All About The Fundamentals with Brian Ker

Welcome. This is the Insider's Edge to Real Estate Investing with James Nelson, the principal and head of Avis & Young's Tri State investment Sales Group. In this program you'll learn game changing strategies to outperform the market. James will teach you how to source, execute and capitalize on the best real estate opportunities in New York and around the world. Now here's your host.

Welcome to episode number 149 of the Insider's Edge to Real Estate Investing. This is your host, James Nelson. I am principal and head of Tri State Investment Sales at Avis and Young and in this week's episode Brian Kerr shares with you his story. From humble beginnings as a real estate broker to working for city government to owning and operating an industrial portfolio his company acquired in New Jersey and Connecticut properties valued at over $100 million in less than two years. If you are just getting into investing or looking to get into a new asset class or geography, this conversation will tell you how to do this from the ground up. Imagine amassing such sizable holdings in such a short period of time. The key is is focusing on the fundamentals. Brian Kerr is the founder and President of Snowball Developments and brings over 20 years of institutional, real estate transactional and management experience spanning the private and public sector across multiple jurisdictions. He is convinced that by partnering with local experts, sophisticated tenants and astute investors in utilizing new technology applications that there is a modernized and more transparent approach to to entrepreneurial real estate investing. Brian talks about his early days at CBRE as a sales broker in Montreal and how he was able to figure out how to convert obsolete office buildings into residential lofts. He was a pioneer in this space. Becoming an expert in a new area and business plan will help you attract investment and outperform the generalists who are in the market. Brian talks about studying the data you need to do the same if you're going to own your space. Lastly, Brian talks about there being no shortcuts. It took him 15 years to become an overnight success. Above all, being trustworthy in a fiduciary to your investors is what Brian attributes the growth of his company. And I'm sure you all will agree and get a lot more out of this episode. You can find out more about snowball developments@sball-dev.com and connect with Brian.

I'll leave his LinkedIn in in the.

Show notes as always at jamesnelson.com so lastly, it has been wonderful to get all the incredible feedback on my book the Insider's Edge to Real Estate Investing from you all. It is incredibly gratifying that it's made such an impact and I really appreciate your sharing the word on this book so others too can discover the incredible world of real estate investing. So once again, you can go to jamesnelson.com to get more information on the book as well as helpful white papers and videos. So so we're going to have a brief word from our sponsor and we'll get right into that interview with Brian Kerr.

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 our industry, our 35 member group is available to help you make informed investment decisions by advising you on your current whole 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.

And now it's time for our Investor Spotlight and with us today is my friend Brian Kerr, who is founder and President of Snowball Developments. He's actually here in my office. So Brian, great to see you in person.

Great to see you too James. Thanks for having me.

Wonderful.

So as I said, I end up doing most of these on Zoom, but it's a treat to be able to sit down in person and we've had the chance to work together on a couple different fronts. So I'm excited for this this interview. So for our audience, why don't you tell them a little bit about your story, maybe how you got into the business and then we can take it from there.

Sure. So I grew up in Vancouver, British Columbia, so I'm Canadian and ended up in Montreal to go to school at McGill University. And there was no real estate programs per se back at that point. This was kind of late 90s, early aughts, but there were some urban planning classes and on the very back end of what was kind of a student politician studying experience at McGill University, I ended up taking some urban planning classes and having already done a master or, sorry, a major in economics, I felt the two things really dovetailed because at the deep core, real estate is all about the fundamentals. It's about doing proper market analysis and understanding supply and demand and without Getting too deep into it, the elasticity or the inelasticity of supply and demand in real estate that creates this really interesting pricing dynamic. So post McGill, I actually started to explore where I could go in the real estate space. And although the development market was pretty much in the doldrums in Montreal at that point, I got given an opportunity to work at CBRE in a relatively young version of CBRE Montreal. They had just reopened the office or opened the office in, in 1997. So I think I was employee number 15 or 16 for CBRE Montreal starting in 2003 in the research bullpen. So it was a great place to start because it was a small office for a big brand with big ambitions. And I got to play a great role within that.

It's wonderful to hear and I want to talk about those early days in research because I think a big, I think premise of the show is understanding getting that insider's edge and really getting under the numbers. So maybe talk a little bit more about what you were doing in those days when you first got into the business with research and maybe how did that help inform your thinking for how you make investments today?

Obviously the technology was not available then, so it was a very manual, person to person research collection. Now you've got all these great resources, whether it's LoopNet, Crexi, Comstack, realnet, all of those things either were really an infantile elements, but they really hadn't taken over. And the thing that CBRE always differentiated itself on was its own collection of market research and data. So from the office or industrial side of the platform, we were calling all of the landlords and brokers to pull together manually by, to a certain degree, Excel, all of the available properties out there in the market. And providing those market studies to the leasing professionals who were servicing their clients. And providing that level of detail within those Excel spreadsheets was really important. Making sure you had all of the details correct. It got itchy. A little bit more interesting on the office side because we had to basically figure out stack plans of all of the different office buildings. So I can assure you that I have trespassed many an office building walking up and down the emergency exits or up and down through the elevators to note down which tenants were in which suites and how that was evolving over time. You start to, when you see the real estate and you kick the bricks per se, you. You really start to differentiate the quality of the product that you're seeing and you can relate that back to the type of owner the type of tenants that are inhabiting these buildings and really understanding the property management component to the business and or some of the asset management decisions that are being taken. So for me, it was extremely granular information that I was taking in in my first year and two years in the research department of CBRE and really enjoying the fact that I understood kind of how the research was put together. But ultimately, what did it really mean as opposed to just numbers on a spreadsheet? What did the space feel like and what do the buildings feel like? And you could only do that by.

Seeing, you know, I couldn't agree more. And I'm smiling because I'm thinking back to when I started in the business and there was no, I mean, I guess costar was around. But what we relied on, we called them the blue book, which was a large blue phone book that basically had owner information, property information, but then we actually cataloged by going building to building, calling up, verifying information, and if I wanted a certificate of occupancy, for example, I had to go downtown, go to the buildings department, wait in line for 30 minutes, pay $5, and now you can get that info at the click of a button. Now then again, everybody has access to this information. So back then it was a lot harder to get information. So when you had it, it was that much more valuable. And now we have so much data that it's, I think, on the other end of the spectrum you can make the mistake where you just sit behind your desk and you think you know everything because you can pull it up on your laptop. But in reality, I really like what you had to say of actually going there in person to verify the information. Because even today, you know, a lot of the public record isn't always entirely accurate. So I'm sure today you'd probably agree that this is very much an in person business.

It's become less personal, it's become less granular to try and really understand the nuances of the street experience. There was a point in a reflection moment where I remember bringing an intern onto our team to catalog all of the strip centers and regional malls across the province of Quebec. And I thought that person was going to get in their car and then they just actually pulled out Google Street View and did it behind their desk on the 20th floor overlooking the mountain. And I kind of was like, this is a lot more efficient, but are they getting the full experience? Are they really? I mean, do you trust Google Street View and everything that it's showing you? How stale dated was that camera going down a street. And so in my view seeing's believing in our business will never move forward and offer without having, you know, toured the facility and getting the full experience. So I think you can be extremely reliant on the information that's publicly available. But this is where brokers come into play is to providing you with the private information insights that only the highest and best quality brokers can ultimately provide.

Thank you. That was a nice slow pitch softball for me to hit. But I would certainly agree because especially if we're in a market that is moving, if we're looking at sales data that's rear view mirror information, I mean that deal might have been negotiated six months ago. Maybe it only just came to the transfer. Which is if we really want to know what's going on in the market today, we need to know what's in contract now, which isn't going to be reported until months later. So I like, I like what you had to say about that. So let's talk about. So you're at CBRE now. Did you stay in the research department the entire time or did you end up in the capital markets group? What happened after that?

So I stayed there for two years and on the second year the idea ultimate is you rotate it out and you become an apprentice to a senior broker. And I had a couple different options. One was to go and work with the office tenant representation team that was quite dominant in the market. Very, very strong team. The other option was to work with effectively a couple investment sales agents who were trying to form the Montreal version or Montreal branch of the Canadian national investment team. And I looked at my options and being from Vancouver and not speaking fluent French at that time, it's gotten a lot better since. But at that time I didn't feel nearly as comfortable. The local businesses were really francophone dominated and I felt that I would obviously propel myself in my career on the investment sales front. I also believe that the business skills and the relationships that I would develop on the investment side would be far more transportable in the. In the end that I decided that Montreal wasn't going to be in my long term plans. And so I made that decision to go and support these two senior sales professionals and effectively started writing their offering memorandums, writing their market research, putting together the market presentations to all of the investors who were becoming increasingly curious but still doubtful of what was going on in Montreal, which was starting to come out of its doldrums post separatist referendum and every investor across Canada was underweight. Montreal, if they were institutional. They could see that Montreal and Quebec had a 25% of the total population, but maybe there were 4% of their investment. A and so everyone was curious. And so I really built my business around providing that insider's edge information to institutions and private capital that wanted to know what was going on in Montreal and how to facilitate their growth into a market that they wanted to penetrate over time. And by doing that for two or three years, I ultimately was given a number of what, you know, I would call discarded mandates, the stuff that the senior brokers didn't want to handle, that they felt uncomfortable in. And one of those asset classes that I got a series of discarded mandates was loft office, which was being developed by the Hasidic community in Montreal and, you know, designed around New York style lofts. And so it was very bare bones, H vac exposed, polished bricks, you know, new flooring put down, but very bare bones leased by architects, designers, some technology firms. And this was before it was considered an asset class. It was before Tammy was quoted as a lexicon within the real estate space. And so based on transacting a couple of these transactions, I started to build up my own reputation as a capable investment sales agent and not just working as the junior for two senior agents.

And so were you sourcing? You said these were developers or New York operators who were coming into your market. So how are you, first of all, how are you sourcing the product for them to actually convert? And then how were you finding these buyers? Were you spending a lot of time going back and forth with the New York.

Well, they were, they were. The Hasidic community is very tied between Montreal and New York. They have a lot. There's a lot of family relationships that cross border. And Montreal also has always been deep into the fashion scene as well. And so you have the Sephardic Moroccan, Parisian, you know, component that also is in that type of business line. And Montreal has just a lot of that product. And it didn't find a home when the deindustrialization of Montreal happened, no different than here, that product had to find a new home. In some cases, it could be rezoned or converted to residential. In other cases, it became this loft office product that was leasing for 4 to 5 to $6 gross and creating, you know, prices of 50 to $60 per square foot, which just seems like they're, you know, it had hit the floor. And there was actually an aggregator in Toronto who had started buying this loft office product in King west called Allied Properties reit. And we had heard about them. So I took my first couple opportunities, put all the nicest photos I could, and left out all of the ugliest parts of these buildings and put a little package together and walked into their office and said, here's your beginning of your Montreal portfolio. And they said, deal. It wasn't nearly that fast. There was obviously a lot of negotiation that went with it, but they could see that there was an opportunity to build their platform and grow in Montreal Allied. I don't know the exact number right now, but I believe they own around 6 million square feet in Montreal and have, you know, it's been a really big part of their growth story as a institutional REIT in what they call the I class of office space.

Wonderful. So how long was it before you then decided, okay, I figured this out? I mean, was it that you kind of went as far as you could in the investment sale broker route in Montreal and then you decided to make a move? Because I know eventually you came down here to New York. So I want to hear what prompted that.

Well, it was 15 years total in Montreal working for CBRE. Ultimately, what I found with the two senior professionals is that they didn't work cohesively enough, nor were dedicated enough to the space. And so perhaps I was a little too ambitious. But I went to my manager, Brett Miller, and I asked him permission to take over the team at 26. And he said, slow down, grasshopper. It's a little too soon for that. So I bided my time, executed more files. The market was still pretty strong in 2006, 2007, was finding that I had what I took to be able to, you know, really take and lead files at a very young age. And then 2008, as the world was falling apart, I decided to make a clean break. And I let you know, the senior person who I was really working for, along with a larger team, know that I wanted to go on my own. And going on my own also meant really disintegrating the team that he had formed. I grouped myself together with two others, and in January of 2009, a great time to start an investment sales team. We launched as the Montreal investment team, and we went on a run. We aligned ourselves extremely closely with our Toronto national investment team brethren. And, I mean, I could not have been luckier. But to have Peter Sense and people like Michael Turner and Jason Smalley and Hillel and Abergel and Casey Gallagher and Matt Brown to, you know, really help push my business career along and, you know, working hand in hand with that Group who had, you know, tremendous market share up in Canada. You know, we ultimately were able to sell $4 billion of product through 2016. And I got the itch at some point to realize that I was starting to sell a couple buildings for the second and in some cases the third time. And I knew that I didn't want to get into brokerage originally. I wanted to get into development. I wanted to be on the principal side. I perhaps was pretty opinionated about some of the investment thesis topics or trying to give advice to clients and telling them, you know, what I really thought they should do. And I realized that at the end of the day, the fit for me and brokerage was coming to an end. But I didn't know how to break away. And as any investment sales broker knows, there's a golden handcuffs of your future pipeline that you can't ignore. It always seems to be growing. The grass is always a little bit greener the next year. And it really took a fortuitous event where my wife is a commercial real estate attorney and she got recruited by Scatt and Arps in New York City. And at that point we looked at each other and said, if not now, when we were pre kids, we could move to New York. She had a great opportunity for her career advancement. As much as I felt like I was growing in my career and had some crazy exciting years ahead and Montreal was really starting to take off, it was the right time to make a move for us as a family. And so for that reason we said, let's go now. I thought that I could, you know, still manage this for a bit and unwind my assets and perhaps still find a few more pieces of business to market. But I'll tell you, it was stark. We found out as soon as my wife gave her resignation notice. Within a couple days I was already getting the phone calls saying, when are you moving to New York? And eventually, really we found out that it was impossible for us to continue to build more business. But we managed to make that break. And I came down to New York and before, you know, long, I tried to figure out what I wanted to do down here. I met with Blake Hutchison, who was CBRE Canada president during my time, also a great mentor. And he said to me very clearly, if you don't know what you're doing, just go back to school. And so I went to the Columbia, Mississippi Red program and applied, enrolled in June of 2017, did my one year there. It allowed me to divest of all of my, you know, remaining mandates up from up in CBRE so I could make some income while I was in school and figure things out. And I kind of said to myself, if I'm going to be a sponsor, if I'm going to be a principal, what do I need to be able to ultimately take investor money and tell them that I'm capable of investing it as a good fiduciary? And I said, well, I need to master the market. And as it took me so many years to master the market in Montreal, I said, well, what's the fastest crash course? So after doing my master's, I said, why don't I go work for government? And so I decided that I was going to take an opportunity with the New York City Economic Development Corporation on the real estate transaction services team. And that's where I was going to really put all of my energy to do a crash course in what makes New York City development and the economy tick. And so that was my next move. And it was a tremendous opportunity to get on the inside of what was happening for public private partnerships, larger development projects, rezonings that were taking place across the city, and get again, you know, kind of get that inside knowledge of what was making the city tick. So that was just in a great experience. And I spent three years there. The first two years was absolutely fabulous. We had so many great projects going on. But then two things happened. First off, I had my first daughter in January of 2020. And then two months later, Covid hits. And all of a sudden the city slowed right back down. Slowed right down. And all of a sudden, while we were at government, we were working on all these great projects, they ground to a halt. We were dealing with force majeure. Letters from every developer who was no longer capable of moving forward on their obligations. We ended up having to be the police enforcer of development agreements and ultimately working on a series of workouts. And I felt like I thought I had done enough.

You said there was a lot there. And I think first of all, because we have a lot of brokers who listen to the show as well, looking to get into investing. Brokering, investing can both become very much full time jobs. I can definitely relate where you wanted to get into investing, but the brokerage machine is still moving. So it probably did take that clean break, if you will, to say, okay, I gotta really jump in here. So. And then I think with your time with edc, and it's interesting, on this show we've had Rachel Loeb, who is the interim head, we've also had Marianne Gilmartin and we've had a lot of developers who've said, coming out of the public sector. And I think, and I'll ask you the same question, but I think if I remember when I asked Rachel, why would someone go into the public sector, she said, look, there's no better way to get frontline experience right out of the gate. Typically, if you're working for a big private developer, you might start as an analyst. It might take you 10, 15 years before you see the front line. Was your experience when you were at the EDC that you just jumped right in and you were getting that front row seat?

Absolutely. You're interfacing immediately with all of the heavy hitters. In fact, the project that I was first assigned to was this small little development in Long island city called HQ2. And so immediately supporting the team who had already been running the bid to figure out how do we unlock the Department of Education building so that Amazon could occupy it as aggressively as possible. And thinking through all of the zoning and regulatory, you know, hurdles that were necessary and how could we streamline things as quickly as possible? And interfacing directly with TF Cornerstone, interacting, you know, interacting with the Amazon team, it was a really, you know, immediate like, okay, you're in New York. And so that definitely for me was my experience. Interestingly, I had done some life sciences work up in Montreal at cbre. And so that experience, you know, immediately propelled me into the driver's seat of working on a series of ida, sorry, Industrial Development Agency tax benefit programs for developments that were ongoing. I took control and was leading the expansion phase of the Alexandria center for Life Science and negotiating that land lease directly with the team here. And so you definitely immediately get thrown right into the mix. And having had tremendous transactional experience beforehand, you know, to a great degree, I was trusted to, you know, immediately interact and take the lead. So for me, it was a great experience. And we were able to get the Deerfield 345 Park Avenue south transaction fully approved and delivered. And that project, I think, has just been a tremendous success. And I really tip my hat to the development team and to the Deerfield group for wanting to move that forward and, you know, being front and center on different rezonings that were taking place, getting inbounds from City hall and understanding their political reality of how they're thinking about the optics of all of the different decisions that they're taking. You know, this is a. There's a city that does not lack for criticism to others and particularly government, for not getting things done. The way they would like to see it get done. And the de Blasio administration was, I would say, extremely sensitive to criticism from all sides. And to a certain degree, they did what they could. And you know, I think that we were at the front of that, trying to showcase what, what it meant to sit in front of a community board meeting and, and take the heat.

Right. Unbelievable experience. So I want to, so now you've cleared the deck again and you've been for a while thinking about you want to become a principal, you want to become a developer, so now you have the knowledge. So I think for a lot of our listeners, if I had to guess what's probably holding them back from jumping in full time or making their investment is, you know, first of all, does it start with the deal or does it start with the capital? So here you are, you've just finished up three great years at the edc. At that point you said, okay, I'm ready. So if that was the case, what did that mean? Did you have a business plan in place? Did you have deal flow?

Did you have capital?

Talk to us about making the leap.

So you need to know what you don't have to be an investor. And so whether it's you have the experience or you don't have the balance sheet, you may not have all the capital up front. You might have an idea. There's a lot of different things that you just need to figure out that you, you don't have to be able to start your business. So I like to say that fortunately or unfortunately, I don't have a trust fund to lean back on. And so with that in mind, you need to know that if you're going to take out a loan, someone's going to have to sign for the non recourse, carve out guarantees, and you're going to need to prove that you have a net worth equivalent to the size of the loan and typically liquidity of 10% of said loan amount. And so if you don't have that, which I'm sure 99% of the listeners of this podcast do not, you need to figure out who's going to provide that to you and on what terms. So that's the first part. You have to know how you're going to ultimately transact because unless you Plan on raising 100% equity, this will be your reality. Or you want to go to the private hard money loan side of the equation, which I don't recommend, but it's available. You need to figure out how you want to go out and secure your financing.

So did you have that person out of the gate or you had to go find them? And at what point was that after the deal came along or just so.

As I transitioned to New York, I had talked to a number of my best clients and some who had started out as entrepreneurs and had grown and others who were second generation families. And I started nurturing the relationship to say, hey listen, it's not now, but soon, at some point I'm going to want to start my business and will you support me? And I said, this is the support I'm going to need. We're going to need money to put up deposits, pursuit costs. We're going to need, you know, the ability for someone to come through and sign on the dotted line where my name is not sufficient, and here is the upside or the disproportionate benefit you would get versus just being a passive investor in the transaction. And so I had started that pitch early. A number of my top clients from Montreal said, yeah, when the right time comes, we'll be there for you. And so it was with that comfort that I knew that, okay, if we find the right transaction. That I thought was there's no such thing as a guaranteed victory in real estate. And I think a lot of people lose sight of that, particularly as they're bickering about how the markets are today. This is not a risk free asset class whatsoever. But I was looking for something that I felt, you know, no matter what, was going to be a bunch single to, you know, a standing double, you know, was kind of what I was looking for under any stress test case scenario. And ultimately that comes down to basis. So there was an opportunity that came about while I was on my paternity leave at the edc. It, you know, came to market, then it, you know, came off the market and we, we started negotiating kind of quietly on the property. And so it screamed to me it was exactly what we were looking for in terms of our concept of what our business plan should be. And so the business plan, to answer your question, was a covered land industrial play where we would try to buy the most amount of land for the least amount of building noi with a series of different asset management alternatives that ultimately all should have pointed to success. So the tenants so stay and they pay more rent or perhaps they vacate and we now have a development site or we'll find a new tenant that is prepared to pay a market rent. And so that was our basic thesis to say, okay, let's just try to buy our land for the lowest price possible and have that land financed by the existing building noi and nothing more than that. And if we can find that equation, then we feel that we'll be able to deliver the type of returns that we think would be attractive to a retail audience and build track record through a series of these types of transactions. And so that's how we started out. We found this transaction. I already had kind of the gp, the general partner side of the equation, figured out as a consortium and we put the deal together. It took a long time. We ran into a series of different hurdles along the way. And I would say for anyone who's a broker listening to this, because you've been transactional, because you have seen the every type of movie and transactions, you're so much better prepared to deal with whatever is thrown at you than someone who has not, you know, been through all those derivations of problems that get thrown at you in a real estate acquisition process.

So, Brian, this is fantastic and really appreciate your sharing and to what extent, if this is going too deep, you know, understand that some of this stuff I'm sure you want to keep proprietary, but only to be helpful to our listeners because you talked about this partner who's going to sign guarantees, put up deposit, like at risk money. So are you essentially taking on a co GP where you're sharing in the promote?

You know, because again, I think a lot of our listeners, they say, okay, how am I going to do my.

First deal if I don't have the capital?

I've got the deal.

So were you just kind of, Perry, pursue with whoever your backer was and then talk about the additional money you raised and then you all promoted off.

The LPs, maybe talk a little bit.

About the structure to be helpful.

So I actually had set up what I thought would be a search fund. So it was a fund that was going to pull together $1.5 million of equity to do a series of these transactions. And so there were originally three investors plus me that all pooled our capital into the search fund. We did called half of the capital up front that was not at risk deposit money. We went in with soft deposits. One of the things about not being in New York City is everybody else just does things the normal way. Right, Fair enough. And so we did have the capital to pursue the transaction. I made sure that the transaction fit all the metrics and was presented to the search fund partners that this made sense. And so that was the GP side of the equation where there actually was a waterfall in the GP fund. So there would be a waterfall at the deal level and then the GP distributions would go into the GP fund which would then go through its own waterfall on a cross promoted fund basis.

Got it.

So that's the way I structured it originally couple, which is still, by the.

Way, it's still the fact. And I understand you've got these long term relationships, the brokerage experience, but at this point this was your first investment and here you are getting, you know, this search fund as you mentioned, I mean that's the real testament. I mean obviously your backers, you know, thought highly of you, is willing to.

Throw 100k 250k at me to say, yeah, go at it and see if we can make it work. And if you do, fantastic. If not, you're going to learn a ton.

And if they stayed with you, fast forward to today. I mean you're, you're what, close to a dozen transactions, nine transactions to date.

And yes, one of the search fund members has been in seven of the nine transactions, another one's been in three and another one's been in two. So you know, we've, we've really, we've really, you know, really appreciated the support. I mean you cannot get off the ground without some benefactors.

Sure.

If you don't have again a trust fund to work from yourself. And so culturally nurturing those relationships, being trustworthy, ethical, you have your entire career to prove your reputation out. And when people start calling in on references, know that anything that you've done, you know, inappropriately is probably going to come up and hold you back. So this business presents all sorts of opportunities for shortcuts. And all I can ever tell anyone is you'll never, you'll, you'll lose your reputation. And if one shortcut goes bad and it puts you on the wrong side of the equation because at the end of the day you're a fiduciary for other people's money and you really have only one shot at it to prove that you can do it the right way. Now we, so we had the GP side of the equation for this transaction which was 325 Midland Avenue in Garfield, New Jersey. It was a 75,000 square foot kind of, kind of buildings on about a three and a half acre site. Textile manufacturing building with very low rent. 650 rents in a market that was starting to really move quickly in New Jersey. But we had a cap on how those rents could increase. So there was a question about when you could really get at the value. But we bought it at a call it a 5.7 cap on in place income. We financed it when debt was very cheap. So it was a bridge loan which know now is not as cheap. But we bought it at $100 a foot in a market that was clearly transacting in the 160 to $200 per square foot range. So we just felt we had a great basis and based on that we went out and started raising LP capital. And now again, this is where the relationships really kick in. There was a CBRE investment sales, you know, leader in another market and who was starting to wind down their own career and started doing real estate syndications elsewhere in the US through some other relationships. And when I pitched that individual that we were looking to raise LP capital, he said, hey listen, I'm already doing this, I'd love to work with you. How about this? We'll go and find 50% of your limited partner capital and we'll get a piece of the promote and we're going to kick in money too and we're going to tell everyone we're behind it. And I said to myself, you know, you can try to have it all or you can just do volume. And I think in brokerage you get taught that it's best just to do volume. You know, the relationships, the track record, the ability to do more transactions and have more visibility even if you make a little less per transaction is the right approach. You know, you can't just swing for home runs every time. You gotta just be in the game and be in the game and be in the game. So a lot of this is just what was beat into me through 15 years of being at CB where you're just always happy when a referral comes in. It doesn't matter if you're getting 20 or 25%, you're doing all the work. You're doing one more deal. That's right, you're just doing one more deal and you get to tell the market you're doing one more deal. And good deals lead to more deals and success begets success. So that was the way that we financed the first transaction. You know, it took a long time to close. The market really improved while we were there. We hit some bumps along the road, both environmental, physical, title, all sorts of things. But ultimately we ended up with a great transaction. And at that point I was, I'm a Canadian again. So I had to get on a new work visa. I was leaving the edc. I was trying to synchronize things. So within a Period of six to seven weeks. I'd resigned from the edc, was on a New York visa, closed my first transaction and then Snowball was a go. And so it wasn't such a clean break between the two. But you know, to a certain degree, you know, I try to, I left with my head held high with the edc, that everything that I was doing till the very end, you know, was all about delivering the best for the city. And you kind of need to have a running head start when you're doing these things. If you're doing it in brokerage, you might already be invested in a series of LPs. You know, be an LP in a series of deals feeling that you've got some income streams coming your way that will get you to where you need to get to. Because yeah, you're going to hit an income cliff because when you start out, those asset management fees and promotes, they just feel like they're not enough and they're too far away.

No question. And you know, I would imagine also as you're trying to figure this out and you don't have a team because to your point that the fees don't justify building out a team, I'm sure, you know, there was a lot of hours spent round the clock trying to, you know, figure it all out. But now, you know, fast forward, talk a little bit about your organization today because clearly with nine assets you have to have infrastructure in place. So maybe talk about. And we are. What's the time span now since you.

Launched Snowball in August of 2021? So we're March 23rd now. So we're talking about almost 20 months I guess.

Okay, so what does Snowball look like today?

So Snowball today is just still a two person organization. It's myself and Jordan Gluck who is the senior acquisitions associate working with me and we manage nine assets, call it AUM, of around 100 million. We closed seven transactions in 2022. That was the scale up year. In a startup model. You have the prove it, the proof of concept, your mvp. And then you've got a scale and you've got to scale as fast as you can to a certain degree to generate the asset management fees, the opportunities, the future leasing, recapitalization opportunities. And you want to hedge your bets, you want to be broad based. And we wanted to demonstrate that we could just do a lot of volume. And to a great degree I bore that last year where we were non stop buying, finding new GP partners, the first original search fund, what fell down in that was that all of the partners in the fund had to joint and severally guarantee the loan. And that just created too many cooks in the kitchen. So I realized after that we just needed one code GP per deal. And to a certain degree, it kind of went on a rotation or a deal specific kind of way of putting it together. But that was the way that we tried to move forward, and it's worked so far in terms of being able to generate the nine closed transactions. We branched out into Connecticut from our first New Jersey deal predominantly because we could see that Connecticut was overlooked. It felt a little bit like some of the things I experienced in Montreal. Everyone knew it was there. No one was really exposed to it. People weren't really paying attention. The research was spotty. And I started digging in from the ground up and thinking through the research, looking at the different offerings that were coming my way, and seeing that there was a ton of positive leverage you were getting day one. And the vacancy rate was collapsing. The absorption was growing. And Connecticut, for better or for worse, despite having abundant land, is supply constrained mostly through political choices of where to place, highways, where you can and cannot put, trucks, where trucks are permitted to circulate in farmland or, you know, areas. Some of it's natural, which is the topography is naturally. Lots of hills and ravines and creeks and wetlands that don't make it obvious to lay down a big distribution center. And I just started getting very comfortable with the math. Again, if you hadn't started in the research department and try to learn an asset class from that way, you might miss out on some of these opportunities. But I started driving the market. I started thinking about what I saw. And what I saw in every business park was a full business park. There wasn't a vacancy. And I started getting very comfortable. So when opportunities started presenting themselves in that market, we started jumping on it. And, you know, typically we bid to place in most of our situations to stay in the mix. But in when we were looking at some opportunities in Connecticut, we bid to win because we said, listen, even if we pay the most, we're still well ahead of where we think this asset is going to be, you know, three to five years from now. And so we really moved heavily in that direction. We acquired five assets in Connecticut in 2022, but we also had our eye on New Jersey. And there were just some exceptional opportunities that presented themselves in 2022 for us. So one of which, and this is, again, if you're in the mix, good things can happen to you. Actually, it was an avison young broker Tim Cadigan of the New Jersey office. Tim and I had actually we met, we were talking about the industrial market and I mentioned my former business partner in Montreal and he said I've done a deal with Serge, my business partner, Serge develope in Montreal. And I said what do you mean you did a business deal? He's like, well we actually did a build a suit for some chemical. I said Tim, I got paid on that deal. We've actually done business together. But Tim and I started looking at a series of different opportunities and there was a transaction where a developer was trying to really focus in on bigger assets. Selling off non core. And for good or for bad, they had a reverse 1031 deadline and it was a deal in the Meadowlands that you know, was available at 165 a foot, you know, 2 million an acre in the Meadowlands and having underwritten bid, aggressively pursued opportunities. It just felt like this one just screamed value but you had to close in five weeks. So I went back to that original group who funded me and my GP fund originally and said guys, this is, this is too good to be true. In some respects it's got some issues. We're not going to do the due diligence we want, but sometimes you just got to be opportunistic. So we ran as hard as fast as we could and acquired that opportunity in Little Ferry. And it looks like it's going to be an absolute star. Rents, you know, under a previous regimen were seven to nine bucks a foot. The market's now close to 18. So you know, it's those opportunities that if you, if you do the work then sometimes one of these opportunities will just come to you and you say, okay, thank you for just being in the right place. But you didn't, you put yourself in that place. You had done your homework. You were standing in the right place, but you knew how to seize the opportunity.

Love that. So Brian, with only a couple minutes left, the name of the show, the insider's edge to real estate investing. You've already talked about several of the traits that you have that give you that inside edge. But what do you think differentiates you? I'm sure there's other investors, you know, looking in the same market. I mean, to take down nine transactions in 20 months, that's pretty exceptional. So what do you think it is that has allowed you to have so much success in a short period?

Well, I think if you're coming from a high volume environment, which is what we did at cbre, we were Mid market focused on really providing confident underwriting to investors who wanted to buy this product. That's a really transferable business school. If you're able to produce 10 to 15 to 20 investment opportunities per year, you're going to be able to move at that type of pace. On the acquisition side, if you're working for a big development company and they're looking at one deal every three, three years, that's going to be a six year development horizon. You're probably not going to be able to transport yourself the same way. Doesn't mean you can't try. But you know your, your mindset may not quite be there. So I think I had that pedigree and training to be able to do that. Secondly, technology I really focused on what would be the technological tools that are now available to me so that I would be able to handle that workload. Because it's not just buying the building which in itself and syndicating capital and finding investors and putting together presentations I tried to do on my first transaction, emailing out to 15 to 20 people and you just realize that's not enough. You got to cover a much bigger crowd. You need to have technology do the work for you. So we invested in our investor portal, which is Juniper Square, to really cater to the, the fundraising component of the transaction. Ultimately it's integrated for things like asset management reports on a quarterly basis so that we can take the information and put it in a one stop place in you ultimately is where right now it's K1 distribution time. So all of our K1s are being distributed off of the platform. So you need to invest in the, the tools that will allow you to be efficient. My personal feeling is that if there's a manual input job, you know that's going to be boring for me to do, it's going to be boring for anyone else. So let's figure out how technology can do everything. So between Jordan and I, we, we underwrite a lot but we use our processes to be able to be efficient and you know, that's kind of it. You just have to be ruthlessly efficient with your time so that you can be and do everything. And we, we don't cold call, we don't cold call to find new properties. We work with our brokers, they're our best friends in the industry. They're going to find the opportunities, they're going to provide the market information, they're going to help support the acquisition process. Most importantly they're going to vet the sellers to see if they're real. And so I think you need to say, hey, what are you good at and what are you not good at? And I think that, you know, my ability to speak with brokers, having been one, is a calling card. And it's going to be, it's going to help me because I can relate to what they're experiencing when I can see that they are having a challenge with their seller because the seller is not as willing a participant in the sale as they should be. You know, that the seller is letting themselves down. They're not going to get the pricing they want. Frankly, that's the deal we chase hardest.

Well, Brian, this has been amazing and there's no doubt that your experience as a broker and the volume that you were able to generate here is translated into a very successful investment career. So really appreciate your being on the show today and sharing your thoughts. I know the audience will get a lot out of it.

Great. Thanks so much, James. I really appreciate everything that you're doing to make sure that the world understands that the options for real estate investing are a lot more open than people might believe.

Awesome. Thank you again, Brian. And if you want to find out more about Brian, you can go to snowball-dev.com to read about everything they're doing. This is your host, James Nelson. As always, thank you so much for listening. If you have not already, please connect with me at James Nelson NYC. Also@James Nelson.com you can find the show notes for this episode along with an exclusive video series, white papers, and of course a link to purchase the book if you have not done so already. So thank you everyone. As always, until next week.

Thank you for listening to the Insider's Edge to Real Estate Investing. We appreciate your subscribing and sharing with your friends. If you haven't already, please connect with James at James Nelson NYC on LinkedIn, Instagram and Twitter. Please also visit jamesnelson.com where you can find the show notes and other episodes along with an exclusive video series and other helpful resources so you can gain the Insider's Edge to Real Estate Investing. Until next week.