you know, run sensitivity analysis myself so that I get comfortable with, with numbers that we're putting forth to other people. So those first three years I learned a lot about the finance side of the business, but I never really understood what the numbers meant. And I'm not sure if that really resonates with you or with some of the listeners, but I'll give you an example of what I mean. I think it was like a year or two into my role there as an analyst and I clearly had just pressed the wrong number, right? Like Instead of writing a one, I wrote 0.1, right? And that's not a small mistake when you're analyzing numbers and you're using valuation tools. And I walked into this meeting and presented my numbers and they made absolutely no sense, right? Like I valued some asset being worth a billion dollars when it should have been 100 million. And it just like I was like, but that's what the numbers say, right? Like it's just like that's what the numbers say. And so the next step in my career was I went to work for a large family office that owns 30,000 apartments and 10 million square feet of office in retail. And we're building 3,000 single family homes a year, like a big family office that had been around for 50 years but had none of the financial side of it. And I'll tell you another story because it really relates to the first one. I came in there as this like fancy investment banker for them, right? I was going to run their numbers and I was going to work on some of their. My role was to come in on the financial side and my ask was like, let me experience the actual running of the real estate, the operations, the construction, the management, the development. And so it was a very good. That was the next five years was heavy on that side of the equation. But I walked in probably like six months into one of the senior principals of the family and I had prepared this fancy spreadsheet with all my investment banking experience. And the guy took a napkin and he took a pen and he wrote down, I want to know these six numbers. And if you tell me these six numbers, I'll tell you if I'm going to do the deal or not. Your spreadsheets you can go talk to someone else about, but give me these six numbers and if these six numbers make sense to me, we'll do the deal. And that's the opposite spectrum. And at the end of the day, after my five years of learning what those numbers meant, the truth is he's right. And again, you need all the rest of the numbers because they're very, very relevant. But at the end of the day, if the high level metrics just doesn't make sense, you can put together whatever spreadsheets you want, like the other, like it won't matter. And so I think when you put it together for me, the things I always look back on was like, if you, if it's really great to understand the numbers and to be able to prepare numbers, that's another thing to really understand what those numbers really mean. Like what does it really mean when you're looking at a expense and it's a repairs and maintenance expense and you have $50,000, does it mean you're, when you dig into that number. Now we, now I know that a lot more and you own real estate, you know, like, does it mean that you're turning over X amount of units, you're operating, you know, this many square feet of office and retail, like how many, what's the lighting, what's the paving like when you understand the numbers inside of the spreadsheet, that's when you really have mastered sort of what it caught, what it means to own the real estate, be successful with it and really make any money on it.

You said so many good things there and I hope our audience is, is taking notes because first of all, the fact that you did have the background and know how to do the underwriting yourself, and that was something when I started out in the business over 20 years ago, yeah, I was doing the underwriting, I was putting together the valuations. So to be able to look at a model and understand what are those key drivers that you're talking about, to see if it makes sense is, you know, is essential. Even if you're not going to be doing those actual models in the future. You know, starting off as an analyst is a great way to break into this business. But you know, in the same breath, to your point, you know, you can get a model to say whatever you want it to say, even if you have all the decimals in the right place.

James, I've created a bunch of models to say what I want to say. It doesn't mean that it means anything at the end of the day. Right. But to your point, you're right, you, you're 100% right.

So you have to have a good gut on what is going on in the market and that kind of back of the napkin type underwriting where, okay, these are the metrics that I really need to focus in on and what I'm looking to achieve here. What's the inherent upside in the deal? Where can I take this and really understanding what's behind the comparables. I think those are kind of the guidelines then the modeling is what, you know, justifies, you know, correct and you can kind of, you know, okay, now that we kind of know where we want to be, that can help fine tune the numbers.

So and one other thing, like on that note, like, I think also the ability to understand, like it's really great to understand the high level numbers, but then to also know how to financially engineer better returns is another huge part of the business.

Right.

It's, it's one, because we shouldn't say that the numbers aren't super important, the financial spreadsheets not super important. The, the ability to properly financially engineer better returns is a very important part of owning real estate.

Totally agree. And it's especially going to be important to your financial partners, your lender and the equity out there. So you bring Up a lot of great points. So talk about working for this family office. So this was your transition into real estate full time. I mean 30,000 units, that's, that's, that's a lot of units that would probably put them up there, you know, one of the top 20 owners in the country I would guess. So what were you doing working for the family? Were you asset managing? Were you going acquiring? Talk to our audience a little bit about how you started off there.

Sure. So I had, I had a really fantastic experience there. I'm very fortunate to have, have had, had the experience and relationship with the family that I had there. They basically gave me an opportunity every year almost to sort of try a different part of their business. So I started in the business with property management of about 2,000 apartments and about a million square feet of office and retail. And it was pure property management. I worked for a really fantastic guy who was one of my main mentors in my career on the management and construction side. Just an absolute sharp guy, sharp elbow guy, tough guy. And frankly, I think in that business of property management you need to be that it's a tough business. And learned a lot about the operations and all the things that I was sort of talking a little bit about earlier about understanding inside of what a repairs, maintenance number is like. I really got to granularly understand exactly what it costs to operate real estate, the impact of, the impact of occupancy, short, you know, going up and down and turnover and does it make sense to allow turnover to happen versus not happen and you know, how to, how to minimize cost and you know, so it was a very important first year and I thought it was a good place to cut my teeth. And obviously I was reviewing, you know, every build that came in and out of those projects and I'd wake up on, you know, I used to say my, I hated snow days, right. Because I was in New Jersey. This portfolio, like I'd have to wake up on a snow day and drive to New Jersey and yell at people to get out of bed. Who wants to get out of bed at 5 o' clock in the morning and shovel sidewalks and. Because a lot of garden style apartments it was, but it was, you know, it was, it was learning the business from the ground and eating lunch with the staff and you know, and getting to know what everyone's background is. And I say all the time, like, I have the utmost respect for, for people at every level of the chain and I, and I think everyone's even equal along the way to make Something successful and something that I learned super early on in that position was frankly the guy who was like cleaning the sidewalk was almost as important as the person who's leasing it. You know, there's so many different reasons like, you know, so everyone has a role in, in the operational side of the business and each one of them is almost equally important to the next. And the properties that ran really smoothly had really great teams and the ones that didn't, had teams that were, that were just, they didn't have great, you know, people weren't into it, you know, and I found people along the way and it still sticks with me that love their job at every level. Like, you know, it's pretty amazing the kind of people you meet along the way when you're managing that size of a portfolio. And there were hundreds of people along the way that I was, that I was interacting with and it was, it was a super great experience. I then transitioned into single family home development. I got involved in about a 20 unit plan development where I went through the planning approval process, the design process, the architect, you know, the full, the full process of getting, building a set, a set of plans together to price, priced out a job and built about 20 homes, which was a super interesting experience and was on site every day and you know, again, just a whole different side of the business. So that was about a year, year and a half. Then I did something very similar on a ground up multifamily 180 unit rental building in Englewood, New Jersey. So I actually was, you know, did the same process and was there from the beginning through the end. And all the while I was like building in this growth for myself within, taking on more and more of the management side of the business and sort of trying to figure out how to make it a little bit more institutionalized because it's a tough business and like trying to figure out how to, how to take such an enormous amount of data and bring it up into something that's easy for someone to understand so you can make smart decisions. So that was a big part of like the job. While I was sitting on these jobs and sitting there, I was still managing a bunch of apartments and, and commercial space. So it was, it was really great and I was super busy doing all of it. And then my.

So how did you do that? I've got to ask. So you were trying to institutionalize a family business. So are these putting systems in place, reporting just maybe you could expand a little?

Yeah, yeah, sure. There. It wasn't just me right there was a group of like five, six people who are working together to get better accounting systems, better reporting systems, you know, from a lease, from. From a leasing perspective, from a revenue perspective, putting budgets into place. Like, you know, there was a lot of technology at that time, and it was a good, it was probably a good 15 years ago that was just coming into the, into the market. And we were trying to transition a lot of the original data that was paper, right. It was all paper back then into something was a lot more streamlined with technology and computers and, and stuff like that, so that you could create a dashboard that had every single property and how many vacancies and, and what the, what the, what the rents were before, what the rents were now, what the concessions were. Like, that kind of stuff wasn't so available 15, 20 years ago by pressing a button. So we were trying to use spreadsheets, we were trying to find technology. And, and so we would spend a lot of time, this group, like, you know, trying to get that stuff done and slowly but surely transitions into new accounting technology, into new marketing and advertising technology to track leads and all that kind of stuff.

Perfect. And I know we'll get to your story today where you have some of the biggest institutional partners out there. So I know a lot of our listeners who might have their own privately held investment platforms where they've been raising money with friends and family, but they want to graduate to that institutional capital that requires. Requires that type of reporting. You know, I, you know, we can definitely, you know, circle back to that, but. Okay, so go on. So from there, did you at any point say, hey, I want to go out on my own and this on my own or kind of what, what was, what was after?

Yeah, so. So the last year there, just to finish out there, last year there, I got into some purchasing of land in Manhattan and trying to put together some development sites. And that's what led me into Manhattan. That was my inroads into Manhattan. And then it got to a point where I really felt that it was, you know, I had gone as far as I could there and had the best experience that I could. And I really felt comfortable that I could go do this on my own. And it wasn't the best of times. It was like at the end of 2008, beginning of 2009. So it wasn't the greatest time to make that decision, But I made the decision. I left the family office and tried to start a business in the beginning of 2009, which was pretty tough time. So my first year or two Was very challenging. Obviously was looking back all the time being like, was that the best decision or wasn't it? But then let's get to 2010 when I started Silverstone Property Group with a couple of other partners. And in hindsight, that landed up being the best time. You could basically start a company. Right. Because we're coming out of a terrible recession, for lack of a better word, probably. And there was a lot of prices that dropped dramatically. People were a little bit shy from gunshot to do anything. And I had no problems. I was fresh and had no problems and landed up buying my first building towards the end of 2009, maybe beginning of 2010, was a small little 20 unit walk up building on Suffolk Street. 166 Suffolk Street. I always say this, we had to raise about $900,000 of capital and it was the hardest $900,000 of money I've ever raised. Right. It was your first deal. You don't have a track record, you don't have the hundred person company behind you that we have today. And it just was a very much passing the hat to friends and family saying, hey, trust me, I can do this. That was my first deal. My first deal was a 20 unit walk up building on the Lower east side. I did every single thing in when we purchased it, I was the manager, I was the construction guy, I was the leasing person. I did every single thing. I lived on the street of Suffolk street every single day for a year. And fast forward my next deal because I lived on the street, I got to know the super of the building across the street who introduced me to the owner of the building across the street and purchased the building across the street, which was 157 Suffolk street and that was the second building that I ever bought which is like a 30 unit walk up building. And again, you know, I was like, I did so great on that one. That one did great. I'm just going to, we're going to buy this one. And that then snowballed into over the course of the next two years, probably purchasing 15 buildings like that, you know, all sort of the same size and shape and going through the same renovation program and you know, sort of rinse and repeat type of concepts. Wow.

So. And I really appreciate your sharing the first acquisition and how challenging it was to raise those first dollars when you didn't have that, you know, that track record. So that, that first $900,000 was that, you know, was that 10 investors? Was it 20, 25 investors? And were these, when people say friends and family, I mean that, you know, are these literally people you went to college with, business people? I mean, I guess, using your whole network?

Yeah, I mean, it was, it was probably somewhere in the range of like 10 to 15 investors. And you know, myself and my partners at Silverstone, you know, literally went to fathers and brothers and cousins and college roommates and said, hey, we, you know, we're going to put this money together. And we did. And, and to our collective credit, it landed up being a very successful investment. And it just snowballed and frankly.

Right. Within a couple, within a year. And part.

I think we sold it. I think we sold it within no more than two to three years. Probably took a year to go through the renovation, another year to stabilize it. We probably sold it right away.

So did you refinance it? Do you remember to go buy across the street or did you raise more money? And I guess your investors already knew that, that you had demonstrated some kind of track record. And did a lot of them come with you to the next acquisition as well?

Yeah, so we didn't use any of the capital from the first deal to fund the next one, but we then had really clean. I mean, it's all about data, right? We're talking about it earlier like, it's all about data. Like, I had very, very good data. I mean, who had better data than me? Like, if you do this to this building, this is what you will get. Right? And I could point across the street and it was really clear. So, you know, the next raise was, was with some of those investors and a lot of new ones and, and the following one was the next and it just sort of snowballed. It was, you know, you get into a network of people and you do well by them and you're transparent with them and you give them information and they feel comfortable. You know, they then introduce you to their network. You know, it's a very organic growth when you get into that business. And we, we, we had some really good timing. I said it before, I say it all the time. That timing is so important in any investment you make. And in real estate, it's no different. You could buy a piece of real estate at the best time and do nothing to it and make money. And you can buy a piece of real estate and do the best job to it at the wrong time and make no money. It's very timing oriented. So the timing was right. 2010, till, in my opinion, almost 2015 was a huge growth pocket in New York. And we benefited from that significantly.

No doubt. But clearly you were Doing something right with the way your hands on management approach. But even with that to acquire and I think you said 20 or 30 assets, I mean you're in the most competitive market in the world. I mean those were great years, as you said to buy, but there was also tons of competition and I'm sure you were going up against the families who were writing the checks themselves, whereas you still had to go out and raise. So how did you convince the brokers, the sellers at the time that you were going to perform? How did you manage to win all these deals? What was your key to win at the end of the day in what I would imagine was still a very competitive environment?

Yeah, I always think that relationships is what wins deals very honestly. And over the course of those next three to five years, I just built really great relationships like even yourself. That's when we met, we met around that time and we're still today we still connect every month and say hello to each other and check in and frankly, we probably haven't done business together in several years, but we still say hi to each other and still concerned about each other. And I want only the best for, for you. Right. And I really feel that way about almost most people we work with. Right. It's, we have long relationship with people. It's a, it's a long game in this business and you're going to lose someone, you're going to win some. And we really spent, I spent a lot of my time personally really cultivating those relationships with the brokers and getting them comfortable that we were going to execute. To your second point. Right. And we got to the point where I was really comfortable putting up hard money, which is what you need in New York. Right. You got to put up hard money to show up to the deal. That's what people want to see. And I got really comfortable doing that because I knew, I could feel that we had real momentum behind us and I could feel that we had the ability to really raise capital and that's really what got us most of the deals. It was understanding the real estate quickly, understanding what you could do with it, and moving really quickly to tie it up.

That makes a ton of sense and could not agree with you more that it's all about the relationships. And you know, this is a business where, you know, your reputation, your track record is first and foremost and as big of a city as New York, you know, word travels fast. And if you know, if you can't perform, you know, or you tell someone something that you know isn't Right. I mean, that, that, you know, can definitely haunt you. So I'm doing everything right and making those connections and, you know, one success leads to another that's, you know, certainly no doubt a key to your success. So where do you go from here? I mean, you, you've, you know, you've got a great business going, you know, you've done a ton of acquisitions, but at this point, I would imagine you've got your sights on, know, even raising the bar further and started to do, you know, crack into that institutional level. So.

Yeah, so one of the things that while we were doing this, I think it's important because, like, I never, I never gave up on sort of what I felt was important, which is, I think it's really important to own and operate your own real estate. So while this was happening, we were really building a very strong management, construction and leasing division. Right. So while this was happening, I was building up an infrastructure behind me that was very relevant that could operate the real estate. And that was a lot of the experiences I had at the family office at the time, you know, so that was all in the background. Just so it's important to know.

And so third party as well, or is this just for your own properties?

Just for our own properties. Got it. Okay. And then what happened was, you know, I had a relationship with a broker, a long relationship with one, you know, @ the time was long, right? It was three, four years. Who called me up on a weekend and was like, I have a big building that I have been in on, but we need to sign a contract over the weekend. And I was like, well, that's a tall order, right? And it was, it was 247 East 28th Street. That was my first purchase of a doorman, elevated, you know, large scale property, and again, spent an entire weekend working, diligencing all the things you needed to do. I had a handshake deal with the owner that if I negotiated with him a contract at, you know, over the weekend and he would give me until the end of the day on Monday to put up a deposit and he would not go back on his word. And so what happened was I said, okay, so we diligence it, we ran after it and then on Monday negotiated a contract and put up a deposit by the end of the day on a Monday. And so interestingly, to his credit, and I give him a lot of credit. And his name was Arnold Sampson Management. I'm blanking on his last name. Arnold. I'm blanking his last name. He was approached by multiple people? Yes, on our gold team. So he was approached by multiple people on that Monday because word travels fast in New York about a deal. And people came and offered him a lot more money than me. And he called me and he said to me, I'm happy to take this money and split it with you, but I will honor my word. And I'm like, I don't want to split the money. I want to buy the building. And he held his word and we signed the contract and he gave me the names of the people who called and he's like, now they're yours. And the people did come call me up the next day and were like, we'll pay you X amount of dollars more. And so to his credit, I give him credit. I don't know how many, I don't know there are that many sellers who would have done that. Very honestly, because it wasn't small money. It wasn't small money that was being offered.

What was the. Can you talk about the need for the urgency? And then how do you do, I mean, to diligence a large scale apartment building is, is usually a week's worth of time pouring through files, every single apartment, looking at the records. I mean, how do you get through that over the course of a weekend?

Yeah, I mean, we just threw, I threw every resource I had at it. We hired people outside to resource it. I mean, we were in their management office from Friday until Monday diligencing it. I got an environmental guy in there Monday morning who just gave a verbal right, like we just ran with it. Now again, dealing with an institutional quality asset. A lot of that information is a little more there because there's financing on it. So we got the old one, the old environmental, and we got the old appraisal. So a lot of that information is there. You obviously want to make sure nothing has changed so that you got to, you got to sort of spot check it. And the lease review was just a very time consuming. I think we had 10 attorneys in there reviewing every single lease and making sure that it was clean and what we needed for it and so on and so forth. So, you know, we did what we had to do. And that was how we broke into sort of the larger. That was my first larger transaction. I broke into that, you know, 60, $70 million deal as opposed to the 10 to $20 million deal. And you know, fortunately, I think we, we bought it at a really good number. And we were, I was able to get introduced to, you know, a family office that, that took a little Bit of a, of a risk with us in terms of our operation because we hadn't done something of that size, but we at that point had owned a reasonable size portfolio and they came in as an LP investor of significant size. That was the first real significant investment made by a group in me and the company and that was the first big purchase.

So talk a little bit about the timing on that because to do a JV agreement for, for an LP to really do their diligence on you and the building, I mean that could take months. So I mean, if the seller was in such a hurry to get a contract signed, I don't know how long of a window you had to close it, but I would imagine that you really had to push things to get things done with the partner and get them comfortable by closing as well.

Yeah, I mean we probably had, I don't remember exactly, but I'm assuming it was a normal sort of 60 to 90 days to close the deal. But look, it was a, it was a steep, like, you know, it was a quick lesson. Right. And frankly I had a really good partner. Like I don't think the partner was trying to take advantage of us very honestly. I think that they probably could have, knowing what I know now versus what I knew then, like that, you know, there are a lot of things that someone could have done that would have been a lot more damaging to us in terms of the jv, but, but they didn't and they, and still today they're partners of mine and we still do business today. So I think, you know, lessons learned. Again, what we're saying is like, you know, your reputation takes you a far, a long way. And this company, you know, still today it's RWN Real Estate. It's, you know, like I'll share because they're, they're good friends and they're good people and, and I've introduced a lot of really close friends of mine who are in the business to them, who's, who are partnered with them. And you know, that kind of thing is a good thing and it goes a long way.

Yeah, and we've had Ari Shallum on the show. He's an amazing person. In fact, I was going back and forth with him on something this morning, but talk about for our audience, the benefits of going with an institutional partner like an rwn, as opposed to continuing to just grow that friends and family network. So I'm sure with the friends and family, you probably can drive better economics because someone get 50, 100,000, you know, they're not going to over negotiate, you know, an agreement. This is, you know, I'm happy just to get in the game. Now you got that probably takes a lot more time to go line that up compared to, you know, one LP where you get all the money at once. But you know, then you're talking about maybe not as good economics. Certainly they're going to be looking for some pretty heavy duty control rights. So maybe just talk about the pros and cons of each.

Yeah, sure. So I think you hit the nail on the head. I think the biggest reason, for me, there's a couple big reasons, but one of the biggest is time when you're starting to raise more significant sized capital. The time needed to raise that capital means you're losing out on something else. So the ability for someone to write a check that's sizable. Let's just talk some round numbers, right. I think that anything north of like $20 million check size is where you start to get into the institutional world. A lot of it's north of 50, but 20 is where you start to find some LPs that there's. That that makes sense for, you know, it's really hard to pass the hat around for $100,000, $200,000 increments if you're trying to raise $50 million. I mean, that's a lot of phone calls. That's a lot of. And by the way, every investor is entitled to that phone call, right? If they're investing 50 or 50, 50,000 or 50 million, they're entitled to their phone call. And so to your point, time is key. I think the professionalism and understanding of the real estate and the transaction also helps the overall success of it. And a good LP will actually add value on the operations and the financing side of it as well. So there's a lot of positives to that, the negatives. To your point is you do lose control of major decision making, which I think can be hurtful. But I do think that 99.9% of the time your interests are 100% aligned. So I really think the major decisions that are relevant, which is when do you sell an asset, how do you finance an asset, you're really interest aligned. So I think that gets me comfortable in dealing with loss of that decision making. And I think the benefits will outweigh the negatives on a larger transaction, on a smaller transaction, we'll still go and raise friends and family money because I think that frankly, those are the group of people that helped us build our business. And I think that they should be entitled to access to deal flow and potential profits the same way anyone else is.

That's really great and so true. So maybe we could talk about now how you started diversifying your portfolio as well. So I mean, you reposition some of the most significant multifamily assets in the city, but also with your partner David Schwartz, you've done some significant ground up projects. So we've had some developers on the show before, but again, building and everything that goes to sticking a shovel in the ground. I mean, this is a whole new ball game. So what, you know, what attracted you to ground up development? Is it the kind of thing that you would tell our listeners? Hey, you know, you really don't want to go into this. You have, you know, the construction background, but maybe talk a little bit about that.

Sure. So, you know, we, our portfolio now is about 4,000 apartments and I would say about half of them are existing multifamily and half of them are ground up development. Right. That's basically the metrics of our, of our portfolio. And both myself and my partner David come from a development construction background. And so, you know, we've always wanted to buy land and build buildings. It's a phenomenal experience to go through to buy a piece of land, design what you want to, exactly how you want to from, from every inch of the way, unit sizes, finishes, amenities, all those kind of things. It's really an exciting process. The construction side of it is always the hair on it. Right. Because that's the, you know, you got to really know what you're doing there. And you got, and there's some, there are variable risks that you can control and some you can't. And so sometimes you're going to run into deals that are just uncontrollable and some of them are controllable. So you know, we really, we started to really spend our time in Brooklyn because that's, that was sort of Williamsburg wasn't what it is today and nor was Bushwick and East Williamsburg and Clinton Hill and all those neighborhoods. And we started to really pursue land because we were seeing that there was a dislocation between sort of the yield on cost that we could achieve on a ground up development deal versus what we were putting a lot of effort into some of these rehab deals. So we built out a development team and sort of fast forward a little bit. You know, we really, we now have built out a full construction team. So right now our company self performs our ground up development again only for ourselves. We've built out a Full property management team, a full leasing team, and a full asset management team. So, you know, we really have built out a fully integrated company that can handle every aspect of a project from start to finish. And I think ultimately that was our goal. Our goal was to have enough mass to be able to really control every aspect of a real estate transaction from start to finish.

And now your business is multi pronged. You're lending, you're doing affordable housing, you're buying in other markets. How did you decide how to grow your business? Because you could have just continued to expand on acquiring more multi, building more product in the, in the city, but now diversifying. Talk about how you decided to go into these new business lines.

Sure. So I think, you know, I think the one big lesson that I, that I learned early on in my career was when I first left the family office and went out on my own. It was a really tough time.

Right.

Because it was the end of 2008 and it was like beginning of 2008, it was a really tough time. And what it taught me was you need to diversify. And we're seeing it again now, unfortunately. Right. And what we, what myself and my partner thought about is there's going to be a time where buying multifamily buildings isn't the smartest thing to do. There's going to be a time where building, buying a piece of land and building isn't going to be the smartest thing. And so how do we diversify our business but stay true to the core of what we know, which is, in our opinion, we stick to residential properties. And so affordable housing is a residential asset class. Right. Homeless shelters, which we've gotten heavily involved in, are a residential asset class. When we're on the lending side of the business, we're focused on residential lending. So we've stayed very true to the things that we understand, the information that we have in our portfolio that allows us to be smart and sharp of what's happening day to day. But we build different business lines. So right now, you know, our lending business is doing phenomenally. We're extremely busy, we're putting out a tremendous amount of money and it's been very successful for us. Whereas we're working every day to keep our existing portfolio stabilized and alive because it's a very challenging time in New York for multifamily. But it doesn't mean that we're not still growing. And so we're growing a lot. We're really focused on social impact investing. We're really focused on trying to Grow into one or two other markets on the residential side. So we went into California and we started to buy some multifamily, went back to sort of what we did originally, which is let's go in, let's buy some older product, go through renovation plan and retent it. So we started to do that. That then led into us being able to lend on someone else who was doing the same thing. So we really stayed focused on what we know and what we do. But we've branched out into every possible aspect of it that we think we can try to generate revenue from.

That's awesome. And it's been really exciting to watch you all grow and be able to get involved in pretty much every aspect of the capital stack. And again, stay, stay nimble. But again with the focus with residential. So, Martin, you mentioned earlier in the show, I mean, you've got 100 people now who work in your office. You know, especially for those who are out there, maybe they're in college and looking to come out into the, the workforce. What do you look for in a candidate? And you know what, what advice would you give for someone looking to get into this business?

You know, I, I think that to me, the first thing I look for is someone who's hardworking. Personally, I think someone who's really hardworking can work through a lot of other deficiencies that they may have. Like, even myself, like, you know, I often view myself as, you know, I really work really, really hard. You know, I'm working all the time. I wake up at 3 o' clock in the morning and unfortunately take my phone and start working, right. And put it away to make sure that I can get back to sleep. But it's just like, it's something that just been, you know, it's been inbred in me and it's something that, so it's something that I focus on. And then I think you really need to focus, you need to pay attention to what you really want to do. I think it's really hard when you first come out of school that it's very scattered. It's like, you know, I want to be in real estate. Real estate's a, it's a big place, right. And I, I just from where my experience, like I stumbled into just the financial side of real estate. So like, I think that it's important to pick one or two spots within sort of real estate if that's the direction you want to go and really hone in on that. And it doesn't mean you're married. To it forever. Right. It just means that that's where you're going to spend your time and really get some master of that specific part of it before you move into the next. And then once you have enough of experience, you'll either get lucky along the way and get some success, or you'll have put together a plan for yourself that you can then take and do something with.

It's great advice. And I'm a big Gary Vee fan and, you know, he talks about, you know, his secret to success, which is really that hard work where there's. There's just no substitute for it, and execution, following through and delivering. So, you know. So true. Martin, what? And we only have a minute or two left. But what would you say your other keys to success are, you know, above and beyond hard work. What do you think has allowed you to get to where you are today?

So I think one of the things that I've really focused on in my career is being transparent and honest. I think it's something that isn't spoken about enough in the business. When things are going great, you can be transparent and honest about it. When they're not going great, you should be equally transparent and honest about it. And I think that it's led to a lot of success for us, very honestly, because when you're making an investment or you're getting into a relationship with someone, it's for the good and bad, and hopefully it's more good. And thank God for us. Knock on what it's been good, but there haven't been without a couple of roadblocks along the way and some speed bumps that we've had to get through. And we've always really tried to be transparent, and I personally try really hard to be honest and transparent with my investors, my employer, my employees, my friends, my family. Like, it's just a very important thing for me that I think leads to good communication is another very important thing for me. I try really hard, as my career has gotten further along the way, like, to communicate clearly what you're trying to achieve, what your ask is, what's being asked of you. I think those. You know, to me, there's a lot of interpersonal skills that come into the business that aren't just sales. Sales is another one. But to operate the business and have a real company that operates, that everyone's pushing the ball in the same direction. That comes down to some interpersonal skills.

That's fantastic now and could not agree with you more. You know, your integrity in this business is paramount. So, Martin, this was awesome. It's been great. So great knowing you over the years and you too, make an effort and I know our audience is going to get a ton out of this. So we just really appreciate your being here today.

Thanks so much for having me, James. I really appreciate it.

Thank you again. This is your host, James Nelson of Real Estate Investing Live from New York. I want to thank you all for joining us this week. Please tell your friends and leave a rating or comments if you haven't already. Please connect with me at James Nelson nyc, whether it's on Instagram, Twitter or link in with me. And please feel free to ask any questions or share your thoughts on this and I'd be happy to answer them on a future show. Until next week.

Thank you for tuning in this week to Real Estate Investing Live from New York. Please 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 on Wednesday mornings at 7:00am Eastern Time and 4:00am Pacific Time, as well as always on Demand. We'll talk again next week.

Sam.