Conviction with Alex Budney

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

Hi everyone. Welcome to episode number 154. This is James Nelson, your host. Wonderful to have you with us and thank you to those of you who have already sent in your reviews on Apple, Spotify or wherever you're rating the show. To ann a n n e amesnelson.com sending a copy of your review and your mailing address. I've already sent out dozens of books, so please take advantage of that offer to get your copy of the Insider's Edge to Real Estate Investing for showing us your review of this podcast that helps get the word out and spread the word and show all the ways that we are helping you gain the Insider's edge to real Estate investing to outperform the market. Okay, so for today's show, thrilled to have with us Alex Budney. And for some of you, you might have already seen this on Instagram Live where Alex not only first joined, showed us the property that we sold to him, showed us the repositioned version, but then came back to record it live in my office. So you're now getting the recording of that entitled conviction with Alex Butney and I know you're going to get a tremendous benefit from this conversation I had. Who shares how to start off in real estate investing and ultimately build your own platform. Alex is the founder of Ennismore, a real estate investment management and consulting firm. Since its beginning, Ennismore has advised on or sponsored more than 2.1 billion of active real estate projects. In addition to implementing Ennis Moore's principal investment strategy, Alex counsels various real estate owners and financial institutions on their real estate investment strategies. A key component of his tremendous work is tracking his work and conviction as he bought into the market in 2020. Shortly after the onset of COVID and at a time when most were on the sidelines, Alex spotted an opportunity and purchased a property that was almost entirely vacant. In this episode, Alex will share his journey into real estate, offering tips for those who want to develop their own area of expertise. Growing up in New York City's Upper east side, he became intrigued by buildings at an early age, including how they were constructed in their history. He studied floor plans as a young teen and thought about what it would take to live in an apartment or co op. And after graduating from a degree in business from Lehigh, he went on to work with his father who had construction company and served developers, including large multifamily builders. The way deals were put together fascinated him. During this time, Alex spotted a piece of land and put together an idea for it which he presented to a developer. The pitch opened doors for him and he landed a job with Related Capital Companies which gave him a chance to learn about the financials of the business. He later shifted to Tishman Spire where he showed up early for work every day and got to know his boss and the extra effort paid off. And during his time at the company, Alex worked in the London and New York offices as Director of Acquisitions and Development for Equity Capital Markets Group. This experience gave Alex insight into the various aspects of real estate, including international approaches and development. He eventually branched into his own space and discovered a niche he could fill consisting of offering advice to owners and financial institutions with real estate interests. Reflecting on his career, Alex credits his success to listening to others, being eager to learn and moving forward with opportunities. And so you can find more on Alex and his company@james nelson.com where you can find the other podcasts and show notes. We're going to have a brief word from our sponsor and we're going to get right into that interview with Alex Budney 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 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 we put our clients first providing tailor made strategies to achieve superior results. Please Visit us at aytristateinvestmentsales.com and follow us on Twitter, LinkedIn and Instagram amesnelsonnyc to learn more. Welcome everyone. It's time for our Investor Spotlight and with us today we have Alex Budney who is founder and Managing member of Ennismore. He is responsible for all investment development and consulting leadership. In addition to their principal investment strategy, Alex counsels various real estate owners and financial institutions on their real estate investments and strategies. Prior to founding Ennis Moore, Alex was the VP of Acquisitions of Capital Markets for maclo Properties. He was also worked in London for Tishman Speyer as their director of acquisitions and development and then also spent time in New York as an analyst for the Related capital company. So some tremendous experience here. Thrilled. And not only this is a first for this podcast, but we actually went to go tour a project right before this that we sold to you. Yes. And I give you a lot of credit because you bought this asset. The deal was negotiated at the end of 2020, closed in early 21. But look, that was a scary time where we were still in this with COVID We didn't know how long were we going to be in this thing for. And really at the time when you bought that, I know we're going to talk about it, the building was mostly vacant. So I'm sure that was a little bit of a scary time. But I, I tell you, you did a phenomenal job with that project. So. And also an all around great guy. So, Alex, thanks for joining us here today.

Thank you for having me. And it's, it's an honor and a pleasure to be on the podcast. And I'm glad, I'm glad we did a first, you know, that's right to do it first.

Absolutely.

Shouldn't every podcast start with going to see real estate?

I love it. I mean, absolutely. This is, this is an in person business for sure. So Alex, why don't you just for our audience, give a little bit of a sense of your background, maybe talk about how you started off, how you got into the business. Yeah, just a little sense.

So I grew up in New York. I grew up on the east side and 72nd Street. And I think that's an important part of my story. I was always interested in real estate from a young age and I didn't have a family real estate company or background. I was just interested in buildings. I used to walk around and look at buildings and the story behind them and try and understand how did it get built, you know, who owned it and what's the history. And back in the 90s and 2000s, they used to give magazines in the co op lobbies that had the listings in the back. And I remember from a young age just being captivated, interested in looking and trying to understand what made different co ops interesting and all of it. So I bought a book that had all the great candela and carpenter buildings profiled and it had background on what was built, who built it, and it had floor plans and this was before the Internet and you could look up on street easy and that was really, I think, where the interest in what real estate is, how it gets put together, you know, what goes on and started.

And when was this again? How old were you? What, what stage of your.

I was probably 12.

Okay, so 12 years old. You're actually looking at floor plans for buildings and just, you know, fascinated with what just how these buildings.

I would fantasize a little bit, honestly about, you know, some of those great old co ops, like, wow, what would it be like to live in this apartment? Would it be like live in that apartment and just, you know, apartments. Back then we've seen a rebirth of these grand apartments, but they were very grand with different rooms and compartments and whatnot. So it was, you know, it was really just interesting to look and think about it. So that's really where the initial interest came from.

And were your parents in the business or what, what do they do?

No. So my father, well, tangentially, my father was on the construction side of the business and I went, I went to Lehigh for college and after. Great school, it is a great school and I learned a lot. I was a business major, but I did take some engineering classes almost as a minor. And there was some interest there on the construction and development side. So I went to work for my father and he had a construction company and his clients were all developers in the city, related, Silverstein, Glenwood, all of these big multifamily builders. And that's really where the interest came. I was probably more focused on when we were bidding jobs, he was selling the curtain wall packages of buildings. I was more interested in how the deal got put together, you know, how they bought it, how they owned it a long time, what was going to be built and developed. And that's really where the interest came. And so what happened was I. I met a developer, a kind of younger, smaller developer, and I put a hypothetical deal together. So I'm 21, 22. And it actually, it was a massy knackle listing for a piece of land I think on 34th Street. And I mean I had no idea what I was doing, but I. So you created an investment, like a hypothetical investment. I went to a friend who worked for another developer. I said, can I have your proforma? And I kind of looked through it and then I looked at this piece of land and I was like, well, I think you can build this. And I tried to look up online, like what far was. And it was roughly right. And I got comps for the sales side and I put this pitch together. And so I go and sit with this developer and his partner, and we're still very good friends today. This individual I wanted to work for, and I. I pitched him, and he was like, well, you know, I like you, and this is really interesting, but you're way too green. You have no experience. But I have a guy who works for me who worked for Related Capital, and I think maybe they could help you. So.

So this is fascinating. So let's just back up a little bit. So this pitch, was you asking them to partner with you to buy it, or were you saying, I would like to work with you, but here's some.

Do this deal like this is. You know, I think this would be a good deal you could buy.

Okay, so you have no. So you have no real estate experience, but you're walking into their office saying, I found this great opportunity. Let's do it together.

Right. Wow. They were growing up developers, and they were doing condos of this, you know, roughly. It was maybe 200,000 square foot project. And I was like, we could do this. And so that's what happened.

I'm smiling. And for those of you joining us on Instagram Live, we're recording right now our podcast for the insider's edge to real estate investing. But I'm smiling because, you know, part of what we talk about in this book for your first investment, oftentimes I think the number one thing that holds people back from investing in real estate is lack of capital, you know, fear. How do you do this? I mean, the fact that you just, you know, you had this sense that I'm going to find an opportunity and bring it like that is the value you brought to the table. And even though it was clear that maybe you didn't have the experience to execute on this, they. I'm sure the reason why they felt comfortable making that introduction is because you took the initiative. And I think for everyone listening right now, especially for those in college are looking to do the first deal, I think this is a really valuable lesson.

And. Absolutely. And two things came. First of all, the introduction to the firm that I went to to get the experience. But second of all, the principal of that developer that I pitched later on was managing capital, and I did my first deal with him when I started NS more 14 years later or whatever. So it all kind of came full circle.

So, okay, so from there, you get a job at Related Capital. Okay, so what are you doing for them?

So I was an analyst, and I think, you know, it was the example of what I've heard people call Their thousand hours of just getting in and working and learning how to work, underwriting, putting pitch books together and being in that. That company was set up as a real estate finance firm, like an investment bank. It was part of the Related Companies but had been taken public and it was separate and it was really that banking culture of analysts and Associates and MDs. And I learned how to work, I sat in a bullpen, I listened to conversations. I also learned how to focus when I needed to because there was a lot of noise and activity in the office. So that was tremendous experience. At the same time I learned, because this was 2007, going into 2008 when Bear Stearns announced, going into the great financial crisis, this company, Related Capital was publicly traded. They were $22 a share when I started and 22 cents a share when I left. Roughly.

Okay, and hopefully that wasn't because anything you did.

No, but I wasn't, I wasn't senior enough to make it back in that regard.

It was. And this was totally different from the Related Companies. No, no.

They were founded by Steve Ross and just now they were on the board. But at that point they had taken it public. It was their affordable housing finance business and they had bought a series of real estate finance companies, cmbs, originators, all kinds of different businesses and gone public and created a mortgage REIT and so on. And it became a poster child for an over levered real estate finance company in that downturn. But I learned a lot about how to work and I moved on to the next opportunity, which was very fortunate. I got an introduction for an interview at Tishman Spire and that was kind of always a dream to get to meet with that company. Interestingly enough, the last interview there were 15 rounds I think was the day that Lehman Brothers announced bankruptcy and the interview got canceled and I was like, okay, this is done, you know. But what happened was they rescheduled. I got the job working their equity capital markets group in London, first in New York. And I was there for two years and they started laying everyone around me and I was like, okay, I'm going to be out of here in two weeks. But what happened was my boss went in early, went in at 6:30 in the morning and I thought if I just go in before him every day, it'll be hard to fire me. It'll be harder to fire the guy who's in first. And so that's what I did for two years. And I'm not a big morning guy. And I was in there and what happened was a. I Didn't get fired. B, I absorbed responsibility from other jobs, which was great. C, I got to know my boss really well in that quiet time before everyone else came in and his boss. And that's where the exposure came from when they were ready to say, okay, we need someone to move to London and we need someone who we know is going to work even if we're not watching them. Because I was still reporting back into a guy in New York. And so they asked me to move to London and that's, that's how it happened.

I'm smiling again because having worked with a team now, I've been doing this for 25 years and, you know, maybe I've gotten a little soft. You know, certainly post Covid, sometimes you're just happy when people actually show up to the office. Obviously, no, no tie anymore either, so. So a little more relaxed these days. But it used to be everybody's on the desk at 7am and I think, you know, one thing is, you know, once 9:00 clock rolls around, everybody's crazy busy. And if you want to actually ask a question, get something done, have some quiet time, you have to either be willing to put in the time before 9 o' clock or after 5 o' clock, because during the day it's really. Can be really chaotic. So. But I love the fact that you. I'm. I'm gonna show my, my worth. And you know, sometimes in times of uncertainty, you just, you double down, you put in the hard work because that's gonna get you through a lot of, of challenge.

Right? And, and just work. That was the big.

Yes.

You know, the big theme I learned.

Is to keep working and going and no doubt also. And I'm trying to think of other guests we've had on the show who have spent time at, at Tishman. And from everyone I've heard, it's, you know, know, institutionally speaking, with how well they are operated, managed and you know, the different verticals there. So I'm sure you got great experience to all aspects of the business.

There's an unbelievable institution and company, and it's interesting because it's a real institutional business, but it's also a family business. And Rob and Jerry Spire are amazing and I was lucky to get exposure to them both. And I loved working there. It was hard, it was hard to leave. We'll get to that. But it was a big decision because I just learned a tremendous amount, really grew to love and respect the business that was built there. So just to kind of finish a little bit if you want, moved over to London. And that was a tremendous experience because what I learned there was I went over to raise capital and be focused on that side of the business. But European debt crisis came about, and so I pivoted and switched to pan European acquisitions. And that's really where I learned to look at different markets. We were investing in Spain, Turkey, the Netherlands. And every market there is different rents or gross net quoted, monthly, quoted annually. The way reimbursables are handled, it's all different. So it was a great learning experience in how to think about things differently and not to be too focused on one way of doing things, both specifically in the real estate, but also in that office. If anyone has the opportunity to work internationally, I can't recommend it enough because I learned, you know, there's different practices culturally and not everyone is right. There's a lot of ways to do things, and you can learn by seeing how other people do things in other cultures. So that was. That was huge for me. And the other thing that I really learned, I was thinking, listening to one of your podcasts about what people have learned. They had an interesting policy at tuition Spire. Jerry Spire, who's brilliant, said, I want. I don't know if they still do it, but everybody has to move their desk or office periodically. And specifically, he didn't want anyone to get too comfortable. Things change. And he would say, you have to embrace change, and if you don't, if you don't change, you die. Which sounds kind of harsh, but I mean, meaning, you know, like, we. You have to evolve.

But I wonder also, just, you know, when you're out on the floor and you're hearing and engaging with people around you, I mean, I would imagine you also get the benefit of, you know, meeting, getting to people better throughout the office. So really, really smart. You know, I was thinking about your comment about the way business is done differently in different countries and learning that. But also, you know, I would imagine that some, you know, you might be able to take that New York hustle to some markets. And, you know, I don't know, just anecdotally, when I was in Barcelona past this past March, and it's a big, beautiful city, I'm looking around at signs and yes, there are some of the big, you know, global brokerage firms that have their signs up for the most part. It's, it seemed to me like a very local type market where now this could be a positive in that you say, hey, you know, I can come in, I can find opportunities that maybe others don't know, because maybe they don't have that international platform, but then, hey, when it's time to monetize that asset, you know, is this a market that does garner international appeal? So I don't know if that question makes sense, but I just kind of 100%.

Well, a big part of it was in particular when, at the time, this is 2011, we were opening an office in Turkey, and I was on the team charged with that. Tish Inspire subsequently opened it. And at the time, Turkey was hot. You know, it's gone through a lot of issues and the geopolitical risks have exacerbated. But at the time, one of the interesting things, and this has been a model that that company replicated, to answer your question, was that they would buy assets or buy land and develop assets and look for specific inefficiencies in that particular market that weren't being done as well in an existing market. So maybe building sell office buildings, sell on strata title, so unit by unit versus a fully leased building. But if you were able to build a fully leased institutional building, the cap rate that it would trade on would be tighter than the individual strata sale units. So looking at those inefficiencies and then finding the arbitrary arbitrage as a result to make money. And so that kind of at your question, that's kind of where I went with it.

Yeah. And the reason why I ask, I mean, a big part of the insider's edge to real estate investing is finding inefficiencies in the market to capitalize on. And I learned this very early on in my career where as even as a broker looking at two properties that would sell on the same block, and why does one sell for 30 or 40% more? I mean, some of these properties broadly marketed that everyone knows, others sold off market. I've certainly been involved in my fair share of contract flips over the years where someone sells, they think they're getting a great deal, and then two, three weeks later, I find someone who wants to buy the contract for a half a million dollars more. So again, that inefficiency, where someone was able to find something that others did not know about that led to a great opportunity.

Right. I have a partner who is, what's the R arb? What's the deal? That's the ultimate arb of a contract flip. Right.

I mean, so, and we, we kind of just glanced over the fact that, that you did make the choice to, hey, I'm gonna pick up and I'm gonna leave New York and Go to London. I mean, maybe this was a time in your life when, hey, this is exciting, you're up for anything. But I mean that, that was, I mean, kind of taking that hard work ethic to the next level where like, hey, I'm willing to go wherever the opportunity is.

It's true. And it wasn't easy and I, we won't go into this, but I had a girlfriend at the time and we did the whole New York, London and it was challenging, you know, but it was an unbelievable opportunity.

So, so you were there for how many years?

I was there for just a little over two years. It was always supposed to be a two year assignment. I didn't want to come back, I wanted to stay. I, I, I'm a huge Anglophile. I just love being there. It was good that I came back though. They moved me back and that was always the plan because New York, I think, was really where I wanted to be, to go on my own. And I was feeling that itch already, go on my own. Right. And I had been called by a headhunter about going to work for Harry Macklow. At the time I was still in London. It was a month before I was supposed to come back. Right. And that was a big decision as I alluded to, because Tish and Spire is a huge, wonderful institutional type company and Harry is the ultimate developer in my opinion. Maverick.

Right.

And, and they searched you out or.

How did this, so you're over in London. So how are they thinking that?

I had a former colleague that I'd worked with, had been placed by this head hunter and you know, they ask and, and we were close and I had, you know, we'd been talking and he's like, I think you might talk to this guy. I wasn't sure.

Right.

So determined to leave really. But I, when I, he said, would you like to go meet Harry Macklow? Who would not go do that. So I went and sat with him and I think we first met when I was working for Harry, looking at some sites. So you know him and you know he's a brilliant, brilliant developer. Yes. And probably one of the most charismatic people. Yes. You're going to come across. So I was, you know. Yes. Instantly enchanted.

Well, you know, there's obviously things that come along with, I mean, Harry famously does not take no for an answer and whatever it takes. And look, there were certainly things that I'm sure, you know, have come out in the press over the years of things that maybe weren't maybe the best approach in some certain situations. But, you know, when you look at some of the things that he's been able to accomplish, I mean, the. The creation of the Apple Store, where, you know, taking a sunken plaza that had almost no value, you know, where Harry, the genius that he is, realizing that this is an incredible opportunity and, you know, the glass cube and, I mean, the. The rest is history. But what was that?

Yeah, no, go ahead. I mean, and that's. That's. I learned a tremendous amount. And it was. To me, it was like entrepreneurial New York real estate on steroids.

Right. So what was that interview like? I mean, this. So you're flying back from London. Okay.

We had many.

Okay. But.

The. The last one was in Harry's office in General Motors, which is that corner office that overlooks the park where the Apple cube is. And interestingly, it was more about. I feel like, if I remember correctly, a lot of it was more personality questions, personal questions, trying to really understand who I was. But there was an instant connection there. I felt very comfortable with him, and obviously he liked me enough to give me the job. And it was very fortunate because we worked together hand in glove, my entire time with him. And what I learned was I learned how he put together a deal from a development standpoint. I mean, he knew more than many zoning attorneys. And he would argue we would be on calls with wherever it was, Kramer, Levin, and he's, no, you don't understand. I don't need that setback if I do this, and so on and so forth. And it just taught me to, wow, look at how he's not giving up and challenging and also assembling really smart people around him. And also how to tie up deals and how to kind of fake it till you make it a little bit when you're lining up capital and a planning team and trying to tie up a site before you go hard on it. And I think ultimately, what was always in his mind that I learned the most, how can we maximize it sounds cliche, but how can we maximize value in a property? How can we make sure we maximize the square feet, but the actual rentable value or the saleable value and position it so it's most desirable for the end user and make sure we're steering the architect and the engineers in the way to do that.

So just going to make a brief note for those of you who are with us right now on Instagram Live, I'm here with. With Alex Budney from Ennis. More. We are recording the episode for the Insider's Edge real estate investing podcast. But we wanted to bring this to you live. So for those of you who have questions you'd like to add on, we'll see if we can, we can get to them as well. So I want to talk about, what would you say? So out of the time you spent with MACLO Properties, what were kind of the signature deals that you worked on and any deals that you were most proud of and then would love to hear about? You know, every great real estate deal deal has a story attached to it. So whatever, wherever you want to go with that question.

Without question, the most significant deal to get to work on. I wasn't there for the acquisition, but I got very involved development was 432 Park. And you know, it's hard to replicate anything like that. And that was sort of the unique aspect of the position was I was hired to do acquisitions and capital raising, but I was getting to work with Harry on everything.

And that was an assemblage of 432 Park Avenue, which is one of the most, you know, iconic residential towers here in Allen City.

Yeah.

You know, an engineering feat, if I'm not mistaken. Column free. I mean, there's a documentary on it.

Yeah. It's 1400ft tall. @ the time, I think it's been surpassed, but it was the tallest residential building in the western hemisphere.

Right.

And it, it's a very efficient, it's a great example. Every floor is the same and it has incredibly efficient floor plan plates, an incredibly low loss factor. Right. And that was something that I learned working with him, that he harped on efficiency. Yeah, the, you know, the, this I still remember the floor plates are 8,200 square feet. And I think in the upper floors where two of the elevators fall away, you have as low as maybe a 500 square foot core stairway.

That's right, yeah.

And so that loss factor is, is tiny. Right. And it also was very efficient from a construction standpoint because once they were setting its port in place. Concrete. Once they were setting the floors, the concrete contractor got into a rhythm. They had a self jacking form that was moving its way up and they had, they really moved quickly. And at the same time there was a building downtown that had varied floors on every side. I remember going by with Harry and he's like, that contractor is going to go bankrupt. The concrete contractor. Needless to say, they did Right. Because they just didn't have the experience to think about. You've got to think about efficiencies when you're building.

So how did you assemble that Site was that just what was there before? It was a bunch of galleries on Park Avenue. How many?

Yeah, just to be clear, I, I came on after he assembled it, so I wasn't involved in that.

But it was multiple parcels, I'm sure. Tenant buyouts and maybe some air rights transfers and.

Absolutely. And, and all of that. And there was a big story and he, he got in trouble on the site and went into bankruptcy. But then CIM ultimately bought the node from ISTAR and brought him back in. So that's the point where I came on board and he was assembling and rebuilding his company and doing projects like 150 72nd, you know, 737 Park, 432 Park. And then the last one that I was involved in was his building in 59th and 3rd that's now built the residential tower there. And that was one where I actually met the equity partner, sourced them in Asia. It was a Singaporean group. And they ended up doing the deal with him there. But at the same time, it was becoming very clear to me that I was ready to do my own thing. I was itching and it was my time to, to move on. So I think there's an element of luck in anything. I was shown a deal on 20th street between 5th and 6th, a condo development where another developer was seeking equity. And so I pivoted. And the day after I left macle, I started working on this deal and worked for three weeks, brought in the same investor that I referenced before that I'd wanted to work for 14 years ago. I knew his group of capital that he was managing would want to do the deal, showed it to him, we quickly put it together, made an offer on what I thought was some pretty intelligent pref equity for the sponsor and, and close the deal within three weeks from that time. And so this was a 36,000 square foot condo development. It was a $45 million project. It was shovel ready. The developer had construction financing lined up and they just needed an equity partner. And it was one of those deals, they don't come along that often, but that it was clear, it made sense in every regard for me, for my investment partner, the deal we offered for the, the sponsor, and so we closed. And that was how I got started on that. Wow.

You know, I think when most people think about real estate investing, they're thinking about taking down the property themselves. They're the gp, they're the sponsor, they're the developer. But, you know, without the equity, oftentimes there's no, there's no deal. Especially for a deal of that size. I mean, almost just, you know, it's, it's rare where you find a developer who is using their own capital to build. So, you know, for our listeners who might have access to, you know, institutional equity, I mean, it sounds like this was a family office.

Exactly, yeah.

So what advice would you give in that arena? Do you see that as an entry point into the business for those who do have access to that type of capital to actually bring them in? And, and as an advisor, as you did, maybe we could talk a little bit about that.

Right. So in, in that situation, I, you know, I would say don't be pigeonholed into thinking everything has to have a specific label. And so in that situation, I had been in the developer seat working for maclo, but trying to bring in equity capital. Deal came along and it was very clear that it needed a certain kind of capital, but perhaps the developer didn't have the ability to structure it. So I knew the capital and what we did was we, we actually structured investment vehicle, an entity that I was in with them and invested together in the deal as the preferred equity investor. Now, some people have built businesses solely on that kind of capital. I always wanted to be operating and developing, and the next deal I did, I bought as a sponsor. But it was just a moment where there was a window and it made sense. And I could see, well, listen, this is a good deal for us, it's a good deal for them. Let's not overthink it. Let's just move and do it. And it doesn't have to be within a certain box necessarily.

And what advice would you give for identifying capital? So let's say, you know, people listening right now, they've got a great opportunity, but they need equity. They need a 10 million, 5 million, 10 million dollar 20 million dollar check.

Right.

You know, clearly you thought about the profile of the deal and matching it with the right equity source. So how do you, how did you know what kind of equity this deal needed and why it was going to, you know, fill that bucket, so to speak?

It's a great question and I think it comes with listening, being a good listener early on because you don't know where someone or something you learned is going to come into play again. Right. So my role had been sourcing deals, but sourcing equity, speaking to many different investors, which was fortunate because I got to know them, but understanding what their hot buttons were. Are they IRR focused? Are they multiple focused, Are they more focused on the downside or the upside what are the different variables that they consider? Do they prefer some kind of subordinate pref equity or debt structure? Do they always want to be common equity? And keeping a record of this, however you do, taking notes, filing it away and, and paying attention? Because I, I learned about this group and I learned the principle years back that I was interacting with. I learned what he was focused on. And so it, it just fell into place. When I saw the deal, I was like, this is a deal they'll do and they'll move quickly. And it's one where I know that if I propose this pref equity structure, it's something that'll work for, for me, for us, this investment group, and also for the developer because it'll allow them to make a lot of money, but it'll protect our downside in a market that's feeling a little cuspy, getting a little hot, and that's what happens. So I think it's just connecting the dots, which sounds kind of cliche, but it, it is really paying attention along the way and, and looking for the opportunity.

Well, I, I think what also I'm, I'm hearing is you really looking to cater the right opportunity for the right capital, like what you don't want to try to do. I'm sure, you know, when people are just getting started, they have a great opportunity, they just assume everybody wants to invest in it, you know, and.

Right.

There's different deal profiles. Does your investor want, you know, long term cash flow? Are they looking for, you know, a bigger return in the short term? Like what is the risk tolerance? And so, you know, again, I think, you know, many times, and I mean, without a deal, there's, you know, and you don't have anything to offer. But conversely, you know, sometimes to first have those capital relationships before you go out there, you could actually know what to hunt for. In other words, I know this investor wants this kind of deal, so let me go find it for them.

Totally.

Right. As opposed to.

Yeah, right. And also it is that confluence of having the deal and the capital until you get to a point where either you have so much of your own capital or you have discretionary capital, but most people or a lot of people don't start that way. And so kind of knowing, to your point, you don't want to waste time calling 20 guys who you know will never do a deal because they're only core investors and you're trying to pitch some heavy value at deal or vice versa. Right. But at the same time, you do need to be persistent with the guys who probably will do it and not necessarily take no as an answer in the beginning because some people are genuinely cynical in the beginning or whatnot. So it's, it's that balance, I think, and trust me, I've been in the situation too many times of having the deal and no capital or vice versa, that there has to be an element of luck again of the confluence of events.

So let's talk about the first few deals that you sponsored. So at this point, you know, you've got some go to investors, you have a, I would imagine a thesis. So you have a business plan of what you want to do. So what was that business plan? What type of assets did you find?

So it's interesting actually. My current plan and what we're executing on and the building that you sold me and went to is primarily heavy value add, multifamily. It doesn't have to be that way. I'm not a glutton for punishment. But it's just worked out that I think there's the most arbitrage with an older building and a small to medium sized building where I can leverage my skill of really reimagining and creating value through that. But that came actually out of a pivot of a deal I did that was supposed to be a condo deal, but the condo market got overheated and we pivoted to rental, you know, the building because you marketed it. 257 Water Street when, when I bought that. And that was the next deal right after 21 West 20th. The idea was to convert to condos. And we did a whole, I had partners on the deal and we did a whole development plan, designed beautiful units, everything. And the market started to slow and it was really clear that if we went ahead with a condo plan, we'd be selling units in potentially a very overheated market the same time. The rental market was very strong. And so I learned there how to kind of have multiple options, maintain optionality and also the importance. This was a lucky thing to learn early in that standpoint. But the real importance, people say it, but in that scenario of cash flow and how important it is to have a cash flow fallback, rental fallback, I.

Would add one more thing to that, which is having the right basis. Sometimes when you are going for a condo execution, you might not have the luxury of having to fall back for a rental. So, so that, that shows that you bought the deal right as well.

So if you're getting $60 a foot rents and your basis is 2,000 a foot, it doesn't matter if you want to rent it or not.

So. So I want to go back to this deal that you bought at the end of 2020. So the time the building was what, 80, 90% vacant? So basically. And it was fully occupied until Covid hit and everybody vacated. Right. So something told you that, hey, I'm going to take a risk. And I remember when we did this deal, we didn't even know if it could be financed. Lenders were trying to make sense of this market. So what gave you the confidence that you could not just re rent the building? I mean, not just do that, but to improve on what was being achieved. So the few remaining tenants who were still there were paying what, about 2000, right? Dollars a month?

It was 1800 in that range.

And what are you renting these apartments for now?

So they're 12 units in the building. It's on 37th and Lex. It's over 100 year old building. 10 of the 12 had left. And these were. It hadn't been renovated in 40, 50 years. Right. The, the seller owned it since the 70s at least. And the units were 1800amonth to maybe 2100amonth. We did a full gut renovation. New kitchens and baths, of course, but central air, new plumbing, new electric, new flooring. I mean, you were just there.

Amazing.

These are small units, they're efficient, but they're at a higher level of spec and quality than really other smaller units in this space, in my humble opinion. And as a result, it was a trend that I had identified that millennials and people who are working and spending a lot of time in the city but want to live efficiently, are willing to pay a little more in rent if they have a higher finish quality and are actually prefer in some ways to be in a more efficient unit. But to answer your question, how did I kind of get the conviction at that time? I think some of it is luck. Listen, I had having a relationship with you was good because you brought me the deal and that was important. And I always listen to anything that you would say when you would bring a deal because I knew that you were transacting a lot respected in the market. At the same time, I was a believer in New York, I grew up here. And I believed, listen, if we make these units nice again and they were in bad shape, they will rent. And if we buy it right, which we can do now because of what's going on in the market and we don't borrow too much money, it'll rent whether we get 2800, 2500. Now we're getting 3800 for a 350 square foot one bedroom, which is very fortunate. Right. But either way, we will. We will.

So you pro forma this deal and you figured this is going to work if I can get a $2,800 rent. And so now, now this is, this is a deal that has, you know, blown away the pro forma. So.

Right. And so that, I mean, listen, it's better to be lucky than good. But I think it's a combination of. It was, it was fortunate timing and it was a business plan that I had executed on other buildings where the market hadn't corrected as much. And we made money, but we didn't make as much money. I had just finished a building in Williamsburg that unfortunately we bought three months before, which we paid a fine number, but it wasn't a post Covid number. Right. And so, you know, it was a good deal and this will probably be hopefully a great deal.

Okay, so with only a little bit of time left, I do want to talk about the advisory work that you're doing because this is also an interesting way for people to think about getting into the business. So you asset manage for some pretty significant owners where they, you are their outsourced real estate department. So maybe talk a little bit about.

Right. And particularly if there's a development focus. So. And this came about in the end of the 2015, after the deals we talked about. I bought, but the market was getting overheated and I was missing deals and I just couldn't make sense of them. And I've heard people refer to being on the transaction treadmill and needing to just transact. And of course you do when you're starting, but you don't want to do bad deals. So someone brought me a fund that really needed real estate expertise. Not a real estate fund, a credit fund that was looking at a real estate deal and wanted someone with actual, what I call specialized buy side advisory capability or consulting capability, how to underwrite a deal, how to value it, how to structure it, not from a legal standpoint, from a business standpoint, and work with attorneys and whatnot. So that's what I did for this group. And then I thought, you know, there are not a lot of guys doing this and it's very kind of niche, but it's really needed for the right group that either has assets that have gone past their usable life, that were stabilized as they are, need to transition where there's an active redevelopment portion or a non traditional investor who sees an opportunity in real estate, and they want to get into it. So I grew that business from 15 up until present, and it's become an equivalent size business to the principal investment side. And they're also very conducive to each other because it allows you to keep running the business, see deal flow, stay involved in deals at the same time when maybe new deals aren't making as much sense and you don't want to overpay. And then as things correct a little bit, maybe that slows down, then you could start buying again and so on and so forth. So that's really. That's how it happened, and it's been very complimentary to the business's growth.

Perfect. Well, I'm going to ask you two more questions then. I don't know, Annalise, if we have any questions on the Instagram feed, or maybe you have a question you want to ask where? We'll see. But I. So I would ask, over the course of your career, what would you say has been your inside edge?

Right.

So, you know, now, you know, with the book and, you know, kind of we've talked a little bit about. This is an insider's game, but what are your key attributes that have made you successful?

It's a great question. I think, first of all, working really hard, that sounds a little bit cliche, but learn, not just work hard, learn how to work, learn how you work best and ask questions. It bothered me when I was younger, and it still happens when I don't understand something. And so I make a point to try to learn and read and figure it out. And also remember these things, because you don't know down the line, when the person you met 10 years ago or the thing you learned in a meeting about structuring a deal that was sort of academic at the time comes into play in the current moment. And at the same time, just be open to pivoting. I think you gotta. Things change, right? And you gotta be ready to move and change and shift and not be too stuck in one single lane because the world's a dynamic place. Right?

Yeah. No, I love that. And, you know, on the topic of pivoting, I actually, one of my interviews is entitled Pivot, where I interviewed Adam Gordon, who has done, you know, so many different types of investments and just being opportunistic and seeing what's out there. And then lastly, what advice would you give to the aspiring investor listening right now? How would you tell them to get started? Maybe they're new to the business, maybe they're in college right now, but they want to, you know, jump into it. And hopefully, though, I know they'll be inspired by your story of just walking into that real estate office with here's a deal. But what. What would you tell someone would be a great way to get their start?

Well, I think when you see the opportunity to transact, if you're lucky enough for something to come along, to act on it and listen, you have to think about risk, and you have to think about all the things that could go wrong. Do your diligence. But I'm thinking of this 20th street deal. It was very clear that it made sense to me. Of course, I spent time making sure and speaking to counsel that I wasn't missing something. But at a certain point, it's okay if there's a good opportunity. Why hasn't someone else done this? It was just a moment in time. And not every deal is so clear. Just do it and move forward and trust your intuition. Be careful, but trust your intuition and do it. And that ended up still today being the most successful financially that. That I've done on a deal. And, you know, I was worried for a long time about what. What mistake I had made, what I'd missed, and, yeah, luckily, I hadn't.

I've made other mistakes, but I love that advice. And I think back to my interview with Jordan Vogel, which I took a page out of Nike's playbook. I called it Just Do It. And that was his advice. Like, you see a great opportunity, you buy it. Like, you don't like something, you can. If you overthink things, you can talk yourself out of any deal. Right? And P.S. jordan is also the same one who said every single deal that he bought, this is like a hundred and counting. The next day, he has buyer's remorse, and he's like, oh, my God, what have I done? I've just overpaid. Because, look, when you buy a property, you know, yes, you paid the highest price, whether on market, off market, you beat out other people. So, but look, have. Have conviction when the numbers work. Go for it.

Absolutely. And Jordan's a friend and a very smart guy, and so listening to him, you can't.

Probably can't go, yeah, well, this has been amazing. I'm so happy we could do this in person. I know that this is kind of a new format to also offer Instagram Live. So, yeah, next time, we're. Yeah, we're multimedia now, so maybe next time people bring questions. And, Annalise, unless if you have another question, a question yourself, we can, we can close it out.

That's a great question. I mean, I think perhaps maybe just being, being a little naive and, you know, just, just, I mean, I do think you have, have to have confidence that where is the confidence come from? I think my parents were good about telling me to believe in myself and do things and that's always helpful. So there has to be someone along the way that, that taught you that. But, you know, you just got to go for it sometimes.

Yeah, no, I, I, I love that I would say the same thing about my parents. I mean, whatever ridiculous idea I came up with, they're like, okay, good, try it out. I mean it, you know, it wasn't this, no, you can't do this. Right. So it's, it's, you have to have that kind of yes mentality. So.

Right.

Well, Alex, this has been a tremendous amount of fun. Appreciate it. I really enjoy the, the time I'm getting to know you over the years. It was so exciting to see a deal kind of from start to finish on Inception and see what you've been able to do there on, on such short time. So I know there'll be many more to come. So thank you again for joining us.

Thank you for having me and the feeling is mutual and I look forward to future deals.

Perfect. Well, this is your host, James Nelson. Thank you as always for joining. If you have not done so already, please do connect. I'm at James Nelson NYC. Very active on LinkedIn, Instagram, Twitter. Check out the site james nelson.com if you have not already where you can find the show notes to this podcast. Of course you can find the book you can order as well as helpful videos to give you the inside edge to real estate investing. So until next week, thank you.

Thanks. 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 and 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.