Balancing Risk with Victor Sigoura

Welcome. This is the Insider's Edge to Real Estate Investing with James Nelson, the principal and head of Avis and 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.

This podcast is for educational purposes only and should not be relied upon for investment decisions. The opinions expressed are those of the guests and not their companies. Listeners should not act upon the information without first seeking appropriate advice from an accountant, lawyer or other professional.

Welcome to show number 186 of the Insider's Edge to Real Estate Investing. This is your host, James Nelson. Welcome. As always, the feedback that's been coming in from many of you, whether it's through LinkedIn, through all my social media channels. James Nelson, NYC I really appreciate when you reach out, you share your thoughts, your questions. It really helps me to keep this show going and it's just great to hear that. It's been helpful to so many of you. And today is no exception where we have another incredible guest. We're here to tell you about how they got started, how they built their company. Advice not just to aspiring investors, but also to veteran investors. I know sometimes we talk a lot about students and thinking about how to get into the business, but what's been really amazing is to hear from many of you veteran investors to say, hey, you know what, I haven't thought about that for a while. Or I learned something that's really helped me step up that game. And today you're going to hear from Victor Segura. He is CEO and founder of Legion Investment Group. He's a real estate developer, owner and operator focused on acquiring and executing developments in strategic and highly sought after locations. Victor has been responsible for directing and overseeing new developments worth over $7 billion across multiple sectors of the real estate industry. And for those of you not from New York, you should definitely take a look at his site, see what he's done with some of these signature projects on the Upper east side. Breaking some sellout records. Really incredible story here and you're going to also hear about the value of establishing relationships, most importantly being honest. Throughout the life cycle of the deal and shares. Victor shares his focus on integrity to build trust and attract investors when he has a development opportunity. So as always, you can go to james nelson.com that's where you can find show notes for this episode. You also find not only Victor's bio, but you can also find out ways to connect with him and as well as his website at Legion Investment Group. So we're going to have a brief word from our sponsor and we'll get right into that interview with Victor Segura.

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.

Welcome everyone. Thrilled to have with us today in our new studio and might be a little confusing behind you you might be seeing Rockefeller Plaza, at least for those of you watching the stream. But yes, we are here at the Green Room here at the Avis and Young New York offices at 530 Fifth Avenue and incredibly excited to have with us today Victor Segura who is the CEO of and founder of Legion Investment Group. So Victor, thanks so much for joining us.

Thanks for having me. And excited to be in your newest studio.

Wonderful. So for our audience, why don't you give a little background about Legion, maybe your portfolio, current projects that you're working on just so the audience can get a sense.

Sure. So Legion Investment Group is primarily a development company focusing on condos rentals. The tri state area is our primary focus today, really Manhattan and Brooklyn. We do also own and operate multifamily buildings in the city. It's not really our primary focus at the moment. And you know we started the company, I started the company in 2016, now have a great team of about a total of six people. We recently came off of a and I know we'll be talking about this later, a great success at 109e79 which was a high end luxury condo development that we executed and we have about four or five development projects, projects in Manhattan in the pipeline. We haven't really announced many of them other than the one that you know of and we're involved in for for a little bit of time on 84th and Madison. So really a a condo developer at the moment, you know, to the extent that we can, you know, ultimately do rentals, whether it's in Manhattan or in other areas, we would like to. But those dynamics haven't been so ideal. So we've really been focused on condo development.

And usually I would save this kind of question for further along in the story as we talk about the projects. But the fact that you have so much going on, and when you told me you have six people working with you, you could have told me 60 people. So explain that as far as. Do you end up outsourcing a lot of the business? How do you. How do you structure?

Yeah, so this kind of ties into some of the, you know, some of my background in terms of how we've, you know, managed companies in the past. And so in my past companies, they were always, you know, really the top executives of the firm. And you cover the, you know, the. The major disciplines. Right. So you cover the acquisition side. So we have a head of acquisitions. We cover the marketing and design. So we have someone who leads that, and then we have the construction side of it and someone who leads that as well. But all those aspects also have outsourced groups. So whether we're working with a brokerage firm on the marketing, you know, sales and marketing side of it, whether we're working with a construction manager or a G on projects, all of that part of it is still outsourced. But we really oversee everything internally. It's always been important to have that level of executives overseeing everything that the company is doing. And, you know, right now, you know, we have about, you know, going back to your. To your first question with all the projects that hopefully we'll be announcing within the next three, four months, we'll have, you know, a little bit over 700,000 square feet in various stages of development. So we'll probably be, you know, doubling the amount of people that we have or so. So additional project managers to work on the construction side, additional people on the marketing side, and other ancillaries that we need to kind of fill in the gaps.

Perfect. Yeah. No, that makes a ton of sense. So I was reading in your bio that you're a graduate of the Cardoza School of Law, and then you ended up working at Greenberg Frag, which is a preeminent real estate firm. I don't know if that was your focus while you were there, but clearly you went through law school. You're a practicing attorney. Was that always just what you thought you'd end up doing?

Yeah, so. So, you know, the. The Law part of my career was really supposed to always be a stepping stone into real estate. Right. It was something. It was an area that I knew I wanted to get into. And so that was really supposed to be a stepping stone for me. An interesting story there. I started working at Greenberg in 2001. I think I started the day or 9 11. And at that time, even before 9 11, the real estate market was pretty slow. And so unfortunately, what was happening at that time were, you know, things are tough, so people were litigating, and so they needed people in the litigation department. And so I started there. I ended up, you know, kind of hooking up with an amazing partner at the firm and did securities litigation for about a year and a half. But I knew that the way to get back into real estate is eventually and to get some of that experience under my belt was to, you know, I needed to stay in front of the real estate partners. And so what I was doing at that time was working to bring in business to the firm. And I was, you know, a first year associate, year and a half. Right. Which I think typically you don't see young associates like that bringing in business, but I did. And that was the way that I was able to stay in touch with the partners, talking, you know, obviously to Rob Ivanhoe, Steve Rabinowitz, all the, you know, players that you probably know in the market today. And after about two years, I was able to transition from the securities litigation department, which was a great experience for me, into the real estate department. And then I did another two years there. And then that's how I met, you know, the people at a lot, and started over there as sort of the first part of my career in development and on the business side of things.

I know we've had at least one attorney on the show turned developer, Ken Horn, and there's also other prolific developers out there who started as attorneys, I believe Steve Witkoff being one of them. So what is it about the legal mindset that has stayed with you throughout your career? You know, obviously, having a knowledge of the law, I would assume is helpful, but. But it is. There are different skill sets, you would say, as opposed to being on the legal side of the equation, as opposed to the business side.

Yeah, so. So I think, you know, I think oftentimes if you're on the legal side, it becomes. It becomes more difficult if you're on the legal side for too long. Right. Because you end up, you know, sort of training your mind in a certain way to your point. Right. And so, you know, Having not done it for that long, I continued to have, you know, the business mindset. And when I first started at All Group, which was the first company I started at, after I left the law firm, having that legal background was extremely helpful because a lot of what we were working on was, you know, various contracts, loans, etc. And in the firm, you know, we had inside counsel, but there wasn't someone who can look at it from not only a business perspective, but also understanding the legal impacts of those business decisions. And so throughout my career it's been helpful. I think, you know, I use it today a little less than I did early on in my career, but nonetheless, having that understanding of the decisions that you're making and the potential impact they might have from a legal perspective is very, very helpful, very important, I think, you know, to, to have that understanding so you're not just, you know, kind of, you know, flying a little bit wild at times without really understanding, you know, the ramifications of some things you might be doing.

And then the last, last question about kind of the, the legal to developer transition. When I've worked on transactions with, with attorneys, usually what I find is we're talking about, you can really get into the details as far as you, what might not happen. Sometimes these are remote possibilities. But, but part of a good attorney's job is to really think about not only what happens when things are good, but when there's challenges. So your tolerance for risk. Right. So the, the, you would say the legal mindset is really trained to think about all the different things that could potentially go wrong.

Yeah, right.

And I, I would imagine that's part of your calculus, but you also have to be a risk taker by nature to put forth a new development.

Yeah, so, so that's definitely true. And I think, you know, potentially even more so in some of the things I've been doing in terms of, you know, assembling development projects, which adds a level of risk. But you're right, I mean, you know, understanding the risks is very important, but being able to pull yourself out of, you know, the mindset of only thinking about the risk, you got to look at the upside and the potential that you can create by taking that risk. And so, you know, I think again, I always had that mindset, that business mindset that allowed me to take a little bit of risk. But again, having that legal background, you know, at least lets you think about things that you. So, you know, better to know than not to know at all. Right. And be surprised by something. So you Know, I think, you know, I had always had that ability to think on the business side, which was why very quickly into my real estate career at Greenberg, I realized that I needed to be on the other side of things. I couldn't think like that all the time. Right. Even. Even in litigation. I was kind of lucky enough to end up doing a lot of securities litigation, which was really arbitration and mediation and talking and settling deals, rather than thinking only about the sort of, you know, continued litigation for 7, 8, 9, 10 years. Things can stretch for that just wasn't my mindset. So knowing and understanding the risks and being able to make a decision to get beyond that is quite important. And that's where I think sometimes if you are a lawyer, you know, for, you know, I don't know, five, six, seven, eight years, I don't know the exact timeframe, it becomes more difficult to take yourself out of that mindset.

Definitely appreciate you going into the background and kind of the change in mindset. And certainly we have attorneys who listen to the show who invest as well and they stay on as attorneys. But there's also. There's probably accountants listening to the show, architects, all different types of professionals who are thinking about how to make that. That pivot. So appreciate you going into that. So let's talk about now how you landed at Elod. When you decided that you wanted to go to the transaction side. Did you think that the easiest path might be going to one of these developers and working as in house counsel or.

It's a very good question, I guess, you know, so the way. The way it all happened is that while I was at Greenberg, I. I got put onto the diligence team for the acquisition of the Plaza Hotel. So that was sometime in like 2004. Ish, if, you know, I'm not 100 sure my exact timing. So around 2004, I got put onto, you know, work on the diligence there. And through doing that, I met, of course, a principal of Elad Group, which was Isaac Chuva, also met the CEO, which was Mickey Naftali. And for a while after that, I was working on the deal itself, and we had a good amount of interactions. And then when I finally decided to leave, I really didn't have a sense that I wanted to go into development, to be honest. Right. I had a sense, you know, for sure I wanted to be on the transactional side. I wanted to be on the business side of things. I did not want to go in house at a place I wanted to get sort of away from the legal side of things. And so, you know, once, once I made that decision, I started to talk to several different firms. And, you know, I think two were in development, others were not. And I just thought that this was, you know, really exciting. Right. Obviously what Elad was doing was kind of exciting at the time they had the Plaza Hotel acquisition, they were kind of getting into the stage of getting to a construction loan in addition to all the other condo development that was going on in the city. And I thought that that was exciting. And so that's, you know, ultimately I decided to start there and, and only on the acquisition side in terms of my conversations. You know, at that point when I was speaking to Mickey, it was, you know, again, we had sort of a rapport prior to that. So he understood my mindset, he understood, you know, how I thought about things. And at that time, for sure, there was really no one else kind of on the acquisition side that was working alongside him. And so having that legal knowledge was very helpful because then I can, you know, be on the phone with the lawyers going over the business slash, legal issues and be able to, you know, explain it to Mickey in a clear, concise, and sort of quick way so that we can make decisions together and move things along. So, you know, that background really worked out very well for me. And I think, you know, just going, you know, speaking in, you know, to someone and explain to them my mindset. The fact that I was able to bring in, you know, business to the law firm on the real estate side. Right. That's a little bit more of entrepreneurial kind of, of of mindset. And I think I was able to convey that, which helped me, you know, just transition as an acquisitions person as opposed to, you know, in house.

Got it. And so it does sound like that they, they did rely on you for your legal expertise and whether it was for financing, structuring deals. I mean, I don't know if weighed in on individual condo sales, but was it kind of a catch all type role where you were just fully immersed in the development?

Yeah, it really became everything. And not surprisingly, early on, very much of the focus was on the Plaza. There was a lot going on. Right. There was all different aspects of it. There was the residential conversion, there was the hotel, it was the condo hotel, there was the retail. So it was a lot of different aspects of that deal. And so I spent a lot of my time early on on that, and then probably not until I would say at least a year plus year and a half, maybe even two years in, I was Able to really start focusing more on the acquisition side. Did. Did a couple of acquisitions and then, you know, unfortunately, we hit the financial crisis. So at that time, just focused on handling the issues that we had within the portfolio. All of which led to great experiences for me and great knowledge that I gained over that time.

Is it so lessons that you learned out of the plaza conversion, I mean, one of the most historic, significant pieces of real estate in New York City. And I. I can imagine that the conversion was not an easy task. So any lessons from that as far as what went well, what were pleasant surprises, what were challenges that you didn't even realize once you really got under the hood?

Yeah. So, you know, again, for me, it was kind of my first foray into real estate. Right. So I saw a lot of different things happening and there was so many different components, as you just said, to that development. I think, you know, one of the main things I probably would have taken away from that or I took away from that was that, you know, when you. When you get into a project, understanding what it's going to entail from a construction perspective, making sure you're properly prepared for it from a, you know, really a budgetary perspective with your lenders internally, etc. And making sure that you deliver, you know, really, really great, great quality. And so we had some issues early on with, you know, dealing with the contractor and arguments and things that we could have saved a whole lot of time on rather than sort of getting bogged down on that, which I think ultimately, you know, impacted, you know, the. The experience overall that I saw there. But there was so many positive things. I mean, we had the opportunity to deal with, you know, Prince Al Walid Bin Talal and his team on the hotel side. You know, we had a whole, you know, we. We really went through a whole kind of evolution with retail over there. Right. There was a question as to whether or not retail could be successful below grade. And we started with the retail, had some difficulties, ended up putting in, you know, the food hall, which was the Todd English Food hall, that was very successful early on. And so we start to see, well, it seems like, you know, the food concept works, and that's kind of how. And so, yeah, I mean, you know, a wealth of experience just dealing with that one project, which is really why, about two years, there just wasn't enough time to deal with sort of typical acquisitions. But overall, had had some great experiences there. I even, you know, after the fact, served on the board of the residential condo with some great owners of Plaza Units learned a lot from going through that process and seeing what buyers were focused on after the fact. Right. Like preparing, knowing things for the future that, you know, buyers and owners will look for once the project is over and you hand it over. Right. So all of these lessons have been, you know, very important for me throughout my career.

Well, it's great to hear that you were really involved after the fact as well, because you do sometimes you read about the friction that happens afterwards and that there's this antagonistic relationship between the developers and the buyers. So, so clearly, you know, things come up, but you were able to address it and the fact that you. You followed through the project curious about the notion of having the hotel and then residential condos. So were the condos getting, or do they still get hotel service? And if so, what do you think of that as a business plan? I guess it's got to have a certain scale to make sense. But is that. That a big reason why you were able to achieve such premiums there?

So I think you look, that was certainly part of it. Right? The, the. The. At the end of the day, it's the Plaza. Right. And it has that iconic nature to it. Obviously, you know, being right on Central park is a huge factor there. Early on, yes, we did try to organize it with some hotel services. I think the interaction between the two often becomes difficult, especially in what is a union building. So, you know, who goes up to the room, who delivers, who does it, how do you put the order in, what are the logistics of it all? So it does become challenging, I think. I think more of it was the fact that it was the Plaza Hotel. It was ultimately a beautiful conversion and you had, you know, you're right on Central Park. So really, all of those things, you couldn't go wrong. Now having the hotel and what was eventually the food hall and all of those kind of services, really, you know, right at your dark doorstep was just an additional amenity that everybody had which, which, you know, definitely added value once it got settled. And we had, you know, all of that functioning properly. And so that was really a great amenity for the owners. But I really think it started with the type of product that we developed, where it was located, and, you know, the fact that most people, you know, other than, you know, some lower units had Central park views.

Amazing. Well, good. So after was a couple of years there, then Nikki decides that he wants to start his own development firm. So Naftali. So was that at the time when. And I don't know if there was kind of a split as far as, you know, certain people ended up going with Mickey and Stain. So I don't know to what extent you can talk about that. And for our listeners who've been in situations where they're at a company and then some of the people leave and sometimes for good reason where that there's plenty of business and, you know, who knows, maybe at the time he just had a different investment strategy or other things that he wanted to pursue and, you know, but. But how did you kind of position yourself during that tradition, that transition, and ultimately decided to start with Mickey?

Sure. So. So not surprisingly, you know, over the years, Mickey and I had become very close. Right. We were really working together on all of the development deals that the firm was doing. So, you know, he and I had been talking about potentially starting something, you know, other, you know, sort of as a. As. As a. As a new company off of Elad. We had talked about it, you know, sort of early. I wouldn't say early, but a couple of years prior. And then, of course, the financial crisis hit and, you know, he had decided that it made sense to, you know, continue to, you know, stay at a lot, help the portfolio through the difficult times. I ended up spending, you know, a good amount of, you know, a good amount of my time for about a year and a half or so in Singapore and a very large development that we had had there, just trying to kind of stabilize it and ultimately selling our interest in it to a Malaysian company out there. But we. We spent some time, you know, stabilizing the portfolio. And then really in like early or mid 2010, I can't remember the exact timing, you know, we started to really solidify plans for a new company and then started the company in 2011. We were, I think, four people. And again, going back to the point of sort of the top executives, we were really like four people that started the company and then brought on someone a little bit later to head up construction for us who was also at a lot, who we had some experience working with. And then it's, you know, kind of.

History from there, a couple of significant projects or lessons that you learned from. From your time there.

So the time in Naftali was quite different for us because at Elad, we really worked, you know, we had the principal, the company was Isaac Chuba, very wealthy individual from Israel. And so we really worked with his funds and the funds that we were creating from our condo and deals and not really working with partners. And every once in a while there would be a partner who was a good friend who would come in for, you know, a 5050 kind of thing, but not, I would say, in somewhat the more traditional way that developers work with institutions and other high net worths. And so for us, it was, it was kind of a whole new experience to establish relationships with institutions and high net worths in order to help us do deals on whether it was, you know, 90, 10, 85, 15, 80, 20 kind of basis. And so I spent a lot of my time early on, you know, establishing those relationships. And thankfully, you know, we ultimately did. While I was there, we did two, two development deals with Carlisle, we did a development deal with Starwood, we did deal with SL Green, some Israeli insurance companies and others both on the rental and condo side. And so for us, it was a whole new look really at the development business in the sense that we were no longer kind of, you know, relying on one source, but, you know, working with a whole group of, you know, institutions and high net worth individuals. So really opened up a whole kind of new world to us which, you know, really helped us do as many deals as we did. I think within the first year and a half to two years, we had about, you know, 10 different deals under our belt. But both on like the rental side.

And the conduct side, there's probably someone listening to this or watching this right now who's at a big shop and they're thinking about taking the leap and doing it on their own. So that I don't call it fear, but the question is, okay, well, if I, you know, if I'm at a place where I currently have great access to capital and a track record and I'm going to make a leap, you know, and yes, some people, they make the leap, they're backed by a high net worth who can, can help them with those first few deals. But, you know, for those who might not have those connections already secured or they want to open it up to a variety of different institutional partners, how did you convince, I mean, again, you said Carlisle, SL Green. I mean, these are major, major institutional players who know the business and I'm sure they admired and saw the value of what you did at the previous company. But how are you able to convince them that building this out, this new platform that you can execute at the same level or be even better?

So are you referring to the Naftali Group platform or you're now fast forwarding?

Well, it could be both.

Both. Okay, so they're both, both relevant in terms of the fact that even when we, you know, started, you know, going back to 2011 or so, when we started Naftali Group, we had to have those conversations with lenders and partners as to, you know, why do we think we can, you know, get things done sort of on our own in this new platform. And for me, I always sor. Know, scratched our, my head and said, well, look, you know, we, we do have a lot of experience here in doing, you know, development deals, especially condo deals, but both condos and rentals. So we had to have those discussions. And it's always a question of, you know, someone getting comfortable with that and sort of saying, okay, we'll, we'll do our first deal. I think so much of it, James, is really building relationships, right? And getting to a point where these people see your sincerity, can trust you, understand where you're coming from, and then, then are comfortable supporting you in the deal that you're working on, right? And that was, you know, I did, I would say a little bit less of that when I started Legion Investment Group in 2016. But there's always those conversations, right? And I think it's really important to establish good relationships first. I didn't, I didn't come to these institutions or even the high net worths with a deal at first, right, and say, here's a deal, do it right. It was more about, look, let's, let's get to know each other, right? Let's establish a relationship first. Hear a little bit about me, learn about me, I'll learn about you. And then when it's time and there is a deal to talk about, hopefully it makes that process easier. You know, for example, with some of the institutions, I was introduced to them by, you know, a friend or a family member. So, for example, at the time, this is again going back to the 2012 time period, you know, thanks to Jaime Chira, I was introduced to the guys at Carlisle and that connection, you know, him knowing me, knowing them, having a strong relationship with them was, you know, very helpful to kick off that relationship. But it didn't start with going to them with a deal. It started with going to them through a relationship and getting to know them much better. And then like I said, when, when, you know, in 2016, when I started my own company, it was a lot of these existing relationships that I had. And interestingly, you know, just to kind of see how the market cycles are, I think institutions were very active between the 2011, 2012 time coming out of the financial crisis and then right up until about 2016 or so, market got, you know, quite hot and in my current format at Legion, it's mostly right now, if not all high net worth individuals that I'm doing deals with. So it's kind of flip flop, right? Started with a high net worth individual and, you know, one individual, then a whole bunch of institutions and other high net worths. Now institutions, as you probably know, are, you know, less inclined to do condo development deals. I think that's changing the dynamic, changing a little bit as, as we start the new year. But, you know, a lot of the high net worth right now is where I'm doing my development.

Perfect. And I really hope that our audience listen to what Victor had to say about formalizing those relationships before there's a deal. I think many of you might think, okay, well, I have to find something first to bring something so I can show that I have value. And I'm sure it helps to have a pipeline and talk about what you're seeing out in the market. But it's more important to make that personal connection first because when there is a live opportunity where you have to move quickly, you don't want to have to just then race to get to know each other and figure out how you're going to work together. So when you're having those initial meetings, right, and it absolutely helps when you have a referral and a friend in common. How much are you getting into the economics again, if there's not even a deal there? They already asking you questions, well, Victor, how do you structure this? What does it look like? Or is it more broad?

I mean, I think, I think it's a little bit more broad, right? It's definitely a little bit more broad. And to your point, I think you're exactly right in terms of the fact that you need to establish that relationship. Because especially when you're doing deals in New York, things are quick. So you don't have that learning curve that you can really do when you're trying to get a deal. So very important to establish that relationship. But I think it's more general when you're talking to, you know, potential partners. Right. There are always, you know, some of those questions about, you know, how do you kind of manage your company? What's your structure? How many people do you have? How much business can you handle? How many developments can you do at the same time? Those kinds of questions, you know, typically come up in the early stages. You know, who your partners are, are there any, you know, other partners in your company and, you know, all those kinds of things just to get, you know, then they know who they're dealing with, really. Right. And they know who sort of the decision maker is. Right. Those things are really important on a high level. And I think once you start talking about a particular deal, that's when you'll get into a whole bunch more detail. They'll probably want to meet more of your team members, understand who you're working with, what their background is, what their level of experience is, and that's kind of how you round it out when you have a live deal that you're working on.

Absolutely. And we were speaking before about our mutual friend Ari Shalom, who was on the show, and part of what I talked about in that episode, and for those of you didn't hear it, definitely go back and listen that one. And because he's coming from. He's on the equity side, but he talks about what he looks for in a partner, so that's also a great perspective. So, Victor, talk to us about creating Legion. So what inspired you to do this? How did you know was the right time to go out on your own and what was the vision on ultimately what it would become?

Sure, sure. So I think, I think, you know, having gone through, you know, six years or so, and, you know, it's funny, I realized sort of the. A lot of time was six years, and I finally done was six years. I get there's. I guess there's some magic to the six years, but, you know, look, I had. I had gotten a lot of experience over the prior years and established really good relationships again, both with institutions and high net worths. Around the 2016 time, late 1516 was again sort of the end of a cycle. Right. And, you know, I thought that it was a good time to. To position myself for the next cycle and try and, you know, get some deals that are attractive. And I knew that at the end of the day, if you have an attractive deal, you can attract the capital for it. Right. And so I thought it was a good time to, you know, start something on my own. We were quiet on the acquisition side. We were kind of finishing and getting through some of the developments that we had in the pipeline then. So things were again, sort of settled. And I thought that it was certainly, you know, the right time to start something again, not without its challenges. It wasn't, you know, sort of an easy process. And I'm not going to say it just, you know, kind of happened overnight. But. But going, you know, having gone through it and, you know, started my own firm, had people around me who would help me during that, that, that Time. So, for example, had a high net worth investor that was doing some deals with us at Naftali on the GP side. And early on when I needed a, you know, a bit of a home or, you know, temporarily got some office space and, you know, worked out of there and ultimately did my first large development deal with this particular person. So, you know, thankful for, you know, again, having good people around you, people who, you know, will ultimately, you know, help you in the times that, you know, you can use a little bit of that help is certainly important. But I knew at that point that had established, I think myself, and I established myself in terms of your relationships with institution and other individuals that if I had the right deal, I can execute, I can get it done and I can attract the capital. And not only that, I also had obviously the relationships on the banking side, very important, have the right relationships with the lenders. And again, went through some of those early questions as to how are you going to do this and you know, why you think you can get this done and can you really execute? So went through a little bit of those questions. But you know, for example, when, you know, when I started with 79th street, you know, thankfully the capital was there in terms of investment from high net worth and then dealing with financing, you know, was relatively easy. You know, it was this special project, special location. And that obviously makes the process easier as well. Great.

So to what extent, and I'm glad you, you brought 79th street up because I wanted to, I mean, spectacular project. What fully sold out. Now you're hitting, you know, in the high three thousands a foot, maybe even more.

The average is a little bit more than 4,000.

Over 4,000 foot. Right. So that, that translates to what some apartments that were over 10 million.

Yeah, we sold. Yeah, definitely. So, so our. So 79th street was, I think holds sort of a couple of records. One which is that it was that had several units over, I think 20 or $25 million that sold within the same building. And we sold our penthouse, you know, for, for a little bit over 6,000 a foot. $35 million sale. So. Yeah. Wow.

So I'd love to kind of take that deal from inception to, to all the way through. So you said that fortunately you had your capital lined up. Now we also said before that in New York you have to move fast, which usually means putting down a hard deposit. So I don't know if you can share how much you paid for the site, what the deposit was, but was that, I mean, I would imagine your partners, you had Your agreements lined up, so they were putting up deposit with you. And then I guess lender was teed up. Next, how quickly did it all happen? And kind of just walk us through how.

So it was a little bit different than the way you described. But, you know, I ultimately put together what I would call were five townhouses on that block. There was, you know, one building which was the. The ones furthest west, 1091 11, which was. Yeah, I think in the past at some point, you know, a larger, you know, single family building, but was broken up into multi units. So I put together five different townhouses there. And, you know, when I first started, I was introduced to one of the townhouse owners who didn't have the unit, his. His townhouse on the market, but did want to sell and, you know, started the discussions with that owner. And once I had advanced those discussions and really understood what the possibilities were around this one particular townhouse, that's when I was able to speak to some capital and say, look, here's the game plan, right? I needed to, you know, I needed to be able to tell the story of what it was going to be and how I was going to ultimately put it together. So I started with the first, then, you know, put the first into contract, had a bit of a closing period, and then on the second, it was very interesting because it ended up being kind of sort of a friend of a friend, and it was owned by that friend's family, and they wanted to also invest in the deal. So they kind of came in and put that building in, and then the others we bought straight out. But, you know, I brought in the partner after I was able to tell the story a little bit. And there was some interesting dynamics around this one particular. You know, there was really about seven different parcels that there was a potential to. To purchase. You know, the one that was immediately adjacent on the west side was actually on the market. So I knew that price, right? So I was able to say, look, you know, owning the first one, and if I get the second one at this price, which it's marketed at, you know, my basis is as follows. And then I'll need to get, you know, third, hopefully fourth and fifth, but I could just do a development with what would have been 60ft of frontage. We ultimately got 100ft of frontage. I was able to buy five parcels. And interestingly, instead of going east and buying additional partner parcels, we went west. You know, early on in looking at that development, the furthest west properties were owned by Cameron Hakeem. And Cameron's not the easiest seller, but we ultimately. And so I didn't think we were going to be doing a deal with him, but ultimately did. He and I are actually quite good friends today. Bought another building from him, as you know, on, on 84th Street. So, you know, we're quite good friends today, but ultimately was able to put together the five parcels and we really had, you know, I would say, you know, the full equity stack done after we had purchased the initial two parcels. And that was at the point where we knew that we'll end up being able to put at least that 60ft of frontage to get a development other than, you know, if we weren't able to. There were some sliver law issues that we had to deal with, which we could have dealt with but obviously preferred to have the larger. And so then once we had the third and the fourth and fifth, you know, came, you know, came together. But again, even with that, it wasn't that easy. There was also a regulated unit or two that we had to deal with there, which we did. And so it took about, I would say, two years to really put the five arsenals together. Now ultimately we had about 145,000 gross feet, 100ft of frontage on 79th street, which when you look today, for example, west of Lexing, very, very difficult put together these.

So I definitely want to get back to how then the project, the design and how it. But I'm so fascinated by the psychology behind the assemblage. We've done close to 200 shows. I don't know if we've talked a lot about assembling. And even outside New York, I don't know how prevalent it is. But needless to say, and what I thought was really interesting, you said as long as I have these two pieces, I have a site, right. That I know I can build and I'm comfortable with the basis and if I can add to it, you know, at a certain amount or degree, it gets better. But I would imagine that helped you stay disciplined. Because if I'm an owner in the pathway of a developer or, you know, you always hear about these tenants who hold out for these enormous buyouts. They think, oh, well, here's the developer coming by with a pot of gold. I just won the lottery and I'm going to hold out for some just ridiculous price that I made out, made up. So how, how do you approach that conversation when they know you are the developer and that, you know, their piece does make your project that much better? Yeah, but you still have to get them to buy into reality where, hey, if it wasn't for me, and you're selling this as a standalone, you know, you're not going to be as better.

So that's. That's exactly right. And it's constantly that tension. And again, I think it. I think it all goes back to some of the themes we've been talking about in terms of, you know, establishing a relationship. Right. And so, you know, I'm almost always front and center with these owners, talking to them about these very issues. Right. On the one hand, your property is worth a whole lot more because of what we're doing. On the other hand, there's a limit to what we can pay. Right. And so, you know, ultimately, if it doesn't work for you as a seller, then I understand that. But you have to recognize that you ultimately be in a worse position if you don't go forward and do the deal. So it's a lot of. It's definitely a lot of hand holding. It's definitely a lot of negotiation. On. On Madison app, for example, it took a bit longer and there was a whole bunch of, you know, different stories behind each one of those parcels. But again, starting there, I kind of knew that there were dynamics that made sense in terms of other owners and sellers on the blog that would kind of quote, unquote, compel them to go forward and do a deal. But obviously there's no compelling. Right. You got to get them to the right place. So it's a lot of that is establishing a relationship with these owners. But. And it's not easy. It's not easy to, you know, it's. It's like you said, right. Oftentimes, you know, people as an initial matter, think, well, oh, you know, here's this big developer, and they're, you know, trying to take advantage of a situation. You know, you have to get through that with these owners. And I think the most important part is getting them to understand that, you know, ultimately they're getting paid well because of their situation, but that there's really a limit because there is. And. And, you know, having the alternative of being able to say, okay, well, if not, I have another path to this. Be very helpful. Right. Otherwise you're kind of really stuck and, you know, you may not be able to get to it. Yes.

So, Victor, that's great. And that all. I follow that logic. But in reality, when you're trying to have discipline and you need it sometimes, I would imagine patience, right. These things take time. But the, The Push, pull there is that you've got a capital partner who's laid out money which I would imagine is costing, right? There's that internal rate of return that, that's racking up. So you're accruing costs to do that and you're trying to make the decision, do I wait? Because I think maybe if I, maybe I just don't follow up with this neighbor for six months and maybe if I'm not chasing them, maybe the, you know, the, the tides will change. But how do you, you know, how do you come to grips with the timing of that and having that discipline where you say, okay, I can't wait any longer, I have to move ahead without. I've got to imagine it's a tough decision.

It is. And look, really, there's no science to it. I think, I think it's very important to make sure that you have some kind of alternative, right? So that you can answer that question and say, well, look, if we have to sell it, then we can sell it and you know, at a minimum, you know, we won't get hurt, right? Or, you know, it will be a bit of a hit to our numbers, right, and our underwriting. But ultimately, the more time we take and the more time we kind of waste on not moving forward and getting a development done, the more risk there is. And sometimes, you know, that risk plays out well in that you get into sort of a new cycle or you hit the cycle at the right time. Other times it can backfire, right? And so you really have to balance. You know, I remember, you know, on 79th street constantly going back to the underwriting and seeing the numbers and say, okay, well, do I have enough room here to make this make sense? Right? And I think you ultimately, you know, you can't oftentimes, especially in assemblage, you get sort of emotionally impacted by what's going on. You're like, well, I can't believe this person won't self entice, for example. And you have to, you have to do your best to try and pull yourself out of that, focus on the numbers. And to your point, you have investors that, you know the clock is ticking on their money. And I think ultimately if you, if it makes sense in the numbers, best to, you know, kind of bite the bullet, get it done and get the project development developed. Because ultimately, for example, on 79th street, you know, we were obviously awarded and it wasn't, you know, our sellout was not the same number that I put on paper when I first started. It was it was significantly higher. And so we were ultimate, ultimately rewarded for a great product that we were able to build there. And I'm happy that even though there were others that I had to pay a little bit more to, I'm happy that we finally said, okay, you know what, it sort of makes sense in the numbers. Let's go. Better to focus on getting this developed than to get bogged down on the emotion of am I paying too much?

You know, it's been really interesting to watch on the assemblage front as well. And over the years, my, the firm where I started, I had Massey Nakla, had done a tremendous amount of business with Gary Barnett where we'd sell off these one off pieces. And Gary was the master, still the master of finding these assemblages where he says, okay, I'm going to buy this property and then I'm going to buy over here, even if they're not contiguous, which is a little bit of a risk. Right. Because if I can't put them together, they're only worth the standalones. And sometimes it works, sometimes it doesn't. But it's, it's so fascinating to me and, and I know here in New York and we've got an audience from all over the country, but you know, in New York, how technical it becomes. You mentioned something about the sliver law and how do we avoid this and do we get height and bulk and maybe if we can acquire this property, it unlocks this light in air and I can get in a better apartment so that there's so much that goes into it. We could spend a whole show talking about it. But I want to, I want to talk about how, and I think you're being very, you know, humble, saying, well, you know, the market moved in our favor. We were able to get, sell apartments for over $20 million. But clearly there was something about this site and the design. Right, Because I've witnessed, and I'm on the commercial side, not residential, but I've seen projects that are literally diagonal across from the block and one sells incredibly well and the other doesn't. Right. So besides the obvious, which is location, what is it about the project that you just knocked it out of the park? Was it the unit size, was it the design? How did you know what the market wanted there?

Yeah, so, so it was a combination of a lot of those things, for sure. You know, if you look in sort of the last cycle, right, and west of Lex and again looking, you know, even into the future on the west of Lex kind of Part of the Upper east side, there's really, you know, very, very little product, right? And so you start there, and that kind of, you know, helps tremendously as an initial matter, but our projects had a lot of very unique, unique factors, right? The fact that we had 100ft of frontage, we were 145,000 square feet. There were other projects that were being built that were about, I think, 70 to 90,000 or so square feet with less units, which also increased the common charges per unit. And we were, you know, 31 units as opposed to double the size of these things. Our zoning, you know, speaking about the nuances of zoning, our zoning allowed us in a part of the building to create really unique units. So we had units that had living rooms anywhere from 14ft ceilings to about 20 foot ceilings as you, you know, went up in the building. And, you know, we also were able to put amenities on the third floor. So not all of our amenities were below grade. No light in air. You know, we have our, our gym, which is on the third floor. The basketball court, squash court is on the third floor. There's, you know, kind of a movement yoga room on the third floor, all with light and air, overlooking gardens, right? So a lot of unique features that we were able to deliver that were really a result of kind of our, our, our site, the size of it, the fact that it was 100ft and the zoning features that allow us to deliver that. But, you know, we, we also, in terms of bringing on a design architect, right, we were looking for someone who would bring a little bit of a different kind of flair to the market. And we started to talk to Stephen Harris, who had never done anything of this size, right. The, the other condo project that he did was a smaller conversion of an existing building. And so this was kind of very new and unique. But, but he, you know, his, his experience, his vast experience was in, you know, a lot of renovation of very high end apartments in the city, townhouses and then things in the hamptons, Palm beach, etc. And so we really wanted to deliver a home for these people, right? With the right dimensions, the right room sizes, you know, oftentimes we would have less of a room count. But it was a lot of that was because our rooms were larger, our living spaces were larger. And so we sort of sacrificed squeezing in another bedroom in order to really deliver a quality of life to the buyers that bought here. And I think all of those things really attributed to how we were able to, you know, the level at which we were able to sell Out.

Great. So, Victor, with only a couple of minutes left, and I think this question could be for those who are new and thinking about getting into investing or better yet, for veterans. People have been doing this for a long time, but they are, they operate existing products so that they're running apartment buildings. Maybe they invest in retail. I mean, look, when you hear about these 20 million dollar plus sellouts, and you know, we didn't talk about returns, but I know that developers tend to speak in multiples as opposed to, you know, cap rates or cash on cash returns. Obviously, you know, there's a lot of risk that goes with these projects. So it's kind of a high risk, high reward. That being said, you know, you've got multiple projects underway. You seem, you know, very cool, calm and collected. So what would you say to someone in the business thinking about going vertical, doing a ground up, you know, talk about that decision, that risk tolerance, that skill set and if someone should think about doing that.

So, you know, I think, I think for, for us, if you, you know, look at our portfolio and again, when some of these other projects come out, you'll see that, you know, we really focused on a couple of very important aspects. I think the first and foremost is, you know, supply and demand dynamics. Right. So even within Manhattan, you know, obviously the neighborhoods are important and where there's good supply and demand dynamics is critically important. And I think as an initial matter, that really helps kind of, you know, should, should help guide you as to where you want to be buying property. So that, that's, that's critically important. And then for us, I think, and I've seen this, you know, over the years, it's important to focus on the right locations. And I think in this market, you know, delivering the luxury, high end product, right. I think that that's even more insulated in terms of the downturns. And what I kind of see happening oftentimes is that, you know, for example, even on, on the Upper east side, right, you know, today there's a lot of products, a lot of projects going on, you know, kind of east of Lex. And you know, when, when there's sort of this, you know, general success within the neighborhood, people tend to then go and bid up land, pay a little bit too much, try and deliver a product that, that, that area doesn't really demand as much. And then you kind of get hurt when you're trying to sell for a price that is just beyond where the market is. So our perspective is to kind of, you know, go for the luxury product in some cases pay up a little bit more, but own the right land. So that when you're delivering that high end product, you are, you know, kind of catering to that segment of the market which is a little bit more insulated from downturns. Even today in terms of where mortgage rates are, obviously, you know, they're, they're, they're higher, but some of these buyers are again, more insulated from it. So I think, you know, you know, as you think about doing a condo development, you know, just try and be careful in terms of making sure that you're getting the right location. In terms of risk. Going back to what we first talked about in terms of the legal mentality compared to the business mentality, it's very difficult for people to understand the risk of paying up a little bit more for a property. But I think that that's actually less risky. Right, because again, insulates you from downturns, especially if you're delivering the right product. There's all the other factors that you have to get to, but if you can deliver the right product, the right level of quality and what that segment of the market wants in terms of unit sizes and layouts, I think you can be really, really successful. So don't sort of get caught on trying to go to this secondary and even sort of tertiary markets or areas of a neighborhood and pay up thinking that you're going to sell these higher prices.

Great advice. So, Victor, last question. What separates you personally from the other developers out there or just in general? The name of the show is the insider's edge to real estate investing. So what is it about you that gives you the insider's edge?

So, you know, I don't know that I would say it's an edge per se. I'll just tell you kind of the way I, you know, look at myself in the business, I try and be, you know, someone who approaches the business with honesty. I try and approach the business with integrity. And from my perspective, I think that ultimately that pays off. Right? You, you speak to individuals out there who are potential investors, you speak to individuals who are potential lenders or existing lenders. And I think that is so important, especially these days where, you know, the equity side and the financing side is so much more critical and particular about who they're doing deals with. And so I think, you know, them seeing the type of person that you are, knowing that you're a person of integrity, I think is, is critically important. All the other stuff, I think, you know, once you establish that and you establish a good name. I'm always about having a good name in the market. I think once you establish a good name, the other things can come especially when you have a good deal that really helps you run quickly. Yeah.

Well, Victor, having known you over the years and work with you, I can certainly attest to your integrity. And just thank you so much for joining us today, sharing your story. Incredibly inspiring.

Thanks so much for having me. Appreciate it.

Wonderful. And thank you. For those of you who tuned in or some of you who are watching this now in live stream, go ahead and forward this episode if you found something of value and I, I don't know how you couldn't and I, I hope, as I say in a lot of these shows, that not only were you taking notes, but you were working to put these actions in to the plants. Because to quote one of my mentors, Rod Santomosovo, knowing isn't doing right. So you really want to take what you heard here and really put it into a business plan. So again, for those of you who are going to be listening to this on the podcast, go ahead, share it with a friend, someone you think would get benefit and that would mean a lot to me. So thank you as always. Until next week, this is your host, James Nelson.

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