93: Perspective with Larry Taylor

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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 93 of Real Estate Investing Live from New York. This is your host, James Nelson. I am principal and head of Tri State Investment Sales at Avis and Young. Thank you, thank you as always for tuning in. And thank you to those of you who've already checked out my new website, jamesnelson.com and sent me feedback. I really appreciate it. This site is for you. This is your research hub to help prepare you to become the best possible investor. It's got incredible resources as well. You can find all our podcasts and exclusive video series, Key Terms, my favorite podcast and books. So check it out right now@jamesnelson.com and please send me your comments at James Nelson NYC. You can link in with me there and love to hear from you. And email is jamesperiodnelsonavisonyoung.com that's a great way to get ahold of me as well. So for today's episode, very excited. We have Lawrence Taylor with us, Larry Taylor. And no, this is not the hall of Famer who played for the Giants, but he has an equally impressive career in the real estate world. And Larry is head of Christina Development and he has incredible perspective and this is definitely a first for the show. He talks about how he helped his parents buy their first home when he was only 12 years old. Yes, he went up, he found the opportunity. He negotiated with the broker and began his investment career at a very young age, learning that he could rent out units and have an apartment for free. And so very impressive. And he talks about his investments over the decades and you can see how in many ways the business has evolved, but it has also stayed the same. So I think you'll get an incredible education from this. Also, Larry hails from the west coast and definitely gives you some great perspective for that market as well, hence the title of this episode. So as always, I hope you enjoy this. We'll have a quick break from our sponsor. We'll get right into that interview with Larry Taylor. Thank you.

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You are listening to Real Estate Investing LIVE from New York. To find out more about James Nelson or avison young, visit avisonyoung.com now back to our show.

And now it's time for our Investor Spotlight. And with us today is Larry Taylor who is founder and CEO of Christina. Larry is responsible for the vision, strategy and leadership. He's a seasoned investor with over 40 years of real estate experience in the west side region of la. His notable projects include the introduction of high rise residential development in North Century City, the development of the Montana Avenue shopping district in Santa Monica, the revitalization of the South Beverly Hills retail shopping center, amongst others. He started his career at Ernst and Young and he also received his Bachelor's of Science degree from the University of Southern California, otherwise known as usc. Larry, thank you so much for joining us today and we look forward to hearing your story.

Thank you, James. It's a pleasure to be here and I appreciate the opportunity to participate in your very popular podcast.

Perfect. Well, Larry, I know where you're based now, which is Malibu, and we were just catching up because I was just out there this past weekend. I'm regretting that we didn't do this from the rooftop of your former property at the Surfside Motel. But tell us, where did you grow up? Were you originally from the West Coast?

Well, I actually was born and raised in the East Coast. Well, a coal mining town in Pennsylvania known as Uniontown, population 17,000 when I was growing up and it was a miserable place to live in terms of terrible weather, coal dust, unemployment, kind of like the not the most desirable place to live. And one of the greatest things my family ever did was pick up and sell what they had and move the family to Los Angeles. So can you imagine going from a coal mining town in Pennsylvania, which was miserable and the coal mines were already giving out at the time, so there was a fair amount of unemployment and there were not many choices for myself and my sisters and my parents decided to Pick up and get out. And the choice was New York or Los Angeles. And my dad wanted to come to Los Angeles because he had friends here and he. He had visited. He came out by train in the 50s to see what was going on out here. And my mother had grown up in a big city in Eastern Europe, and she wanted to go to New York because we were more metropolitan. And it's the only argument that my dad ever won with my mother.

Did your dad already have a job in hand or what did he end up doing when he relocated to la?

He relocated here because he was in the fashion business and he was the part of a design team that basically was the costumer for Lucille Ball.

You know, growing up, did you have odd jobs or any exposure to real estate? And then maybe tell us a little bit about how you ended up at USC.

Yeah, actually landing here at age 10, I felt like a spore that had landed on another planet because it was so foreign to me as compared to what my childhood experience was growing up in Uniontown, Pennsylvania. But I believe that all of us follow a certain inner, you know, we're all born with a certain guide or interest, like, you know, actors who start performing at three, and artists like my daughter, who's an artist and was drawing in her crib. My earliest memories of being interested in real estate were living in Uniontown and watching every day as I walked home from school to my dad's office. I would walk past a building that was under construction, had a construction fence with these little windows that you could look in and observe. And I would be there for like, you know, half an hour at a time, just watching the excavation, watching the foundation being poured, and being really kind of like, this was my thing. It's like every day I would walk by to see the progress. So I think I had it innately. I think I just followed a passion that was inbred, probably from kindergarten. But when I got to Los Angeles and found out that my family had to live in an apartment building, when I was growing up in Uniontown, only poor people lived in the apartments. We had a home. And so I thought, this doesn't feel really right. And my parents, friends who had come to Los angeles in the 40s, by the time the 60s rolled around, they were living in fairly nice single family homes with swimming pools in their backyards. And I think I was 12, might have been 11, but maybe closer to 12, where I picked up the phone, called up a realtor whose name I saw on a sign in the neighborhood. It's an area now it's the city of West Hollywood. Now that's where we first lived. And I called up and I said hi, I want to buy a house. And I got a call back and this broker showed up and I got in this car and we started driving around looking at houses and I had no idea, I just knew that I wanted to get out of this apartment building. And the guy says now why is it that you feel you want to have a house? And I said, well I grew up in a house and I don't. This is not my, doesn't work for me. And he said, well, have you ever thought of buying an apartment building? And I said wait a minute, I want to get out of an apartment building. And then he explained to me, in Los Angeles the Trend in the 40s, 50s and 60s was people would build an apartment building, let's call it a small building, five maybe 10 units. They would build a three bedroom, three bath owners unit and then you would live in the building and the other nine tenants would pay rent and then you would collect enough rent so that you could live for free. Now I'm 12 and I am intrigued. And so I said, well what kind of money does that take? Because my parents sold their three story home in Uniontown, Pennsy, $7,750 and our rent was $125 a month on the apartment. And I can't remember the exact price of this particular property, but he identified a apartment building with a three bedroom, three bath owner's unit. And I said, you know, that's a lot of money. I don't think my parents have that kind of money. He said oh don't worry, you can borrow the money. And I said really? He said yeah, you can get a mortgage. And this particular building had an assumable mortgage from the Caldwell Company, which was a servicer for an insurance company. And he said you can just assume that and you only need about $7,000 down and then you collect the rents and then the rents are used to pay off the loan and then you live for free. And I said that can't be. Like I get to live for free and the tenants pay off my loan. And yes, that's actually what happened.

So hold on, I gotta get this straight. So this broker actually takes you seriously as a 12 year old, he's driving you around and you were the one who put this together? You convinced your parents to go ahead with this?

I did and they did.

Well, definitely a first of this show. I mean I've heard, you know, some investors who got into this maybe in college, and they, you know, started by buying, you know, a couple units to rent out the friends. But this is definitely a first, so. Wow. And that sounds like, you know, a deal that was too good to be true at the time. But I guess maybe. I guess people just weren't even aware or thinking about it.

No, it's just kind of like this was the trend in the early 60s that you would buy an apartment building and if it had an owner's unit, you lived in it. I didn't understand economics. I just knew that my parents only had about $10,000 in savings. So if they only have to come up with seven and borrow, maybe the other 23. So for $30,000 at the time, you could live in a decent apartment building and have three bedrooms with two bathrooms, which was more important to me than anything else.

Did you help them run the apartment building then? Were you actually collecting rents and learning how to 100%?

It was so easy because they had these printed forms and all you had to do was fill out the form and collect the deposit. And it was really very painless. And I collected enough money to pay the mortgage and the property taxes and. And lived basically for free. And a year later I traded out of that and I sold that. I don't think it was. It was not a 1031 exchange. Trust me. I was not that sophisticated. But I did buy our first single family home. So by the time I got to age 18, I was now at USC on scholarship, and I formed my first real estate company as a junior. Wow.

And what were you studying there at that point? You knew you wanted to go into the business?

Yeah, I got a scholarship through. It was a scholastic scholarship. I had pretty high grades, and I was fortunate enough to have met the assistant dean, the school of Business, who took an interest in me, you know, a break in life. My parents could not afford the tuition, which was $100 a unit or 1,600 a semester would have broke them. So I got a scholarship to USC fully paid, and it was through the School of Business with an emphasis on accounting. And at that time, and still to this day, USC Business Undergrad Accounting program is one of the most notable in the nation. So graduates of USC from that school were all intended to go to the big eight accounting firms at the time. Now there's four, but there were eight. And so I was an undergraduate student studying accounting, but I was taking every real estate course that that school offered. And so it just happened to coincide that when I was a Jr. Was 1973, and it was during the Arab Israeli war and the ensuing energy crisis. And so at that point in time, the country tumbled into recession. And I was sitting there in my appraisal class telling my classmate sitting next to me, our final exam is based on appraising, picking a property and doing a full appraisal report. That was our final exam. And so I looked in the LA Times and I found a building and I called the broker and said I was interested in it and I got all the information and I used that thing to do my analysis and prepare my appraisal report. And then I, I did it as a co working project with my classmate and I said, this is a good deal, we should buy it. And that was the start. We started our own company and we actually bought the building and did a lot of different things to it. But during that time period, we were in recession and we were in the middle of President Nixon's wage and price level freeze. So rents were frozen as everything in the United States was frozen. Wages, groceries, eggs, milk, fuel, everything was frozen. And I was studying in my executive decision making class at USC the history of price controls. And that historically price controls never worked. And once price controls came off, inflation would go crazy. So I thought this is just the greatest time ever to start buying real estate. Because when these price controls come up, come off, rents will go up and buildings will become more valuable. So that was really the start.

And how did you raise money for that first deal? Were you still getting the seller to finance or assuming financing for the bulk of it and then the rest of the money?

I went to that seller and that seller was willing to take a note for the difference between the existing financing, the purchase price payable in like 12 or 14 months. And I figured that in 12 or 14 months the price controls would come off, I'd be able to raise rents and then finance it. But we also were in a period of time, you may know about this, but we were in the Wellenkamp v. Bank of America, which was a Supreme Court case that held that no bank or savings loan in the country could accelerate a loan just based upon the transfer of the property. So I could just take the loan without ever telling the lender. Then I got the seller to carry an unsecured note, and then six months later the controls came off, I raised the rents. And then I went to see a guy at Home Savings and loan, now 19, and I tell him I want to refinance this building. And he goes, you. And I said, yeah. He goes, you have any credit? I said, well, I own the building. He said, but you didn't borrow any money. I said, well, I just took over the loan. I didn't really take it over, but they couldn't really accelerate. Anyway, he took a liking to me. His name is Al Brooks, and he recently retired as the head of income property lending at JPMorgan Chase. So when the time came, graduate and USC basically expected me to interview with the big eight firms, which I did. And I got offers, but my. I got an offer from Kenneth Leventhal. And I said to my dean, I'm going to take this job. And he says, you're going to work for Kenneth Leventhal instead of Price Waterhouse or Coopers and Lybrand or Ernst and Young? And I went, or Ernst and Ernst at the time. And I said, yeah, I kind of have a moral obligation. So I went to work for Ken for nine weeks. And I showed up. And the first two weeks they were teaching us how to use a 10 key adding machine by touch. I had mastered that like five years earlier. And then the next week, they were basically taking us through the steps of bank reconciliations. And I thought to myself, what college student doesn't know how to do a bank recipe? So. But I was also. By that time, I found myself in Malibu for reasons which I'll get into. But I purchased options on 17 lots not far from where you had lunch, basically down the street, La Costa beach, which was mapped as a landslide. And lots were never saleable. So I tied them all up for a thousand bucks. And on the first lot I drilled it came up grossly stable. So all I just needed to do was put a road in. Except the Coastal act had passed and you weren't allowed to do these things. But I did it anyway. And I was putting a driveway into my first lot while I was at Leventhal, but I had already started my own company. And I could see my secretary by looking out my window at the 17th floor of the South Tower in Century City. I could look down and see my secretary through the window of my other office. And this lady put her body in front of the tractor and wouldn't allow the road to be built. And I was getting all these calls over the paging system at the time. Ken saw me in the hallway and he went, come in my office. He said, I own this firm, and you get more phone calls than I do. What's up? And I said, oh, shit. I bought these lots. I'M building a road. And he goes, just doesn't make any sense. I'm moving you to small business. He said, you're not going to follow the route of going through the standard progression of accounts. So he puts me in small business, and I go out on an audit to a couple of real estate developers that were in trouble. By the way, all the real estate developers were in trouble in this particular 74, 75 recession. And so these guys had built a bunch of condos out in the city of Glendale, and they were all in trouble, and they were in foreclosure, and it was pretty ugly. And I met the two guys, and I said to one of their two brothers, Mark and Emery Ruba, and I said, emory, did you ever build single family? And the guy goes, yeah. I said, do you want to build some houses in Malibu? He said, yeah. I said, oh, okay. Well, I have something for you. So he became my first builder. And then just a couple of weeks later, I went to HR and I said, hey, it's really quiet around here. Basically because a lot of people were leaving the firm because the firm was suffering, because the clients were doing poorly. I said, I'm thinking about going to Japan. He thought I was kidding. But a friend of mine was an attorney, had a client in Japan, and I left for a month to go to the Far East. And while I was in Macau on Christmas Eve, I called the director of HR and said I wasn't coming back. And he was astounded. But they got over that. Ultimately, E and Y became one of my outside CPA firms. But that was really the story. So here I was in Malibu, and those 17 lots, which I tied up for $1,000, I sold off. Well, the strike price was about $10,000 per lot. I sold them all off at about 33,000 a piece. And then I found myself in Malibu. And you might ask yourself, well, how did that happen? But you know how in life we have mentors and we have influencers? And one of my college classmates was a guy by the name of two guys, Louis Grazedillo and Jeff Eltinge and Grazadillo. And Eltinge formed Imperial bank, which at one time was the largest bank in California. And they were real estate developers. And if you were Pepperdine, if you went up there, you'll see the Grazadillo School of Business. Well, those guys were my. They brought me to Malibu because During that early 70s recession, Hepperdine had just been built, and Alcoa had purchased all of the land adjacent and subdivided it and was Selling off lots to developers, many of whom went broke. And Imperial bank had made the loans and taken back about 18 lots. So Elton said, why don't you guys, myself and my classmate with my partner and his son, buy these lots of. The bank will provide the construction financing and the land loans. And Jeff Eltinge's brother was a contractor. You guys can build homes. But those lots were about 25 to 30,000 apiece. And I was buying one acre lots for 10,000, except they didn't have any coastal permits, and those were ready to build. And so that's kind of my first foray into Malibu. But talk about impressions. Just like when I was in kindergarten or first grade, looking through the window in Uniontown with a building being built. I had to go over to George Elton's house one day to talk about these other lots. And he lived on the beach. I didn't know people could live on the beach. This guy's house was on the water. And I went, this is the coolest thing I've ever seen in my life. I want to do this. So at age 21, I moved to the beach, and I've lived on the beach in Malibu ever since, and I still have that same property.

Wow, that's unbelievable. I mean, you pick one of the greatest spots on earth. So was this kind of the early makings of Christina? Because I want to talk about what you're doing with the business now. I mean, has this been the same business that you've just continued to grow, or has there been iterations over the years? Because I want to talk about what.

You'Ve been doing now.

I think everything up into maybe 1977 was rather accidental, kind of like just bumping in, like, from age 12, that would have been 66 to 77. I was just bumping along and meeting the right people and getting some guidance and some mentorship. But one of the really influential persons that came to speak to us at USC was a guy named Samuel Freshman. And I don't know if you know Sam Freshman, but he wrote the book Principles of Real Estate syndication, published in 1972. He spoke to our class about real estate syndication. Now, I didn't remember anything about this because I'm poking around with land. I'm playing around with some apartment buildings now, very focused on Malibu. But through a friend, I was introduced to a fellow by the name of Jerry Buss, who's since deceased. But Jerry, who owned the Lakers, which he's famous for, but Jerry was a real estate syndicator. And so I had Lunch with him one day after I was introduced. And he said, now Joseph, who was my friend who worked for him, said, Joseph tells me that you buy apartment buildings and what do you do? And I said, well, I find an opportunity that is undervalued and then I go in there and I upgrade it, I raise rents and then I resell it. Then I take the money and I do the next one. And he said, where do you get the money? And I say, well, my lender is Home Savings, that's my friend Al Brooks. I get my long term debt from him and my short term debt I get from Imperial bank or another bank, which was an offshoot from Imperial. And I take a 24 month loan and I finish the deal usually in 12 to 14 months, and then I do it again. He goes, that doesn't make any sense. I go, why? He said, that's linear. Jerry Buss had a Ph.D. in mathematics. And he said, let me show you how we do it. And he gets out this private placement memorandum, five pages with a staple in the upper left hand corner, and he says, here's what we do. Now, in the 60s, the highest paid professionals in Los Angeles were aerospace engineers. And the maximum tax rate was about 70% at the federal level. And so if you bought apartment buildings, another real estate, you got all these depreciation benefits. 5 years prepaid interest deductible in the year incurred, double declining balance depreciation. And so what Jerry and his partners Frank and Bob Mariani were doing when they were syndicating these buildings with all their aerospace engineer buddies, and they were just buying apartment buildings and buying, and in some cases building them. And he said, look, we can do at least five deals a year and we split the profits 80, 20 with the investors, right? And they charge, we charge them the fee to buy it, a fee to manage it, fee to sell it, a fee to finance it, and we get 20% of the profits lost in cash flow. Now he said, larry, think about it. If you did five of these in one year, wouldn't you get a building free for every five that you syndicated? Five twenties. I went, I like that you use other people's money, you get the benefits, and every five buildings that you buy, you get a building for free. So I did it and I became a syndicator. And Jerry said to me two most important things about using other people's money. Number one, never lose your investors money. And I thought, what a good guy. You know, guy is really concerned about his reputation. He said, no, it's not that he said, if you lose their money, you won't have any money for the next deal. So I said, well, how do you not lose money? He said, you only buy great real estate. We only invest in Westwood and Brentwood and Santa Monica and that's it. And I said, why those areas? He goes, highest demand, lowest supply, we've never had a problem. UCLA fees Westwood and Grant Wood and Santa Monica is close to the water and that's what we do. And they had accumulated several thousand apartment units by that time. And so here I am syndicating and I'm doing really well. Except he goes, well, other piece of advice was not you have to figure out where to go get your equity. You know, we've got. So I went after aerospace engineers right away and got a few. And then in doing my research, I realized that the highest earners after aerospace engineer was in the entertainment business. Actors, actresses, directors, producers, writers. When a movie does 20 million, which was a lot of money in those days, that's all cash, you know, box office, it's just cash, something. Well, these people need to invest in tax shelters. And so I made a list of all the business managers in the city west side and picked the top five and started knocking on their doors with my little five page memorandum saying, hey, I just tied up the corner of Wilshire Boulevard and Roxbury in Beverly Hills, you want to invest? And I got my first business manager, which led to the next one and the next one. And I really did become a very successful syndicator for a long time.

So fast forwarding to today, because what I'd love to hear about is the parallels and certainly very different economic environments. But you know, syndication is still a huge part of the business. I mean, it's become a lot more institutionalized. I mean, the idea that you're out meeting with business managers and kind of knocking on doors, so to speak, I mean, it really seems like you've automated this process now. And it seems like taking a look at your site and some of these funds that you've put together, you know, how have you modernized that today? I mean, maybe you could tell us a little bit about Christina and you know, how the company is set up and you know, what are the parallels today, you know, are a lot of these principles investing tried and true and have stayed with you throughout your career?

Well, yeah, I mean, the basic principles have never changed since 1973, but the world changed dramatically in 1991. So, you know, as good as things were, as bad as they were in 80 and as good as they were in 88 now we had the collapse of the savings alone. We had the Resolution Trust Corporation. We had the collapse of the publicly traded limited partnership business which took down everybody from JMB to all these other names that no longer exist. And again, I sold the portfolio out by December 19. So in 91, after the 86 tax act took away all of the benefits of taking real estate losses and offsetting them against ordinary income, all of those business managers were out. I couldn't raise a dollar because I could no longer offer the tax benefits to those wealthy investors. And so we had to pivot in some fashion. And so we still had a fairly substantial portfolio comparatively for that time, call it about 400 million, 450 million in west side properties. And now it was either go public or go bankrupt for a lot of these real estate companies. And our advisors, our accountants at Coopers and Lybrand said, you know, you ought to think about doing a reit. So we were going to take our portfolio public at the time and elected not to ultimately because we had a mixed product portfolio of office, retail and apartments. And the street only wanted one type of product. So what do you do? You can't raise money from limited partners, you can't syndicate anymore. The good news was we were sitting on a pile of cash, having liquidated the portfolio by 90. And the properties that we had were seasoned and they could perform at a 50% occupancy rate and still produce cash flow. And I went to Wall Street. I heard that's where you could get some real money. And I did. I partnered with Donaldson, Lufkin, Genret with their Opportunity Fund that was referred to them by Goldman Sachs through their Whitehall Group. And I got a few hundred million dollars from them to go buy a bunch of real estate, which was very interesting for a local syndicator used to doing a five page memorandum with a staple in the upper left hand corner having to crank out, you know, a 15 year projection showing a break even and the 20% IRR by year six or year out. And I had never heard of a preferred return in my life. What do you mean a preferred return? This is my split. I was up to 75, 25. Then it's like, well, we earned 20 and then once we earn 20, we'll split it with you 7525. And I went, and no fees. They said, no, we don't pay fees, this is stupid. But I did it and successfully and moved on to a relationship with that. Well, DLJ became Credit Suisse So I had a much bigger relationship. And at that time Ken Molis was at Credit Suisse, who I had met when he was at DLJ here in Los Angeles. He actually lives down the street from me and I've moved on from there to Paine Weber. And I'd met their chairman just being in the real estate business and they didn't want to be in the opportunity fund business. They had $3 billion worth of real estate on their own balance sheet. I partnered with them, we bought more real estate and we grew that portfolio. And then Paine Weber sold the Ubiquitous and UBS wanted to be out of the real estate business. So we bought the portfolio at a 15% trailing IRR. And that was around 1998 to 2000. And we accumulated all the real estate from 91 to 2000. In 2001, the market was hot. Sold all the real estate. By 2007, 2008, the market was shifting. 2009, the shade of the fan. And now what do you think? Here we're sitting with a pile of cash and a tremendous opportunity to buy real estate at a discount. But the discount factor wasn't that great in 2009. It was more of a bottom up recession than a top down recession. Meaning the properties that we were interested in weren't necessarily trading at that much of a discount. But I didn't have any vehicle to buy real estate. I wasn't gonna syndicate. I certainly wasn't gonna go back in business with Wall Street. That was too stressful. We made money, but it was stressful for us. And I started looking at the fund business because when I started back in the 70s, if I wanted to raise money, equity, I had to show that I had the deal. It was like the chicken and the egg. I'd go to a seller and say, I wanna buy your property. And the seller would say, fine, show me the money. Then I'd go to money and they'd say, show me the deal. It's pretty challenging to put those pieces together. And I was intrigued that by the mid-2000s that people would actually commit large sums of money without knowing what the real estate was. And I went, I need to study this. So I contacted people, excuse me, people that I knew in the industry, Barry Sternlich, who had Starwood and a few other Asset management, which had an industrial fund here, and the guy that ran, I went to high school with, and I started to study the fund business to get an understanding of funds. And I studied it actually for three years with my team. Spent a bunch of Time and money and came to the conclusion that if you were in the fund business, you weren't in the real estate business, because funds are in the business of raising money. And then they have to go find a sponsor like Christina to be able to deploy the money, because the funds don't do anything. They need to find a sponsor and a manager. So when you added up how much money a fund spends to raise its capital between the offering costs, the placement agents, the broker dealers, and then they get their cut, then they have to go find me and I have to get my cut right? Also, the fireman in Boston can collect his retirement, right? It looked to me like a shitty deal for the investor. So I started thinking about it. I said, why can't I, as a sponsor raise my own capital? And then. So that kind of pretty much was where we were going with it. And our lawyer, our law firm at the time was Milbank Tweed. And I went to them and I said, well, I want to start my own kind of real estate fund, but I don't want to call it a fund because I don't think it's a fund. I think real estate should be owned for 30 years, not three years or five years. I mean, all my syndications were 30 or 35 year term. And they said, well, what do you want to do? And I said, well, here's a ppm that I got from Lake Mason on one of the deals that they did. I said, I like this structure. You just copy this structure and put in my little things in there. And they said, how much do you want to raise? And I said, 25 million. And they said, 25 million. We've never done anything for less than 250 million. I said, well, I figure I can do five 25 millions and quickly deploy the capital, because if I had 250 million, I couldn't deploy it. There's not that many good deals, and this is very important for the world to realize is that these funds that raise billions of dollars, there just aren't that many good deals. And they can't be buying these things accretively enough to be able to give investors the kind of yield that we have historically, which is over 20% per year, not including tax benefits. So I decided to not call it a fund and call it a private equity company. And we very quickly raised that. Actually, we were oversubscribed to 26 billion. We deployed that into some excellent opportunities, and we've been doing it ever since. I mean, the last five years. But the JOBS act was the fundamental change, it's the Jobs act and the Internet today that didn't exist at any time before. And why do I say the Jobs Act? It's reg. D506C. I know you're familiar with reg A. I know you've got some things in the reg A world that you're doing. I researched it. But reg. D506C. The significance of 506C is that for the first time since 1934, allows us to market the opportunity to invest in real estate in 50 states. We have hundreds of investors now who have invested with us hundreds of millions of dollars. We reached them in 50 states and we have our basic simple syndication strategy. We only buy prime real estate in west side Los Angeles. It's still the standard 7525 split. It's a standard fee structure that we used as a syndicator in the 70s. And our investors can't get enough of it because there's probably 10 and a half to 11 million accredited investors never got into a real estate deal. And so that to me represents the greatest opportunity in real estate investment in the history of the United States since the securities and Exchange Commission was born. And that's the story. Wow. Wow. You've got 11 million people, you got millions of people that want to invest in real estate but they don't know how to get it. And the law now says we can advertise in 50 states and we can communicate through the Internet. And we have hundreds of investors we've never met. And these aren't investors that are investing $1,000. This is 250,000 to 15 million.

And how are you finding them? Is it just reputation, word of mouth? You're very forward thinking. And our listeners can go to christinala.com to see some of the information that you put out. But is that, you know, where do you bring in most of your investors from?

Well, first of all, we had, before we started this, we had a 40 year track record of zero losses and 20% plus returns and a 2.35 MOIC looking back, and it was, you know, it's not audited, but we hired a firm to go back and actually certify Our results from 1993 to 2006, the best records that we had retained, but with a 40 year track record of no losses and operating in the most highly desired real estate in the world at a specific time. Where we are the port for the Far East. This is where everything comes in from China. Just the fact that we're here when investors here that it's Westwood, Brentwood, Santa Monica, Beverly Hills, Century City, West Hollywood, Silicon Beach, Playa del Rey, Venice, Marina del Rey. It's like, you know, you stand that up against any other investment opportunity, that's exactly where that investor is going to go. And then you put that with a track record and an historical sponsor like us, who's been partners with major financial institutions that's been in business for ever, that knows this market as well as anybody could possibly.

Larry, your story and appreciate it so much, you're sharing in the historical perspective and the business has no doubt evolved, but the principles, you know, the location and delivering results for your investors are clearly timeless. So this has just been incredibly helpful. And unfortunately we only have a couple more minutes left. But you know, if you were to attribute the keys to your success, what would you say that those key traits are?

Number one, only buy great real estate. Number two, never expect to flip something and make a quick profit because the government rewards you to hold the real estate, not to sell it. Number three is that, you know, the principles that we are taught as children. Number one is always own real estate because it's tangible versus an intangible like a stock or an ETF or you know, some other kind of instrument. And two is location, location, location, doesn't matter how smart you are. I can tell you most parts of the United States, whatever real estate you buy today and you pay a price, it's going to be worth, worth that or less 10 years from now. And number three, real estate as an industry is one of the only industries that you can invest in besides oil and gas, where the government rewards you through depreciation, amortization, tax credits, so on and so forth, that makes the investment attractive to hold, not to sell. So the after tax returns and the ability for investors, and one of the reasons that investors need to invest in a private equity company structure like ours is that passive losses generated from real estate can only be used against passive income. And so most people don't have outside passive income. If they buy one property in their life as an investment property, the depreciation, amortization losses are just suspended until they sell that property, if they ever do. But if you own multiple properties within one entity, you can use the losses from one to offset the gains from the other. So our whole thing is how do you build wealth, preserve the capital and generate non taxable returns? And that's always been our focus, tax appreciation, high quality location and hold it forever. Which doesn't mean never to sell. Because if you Own great real estate in a great location. It's almost as liquid as any other liquid investment because people are always wanting to buy it. Most of the real estate that we've sold, we've never marketed. People come to us and say, I want to buy your property. And when someone comes to you and says, I want to buy your property, and you say, well, I don't want to sell it. And they say, but I really want to buy it. And I say, well, if you excite me with something, I might sell it. And I think every time we sell, it's usually worth a lot. I mean, at a price. Something we don't think we can replicate in 10 years. And finally, the opportunity on the west side of Los Angeles right now is driven by a lot of incentives that the city of Los Angeles, the state of California, has, you know, put in place to incentivize developers to increase density and to basically get rid of almost everything that was built pre1980, because none of it is seismic standards and we have earthquakes here. So, you know, the whole swath of real estate is going to redevelop in the next 30 years. So by the time we become all electric cars, probably have all new seismically safe buildings. So it's an endless opportunity to continue to build a fortune here in Los Angeles. This is our bread and butter.

That's amazing. I really love how you really captured the whole essence of the investment and how you've really been able to break down the advantages of investing in real estate. So the last question before we go, a lot of the listeners we have are they're still in college, maybe they're in a different industry. They're looking at getting into real estate. What would you say to them about how to start off, especially based on some of your earlier comments, that to break into some of these prime neighborhoods locations now, the barriers of entry are so high. So what would you say to someone who's starting out, maybe they don't have the capital? How would you. What would your advice be to them to get into the game?

Well, fundamentally today, what's available to, you know, your children, my children a little bit older than yours, and they've gotten out of college. But, you know, when I was in college, they didn't offer real estate as a major. Today, you know, whether it's uc, USC or UCLA or Columbia or nyu, they all have real estate programs. And I think that if you're interested in real estate and you're a young person, you can, you can enroll in colleges that have great real estate programs. And not only do you learn the fundamentals of real estate, but you get to meet a lot of important people who are usually visiting professors. So I think there's a lot more education opportunity that's available today than when I started. Number two is if you have an opportunity to intern while you're in school with different real estate companies and get some experience.

But at the end of the day.

You have to follow the passion. You have to have a natural instinct for it. And what I'm finding, we probably had 100 interns that have come through this firm or more over time. I've lost count.

You can learn the fundamentals of how.

To run an Argus analysis on a 10 year projection with rents increasing 5% a year and expenses increasing 3% a year. I think it's your IRR blah, blah, blah, blah, blah,. ROI, cap rates and all the, what I call the fundamental tools. They're all very valuable taken together. They're irrelevant, standing on their own. And somebody has to have the green eyes to say this is a good deal.

They can't teach you that in college. Okay, that's just very, very fundamental. But if you focus and you study on market, study a market, understand the market, understand who the players are, understand what the demographics are, use the tools that are now available, I think you can do very well.

Wow, Larry, that was incredible. Cannot thank you enough for sharing your story and I just hope that our listeners took notes because there was so much information in there. So this, this was so helpful. So really appreciate your spending time with us here today.

Well, James, thanks for having me and appreciate very much the opportunity to share some of my stories. And if any of your listeners find it interesting, then that'll make me feel really good.

I'm sure they will. And Larry, it's certainly next time I'm out on the west coast, I will certainly reach out to you and we'd love to meet up in person one day. So thank you again.

Come on out here and we'll take you to Nova. We have a table which is very coveted over there. Wonderful. If just us and Larry Ellison, wonderful.

Well, thank you again everyone for tuning in. This is your host, James Nelson, Real Estate Investing live from New York. If you haven't already, please connect with me at James Nelson NYC on LinkedIn, Instagram or Twitter. And if you haven't already, you have to check out my new website, James Nelson.com. it is a resource hub for you to become the best investor possible, gain the insider's edge to Real Estate Investing. You can read about all the podcasts here, including this one. You can get access to the white papers and exclusive video series. I want to be as helpful as possible, so thank you again for joining and telling your friends. Until next week, thank you again.

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.

SA.