92: The Enthusiast - Atit Jariwala

Foreign 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 92 of Real Estate Investing Live from New York. This is your host, James Nelson. I am principal and head of Tri State Investment sales for Avis and Young. Thank you as always for joining. It means so much to me. And for those of you who have already checked out, My newest site, jamesnelson.com this is a resource hub for you. I built this site to help you have all the information and tools that you need to be the most successful investor possible. You can find all of our podcasts there, but you can also find an exclusive video series. If you sign up on the website, you're going to get a step by step guide on how to invest and gain the insider's edge to real estate investing. So for today's show, you are certainly going to learn those traits as well and those skills from Ateet Jeruwala. I've entitled this episode the Enthusiast because that is what atit embodies the passion, the desire that has fueled him throughout his career and for him. He talks about all the hard work, but he talks about how he loves the business and that certainly is what keeps him going. He also has an incredibly interesting perspective as he is also a startup venture investor. So he also has a lot of visibility into the technology space that has helped being fueled the real estate business. Lastly, I'll say you definitely want to listen to this episode. Throughout he gives a recap of the time that he negotiated a lease one on one with Tesla's Elon Musk. You're going to want to hear this. So we're going to have a brief word from our sponsor and we'll be right back with that episode with ateet Jerry Walla. 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 people. 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 is my friend Ateet Jarawala, who is CEO of Bridgeston holdings, which is a hospitality and real estate firm. Ateet is an enthusiast who operates, owns and invests in a multitude of business types and asset classes as well as in technology ventures that intersect with the physical world. With a national portfolio Currently valued near $1 billion, Atit has owned and operated over 50 hotels, dozens of office buildings, industrial parks and residential buildings. With an unwavering entrepreneurial spirit, Atita has found numerous startups and is an active venture capitalist investing in many technology startups. He's also an honored board member of one of New York's largest nonprofits, the Henry Street Settlement. And he received his MBA from Stanford as BA From Yale. So we're going to get into all this and welcome and thank you for joining us today.

Ateep thank you, James. Glad to be on and seeing you again. It's been a little bit.

Absolutely. I can't wait till it's in person again. I know what it will be soon. So ati, tell us, where did you grow up?

I actually grew up in Bridgeton, Missouri, actually in St. Louis, Missouri. And there's a town called Brixton where my parents had an Econola motel that they managed. And we grew up there in two rooms. I kind of lived there for the first years of our lives and that's where I kind of grew up. My chores in the motel were cleaning rooms, doing laundry, run the front desk. So I kind of, I haven't been able to shake real estate since those early days.

Well, I'm like envisioning Schitt's Creek here. I don't know if you, I mean, am I anywhere close? Is that next to each other?

Yeah, I mean, sort of. It wasn't that bad. It wasn't that bad. Although I will say that there was quite a few guests that came in with just cash wads and I didn't understand why so many people had cash and you know, all the time. And there were some maintenance issues, but the motel was a little bit better. Well run Although, kind of lodges aren't that great.

Well, I mean, I'm sure growing up around that, I mean. And you said you were pitching in at an early age. So were you. I mean, you were really learning the business from the ground up.

Yeah. I mean, from the time I could walk, you know, it was like, what? Those are the chores we would do. You know, it started off with picking rocks off the. The pavement or, you know, picking weeds out of the grass. And then it obviously went up into laundry and housekeeping and kind of every role you can imagine in a motel.

So you end up getting your BA From Yale. So I've got to assume going from the St. Louis area kind of. I guess it's kind of a rural area to, you know, going to one of the best colleges in the country, if not the world. I mean, I've got to imagine you were probably a stellar student. I mean, what was your path to get there?

Yeah. So to get to Yale. So I'll validate for my class. I played tennis. I played oddly. I played ice hockey for a year in high school, and I did track for a year, too. I played the trombone as an instrument, and I. I was involved with a lot of the class clubs. I was president of probably half the clubs. And so I was just very actively involved while also working in school. I never visited Yale. My high school really never sent anyone to Ivy League schools. Ivy Leagues didn't come and recruit. The only reason I applied is I was going grocery shopping for my mother one day, and there was this US News and World magazine report in the aisle before checkout. And I'm like. It said the college report. I'm like, oh, okay. You know, I was like a junior. I was like, why don't I. Why don't I pick this up and look at it? And I. I flipped it open. I looked at the rankings, and that year, Yale and Harvard were tied for number one. But Yale's acceptance rate was higher. So I was like, okay, well, I'm like, I got this SAT score and I got this gpa. Like, why don't I give it a shot? And so I. And I was going to only apply to one because, you know, I didn't think I had a chance. Anyway, so I called Yale up. They mailed me back in the day. They mailed me the Howard application. They had the electronic application, but it wasn't widely used. And I typed in my application and sent it in and got in. I never visited the campus. It was great. It was kind of crazy. Wow. Wow.

So you just show up to school. You'd never been to the campus before. What kind of adjustment was that like then when you showed up?

You know, it was, it was a pretty big adjustment. I went to a high school that, you know, it was a great high school. I mean, in terms of friendliness, everyone was nice, it was safe. But it wasn't a high achieving high school. It was just, yeah, it just was a normal school where athletics were more, you know, pronounced than academics and, you know, and so going to a school like Yale, where a lot of the folks have learned a lot, you know, half the school probably goes to private schools and they learn so much. I remember one of my roommates, like they were taking something I thought was crazy. They took Shakespearean literature in their junior year or something. High school. I'm like, I took English three, you know. And so it was, it was a bit of a, in the diversity was, it was great, you know, and so like, I think I was one of like three minority students in a 300 person class. And so, you know, going from, going from that atmosphere to a place with very diverse, lots of different cultures, different academic backgrounds, but it was fun.

So did you know that you wanted to pursue business? I mean, was that a passion? I mean, did you ever think go back and work in the family business and maybe, you know, expand the hotel portfolio? Was that in your mind?

No, it wasn't. At the time I kind of wanted to just do my own thing. I wanted to be able to figure it out. And I was getting a liberal arts degree and you know, I didn't know what that meant. You know, frankly, I come in, I came into it without knowing what I wanted to do in the future. And so I really just had my friends. I remember one day, one of my friends, his name is Rudy, he was like, hey, Goldman Sachs is having a information session on investment banking. They're coming, right? I'm like, what is investment banking? Who is Goldman Sachs? What are you talking about? Like, we never heard about that stuff in Missouri, you know, like that this was not where, you know, not common. And so, you know, I'm like, fine, I'll go. He's like, basically he said, this is what, this is the job. Everyone does this in consulting, you know, from, you know, from Yale. If you're a business degree and you're not going into academics or medicine or something, or going on to further education. And so I went to the, I went to the information sessions and I ended up working in investment banking out of college at citibanks invested and so I took that job. Just think I was going to be an investment banker and at the time you have to go to different groups. You do this like little thing in the first six to eight weeks where you meet different groups. And given my background in hospitality, I worked at the motels during summers and stuff. The real estate lodging group took a liking to me and asked that I joined the group. And so I ended up being in their real estate lodging group at Citibank's investment bank. And so that's kind of got me into finance here in New York.

Was real estate in the picture at all? I mean, obviously Citi, you know, one of the biggest lenders out there, I mean was that. Did you ever get any exposure to real estate while you were there?

No, just the capital markets, just M and A and fundraising basically, you know, just like IPO secondary offerings in the public markets for these large real estate companies. It wasn't really a real estate job per se, it was more of a capital markets job, understanding how the capital markets work and M and A activity.

Got it. And so how many years were you at Citi before because your next move was to get your MBA from Stanford? Is that where you went next?

So I actually worked at a couple of investment banks, first with Citi for a year and a half and then was it a company called Wells Hill Partners, which is a boutique real estate investment banking firm in New York for two years. And that was more granular at the real estate level where it really understand real estate fundamentals with some brilliant guys there. And then I worked in real estate, private equity at a boutique firm in New York for a couple years and then I went to Stanford for business school.

And why did you decide to go back and get your mba?

The Great Recession, that was really the main reason, to be honest. I had gone a little later in my career. I was 30 when I started business school. And at the time I thought, you know, I was at least at Stanford. Most of the guys there were 26, 27. And I had missed kind of that window earlier, window that most people do 45 years. But I was, I was working in what I thought was I was doing well in my career. So why would I take a time out to go to a business school? I was already learning business but the Great Recession hit and I wasn't doing any real estate deals. So I was like, well, you know, I thought about, you know, business school and so I just applied to a couple firms, a couple of universities and.

Hopefully you visited before you showed up.

I did, I did. This time.

I can't go wrong. If it's Stanford, you'd only be, I'm sure, pleasantly surprised. So what were your major takeaways there? And was there, I mean, these incredible networks? I mean, I'm sure, I mean you look at all the entrepreneurs and we're going to get into some of your tech investing. So you were like right in the heart of that. So was that what kind of started to expose you to that world as well?

Yeah, yeah. I mean, just to step back for a second, I mean the going to business school and from my experience at Stanford was much more than I imagined. You know, I thought it was like something where I was going to read textbooks and learn kind of a little bit more, you know, academics around how business work. What I got out of it was frankly my best friends, a lot of learnings about how business works, some great mentors and a huge, massive network of people that can, they could provide advice. And it helped me out. And it was just a great two years of just getting a breakout of life, you know, and it was less serious, frankly, business school less serious than undergrad because they focus more on team building and management skills versus just, you know, some equation that you have to, you know, calculate in some calculus class. And so like it was, it was, I got a lot out of it. And going to a place like Stanford, which was really helpful to me, is that I was one of the. I was probably the only real estate guy in my class, which was great because many of my classmates that went into venture capital or startups, a lot of them have real estate questions and I naturally was the person they would ask which to get your question, James, was how I got into venture because I would advise almost many of the top venture firms in the country because they're based in Silicon Valley on their prop tech investments casually or connect them with other real estate players and naturally I would get allocations of their rounds.

That's awesome. I mean that's just such incredible experience and I'm sure that has certainly been a big foundation and key to your success. So what did you end up doing after you graduated?

So I started Bridgeton holdings while I was in business school and Bridgeton is a vertically integrated owner, operator, developer of commercial real estate. We own and operate hotels, office buildings, multifamily and some industrial assets across the country. We have about a billion dollar portfolio. You know, we had up to 25 hotels about a couple years ago. We sold in 2019 a number of those Hotels. But we still have, you know, wow.

The timing on this before COVID I mean, sometimes I guess luck can certainly play a big part, right?

It was 100% luck. I did not time that at all. And you know, part of that was just the desire to stay focused. And we thought it was a pretty hot market. And so we had exited some deals back then, but we were. But half the portfolio. Half is probably office and a little bit of multifamily and industrial assets. Primary focus in New York and San Francisco.

So maybe you could tell us about one of your first deals. I mean, what was the size? How did you raise the money for it? I mean, acquisition, you know, I'm sure that had to be a little bit nerve wracking, right?

It was really, it was really nerve wracking. Actually, I. It was a friend of mine that I'd actually met from business school and actually approached me and said, hey, it's a wealthy family. And they said, hey, we have a large international real estate exposure and you know, we would love to have us real estate exposure. And so they said, hey, we want to build a diversified portfolio. So our first deal was a multifamily deal in Kips Bay, New York, these five buildings on 33rd Street. And we bought them from an owner operator. They used some third party management. We managed it and then we ended up selling it three years later and they funded the entire thing.

Wow. So I gotta ask, I mean, if you, you never owned and operated multifamily in New York. And for some of our listeners who are active outside the city, I've gotta say New York, from what I've heard, is the most complicated landscape when it comes to multifamily. All the rent regulation guidelines. I mean, how did this family trust you to go in and execute on this business strategy when you, I mean you had great experience in schooling, but as far as actual hands on operating experience, I mean, this was totally new. So how did you convince them to do that?

We had good lawyers, we got up to speed. I've been involved in looking at a lot of these deals for quite a bit of time. We kissed a lot of frogs, looked at a lot of deals before we closed on that deal. Evaluated a lot of things, got comfortable with rent regulation. Now, James, this is many years ago, so it was less regulated than it was now, but it was kind of a clear path to like that park flow was 40% regulated, 60% free market. So it wasn't a fully regulated property either.

And back in the day that was considered a Good thing that was your upside where if you had rents that were regulated and below market artificially low, that if you could try to wait for vacancy, that you had this incredible upside. Tell our listeners a little bit because I know you deal with a lot of foreign capital. Yes, they want diversification, they want the safety. But what are their considerations when they're thinking about investing here? I mean years sometimes these groups come in, they only want to buy 49% because they don't want to be the owner. There's all this tax treatment, although typically they bring the money here and then I guess their taxes, if it's here maybe, I mean we could spend an hour talking about this. But maybe a little bit the bullet points of what foreign investors are thinking when they come here and ways that they like to come in to be most tax efficient.

Yeah, I mean James, like you said, we could probably spend a day talking about foreign tax structuring and depending on what state and if there's a tax treaty with that country, I'm sorry, which country? Tax free with that country, like, you know, that makes a massive difference. You know, a country with a tax free of the US is a lot easier to deal with from a tax perspective than some countries where there isn't a tax treaty, which has been my case. And in that case, it's a pretty complex structuring of how to get money offshore in a regular basis. Previously we were able to do that as shareholder debt. If things are characterized shareholder debt, you can send it over as dividend payments, not dividend payments, as interest payments on the debt. And the US Tax rules are changing a bit, so we're a bit figuring that out today. But a lot of times you may have to hold the cash onshore and then when the property's exited and complete, you can send it back. And so you are right. A lot of times we just have to keep it onshore until the sale of the asset. A lot of times a lot of foreign capital. What are they looking for is diversity from their own. I mean the US is the most liquid market in the world. It's also the most stable. You can buy title insurance here. You actually understand the risks. You can't get that in most countries. And so people come here for stability. And what we found with a lot of countries is they want assets that generate dividend income, something that where they can get payments on a regular basis or they think they can get payments on a regular basis. There are some other investors that like development deals, they like the upside, but it just it really depends on the family office and like who you're dealing with because it's so broad.

Makes a ton of sense. And I think what you said right off the bat of having good counsel, that they earn their fees with all this structuring and making sure that you don't fall pitfalls. So you end up building this portfolio. And I know now you've got extensive holdings here in New York and out on the west coast. So from there did you just start building a portfolio, you started acquiring some. Was this all in New York City? And if so, was that because that's really what the foreign investors wanted.

Yeah. So that was a big thing. So depends some foreign investors just look at the United States, like, hey, United States, I, I will buy, I want a 10% coupon. I'll buy in Omaha. And that's fine because it's multifamily in Omaha. Great. Some of the investors we dealt with were like Omaha, I've never heard of that place. Like I want New York City, I want San Francisco, I want la, I want dc, I want Boston. And so for our mandate was those major cities. And so we primarily focused in New York and the New York region, Boston and San Francisco with our original investors. Now we invest across the country, or I should say, you know, in between that early stage and maybe a couple a year ago we had invested across the country. We're now back focused on New York City and San Francisco, which, you know, we found that having a concentration of our time and energy has been really helpful as well as having relationships with like folks like you, James, that can show us deals that make a lot of sense for us. Being, being hyperlocal and being understanding and understanding the market and being folks that can see deals in real time as they come up and not having to prove that we're real.

And did you have the same capital partners? Do you have a stable of investors? Was everything kind of deal specific? I mean I got to imagine with the complexity to do one of these deals, it would make sense to do something programmatic.

That's right. So we've done as Bridgetton, we've probably done four or five dozen projects now. So you know, 40 to 50 projects, the first dozen or so was with the same capital partner. And then since then we've diversified it and worked with many other capital partners, institutions, high net worth, ultra high net worth families, that sort of stuff.

And not to try to, you know, pry into your playbook, but just I think, sure, a lot of our listeners are thinking, you know, access to capital might be one of their greatest challenges to breaking in. So you know, for our listeners who have found this incredible opportunity, there's all this foreign capital that wants safety for all the reasons that you mentioned. So let's say they figured out how to access that foreign capital. And I believe you said on the first deal they put up all the money. I mean it doesn't get better than that. So I mean they're posting the deposit, they're taking that risk, but you obviously have to get compensated as well. So to what extent? Just so the listeners can understand structure, is it like an acquisition fee? Is it an asset management fee? Is it some kind of promote? How would you set something up like that when you don't have capital in the deal yourself?

Yeah, sure. So I think so I should have said they put the majority of the capital in on that first deal. But you're right, that first deal they took a lot of the risk that normally wouldn't and in return they got a really good deal. So I say I was looking at the forest through the trees and I wasn't stuck on knowing that I could only do one or two good deals or three good deals. I was like, hey, this is something that I can work with. This partner, we're going to be a win win for both of us. They're going to get a great fee structure, they're going to get better fees in general, but they're going to put up more of the equity. They're going to take greater risks on me as a manager. And it's worked out for both of us, frankly, that capital partner is very happy. We look at deals all the time with them still. And our deal structure is a little different than it was in the first deal because now I put up risk capital today. But like you said at the beginning, it was that capital partner that did take the risk. And I advise that like, you know, don't look at the one deal. You're gonna do many deals in your career. So like, yeah, maybe you don't make a, maybe you're not gonna retire on your first two, three, four deals. That's okay. You got a long career, like get a track record. Because all you need is a track record to really build a business and even shorten.

It's such incredible advice. And you know, I think, you know, maybe for some of our listeners who have yet to make their first investment, maybe they're waiting for that home run deal where, you know, you knock it out of the park. And I think to your point, to Just in the game and get that experience and that track record because, you know, that is something that you can leverage. You get known. I mean, I'm sure we connected very early on because you start, you know, the press that's being generated, you get known as a buyer. And you know, when we, from the broker's perspective, again, when we have someone bidding on a property, we want to know, hey, you know, are you capable? Have you done this before? So I think that was really wise of you to look at the big picture and not say, hey, you know, how do I keep all the economics to myself, this first one? So that. And to do a dozen transactions after with that same partner, I think is certainly a testament to that. So you start off with these multi deals in New York. When did you start building up the hotel portfolio? And I know now you've developed the best hotels and some incredible neighborhoods. The Village. We're going to talk about your latest hotel that you just opened amidst the pandemic, the Walker Hotel. But did you start off kind of converting some of these older hotels and in a flag, maybe explain how that works for our audience?

Yeah. So started off with a couple of hotels in the Midwest that were smaller, got an understanding of the business, started building a small team on how to operate these hotels or branded properties, and then bought a little bit more in the Northeast. A little bit. But really it wasn't until I started building the Walkers where I was really putting out more capital and kind of really taking larger swings. And it was really all about the team, building out a team to manage and operate these things. Hotels are operationally intensive. You got revenue management, sales and marketing, engineering, accounting. And so I decided to build my own team. You know, I wouldn't necessarily recommend that to everybody. You know, it might be easier to outsource it to a professional hotel operator if you're just focused on buying. Because I was, you know, I was born in a motel, essentially, like, I was used to it and it was natural for me to operate. But if you're not, it's a business that you kind of really want to understand, like running a coffee shop. You gotta really wanna know how daily inventory works and lots of staff and whatnot.

I'm so glad you mentioned the operating piece to it because, you know, and I've handled the occasional hotel sale, but I really. It's an entirely separate asset class. It's an operating business. And so, and many of you, I mean, you see these Marriotts all over the world and some of you might be surprised to Know that Marriott probably owns probably a couple percent of the actual hotels that they actually manage. They're basically just there getting management agreements, whether it's the 20, 25 years and they're help you collect, obviously run the hotel and get bookings. But it is worthwhile spending a little more time about because you've also opened some very successful boutique hotels. So the choice of letting someone else manage it and putting a flag and tapping into their booking system and I'm sure you know there's a cost for that, right. As opposed to opening your own flag and trying to fill it. So how do you, what approach did you take for operating?

Yeah, I say that, you know, what I found with the branded hotels is that you're taking someone else's playbook and repeating it and they tell you exactly what to do. And for me that wasn't exciting. It just, it wasn't exciting on a day to day perspective. And I also found that the world was going more towards unique, interesting experiences which you can find on Instagram, you know, prior to Instagram, prior to that, you know, the iPhone, you know, was created in 2007. It wasn't that long ago, you know, people didn't have access. They wanted surety of stay that there was a good breakfast, there was a good bed, there was a good shower. And so they flocked to Marriott's and Hilton's and IHG and all the brands because they created their brand as a consistent experience. What the brand didn't do until recently is realize that now that people can easily check reviews on their phone and see pictures and get recommendations like they're not seeking a kind of plain vanilla experience. Time and time again. You don't really want to stay at a Holland Express so many times, you know, like it serves its utility. And so for me that wasn't exciting. For me, what was exciting is being able to craft a property that attracted guests that I could be proud of and that it's enjoyable to work at. You know, I'm like, I want to work on projects that are fun and exciting and unique and also it's what guests want luckily. So it kind of wins, win, win. So that's why we've decided to go pretty much exclusively boutique. That's kind of what we focus on today.

So I want to jump forward till today just so we can continue the arc of the hotel. I want to go back and talk about some of your office investing and what you've been doing. But you know, I've got a. And you were kind enough to walk me through your. Your walker hotel very early on in the process, and, you know, congrats on its opening. I mean, such an incredible project. But, you know, I mean, you were. You were right in the midst of this. I mean, what. What was that like? What were the challenges to getting this finished and, you know, getting this up and running?

Yeah, I mean, the walkers and being in the hotel business in general, but, I mean, just talk about the walkers. It was painful because, you know, we were in the process of opening. Basically, it stopped open. Covid hits and now all of a sudden, our plans are all screwed up. You know, we couldn't open the restaurant, couldn't open the coffee shop, couldn't open the speakeasy, couldn't open the rooftop, couldn't open the lobby. You know, it's a relatively large hotel. We had staff. We had to make very difficult decisions with our staff, which stinks because, like, we were, you know, just prior to Covid, we were on, like, a company high in a lot of ways. A lot of our properties were doing really well, and that was ramping up. And then all of a sudden, like, kind of demoralizing to make very difficult decisions. And the folks that stuck around have to work in pretty hard. You know, we're in the hospitality business. We're frontline workers in a lot of ways. You know, guests are coming in, they may or may not have Covid, and we're sitting there having to check people in, and a lot of times the hotel would be empty. It'd be one front desk, you know, one manager sitting at the front desk. So it was a scary time. Now, what was great about this all which I had learned a lot, that I didn't hear a lot of complaints. I didn't hear a lot of people saying, hey, like, you know, I'm working these tough scenarios, and, like, I can't believe you're letting me go. And that are. All I heard is like, I totally understand. I'm so sorry you have to go through this. You know, we're here with you, everyone making sacrifices, working harder, getting paid less. I mean, it was a kind of a. It was a special time in the sense of making me rethink humanity and, like, thinking about, like, how you treat people and how the world works together in a time of crisis. Because it certainly was the case with our team that everyone came together in a pretty great way. I mean, and now that we're, you know, I know Covid's not over, but we're on the opposite side of this. You Know, we can't hire quick enough right now at all these properties. But it was a scary, sad, crazy time that entire last year and a half.

Wow. I mean, I just, I can't even imagine, but to be able to get through that and to come out stronger, because I've got to imagine a lot of the competition, you know, will fall by the wayside as well. I mean, some of these hotels may never open again. So I mean, the fact that you're able to deliver this and, you know, it really just seems being, you know, back in New York full time for me and, you know, being out and about, I mean, people, you could see how much they've missed, you know, being out and interacting. And so to have, you know, the rooftop and all the F and B space you have there, you know, you are definitely, hopefully, you know, reaping the ball. Your hard work there and your patience, 100%.

You can tell people are pouncing to go out, they're looking for a fun time, they're getting out, we're busy. It's an incredible feeling. It's an incredible feeling.

New York's back, so let's change gears and talk a little bit about office. So first of all, the fact that you've been involved in multifamily hotels and office, I mean, each asset class is so different. Different sets of challenges, you know, different landscape. I mean, breaking into office, I mean, you are dealing with some of the biggest REITs out there. I mean, not to say that the REITs aren't buying multi or hotel, but you know, these are sizable capital investments. They need a lot of money to get started, get, get tenanted. So maybe tell us about one of your early office deals. And I remember, and I'd love if you could recount the story of having a lease negotiation with no other than Elon Musk from Tesla. So maybe you want to talk about that deal and how that all happens?

Yeah, sure. That is actually our first office deal in San Francisco. So at a high level, we focus on San Francisco office. We're good at it. Like I mentioned before, we kind of spread ourselves a bit thin where we were going into new markets and we were always a new player in town. We realized that it's hard to compete sometimes being just a new player in town. And so what we were trying to do is focus on the markets that we know a lot of folks like New York City, San Francisco and in sf, San Francisco office. I also have the double benefit of being well known and knowing a lot of venture capitalists and so with a lot of the tenants in those office buildings, I can underwrite our tenants really well. And so that was kind of like my secret sauce in San Francisco is I. I can underwrite a lot of the tenants in these office buildings there. I can't really do that everywhere. Know, it's usually where there's a Silicon Valley presence and where I can really know the tenant. Otherwise, I'm just another office owner. But my first deal in San Francisco was a building called the Pioneer Building in the Mission area of San Francisco. It was a really cool building. We bought the building from a firm that bought this and did a pretty good renovation during the Great Recession. And there was five tenants in the building. One of the tenants was actually Stripe the Unicorn payment process. This was their first headquarters, was this building. And in a great firm, they were one of five tenants. They didn't have a lot of space. And as they were rapidly growing, they started taking all the other spaces in the building. They took the building across the street, another building a block over. I mean, they just started growing so quickly. It was crazy. It's another Silicon Valley story. And eventually they had, like, three years left on the lease or something. And eventually they said, hey, listen, we're consoling our. All our employees into one big building. And they moved and built the headquarters, and they're like, hey, we just want to get out of the lease. And so I started searching for a tenant, and I ended up getting. Actually, Elon Musk's office reached out to me and said, hey, you know, we are. Elon's interested in leasing your building. I'm like, okay. And I was. I was talking to some other tenants. So he. He had known that I was. I was looking. He actually. He had a partner in this company called OpenAI who had reached out to me. And then. And then eventually they said, hey, Elon wants to talk to you direct. And, like, are you free? I'm like, yeah, I'm free. When he's like, I can talk to you in an hour. I'm like, all right, I'm free to hear my phone number. And so. And so. Just. Just an amazing guy. I ended up talking on the phone a few times, emailing back and forth. We were negotiating the lease. You know, at one point, I'm like, so am I gonna. Should I connect your lawyers? My lawyers, or how should we do this? And he's like, no, no. He's like, you and I can handle this. I'm like, okay, fantastic. I can do that. I never go through 70 page Lisa Solo. But I guess I'll do that this. So eventually we had gotten to a stage where we were going, we were getting close to finalizing, and he's like, hey, why don't you come meet me at Tesla, their X days of the week. And so I drove up to Tesla's factory in Milpitas in San Francisco in California, and they give me a little private tour of the factory. And then he's like, I guess he apparently offices in different parts of the Tesla factory, or he did at the time, and meets with, with everybody. It's crazy. I mean, the guy meets with, he's so into the weeds. There must have been a huge line. I don't know how many people, 20, 25 people waiting out the line of this glass office in the middle of the Tesla factory. And I meet up with one of the folks that works with him and they're like, hey, Elon, we'll see you next. As soon as this next office, next meeting is done, here's a couple coffee. And so I, I, you know, he, I cut the line. I sit down with him for a couple hours, and we're just page flipping this lease, negotiating it one on one, and we got it done. Like, I mean, like, he's, he's like, you know, lawyers are just going to screw this up. You know, I know I want the building. He's like, at the end of the day, I want your building. I'm going to pay you rent. You just want a tenant that pays rent. That's all that matters. Why should I, you know, pay someone to like, mark this up in Redline in something that doesn't matter? And I'm like, you're right, that's true. So why not? So it was a great deal.

I mean, when you first told me that story, I was just blown away, first of all, because it's Elon Musk. And that's just, I mean, you kind of, you know, him sitting in a glass box in the middle of a factory and going in there to meet with him. But, you know, it also makes you think. I mean, sometimes maybe we make this business too complicated. I mean, a typical lease that we, it should be six months and, you know, cut through it. I'm still amazed that he was actually one that would do it. I mean, you would think with that size of an organization that, you know, he would have people. I mean, he had a real estate department. I mean, it's just crazy to think, I mean, and this wasn't, I mean, how long ago Was this, I think four years ago? I mean, it's not like it was 10 years ago when they were still just a concept. I mean, this was. Wow.

No, he basically said it. He's like, I could easily have hired a lawyer. He has tons of lawyers. I think it was for him, it was like, I want this building. I want what I want. You know, you just want rent ultimately in a tenant that doesn't go out of business. I will make you happy. Let's just get this done. Why would we, why would we just spend hours negotiating imminent domain clauses and casualty clauses and garbage that never happens? You know, like, I mean, what's the point?

He's kind of right. He's kind of right. But, you know, something that you said earlier about your key to success with office is really knowing your tenants, and I hope lost on the audience because, you know, really, you know that you are taking a calculated risk, right? Because the amount of time and effort and money to get a tenant in the space and then, you know, if they can't pay the rent and then you have to get them out, I mean, it is a very, very costly mistakes. So the fact that you were able to do your due diligence on these tenants, and I'm sure you'd tell us that, hey, sometimes the highest rent is not the best rent to take. I mean, because especially with. To make sure that they're going to, you know, do the right thing. So I'm sure that was a big part also of qualifying 100%.

I mean, I actually think my office investments in San Francisco are the same as my angel investments in San Francisco, but exactly what you said, James. My. I'm in the tenant's business if I don't understand their business. Just because they're paying a dollar today doesn't mean they're going to pay a dollar tomorrow. They can easily go out of business. I need to understand exactly what they do, how capitalized are they, what's their cash flows, like, how long are they going to be in business? Like, what's their capital stack, who's backing them, what's the references, what's the product? I mean, I have to understand everything about them. Otherwise there's a big risk they go out. And that's kind of how we've been thinking about our office investments. For sure. You have to understand the tenant.

That's amazing. And it really makes real estate so much more, you know, three, four dimensional in the sense that, you know, there's this extra. It's not just about the brick and mortar and really understanding the tenants business. I mean I don't hear a lot of operators speak about that. So you know, we love to hear a little bit about your angel investing. And was that natural byproduct? So you're already, you've got your network through Stanford, you're seeing them on the tenant side. Did that give you access and a foray into these investments? How did you start getting into angel investing?

Yeah, so I got into angel investing primarily because of my classmates from business school work at many of the venture firms you've heard of and in Silicon Valley and in. So they would approach me with a question around. Hey, I remember one of the first one was Realty Mogul, which was this crowdfunding platform. And one of my friends would call me and said, hey, we're thinking about backing this company. Is capital an issue in real estate? It is an issue in real estate. It's the issue that people are all constantly looking for because it requires a lot of capital to buy. And I went down the pros and cons of a crowdsourcing model with the person and like it went down the line. It's like, hey, is short term rentals, is that a business? Is, you know, is we work a business that can work and you know, are these businesses. And so I every time, even if I had a negative, you know, venture capitalist a lot of times thinks in long terms like hey, this person's going to disrupt this industry and change it. So they think of negatives almost as positive. It's like, hey, with enough capital we can disrupt it. Going back to your question, I invested alongside a lot of these companies. They would say, hey Pete, eventually I just need free advice because I enjoyed it, I loved it, and I would be able to trial, this is important. I was able to trial a lot of these technologies. So a firm would come to me say, hey, what do you think of this guy? Would you actually want to try another, Pete? I'm like, yeah, sure, free tech, why not? And so I would end up trialing this tech. I would say I liked it or didn't like it or I liked it. You should talk to X, Y and Z, my friend at these other real estate firms. And then eventually I would say, hey, thank you for all this free advice. Do you want advisory shares? Do you want to invest? And so I started getting allocations and I started getting smarter around like why? Why are these guys are making so much money? Why? Why can't I put money into this? I'm someone helping them with their Investment, so, and so I just kind of, I've made, you know, I don't know, 60 investments. I don't know how many. It's a lot over, you know, the last few years. And so I've kind of become a really super angel.

Wow. Have you ever thought about institutionalizing that? Starting your own fund? I mean, does it ever get to the point where those investments are more exciting or profitable to you than real estate? Or do you think it's possible to do both?

Well, you know, I actually do have a fund called Wilshire Wayne Partners. It's a small fund. We're investing out of our second fund and we do, we are professionalizing. I have a partner in that business and we make venture investments primarily focused on prop tech businesses where we kind of institutionalize what I do, but I also angel us on the side outside of that business because that does later stage investments. Later meaning like A and C. While I can also do like just pure angels investing on my own. But can I do both? Yeah, I certainly think I could do both. I mean, I think both help each other too. I think as a better investor in proptech businesses makes me a better real estate investor and vice versa. I wouldn't be able to get the prop tech investments unless I have a big real estate portfolio that's really active and utilizing the latest and greatest technologies. So I think they can work hand in hand.

That makes a ton of sense. And I've dabbled and done some angel investing as well. And when you know the space or certainly the founder, it makes a huge difference. But I also, just from an intellectual standpoint and understanding how these companies are trying to solve problems, I just find it so fascinating. So that's tremendous that you can do both. Well, you got an incredible story here and I know our listeners are going to take away a lot.

Thank you.

James, over the course of your career, what would you say have been the keys to your success?

Yeah, sure. I think one of the keys to success is being self reflective, kind of really understanding what it is that makes you tick and what is it that gets you out of bed. I think being able to step back and just saying, hey, I don't. It's not just money because I think a lot of young people say, I just want to make a lot of money. I don't think you make a lot of money if that's your focus. I think you make a lot of money doing things that you're passionate and love. Because ultimately it boils down to what I think the cliche Answer is, is this hard? Working hard. And it's like really hard to just work hard and hate what you do. I mean, I did it as an investment banker, frankly, but like it wasn't sustainable as a business model. It was a good stepping stone to what I do now. But you know, I wasn't personally passionate about it and it wasn't something that got me up every morning. What I do every day, underwriting real estate deals, understanding hospitality deals, underwriting venture deals, I love. And so it's not work. You know, people ask what are my hobbies? I'm like, my hobbies are my work because I love it. It's like I get to design hotels, I get to back incredible entrepreneurs, you know, that's what I love. And doing that self reflected deep dive and saying, hey, what do I really love? You know, not being silly, it's not. I didn't mean it that way. Like you want to be an artist doing art, that's great. You probably might not make a lot of money because the probability of being successful is probably not high unless you're just really great at it. But it depends on what type of art. But maybe you can use that art skill to do something else that actually makes sense. Like maybe you can be an interior designer. That's amazing and that sort of thing. You know, I think really kind of being self talked to, what makes you get up every morning is really important.

I'm gonna make sure my 16 year old son listens to this interview very carefully because when I asked him, what do you wanna do? He says, I wanna make a lot of money. There's certainly a lot more to life. And I love what you had to say about being self reflective and passionate. And I've got to add from your bio, real estate enthusiast, I have not, you know, I've not heard, you know, someone's bio and this entrepreneurial spirit. So I mean you definitely embody it.

Thank you, Isaiah. I mean it's true. Like I love real estate. I do, I love hospitality real estate. I love that we can actually make a difference in people's lives and make experiences for them and make them feel better every day and house them and make them feel safe and everything else. I think it's just, it's something, it makes me connect with people. I love it.

Absolutely. I completely feel the same way. So. And then just last question, what advice would you give? And we actually, we have a lot of listeners to our show who are still in college and they're thinking about getting in the real estate or maybe someone who's even, maybe they're thinking of switching fields. Maybe it's an investment banker who's listening to the show right now. I mean what advice would you give them to break into real estate and be successful?

Yeah, biggest advice I do is just do a deal, do a small deal. I mean I don't think there's anything wrong with doing a two unit duplex on the outskirts of the city that you, that you got, you know, that you've used your life savings to invest in or get some friends and family, ideally to put a few bucks in, but it's not a lot. Do your first deal, then do your second deal and then do your third deal. Don't start big because there's no need in real estate. You have enough folks that also like real estate, that also invest, want to invest in real estate, that all you develop a track record. Isn't that hard. You know, you just have to do a few deals and all of a sudden you're a real estate investor. And I think just don't think about the first 100 unit deal in Manhattan and like it's an uphill climb. It's hard. Just start with something to get it done. Do your first, get it under your belt and move on. It's so much easier. It's not complicated.

That's an awesome way to end and just so inspiring. I really hope our listeners take this to heart. So ateet, thank you so much for joining us today and sharing your story.

Thanks James for the time. I appreciate it.

Wonderful. This is your host James Nelson of Real Estate Investing live from New York. If you have not already, make sure and connect with me at James Nelson NYC on LinkedIn, Twitter, Instagram and certainly check out my newest website which I have just released. At james nelson.com you can find all my podcasts an exclusive video series that teaches insider's edge to real estate investing. So until next week, thank you again. A different approach to putting our clients first Avis and Young's Tri State Investment Sales Group sells multifamily office, retail development and specialty sales throughout the New York metro area. As experienced thought leaders in their industry. Our 35 member group is available to help you make informed investment decisions by advising you on your current holdings or identifying new opportunities in the marketplace. Our one unified team is built on an industry unique platform which promotes unparalleled collaboration and teamwork. We share core values of hard work, integrity and expertise. We put our clients first providing tailor made strategies to achieve superior results. Please visit us@aytristateinvestmentsales.com and follow us on Twitter LinkedIn and Instagram amesnelsonnyc to learn more.

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.