A Tribute To Jim Kinsey With Rod Kritsberg

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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 Real Estate Investing Live from New York for your 100th show. This is your host, James Nelson. As always, principal and head of Tri State Investment Sales for Avis and Young. And I cannot thank you all enough for all the support we've now been going on for over two years, a week at a time started this idea to help you all become the best possible investors. Obviously, I had no idea that Covid would hit us. And I think what's been most meaningful for me is as I've seen many of you in person after we had been separated for time for you to say that this show helped us stay connected and helped you learning about real estate. And now we are growing and only getting stronger. So I could not be more excited for the future of this show, the next 200 episodes, the books that are coming out, and it is all culminating on my website, jamesnelson.com, where you can find these podcasts, where you can also find the exclusive video series. So if you've not signed up for that mailing list, please do so. I can stay in touch with you for important updates. So for our hundredth show, I have a very special show and tribute to my good friend and partner, Jim Kinsey. Sadly, Jim passed away unexpectedly in September of this year and his passing, though incredibly tragic, has given us a lot to think about and to be grateful for every day with us. Today on the show, I'm going to have Rod Kritzberg. He and his partner Greg Kraut were actually introduced by Jim Kinsey. So we're going to talk about Jim and then talk about Rod and K Property Group's story. But before we do that, I'm going to read a tribute to Jim Kinsey, which I published in Real Estate Weekly that talks about some of the lessons learned which I hope will be helpful and instill a little bit of his wisdom in you. So Jim was not only a dear friend and partner in Avis and Young's Tri State Investment Sales Group, but my sounding board for over 20 years. I still feel like I am in shock, as many who knew him still are. We, and I know his family are grateful for all the support to help us get through this difficult time, I would love to share with everyone what Jim taught me and for those who didn't know him, a sense of who he was. I I got to know Jim by representing his family in the sale of a property early in my career. After we closed our first deal together, it was very clear that he knew a lot about the business. A lot more about the business than I did. In addition to working for his family, he also had his own mortgage brokerage business. He knew how to get deals done. I convinced him to join Massie Nacal and try investment sales. He loved that company and its people, but quickly outgrew his territory and decided to start his own brokerage firm, erg, which rose in the ranks very quickly. He later started Kinsey Capital. What is amazing is how he's kept in touch with all those people he worked with over the years. We meet up frequently for coffee or catch up over the phone to trade notes and share some laughs. He had such a great way about him and always knew the right thing to do. Three and a half years ago, when I wanted to start a new investment sales team at Avis and Young, I called Jim. It would be a heavy lift and I couldn't do it alone. He was the only one who could do it all. He agreed to be my partner in the new venture. We spent time round the clock planning how to build out the best sales team in New York City. Once at ay, Jim quickly became the go to to get things done. In addition to fulfilling the role as the sales manager for our team, our company asked him to step up to the role of COO of US Capital Markets. He was in fact working two jobs, but sometimes always had time to be there for people. Especially the newcomers looking to break into the business. The loss of Jim was shocking and will take years to process. But Jim would want us all to continue soldiering on. I've heard the saying that no one wants their tombstone to read. I wish I spent more time in the office. Although this is certainly true for Jim, as family always came first. He loved the business and the process of working the deal. It was hard not to get caught in conversation and start sharing war stories. Some of the greatest things I've heard from colleagues is that Jim made them a better person. Just being around him had that effect. Some even said he had a certain Yoda like quality to him. Here are some lessons learned from Jim that we can all embody to have his memory live on. Number one. Family first. As busy as Jim was, he always there for his wife Nikki, his son James his daughter Noelle. He'd leave events early so he could take his son to hockey practice. Be there for your family. Number two Be an advocate for your people. Take a genuine interest in those around you. Have a giving mentality without an expectation of getting anything in return. Number three Shoot straight. Sounds like an obvious one, but sometimes it's easy to talk yourself around a situation. Tell it how it is. People appreciate the truth even if it's not the news they want to hear. Number four Always deliver. Don't over promise and under deliver. Your reputation of getting things done is far more important than coming up short. Number five Be a problem solver. Focus on the solution, not the problem. Number six don't take yourself too seriously, especially when life gets tough. Find the humor in things. Number seven Grow every day. Jim was always learning and open to coaching. Number eight Find your inner peace. Jim embraced meditation and Buddhism. He was able to stay balanced and always have a positive outlook on life. Above all, what's most important is to live each day to its fullest. It's cliche, but Jim's passing reminds us all to never take every day for granted. Make a special effort to reach out to those around you today to express your love. Ask yourself what would Jim do now? For those of you who would like to support Jim's family, they've asked donations to go to his children's 529 college plans. And if you go to the show notes of this episode, you can find the link so you can contribute. And once again I appreciate everyone's showing of support and I thank you again for listening. We're going to have a brief word from our sponsor and then we're going to get into that discussion and conversation with Rod and and we're going to share many more memories about Jim. 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 at aytristateinvestmentsales.com and follow us on Twitter, LinkedIn and Instagram amesnelsonnyc.

To learn more today, I'm thrilled to have with us Rod Kritzberg who is co founder and CIO of KPG Funds, which he co founded with Greg Kraut in 2014. The CEO KPG is a value add owner and operator that purchases architecturally significant but aging class B and C properties and converts them to Modern Class A. KPG's design Ford brand attracts and retains the modern day workforce with over 5050 years of combined experience. Based in New York City, KPG manages fully discretionary institutional vehicles that are privately held and management owned. Rod, great to see you. Thank you so much for joining us here today.

You know, now that you said that, I feel make us sound old. 50 years of experience. Oh man, I guess we have been doing this for a long time.

Well, certainly your experience and knowledge, I would not be surprised. I'd give you at least maybe 40 years. 50 might be a stretch.

Listen, I think Greg's a little older than me, so maybe he's carrying that weight well.

Hey Rod, on a more serious note, I want to kick things off because when Greg called me about doing the show and I've wanted to have you guys on the program for a long time and Craig made this suggestion right after the passing of our very good friend Jim Kinsey, who is my close friend, business partner, mentor, sounding board for 20 plus years. And what was amazing about Jim because I'd worked with him in many different capacities over the years, but it's amazing the connections that he had and with the people that he that were such a big part of their lives. So I wanted to start with that because I know Jim was actually the one who brought you and Greg together. So can you, can you talk a little bit about how that happened?

Absolutely true. You know, Greg and I both, but I personally have known Jim or knew Jim, excuse me, for a long time since the beginning of my real estate career going all the way back when I was an investment sales broker and we would sort of work on deals together. But the, the interesting part about Jim was we might have done maybe one or two deals together, but we would talk all the time. We had a connection that was more friendship than, than professional relationship. And then as my career progressed, it was always still that friendship. Back in this is all going to come a little bit full circle I guess. Back in 2014, I guess when we founded KPG Funds, my partner Greg was where here at Avis and Young. I didn't know Greg at the time and I had just left position with a high Net worth family office running acquisitions over there. And I was sort of looking for my next avenue. I don't usually talk about this story, but it was funny because I'm not going to get into the names of the specifics, but I was approached because of my investment sales background by a group that was backed by a large asset management firm that wanted to break big into New York City. And they approached me, you know, fully independent, I didn't source it. And they asked me if I would run their entire investment sales team in New York City as they broke into the market. And it wasn't necessarily something I wanted to do, but, you know, it was a robust offer. So I gave it some thought. I called Jim because I thought that was the best sounding board, really was. He was a friend and he would give me some genuine advice. I said, Jim, I don't know, really want this, what should I do with it? He's like, stop, don't do anything. I got the guy you need to speak to call Greg Kraut. Let me connect you with Greg Kraut. At the time, Greg was sort of the, what is he, the founding member of Avis and Young New York. And he was buying up companies and bringing in brokerages and brokers, et cetera. He's like, you have to talk to this guy. He'll give you insight and steer you in the right direction. So that was the first time I ever heard Greg's name. And how we ultimately got connected was with that one conversation with Jim. After a five minute chat with Greg, it was very clear I had no interest in being an investment sales broker. Even though I'm pretty sure probably Greg tried at some point to bring me over to Avis and Young. I said, no, thank you. So that's how sort of the career progressed. And I went on to found K Property Group, you know, a few years later, finally got Greg to come over and leave his, you know, fancy post over here at ay. And then we formed, you know, a company together. It was, it's all, it's all for Jim. You know, we, we really did share a great connection and it's, it's, it's incredibly, incredibly sad. I was looking through my phone and I actually had been texting with him the Friday before that awful Sunday morning, maybe it was Saturday, I don't remember now. And we were just texting about absolute nonsense. It had nothing to do with. He shot me a text because some news broke about some buildings that we were acquiring down in Soho. And he wrote something silly like you know, when you guys gonna hire me? I was like, you know, I don't think we need a third. You know, I don't think we need a third musketeer. We were just totally joking around, and that was the nature of our relationship, and it maintained that way. And I absolutely adored the guy. I did want to come on this show and say something else. And this is on behalf of KPG funds, myself and Greg. We do want to pledge $10,000 to the 501 or 529 plan I think you guys have going around for Jim's kids. Unfortunately, I don't know his wife. I never met her. Look, our friendship was professional in nature, even though it was more friendship than professional. But when I went to the funeral, I saw his wonderful family, his wonderful children, and I was just absolutely devastated, heartbroken. And, you know, we want the absolute best for them going forward, and we hope everybody over there is doing well and they're okay. So I see you, and I see you getting emotional. I'm trying not to.

Yeah. Good thing we're not on video here, because I'm trying to, you know, hold emotions back, but it's hard not to, and as incredibly challenging. And this was a huge shock, you know, for all of us. I was going back and forth with Jim Friday night as well, and, you know, to have something like this happen at the age of 44 and with a family and two kids, I mean, it's just. Can't even imagine. But what I will say is that what has kept us going, you know, kept us going, is hearing stories like this and the incredible amount of support that has come from the community. And so thank. I mean, that's such an incredibly generous pledge and to be able to support the family and help, you know, it's a small thing that we can all do to try to make a difference and, you know, be there for the family, because Jim would have been, you know, there for ours. So it's. We all feel just so fortunate to have had him in our lives. And it really makes you grateful for every single day. I mean, say it all the time. And it's like, you know, it's just. You really have to be grateful for every single day. And so when I heard you all wanted to do this as a tribute to Jim, I thought, what an amazing idea.

There's this. I should probably be a better Jew. There's this thing in the Jewish faith. Not that I'm extremely religious at all, but there's a thing in the Jewish faith. Where if you bring two people together and they end up, you know, sort of having a baby, you did a mitzvah and you basically, simply put, you get to go to heaven right away. Right? You get, you get keys to the door. So not to that extent, but, you know, he did bring Greg and I together and we did create a company and, you know, knock on wood, that's been going very well. And, you know, maybe we're not of the same faith, but hopefully, you know, that matters somewhere.

Amazing. Amazing. And you know, this business, and we've said this before on the show, that this business is about the people, right? I mean, yes, there's, there's the physical real estate, but actually, you know, finding the opportunity, capitalizing the opportunity, reposition. It's all about the people and the team. And for those of you who have not heard the first episode that I ever did, I interviewed Bruce Ratner, prolific developer, did over 50 projects throughout the city, built Atlantic Yards, the Brooklyn Nets arena, and we went back and counted. He mentioned the word people over 50 times in a one hour interview. And it was almost difficult to get Bruce to take credit for any of the success because it was all about the people on the team. And so the fact that it was, you know, Jim, a person who, an incredible person who brought you together and, you know, out of this, this incredibly successful venture. So, you know, just thank you for sharing that and it's a great way to, you know, to kick off this conversation. So. But Rod, let's, let's rewind a little bit. Let's talk about. Because I'm fascinated and I think a lot of our listeners, or I know a lot of our listeners are, you know, whether they're in college now or maybe they're out doing brokerage right now. And there's been several people who we've had on the show before who started as brokers, made the transition to principal. So maybe talk a little bit about, about those early days, what you were doing as a broker. And then maybe you know, that, that first transition you made to become an investor.

It's funny how often I get that question specifically from brokers who always think the, the grass is greener on the other side. You know what? I will jokingly always tell them that they are in the best position in the deal. They collect the money and they have no more responsibility for the asset, no risk. They have guaranteed payment. Nobody has to wait for returns. You show up at the closing, you collect the big fat check, you go home, you move on to the next one. So for all those brokers listening out there that think, oh, man, how great would it be to have the prestige to be big man on campus real estate developer? If you're collecting your checks, you should think about that a little bit. But the transition is interesting. I think this speaks more to the type of company that we are and the way we ultimately source real estate. You know, us, your whole team knows us. They talk to me all the time. We, we make it our business to know everything that's going on in the city. Not just about sort of our niche product type, right? We're, we're boutique office developers, but about everything that's going on in the city. And people come to us for information because, you know, we, we collect the data and we treat it the same way sort of the brokerage houses do, right? We want to know everything that's going on. Every sale, every potential sale, every owner that's held for a long time and is thinking about selling. Right. We want to be on top of that. The one great thing about having two partners that are ex brokers that didn't overlap, right. I'm an ex investment sales guy and Greg came out of the leasing world is that we. The same techniques that you use to be a good canvasser as a broker, and that goes on the tenant side and that goes on the sort of landlord, investment, sales side. Those same techniques will help you translate in, you know, finding the deals. Now, the modern brokerages, like you guys, what, what you do is you, you keep a staff of, you know, underwriters, so that when you're presenting your bovs, you know, you're presenting cash flows and things like that. So a lot of what you're doing is very similar. There's a lot of parallels to, to, to our underwriting, right? I think the, the broker's underwriting tends to be a little bit more aggressive, you know, fair, fair, but, but a lot of it is, is the same. And candidly, it is a lot of just, you know, learning, learning how to get through a deal. There is a lot of just understanding markets, understanding what makes a good deal a good deal, understanding each individual building sort of block by block and neighborhood by neighborhood, right? Buying something on 30th street and 7th Avenue is not the same as buying something on 21st street and 5th Avenue. Even though if you looked at them on a map or you try to walk from one corner to the other, you can be there in less than sort of seven minutes. It's really important to understand those things. And if you can Learn that as a broker and if that's as a leasing broker or an investment sales broker and you can figure out how to transition those things into deal making, you can probably take that next half step of sourcing it and then underwriting it. And then obviously the hardest part is raising or finding the capital for it and then ultimately going through to closing.

So, yeah, I love what you had to say about becoming an expert in a specific asset class, a specific area. And you know, look, being whether you're a broker or an investor, if you just sit back and wait for the deal to come to you, you're not going to do a lot of business. Right. So what has really impressed me is how forward thinking that you and Greg are. You're very, you know, you're truly thought leaders and that you're out there, you've got opinions on what's going on the mark market. I know Greg's certainly not shy and he was one of the first people I know to really, you know, have that battle cry. Last year when we needed it in 2020, there was not a lot of people standing up for New York. He said, look, we're doubling down. And that took guts. I mean, for sure.

But we closed the deal together.

That's right.

What was the story we were just talking about before we came on air? It was, I flew up from Florida to tour a building. It was probably late spring, early summer. And I tell everybody this story. I call it the zombie apocalypse. There was nobody on the street. I met one of your team members down there and they walked me through a vacant building and I walk out to the middle of 14th street, which is usually hustling and bus. I mean, I could have taken a nap in the middle of the road. There was nobody out there. But at the same time, we never thought that New York was over. We just wouldn't believe it. It was impossible. Now I'm always very weary to call Covid a market cycle. Right. It wasn't a financial market cycle per se, but it did have the COVID disease actually ended up, the spread of COVID ended up creating the same types of things that you would see in a natural financial market cycle. Right. So natural down cycle, you get stock market crash and real estate crashed and all those same sort of things happened. They just weren't financially driven this time. Right. They were consequences of something else. But you mentioned that those 50 years of experience. So Greg's lived through or worked through. I said a couple of the cycles. I was a young investment sales broker during the Last sort of crash in 2008, 9, 10, and I'll never forget it. And the one lesson that I took out of that was I remember seeing deals in 2009 and 2010, and that was the absolute worst of it, where I was screaming at the top of my lungs saying, oh, my God, this is the best deal I've ever seen in my entire life. Somebody is going to make an absolute fortune if they buy this. And there was nobody on the other end of the line. There was nobody there. There was nobody to call.

There was no money.

That was it. There was no money. So this time around, you know, we had the money. So, you know, I got into the trenches and I doubled down and we had the most active year of our company's history on the acquisition side, you know, and it's, it's exciting. It's exciting just to see through it. And we were always projecting a recovery. You know, we were underwriting for a, you know, very. I don't want to call it mild. We were projecting a recovery. We thought it would take, you know, a few years, you know, one, two, three years, like a normal sort of financial market cycle does. I can't speak for the leasing markets, right, because I think we just overachieved because of our product type and our location, you know, but the investment sales market, again, this is something we were talking about. It's really doing that. What was that, that, that V shaped recovery that everybody was hoping for, where, you know, a lot of those deals that we were really searching out last year, they're starting to disappear quickly and pricing is really starting to stabilize and underwriting is starting to get a little bit more aggressive. And I'm sure your bovs are coming in a little higher than they were last year. And, you know, we think that, you know, it's stabilizing. Cap rates are stabilizing depending on what asset class you're in again, free market, multifamily even. And we're going to speak specifically about New York City. We're not, we're not a national group. Right. We focus on the five boroughs, but mainly we focus on Manhattan. And even more specifically, we focus on Midtown south because that's where the tenants are. We'll look everywhere, but, you know, we want to go where the tenants are. We can talk about that sort of data driven approach, but, you know, just think about where cap rates are. Right? So there's, if you, if you go down the asset classes, industrial obviously is in a bit of a bubble, I believe. Right. Cap rates are unsustainable, sub 4, sub 3 in some cases. And then free market, multifamily shot all the way back. Right. On the leasing side and on, on, you know, stabilized sales office is starting to come roaring back. You're seeing some, some, you know, sort of big time transactions at high dollars per square foot and some sort of low cap rates coming in and you know, more hit the market every day. And then, you know, unfortunately, real estate still, sorry, retail is kind of, you know, lagging behind, but, but it'll get there. I think it'll restabilize. So. Yeah, so just talking about that same mentality that, that, that block by block, that, that being, being proactive instead of being reactive as an owner, right. Because we didn't come up in that institutional world, right. We didn't come up in, in a place where we might have, we might have come out of a large allocator shop or something like that where they're out there waiting for the top 10 brokerage houses to send them deals or they're waiting for your joint venture partners to send them something so they can review it, underwrite and see if they want to invest. Coming up out of that brokerage world where you eat what you kill, you have to constantly keep hunting. Right. So we never lost that mentality and it's really been a benefit to us, you know, in our professional careers and, you know, in our company. Wow.

Awesome. And now in retrospect, it's easy to say that you made the smart move buying in, but just to dig a little bit deeper there, I mean, how did you know that New York was gonna come back? I mean, look, and when you were doing these deals, I mean, there wasn't even a vaccine in sight. I mean, how did you have the confidence to double down and make some of these buys?

So part of it was data driven and part of it was anecdotal. Right. New York, historically over the last, again, three market cycles, takes the brunt of the pain and takes it first, but then recovers the fastest. We can go back because the last three were all horrible. Two of them happened here and one of them happened here first. Right. So you take, you go, you go back to September 11, 2001. The economy collapsed after that. Right. Markets collapsed after that. And that was here, unfortunately, in New York. Right. And during that time, anybody would have told you this was the big headline. Why would anybody ever go into a skyscraper ever again? It's too dangerous. Why take the risk? Right? You were around. Why would we ever go back? What happened not only did people go back, they built more of them, they built them bigger, they built them safer. People moved on, okay, because we're creatures of habit. We like what we like. We want to get back into our normal routine. We don't want something like that to stop us, right? We need productivity, we need work. We need a place to work. We want the nicest thing possible. Those are New York City skyscrapers. You go to the next market cycle, right, that was started by, by Bear Stearns, Lehman Brothers and then every other bank. Where are they all located? Here. They said the financial industry is done, banks are done. They're never coming back. They're never going to build buildings, they're never going to pay rent again. What happened? Not only did they come back, they each built themselves a new big glass tower. Came back stronger, stronger than ever, roaring back. And the market came back with them. And then the big headline during COVID was like, that's it, it's too dangerous. Nobody's ever coming back to the office ever again. It's never happening. That's it. Everybody's working from home now. All we can do is look at the past and then we have anecdotal information which is, hey, I spent some time working at home, me personally, with my two young children which were on Zoom School at the time. And they're young, five and seven. If you've ever seen a five year old on Zoom School, it is not a pleasant sight. And I just felt awful for them. But yeah, so I'm at home, you know, trying to work and there's a five year old and a seven year old on Zoom School. My wife is at home. And I said to myself, oh man, I can't be the only one that is dying to go back to the office and I'll do anything. You want me to wear a mask, I'll wear a mask. You want a biohazard suit, I will put one of those on. And I need to go back. So, you know, that's the anecdotal part. And then there's the data, right at that same time when we were really, really scared, right? A lot of Asia was already back in the office. Hong Kong was back, and parts of China and Korea, you know, and they had handled the virus a lot better than we did, right. I'm not, I don't want to have a political conversation about how and why. They just did, right? And they got back to it. And this is the most important city in the United States in my eyes. And I think the greatest city in the world, truly. And not saying that because I've been here, you know, my whole life. I'm saying that because I've been to most of the other large metropolises all around the world and I truly believe this is, this is the best one. So I figured if finance isn't going to disappear, money still exists. And we're the second largest tech hub. Tech still exists, Right. Google, I don't know if you heard, they just bought another $2 billion worth of real estate, but they still exist. We're the second largest tech hub outside of San Francisco and all the ancillary businesses and all of a sudden, hey, wait, the rents went down how much? 40%, 50%. It was hard to judge at some point because there were multifamily, you know, landlords giving four months free on a 12 month lease. I don't even know how to calculate that. All of a sudden you see this influx of young people, the working population. Right. Because like 70% of our working population is under the age of 35. So the talent is still here and energized. Dying to go out, dying to go outside. Dying to get a job or dying is a terrible word. Sorry, that's a very poor choice. Excited to. And all of that is happening around you, but all you're hearing is headline news on like whatever it is, Fox News. It's like, oh, New York City's done so crime wave. Everything is terrible is don't come back. That just felt to me like the most ripe buying opportunity I had ever seen or that I had yet to experience as, as a owner developer with access to capital.

Wow, that's. I love that answer. And it's not even being a contrarian. I think it's just informing. Pulling your own data, making informed decisions. Because sometimes like you said, what you're reading the paper can just be noise. Right. And they're looking for the sensationalism and they're trying to sell ad space and meanwhile you realize the trend that was happening. So. But I think what also a big part, it's not just of your success, isn't just timing, it's also knowing what is the right product and where. So it's not just like you could have bought anything last year. I mean, sure, maybe, maybe the market appreciates, but look, there's going to be winners and losers. And one thing that we've tracked here, we looked at the top 50 leases that were done year to date and every single one of those tenants either stayed in comparable space or traded up.

Yeah.

So we're seeing a huge flight to quality right now. So if, if maybe you could tell the audience a little bit about your program, talk about the portfolio, what separates your buildings.

I was going to touch on, I was going to touch on the, the building type, right? We, what do we end up buying? We ended up buying the type of buildings that ended up being in vogue specifically during, during those terrible pandemic times. Everybody started talking about how do we get people back into the office, right? What do these buildings need to be like? Well, they said, well, they need to be new, fully renovated. They need to be energy efficient. They need to be, you know, healthy, high tech. And we said to ours, and, and most importantly, this is a big one. They need to be boutique. Oh, tennis want their own floor. Now. I don't, I don't want, I'm a 10,000 square foot tenant. I don't want to make four rights and a left on a, on a hundred thousand square foot floor to find my space and pass who knows how many people in the hallway. I don't want to be in one of 20 elevator banks, okay? All of a sudden, the boutique office building, that's all we hear. And, and they say, oh, it needs to be, it needs to be healthy. I said, well, we've been doing well certifications since before the pandemic. It's just, we like it and it's smart. It's what the tenants want, tenants always wanted. You want high quality air in your building. You want a lot of natural light in your building. These are things that tenants want. And they wanted it before the pandemic. It just got highlighted when all of a sudden everybody was looking around and saying, oh man, how do we get these people back to the office? You have to make the office a place you want to go back to, right? How do we get them out of their underwear? Everybody's on zoom calls. They got their tops on and no bottoms. How do we get them to put on a pair of, you know, so all of a sudden everybody's looking around and we're sitting there thinking, you know what? We've been doing all this. Not to mention we, you know, we build the type of space that tenants see in their mind's eye. I'll tell you what I mean by that. You have tenants and you'll watch a movie and they, and they see, you know, loft office space, right? They see the exposed brick and high ceilings and cast iron columns. And in their mind, they're like, when these CEOs, they come around, they're like, oh, yeah, that's. I want space like that. Where do they have space like that? Well, you know what, we've been building space like that the whole time, and we have achieved rents that most of the market would have never believed we could achieve. And that is just a testament to the quality of the space that we build because we, we care. Right. You can walk into one of our spaces and see the difference. We also believe in, just as a sidebar, building all of our space. Right. For the most part, tenants are lean, they're small, they don't carry real estate departments, they don't carry architects or engineers. The idea of even building out a 10,000 square foot space is so overwhelming, specifically in the neighborhoods that, that, that we have traded in that are landmarked. I mean, nobody wants to do it. They don't want to do it. They don't even want to think about it. They want to walk in and see space that they've always envisioned their office to be. And you know, we build that and we spend the money to build that. We, we do it with the detailing. We do it. You know, you, you'll never walk into one of our spaces and see, you know, a cheap plastic or Caesar stone or anything like that. We have massive slabs of marble in our kitchen. We always build to what I always call like a, like a high end condo quality, High end residential condo quality. High ceilings, high glass hardwood floors. Even our bathroom. You'll never see a plain white bathroom. Right? Because if I'm the CEO of, let's say, a tech company and I just raised series B 150 million bucks, what do I live in? Do I live in a walk up in the East Village? No, I live down in a really nice condo or townhouse or I live in the suburbs in a really fancy home. Do I have Home Depot bathrooms in my house? No. Why would I have them in my office? Right.

You're probably spending more time there as well.

So all of a sudden we have this ultra high end space and the market starts coming back and we're just ticking. Every box, boutique building, check, whole floor, check, control your own environment, check. The tech that we put into these buildings. We were touchless before we knew that people wanted to be touchless. Everything operates, you know, in our buildings on an app, right? It's all. We always figured if you can go to a concert and sort of have the Ticketmaster app or whatever it is, that you can double tap and it's in your Apple wallet and you can scan it, you can scan on airplane, why can't you do that to walk into your building? Why can't the elevator know what floor you're going to? This is not complicated stuff. We have Nest, Nest Cam, sorry, the Nest thermostats. We put them in our spaces, they cost a little more than those, you know, Honeywell things that a lot of, lot of people do, right? But if I'm in a high end space, I want the same comforts and tech that I'm getting everywhere around me, right? All the stuff that I'm spending money on outside, this stuff should be built into office buildings. And we, we do that, we do that because we think it's good sense. We do it because we like it and we build the type of space we want to be in, right? And ultimately that manifests itself into higher rents because when the tenant walks in, they say, oh, you know what? These guys are 10, 15% premium to the market, but I get why. And then they start to say, well, it's only 10% more. And I get this versus that and it's just a better mousetrap. We win every single time. That's it. Yeah.

And one more important consideration, location, of course. I mean, look where, I mean SoHo Midtown South.

So, so look, that's, that is data driven, right? We talked about this all the time and we came up with this. And I want to, I want to give kudos to my partner Greg, who, you know, envisioned this and then Mad scientist, he's the mad scientist. He's Greg, he's great. Where he came to me and he was like, I have this great idea, we're going to do this. We're sort of doing it anyway, but we should structure it. And we have our relative strength of the sub market index, rssi. And what RSSI measures is tenant demand against available space. And available space is not just vacancy. That's vacancy and you know, available space that's going to come to the market. You know, shadow space, stuff that's going to come to the market within the next 12 months. So, you know, it's coming out against tenants in the market, right? And we started breaking it down by submarket, right? And what we found very quickly was, look, I don't want to say it poorly, but tenants wanted to be somewhere and that somewhere is Midtown South. And we noticed that there was a lot more space in most parts of Midtown property and the financial district then tenants looking for space that could ever absorb that kind of space. So, you know, we started focusing in on those markets and we, you know, focused in on, on Buying high quality assets, physically attractive assets in those markets, so that we can do our sort of KPG design, right. So that we can turn over these assets into the high quality buildings and space that ultimately the tenants want. So they go hand in hand, Right. First you buy in a place where the tenant wants to be. You buy the best building over there or the best, the most attractive building over there. And then you gut renovate that thing into the best piece of real estate they've ever seen. And you win every time.

There you go. So we only have a couple minutes left in the show, so I want to talk about how you capitalize your deals. And I know if I'm not mistaken, in your earlier career, when you start as an investor, you worked with some family offices, you know, private syndications.

Yeah.

So you've now raised, I think, your second fund already, which is very challenging to do to get an institution to really believe in your thesis. Right. Because you're going to go, you have a business plan, right. You might not have, you know, here's six buildings, we've already bought them. You're getting them to take that leap of faith with you that we're going to find this and we're going to execute it. So how did you pull that off?

Data. It's, it's belief. It's, you know, charisma, understanding. You have to get in front of somebody and not just say, hey, you know, I'm, I'm better than everybody else at this. You should come invest with me. It's showing them, right? And we, we always talk about what is, what is KPG secret sauce, right? It's sourcing and leasing, right. If a retail condo gets sold in the Bronx, I want to know about it, right? And I want to collect that data. If a lease gets done, if there's a tenant in the market, even smelling around the market, believe me, Greg will know about it. Right? And it's, it's those two things plus presenting, you know, presenting yourself structurally, institutionally, right? You need to have the right back office, you need to have the right staff on board, you need to have great people, you need to have the proper paperwork and be able to do all the reporting and all this stuff, all the mountains and mountains of work that has to happen behind the scenes to run an institutional organization. And then on the front side of it, when you go with any other investor, you have to make your case that, hey, here's what we're gonna do, here's how we're gonna do it, and here's how we're gonna beat the market. Here's why we're good at it and why, why it's gonna work. Right. And we just talked a little bit, you know, just for a few minutes about what we've done and how we've done it. Right. And the proof. The proof is there. It's right there in black and white on paper. Right. We took a building, we renovated it because we said the tenants would want it. Hey, look what the tenants did want it. And we beat all of our pro forma rents in a down market. So it's all of those things put together in a neat little package that help you raise money. Right. And that's it. That's the whole story. I wish there was a better explanation for how it happens.

Sure. Maybe a little hard work mixed in there as well.

You know what? Look, for all those young aspiring real estate developers out there there that, you know, if they're, if they're brokers or not, just be ready to work some hours, you know, be ready to work.

Yeah.

And, and, you know, just you're going to be in the office or wherever you are and there's going to be some late nights, so be ready to put in the time.

There you go. Well, Rod, this has been awesome, Such an incredible conversation. And I'm once again so happy that we could do this episode in Jim's memory and just again, everything you had to share, you know, embodies everything that he's about. So can't thank you enough. And I know our audience is going to get a tremendous amount out of this discussion.

Yeah. Thank you. Thank you for having me.

Awesome. This is James Nelson, your host of Real Estate Investing live from New York. Thank you as always, for tuning in. And if you've not checked out jamesnelson.com yet, please do. That's where you can find this episode as well as the show notes and previous episodes. And thank you as always for sharing this with your friends. And this show is all about making you the best possible investor to have the inside edge to investing. So until next week, this is James Nelson, your host. Thank you. 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 7aM Eastern Time and 4aM Pacific Time, as well as always on Demand. We'll talk again next week.