Creating Alpha with Brian Ker and Scott Sambade

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

Welcome to episode number 223 of the Insider's Edge to Real Estate Investing. This is your host, James Nelson. I'm principal and head of US Investment Sales, Avis Young. First ever. We have Brian Kerr and Scott Sambade in the studio today from Snowball. I've done a lot of one on one interviews. It's been a while since we've had two guest partners on the show at the same time. It's a lot of fun. I've known both Brian and Scott for several years and we're going to get into it in the intro on how I met them or at least have have come to get to know them through uli. But you're gonna learn today about generating outsized value by investing in underappreciated properties. In this episode, Brian, president of Snowball Development. Scott is the head of capital markets. The company was created to acquire underutilized and underinvested properties in the greater New York City urbanized region. With the opportunity for immediate renovations and long term development potential. They found a really great niche for industrial not just in northern New Jersey, but have found some great pockets in Connecticut. So they're going to talk about that. We're also going to talk about their involvement with the Urban Land Institute. I'll be in Denver for their buy annual meetings. It's an incredible organization. For those of you who are listening, even students, they have student memberships, they have mentorships. For those of you who are more veteran incredible product councils to exchange ideas what you're seeing across the country in different asset classes. So Brian and Scott will walk us through how Snowball Finances deals communicates with more than 100 investors. They're going to talk about kind of the difference of friends and family versus institutional capital partners. And as always you can connect with Brian and Scott. You'll find their information on james nelson.com and in the show notes. We have a brief word from our sponsor and we'll get right into our interview with Brian and Scott.

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Hi everyone. So we have a real treat for you. For the first time ever in the Avis and Young 535th Avenue studio here we have two guests with us. Back with us, Brian Kerr, who is founder and president of Snowball, back on the podcast for a second time, and Scott Sampad, who recently joined as head of Capital markets for Snowball. So I realize in the intro I will have given you the proper formal introduction, but Brian, I actually liked your bio that you just recently gave me. So how would you describe your position?

So I'm a recovering investment sales broker of 15 years from Montreal, which was a hard place to attract capital. And then I survived three years of the de Blasio's administration working on the real estate transaction services team of the New York City Economic Development Corporation. And then we rock the lead. Decided to found Snowball in the peak of COVID but decided that we would make a go of it at that point with ZIRP providing a little ammunition and relatively easy fundraising. And we're now 14 acquisitions into this program, one disposition and so far the thesis is proving out to be correct and my wife fully regret the decision I took.

There you go. So that's a great intro and got to love the fact that we have a Canadian who is serving doing good for New York City. So we appreciate that. And Scott, for those who have not don't know who Snowball is, maybe you could just give a little overview of what the platform actually is.

Sure. So Brian started the company with a very singular focus and that focus was to find the smallest piece of financable real estate, in other words, the physical box, the building with the most amount of land. That's taken a couple of different forms, but I think if you look at each transaction that's been purchased, and I've been advising the company pretty close to when it was formed, joining obviously last summer. But his vision in terms of identifying submarkets in New Jersey, submarkets in Connecticut, where there's high demand, where people want to live, where there's a need for goods and services, where there's a need for tenants to be able to meet those demand for goods and services, that's really been the fundamental, you know, precept of Snowball it's not. Is it a 30 foot box, is it a 12 foot high box, Is it square, is it rectangle? Where does it sort of fit? And the function I think ends up being defined by the tenant. And I don't know if you want to add to that at all.

No, I, I mean every tenant. And so we buy fully leased assets. For the most part they've selected this location because it met their needs at a particular point. In some cases they'll grow it, some cases they might need to shrink from it. And that where that can be where some of the opportunity comes from. But all real estate provides some level of value to a tenant. And then it's our role as an active developer to try to figure out how to improve that real estate and not just the building, but every square inch of physical property, the land area. And then thinking all around how we can improve the value of that property for the tenant, ultimately for our investors, and then also for the community. And if you're able to do and service all three constituencies really well, ultimately as the sponsor and the manager, we do well.

Yeah. I love the mission statement on your website and although I couldn't recite it, I could paraphrase but you know, finding these growth markets, these opportunities and letting that snowball pick up momentum and it's been really exciting because I've been tracking, well, we've both known each other a long time, but watching since the inception of Snowball and you know, sure initially you were making some moves into Northern New Jersey, which is kind of a more, let's call it a traditional industrial market. But that pocket that you found in Connecticut and that thesis, and I want to get into that, on why you've been buying in Connecticut, before we get there, I think we do need to establish how the three of us, what we all have in common. So what is the, the organization that has brought us all together? Well, and it's not the love of American hockey, I take it, Brian?

Canadian hockey. Thank you. It is our game. But the Urban Land Institute was a group that I looked to when I came down to New York City from Montreal. We didn't really have ULI in Montreal. There's a Quebec version of it, of course, called the Urban Development Institute, because Quebec has to be different as a distinct society. And the ULI provided a platform for me to network. And so I got involved in ULI through the Ms. Red Columbia program, went to the fall conference in la, realized there was a really interesting mentorship program and I reached out to LOA Bellini, who Scott was partners with and was a former client of mine in Montreal. We had. I bought and or advised both their acquisition and disposition of properties in Montreal. I said, I'm new to New York, but I'm not new to the industry. Where do I fit in? Am I a mentor or am I a mentee at this stage of my career? And Loa and Scott got together and said, actually, someone, a mentor, relatively senior mentor, has just become liberated, and this is a great opportunity for you to slide in. And when Loa told me it was James and it was you, I absolutely said, like, this is the perfect opportunity to get, you know, a quick pathway to senior leadership in New York City and to get the introduction. So this business is always going to be about relationships, about trusted relationships. And I'm sure you trusted Scott and Loa to find the right person for you and vice versa.

Yeah. Well, this is clearly what is it in the scene of the Karate Kid, where the student becomes the teacher. So it's. I want to get back to our early interactions, our coffees, when I was mentoring you, but, Scott, talk a little bit more about ULI in general, the mentorship program, because we have a lot of listeners. Many of them are college students. Some are grad students. Some are professionals in their career. I'm going to be going out to Denver in a week or two for their, you know, semiannual conference. But for someone who's looking to plug in, maybe just tell them what ULI is and what would be ways to onboard and get involved.

Sure. So the Urban Land Institute probably has somewhere between 50 and 70,000 members worldwide. I don't know the numbers stateside, but it's really based upon, you know, three concepts. One is smart growth to urban planning. The second is a high degree of professionalism. The third is a high level of integrity. In order to become a full member of uli, you actually have to have two or three people sponsor you. And if there are bad actors who attempt to gain access to the organization, that tends to be discouraged. Not. Not entirely cut out, but it tends to be discouraged. What I think listeners can do to get more engaged is every city across the country has local chapters as they are. So New York has one, San Francisco, Dallas, all the markets in the southeast. Chicago, as an example. If you reach out to any of the members of the local chapters, they are geared to welcome you. They're geared to engage you. There are local events. There are national events. There are more resources inside ULI that both we at the mentor program in New York, made available to everyone across the country. But ULI is. It's the highest level of professionalism I've ever seen from anyone. Every major investor is a member. Every major lender is in the. Is a member. Every major developer is as a member. And so for me, I got lucky. It was the late 90s, and a couple of people had approached me and said, hey, why don't you join this organization and why don't you become a mentor? We'd love to have you get involved. And that was 98, and we're now in 2025. So it literally is the single best decision that I ever made by accident. And I'll give a shout out if he ever hears this to Justin Toll, because he's now based in Florida. He was in New York at the time. And Justin was the reason I originally became a mentor and originally got involved with uli.

Yeah, I remember. Thank you for all your service and, you know, running that mentorship program. I mean, this isn't just pairing a couple people. I mean, they were 10 years.

Lola and I did that in the last five or six. We brought on a lot of other people because it just became too much. Yeah, but it did not happen without community. It did not happen without people like Brian reaching out to Lola, people that we reached out to at the edc, people that we reached out to in New York, Community government. I mean, that's the one key facet that I think ULI brings, that sense of community. You know, when Brian talks about what Snowball does as investors, it's here's our tenants, here's our stakeholders, but what are we really doing in the community?

That. That.

That's lip service for a lot of folks. It's actually something that, you know, ULI really believes in and something that Brian really believes in.

Yeah, it's really a group of incredible people are willing to share ideas and again, that sense of community. And kind of the pinnacle is. And what happens at these biannual events is that you have, you know, product councils that get together and talk about, you know, issues, trends, and you see kind of live in person, how one city is kind of learning from others and developers sharing information, which sometimes can be a little contrary in our business. So. But great programming that you ran. And thank you for the introduction, of course, to Brian. And look, I get approached all the time, James, I'd love to get into investing. Give me some advice. And so we're talking about your plan. And at that point, you were at the EDC and you Said, look, I've spent some time doing brokerage. I've got an investment thesis. I'm going to go buy some buildings. And I'm thinking, okay, this is great, and of course, rooting for you. But I mean, to give you the biggest compliment, I mean, the way that you built this platform and the way you've been able to scale that, I mean, sometimes we have guests on the show and it's great, they've acquired 14 properties, but it's over the course of, you know, 14 years or decades. I mean, Snowball again has been in existence for how long now?

Three and a half years?

Yeah, three and a half years. And folks, not the easiest time to be acquiring real estate. I mean, we, you know, out of the, you know, on the heels of COVID and then interest rates spiking, I mean, there's been a lot of volatility. We know the deal volume has been way down. And yet you have been able to find, you know, great opportunities to reposition. So I guess. And by the way, I want to remind the audience again, you know, listen to the first interview I did with Brian for kind of the precursor to this. But, you know, Brian, again, this vision that you had for Snowball, when you started this, were you thinking, okay, I'm going to just opportunistically try to do a deal and, you know, try to, you know, match some investors, because it really feels like to me that you had a bigger vision on, you know, you were starting small, but thinking institutionally, is that right?

Well, when you are trained by I'll name drop, and I don't try to do this too often, but by Peter Sense, who is the, you know, the most important broker in Canada for commercial real estate. And his disciples are people like Michael Turner, who trained me. And you have an institutional background, but you're still operating in the private sector of commercial real estate, where the majority of the people you interact with are family offices, entrepreneurs, syndicators, sponsors. And so I've always said that you want to end up being hybrid in that you have to have the mindset of a private operator, but you have to have the institutional capabilities to walk into an investment committee, to walk into a boardroom, speak their language. I used to say I would go down to Toronto and speak Toronto because it was very different than what we would do up in Montreal and operate in that environment seamlessly, as if you were having drinks in Montreal with a leasing broker to talk about what's happening on the ground at those properties. And so that's the Capability of snowball is that we can be a lot of things when we need to be those things. And yes, the idea was that we would smart with a series of small deals that are really just private capital oriented deals. But we would make mistakes, deliberately, erroneously make mistakes on our modeling assumptions, our capex assumptions, our land use entitlement assumptions. But by making a series of small mistakes, we would learn. And by learning we could then decide that we could take on greater risk. Or you'd realize that you need other pieces in your company that had better experience than you and figure out what I'm good at, what I'm not good at. And so it's been a learning process to grow. And you know, the first five to six assets, it was relatively easy to raise capital in 2022. There was a lot of money that was flowing around. It was very easy also to do the wrong deals. And so I think the one thing that helped us a lot was our discipline to not reach. There were a number of times that we were invited to a third round, best and final, by a broker. And on those interviews we were asked to raise our price by an extra 3 or 4%, which I outright rejected on the call and you know, probably didn't help me. But that discipline is also why we're not offside on any of the transactions we've done so far. And by preservation of capital and the learning process, we've now been able to take on much larger, you know, quasi institutional to institutional transactions. And that's ultimately where the growth of the business will be. But you know, James, if you had a great $10 million deal in Westchester county that hit our thesis to a T and we were only going to raise three and a half million dollars of private capital, I can't walk down 40, you know, Fifth Avenue and go to any of the repi shops and see who's going to fund me. That's going to go right back to our institutional or non institutional capital sources. And there's 140 investors on our platform right now that support our vision. And you know, they're not always going to be ready to invest, but when they are ready, we're willing to put a deal on the platform and we end up closing.

Well, full disclosure, I'm one of those 140 investors in a couple of the snowball deals. And you know, I've invested over the years in thousand two dozens of LP positions. And to once again give you a big compliment, the reporting, even if this is, you know, typically friends and family, it's kind of a different level of reporting. Everything that you all do is really institutional in nature and really appreciate the amount that frankly you over communicate, you know, sometimes, you know, on these deals you make an investment and then hopefully you hear back in two or three years if it worked out. And I think for those listening, especially those starting out raising capital, you know, you mentioned, you know, the problems along the way. Yes, there was success, but you all have always been very ahead of the curve when there's an issue to, to make the investors aware. This is, you know, this is the situation, this is how we're going to address it. And I think, you know, as an investor, I know that you're looking out for us and that, you know, I don't get a phone call one day, hey, you know, sorry, but we're out of the money on this. You know, the lender's taking back the key. So. But Scott, I want to talk about, you know, your story and kind of what brought you to Snowball in a full time capacity. I mean you've, and maybe for our audience, give them a little background on your story because you have touched almost every single asset class. Right. So certainly industrial, but you know, multifamily, senior housing, life sciences. So, you know, maybe a little bit more of a background on kind of your story and then the decision to, to work now with Brian in a formal capacity. Snowball.

Sure. So for a variety of reasons, my career has taken lots of different paths. I was supposed to actually fly for the Navy.

I did not know that.

Yeah, I used to wear my hair kind of high and tight. Okay. I didn't go through rotc, but there was a program called avroc, which is Aviation Officer Resort Candidate School.

Okay.

And my year after graduation, I was on my way to get my private pilot's license, which was in Atwater, California, which is not too far from Merced. And I ended up getting into a car accident. And so my family had been in real estate. I had been around my parents, who in the late 70s, early 80s had invested in subdivisions on Cape Cod when interest rates were high, teens, low 20s. I had some cousins who were in the construction business. I don't even think I've told you this. They were crazy Canucks. They were from Nova Scotia. And at 15, 16, I was swinging a hammer and a nail. So I'd always been around real estate. And so I decided I was going to be a student because those interest rates and a lot of those decisions in my own family, I mean, they lost a lot of money they just. My dad had a trucking company at one point to sort of bring his career back, but it just didn't happen. And so I got a degree in English literature with a minor in computer science. And I understood real estate, so I did real estate appraisal work. I did real estate consulting. I sort of came into New York 93 in Deloitte. This was at the time when Prudential the Priest accounts were under a tremendous amount of scrutiny because Jorgensen had said priests overstating their values. And listen, they were private real estate accounts. They weren't being marked to market on a quarterly basis. And so fast forward to a couple of investment banking positions. Fast forward to me sort of doing my own developments. What. What I sort of have taken the path on is growing real estate companies. And I helped a company called Maplewood Senior Living grow until my friend passed away a few years ago, Greg Smith. I helped a company called Titanium. Diego Hodaro is very successful in Jersey city. Helped get 750 units done with him there. And look for me, 2022, 2021, 2022, that was sort of a turning point. I was trying to figure out, you know, what to do.

And.

And full disclosure, I work probably five, six days a week, 16 plus hours a day. And half of that time is to Snowball. The other half is to a developer who does ground up residential. So the two capital groups that are investing right now, and when I say capital groups that are investing, I mean institutions that want to put money into residential and industrial. And it's been, I think, a lot of benefit for Snowball. And what attracted me is I failed during COVID personally. I lost three or four deals. My life turned upside down for a little bit and had to bounce back. And as a result of that, I've been very focused on people that have a clear vision, people that have integrity, and, you know, two asset classes that I felt, you know, were very successful. Brian came through the program. I knew him a little bit. And for a period of about three years, I saw how the company grew. And I had the ability and the wherewithal. I mean, we actually sat and had lunch. We made a deal in an hour. And what people know is that Snowball's bought 840,000ft in Hartford. What a couple people know, because we talked about it a little bit when I was at La Grasse's asset management committee, is it didn't happen with two deals. It happened with three different deals that Brian had the vision for and that we were able to work with sellers, work with capital. And it was not easy in any way, shape or form. And one of the things that Brian and I were talking about is, and we constantly talk about is how do you get the attention of people to focus on data. And we did a white paper that our investors see that talks about Connecticut, and we did a white paper that our investors see that talks about New Jersey. These are things that if you painted New Jersey with a broad brush, everyone would say, oh, there's too much supply in Jersey. Well, the new product does have too much supply. And he makes a funny quote that we give him a hard time. Exit 8 is where promotes go to die. I think that was on point.

But.

It'S part of that. And you know, Connecticut, on the other hand, has been a 20 year success story, but there are a lot of investors who got burned. But I want to turn it back over to Brian to talk specifically about sort of his vision in kinetic. But what brought me there simply was somebody who had both the drive and the ability to garner attention, who had an institutional focus, but an entrepreneurial mentality and an ability to raise money. Of the $60 million that has been deployed by Snowball, only about 17 or 18 of it has been institutional. Everything else has been because of this man. To my left, having a great network in Canada, having a great network of people. I mean, I think I had one or two people that came in and believe me, that's the toughest thing to do is to raise money from people. You've even turned me down. And that's okay, right? Because that's, you have to have the infrastructure, you have to have the right approach. And that's sort of what brought me.

But, well, and it also, and I want to let Brian answer that, that, that question. But you know, it can also be about timing, right? When it's, when it's right when you're hitting the investor and you don't know what's going on on their side. So it might be they love the deal, but it's not the right time. So to have that stable of 140 investors, I mean, that, that's really. And growing. But Scott, I, first of all, I want to thank you for sharing. I mean, oftentimes, you know, on shows like these, people want to just share, you know, the highlight reel, right? But you know, appreciate you're talking about some, you know, the challenges and look, I mean, for me as a broker, you know, thinking back to the Great Financial Crisis 2009, and guess what, even, you know, there was a point in 2023 where the transaction volume almost dropped in New York to the levels back to 2009. Right. And clearly huge drop off in. When you're a broker, as Brian knows all too well, I mean, you're paid on transactions, so there's not deals. So, you know, but what's the answer to that? And look, hard work can make up for a lot of these things. And I'm sure you'll, you're well on your way to, you know, getting back clearly in the zone where you don't have to work the 16 hours every day. But you know, that can certainly help get people back on track.

I like it.

We'd be bored otherwise. Right.

And you schedule other things around. I schedule time with my kids, I see my kids on the weekends. And I think it's important that if you believe in something and you run a process, and that's what I think one of Brian's greatest strength is it's the vision, number one, because I don't have his vision.

Right.

But it's also, it's the commitment to the process. And I think every single person who has sort of come into Snowball, you know, we each sort of bring something different to the table, that commitment to the process.

But so Brian, I want to. Because that's a really interesting statistic that Scott just gave about the capital. So you've raised 60 million and only 17 million has been institutional. So is, you know, I don't think you're giving up on your, you know, friends and family network. I mean, quite the opposite. Sometimes you see sponsors, as they grow their business, they become, you know, part of that gp and then you're going out raising institutional capital. But I mean, thinking how far Snowball has come in three and a half years, I want to ask you, where do you see yourself in the next five or ten years, another three and a half years? Are you doing hundred million dollar deals? Does that percentage of institutional investors grow?

It's tough to understand where the true alpha is in a $100 million deal. And my big criticism of institutional investors is that they're often following beta trends, whether it's quality in locations that have over the last two or three years experienced strong leasing fundamentals. And then they can jump into that and they're a part of the herd. Or through 22 and 23 into 24, they've been chasing distress and thinking that they need to buy blood in the streets. These are common threads you hear, and they're not necessarily trying to follow the operator who's really figuring out a way to create alpha through looking through the front view windshield around the data that's right in front of them. And so that's been our biggest challenge for attracting institutional capital.

Right.

It's not that we're zigging where they're not zagging, they're just 100% focused on how they can raise their money and how they're going to deploy it. And we're just looking for what we think are the best deals to do and where we think that opportunity for us to maximize our return ultimately is.

So said another way, you know, if to attract institutional capital, you have to go with the herd, so you're kind of, you're buying the deal that's kind of right down the fairway. I think what you're saying is to find those more opportunistic opportunities, you know, even if you could attract the capital, then is there an exit? Right. So is that kind of why you always have to swim with the stream if you're trying to appeal to the institutions?

You could, but I mean, there's many types of exits, right? There's many types of exits. Our first exit so far was selling to a user that created almost a 3x for our investors.

Right? So, but meanwhile, is there a play where you've got this portfolio and there is a thesis clearly that you've stuck with? I mean, couldn't. And we have actually made some of these introductions where an institutional investor comes in and says, look, I really love what you're doing. Can we recap the whole thing? I mean, is there a way to take smaller assets, put it together as a package and then get. Because usually the deal size is usually the first challenge with these institutions where, hey, if I can't write a $20 million equity check, it's not even worth my time. So is there a play here with what you're growing, that this could ultimately be a recap, or could an institution have appetite for a portfolio?

We definitely see our portfolio, which is across the tri State, but more or less huddled around a couple clusters. Northern New Jersey along the I80 into Connecticut with clusters in the Waterbury kind of Route 8 corridor plus Hartford, couple sprinkled assets where we haven't been able to cluster up. Danbury, Norwich, we haven't been able to find anything that really fit yet on the shoreline. Is there an opportunity for us to sell or recapitalize sub portfolios where people, you know, do realize that there is some economies of scale and they'll overlook the individual imperfections of the assets because again, we're a building type agnostic buyer. It has to fit our metrics of what is a good deal, rather than us trying to figure out what the future institutional investor wants to buy from us. Again, I'm not trying to play their game. What we think ultimately is investors will come to our game. And there's an element where we're starting to hear a lot of the iOS groups, the larger ones are realizing that the collateral that they've picked up, which is a gravel field beside a highway.

Yeah. Define iOS. Just for those who don't know what that is.

Industrial outdoor storage, which could be a paved or non paved land, which is.

Really hot for institutions. They love it. You could say it's even a covered land play. You've got income on it. Maybe one day there's a reason.

It's also never been down, cycle tested.

Right. And you've got to be patient. It's long term bets. Right. It's a long value.

There's not a lot of leverage right now that banks are willing to offer. Offer it. But what we're starting to hear from some of these iOS groups is that they're looking for more building collateral to go with their iOS play. And that's our game.

Yeah.

So we'll see if ultimately the market comes to us. But from my perspective, in our private capital perspective, income is income. And what we're trying to do is generate the maximum income on our properties that, well, exceeds the income that we had when we bought it. And you know, I mean, I'd love to hand Amazon as a tenant, but their dollars are the same dollars as, you know, trucking company xy in terms of the dollars that show up on my bank account.

Right. It's not credit might be a little.

Better, but the credit doesn't give me a 1.4x more dollar. You know, it's the same dollar that shows up in our bank account. It's the same dollars I pay my lender. It's the same cash distributions I'm going to send to my investors. So I love the credit story when you end that wants to pay you the most. But sometimes the juice isn't worth the squeeze with the tenants who want to pay the most because they won't pay you. I'll give you an example. Walgreens, they love doing sale leasebacks. They've only ever offered 1.75% rent bumps.

Right.

Why would I sign up for that?

Right, Right. So, Scott, your role as head of capital markets, just for the audience, what does that entail, you know, how are you looking to optimize this, you know, the current portfolio? How are you thinking about capitalizing deals moving forward?

So I was telling a friend of mine that the last, I would say, three or four days, in my mind, are the most economically unproductive days I've had probably since I've joined, you know, Snowball, as well as, you know, some of the other work that I do. I think that there's really two things that happen on a regular basis. And, you know, we have two of these and one of these for a reason. And so I think you have to listen to what people are saying and sort of figure out what that means in application. And let me give you an example. I hear capital markets people who are either on the equity side or even lenders say all the time, well, we don't think that box is functional, or we don't like this, or we don't like that. What Snowball does is they focus on areas where, you know, tenants have picked this location, they've picked, you know, people that want to be around this location. IT services, you know, all the things that are necessary for that business. And in some cases, that might be a building that's 14 foot clear. In some cases that could be a building that's, you know, 20 foot clear. In some cases that could be a building that's 30 foot clear.

And I don't want to stop you because I know you're on a roll, but how do you actually do that, Brian? Because is this like data analytics or is it just talking to brokers and finding tenants in the market? Because that's, you know, you're getting really specific. So how do you figure that out?

Well, so we're always, you know, our first underwriting criteria in any transaction is do we like the dirt, the size, the shape, the configuration, the accessibility, the price of the dirt? And if we can't get over that, then it's a pass for us, the box on top. But the tenant already is in the box on the dirt. So the question is, what's the price they're paying as terms of rent? Is that market? And if it's not market, why? Is it because the previous owner was passive living in Florida, not managing the property, delegating all responsibility to manage the property back to the tenants, and was prepared to take less in exchange for less management of responsibilities? James, you know, this drill down in the, you know, West Village or Chelsea, a number of these people are happy to have no responsibility, but to, you know, know that they're going to have sticky tenants. So as an active manager of real estate, we have to figure out, okay, where can we move rents to? How much do we need to improve the property? How much do we need to make the building more functional so that we can demand a market rent and move that rent to market or beyond market in some cases, and push the market in a certain direction. And so these opportunities are everywhere in commercial real estate. There's no lack of owners who are families intergenerational, who are finally ready to pack it up and sell, or users who don't manage their real estate like a professional investor would. And so for us, it's ultimately trying to unearth these opportunities. And that's where an operator's alpha can come into play.

So Scott, back to you on the capitalization of this, because there might great deal for you might be a deal that has that upside where it's a legacy tenant, they've got two or three years left in their lease, and you believe the rent's half of market. Okay, that's great. From an upside story, you know, is the bank going to give you credit for that? I mean, how do you start to think about how you're going to finance that, how you're going to structure the capital stack? Sure.

Early in my career, I had the fortune to be outside of the room where I heard Mr. Schneider, I never called him Irving, it was Mr. Schneider. And he talked about Harry Helmsley and he said that he never bought something that at the time he didn't overpay for. And what that's communicated to me throughout my career, when I talk to capital, whether it's debt or equity capital, for me it comes down to the basis. The money that I have made successfully in real estate has always been whether it's apartments, whether it's industrial, whether it's across all the asset classes, it comes down to basis. And the specifics that Brian talked about are things that we're able to go into in our portfolio. And as an example, talk to them about. So 1640, John Fitch, 1640, John Fitch had a tenant for two thirds of the space that had a market level reset. Snowball had intel inside and several buyers and several capital sources that were supporting buyers who competed. The Snowball all said, gosh, you know, in spite of the market, we should have stretched on that a little bit. You guys did a great job and you're going to do really well. We underwrote a rent in the low sevens and we executed a rent up the street at almost $9 a foot because of what Brian did and because of our process.

So that helps that you have, I mean, once you start growing this portfolio, clearly you have more data because you know, you're seeing the, there's a level.

There'S a level of an uneven playing field. And so we compete against that. When we go into markets that we're less familiar with, we don't go on and take the riskiest deal that's got the near term problems we have to solve. What we're going to do is we're going to go in. Our first acquisitions in Hartford were corpus deals or sale leaseback with 10 years of termination where we structured the deal well and allowed us to tiptoe into the market, get to know the brokers, get to know the landscape, poke around a little, plant a flag. And then once a more riskier opportunity came around that we felt comfortable taking, that's when we take the plunge. So it's always going to be incremental. As I said, you know, we try to make little mistakes so that we can avoid a big mistake.

Data, that lease that I talked about, we did not have that signed when we both posted non refundable money with an institutional capital partner or when we closed with said institutional capital partner. We only signed that lease last week.

Two weeks ago.

Two weeks ago. So being able to present data. So I challenge anyone who is listening to this podcast to the following question and I'll ask James this. Do you think it's possible to change anyone's mind?

Depends.

Psychologically speaking, it is impossible to change someone's mind. What you can do is you can present them different data on which they can make a different decision. He hears me say this.

I like that answer. That's the way that I would think that someone would change their mind. But you're right, it's on a new fact set. Because if, unless. If it's the same.

Correct? Yeah, correct. And that's, that's something my entire career I have always focused on. It's what's the data say? What's, where are you getting the data? I have this argument about COSTAR all the time. And it's more on the multifamily side and sometimes on the commercial side and even Hartford on the costar. Not to pick on costar because overall it's a great service. But you have to dig into the information that's on the surface. You have to be able to have the conversations with brokers. AI is the most powerful tool in our business right now and it's fundamentally changing the way we are considering data. But what it lacks and what it will continue to lack is the ability to talk to a James Nelson, to talk to the top leasing broker in Hartford or two people, because it's a much smaller universe and be able to understand what's going on kind of at that level or sort of understand because, you know, I live in Connecticut, right. That gives me a different perspective on things that happen in Connecticut because I talk to lots of people who are in Connecticut, different heads of towns, zoning councils, different heads of economic development. And I'm sort of there, just like when I lived in New York City and you live in New York City, we sort of pay attention to the places that we live. And so getting back to your original question, which is how does that affect my day to day? My day is spent thinking about both where we're going, what data we have to present in order to re engage with people who institutions are just like people, James. You don't necessarily catch them on the right time. They may be involved with two or three transactions where you and if it's a small family office with just one or two people, you may be out. But it's that continual process of going back to people and saying, hey, by the way, here's sort of what we're doing. I mean, we're going back this afternoon and looking at the Snowball quarterly newsletter and something which you as an investor have seen. And it's going to talk about, you know, trends that we're sort of seeing. And it's going to talk about where we sort of think the opportunities are. But it's that maniacal attention to detail that allows me to do my job. If I didn't have that in either of the platforms that I work with, I would be just another person making a phone call. When you show up and talk to people with data that is well thought out, they may not necessarily say yes, but they'll respect where you come from. And if you talk to them enough and if you engage them enough. You talk about this in your podcast. So does Bob Nackle and his podcast. Those sellers who you've given market data to for seven, eight years that finally say, this is the expert who I want to represent? Well, that's what we're hoping comes back to Snowball. I don't know if you want to add anything.

Well, Scott, first of all, I've got to say I'm smiling because, you know, what you're saying could be the forward to the next edition of my book because this is really the premise in why I love real estate investing because it's still an inefficient marketplace without everybody doesn't have the same data. This isn't like investing in the stock market where I always figure I'm the last person to know. But there's all the data exists and here and believe me, it's not costar's fault. I close a transaction within 30 seconds. I get a call from my friendly costar rep saying congratulations on the sale. Can you provide us the information? They have a human being and maybe one day it'll be an AI following up, asking the questions. But look, I'm telling you, I've been doing brokerage for 25 plus years and Brian, I'm sure you remember this most, maybe not most, a good portion of brokers out there are still the old school where what my knowledge is my competitive advantage and I'm not going to share it, right? So you know, we're happy to you know, share our sales comparables and market knowledge because we want to get it out there. We have that abundance mindset. But that's not always the case because the point is that, and this goes to you know, your AI query, you know, what's that doing? That's just searching what's available out in public information on the web. And so much of this is not published anywhere. And that's why this is still very much an in person business. It's a business about the relationships and getting that insider's edge. What that really means is having that competitive advantage that you're talking about and.

Your expanded network too, James. I mean you've done a fantastic job of reaching out to people and giving to getting. Brian does the same thing. We have Snowball has spies everywhere, right? Because we provide information and it's the trust and the care that you use that information with. I think that's very important that anybody listening that is how you are ultimately judged in this business. People may not like you, but if they respect you and you try to do right and you respect that confidentiality and you respect that information flow, you will get people that come to you and say hey, I saw you did this, we did this and couldn't quite figure this out, that that creates opportunity.

What do you think Brian?

I mean you nailed it. This is a business of asymmetrical information. When I was a broker, the most invaluable comp to me was the one that was firm but had yet not closed. The second most valuable comp to me was the One that was under contract and was about to go firm. The least important comps to me were the ones that had already closed because that was three to six month old data.

Yeah, I want everybody who's listening to this, I want you to go do the playback and listen to what Brian just said. Because I, we've done, you know, 250 episodes. I don't know if anyone has ever made that exact point. So I mean, and I couldn't agree with you more. Whenever we do our sales reports and yeah, we want to give, let's talk about what happened in the first quarter, let's aggregate those sales. It's where we capture everything. But let's face it, a sales report that I put out in April for the first quarter contains deals that closed as early as January that probably were negotiated three to six months before in a total different interest rate environment. So the only thing I would say is that when we do look at some of these comparables, one thing that I've now been doing is saying, okay, where was the 10 year treasury when that deal was done? If it's a cap rate deal? And maybe that doesn't, you know, there's so much more that's happening. But you know, what you're talking about is real time data now. I guess for now you're plugged in, you're talking to brokers, you spent the time, you both, you know, have great relationships. But someone's listening to this right now saying, okay, that's great, Brian, but I want to go into a new market where I don't know anyone. Like how do I, does it just take time? Is that the answer? Like how do you get that information?

I think the easiest thing when you go into a market is you try to be as transparent as possible with the brokers. You say, here's what I'm looking for and really define your box. Don't just say, hey, I'm looking for a good deal.

Right?

Because that's giving the broker nothing. And the broker already has. They're five to 10 buyers on their speed dial who they've had 20 or 30 years of relationship building established and trust established that they're going to go to for something that's a good deal. So you're probably going to go in and you're going to buy potentially a marginally good deal to plant a flag. Understanding that your returns won't be the best returns of all time, but at least you're now penetrating into a marketplace and allowing yourself to start getting at the forefront of the Data that's transpiring in the market. Amazon yesterday announced that they bought 20 million square feet of land in Enfield, north of Hartford, pretty close to the Massachusetts border. We knew about that deal four months ago because we talked to the brokers representing the seller and the buyer. Amazon also has been in the news trying to buy land to acquire a 3 million square foot facility in Waterbury. And it's been going through a series of land use actions for the past two and a half years, tracking that maniacally because that is a massive catalyst to a submarket in Waterbury that is less than 30 million square feet. We're talking about 10% of the inventory will be added in one development project. So if you're not paying attention as a buyer trying to come into a market to understand what will be the major drivers of employment, land use, ancillary service operations to those catalyst situations, I feel like you're trying again, you're trying to play beta plays as opposed to trying to play alpha.

So I love that. And certainly, you know, in the book I talk about one of the first things I observed early on my career was the rezoning of 6th Avenue in Chelsea, where almost overnight that quarter went from flea markets to 30 story apartment buildings. And what I say in the book is, look, even if you're not planning on building, you know, a 30 story apartment building, if you happen to be one of those little taxpayers, you know, three story mixed use buildings, guess what? Your neighborhood just got a whole lot better, right? So, you know, I think, you know, having that information, that inside information, right, to go and make that thesis. Now, of course, the flip side of that is what happens if, you know, you're buying something because of a, you know, what you hope will be, you know, a major acquisition or infrastructure, you know, change, and then it, it doesn't happen or it gets postponed. So it's like timing, Scott, something that you think about when you're doing these deals and how much of that, you know, do you rely on?

So I have to be very careful with what I'm about to say because it could end up in a discussion about tariffs, which I don't want to get into. But I, for the majority of my adult life have really listened to one investor as it relates to timing. This guy named Warren Buffett, you may have heard of him, and he says a couple of things. One is you can buy at every point in the cycle if you invest in good companies with good people. And I have tried to apply that to real estate. And I think Brian will say it in a slightly different way in that, you know, we're a shop that's sort of set up to buy, sell, refinance and sort of, you know, grow. But I think that the timing is important. Important if you can find moments where you either have the conviction or you have better data that allows you to make a bet that in time others will see. And that's. That, I think is a little bit about where we are. But I don't want to steal your thunder because I know you have, I think.

Let's talk about a specific example of that, which was In November of 22, we were under contract to buy a building in South Windsor. It was going to have a short term remaining leaseback on it. So there was risk that the tenant could vacate, but they were fully occupying it. And the capital markets in the fourth quarter of 2022 were going berserk. The Federal Reserve was raising the SOFR Federal reserve rate at 75 basis point increments. Every meeting beyond anyone's models. No one understood quite how to deal with it. And deals were getting dropped left, right and center. And we love this real estate because it hit Snowball's thesis to a T. Functional warehouse could be improved, but functional. Fully leased with excess land and we were getting it at half of replacement cost. The tenant in place was a credit tenant. And we basically went to the broker and the sellers and said, well, we can either deal with this two ways. We can either get a bridge loan from a debt fund who's now going to charge us 225 basis points higher than we had projected when we bid on this in September, or you can provide seller financing to us. So you have a choice. Max proceeds, but deferred or less proceeds all. Now they wisely made the decision for maximum proceeds. We were able to close on the transaction. We've now renewed that tenant for an additional five years after they extended twice with us. So conviction through uncertainty. When you're looking at your real estate and you're following your thesis and then going back and trying to make a deal as opposed to running away.

Yeah, no, that. That makes. And it's so much in the spirit with how Snowball operates and again really focusing on the solution. So this has been an incredible conversation. It's been a lot of fun with the back and forth as well as we start to wrap. I do want to talk about this isn't a current events show because I want someone to be able to listen to this episode two years from now and get benefit from this. But needless to say, you know, we talked about, you know, the challenges in the capital markets. You know, the latest thing when we finally thought we were kind of back on track. We're going to have tariffs, not this that. I mean, look, you have a lot of Canadian investors right now. You know, the U.S. you know, might not be too popular with Canadians as an investment option. So how do you know when you have these macro events that are clearly, you know, beyond your control, you know, how do you maintain, you know, these investor relations? How do you know, continue to keep moving in uncertain times?

So being a former broker, you always have to stay positive and optimistic, no matter the circumstances. That's your job. Never like to say that you're lying for a living, but you certainly have to be optimistic for a living. And sometimes being optimistic is sometimes lying. And I was in Quebec, and Quebec would go through these throes of economic and ethnic nationalism. There would be a government brought in place who was separatist or would try to do things, or still do things to try to really appeal to a population group that felt deprived and, you know, deranged by, you know, the oligarchs of Toronto or whatever. So coming from Quebec and now seeing, you know, what Trump is doing under the current administration, I can go back to everyone who saw the Montreal story from, you know, 1995 to 2025 and say, despite all the hysteria, despite all the craziness, should you have bought small bay industrial by the airport, which would have been 40 bucks a foot and is now 250 a foot?

Yeah, yeah. Should you have to learn from, you know, from history. Right. This isn't the first time that we've ever seen uncertainty in our career.

You know, are you going to take massively wild swings where, yeah, you could be wrong? No. But go down the fairway of a safe bet that's well underwritten with someone you trust and go for it. That message is harder to deliver today because of people being apprehended at the border and strip searched. Yeah, there are some examples that are happening within this government and administration that are particularly concerning to any Canadian or foreign investor right now. But ultimately, the approval ratings are also demonstrating that this behavior will not be tolerated for long. And so I'm confident that the American people will ensure that rights of individuals are protected, and that includes property rights.

Yeah. And look, Canada has been an incredible partner to the U.S. certainly been one of the largest investors in U.S. real estate when we think of other global capital. But, Scott, to close this out I'm feeling like you may very well channel Warren Buffett. Right. Because in times of uncertainty and from the broker's perspective, what happens is you get a huge drop in transactions because what do people do? Nothing. You know, sellers move to the sidelines and say, well, I'm not going to sell into this thing. And buyers say, oh, well, there's distress. Let me wait. There's going to be better opportunities to come. So, you know, the idea of continuing to transact and act even amidst a lot of uncertainty, what would you say to that?

I think that a focused and well balanced team looking at facts and having data to support their decisions, if you capitalize yourself properly and you allow for contingencies, I think you're always going to be successful. I think if you have shorter term outcomes without the ability to pivot, you know, full stacks and prep equity only makes sense if you've got investors behind you that if they take a side turn or you take a side turn that you think ultimately is going to get you to a better place. Those are the bets and you have to pick who you're going to make those bets with. Because if you go to groups that are focused on, you know, loan to own, or if they're focused on, you know, being reactive, that's why you have to have a time that you've seen these investors act. What did they do in 08? What did they do in 2010? How did they behave? How did these institutions, you know, respond? And it's challenging anyone listening to this. If you follow the right process and you have the right people in place, the rest is going to sort itself out. You just have to have the conviction to actually make the bet.

And we're consistently testing the market, whether it's a refinance, whether it's a recapitalization, a disposition, opportunity, acquisitions. We're in the capital markets always with something. And because our portfolio has grown to a significant enough size, there is leasing data coming out of our portfolio that we can constantly tap into. So it's. That is the benefit of starting from a small position and getting ourselves to where we're at today. We're not done. I think, you know, being twice the size as we are today gets us an even greater depth without having, you know, put ourselves in a position where our tenants become numbers and they're not people.

So this is a great way to end. And you know, the current theme through this whole conversation has been about the people. We remember we started talking about ULI and the community and the network. We talked about how you gain the advantage on opportunities by having the knowledge, having the right connections in times of challenge, dealing with the right people. You know, it makes me think back to the first podcast that I ever did. I interviewed Bruce Ratner and I kept asking him, you know, how did you build 50 buildings? He kept talking about it was the people, it was my team. Rick Clark, by the way, was very similar in that he almost he didn't take any personal credit for building Brookfield, the largest global property owner in the world, founded in Canada. And yet when I went. So when I went back to look at Bruce's episode, he said the word people are teams 50 times in an hour long interview. I said, wow, that must be a pretty important thing when it comes to real estate. So you all listening? You are certainly a part of this community and we are so grateful that you joined us today. You know, the best thing you can do is you can share this episode. There was so much that was helpful, useful information. Again, make, you know, make this actionable in your practice, but also share it. That's the word to get the word out there. So as always, you can go to jamesnelson.com the site is not about me. I built this site right for you. That's where you can find the show notes. For this, you can figure out how to connect with Brian and Scott and learn more about Snowball. Lastly, you might want to follow Brian's last LinkedIn post. I think they're hiring. We didn't get a chance to get into that today. But a little tip for those of you who were listening, you know, following, you know, an hour into this interview, there, there might be a job opportunity there for you. So as always, until next week, thank you again for joining.

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