Episode 200! The Best Of The Insiders Edge To Real Estate Investing

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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 everyone to the 200th episode of the Insider's Edge to real Estate Investing. I'm your host as always, James Nelson, Principal and Head of Avis & Young's Tri State investment Sales Group here in New York City. And wow. Thank you. Doing the math in my head here. We have been going for at least four years strong or at least very close to it and what an incredible ride. I want to thank all of you. The feedback is really what has kept me going. Love when I see you all out at events or you reach out, whether you link in through LinkedIn or maybe you email or reach out and let me know what positive impact this show has had. It's so gratifying. I can tell you that I learn a tremendous amount from doing this show. So above all I am most thankful for our guests who take their time out of their day to help share the Insider's Edge. So again, you would think in this competitive world that we live in that most of the legendary investors out there, the successful ones, probably wouldn't want to share how they went about building their business. But I think we've proven pretty much the complete opposite. We're going to have a couple clips Some of my favorites and apologies in advance, we only have, I wish the show could go on for hours and hours, but we're only going to have five different clips from some speakers who have come on the show. We have Don Peebles, who I had the chance at seeing at the commercial observers Power 100 event. Don Don has such a spectacular story, having started in city government, launching his career out of D.C. and then really discovering his first incredible opportunity down in Florida. And he has such a passion for building, but also for bringing diverse players to the table and really giving back in that capacity. So I, I think you're really going to enjoy the excerpts from the Don Peebles episode. Don, I want to talk a little bit about your childhood and what I've read is growing up and I believe this was in D.C. and I know you moved to Detroit, but as a kid you, even at an early age you were working alongside your father, helping him out at the auto body shop. It seems like hard work has been something that's been instilled with you at a very early age.

Yeah, you know, my father grew up in rural Virginia during segregation and his father, my grandfather, was a janitor in a public school system and a farmer. So he ran a farm. And so my father as a young boy worked on the farm. So he learned to work ethic very early. He got drafted in the Korean War and then from there moved to Washington D.C. when he was discharged. And that's where he met my mother. And but, and then for, you know, for all of my childhood he worked one as a civil servant and then as an auto mechanic and he had his own part time business as a auto mechanic. And so I used to work with him on weekends and helping him with different things, you know, around the garage and normally kind of organizing tools and so forth. And so I mean I learned work ethic. He started very early every Saturday morning and of course during the work week he started early. So I mean I learned hard work from him. My maternal grandfather was a doorman at the Woodland Park Hotel in D.C. for about 40 plus years and he worked around the clock two shifts. So hard work was instilled in me very early on.

And then I saw that, that you were also a congressional page and this also involved a lot of hard work. So I think this is while you were at school. So you would get up at 4:30 in the morning and catch the bus. Is that the typical day? And what were you doing on the hill?

Yeah, so my mother thought as a, you know, I began to be A bit of a rambunctious teenager, my mother thought a structured environment in addition to school and sports would be something that would be helpful for me and exposed me into politics would also be helpful. Of course that would. I mean, this was the 1970s, so America was still in transition, dealing with the remnants of the Vietnam War, post segregation and so on. So she was able to help me get a position on the Hill as a page, which was an amazing program for high school students. You went to school and there was a school for Page was on the top floor of the Library of Congress. And school started at 6am and then at 10:30 we walked across the street, reported for work at 11 when Congress began to work for its workday. And then that went on until 7pm or later. And then I played sports, so I played basketball. So I had basketball practice, et cetera. And so that kept me very busy. And I normally got home about 9:30 or so, did some homework, went to bed around midnight, and got up about 4 o' clock in the morning and was out of my house at about 4:30 to 5:00 clock every morning. So I learned time management, which was great, and learned how to learn the value of hard work and made some tremendous political contact while I was there and learned a lot about how our nation's government works. Wow.

Unbelievable. What a work ethic. And I definitely want to circle back because I know those public private partnerships and working with the government has been a huge part of your success. But I want to talk about what happened next. So you go to college, but my understanding is you only stayed there maybe a year or so. And in your book you said that you already knew that you wanted to be a real estate magnet. So talk a little bit about kind of school. And I think at this point, was it your mother who was. You said she was a sales agent, but also doing some appraisals. That's kind of where you got your start.

Yeah, my mother actually, my parents divorced when I was five. My mother and I moved to Ford, Michigan, where her sister was living with her family. And she started as a real estate sales agent in 1968. And so by 1970 or 71, she had her own brokerage business. And so I watched her work in the real estate industry. And then when we moved back to Washington, I was a teenager. At 13, she got a job at Fannie Mae and then ultimately went back into her own business and had her own appraisal business. And so I was exposed to real estate from her hard work and also Some of the challenges that women confront when they go into the business world. And then on my father, from him, I got this unyielding element of hard work. So I got. But I got exposed to real estate very early. So when I went to college, I was going to be a doctor. And then in my high school yearbook, it said that I would be a med. I predicted that I would be a doctor and then invest in real estate to build wealth and then go into politics. So I skipped over the medical thing and I haven't gotten around to the politics yet.

You certainly gotten around to a fair amount to keep any one person busy for a lifetime. So talk about some of the early years of investing. And I love your book because it really, it talks about kind of getting in at the ground floor. And you said, you know, started with maybe buying a lot or a couple small vacant buildings. I mean, were you kind of dabbling in investing while you were doing the appraisal business on the side?

Well, I mean, it's interesting what happened is I came back to D.C. and this was 1979 when I finished, when I quit college into my freshman year and interest rates were 20 plus percent. That was a time of great economic crises in the country. And so I was selling real estate so I could sell, but no one could qualify to get it alone. So it made it challenging. So I started working part time for my mother to learn the appraisal business. And then ultimately I went and worked for someone else because I wanted to have a bit more independence. And then by 23, I started my own appraisal business. And then because of politics, I got the door open for me. So I became a appraiser for HUD and then some other government agencies, and then banks followed and so forth. And then I was very active in politics. And so I became involved in the mayoral election and the mayor got reelected and then appointed me to the City Property Tax Appeal Board. And I was 23. And then at 24, I became chairperson. So, you know, it went from me being kind of lost and trying to figure it out in 1979 as a 19 year old to kind of things beginning to come together, you know, by the time I was 23. 24. At 24, I was chairman of one of the most influential and powerful real estate boards in Washington D.C. i had a growing appraisal business. And then at that point I decided that I needed, I wanted to be a developer because I understood that developers were the creators and I wanted to be, you know, one of the creators. So I began to look for real estate development deals and ultimately found one that just kind of walked into my office, literally in 1986, I was 26 years old and boom, you know, someone walked into my office, a broker did, who was actually a sub tenant of mine and presented a real estate deal to me. And that deal changed my, the trajectory of my career, accelerated it and got me into the development business as a 26 year old.

That was. Yeah, I remember reading about that. That story suits. So you said that this was a class A office building on Martha Martin Luther King Boulevard. And if I'm not mistaken, maybe it was a vacant building but you had the government lease and you were able to kind of put it all together. So maybe just for our audience, because we've got a lot of inspiring investors who are trying to figure out how to do their first deal. It'd be interesting to hear how you pulled that together. And also how did you raise the capital for that?

Well, you know, I'll tell you, one of the big things I'm a believer of for entrepreneurs who want to get into a particular business is to get into the mix of things. So be in the mix of things. And that was key. So I was in the mix of real estate. I was letting people know I wanted to do development deals. So that created some flow of opportunity. And so this particular project, one of my sub tenants in my office space for my appraisal business was a real estate broker, a one man shop real estate broker. So he came into my office and presented me with a deal to buy a piece of land in Anacostia which was in an economically neglected community, an African, predominantly African American community. And the commercial corridor was destroyed during the 68 riots. And so the city had targeted that area for revitalization. So when he came into my office, I said, why would I want a property in Anacostia? I want to do a deal downtown. And he showed me this letter signed by the mayor of Washington D.C. committing to lease office space in a proposed building on that site by another developer. The only catch was that other developer didn't have site control and he was haggling with the seller of this property. He was an old line real estate speculator in D.C. and he was haggling with him over $150,000. The seller was adamant on $900,000. And this developer only wanted to pay 750 so long. And the short of it is I figured if the mayor was going to, you know, lease faith from this developer, he would lease space for me. And so I went and met with the seller of the property and agreed to pay $900,000. Brought in some partners who I had been looking at a downtown deal with, who were smaller real estate developers looking to go to the next level, but had done well for themselves, so had some money and some experience. And so we ultimately joined forces and on a 50, 50 basis, they put up all the money, they supplemented my inexperience and I put the deal together. So we put the deal together, got the city to do a lease deal with us at less money for a bigger building, so less per square foot on a bigger building. And then I went out and found the financing. And then ultimately we co developed that project. The city pre leased it for 20 years. We delivered it early in 1989 and the city released it another 10 years, you know, with another administration. And now recently the current administration extended the lease for 16 more years. And we're just finishing a complete renovation of the building which will be done in September. So I mean, that deal, I mean, I've owned that building for my entire development career. And it just goes to show that opportunities present themselves and we got to capitalize on them when we see them.

Fantastic. And it's amazing how you've been able to bring people together throughout your career and again, working with government, because I was reading after that, then you start investing down in Florida. And I know in the early 90s you picked up Convention center, the Courtyard by Marriott, but I wanted to talk to you about your 96 purchase, the Royal Palm Hotel, because you've had a lot of firsts in your career. But if I'm not mistaken, this was one of the first hotels developed and operated by an African American in Miami. But you know the value that you were able to create there. I read that you purchased it for five and a half million dollars.

And I don't know if this was.

By virtue of an up zone or just right place, right time, right business plan. But if I'm not mistaken, you sold that for $127 million. So that seems like that worked out pretty well.

Yeah, I mean, so we bought again. I was, I mean, I think part of what luck is. An old friend of mine, a banker, told me that his definition of luck was when opportunity and preparation merged together. And this is another example of that. My wife and I, our young son, were in Miami at a vacation apartment we bought back in 1990. I guess it was New Year's Eve, 1995. And I read this article about the city owning the Royal Palm Hotel, and they were looking for an African American developer to redevelop it. And as a result of the tourism boycott by African Americans, they had created this opportunity. And it was next door to the Lowe's hotel development project that was just starting. And that was a big box convention hotel. So I read it, thought about how many African American developers are there in the country, how many could do this deal, and hopefully how very few of them were reading the Miami Herald. And so that right after New Year's Day, I went out and looked at that property, and I looked at the site next door, bought that one, too, and then bid on the Royal Palm in June. And then Of June of 1996, the City of Miami beach selected my team as the developer. And that was billed as the first major hotel in the United States developed and owned by an African American development team. And so again, and then, you know, in that project, we built that project. And after opening, a few years after opening, got an incredible offer to sell it and sold it. And I mean, but again, it was kind of being in the right place and being presented with the opportunity and then acting on it. And I think that's a big thing I would tell entrepreneurs is that if you're in the mix, you're going to see opportunities. There are going to be many opportunities across your pathway. And the key to that is to capitalize on those opportunities when they present themselves. We've got to see the opportunities, but then when we see the opportunities, react to them and capitalize on those opportunities, because they don't come by often, but they come by. And if you. It's kind of like being a great basketball player and you get the ball, you got to know what to do with it. And I think in business, if you get the opportunity, you gotta just do it, take the shot.

Next we have Mary Ann Gilmartin. So Marianne was my second guest ever. So the first guest was Bruce Ratner, who I also had the chance to see at an event last month for the Jewish Museum of Heritage. But Bruce talked about how he used to love to recruit from the public sector because he worked on a lot of public private partnerships. And so Marianne was working in the public sector, and he brought on board her. On board for Forest City Ratner. And wow, did she really take hold, ultimately becoming the CEO of that company, doing incredible things, working on some really complex assemblages and rezonings. And now after spending time at L and L when I interviewed her, now she has formed her own company, Mag Partners, and she's going to talk about this female led development team and all the incredible projects that are underway right now, not to mention, and today she's redeveloping the waterfront in Queens. I don't think we get into the episode about her work in the Baltimore Inner harbor, but you'll also want to take a look at the work that she's doing there with Under Armour.

And so we decided we wanted to put a hotel on top of our 42nd street retail project. And we recognized that nobody else could do that because the government couldn't just let another developer build a hotel. And we went and pitched the idea. We went to our parent company in Cleveland and they said, well, what do you guys know about hotels? And we said, we've been studying the the market and here's what we know. And we became instant experts and we built two very successful hotels, the Battery Park City Embassy and the hotel on 42nd Street. And we did that without ever having built one before. Same thing with an arena. I mean, most of us, you build one arena in a lifetime, right? It's not a business where you could roll out a whole portfolio of arenas. But we become subject matter experts. But it's partly because we are really good at problem solving, good on data and good at knowing how to pull the right people in at the right time.

It's still, it blows my mind. Not only were there 50 ground up projects, not to say that I'm sure there were some challenges along the way, but you had some incredible successes. You said, with these two hotels. Building a hotel and operating is a very, very specialized business. In fact, I even take it outside the typical real estate asset class domain. It's unbelievable to hear that you were able to figure out, were there partners along the way and were you reaching out to others in the industry or were you.

As far as Citi's balance sheet, this is a public company at the time, which was really a family business dressed up in a public company dress. This was not a REIT. There wasn't even that many REITs in the 90s to speak of. But this was really a family business that went to the public markets for its equity. The stock was in the high 60s. We were making a lot of money and there wasn't this angst and anxiety around product types. We knew we'd be renting rooms every night and that it wasn't going to be an easy business. But we actually brought in a management company that brought no equity, you know, Hilton and Embassy Suites. And we took the risk to build it and operate it. And then what we did do is recognize it is a tough business. And we found the right time to exit and we exited. We sold the downtown hotel to Goldman Sachs and we made a great exit on the Midtown hotel and then made the decision that if we're hotels in our projects, we would carve that part out and let somebody else take the risk. But it wasn't because we got hurt. It was mostly because you realized this is a different kind of a business. But we were able to dabble in it and make great returns for the shareholders. And everybody ended up very, very pleased.

You ended up. We know how the end of the movie happened at Forest City and you were CEO. So what happened in between and at this point, how big was the company and how did you. I mean, what were the other roles that you fulfilled on your path to CEO? Because again, for many of the listeners on the show, they might be at some of the these larger companies and figuring out what is the upside potential. So what was your story in the climb to CEO?

The first thing I'll say is I never had my eye on the corner office. I just was looking for real deal flow and ability to always learn and grow. And I think that's important for people because often it's the people who are constantly focused on where they're going to end up and what's in it for them that end up being the most frustrated and dissatisfied with the result. Again, you have to work in a place where there's an appreciation for skill, capability and leadership. I happen to be fortunate enough to be in that organization. Bruce has two daughters. I was benefiting from the fact that neither of those daughters wanted to be in the real estate business. So even though I was working in a family dynasty, I wasn't up against a family business in New York. There was nobody in the way. I don't know if I consciously knew that. I just know that I wasn't dealing with family dynamic on a day to day basis, which in real estate in New York is a reality. So there was a clear path. But you know, there was a joke in the company that the closer you got to the corner office, the hotter the seat got. And so, you know, it got more intense because we knew we were really, you know, it got for Bruce. He surrounded himself with really, really strong people and we knew what our job was. And so as I worked my way into the management part of the organization, I had a partner. He and I ran the business together. We kind of divided the king where when Pacific Atlantic Yards came along. Jim Stuckey did Atlantic Yards, and I did everything else. And that allowed me to build a New York Times building, build New York by Geary, run the office portfolio at MetroTech, do all the leasing. So I was both a developer and an operator. And that was a tremendous opportunity for me to not just deliver the long term value creation proposition on a high quality asset, leased and ready to stabilize, but actually to take the portfolio and lease and release that space over and over again. I had a team of people that were skilled in many, many different areas. And in many ways it was because Atlantic Yards just sucked the life out of the company for the first five years. And there was. I said, I think I should be the everything but girl, I should do everything but this project, and you and Jim Stuckey should run that project. And that is in fact, what happened for a number of years. But that gave me an enormous birth, really, to grow as a manager and as a leader, a developer and an operator. And there came a moment when Bruce called me into his office and said, there's going to be a change and I'd like you to take over the project. And I thought, if you build a building like the New York Times building with Renzo Piano and the New York Times as a partner, you're fortunate enough to go on and build New York by Geary. Over 900 units of multi family rental, which is almost the residential equivalent of the icon that is the New York Times building. You ask yourself, like, what could I possibly do next that could be as exciting and as interesting? And it's a problem. I mean, it's. It's a champagne problem. It's a problem. Yeah. So when Bruce called me into his office, I thought, this is sort of a calling, right? This is the uber example of everything it takes to build large scale complex development projects in a place like New York. I knew I was ready. I think Bruce knew more than I did. I was concerned because this is a project that just was chock full of everything, including opposition that had committed to sue and create Ajita early and often. And they kept to that promise. And so I was walking into the belly of the beast.

You were thinking back to your days of working with the squad or with the dogs.

Exactly. And so in 2007, I took over that project. And for 12 years, that became like a child to me. I nurtured it. A lot of the buildings do become like children because they require that patient nurturing, but at the same time, an incredible sense of urgency because time is everything. It was probably during my work on Atlantic Yards and Pacific park, that Bruce started to see in me the leader that he wanted for the future and beyond his days of CEO and president. So he came to me after we finally closed the project and put the arena into the ground. And these were battles and challenges like no other. I mean, Bruce and I together would admit the fear, the concern, the difficulty, but to put $500 million into the dirt in a project where you had not a single vertical building to show for it and enter the Great Recession, have opposition that essentially just was running the clock down, knowing that at the end of the year, In December of 2009, if the arena had not started construction, the way in which we were financing it, the loophole in the IRS tax law would close and we would no longer be able to finance that building. So we closed the transaction in the last possible day in December. So we went right to the edge of the cliff, and Bruce and I had a pact that we would sweat it out with each other. We would talk about our fears with each other, but we would never, ever let them see us sweat. So we managed a group of 50 people with a certain audacity and ferocity that needed to be. And I think through that ring of fire on the other end, Bruce said to me, I want you to run the company.

Wow. Wow.

And then I did what. What probably is a bit bizarre, which I tried to talk about, of it, because we had such an incredible partnership that I thought, why would I screw with it? I mean, it's so good. And I didn't feel like I needed to be in the corner office. In fact, I had the better job because it wasn't about my ego. But he. He really took all the shots, and he got the glory, but he also got the grief. And I was. I was given a very, very wide span of control. And so he had tremendous confidence in my ability, and I loved working with him. So I really tried to talk him out of it. And in his mind, it was time. And I said to him, nobody's ever taken Bruce Rattner's job, and I'm not sure that I want to be the one to do it. So we started on a path of transition. And I think the most challenging part of my career was that moment of taking the baton from Bruce and not wanting to be a lesser CEO and leader than he. I was given the great benefit of having him still in the company as a chairman, and. But it was a transition that wasn't easy, because you might recall that whenever anybody talked about what we were doing at the time, Farsity was a $12 billion company and we were 40% of that balance sheet in New York. Anytime anybody wrote about the company, it would say Bruce C. Ratner. And then somewhere down in the middle of the article it would talk about Forest City. But he was a cult of personality. And so I didn't want to be Bruce Ratner. I didn't want to try to mimic his style and his vision. But I knew that he was this formidable presence in real estate and in my life and I wanted to not disappoint him and I wanted to continue on his legacy. And I think the thing I am most proud of is that for the five years we were able to jumpstart the residential part of Pacific park with the introduction of Greenland as a financial partner. Cornell Technion was one of my first big wins as CEO. And then finally the leadership and the people in the company they stayed with, I was able to retain talent and grow talent and keep the organization in tip top shape until such time as they decided to go the direction of Areit. And that's when I had in my head the news flash that this was not going to be the kind of company that built great complicated projects like Pacific Park. That this was a company that was going to be a very strong operating company. And the days of building large scale ground up development were probably behind us. And that happened two years before the company was sold to Brookfield. But even with that, I was able to partner with Bruce mentally and emotionally so that he could understand that I wanted to find my next big move and have his support and not have it be done in a way where I left anybody feeling like I didn't support everything that the company was trying to do.

Well, you definitely accomplished that. And what an amazing story. And I was thinking of all the firsts and the largest one, was it modular tower as well? I mean, just such an amazing project. But I'm thinking still that December, I guess 31st, you're probably, like you said, at a deadline. So what was the key to your success? To close that deal and then to see it through.

I mean, I'm going to call it my Isuzu moment. So it's like anything, it's a very complicated situation that you can distill down to one of the most simplest things, which is really tenacity and staying addicted to hope. That evening, in trying to close that deal, we lost an $86 million letter of credit. It lost its way from Cleveland to New York. It had to be in its original form or the government wouldn't take it. We were hitting a deadline because the bond desks would not be open for the holidays after December 20th. Something we were on the very, very end of the year for all of the trading desks that would sell these bonds that the market would buy. We were in the recession. I mean, this was 2009. Nobody knew if these bonds would even sell. We had Goldman Sachs telling us that they thought we could stand it up, but that there may be more equity required. So we had everything, all these headwinds. We finally get everything where it needs to be, and we need to close with the government to really seal the deal. And we lose a letter of credit. And we have probably 50 lawyers at Skadden Arps. It's nighttime. There was an outage, which if you go back and look at this night, it would tell you the night of the night in question. Because there was absolutely no ability to use your BlackBerry in New York City. And obviously, this is a bizarre thing because we were all on blackberries and there was no service. The system was down, the RIM system was down. And so there was no communication ability because there was some storm. So because because of the storm, the UPS got backed up. And so UPS was a mess. Somebody put it in UPS, not FedEx. And we were in a moment of truth. And we had the government in one room trying to convince them that they should be able to take a fax copy of this letter of credit. We had all sorts of people scurrying about trying to track it. And I sent somebody out to Maspeth, Queens, to go find the letter of credit. And then I remembered that one of the law firms we worked with represented ups, and he was in the Caribbean for his holiday. I asked for his cloak and dagger, and I asked if he could help get me to somebody at ups. I needed to open up the facility. Wow. And I'm not making this up. And we opened up the UPS facility in Maspeth, Queens. There were thousands and thousands of documents. We found the letter of credit at 3 in the morning.

Oh, my gosh.

And we all stuck around and we closed the deal that next morning. And I would tell you that I created this playbook where people were looking at me like, she's lost her mind. There's absolutely no way this is going to happen. And we even had a plane on the tarmac at Teterboro in the event that we had to try to get back to Cleveland to reissue the letter of credit and make it back in time. But the timing was such when the bank opened that we would never make it. But that was going to be the Hail Mary. And so that I was so convinced that if we just opened up the UPS facility, we would find this letter of credit. And there was a gentleman sitting outside in a car. And when they found the letter of credit, you know, he came, you know, running back to the office at Scadden with this letter of credit. And so this was all my concerns. But it's kind of like thinking you could talk to the squatter. Like sometimes you've got to go places where other people aren't going to go. And I think at that moment, Bruce knew that he had his succession plan because.

What an incredible story.

Well, the reason I called Zuzu is I was supposed to be out shopping for Zuzu pets for my daughter because for Christmas, remember, Zuzus were the whole rage. And instead of shopping for Zuzu's, I was shopping for.

Wow.

Wow. You heard it here on the Voice America Network. Okay, so that's unbelievable. I want to talk a little bit about what you're doing now at L and L Mag here you have made the transition to residential and this was very entrepreneurial to come and, and do something new. So what prompted that as opposed to going to another one of the. Well, L and L obviously very established, but what prompted this move?

It gets back to my dilemma. After building a couple of great buildings, which is if you want to up your game, the question is, what's next? And I felt a sense of I really ought to do something that I can control my brand and I can build the kinds of buildings I want to build, which is to say you can build beautiful ground up buildings of all types in New York City. You can build, build them with people and for people that look like the city we live in and doing all of that, you can deliver great value for your partners, your investors, and for the communities in which you build. That sounds simple, but it's not. It's not the way the game works in New York. So I don't want to build commoditized product. I want to build different types of buildings in all areas of the city. And I think it should be built by people that know the communities they're building in. And so I want to kind of disrupt a little bit and I want the team to look a little different than the usual suspects. And so with that in mind, I set out to find places where I could shore up my capabilities. Knowing at Forest City always had a balance sheet and it's important to know what you had and what you wouldn't have anymore. So upon my departure I knew I needed somebody who could help put the capital together. So in a very strategic way, I went to the parent company and to Bruce. I explained what I wanted to do with their complete blessing. I paid attention to a number of the things that were pressing inside of Forest City and at the same time I planned for my departure and I took a group of people with me that I believed I could build a company around. And that all happened on January 22, two years ago this January. I am really aligned with David and Rob because they're doing all the repositioning. So any asset that's repositioned is L and L. Anything that's ground up, whether it's office or residential or mixed use, is L and L Mag. So they're obviously investors in my company, but we're co located together. We're collaborating beautifully. My team is working on Terminal, for example, a terminal warehouse project on the far west side. So we are cross pollinating the talent but at the same time we're two independent platforms. And I have a real identity in L and L Mag that I want to continue to nurture and I want it to become its own brand. Obviously L and L is an incredible organization and L and L Holding has already a foothold in this market that is remarkable and that's what I want L and L Mag to have. So I feel protective of the new brand and at the same time I have the entire infrastructure and platform of L and L to leverage in everything that I do. So our first transaction within 12 months of forming the company is 28th street where we're building a 450 unit multifamily residential building across from FIT. We are partners with a large landowner in Queens, right adjacent to where Amazon was supposed to go. And we are working on a district wide rezoning for that parcel and the area around it that harkens back to my economic development days. So it's both public development and private development. It's really, really exciting. And we're working on the terminal warehouse project and then we're in pursuit of two other opportunities that are quite exciting and hopefully by the time this airs we will have landed at least one, if not two of them. And again, the platform can do both multifamily and commercial. And so as I told you, my first love is office and that's where David Levinson and I really have a commonality because we really love this notion of building boutique office Buildings and high quality 21st century performing buildings in New York which is what this city needs to be a global city going forward.

Next we have Ian Ross from Samara Road. We have had incredible feedback from Ian. I know we're going to have him back on the show. We Ian talks about know your market and what I love about Ian's story is how he's been able to develop in several different cities and how he's able to go in in a very short period of time. How do you get an understanding of a market? He talks about a one day city, a two day city or a three day city. The larger the city, the more real estate to cover. The he needs more days to cover. But he really talks about how he goes in. He speaks to the professionals. He gets the lay of the land so he can make smart investments.

Love working hard, love hustling, love deal making. I'm very much kind of New York through and through at this point. I always say I love the LA lifestyle. I don't necessarily love the LA work style and that New York work style. The hustle is truly infectious and it really keeps me driven here.

Yeah, I'm kind of jumping to the end of the movie but I could have shared this in in your bio. Today, Samara Road has sourced and executed on 66 distress deals at a valuation of 1 billion5 across 49 markets in nearly half of the continental US. I remember when you spoke to our group it was look, we've got so much on our plate. We're working seven days a week, part of it now. You see so much opportunity out there and how do you capture it all? But it does not surprise me knowing you now that you're not someone who's just hanging out on the beach waiting for it to happen. Talk about because I think a lot of when our listeners hear distress, everyone automatically their ears perk up and they say if it's distressed it's got to be good because maybe someone failed. You're getting in at a better basis. You really learned in this CMBS space where you really were entrenched in early in your career. Maybe because a lot of our listeners are first time investors, they might not even understand those markets. But tell us a little bit more about when you first started out. But how did you find this distress? Where did you kind of play in the capital stack?

Yeah, no. So first off update, we're at a little over 70 transactions now, almost at 2 billion. We're now 24 professionals and we own about 20 million square feet wow. So it's been tremendous growth. We're opening an office in Nashville right now. We have an office in Cleveland, and we're going to be opening an office in Kansas City before the end of the year. So.

And this is all deal specific, because the other thing that blew my mind is you said we're not doing a fund. I've got a stable of investors and I want to get to that later and talk about that because you're a prolific capital raiser as well. But this is all on a deal specific basis, which I think makes it even.

We've raised almost $500 million all deal by deal. But I'll give you some of the background you were looking for in terms of what Somara Row does. We buy distressed value, add opportunistic deals, all sourced off market, largely in secondary and tertiary markets, looking for largely a asymmetric risk profile where our downside is highly limited because of how we source the deal, and an opportunity for an outsized upside return where, frankly, we can work our butts off and create our own risk and add value to real estate. Put differently, we like solving problems, finding problem assets, finding hairy situations on the way in. We don't look at marketed broker flyers. No offense, James. No, we're looking for hairy, unique stuff.

I want to talk about this because I think it's a really important point. There's two. Clearly, you can't argue with success here, but the two sides of the coin is, in a market that's flat or maybe even declining, the job of the broker is to educate the seller to really understand where the value is and the service to the buyer is you know, what you're getting yourself into because hopefully it has been vetted. That broker who's representing the property can tell you, look, this is where the deal stands. This is where you need to be. It could be said that for an off market deal, you don't really know what you're getting. You could be going down the road, you think you have it last minute, they pull the rug out from under you and someone else gets it and you say, hey, you didn't even tell me this. But clearly not having to compete with a bunch of buyers is very appealing. How would you respond to.

Let me take you back a little bit in terms of how we source deals off market. Actually, let me give you a little more context of what we do. 20 million square feet, all asset classes, all geographies. We own a lot of office, a lot of industrial, a fair amount of retail, some cold storage, some Other storage, some multifamily, a little bit of hotel, a little bit of student housing. We're in markets from coast to coast. I'd say largely in the middle of the US and the Southeast, but we're in Modesto, California, Las Vegas, Tucson, Austin, Kansas City, St Louis, Memphis, Nashville, Louisville, Greenville, Huntsville, Pittsburgh, Minneapolis, Allentown, and a lot in between.

That just blows my mind because I have spent over 20 years studying wine market. And New York is such a massive market with so many neighborhoods.

That's exactly it. I love all the markets we invest in. Save a couple. But I really do have a deep love for, whether it's Casey or Pittsburgh or Nashville or Memphis, we become entrenched and really embody a lot of what being a local investor in those markets. People in New York always ask me that question. They go, how do you figure out a market? First off, everybody on our team is as intense and passionate as I am. We love what we do and we love understanding the who, what, where, when, why of real estate, where people are living, where people are working, where they're playing, where they're staying, and why they're going to be there and why they want to be there. But Greenville or Louisville, these are not New York City markets. These are markets that you can figure out in a matter of days, right? So there's a. There's a wall in my office that says in big black letters above a map of all of the Sumera assets, it says, know thy markets. And what that means is, everybody on our team better damn well know their markets. How do you know your market? But when we're acquiring something in Indianapolis, which we're working on now, my team, two of the guys and myself went out there and we spent a matter of three days touring every building, met with every broker in town, toured every neighborhood, went and stayed at two hotels, went drinking and eating and hanging out, went to coffee shops, wanted to understand the fabric and the culture of the community, how people are living, working, playing, moving around that city.

But there's no inside information. I mean, if you had lived there, worked there for years, you would know, okay, this area could be getting rezoned, or, hey, maybe there's this tenant coming, or this is working, or that. I would imagine that some historical perspective would be helpful in a market.

You can learn that in those markets, they're not as deep as a New York City market. I think we also have the New York City in the national perspective. We see a lot of what's working in certain places. Adaptive reuse of historic Structures for office conversion to creative office space is working. Let's find something like that in Indianapolis because that might not necessarily exist. I think the other thing you've got to realize is when you take out land value, which land really only exists as an extremely valuable, high priced asset in your top 10 MSAs, a lot of markets also start looking economically the same. I'm diverging from what I was talking about in terms of feeling the fabric of the community, but in terms of the economics, I can tell you office outside of your top 10 MSAs is largely a 19 to $25 full service gross product save new construction, which is probably closer to 34 to 38 with a few variables. My point being a lot of stuff across the country, when labor is fairly similarly priced and cost of goods sold are fairly similarly priced like raw materials, when land gets taken out of the equation in a lot of Midwestern or southeast markets where land isn't as limited a resource, economics start blending together very similarly. You still have to understand the community. And that's what we take a lot of pride in doing, in finding spots and in finding unique assets that have a value proposition that we can improve and make better.

So how do you then source the off market? Because I want to get back to the question. So you go into this market, you don't know anyone there, you reach out to a company, couple brokers, so then where do you find the deal flow? Because if you're meeting with the brokers but you're not buying their stuff, they're happy, I guess to help you out, they're thinking that maybe they will sell you something. Or these brokers turning around and saying, well, I'm listing this, but you should really take a look at this other thing that I know about. Is that kind of what you mean by off market?

No, not exactly. So first and foremost my background going back to Morgan Stanley and Triangle Captain Capital was largely around trading CMBS product and understanding CMBS product. So when we started Somara, we got control of about 5 to 6 billion dollars of legacy CMBS product by buying controlling class pieces within the CMBS capital structure. And that probably provided us an opportunity to buy about a third of our portfolio. So when we think of kind of sourcing mechanisms, one way that we've acquired real estate has been out of the CMBS universe and that's just buying non performing loans or REO assets out of trust that either we control or we're exposed to because of our activities within the CMBS space. So tic deals and tick Recaps were a lot of kind of our another piece of the sourcing pie. Third, we've been very active in the bankruptcy space. So we got introduced to Gibson Guitar pre during and post their bankruptcy and ended up buying pretty much all of the real estate off their balance sheet, helping them inject liquidity into their capital structure as they tried to pay their debt current and pay off their debt during some tough times for the company. The company's now been taken over by a private equity firm. But in the process we were able to buy a lot of their real estate in Memphis and in Nashville. In Memphis we ended up doing a phenomenal transaction with, with Federal Express FedEx building their first downtown creative class A millennial leading urban millennial leaning urban core creative office space for their logistics division. And we're now building another project next door that'll be another class A office building in Nashville. The Gibson stuff got us into that market and that market's been exploding. I think we were early there. We've now done about a dozen transactions in that market and are opening an office there as I mentioned, without giving.

Away the secret sauce, so to speak, because the idea again of buying distress, buying out of a bankruptcy, is this something that is available? I've handled over the years, 363 sales where there's a public auction, we have to advertise. I'm not sure if that's how you ultimately bought these. If you were a stocking horse bidder.

It was more just a distressed company that needed, needed liquidity.

And, and that, and how did you find out about that? Did you just. You got a tip or.

We have our ways.

Okay, all right.

But, but lastly, I'd say, you know, and, and we look for just hairy, messy situations wherever. But, but I think the, the, the last way that we're sourcing deals is we've planted our flags in 45 plus markets around the country. And we take a lot of pride in how we do things in those markets. We're responsive, we're responsible, we move quickly, we're entrepreneurial, we're aggressive, we're problem solvers, we're well capitalized and we do what we say we're going to do. And I think, you know, those attributes are expected in a lot of your gateway markets. I think finding counterparts in the real estate space in secondary and tertiary markets that display those attributes is a little bit more challenging. And we've developed a reputation in our respective markets of being a reliable counterpart, being a liquidity provider, being somebody that can move quickly that's sophisticated and they can get stuff done because of that. We've seen follow on opportunities in markets like Cleveland and Louisville and Indianapolis and Nashville and Kansas City and Pittsburgh, where we learn those markets, we get smart on those markets, we come in through some unique debt, uniquely sourced opportunities. Then we learn the market, establish our footprint and expand from there. That's really been a great way of developing our growth.

I'm really glad you brought up the credibility piece, the certainty of execution. I just finished Steve Schwarzman's book, Whatever It Takes, and he talked about when Blackstone went into real estate and they did one of their first transactions. It was basically a handshake. And after the transaction closed, I guess as the story goes, the seller said, we were just waiting for the retrade. We were just waiting for when you were going to come back with the whole laundry list. And Steve said, well, nothing materially changed. That's how we do private equity deals. We're handshake people and that's our reputation. In New York, it's, I mean, here it's a 10% hard deposit. There's no contingencies. You know, someone's credible. I mean, yes, we're interested in reputation and track record, but at the end of the day, if they sign an airtight contract, there's not a lot of places they can go. But I mean, some of these markets you mentioned you might have a $20 million deal that you can tie up, I would imagine for 60, 90 days of due diligence with maybe.

But we, we create an advantage and we make ourselves more attractive by not behaving like that. We move extremely quickly. We know what we're doing, we know what stuff is worth, we know what we're willing to pay. So in that 20 million, I mean, we're negotiating a deal right now, off market approach, somebody who may or may not be looking to sell their real estate. It's a $25 million transaction. We're going to put a million dollars hard, day one, and we're going to do 30 days of due diligence and close in 30 days thereafter. And I think finding a buyer that can move at that speed with high level sophistication, reliability is hard to come by in a lot of these markets. A lot of these markets just haven't been institutionalized. And Nashville's been an interesting experience for us. I got to see Austin call it in 2011, 2012. We participated and participated in that market, but got to watch the institutionalization of that marketplace. Nashville's getting there you know, there was recently a trade where Starwood bought out Heinz on an office building downtown at $700 a foot, I believe. And you're starting to see some institutional buyers come out and participate. On the stabilized side, I'd say you're not necessarily there. The developers are there, the stabilized cash flow buyers are there, or maybe looking for 100 basis points of spread on yield, but the value add, roll up your sleeves, do the dirty work kind of institutional capital that's everywhere in your top 10 MSAs isn't in that marketplace, but they're certainly coming. But watching the evolution, institutionalization of a market like Nashville has been very interesting and it's led us to look and say, hey, what are the next Nashville's right? And what are the next Austins? And we're constantly thinking about that because it's definitely a market that we're in. I think it's hard to find a secondary market that we're not a participant in. And we very much look at kind of a portfolio view and say, hey, which of these markets have interesting tailwinds, have similarities to some of these other markets that have taken off. Our more macro view on America is that America's urbanizing and, and continuing to urbanize, that primary markets are becoming.

Too.

Expensive and difficult for employers to hire. The cost of living is high, the cost of labor is high, the quality of life is low, the ability to retain and hire talent is challenging. And we see a lot of employers and just a lot of creatives say, hey, technology enables me to really locate anywhere. If I, why be a struggling restaurateur in Brooklyn when I can go do this in Kansas City? I mean, one of the best pizza chefs in America is this guy in Phoenix, right? Like you can kind of do anything anywhere in today's America, in today's technologically connected world. And we think a lot of these cities are gonna, are gonna see a real rising tide.

Next. We have a friend, mentor of mine, Ryan Sirhan. He also wrote the forward to the book. He was kind enough to say that no one is better positioned to tell you exactly what to do. And so not only was Ryan kind enough to write the forward to my book, but he was really the impetus for the book. And I remember when he started the sell it like Sirhant course, I was the first person to sign on from the commercial side. And he called me up and said, James, do you know what you signed on for? This is a course that we've designed for residential. I said, ryan, exactly. I want to understand what you all do. I feel that the commercial brokerage world, we're still in large part, we're not joining in on this digital media marketing revolution. And I want to learn what you do. And so he's been a big inspiration to our business here and the whole book process. And I give him a big thank you in the book. But he was the one who introduced me to Kevin Anderson, my agent, who ultimately helped us secure a book deal with McGraw Hill, our publisher, who also introduced me to my writing partner, Rachel Hartman. So just like with real estate investing, where one good person can introduce you to many more, certainly that was the case with Ryan and all the incredible things that we've done on this book project.

Yeah, I mean, for those of you who don't know me, I'm a residential broker based in New York City. I was born in Texas, bounced around eight times before fourth grade. I really grew up outside Boston. That's where I went to school. My parents made me play every single sport known to man. I sucked at every single one of them. I was okay in school, but the only thing I was really good at was theater. And after I graduated college, I went to Hamilton in upstate New York. I decided, you know what, before I have responsibility, I want to go to New York City and see if I can and do this theater thing before I then have responsibility, and then that would be really hard to do. And so I came to New York, and it's really, really hard. You know, it's a hard city to make money in. And I ran out of money within 2006. I ran out of money the summer of 2008, and I got my real estate license because a friend told me to. And I had a friend from college who was selling apartments at twenty Pines. So Armani Casa Schpo is the broker in the summer of 2008 over Craigslist. And he had, like, a nice apartment. He had cool suits. He wasn't that smart. I was like, man, if you can do it, anyone can do this, right? New York City real estate has got to be the easiest thing ever. So I got my license, which was relatively pretty simple. And then my first day was September 15, 2008. So Lehman Brothers filed for bankruptcy that morning. And the benefit for me was I had no money. So, like, I didn't have a stock portfolio. I was watching. Like, I wasn't stressed out about the market. I just thought. I just thought real estate was then really, really hard. And I just started doing rentals. Craigslist, right? Craigslist. Rentals I'd meet people at Saks Fifth Avenue. I would totally profile everybody. If you had more than two shopping bags, you were. You had. You had money, and then you deserved my card. And. Or you were looking to buy or rent something. And I would look for pregnant women in Starbucks on 49th and Madison. Listen, I feel like this is a safe environment for me. Right? Yeah, listen, if you're in the residential business, right, it's all about knowing your market. And now when we do buildings, it's all about figuring out who my target market is. But back then, it's like I was looking to do, you know, if I could do a $5,000 a month rental, the commission check would be $5,000. I was a new agent, so it would be 5,000 bucks. I'd split a 50, 50 with the house, it'd be $2,500. My rent was 1,100 bucks. My monthly expenses were $400, give or take. Like, I would be rich. And so pregnant women on the Upper east side in Lululemon pants were always very anxious and really needed extra space. And so those were some of my first clients. Foreigners coming out of Saks Fifth Avenue, people on Craigslist. And then if you were pregnant, I was coming up and asking you if you needed a new apartment.

Wow, bold. So, you know what also amazed me was a lot of us first saw you on Million Dollar Listing, and even then, it didn't seem like you were a huge broker. I mean, it seemed like almost soldier made. You know, we're rising slowly, but maybe talk about how you managed to find your way out of that show.

You know, Million Dollar Listing did a casting notice in curbed at the time, in the beginning of 2010. So I'd been a broker for like a year and a half, and I sold a couple apartments, but was kind of trying to figure out what I was going to do. And they put a casting notice out asking for the best agents. I think it was the best real estate agents under the age of 30. And so I just figured that that was me. And I went to an open casting call. 3,000 residential brokers showed up at the Hudson Hotel over a couple days. And then they narrowed it down over 10 months. And I listen, like, if you think about. And we talk about this a lot now, like, your personal brand is not your logo, right? Your personal brand starts with your core identity, so it's who you feel you are inside that then turns into the perception the world has of you. And that perception then turns into your reputation. Because that's what people say about you behind your back and then your reputation is your personal brand. And so I knew they were looking for the best real estate agents under 30. And so I just said, I'm the best real estate agent under 30. And I told them that's what I was. And they were from la and people from LA don't know anything about New York. So they totally bought it. And they followed me around one day I borrowed a friend's car, Range Rover. I'd never driven in New York City, ever, which was pregnant ladies. No. But all he told me was like, listen, this is how you drive in New York. Just go. And so that's what I did. I just went. And they were completely terrified. And I showed an apartment. They got to see kind of what my day was like a little bit. I told every single person I know to call me. I was like, between 8am and noon, just call me. My mom called me like 10 times and was. Didn't understand why I kept hanging up the phone. And then I ran out of things to do with them and so I just left. I kind of freaked out and left because a girl had done that to me once on a date. She just like looked at her phone and said, I'm so sorry, but I have to go. And it wasn't mean. It just made me like, what the fuck? It made me like, you then want her more. Right. And so that's what I did to them. And I have learned since that day forward one of the best way to sell anybody is just to walk out the door. And they cast me on that show a couple months later.

Amazing, amazing.

So did then just all blow up? Because, I mean, maybe talk to the group a little bit about, you know, the community, the social media did it. All of a sudden things went 180 from there.

No, no, no. Then I had a mental. I had a total heart attack because I was renting apartments in Koreatown, where I lived. I had been hired by TF Cornerstone to do my first building, which was 99 John Street. My first piece of PR ever was in Bloomberg. Because we had to figure out how to get people financing in a building that. That no banks would allow financing in. Because when Tom and Fred, when they bought 99 John initially from AIG and turned it into a rental building and then decided later to turn it into a condo building. There weren't condo phases. Financing was super easy pre 2008. And then all of a sudden 2008 happened. And so then Fannie and Freddie Came in and said, oh no, this building is now majority investor owned. But it wasn't. It was owned by the developer who was converting. But that process hadn't been worked out yet. And so no one could get financing. So I had to learn how to get PERS approval in Washington D.C. to get FHA financing. And we ended up becoming the first condo project in Manhattan that allowed FHA financing. And so we were able to do deals at 3 and a half and 5% down. And then when we lost that, then I convinced TF to do sponsor financing at like 5 year notes with a balloon. And so that got me like initial press. And I was 25 at the time, just winging it, trying to figure it out. And so we filmed that whole first season while I was a sales director there, running around trying to show apartments at the same exact time. But the first season didn't come out until the beginning of 2012. And when it came out, I waited for the phone to ring and no one cared.

Like, it's New York.

But it wasn't just New York. Like, I was like, okay, so I'm gonna be on tv. Everyone's gonna call. No one calls who they see on tv. You know, like, it's just not something you do. And so it took a long time for people to then be more comfortable. But what I knew it did is it, it gave me something else to say on the phone. So kind of the same thing I would say to people in Starbucks or outside Saks, because our office was on 49th of Madison. It gave me that other hook to go to people with and say, oh, also there's this thing. Whether you cared about it or not, it was a way for me to kind of get into the door. And the biggest role it played was in new development because developers, I found, really had a lot of product to sell, especially at that time. And they wanted the exposure for the product and they wanted exposure for themselves because then they could go around and raise money because they'd be sitting with guys and they'd say, oh, didn't you have that thing? I saw that thing on tv. And it would help them raise money for more projects, which is why you see so much new development on the show now.

Now, yeah.

So I'm going to give you. Because we started by exposing some of the early years, I want to give you a big compliment because. And to your point about it, you know, it's not just Hollywood and it sells and everything happens. You know, when we first met through a mutual developer client, you know you were already out there and super busy. But no, no, Ryan is available. He's always shows up, he delivers, period. And that's, you know, we've known each other for how long? And that is always the case. When you say you're going to do something, you're here, you follow through. I don't know how you do it, how you pack so much stuff in the day, but, you know, I mean.

I will not to cut you off, but I will say, like my dad taught me one thing, which is like when you decide you want to be an adult and a professional, you make decisions based on your commitments. Everyone else, amateurs, everybody makes decisions based on how they feel. So if I make a decision that I'm going to see you at one o', clock, or if I'm going to book out my calendar or if I'm going to wake up tomorrow at 4 to hit the gym if I'm busy or I'm tired, and then I cancel or reschedule, I am now an amateur and according to my dad, which is burned into my skull, I'm still a little kid. Or I can be an adult and buck up and do what I say I'm going to do. So I require that of myself and every single person who works for me. And I have a one strike policy. If you make an appointment and you do not make it based on how you feel or you were lazy or you were tired or something else, there are a lot of other real estate brokerages that you can work for, but not mine.

Love it.

Yeah.

So talk a little bit about Big Money energy, the latest book, you all have to check it out. What does that mean? And yeah, a little bit of a sales pitch there. Why not? Not that you need my help, but. But talk about that book and how you embody that and how that helped propel your career.

Sure. So I wrote my first book, Sell It Like Sirhant, which kind of turned into. So I worked for a firm called Nest Seekers for a long time. I don't know if anyone here has ever heard of it, probably not, but it's still there even since I've left. And I was there for 12 years. But I had to do everything by myself, right? No resources, no help, nothing. And so I had to figure out like everything how to sell, how to do like, there's no training, no nothing. And so I created what I called like an agent bible. And that eventually turned into Sell It Like Sirhant, which was the first book which turned into the television show on Bravo. Sell it like Sirhant. And then turned into the sales course. Sell it like Sirhant. That now I think we're just about 10,000 members in 110 countries. And we started that two years ago. But anyway, so that book really opened me up to a whole host of salespeople around the world. And then Covid hit last year and then I like, I'm not the kind of person that can just sit and do nothing. And so it's like, this is a great time to write this second book which is really seller. Like Sirhant was kind of the tool. So for anyone getting into real estate, both commercial or residential, like anything you need to know about how to build a sales career, right? And it's not the individual facts per cities or how to comp. It's none of that stuff. It's. This is. This is how you really structure your life so that you can sell anything, so that you can build this limitless livelihood. And it was very much all the tools. And then big money energy was the idea that I always had of like what I. What I call successful people. Back when I had no money, when I would go to an event like this and be totally stressed out that everyone has, you know, suits that were tailored and mine was not, and I only had one and I would see people walk into a room and just feel like they owned it. It's like that person has like amazing energy and that person has like big money energy. And it was a bit of like, you know, I lived in a 200 square foot apartment at 38 West 31st street, apartment 1100, like it's still there. And I had to kind of embody that. When I had my first sales client clients, and the first one I ever had, where it really kind of clicked for me is I had a woman named June Shen from China call me on the phone at the office randomly because she saw an ad that I had put up for an apartment that definitely didn't exist. And she said she was looking for an investment apartment for her daughter. And I asked her how old her daughter was and she said, oh, well, I'm pregnant. I was like, that is super forward thinking. And she worked in oil, oil and gas. And she was flying to New York and just wanted an investment property. And this is 2009. And my gut instinct, because she told me her budget was a couple million and I had done deals that were like a couple thousand, was to initially refer it out. I wouldn't know what to do with her. What do I do? I Don't know. She's never going to trust me. Who am I? I barely. I haven't even really committed to being in this business yet. And then I just sort of looked around my office and the guy that got me into it, it's like, wait a minute. I can do this. If I tell her I'm the greatest real estate broker in the history of the known universe, if I believe that, then it will be true. And maybe it's not true tomorrow, but it will eventually be true the more I manifest it. And I looked around at everybody else that was successful in selling. The only difference, other than the fact that I'm not Jewish and didn't grow up on the Upper east side, was that they just knew more, right? They were able to call upon their experience, the places they'd been, the deals they'd done. It's like, okay, so I can memorize all of that. And so where the theater training came in is I used to have to memorize books. And so I spent the entire week waiting for her to show up, just memorizing every block, every street, every building, unit count, architect, developer who lived in the building, what units closed. I would go into every coffee shop. So she wanted to be on the west side. So I did this from 51st to 71st west of 9th, basically so that just in case she was hungry or thirsty, I could walk into a shop or something and say, hey, Bob. And Bob would say, hey, Ryan, because he met me yesterday. But to June, I've been there a lot, and it worked. And she bought apartment 21L at 80 Riverside Boulevard, an ex tel building, the Rushmore, for $2.1 million. We negotiated the St. Regis Hotel at the 2:35 in the morning. And I had to go get her McDonald's and fries because here it tastes way better than it does in Shenzhen. And walking out of that deal, you know, after all the splits and everything, my commission check was just over $24,000, and that was two years of rent, you know, And I was like, all right, cushion. Everyone in the world is jun Shen to me now. And all I have to do is go meet them and if, you know, we talk about future you all the time. And that goes back to million dollar listing too. The best piece of advice I got for a million dollar listing was Rubenstein pr. If anyone ever worked with them. So Richard Rubenstein told me, he's like, listen, go hard and don't film anything that you don't want more of. So basically meaning like, don't put anything on camera that you don't want people watching in a year that you want to be known for one year from today. And it completely changed the way I think about business and career and life that you want to put yourself out there living in the future versus just the way you're living today. And so that initial season was then like Ken nahum's penthouse at 95 Green street that I got for cold calling over and over and over because I saw it in the New York Post because he was getting sued by his condo board. And my pitch to him was, let's put your apartment on the market and let's put it on TV as a total F you to everyone in your board. And he said, yes, it's like great. And that was my first $20 million listing that also didn't sell. And then it just kind of went from there. And then Instagram came out in 2013. I don't think I got on it until 2014. And that really is where things kind of changed because it became a visual medium for creating a passive audience and then passive leads and then video and everything started in 2016 and then the vlog and the rest of that kind of started in 2017. Course in 18. And then I blew up my whole life and started my own thing last year.

Last but not least, we have Scott Rechler. Scott has been such a vision visionary and such a steadfast supporter of New York City. And in this interview we really talked about the importance of giving back. I love not only that Scott has developed incredible properties here in New York City, but he's done it in the right way and that's certainly important. So I know you're going to get a lot out of this interview as well. Did you learn anything from your parents, your grandparents about dealing with challenges and even crises in the past?

Yeah, thanks. I'm glad to be here and share some insights. It's interesting when I think back. I came into the real estate industry in 1989 and it was right when we had the real estate industry was going through what I would say is one of his generational crises for the industry, which was the savings and loans crisis and was sort of what led to to that early downturn for the overall economy through the early 90s. And it was a transformative moment for real estate because after sort of decades from Post World War II of having operating real estate as a local business, relationship based business, parochial project by project, we went into this crisis and then came out of it a very different business that was much More institutional, much more about leveraging the public markets, public debt markets, securitization. And so it was really transformative. So coming in, in the heat of a crisis and then working in my family business and helping us navigate through that crisis and positioning us for. To ultimately go public on the other side of that and then and start growing was sort of. My father used to teach me, was my PhD from post grad school. I was at NYU grad school, but before that, after that, and then it's just, you know, so you learn a certain psyche in that that you keep pushing, you got to have tenacity and that there's going to be challenges in downturns or any other crisis that you face, but you got to be optimistic and you got to just keep pushing through those challenges and find your way and navigate it, because the world changes with each dynamic. And so as things change, you got to change your strategy to try to grab the current, to take you in the right direction.

That's fantastic. And I know you also, you have incredible experience and record of working alongside the community and working in the public arena. Was that something that was instilled in you at an early age? Was your family involved in government as well? Or how did you not involve the government?

But, you know, again, being from a business that is based on the health and vitality of your community, which real estate is, My family has always been very active in making sure that our communities remain strong. And so it was sort of in my blood to sort of take a very heavy interest and sort of, I think it's sort of symbiotic which that I view that, you know, when our community is strong, our business is strong, we're strong, our neighbors are strong. And so that, you know, I look at it as, it's all sort of part of the same formula and it's a connective tissue that you really can't operate with if it isn't all operating at full pace. And you know, we have a saying that says sort of foundationally at our company, which is doing good and doing well means doing better. And you know, that means that doing better means everyone needs to do better. And if everyone does better, you do better, but you're not going to do well unless everyone's doing better.

That's fantastic. And may I would imagine, certainly the public sector really benefits from your experience on the private side and really partnering. So talking about another incredible challenge and how you were able to persevere, maybe talk about coming back from 9, 11, maybe from a business perspective, but Also the time that you spent at the Port Authority and rebuilding the World Trade center.

Yeah. So 911 was obviously extraordinary and horrific time for the city and in so many ways also set the path for where the city is today. And I have a strange relationship. I actually watched the first plane fly into the first tower and. And watched the second plane and was down there for that whole experience. And I remember coming up from downtown, walking up, and everyone's covered in Sutton. There's F15s flying over the city, and people had their cell phones to their ears, but they weren't working. And it was probably the one time in my life where I really questioned whether or not I was going to even actually make it home. Because you didn't know. You knew. There was just so many rumors of planes in the air and where this was going. But it was tremendous uncertainty. And I always have this vision that sticks in my head is, was this young woman standing in the middle of, I think it was Madison Avenue at the time, screaming, daddy, Daddy, Daddy, Pointing where the smoke was, coming up where the World Trade center was, and these two other women who obviously were strangers, were holding her like she was their own child and caring for her. And it was a moment of time that made me really think about, you know, what makes New York New York. Right. Which is that, you know, that when things get tough, we come together as a community. And while there's so much diversity and different people from different places, it all seems to disappear, those differences when we are challenged as a community. And so that's something that has stuck with me. And then through the years, I worked on, be obviously engaged with downtown. And then in 2000, the governor asked me to take over as vice chairman of the Port Authority. And really, the time the World Trade center had, all the work had stopped. There was infighting amongst all the different stakeholders. There was no budget, there was no timeline. And he said to me, this is supposed to be a symbol of freedom, a symbol of hope and a symbol of government effectiveness. And instead we have this, this site that is a symbol of total ineffectiveness and almost sense of irresponsibility, and we need to turn it around. And so that was what I was tasked to do and got very deep into it. And you realize when you start working on that project, the people, the men and the women, the construction, everyone that worked on that project viewed this different than any other project. This was a mission for them, too. And the level of dedication and commitment of all the men and women that worked on that project was extraordinary. And you know, and the challenges that dealt with it were obvious, right? I mean, this was a sacred site where so many men and women lost their lives. It's a site that was publicly owned and yet there's private partners on some of it. It was had an agency that has held by run by two states, New York and New Jersey. So you had those stakeholders in the mix. You had the city and the state. So there were just so many different stakeholders. And so, you know, the big part of my role was to come in and help build bridges of understanding, to get the people on the same page, communicate, put aside the, you know, any parochial political issues or agendas, be sensitive to the families that lost their loved ones there and their issues, but also be realistic and thinking through some of the commercial implications of rebuilding Lower Manhattan and what it means to our state and our country. And so it was difficult, to say the least, but in many ways it was a very enlightening, rewarding process. And now I'm vice chair of the 911 Memorial Museum Memorial. So I'm still very engaged there with Mike Bloomberg as chairman. And you see, you know, there's a lot of similarities today to sort of some of the feelings that we felt, you know, post 911 and what the whole museum is about, right, which is that, you know, after 9 11, you know, we felt we were attacked. We were attacked from something outside. And we had, you know, it took so many lives. And, you know, there was a sense of shock and sense of uncertainty that exists as our whole community, sense of mourning for all the lost loved ones and neighbors that were lost during that period of time. But there's also coming together, as I described earlier, and that's what the museum's about, right? Which is how do we take moments like this and build resilience? How do we take moments like this to build stronger communities, to find our way to cross over the horrific experiences we went through and come out better on the other side. But at the same time, respect the memory of what happened and learn the lessons of what happened and respect the people that we lost during that period of time. So a lot of what those that have gone through with 911 has resonated with me a lot as we were moving forward through this process.

Well, I was really amazed to hear your story and when you spoke to our company too, and talking about that time and how everyone did come together after that incredibly tragic event, but how New York did rebound stronger. And I know that's the hope today with what we're facing, but this is Very different, because then we were all able to come together and help support the local businesses. And now the best thing we can do is to stay put. And I do want to get to that. And I really, I want to hear all the things that you've been doing to help us figure out how best to move forward. But just to go back to your story. And so coming out of that and the city starts to rebuild, talk to us about what was going on at Rexon at the time. Were you all building the portfolio? I mean, you had an incredible run until, was it 2007 when you ultimately sold the company, but maybe talk about while you were at the company, how you all were able to expand the portfolio and what the focus was at the time.

Yes. So what we did in 1995, when we took the company public, the objective was to acquire other sort of generational family businesses in office and industrial space throughout the whole New York metro area and build a regional company with the view that you have this power of local, of connectivity, of insights, of relationships that would be a competitive advantage for us to be able to source opportunities, service our customers better than we otherwise would have, work with local officials, and build stronger communities through the process, which is something that was always important and rewarding for us. So we did a series of acquisitions and then by 1999, we were in every market. And then in 2001, actually post 9 11, we began the process, start thinking about shedding some of our suburban assets and investing more into New York city. And so in 03, we shed our industrial portfolio and then took the proceeds from that and began buying more and more in New York City. And then by, I would say, 05, 06, we were one of the largest owners of office properties in New York at the time. And we saw the world changing again. We saw that while New York was thriving and prices were escalating, rents were going up. We saw our customers needs were changing and that there was a need for them to be more and more flexible. And yet the public markets were more and more restrictive. So whenever we did anything that wasn't within the four walls of what the public markets thought was normal, we would get penalized. And yet when we talked to our customers and so changing demographics, we realized that we needed to operate differently and think longer term to what was going to be the changes that would come through technology, through the way people work, people live. And so we decided to sell the company in 06 and ended up selling in January of 07, which is pretty close to where the Top of the market was, but in reality it was more strategic than speculation. As to being at the top of market, it was more strategic that it was a time that we thought that there was enough demand that we could actually trade the company. And you never want to try to sell a public company or begin the process unless you know you're going to be able to execute. Because if you fail, you lose the confidence of your board, your customers, your partners, your shareholders. So we knew there was the window, but we also felt that we wanted to restructure our approach to being longer term, have more flexibility and really driven by our customers insights and our customers needs about how they want to live, work, play and stay in a changing dynamic. So we sold in 07 and then went out and raised capital from around the world for a period of time and then came back in the market in August of 09 and probably over a two year period of time acquired about $4.5 billion of assets early in the game. And if you think about August9, our first acquisition was a piece of debt on 1166 Avenue in the Americas and JP Morgan was its sole tenant. Then we were getting a 15% cash on cash return and we spent literally weeks underwriting. What happens if JP Morgan goes out of business? And what's this worth? There was still that much uncertainty, but we went through that process and then continue to buy buildings from private equity hedge funds and then file tech companies as they were growing on the west side. Board star at Lehigh, which was our first big building in Chelsea and then a number of others in downtown. And so we again it all became where are our customers? What do they need? Same thing, a multifamily thinking about transit oriented development in the outer boroughs and suburban urban areas that have that connectivity. And so that's driven our business and our growth. And today we have about $9 billion of equity, private equity that we've raised from around the world and $20 billion of assets that's in this portfolio. So we're as vested as you can be in the city. And the underlying theme and investment thesis was that New York at the time, coming out of 08 09, another big downturn was being repositioned to be a magnet for talent. And that was Mike Bloomberg's big focus was how do we create a economy that focuses on applied sciences. And as technology was evolving, it wasn't about creating new technology, it was how do you implement that technology to make a business more effective. So how do you apply that technology? Our bet was that that was going to be successful and more and more of talent would come to New York. And as more talent came to New York, more companies would come to New York and we'd have this self reinforcing cycle. And if you look at the stats in terms of population growth, job growth last year, the recent flurry of major tech companies and media companies making enormous commitments to New York, that's really what's driven it. And so today, as you think about where we are, that's really, I think the question at hand, right, is that cycle that we went through, that self reinforcing cycle of talent coming here, talent attracting the companies, will it be able to sustain itself in a post C19 world? And our bet is that it will, because I think that New York, as you said earlier, it's been tested before, but there really is no place in the world like New York in terms of the scale, diversity, culture.

The level.

Of different types of businesses that are here, and expertise. So there may be a period of time like post 9 11, where you may see some pullback, you may hear stories about people moving to the suburbs, people moving to secondary cities out of sort of a fear, anxiety from what we're all living through right now. But as we get to a point where there's a vaccine and we normalize things and work our way through this, New York will resume itself. And I think one of the big benefits we have, which we didn't have back in 08, was that we have the big companies that have made commitments here. Whether that's Google, whether it's JP Morgan, whether that's Disney, they're building for the next decade, two decades, three decades to be here. So in this case it's almost the inverse is going to be the stabilizer. It was the talent that brought the companies, the companies being here is going to stabilize us through this period of uncertainty and give New York a chance to get to the other side and then rebuild all the characteristics that made it so attractive to start with.

I fully agree that the New York will come back, it always does, and it'll be there different this time. But I think we could certainly also learn from how you were able to rebuild at various points over the last few cycles. I want to definitely talk more about today, but you talked about how you sold in 07 and then you were able to raise this money. And I've got to imagine that was no small, I mean thinking about the collapse of Lehman and Bear Stearns and suddenly you're back in the market trying to raise capital. And for Our listeners on the show today, they're probably thinking about, okay, there's going to be opportunities in the future, but right now the capital markets are effectively shut down. I've got to imagine there was some similarities back in 2009 when you were looking to raise money. How were you able to convince investors and banks that this was now the time to jump back in and that you could deliver?

Yeah, that's a good question. And it was really, we started in 2007 and 8. So you really challenging times, particularly in the U.S. u.S. Pension systems were overwhelmed with challenges. Not only they were overwhelmed with challenges, most of them had to have budget cuts. So you'd have one portfolio manager doing of the job of 10 trying to deal with all the fire hose and challenges coming to them. We had the benefit of having a very strong track record with our public company. Over an 11 year period we had a 700% return to our shareholders. So we had that. But the reality is the investors that we're pursuing were totally different investors than the ones that would own our shares as a public company. And so these were all new relationships and it was very difficult. We literally traveled around the world. I always, people say what was the worst decision you made? I always said the worst decision I made was that right after we sold our company, I didn't take a year and a half off and start later because we just started the project.

I was going to ask if SL Green asked you to take some time after that you were able to go back and invest right into New York after the sale.

I think we had a year non compete in New York City, in Manhattan maybe. So the theory was let's go raise the capital during that period and then come back out. And what ended up happening was there were, I would say 90% of the traditional capital sources were dealing with too much real estate issues of their own to have interest investing in a new concept. Even they thought it was the right concept. There was the 10% and it turned out to be in our case, global investors, non US Investors that had not been invested in real estate when the collapse occurred and saw this as a unique opportunity to get into one of the most competitive markets in the world when there was the least amount of competition. And they viewed us as having the local expertise to be able to go do that. And so that was really, we were fortunate to find the handful of them at the time who believed in that vision. But also it took us to really start cementing and building momentum was getting the first deal because you can talk theoretically about what you think the opportunity is, but that only goes so far. But when you can actually show people, here's the investment opportunity, here's why this is so compelling, it's right in front here. Then people can start seeing tangibly what you're referring to. So it really wasn't until we started to lock up our first couple of deals and we had to use more of our own balance sheet in doing that, that we were able to start getting momentum in growing the fundraising process.

Thank you again to all of you for listening in. This show has been a tremendous amount of fun. I can't wait for the next hundred episodes and to keep this going. So as always, you can go to James Nelson. That's where you can get the show notes for this episode so you can find out how to connect with our speakers. You can also go in and find articles that I've written along with my writing partner Rachel Hartman. We post them weekly at Forbes, but we also do a lot more work. We're here to help you gain the insider's edge to real estate investing. That's what this site is all about. So hoping that you check it out there. And last but not least, if you have not connected with me at James James Nelson NYC, Instagram, LinkedIn, Twitter. Very active on those platforms, also putting out great content to help you gain that insider's edge. So thank you as always for joining. Until next week, thank you for listening.

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