Career Building with Stuart Milstein

Foreign 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 episode number 192 of the Insider's Edge to Real Estate Investing. This is your host, James Nelson. I'm principal and head of Tri State Investment Sales for Avison Young. Thank you as always for joining. Thank you to my team who helps make me look good and also sound good. So thank you to Nick. Thank you to Annelise. You might have seen that in our last episode, we started a new miniseries, the Sell High Miniseries. That's going to definitely be something that you're going to want to check out to help give you that insider's edge, not just to real estate investing, but also selling. That's a big part of the process. But for today's episode, we have with us my friend Stuart Milstein. He is founder and president of Drake Street Partners and you're going to gain insight into working at smaller real estate firms and larger institutions. Prior to forming that company, Stuart was an SVP at Beacon Capital Partners and a vice president at Vornado Realty Trust, where he was responsible for acquisitions, no purchases, and asset financing. He also worked at Clarion Partners in an investment banking role at Bear Stearns Real Estate Group and Layla Equities. He has a master's, an MBA from Columbia University. So what I really like about this discussion is Stuart doesn't just talk about his successes, which include his first acquisition, $70 million on his own. Can you imagine that? Your first acquisition, $70 million. You listen to this episode, he's going to tell you how he did that. If you know and you've been investing for a while, success is not guaranteed. And if you're in the game, you're going to have challenges too. And what I really appreciate about Stuart and his honesty of talking about some of these difficult situations, maybe some of you are navigating this right now. We had unprecedented increase in interest rates and dealing with lenders. And Stuart is also going to give you some insight on how to best navigate those challenges and do it in the right way. So hope as always that you're taking notes. And last but not least, if you like this episode, I really appreciate if you rate it and you subscribe and even share with a friend. Okay, so I know I'm asking for a lot here, but that's what helps grow this audience. We're getting all kinds of requests now for people to come on the show. We're getting better quality guests. They're going to be more helpful to you. So if you can just take five seconds, maybe 10 seconds, if you have not already subscribed to the show, do that. And we're going to have a brief word from our sponsor. We're going to get right into that interview with Stuart Milstein. Thank you.

A different approach to putting our clients first. Avis and Young's Tri State Investment Sales Group sells multifamily office retail, development and specialty sales throughout the New York metro area. As experienced thought leaders in our industry, our 35 member group is available to help you make informed investment decisions by advising you on your current holdings or identifying new opportunities, 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.

Okay, welcome everyone. Thrilled to have with us today Stuart Milstein who is founder and president of Drake Street Capital Partners.

Drake Street Partners.

Drake Street Partners. I practiced that three or four times. All right, cut. Well, let's start over again. Wonderful. So Stuart and I have known each other a long time and I've got to say that you do an incredible job of being out there, you know, always not just making connections, but you're definitely a student of the business and I really appreciate that and I'm excited for our audience to hear this today because you've got a really great story. Having started, saw Columbia master's program in real estate and then went and had some really incredible institutional experience and now founding your own firm. So maybe story take us back a little bit into maybe that decision to go and pursue that, that master's at Columbia was that kind of the first step towards pursuing a career in real estate.

So you know, when I, when I first started my care, I was at Bear Stearns, as you mentioned, and I Had been there for about two and a half, three years in the real estate group. So I'd always been focused on real estate. And when I was at Bear Stearns, really in the investment banking group, you look at real estate really from what I'll call a 30,000 foot level and felt that I liked the industry, wanted to continue in it, but a little bit more on the ground level and went to Columbia Business School. I figured that would be a good transition to get from what I'll call the, the 30,000 foot level down to the, the, the ground level and really work more at the assets as well as the corporate side of real estate. So that was, you know, a big part of the decision to go to Columbia Business School.

So I've got to ask. And I've had a lot of friends who were at Bear Stearns and we all know what happened in the demise. But you know, at its time, at its, you know, it was a incredibly powerful company and incredible talent. What are some of the things that you learned while you were there?

So, you know, listen, I think the investment banking background, while tough, is, is super valuable. The, the experience you get in analytics, in focusing on details, in presentation, working with various disciplines, I think was, was phenomenal. So I, I really appreciated that experience that I got from working there.

Do you think the work ethic. Because I still hear about these investment banking analysts who, and I don't know if it was the same way when you started, but was kind of you're going in for a two year stint and you're working 100 hours a week. I mean, was that kind of what you were throwing into? And if so, has that work ethic stuck with you?

So that's one of the things that I think is helpful about the banking environment. It's not great when you're, when you're in it, but the, the work ethic that it provides is pretty intense and stays with you. Fortunately, I'm not working 100 hour weeks anymore, but although I might be just in a different, a different.

You're working for yourself now.

Well, I'm working, you know, you're, I'm probably working more hours a week just thinking about what, you know, all the stuff that needs to get done, but not necessarily sitting in front of a computer and cranking out models and presentations for hours a week.

Got it. You talked a little bit about your experience at Columbia and that kind of the, why you made that move, but actually talk about kind of the actual experience and I'm sure we've got a Lot of listeners here, some who might be. In fact, we have someone in the live studio today who's at SUNY Binghamton maybe might think about going and pursuing a master's at some point. And there might be some listening right now who they're several years into their career and they're trying to decide does it make sense to now go pursue a master's. So what would you say to that? When is the right time to pursue a master's? If all.

Yeah. So, you know, I did this a while ago, so it, the, the dynamic might be, Might be different now, but I know it certainly gives you the. What I'll call almost like a stamp of validity. And I think that does help the network and the sort of relationships of, oh, you know, those who went to Columbia and other, other MBAs, I think is also very helpful. And the skill set that you learn there, there's a, you know, when you're in the job, you get a lot of great experience on the job, but stepping back and understanding some of the theory, the rationale of why you're doing this is then helpful in transitioning and understanding other. Taking it to other situations. So I think all those aspects of it do make it valuable.

I think not just the education, but as you mentioned, the network is so important and that's a big reason and why. I mean, I know some school, in some cases I would certainly had to post Covid go hybrid but or fully virtual. I think now, you know, for those of you who might be thinking about going back to school, I think in person and actually meeting people and having connections. And I think what makes for a great master's program is also, I mean, sure, you have some tenured professors who are, you know, they have to, you know, keep the program going and the structure, but I think also having active practitioners, those who are actually. And so Massoud Body, who we've had on this show, he actually is an adjunct professor at Columbia, but that's not his, you know, he, he's out running Silver Peak. And so to have someone in the classroom like that who is, you know, out there actually transacting is. Is super helpful. And then really pulling from that network in the classroom and because those, those, that network could be your next partner, it could be your equity. It could be, you know, again, an introduction.

Yeah, no, so I guess a couple points on that. The, the job I got after Columbia was at Vornado, and I first got introduced to Vornado because two of the senior executives there were guest professors teaching a class at Columbia. So that was how I had my first intro to Vornado and certainly helped me get that job after school. So that's certainly the case. And from the network perspective, you know, what a lot of these schools do, which I think is very helpful, is they'll do an annual conference or an afternoon of just get together. And to me, and as you talked about, being out there, meeting people, getting ideas, hearing what's going on in the market is super valuable to me and helps me think about new ideas, new ways to approach opportunities, situations, and just learning from. From many other people that have been doing this before as well.

Great points. And I want to make sure that you all are listening and taking notes and something that Stuart said, which is really, really important. And I will tell you, the number one question that I get from the audience is career advice, James. How do I find my first job? How do I find my next job? How do I elevate what I'm doing? I'm sending out tons of LinkedIn messages, I'm emailing people. You know, my hit rate is like, you know, maybe one or two people respond for every 100 request. I'm not getting interviews. What's wrong, what's happening? And my advice is this is so much about that in person. So I gotta imagine, I mean, yes, landing a job at Vornado, you know, having that master's degree and having that knowledge, super important. But you got to meet, you know, two of the members of the leadership there who offered you that position. So I'm sure you were able to take that conversation offline. So you're not. Not going into hr, you know, as just a resume on a stack with 100 other applications for a position?

Yeah, no, I think, you know, in that case with me, and anything that can be done, I'd say in general, getting a job, trying to find a tenant, trying to understand a lender, whatever it is, getting that personal introduction and somehow being able to get a connection or meet in person is certainly unbelievably helpful in terms of then getting the next response and continuing the dialogue.

Talk about to land your first job in real estate at Vornado now, if not the biggest, one of the biggest landlords here in New York. And I've got to imagine going into an institutional shop like that. I mean, again, you have so many different ways to learn and to grow within a company like that. So what was. What were those early years like? If you remember, you start off, you back as an analyst and you're cranking numbers, but now, instead of on, you know, for Bear Stearns, you're doing this for acquisitions. What did those early years look like and how are you able to grow within the company?

Yeah, so I was in the acquisitions group, as you mentioned, and, you know, one of the things that I really appreciated about being at Vornado versus being at Bear Stearns, where again, it's a much more 30,000 foot level and really on the financial side is we would look at that and really understand the big picture, whether it was a portfolio, whether it was an asset itself, whether it was a development site, but having the operational teams and the development teams and the construction teams all available to you instantly and understanding how they thought about the situation, what some of the challenges might be, what some of the opportunities are, which I think is equally important. Right. I find that both aspects of it is important and it's almost easy to find the challenges and the negatives about an opportunity. And again, if we're in the acquisition side, that's what we spent a lot of time looking for. But also having the ability to say, where's the opportunity here? What's unique about this that we're missing? Where can we maybe do a little bit more redevelopment? Maybe we could be a little bit more efficient in our costs, maybe we can be more efficient on the operations. So those are the things that were equally as interesting in terms of being able to find the positives and not just the, oh, look at all these problems that we need to encounter. So that's that. I've also certainly taken with me and said, okay, where, you know, when looking at opportunities, where can I particularly add value that others might not be seeing as, as easily? And that's, that's the real benefit.

So, and I get this question a lot as well. You know, James, should I go try to work for a smaller private entrepreneurial shop? Should I go work for a big institutional shop? I mean, I think you just gave some of the reasons why you might want to work for a larger firm because you have that infrastructure, that deep bench. Whereas I'm sure even today, when you need to go figure out, you know, what hard costs are, you know, you're going out and you're, you're, you know, talking to GCs, but you don't have that maybe that functionality in house.

Right. So listen, I'd say the pros and cons of the, you know, the large shop versus the small shop. And I've done both a few times actually. Before Bear Stearns, I was actually at a small investment bank called Laidlaw equities. And the benefit of the small shop is your doing more. Right. So if you're at a small shop, you don't have the group, the construction group to rely on. On the other hand, you have to dig in and understand it more yourself. So usually you'll get, you know, more of a breadth of what you're doing. You won't necessarily have the expertise to rely on and have you focus on sort of your role, your role becomes much broader. So I think that's one of the big differences between the smaller shops where you got to do it all yourself and the larger shops where you can rely more on a leasing team and a construction team and an operations team versus okay, you got, you got to now figure it out on your own.

That makes a ton of sense. And I would imagine also you go to smaller shop, you might be the acquisitions guy and the asset manager and the analyst. Right. Which could be good because you're getting a whole lot of experience and you're also on the front line, but you also, you know, you might be burning up a lot of time as opposed to just being able to focus on that one piece. So let's talk about. So after Vornado, then you make the move to Beacon.

Yes. Yep.

And what, what prompted that?

So at Beacon, you know, I like Vornado is a, you know, public reit. And what I, what was appealing about Beacon is the private equity shop. So they are a series of private equity funds. They raise the money, they buy assets, fix them, sell them, what I'll call the typical private equity model. And that was something that I thought would be both interesting for me to do from a career standpoint is understand more that full life cycle as opposed to a Vornado, where it was buy it, own it, keep owning it, own it some more, and keep fixing it up along the way, but not really exiting the deal for the most part. Obviously there are exceptions, but in general it's a much longer term hold and having a, an experience where you're really looking at it from both an own and a sell standpoint and trying to monetize at the right time, all that was a, I thought a good additional opportunity for me to get exposed to.

So, and this might be pretty applicable in today's market, but that access to capital, right. So you've got the public markets and you're effectively investing off your own balance sheet as opposed to going and working at a private shop where, look, if you have a fund raised, you know, fantastic. But if you're out having to raise money, deal specific, which is kind of the other end of the spectrum. You know, most people listening, I'm sure they say, look, if I'm going to go work for someone else or for another firm, I want to make sure they're active in doing deals and have that access to the capital. So what would you say to that trade off?

Having access to capital is wonderful. It should not be understated and underemphasized. But I would say when you're in a shop, you're limited to what they or that capital wants to do. And, you know, in my situation, I'm doing, you know, New York City office deals. I'm doing industrial deals in Massachusetts, I'm doing industrial deals down in the South. I'm looking at buying debt. So I'm trying to be flexible for the market. There might be some groups for whom has, you know, one set of capital for all of that. But what I, well, I'd love to have capital for all of that. I like the idea that I can go to the right capital group depending on the opportunity. So when I find a good opportunity, even if it, if I'm at a shop which has a limited bucket, then they can only do what, what, what they want to do or what they're supposed to do. And so not being tied to the capital gives you a lot more breadth of what you can do. Again, you then need to get the right capital as opposed to have it.

Stuart, I love this discussion that we're having. I know this is going to be super helpful for our audience because I think to kind of go through your story of, okay, starting off in investment banking, then why go pursue a master's, go work with big shop, small shop private equity. So, so the next transition, I want to talk about your decision to make that leap to start your own firm. What was it that gave you the confidence to do that and what triggered that?

So it was, I guess, many real estate folks at larger firms are always thinking about, do I go out on my own? How do I go do that? For me, the timing made sense. In what I'll call 15, 16, there were still, I think, a lot of good opportunities for deals. We were coming off 09, 10 where things were really slow and depressed and pricing had come up. But 15 and 16, it was still, I thought, good opportunities to do investing and there was access to capital. The capital was interested in doing deals. They had what I'll call release the reins from when they were really holding on tight during 10, 11, 12 or 9 10, 11. So those two things said, okay, this is the right time. I think there are good deals out there and there's capital available that's ready, willing, and able to invest, so let's go do it now.

So I really want to dig into this because I think, and I write about this in the book, that the number one thing that holds investors back from making the leap and, and making an investment on their own is that that fear of not having the capital. So when you made that decision, how confident were you that you had capital partners lined up? Because it's one thing to know them, you know, and it's one thing for them to invest when you're at one of these bigger shops that has a track record, you know, a mile long. It's another thing when, hey, this is my first deal that I'm doing. And they're saying, you know, Stuart, we like you a lot, but, you know, you have no track record right on your own. And how do we know that you have the infrastructure and the ability to pull it off? So I guess two part question. The first part is, how confident were you that you had the capital circled before you made the jump? And then, you know, did you. How did you convince them that you could actually make this happen on your own?

So I didn't have the capital when I made the jump because I knew it was going to be very deal specific. And that was something I debated. And I don't know if I went, you know, right or wrong, but said, okay, do I spend the time trying to get the capital so I have it more in house, whether it's a GP fund or a fund, or do I just go get the deal, find the deal and try to capitalize it. So I felt that it would really take me longer than I wanted to raise and find the capital and said, let me, let me try it with a deal first. And that was really the way I was able to find out if I had the capital is a 5 deal, and let's see if it works. It wasn't until you actually have a deal, because again, I raised the funds deal by deal until I knew that I had capital for that deal.

Do you mind getting specific just to be helpful as far as what was the first deal, what was the acquisition, what kind of equity did you need to raise for it?

The first deal was in Long Island City. I'd say one thing that I have learned or that I found is that, you know, people say, oh, wow, your, your first deal is, is the hardest. I have not found Any deal to be any easier than the first one. They are all difficult. They are. No, it's. I mean, every one. One stands on its own. And I find that, that each, Each deal has its own challenges and is. Is. Is difficult. Needs to be worked through. So.

So the first.

It's not like once you get one, they all just easily flow from there. All right, but. So the first deal was a property in Long Island City that was going to be vacant, and we were. The business plan was to renovate it and convert it into creative office space. Got it.

What was the purchase price on that?

The purchase price was $35 million and we were going to spend about the same amount to renovate.

Okay, so $70 million total project cost. So how much and how much of that could you finance? And how much equity?

So we financed, advanced about 65% and brought in two private equity funds to that partnered up to do 90% of the equity.

Wow, that sounds like. And you did this all within how much time frame? Because obviously you're out there trying to buy the deal and unless if you said, hey, I got a look, completely off market and I got, you know, due diligence and I had time to do this, but like, there's pressure with the seller to transact. Right. So part of that is going and getting the deal, but then trying to onboard the equity and the. I mean, that is the dance. That is.

I made it sound simple. I don't know if I made it sound simple, but. No, that was exactly what we had to do is.

But you knew these equity partners before. It's not like you just cold call them for the first time. You'd probably been courting them for a while to say, hey, this is what I'm doing.

I had known him for a while. I knew him from my days at Beacon and Vornado, and we had, you know, talked about deals together and buying and selling. So. So I. It was a network I knew and groups that I knew. Obviously, I. I didn't know them as. As partners for our deal specifically, although had talked to them about that as well, because, you know, listen, what I find in. In real estate, somebody gave this description which was, I thought, relevant, which is your. Your competitors, partners and you know, at all at the same time with the same people. Right. So one person you could be, you know, competing against to get a tenant, let's say, or to buy a deal, and the next day you're buying and selling from them, and the next day you're partnering with them. So these groups you're running into them all the time at, you know, with different hats on. And it's, it's an interesting relationship that I'd say exists in the real estate industry. There might be others that are like it, but I can only speak of the real estate industry.

And again, how I kicked off the introduction after I whiffed on the name of your company, after I got that right, the compliment was that, you know, I see you out there in the relationships. And again, like you said, someone might be your partner, they might be on the other side of the table. But again, that's why I'm sure the way you handle yourself and create those relationships are really important. So I've got to ask. I mean, landing those two equity partners at the same time, was that kind of like one negotiation where they're both getting the same terms? I mean, because again, you're negotiating a purchase and sale agreement, you're negotiating with the lender, and then you've got a JV agreement with two equity partners. So again, how. How are you landing that ship?

Right. So in that case, the two equity partners actually came together again in the name of, you know, everybody sort of knows each other working together. They, they happened to both realize they were looking at the same opportunity. And, you know, we were all open book and saying, okay, listen, you're interested, you're interested. Let's, let's you guys, let's all do it together. And we, it was not different terms for each of them. They were, you know, collaborating together.

Okay, that certainly helps. And then, and then for your 10% of the equity, was that what we call the friends and family and those are the people like Stuart, we believe in you. Let's.

Yeah, exactly. Yeah, those, those were the, the friends and family. And the. It was a, you know, even, even that part was challenging. But yes, that was the groups that said, okay, you know, you're doing this on your own. Let me, let me, you know, I like real estate. This is a good way for me to start investing in it.

Good. And, you know, for, for people listening. And this is the power of real estate. And to be able to raise capital and, you know, both debt and equity, to be able to get into a sizable transaction like that, if you have that kind of friends and family network to help you with the GP and then have LPs as well. So maybe talk about, you know, some of the. And you started talking about your first investment with the creative office in Long Island City. You know, talk about investments that you've made throughout your Career that were successful, maybe ones that you had challenges with. And just to kind of give our audience a sense of the different kinds of deals that you've done.

Yeah. So, you know, at. As I was saying at Drake, you know, one of the things that I find is I'm. I'm trying to find interesting opportunities that might not fit in everybody's box. And you know, where I sort of said this also earlier on, that trying to see benefits or that others might not be seeing. So in the. In the Long Island City deal, for example, there was an ability to add a floor onto the. Onto the building that. That not everybody was aware of.

How did you figure that out.

Really, from to your point, going out there, touring the asset, happened to hear about this nuance from another opportunity I was looking at, which had to do with heights of parapet walls and really minutiae that happened to make me aware of it on this opportunity, sort of pulling it from a different opportunity. So that was. That was, you know, what I'll call something that I. That. That was an opportunity that not everybody. Everybody saw. And to my swine, you know, trying to find some extra good news, not necessarily how to make the deal work, not how not to make the deal work. And there were a couple of industrial deals where I looked, which I was looking at vacant opportunities where I had a tenant that I knew was looking for space and was basically able to buy a vacant building and lease it up simultaneously. So those are. There was another deal that we saw where we were able to get fairly creative and aggressive financing for the opportunity. So the deal was okay, but because of this financing that I brought with it that made it more compelling and why I was able to make it work. So really trying to bring something to the table that might not be right down the fairway in terms of making an opportunity work.

So, Stuart, this is right out of the insider's edge to real estate. You just covered at least three chapters in the book. Everybody. You still have to read the book. We're not letting you off easily.

Buy the book.

Yeah, buy the book. That first part of finding value, I think we called it spotting the gems where others do not. Right. So how do you don't want to be bidding on something on a level playing field where everybody has the same information, looking at the deal the same way way, because then the deal just gets bid to perfection. But if you have that angle and whether it's a zoning trick or some kind of bonus that someone doesn't know about, how do you unlock the value of the property that someone else doesn't know about. I mean, I, I remember we had a guest on the show from San Diego and the city rolled out a new program for ADUs, Accessory Dwelling Units. So he's out there buying, you know, one and two families. And you know, the owner, you know, he's competing against other people who just want to buy it for their home. And then next thing you know it, he's filing for like another build another four or six units in the backyard. And he's doing this like times 100. Right. So, but again, that's kind of his niche of what he's doing. So. And then talking about bringing that tenant to the table and I, I love that business plan. Jeff Sutton, you know, billionaire real estate investor. I mean, that is how he got his start. I first him speak multiple times and talking about those early days of buying distress, real estate, vacant retail, sometimes even buying out the existing tenant. But knowing that he had Payless in his back pocket, knowing that he had Walgreens now Prada, Gucci, you know, whoever else it is, but that also is bringing something to the table that others do not have. And then obviously today, going into a deal where you have, have financing available, and I don't know if that was assumable financing, seller financing, you know, different ways to structure a deal to make it work.

Yeah, no, that, that I think is you, you can make both work. Right. Sometimes the, the deals just work because, you know, for example, in this market, capital is a little bit hard to come by, a little reserve. So there, there could be good deals just because it's the right time. But in every market, you got to figure out why it is that you can make this deal happen. And it could just be that everybody else is asleep and you're there, because that is the case in a lot of markets today. So each opportunity needs to be sort of evaluated on its own. And where am I adding value here?

And how do you find these opportunities?

It's mostly through brokers. Some of them are broadly marketed, some of them are quietly marketed. Some of them are, I'd say a lot of them have been marketed, but it's staying in touch and, and you know, again, going to your point of, of being out there and staying connected with people and, and saying, oh, you know, whatever happened with this deal, whatever happened with this deal? I still think this is interesting. Can we try to get it? So it's, it's, I'd say it's a lot of those different avenues.

And how do you compete against the bigger shops, if you are going into a bid and you know you're competing against a much larger operator, how do you level the playing field? How do you gain that inside edge?

So a lot of times is I'm easier to deal with. That is a big, A big benefit. Some of these folks can, can, you know, can be. Have a reputation or like being difficult. And I think, you know, being user friendly is helpful. And you're also explaining why I think I can close. Right. So if I do have the angle, the advantage, the tenant that helps get folks comfortable, then I'll really be there.

Got it. Okay. So clearly you've had a lot of success along the way. That being said, you know, for anyone who bought over the last five years, I mean, especially on the office side, there's been real changes. I mean, talk about a black swan event of COVID You know, hybrid work now, you know, rates going up. You know, the biggest owners in the country in many cases are handing keys back for any challenges you've had along the way or what. What if someone listening right now is dealing with a situation where, you know, maybe they have a loan coming due, they don't have the ability to refinan finance. What, you know, what advice would you give there, you know, to deal with a tough situation?

So I've had my share that I've needed to deal with. You know, I'd say the. Not that I know that I have the answer, but I think the. One of the hardest things to figure out and it's, you know, still happening and it's going to be happening to more and more people is when do you stop capitalizing the deal? When do you stop? If it's a deal that needs additional capital, really understanding if and why you're continuing to feed the deal is an important component to figuring it out. Because it's easy to. I mean, not that easy, but a lot of times I should say inertia, as you keep paying the bills and paying the bills. And it's important to step back and think about that. You also. And all aspects of it, right. You need to do the right thing. You want to protect the asset. You have responsibility to people. So it's just something that I think is really important to think about as you're doing it. And sometimes the continuity or the inertia of it just has to continue maybe without that happening.

Yeah, definitely appreciate your sharing on this because everybody likes talking about the wins, but I think also how you handle challenging situations and doing the right every. It's easy to do the right thing when it's a great market and everything's going well. I think what really defines character is when you're having challenges and, you know, how do you still maintain those relationships that, you know, who knows, five, ten years from now, you might be, like you said, on the same side of the table or you maybe you'll be across the table again, but doing the right thing. And I would imagine that communication would be a big part of it and that whole dynamic with the lender. And how does that discussion go? And you said, well, we're trying to figure out, you know, is it possible to continue to fund this? Does it make sense? Is there an ultimate exit? I mean, you have a partner, right, In a lender saying, okay, well, are we going to do this together? Do you want me to continue to try to, you know, let's, let's try to see if we can, can exit out of this or how does that conversation go?

So I think you're right. The first thing that you said, which is communication and just being open about where things stand, what you can do, what you can't do, what a lender or a partner can or can't do, and then there's the. What I'll call makes sense to do. And that might just have to do with, with different risk tolerance, different assumptions, different financing sources. So I think understanding all the components of it help for a more open conversation and to get the, you know, I'm going to say the best result. It's often not a good result for anybody, but to get at least the best result with that situation for each group. And it might be different depending on the group. Depending on the situation. Right. If there's a lender who has lender financing, then that might be a different situation from a CMBS lender or might be different from a partner that has a fund versus that which is all used up versus a partner that is a REIT versus a private family. Right. So each situation is unique. And I think having those real conversations helps everybody at least get to the best outcome they can. And if not, ideal.

Good. Again, thank you for sharing that. So let's now talk about being opportunistic, because where there's challenge, there's also opportunity. Okay? So, you know, right now, and again, we want this show to be evergreen. So if you're listening to this five, ten years from now, we want you to get value out of this. But at this point in time, where we are May 24, depending on, you know, what research reports you're looking at somewhere in the neighborhood of $1.5 trillion of debt coming due in the next five years. And it would seem that a lot of this, there's going to be a lot of challenges with refinancing and you're going to see a lot of owners, borrowers who are forced to sell. So are you positioning yourself to go after those kind of opportunities when you're looking to buy? And we have a whole chapter in the book on sellers motivation. I mean, how much are you considering the story of the deal, the profile of the seller into deciding what you spend your time on?

So I'm spending a good amount of time trying to figure that out, but also realizing that it might not be time well spent trying to figure out a motivation of a seller.

Do you ask the question, though, when you think of it?

Yeah, no, we certainly ask the question. We certainly try to understand it and try to figure out is this an efficient use of time? And it's becoming, I'm going to say, a little bit more challenging because we're looking at some debt deals now. And I keep asking myself in the back of my mind, is this just a pricing exercise for the lender and borrower to work out a deal together? The answer is maybe it is. But if I worried about that for every deal, I would. If I'm skeptical that every deal is not a real deal, you wouldn't be spending your time on too much. So I think you need to manage the time, but you can't necessarily look at it and say, oh, I don't think this is a real seller and throw in the towel, or I'm not convinced they're really going to sell. It's certainly a challenge. And I find it to be more a challenge today than, let's say, five years ago where people, if they wanted to sell, they sold. It wasn't worth anybody's time to pretend. Now, there are various reasons why it's worth going out to the market to understand. You know, how to value it, understand where they need to, if you're a bank, need to write it to. If you're again trying to figure out a buyer or borrower lender situation, at least there's a third party to create a value. So now there are more reasons than in the past why they might do it. But on the other hand, that's what this challenging market is, which creates opportunities.

But it also sounds like you're at least doing enough research up front to make sure that whoever you're dealing with can actually transact and I say, look, before you even start underwriting a property, if you're not checking how much debt there is on it, I mean, again, the broker might be putting something out there with the hope that they can clear the debt. But if it's close or if clearly the borrower is upside down, you might be spinning your wheel speaking to the borrower. You might need to be speaking to the lender. So I think also just kind of making sure that you're at least dealing with a party that has the ability to transact would be important.

Right. Well, and that's the conversation. Right. They will say often they'll tell you the lender's on board. Sometimes you're talking to the lender and the seller's not on board. You know, certain situations all of a sudden that you also need, you know, you'll find out you're dealing with the lender who all of a sudden will tell you, wait a sec, I just need to run this by my, you know, I sold off a piece, so I just need to run it by them. And you're like, where'd that come from? So there's only, you know, there you want to do the work to, to make sure you're not totally spinning your wheels. But I think it's. It's harder and harder to figure out what's real and what's not.

I. I think you had told me at one point when you were focused on industrial, that you're also now thinking about potential sale leasebacks. Is that something that you've explored where you're actually trying to find businesses that own their buildings and looking to buy and lease back or did. Did I. Am I.

No, we. We have one of your thes. Yeah, we have. We have been looking at that quite a bit. And for certain businesses, certain markets, we think that is a good opportunity for the owner of the business to get some liquidity, especially in this market where liquidity is a little bit more challenging and for us to get a slightly better yield on the real estate than we might otherwise.

Right. And when, you know, you have that essentially that tenant in hand, because now that owner becomes a tenant, it. I'd imagine that also helps with the financing.

For sure. For sure. Yeah. So that's one of the reasons we like putting those deals together. And there's what I'll call a little bit of a vig when you're putting it together versus buying it stabilized.

So, Stuart, when you say we maybe just give a sense to our audience of kind of what does your company.

Look like so we is a. I say we a lot. I don't know it's we, but it's. So I have one, one person on a sort of part time. And then for the most part we use third party providers to get the best service we need. So you know, we'll use the right contractors, the right leasing brokers, the right property management and find that getting the best in every market and in every industry and product type is the most valuable way to operate the portfolio. And obviously we stay on top of them, but getting the best at each skill set is the way to go. And then also when I say we, it's me and whatever partner I'm looking at various deals or doing various deals with is, is my team, we is us and my partner, we is, you know, on each deal and, or we as just the team that it is at each time.

Makes sense. And then so, so how do you spend the majority of your time? What, what is like a typical week look like? And are you very focused on the acquisition side yourself? I mean, what, what, how do you figure out how to prioritize?

I mean, I love podcasting, so see how many more times I could do this. Good. I'd say I try to spend most of my time on new deals and acquisitions. I'm not always successful doing that because the portfolio does need management. It's not on Autopilot. I'd say 18 and 24 months ago I was certainly spending a lot more time on the asset management side of the business from the acquisition side, just because things were evolving and we needed to, to work through various situations. And I continue to do asset management. Buildings need to be leased, loans need to be managed and reported and lenders have questions and tenants have questions and operations need to happen, construction, renovation. But I try to spend most of my time on acquisitions, which is talking to brokers, talking to owners, talking to tenants, trying to figure out where, talking to partners where there might be opportunities.

And it probably would not be an exaggeration. Maybe we don't see every. Each other at least once a week, but, but definitely every other week. And so, you know, we're part of the same associations. Young Men's and Women's Real Estate association rebny. What would you say to our listeners as far as, you know, organizations to join networking events? You know, I, I've also seen you at a lot of charitable events. So how do you figure out what you want to attend? Because, you know, you seem to be doing a good job being out there, but there's Also kind of, you know, the only thing you have is your time. So if you're spending, you know, time out there at these events, you know, you're not out there obviously walking properties at the same time. So how do you figure out what to do?

So I, I mean, I don't know that it's instead of. Right. I mean to some, some of some events are what I'll call, you know, double bonus. Right. You see 20 people at one spot that you can talk to versus 20 separate coffees and phone calls. So while you're out there and you're not at your desk, it's actually sometimes more efficient because you can, you can take care of a lot of business meetings, ideas, suggestions in one spot. You know, I'd say, you know, the other organization that I am involved with is uli where I participated. I think, you know, a lot of it is what's the mix of the groups that go and the people that attend and you know, YMW rea, which is obviously an organization, you know well and REBNY and ULI I think are some of those that, that, that fit the bill there, that are productive use of my time and sometimes I go to events that are not worth my time and I try to leave them quicker.

Yeah, no, but I, we're in the same camp on these and I think it's so important to. This is an in person business and I think to be able to go out there and trade ideas and also hear what other people are saying and find opportunities. I always think, think there's going to be more things that are going to come out of an in person encounter than maybe just a conversation over the phone. And certainly you're getting, you're not going to get that level of detail over an email, right?

Yeah, no. Certainly the emails are good for setting up the meetings or the in persons or the phone calls, but relaying it is not quite as easy by email. But again you got to do that sometimes because you don't have time to meet with everybody and not everybody has time to meet with you. So that's the other thing that you need to be good at is sending the right email, the right message, not too long, not too short, hits the bullet points. If you're trying to get them interested in a deal, if you're trying to get them interested in a building, whatever it is needs to do that as well.

Good. So Stuart, I want to talk. We only have a couple of, couple minutes left but to kind of, kind of get to the bottom of how you're wired. And I mean to say your first deal was a $70 million acquisition. I mean, people listening to this are probably, you know, they're thinking, how am I going to do my first $7 million acquisition or $700,000 acquisition? So, I mean, there's got to be a certain amount of, for lack of a better word, guts to, like, put yourself out there and make the leap. I mean, you seem like a very, you know, calm, cool, collected individual. But, I mean, I. I gotta imagine that taking that leap and doing that first deal, like, what is it about you, that how you're wired, the confidence that comes from within that, you know, allowed you to take that leap?

Well, therapy session. We switched to a therapy session very quickly.

All right, good.

So I'd say that all sounds nice. Really. It was where. I think it's where your connections are, where your capital is, where your relationships are. Right. So to me, it would almost be harder to do a $5 million deal because the connections I have want to write $20 million checks. It doesn't make good, bad, or indifferent. Doing a $10 million check where I need to raise 5, let's say, or 12 million, I need to raise 5. That's a different avenue, that others might have better connections, too. And I'd love those connections. I just don't have that as deep of those as I do larger. So I think it's really looking at what your skill set is. What, you know, where you have connections, where you can add value in order to. To figure out what. What the right direction is to go.

Wow, that, that. That is super interesting. And, you know, the. The fact that a $70 million deal could actually be easier for you than a 7 million. But I would assume you didn't just wake up one day and say that this is a more efficient way to do this. That was really building on that 20 year experience. I mean, I would imagine all those years of Vornado and Beacon were where you're able to cultivate and meet some of those connections that would serve you later when you went off on your own.

Is that true? Absolutely. Yeah. That was sort of the network I was in.

Good, good. Well, Stuart, this has been awesome. Really appreciate you sharing your story. I'm sure, sure. I know the people listening get a ton out of this. So, I mean, any parting advice? I mean, for someone listening to this right now, and it could be, let's. Let's maybe not talk about, you know, we want to help the college students out there who are thinking about getting into Business. But how about that, that person who's sitting at Columbia right now, they're about to get their, their, you know, their master's degree and kind of what would be the next step? Well, what advice would you give that person to take advantage of the opportunity in front of them?

Be tenacious, don't try not to take. No follow up. Follow up. It's a good market and there's opportunities, but that's also, it's a difficult market and those two often go together.

I love that. And that is a, it's, we probably don't talk enough about it on the show. But that tenacity. And again, it's like, you know, you could have written this book because I talk about the importance of tenacity, not just investing, but just also my experience in brokering and your stick to itiveness, you know, following through and look, if you're the kind of person who, you know, you try things once or twice and it doesn't work out and you get discouraged, this is probably not the right business for you. Right. You have to be willing. You know, things aren't going to always go your way. But it's also a numbers game and it's also kind of following through. And if you give up easy, right. That's also probably not a great road to success. I think that when you're saying don't take no for an answer, it's probably approaching it from different way and, you know, not just, you know, giving up on it. So, Stuart, this was fantastic. Really appreciate you joining us today and thank you, James.

No, this was great. I appreciate you inviting me.

Of course. And for all of you, whether you're listening to this now or you're seeing this on Instagram, Twitter, LinkedIn, we're definitely here to help you gain the insider's edge to real estate investing. If you've not checked out james nelson.com yet, we built this site is not about me. This site I built was for you to help you gain this advantage. So not only can you find the show notes and find out how to connect with with Stuart, there's also helpful videos on there. You can get the white papers that we post at Forbes and then also there's a monthly newsletter. So if you've not signed up for that newsletter, you're going to want to do that because we culminate everything. And last but not least, if you like this episode, share it with someone else. It's really easy to forward it on. You'll be helping someone else out. So until next week. This is your host, James James Nelson. Thank you again.

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.