Building The Unbuildable with Rob Lapidus

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.

Welcome to show number 136 of the Insider's Edge to Real Estate Investing. This is your host, James Nelson, principal and head of Tri State Investment Sales at Avis and Young. Thank you as always for joining and thank you to all of you. Have already pre ordered my upcoming book with the same name as this podcast and yes, this is what it's all about is giving you the inside edge to real estate investing. And this book is going to teach you how step by step. And I've already gotten some rave endorsements from some great friends and mentors in the business including Rod Santomosimo, Blaine Strickland, Francis Greenberger, the self made billionaire and author and Lois Weiss, a reporter from the New York Post. So I know you're going to get a lot out of this book. If you have not done so already, please go to james nelson.com. that's where you can find out where to order your individual copies or better yet, you can order a book bulk shipment for your company where I'd be happy to come in and talk to your group about how you can apply these lessons to your business to give yourself the edge. So with that we've got a great show that for today we have with us Rob Lapidus who is President, CIO and co founder of L and L Holding company. I have gotten to know Rob over the years as we sit on the board of Spark Youth together. He has an incredible story having started as an attorney, moving in house for a real estate developer and then starting L and L with David Levinson in 2000 and ultimately growing it to a 400 person company with an 8 million square foot portfolio. Prior to founding the company, Rob was President of Westminster Capital Associates where he placed over 300 million of mortgage financing on multifamily commercial and retail properties in New York and New Jersey. And before that he was with Belmead Development Corporation, a subsidiary of the Chubb Corporation, which is where he really learned the business handling leasing, management and syndication and financing of their 12 million square foot portfolio. Rob graduated magna Cum laude from Wharton and received a law degree from Cardoza. And in today's discussion, Rob is going to talk about the importance of value and trust by playing the long game. This means sharing core values with your partners. He also talks about challenging yourself by surrounding yourself with like minded individuals. This led Rob to jumping in to becoming a principal at a very early stage in his career. He goes on to talk about managing risk and taking on the right projects. He shares about building the unbuildable with their latest development TSX Broadway where they raised the historic Palace Theater in Times Square 30ft into the air as part of a 47 story hotel tower. He also talks about what he considers.

The best office building in the World.

At 425 Park Avenue. So I know you are going to get a tremendous amount of value out of this episode. To learn more About L&L's projects please visit www.ll-holding.com. so we're going to have a brief word from our sponsor and we're get right into that interview with Rob Lapidus.

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 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 Rob Lapidus.

Who is President and CIO as well.

As the co founder of L and L Holding Company. So Rob, thank you so much for joining us today.

James, hard to say no to you, but my pleasure to be here. Thank you.

Awesome. So a lot of exciting news coming out of your office recently from the topping out of 425 Park Avenue or excuse me, the opening of of 425 Park Avenue and the topping out of TSX Broadway. So a lot of exciting things going on as well as terminal warehouse and some of the new developments you're doing in Florida. So we're going to get to that. But I want to start with where it all started. So Rob, tell us where, where are you from? Tell us a little bit about your those early days, sure.

So I was born in a manger in Bellmore, Long Island, New York. So I'm from. I'm from a town called Belmore in Long Island, South Shore, right near Jones Beach. People, I know it from that. I grew up on the island. I went to college. I graduated from University of Pennsylvania in Philly, 83, went to Cardoza Law School here in New York, graduated in 86 and started my career as a lawyer working at a mid sized law firm, doing a lot of transactional work, doing work for investors, banks, financial institutions and real estate people. So, you know, once you get exposed to that sort of understanding, I used to joke to people that when I was a lawyer, Friday afternoon, my office was in New Jersey, one of my clients would come by and drop off a pile of documents on my desk as he was heading down to the shore. We went to the beach in Long island, but down the shore I sort of got what it meant and I said, wait, he's dumping the stuff on my desk and I get to work on it all weekend. And Monday he's boating and swimming and on the beach and I'm scribbling away on documents. And I think deep, subliminally in the back of my brain, I probably said, I think I'd rather be that guy. So I think from an early on stage, I knew that being a lawyer was a great education, a great background, and I practiced law in private practice and then I worked for a big real estate company as a lawyer for a while. I think that it was a great, great background for what I do. I had a business background, you know, at Penn. I minored Wharton in business. So, you know, the legal and business background has definitely helped me throughout my career in just navigating issues.

Yeah, that's an incredible background. And it's also good that you were able to figure that out at very early on in your career and able to parlay that into a real estate career. So from there, and I guess so you, you were an attorney at Kimmel, Wolf Sampson, and then from there was it that you went to, to Bell Meade Development, and that that's a correct area of Chubb.

Correct, correct, correct. You did your homework. So by the way, when I went to law school, I thought I was going to be an agent for musicians or athletes. And by the way, in my personal life, I am very involved in music and sports, both as an active participant, as a fan and as an investor. So maybe I got to sort of go full circle with those endeavors. But yes, essentially I went to go work for my landlord. Wolf and Sampson or Kimmel and Wolf and Sampson. When Irwin Kimmel was the Attorney General of the State of New Jersey, it was Wolf and Sampson. And when he wasn't the Attorney General, you could use his name again. And we did. I actually met and worked for the lefrac when they were doing Newport City way back when. Some of those original documents had my names on them. And it was Sam LeFrack, which is dad, who was our original client. So way, way, way back. And so that was the history. And then when I had the opportunity to sort of go move to the business side of things within Bell Meade, that was sort of like my master's and PhD in real estate. We were a vertically integrated business, similar to how we are at L and L today, that we had acquisitions group, we had development group, we had finance group, we had leasing, we had marketing. So a lot of the same what I learned there, we were able to adopt over time here in our current state. But that was a really, really good opportunity. And then there are periods of time in corporate America, we're coming together as a conglomerate is a good thing. And there are periods of time we're breaking it. AP is a good thing. So when I was, when Bell Mead was owned by Chubb, it was a good thing being all together. And then all of a sudden Wall street was saying it wasn't a good thing. So Chubb spun off its life insurance business and then spun off its real estate business. So I was actually one of the people involved in the sale of the business. And when it, when it, when we sold it, I ended up becoming the president of Charlie Kushner's company, Westminster Capital. So that was a period of time in my life where I went from being a mid level executive at a big company to the president of this division within a family owned business. And then from there I partnered with a guy here in New York for a few years at a small shop. And that's where I met David Levinson. He brought a deal to us and that was. I met him in the late 90s. And we started L&L in June of 2000. So this coming year will be our 23rd year of L and L existing. And we started off with two people. Now we have 400. So pretty similar in size and scope to what Bell Meade did. Just a different geographical focus.

Amazing. And I definitely want to get to those early days. But just curious, with Bell Mead and even with Westminster, with your legal background, I mean, did they ever try to come to you as in house counsel, or did you make it very clear from the start you wanted to be a.

No, no, no. I started off when I left my law firm. I became an in house counsel at Bell Me. That's what I did. And I'll never forget this. It was obviously a bunch of years ago, the president of my company came to me and said, you could be the next general counsel here and it'll be a complete waste of your abilities and skills. Cause I had a business acumen about me. I was the type of person who knew how to. Knew how to get things done, and I didn'. I understood the legal ramifications of things, but I didn't let it weigh me down. Sometimes lawyers overthink things. I was always more of a practical lawyer. My clients really liked me because I was able to get things done pretty efficiently. And now we have 40 or 45 different law firms that we do business with. So I could weed my way through the legalese pretty easily and get to the essence of things without wasting a lot of time on the what if scenarios. I mean, a lawyer's job is to point out, you know, all the possible problems that could happen in any transaction and to protect your forum. And an intelligent business person, you know, needs to sort of be able to see through that. The law firm that I use the most, Paul Hastings, you know, was they were all trained by Marty Edelman. Marty, you know, is one of the deans in our business. And I think Marty and Peter Olson, Eric Landown, you know, the people who learn at his footstep are all very practical thinking attorneys. And so they've always been very good partners of ours in understanding what the goal is, understanding how to get there, understanding how to staff the projects intelligently, knowing when to chime in, knowing when to not chime in, and not to overly complicate things. So that's been a hallmark of sort of my life and also the way we've ended involving other professionals sort of in our world, too. So if you're overthinking things, just churning out legal fees, it's not going to work too well for our team.

Yeah, we call those attorneys, we look for deal makers as opposed to deal breakers. So again, looking to figure out how to get to the finish line. So what was there a little bit of a learning curve as far as understanding the fundamentals of investing? Like, you know, you had the law degree. What was learning how to do real estate deals was that kind of learned on the job then?

You know, I had a business Background I was always very good with numbers and math and sort of understanding finance. But you know, what you learn on the job is something very different than what you learn in school. Just because I was a straight A student didn't mean I knew how to do anything in real life. So the beauty of my legal position inside Bell Meade was that I was interfacing with the treasurer and CFO of my company, the head of asset management, the head of leasing, the head of construction, the head of development, head of approvals. So all of the pieces of the puzzle that brought together ultimately our projects I had to understand because I was drafting the documents for it, negotiating with outside law firms, dealing with our joint venture partners. So I really had to understand it. So it really was like a post doctorate degree in practical real estate. And because my company was owned by a big Fortune 100 financial company, the CEO of my old business, Bell Meade, was really a financial genius. He wasn't really a real estate guy, he was a finance guy. So we were involved in very, very sophisticated real estate transactions. So we, way back in the day, we always bifurcated the land and the building. We were vertically integrated. We financed different pieces of it differently. Sometimes we used Chubb's commercial paper to do things, sometimes did mortgage financing. We were involved in some M and A activ. So it was a very sophisticated, hands on learning opportunity. And I was like a sponge. I absorbed a lot of things and I was able to bring a lot of that into practical use when I started doing things on my own down the road.

And I guess with Westminster too, you were on the debt side of the business. And so what was it that led you to partnering with, with, with David and pursuing the development side of the business.

So, you know, David brought us a deal in the late 90s. And I remember the guy who ran my old shop, he, he was, he and his partner at the time would say this, you know, this guy's coming in, this broker. Don't listen to anything he has to say. He's just a broker. And I listened to David articulate a very coherent strategy on what we were going to do with a piece of property, how it was going to be transformed, who the tenants were going to be. And again, David started off in the brokerage world, so he understood the tenant side of the business really well. And I was much more impressed with what he had to say than what, you know, my current partners had to say. Those are how they approach real estate. And so, you know, for, for just saw an opportunity there that you Know, where I was was not going to be the growth type of position that could be if I ventured out to do something on my own. And David had an entrepreneurial flair himself. He always wanted to get onto the principal side of things. You know, my background was in legal, finance, structuring, partners, capital raising, and his background was in, you know, leasing and building. So it was a nice complement of skill sets when we decided to entertain this new business venture. And again, we've had tremendous relationships throughout our careers. And so early on, I mean, the first thing happened, I was actually on vacation with my wife. Before I started with David, I got a phone call from a friend of mine who ran the real estate business in New York for Carlisle back at the, at the time and said, hey, we're looking at this opportunity, you know, would you like to be our operating partner? The quickest yes I ever said it was the worst economic terms I ever agreed to. But it sort of put us in business with a real top tier organization from day one. And we ended up doing our first four deals with that group. And it sort of got us, you know, it got, you know, I remember clients of mine who were private real estate investors, developers, operators, would say to me, you know, to be in the real estate business, you actually have to have some real estate. So actually acquiring some, some properties was the first step along the way. And then as we were able to get our arms around some opportunities, it was just David and myself at the time and our assistants and we just used, you know, the, the platform at the time that David was affiliated with, which was Edward S. Gordon and Insignia and CBRE to do like our leasing and management and a lot of the back office stuff. So it was a good way to sort of see the early parts of our business. And then like every third party, you know, a third party operator, a third party provider of services as good as they are, are not as good as you are, period. The end. So when we got to a certain point, excuse me, we realized that in order to reach that next level in terms of quality and expertise and hiring the right type of people, we had to take some of these services on our own. And that's what we did. That's. We sort of moved out of Insignia's office or CB's office at the time, you know, got our own space and we started doing our own things. And it was, it was an important, it was an important avenue of growth. Because think about it, if you're affiliated with one brokerage firm, you know, the other brokerage firms May or may not want to do business with you, may or may not bring you opportunities. So we had to be agnostic, we had to be Switzerland because we wanted to have the highest probability of success of acquiring opportunities, leasing opportunities, financing them. So that's, that's what we did. And that's how we've evolved. That's how we've been, you know, for almost the past 20 years.

So, so it, your partnership with, with David just seems, you know, again, maybe it was luck that you all, you know, came together when you did and, you know, perfectly complementary. But, you know, at the time, did you just have this gut sense knowing this was going to be the right partnership? Because I know a lot of our listeners are thinking, you know, having a partner is a great way to start, especially if it's someone who has that skill set that you did not. But how did you know that you could actually work with him, that you had the same mindset goals? What was it that gave you that confidence?

Well, listen, there's a little element of luck in everything you do. This coming June, I'll be married to my wife Carol for 40 years. So there's luck in every relationship. It has to be based upon certain things, like valuing and trusting the other person's opinion. Dave and I are very, very different people, which I think is good. But our value systems are very similar in terms of what's important. Honesty, integrity, caring for your family, caring for the community. So those core assets, those core values were there. We had a couple of friends in common, like Steve Siegel, who, you know, I knew from my Bell Meade days because he ran a subsidiary called Chubb Realty. And so I think we both did our homework. You know, we contacted some of the people within our orbits, and I think we both got answers that we thought were good, were acceptable. And then, you know, we described that we jumped off the cliff together, holding our hand, literally. We had a one page agreement describing our relationship. And you turn around now and we've built some really iconic properties. We have some of the greatest investment partners. We've built a team that's second to none, and we've even impacted the skyline here in New York. So we made money. We did it with good people, we did it with good partners. We had fun doing it, and we had, I think, a positive impact on the community. So that perspective, it really was more than probably either one of us could have envisioned at the time. I think we were both hopeful that it was going to be successful. And I think in any good relationship, you have to be open and honest with each other. And sometimes it requires tough conversations. You know, anyone who's married knows that. Anyone's in a partnership knows that. Anyone who's a human being and lives life, they want to have a meaningful, rewarding life. You have to. You have to be vulnerable in certain situations. You have to be truthful in certain situations. And, you know, it's how you sort of build the groundwork. I mean, I'm very fortunate that I have a lot of really good people in my life who care about me and that I care about. And I think that way of treating people listen, that's how my parents raised me. It was. They were the most honest people in the world. And, you know, their word was their bond. And that's how I've always operated personally and professionally. And I think, you know, you play the long game, and I think you play the long game. You know, it's sometimes, it's sometimes easy to take a shortcut. I always tell young people who are mentoring that the only thing you have that's with you forever is your name and reputation. And that short cut early in your career might seem like a good idea. But I said, listen to your instincts, listen to your internal radar, and if it doesn't feel right, it probably isn't. And just think about things long term. You have to plant the seeds. Takes a while for them to blossom and germinate and become a strong forest. Or we analogize things to building a building. You got to build a strong foundation. You don't have a strong foundation, greatest building in the world will get knocked over. So I think the strong foundation for young people listening is having a good name, good reputation, being honest, being hardworking. Surround yourself with people who you trust, who are smart, who can add value, and who can tell you the truth. I mean, I think some leaders that we see in the world today, they surround themselves with yes men or women. And I'm not sure that does anyone a really good thing. I think it's a big disservice. You need people close to you to say, I wouldn't do it that way, or have you thought about it this way? Or you're making a mistake. And living in a silo doesn't really work that way. So we've created an organization here where everyone is able to speak their mind and have a seat at the table. And we value people's opinions and perspectives. And I think that's how you create a long term, sustainable, viable business with a good culture that people want to work at and want to come back to and that partners and investors want to invest with and tenants want to be in your space. A lot of it's not rocket science, a lot of it's common sense, but there's a lot of common sense missing from the world today. So having it is an important factor in success.

No doubt. And wow, so powerful, that advice that you're giving. And I hope for our listeners you're going to go back and listen to that again, because Rob is totally right. When you're starting out in the business, building your company, you have to start with the right foundation and the right people. And so I really appreciate what you had to say, say about, you know, doing the right thing, the honesty, integrity, reputations, everything in this business. So no doubt that's been a huge part of your success today. So I don't know if this would be more of a question for David, because I know there's a lot of people, our listeners, who maybe they have one foot in, and maybe they're doing brokerage now, maybe they're doing, you know, they have some salaried position, but they're looking to dabble at investing on the side. For you, it might have been, you know, you were all in from the start, but, like, at what point did you decide, you know, I've burned the boat, there's no looking back, I'm all in on this. Or was it just as. I don't want to use the word easy. But you said your first partner, you know, you signed them up, you did four deals afterwards. So was there never kind of a concern that this thing was going to take off?

Listen, I think. I think we all have doubt, and I think questioning what you're doing is part of how you grow. And if you don't have any doubt, you're going to run into a wall one day and doubt's going to hit you on the head and knock you unconscious. So I think, listen, I'm very conservative by nature, so it's not like I would cavalierly, hey, say, let's just do this. I thought about it, I planned it out, scenario planning, what have you, and made sure that the moves we were taking, you know, were rational, intelligent moves. I think at the end of the day, when you're in the service business, when I was a lawyer in the service business, you're acting vicariously for others. I remember going to a closing, one of my first closings as a lawyer, and I'm with one of the senior partners, and we left the closing to go to A firm dinner, and he says, we just sold the hotel. Wasn't it great? Blah, blah, blah. And he was getting his jollies out from that. And I'm like, we didn't sell a hotel. We pushed a bunch of paper for a client who sold the hotel, and now we have to go tomorrow and sort of redo it again. So I always knew, for me, life is about joy. It's about finding things that make you happy. It's about enriching yourself. It's challenging yourself, surrounding yourself with people that you want to be with. I always knew that being an agent for others was not my true calling. That my calling was much more to be, you know, to work for myself and to lead other people, you know, into battle, so to speak. That was always much more my natural way of being. So most brokers, you know, cannot become principals. They're wired differently. It's a much different risk reward element, right? Brokers are not putting their capital at risk, they're putting their time at risk. It's a very different thing when you're signing on a completion guarantee or you're investing your own money in something versus your time. And many people in our business, whether they're lawyers or brokers, you know, they move over to the ownership side because they've been around it, they understand it, they say, hey, I can do that. I could do that. And that group of people are the ones that get turned on and maybe can do it. But the overwhelming majority of brokers should stay brokers and lawyers should stay lawyers because that's really how they're wired. For me, I was never really wired that way. I just knew it was a great education and a stepping stone. But I never envisioned myself to be barrister extraordinaire and being court every day or doing deals for others. So I think you have to find your true calling. So I think that was always my true calling. And I think David also, although he was very good at being a broker, I think his true calling was more to be on the principal side. Just took him a little longer to get there. Also, he had a very lucrative career as a broker. When you're one of the top brokers in New York City, you could imagine back in the day making seven figures in the 1980s was a pretty good place to be. So from that perspective, you know, you're giving up less, so to speak. You know, you're giving. I mean, you're. Sorry, you're giving up more because you have a lot. You know, you're already making a good living but you're not. You're not, you know, turned on the way you're turned on. The sense of, you know, pride you have in something for your own account and, you know, impacting the skyline and doing the right thing for your employees and investors and partners in the community is. It's a. It's a very heady feeling. And I think everyone has a different path to getting there. In general, I think if you can pursue your passion, whatever it is, you win. My dad was an optometrist. He worked six days a week. He loved what he did. He loved going to work. He worked very late two nights a week. He worked on Saturdays. Never complained about it. And I'm like, dad, it's like Saturday. He goes, yeah, he goes. He goes, you know, my patients, they work during the week. Some of them need to come in on Saturday. He didn't begrudge it. He didn't think, woe is me. He was very happy, you know, doing that. So. And I think one thing my sister and I both learned from my parents is sort of the joy of work. And my sister's an attorney, and she likes being an attorney. You know, it gives her joy in a different way than it gave me. So I think one takeaway is follow your passion, whatever it is, and if you're getting joy out of your work, it's much less work and more of a lifelong commitment.

That makes a ton of sense and also, you know, right in sync with what you're saying about, you know, being true to yourself and doing something that makes you happy.

But.

But I do have to ask. I mean, and you make the point because as a service provider, whether you're a broker, an attorney, you're specking your time, but you're never, you know, put. Putting your net worth on the line. And so, I mean, was there ever early on in the career where, you know. Because I do believe that fear is probably what holds back a lot of investors from putting their money on the line, whether it's signing up personally or whatever it is. Like, how did you deal with that early on? And I don't know if it's before you met David, but I remember him telling the story about how he acquired this ski resort. Resort might be generous. It sounded like it was a, you know. Oh, yeah, ski hill or something, but it sounded like it did not go so great. So, I mean, how did you kind of manage that? Or maybe it did.

No, it didn't. It drove him. Listen, he filed for bankruptcy, but he did it when he was A young person. So I think you sort of, if you want to, if you want to lose it all, you want to do when you're single and you don't have kids and you're young and you have time to sort of, you know, earn it back. So I will tell you this. We have always been, as a partnership, and I've always been individually incredibly risk averse. People think, oh, you're a real estate developer, you must be taking all these crazy risks. We don't, we structure our deals in a way where there's limited liability. We don't sign things personally, we don't sign guarantees, we don't put everything at risk and cross collateralize anything. We never did. So the way we structured deals was more difficult, it was much more nuanced. We had to fight the good fight a lot because some people, there are a lot of people in my position who sign personal guarantees every day, don't think twice about it. Some of them are so well off, it probably doesn't make a difference. And some of them I just think a little bit naive on how, you know, when something goes bad, how it can go really, really bad. We never did that. We were the tortoise, not the hare. We structured our deals intelligently. We had limited, you know, liability on everything. You never cross collateralized anything. And that's how we built our business. So the fear factor was I'm really fearful to do those things that my brethren do. So I'm never doing it as opposed to, I'm going to sign it, sign up for all that risk and hope for the best. So we definitely approached our business much more cautiously and carefully. Listen, I have no personal debt in my life on anything because I have debt in my business, right? You know, I have big mortgages on our properties. You gotta repay them even though they're not recourse. That's enough. You know, I don't even have a mortgage on my homes because I just philosophically, I just don't want to have risk there. I want that, that part of my life to be sacred and sacrosanct and protected. And I'm at the stage of my life and career now where I could do that. You know, earlier on it was more difficult, but there was a lot less to play with. As you expand sort of your capabilities, your net worth and all that, you have to make sure you're protecting it. And you know, I've done that from the beginning and continue to do that.

So it's been, I guess, 22 years since you co Founded L and L. And you said you started with two people, the partnership. Now you have 400 people, you have 8 million square feet. So how, you know, tell us how you went about building your team, how you ended up. You mentioned the first couple investments with the same partner. Did this just grow exponentially or, you know, I'm sure to get to these various points, there had to be several inflection points along the way. But just, you know.

Yes. Yeah, so. So there were several inflection points, exactly. Our first couple of deals were smaller deals. We started our business in June of 2000. And I said to David, it's probably going to take us a year to acquire our first asset. I told you I got a phone call from my friend at Carlisle before we started L and L. And then another friend of mine was involved in a deal, 155th Avenue. And so both my friend at Carlisle and this other friend in the business brought these two opportunities to our attention early on in the, let's say, summer of 2000. And we closed on those first two deals in September and October of 2000. And we were happy. We're in business. We were going. Then there was another opportunity. We closed on our third deal, Metropolitan Tower, the building I'm sitting in right now. We closed on that December 27, 2000. So in our first six months of business, we had three buildings and sort of we were off to the races. It wasn't a straight line by any stretch of the imagination. We were using people inside Insignia to help us do accounting and management and leasing. And then it took a little bit of while to sort of get the next deal and then the next deal after that. We actually were able to bring in a lower cost pension fund as a partner. So we were able to sort of pay more because the lower cost of capital enables you to pay more for an asset. And still everyone able to make money sort of better arbitrage the operator, as long as you're taking care of your investment partner. And then we continue to expand. So then we bought a building with a pension fund. Then I think the next real inflection point, we had a really good relationship with Mark Walsh and Charlie Manna and all the guys at Lehman Brothers. And they were our partner when we bought 200 Fifth Avenue. They were our equity partner. And we all know what happened to Lehman Brothers as part of the global financial crisis. So our big equity partner went bankrupt. So probably having a background in business and law and workouts and structuring came in handy then. But 205th is an asset was the first time we always did value add. Proposition the 205th was a complete major redevelopment of the building where we changed its core and floor plate, you know, and added amenities to it. And that sort of put us into a different arena and gave us the confidence to say, okay, we can take on things that are even a little bit, you know, more complex than just buying a building that needs, you know, new windows, new lobbies, new elevators. So. So that. That was one of those inflection points. And then during the global financial crisis, because of our relationships and because of our abilities to fix problems, a lot of institutions came to us and asked for our help to do things. So we did. We actually. Our business grew in 2000, you know, 8, 9, 10, largely through relationships of people who had problems and wanted us to finish building a building or leasing it, imagine or doing whatever needed to happen on the operating level of a building. And our reputation and relationships enabled that to happen. And then, you know, from there we're able to, you know, then we did like, you know, 195 Broadway and 222. You know, we ended up doing, you know, 150 the second time, 155th. We did 114 5th. So different things, you know, sort of, sort of came about. We were in a competition with a bunch of people. We awarded the assignment to redevelop 390 Madison, which was a complete remassing of a. You know, we took an old building and we made it into a modern great building. And we did it without tearing the whole thing down, you know, waiting for rezoning. But we actually remassed 20% of the building, you know, that was existing. That was really good practice, so to speak, for 425 park and TSX, which were even more complicated projects. So the evolution of our capabilities, our team having more sort of engineers and architects like that in house, and then having the reputation and capability and maybe insanity take on some of these projects because, you know, we called at our. At our. At our grand opening of four to five last week, you know, several times referred to it as building the unbelievable because several times our engineers said that. And we had our contractors all wearing shirts on the property that said building the unbuildable because they heard it so many times. But we were in the building last week. It was buildable. It just wasn't easy. So I think that was sort of brought us through from the very beginning to the different complicated types of project we've been able to get involved with. And listen, who knows we talk about where we are today and obviously we have a different economic climate. We have a post pandemic climate. We have a world that is unsettled to say the least. We have inflation that's crazy, interest rates that are really high. And once again, the death of office buildings. I mean, I heard about it many times in my career, but I think this time commodity office buildings in places like New York and other CBDs really are going to be challenged. And I really am not sure what the future is going to be. Fortunately, we don't have a lot of them, but there are a lot of them in New York. So perhaps with our relationships, our team, our abilities and our track record that when some of these problems come around over the next couple of years, which there'll be plenty of them, that maybe the L and L business will grow again through those, you know, asset recovery types of situations and maybe some of which will end up investing in or buying or we'll just fix them for people as, as, you know, as a third party provider who knows what they're doing. So that's what happens in life, right? You go around, think things are circular. I mean, I think about Lehman Brothers, they were a great partner. Mark Wall, still a dear friend. And many of the people we work with at Lehman are at their own places now and we're dealing with them. How about our first employee was a guy named Matt Knisley who I hired from Carlisle. He was our analyst. I'm now finalizing a deal with him and his team, insurance team, to be our partner in something. So talk about, you know, talk about full circle. You know, Matt was a young kid who maybe was just married at the time and now his kids are all in college. So that was, there's something about that that actually makes you feel good, that you've planted the seeds the right way, you maintain relationships the right way and so many years later you'll be able to transact with someone on a totally different plane than you did, you did early on in your relationship.

No doubt. And so wonderful for you to see people throughout your career and, you know, have those contacts for life. So.

And I listen to the young people that are going out drinking with their buddies, going to ball games, going to concerts, whatever. Those knuckleheads will move into position. I think about my friends, a bunch of knuckleheads who are now, you know, running firms, managing partnership things, doctors running hospitals, whatever they are. You know, you maintain those relationships. These are lifelong relationships that, you know, the level of trust and confidence you have in someone that you've known for decades is special and unique. And so I encourage. I encourage people, you know, to go out there, maintain relationships, and find the ones you know that are keepers.

Great advice. So I want to get to building the unbuildable, but I have to ask because I love how you said we bought a building with a pension fund. I mean, I would think from a transactional standpoint, acquiring a building, I don't want to say is relatively easy. Of course, there's the diligence, the purchase and sale agreement, getting the financing, pretty challenging. As far as the.

How about just the competition up front that most sophisticated sellers of buildings hire brokers because the brokerage community has done a good job convincing them that's the way they're going to get sort of their best result. So you are competing with some of the richest people in the world, some of the biggest players in the world. People have their own discretionary capital, whether it's a public vehicle, a private, you know, a private fund, a private billionaire. And, you know, David Rob were just two guys without any of that. So we had to outsmart people and work a little bit harder to get to that front of the line. So when you were bidding on a $500 million property and you're competing with people who control all that capital, you had to make sure that you had good enough relationships where you could compete with them, even though you have a different structure. Right? So. So the hardest part about acquiring a property in New York City is the upfront competition. I mean, at four to five park, we literally competed against every major player. We had a different view, a different vision, a different way of approaching it, which obviously turned out to be right. But the competition here is like almost, I think, like almost anywhere else in the world. It's more competitive here. So that's the toughest part about. About it. Obviously, you know, negotiating the deals and papering, all that stuff that has its own complexities, but you don't get the deal. You have to worry about what the documents look like.

And on top of that, all while you're negotiating this psa, you have to strike that JV agreement. So. And I'm looking at some of these groups that you've partnered with. BlackRock, Green Oak, JP Morgan Principal. I mean, these are serious partners. So, I mean, as far as I would imagine, the complexity of these JV agreements are these. You know, do you try to map that out in advance or. It obviously helps if you've done a deal with them before. But if you are doing a deal with one of these groups the first time, you know, how do you make that happen simultaneously with taking down the deal and not losing it to the others, as you mentioned, who might have that discretionary capital in hand.

So every situation is a little bit different. You have to be a good listener. You have to really understand what's important to your investment partners. They're not all the same. Some of them have no problem signing guarantees, some will never do it. Some of them have no problem paying, you know, a development fee or an acquisition fee. Others do. Some care about equity multiples and some only care about IRRs. So you have to really understand that part. And so you have to have these ongoing discussions and relationships. Capital. And there's always new capital coming in. There's always new groups for whatever reason who wanted to invest in this market. So it's more art than science, but the same. You know, my general counsel, Kevin Fallon will say all he negotiates are guarantees and affiliate contracts. Because those are, those are two of the big sticking points that you have with a lot of investors. It also depends upon, you know, which law firm they're using. You know, some lawyers, you know, oh my God, this guy is going to be a total pain in the ass, going to be a nightmare. And others like, oh, I've done three deals with this person, you know, it'll, it'll be a lot easier. So that, that is a piece of it too. With some of my institutional partners, I actually asked them what law firms they use. Sometimes they'll say, we use these three. I'll say, use, I'll just say, please don't use that one, just use these other two. And they're pretty good about that. Yes, if you have documents already in place, it's helpful. But you know, you end up, you end up signing a term sheet which might be non binding because does the roadmap. And sometimes, very often you're signing a deposit agreement which says, here's how it's going to work if the JV happens. But here's how it gets unwound if for every reason one party doesn't step up. So it's all about different points in negotiation. There's different leverage points. As David and I matured in the business, we were able to tie things up on our own. We were able to put the deposit up ourselves. Then it's a different leverage point because you're saying to three or four groups that you know are interested in doing the deal, hey guys, here's what we're interested in. We would often send out a term sheet to three or four investors at the same time and see what, what kind of feedback you would get. So every situation is a little bit different. I think that it's always a truism that if you have a good deal, you can find the capital for it. But with us, we not only want to find the capital, we want to be a good partner who we like working with and transacting with. And of course we want the terms to be favorable to us. So those aren't. Those don't always come together in a neat package. Right. The group that says yet the opportunity funds very often are the ones who can move the quickest. Right? They, they, they get it. They know that they're getting paid to move quickly, but they want a 20% return. Then you find someone who's more middle of the road and wants a 15% return so you can pay more and still get the deal. Then someone wants a 12 or someone who wants a 10, someone who wants an 8. So, so within that universe, the person wants an 8% return could pay a lot more for the asset. Someone wants a 20, but the person wants an 8. Might take them 3 months to a yes person want a 20, might build it in 3 days. How do you navigate that? One of the things we've done historically is we would often buy a building when it was riskier on the spectrum of what's out there, maybe it needed some redevelopment, maybe it needed to be fixed in other ways, maybe it needed to be leased. It just needs value add stuff. So very often you would mitigate some of the risk because I always say to our investors, when the mitigation of risk business, so you mitigate some of the risk and then it's a less risky project and you could get your own capital partner out because they could get their return. So you recapitalize it. So the building I'm sitting in right now with you met Tower, we've owned, we've recapitalized it five times since we bought it. We bought it first with Carlyle, we capitalize it with Invest Corp. We recapitalize it with principal, we capitalized with BlackRock and now we own it with Mitsubishi Corporation. So each, each investor has a different cost of capital, a different view of the world, and probable that Mitsubishi Corporation wouldn't have been able to act quickly enough in 2000 to buy it, even though Carlyle was able to get their 20 plus percent return. But after we leased it, mitigated, made it More valuable, you were able to do that. So we have several examples of that. You know, in our portfolio, we've, we've, we've recapitalized buildings two, three, four, five times. And for us, because we're in the real estate business, we want to be in the real estate business for a long period of time. We have no problem sort of quote unquote monetizing the promote, giving, you know, giving a good return to our investment partner. And then, you know, at the end of the day, you might own a core property that is cash flowing for a period of time, but we've had core properties that have become opportunistic deals because the tenant who you signed a 10 year lease with or a 15 year lease, depending on the case, all of a sudden it's an empty building that needs to be redeveloped. And so 155th is a perfect example. We bought it with over 100 tenants in it. We made it the corporate headquarters for emi. When EMI lease was rolling, you know, before they expired, we actually made a deal with another tenant to take over the whole building. We actually added a couple floors to it and now we have a credit tenant on for 15 more years. So the value add became a core, became opportunistic, becomes core again. So you can live throughout the life cycle of it again if you're bringing value to the table and you have a desire to own real estate. Because we like owning the real estate long term so we can build a culture so we can give people job security so they, they don't. It's not like we own 10 million square feet, we sold it all and we're starting again. It's more of a nuanced, you know, long term philosophy that we have adopted over the years.

Yeah, I love that. And you know, listening to your partners and looking for the right fit and it's just amazing to hear that you recapitalize the the same asset five times and each time I'm sure it was a different proposition and a different partner, so.

That's right.

I'd love to hear, with a couple minutes left to go, I want to hear about your vision and how, you know, whether it was tsx Broadway and I don't know who came up with the idea of lifting that theater 30ft up into the air or the way that you chose to redevelop 425 Park. And I remember when you did that and I think you did that in advance of the Midtown east rezoning. But clearly you had a vision for that block Font or maybe even with Terminal Warehouse. And what gave you the sense that you could take an old warehouse and turn it into one of the top office buildings out there in the city. So, you know, who's the one that comes up with these ideas and how do you know that you can actually execute on them?

So we have a general corporate philosophy which is best in class, right? Which doesn't necessarily mean building the best building. It means building the best building in that market under the totality of the circumstances, right? And so we have done that, and we have also done a very good job of preserving really great architecture while combining that with 21st century intervention. So if you think about, like, a great house in an old community in Westchester, you know, you love the old facade, but you want new systems, New bathroom, new kitchen. We have incorporated that philosophy in a majority of our portfolio, where you take buildings like Terminal warehouse now or 155th or 195 Broadway, or 114 or 150, where there are historical, beautiful architectural components of it. But today's tenants in this world, they want amenities and they want modern intervention. I remember when going through landmarks approval for 205th many years ago, they were showing us pictures as well. You know, 100 years ago, like, there weren't two sets of doors. Like, yeah. But there also wasn't their conditioning. We had to explain to them that. And you have to deal with the constituents you have in front of you. So I think the vision thing comes from this tenant centric belief and understanding that it's our job to create the best environment for our end user. Right? Our customer, the tenant. So the combination of David's experience and our leasing team's experience and our development experience of. Of what that ultimately should look like is a big piece of the vision. So you sit there and say, can you do that here? Right? There's a lot of buildings. You might not be able to do that. It's not cost effective. It's a landmark district. You can't change, but fortify. Park is a perfect example where for the first time in 50 years, we're able to create a block front building, an entire block front building on Park Avenue. We did a global architectural competition. We met, we had four Pritzker prize winning finalists architects. We spent months with them. We learned, we raised the bar for our game, and we knew what sort of the art of the possible was. We couldn't wait for Midtown rezoning. We had a deal. The Bloomberg administration, city council obviously nixed it. So we had to retain 25% of the slab, which made it much more complicated, much more expensive. But we didn't want to wait another couple of years. We employed the same 75, 25 philosophy at TSX. I think one of the reasons why Fortress selected us to be their partner to do it, because we were the only ones between 390 and 425 actually had relevant experience of doing that crazy stuff. So I think we always challenge ourselves with the vision. We partner up with great architects and engineers to help us do it. We always sit down in our development meetings with all of our constituents. People have to build it, the people have to lease it, people have to operate it to understand all of that. And then, you know, having that tenant centric approach, saying what's important to the tenant, right? If you look at the top of Fortune 5 Park, it's column free space. You come out of the elevator floor to ceiling glass column free. We knew it's. We know it's our job make our partners look smart. We know it's our job to make our leasing brokers jobs easiest when you can. So that, that all goes into it. With tsx, the idea of lifting the theater came. It preceded us. One of the original partners in the deal, Mark Siffin, came up with that idea with Fortress. They couldn't do it. So the vision of doing it was there. We changed the vision. We made it so you actually could do it not on a piece of paper, but literally physically lifting it, which is a much more complicated endeavor. And so we were sort of the right ones to do that. So sometimes it's about adapting other people's vision into what you have in that case. Most of the time, it's a combination of our collective vision with sort of the architects we're working with and understanding what tenants need. And that's sort of how it comes about. But it is not a linear process. It is not an easy path. Everything's a little bit different. The zoning. Different parts of the zoning in the city are different. Different neighborhoods have different constituents there who are pro or anti something. And then there's just, you know, wow, what, what can you do here if you're untethered from anything? What can you make this? And then of course, you get tethered, right? You can't spend, you know, an infinite amount of dollars. You can't take an infinite amount of time. You can't necessarily move every structural wall you want to because it would cost too much or physically impossible. So it's, it's. By the way, Fortune 5 Park is the best building in New York. I think it's probably the best building in the country. Just saying. But there were many things that we originally designed in 4 to 5 that aren't there because just because you have a wish list, sometimes you can't, you know, you can't always get what you want, as my friend Mick Jagger once said. So. So it's a process and you have to have a team that you trust. You have to have smart people who add value to the conversation. And then you have to look at the, the art of the possible in terms of, I need someone to give me a billion dollars to do this. They want to make a return on it. You're not just building a testament to, you know, your ego of the skyline. You want it to make it economically viable too. So they all come together in that Boolean base that ultimately becomes one of our projects. Incredible.

And you've certainly done that and just the range of your projects and the magnitude. And we didn't even get to talk about your newest development down in Florida. But with we just a minute or two left and the title of this show, as well as my upcoming book, the Insider's Edge to, to real estate investing. Rob, what would you say is your inside edge that has given you the advantage over the years? And what advice would you give someone looking to get into their first investment where they could learn from you?

I think I touched upon this. I think my edge is my reputation and my relationships. I do what I say I'm going to do. I've done that my entire life, my entire career, and people understand it. And I built a lot of trust. So that's the edge in terms of doing your first investment. I think you always want to invest with people who've been there before and know what they're doing. I would much rather advise someone to make a small investment in a project and ask if they could sit in on the meetings and go to the site and just sort of understand how it works. Right. You want to learn through the experience and the eyes of others who've done it before you. Right. This isn't rocket science. And by the way, even if it is rocket science, you want to learn from the rocket scientist who knows what he or she is doing. So I think there's very often young people want to skip a step. I mentor a bunch of kids at Wharton every year and many one of them just want to be the CEO of a company on day one. And what I explained to them is that's not how it works. You need to actually be in the trenches first, and you need to understand what you're good at, and you need to become an expert in what you're good at. You need to have people around you who are complementary. I tell young people, start working here. I said you could walk around this office. And there's decades and decades of experience in anything you want to learn just by asking. By the way, my job is to be a conductor, to be a leader. Right? People here know more about construction than they ever will. No more about leasing than ever will. You know, know more about property operations everywhere. But you have to have people here who you trust are going to execute at that highest level. So I think it's knowing what your limitations are in anything in life. And, you know, you got to be a plumber before you're an architect, as one of my former bosses used to say many years ago. And I think that's, that's, that's true to this day.

Rob, this has been tremendous. Thank you so much for taking the time. I, I know our listeners are going to get so much out of this, and it just.

And I look forward to a signed copy of your book. Who knew you were, you were an author, too. I didn't even know.

You can count on it.

When do you have time to write a book? I mean, you're out doing podcasts, you're out doing deals, you're doing philanthropic work. Come on.

I get a lot of help like, like you do. It's all about having a great team.

So you get a lot of help and not a lot of sleep. That's the winning combination.

Very true. Well, Rob, this was amazing. Thank you again for joining us and it's really been great.

My pleasure. Nice talking to you, James. Always good to see you.

All the best. Thank you everyone for tuning in until next week is your host, James Nelson. Thank you again for listening.

Have a great day, everyone. Bye.

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.