Finding a Partner with David Schwartz

Foreign this is the Insider's Edge to Real Estate Investing with James Nelson, the principal and head of Avis and Young's Tri State Investment Sales Group. In this program you'll learn game changing strategies to outperform the market. James will teach you how to source, execute and capitalize on the best real estate opportunities in New York and around the world. Now here's your host. This podcast is for educational purposes only and should not be relied upon for investment decisions. The opinions expressed are those of the guests and not their companies. Listeners should not act upon the information without first seeking appropriate advice from an accountant, lawyer or other professional.

Welcome everyone to episode number 195 of the Insider's Edge to Real Estate Investing. This is your host, James Nelson. I'm principal and head of Tri State Investment Sales at Avison Young. Thank you as always for listening and I love the feedback. What is so gratifying is when I'm out and about and summer has actually been a surprisingly active time. I've got to remind you all this is an in person business. This is not. Yes, you're listening and that's a way you can improve while you're on the go. But as you're looking to build your business, going out, attending summer outings events is a great way to see people and also you know, while you're at it, have have some discuss and it's been great to get some feedback from many of you and I also love suggestions on guests so feel free. James nelsonvisonyoung.com that's my email. You can also try james nelson.com if that's easier. But any suggestions feedback from the show, really appreciate it. So we have another incredible show lined up for you today. With us we have David Schwartz who is co founder and principal of Slate Property Group. I've Known David Probably 15 if not 20 years when we met up of Brooklyn when he was just starting to go out on his own, built his first building in Brooklyn and fast forward Slate today has developed over $2 billion in real estate throughout New York City with over 2,000 apartments. And David has an incredible perspective. He really gets involved in the community, has done a lot of work civically and also on the political front, which is something that we don't actually talk much about the show about how to engage with elected officials and he's certainly partnering with them today as go out and they're building affordable housing all throughout the city as well as luxury condos. It's really interesting how they've really built the wide spectrum so maybe for some of you out there who are in the affordable space and you're interested thinking about luxury apartments and vice versa. I know you're going to get a lot out of this episode. So as always, if you go to james nelson.com I built this site for you. That's where you can find show notes how to connect with David. You also see helpful white papers that we've posted on such media outlets as Forbes as well as some helpful video series. There's a lot of information there for you. While you're there you can sign up for the monthly newsletter. That's what really culminates everything that we're doing on a monthly basis to help you gain the insider's edge to real estate investing so you can get those game changing strategies to outperform the market. We're going to have a brief word from our sponsor and we'll get right into that interview with David Schwartz A.

Different approach to Putting our Clients first Avis and Young's Tri State Investment Sales Group sells multifamily office, retail, development and specialty sales throughout the New York metro area. As experienced thought leaders in their industry, our 35 member group is available to help you make informed investment decisions by advising you on your current holdings or identifying new opportunities in the marketplace. Our one unified team is built on an industry unique platform which promotes unparalleled collaboration and teamwork. We share core values of hard work, integrity and expertise. We put our clients first providing tailor made strategies to achieve superior results. Please Visit us at aytristateinvestmentsales.com and follow us on Twitter, LinkedIn and Instagram ames Nelson NYC to learn more.

All right, welcome everyone. Thrilled to have with us today my friend David Schwartz who is co founder and principal of Slate Property Group. Currently Slate is developing over $2 billion in real estate throughout New York City representing over 2,000 apartments. David and I have known each other a long time so we're going to have a lot of fun today, get into a lot of different topics. So David, welcome.

Thanks James, nice to see you.

Likewise.

So it's a long time we know each other.

Yes. So you're a native New Yorker, right? So the son of the famous gridlock Sam. So I want to talk about like your New York roots and how is that kind of like help shape you and the fact that you've remained committed to New York and just talk about how that's kind of informed your journey.

So I was born and raised in Flatbush, Brooklyn. So like real Brooklyn when Brooklyn was Brooklyn. So The Brooklyn that you think about. And my dad worked for the city, so my dad is Gridlock Sam. He coined the word gridlock.

Right. So his job was to actually try to chart the traffic and figure out how to alleviate it.

And he was like a superhero fighting traffic.

Okay, I like it. Wasn't he successful?

You know, I think mixed bag, but I think nowadays I think we're losing the traffic war. Okay, but he's still fighting it. Okay.

I love it. I love it.

Okay, so if you're stuck in traffic, my dad's on your side against traffic.

All right?

That's his mission. But I grew up in Flatbush. It was sort of like a working class kind of neighborhood at a time in which people were leaving Brooklyn. So this was. You know, my parents bought their house in 1976. That was the time of blackouts, riots, you know, disinvestment, white flight, all of that was going on. And I think that shaped me a lot. My mom was a social worker, and I went to public schools in Brooklyn. It was a really different place. And I think it really, you know, taught me a lot about the diversity of people, the diversity of the world. And, you know, also just sort of as Brooklyn changed and as New York changed, I mean, New York was in a tough spot in the 70s and 80s, and New York started to get a lot better. And it's great what's happened in New York, and. But at the same time, there are some negatives. Right. It's really expensive. At that time, it was really cheap. We had 7 million people in New York. We probably have. I think they count like 8.6 or 8.7, but it's certainly a lot more.

Right.

So we've added probably 2 million people to New York over the past 30, 40 years.

Your attraction to real estate, because you end up going to the Kuhn Real Estate center at Syracuse. So at some point along the way, did you have family that was involved in real estate or how did you even. No, this was a thing.

Well, it was. It wasn't the Kuhn Real Estate center at that time. So there actually were. It's. It became later.

Okay.

You know, updating myself. I wish. I wish I was young enough to have gone to the Kuhn Real Estate center, but I wanted. I went to school to be an engineer, and my dad was an engineer, so I was going to be an engineer. And then after a couple years, I realized I didn't want to be an engineer.

So what had originally attracted you to engineering? And were you building things? Like, are you handy, were you thinking? I mean, what was the. It was just kind of, I want to do what my father was doing.

If you ask my wife, life, I'm really not very handy at all. You know, I was good at math, and my dad was an engineer.

Okay.

And we came from sort of like that. And that's what my dad knew. So he was like, try engineering. And you could always do anything else from it. But, you know, if you learn how to. If you learn how the math works and you learn how to solve problems and how to be analytical, it can help. And I started as an engineering major, civil engineering and finance minor. But I quickly realized that I like the finance stuff a lot more.

Were you exposed then to real estate in school or.

No, no, not at all.

So that happened after. So, okay, so you graduate?

I graduated. I went to work at JP Morgan doing investment banking 100 hours a week. Yeah, it was like, still in the days when, you know, I think it's changed, but back then it was like, it was like pledging paternity. Right, right. You're going to do 100 hours just to torture you.

And how did you do with that?

I mean, I survived for about nine months or so.

Okay.

But, you know, I will say, learning that level of responsibility and getting things done and, you know, just being in tough environments really did help me.

Were you actually kind of an analyst capacity and doing underwriting, and was any of that transferable to underwriting a real estate deal?

You know, I think it was in the sense of, you know, look, understanding cash flows and looking at what numbers mean. But I think what was more important was the expectation of figuring things out and getting things done correctly. So I think that expectation of excellence was really the thing that you learned most from investment banking and the hard.

Work ethic, I would imagine.

Yeah, like, you just have to get it done. Like, hey, this has to be done Monday. Like, if that means working all day Saturday and all day Sunday, like, that's what you're just going to do.

Right, Right. And so what happened after the nine months there?

So we, you know, I got involved with some friends and we started a, you know, a company to do some VC work. And, you know, ultimately, technology was not what I wanted to do. And I just always kind of had this passion for real estate. Even when I was a little kid, I used to. And I only realized this later, I would ask my parents, how much does that house cost? How much does this house cost? Why would a house in Flatbush that's so big cost so much less than, you know, something in Park Slope that was smaller.

Right.

You know, like you have a house in Flatbush where we had a backyard and you had a driveway and a basketball loop, but you had attached houses in Park Slope and they were like double or triple the price. And it just like, why, that doesn't make any sense to me. But.

And you had an understanding of the landscape then, right? You had, you knew the neighborhoods. I mean, that, that certainly has to be an advantage, right, as an investor, because we talk about sometimes it's better to start off investing in your own backyard. Or, you know, we have a lot of investors who've been on the show that invest nationally. I mean, Ian Ross from Sumera came in here and said, look, you know, I go in and I'll learn a market in like two or three days and I'll go make an investment. I mean, you obviously have a lot more time spent here. I mean, you've seen these areas change.

Look, I think starting out, it was so important. I mean, and I went to go backwards. I mean, I ended up working for a company called Crescent Heights. That's how I started to learn.

So you went from the VC straight to Crescent Heights? Yeah, so I mean that, that's a. I mean one of the largest developers in the country. So, I mean, but you didn't have real estate experience at that point. So how did you convince them that you could so get the job done?

You know, I, I told them, I made them an offer I wanted to work there and I said, I'll work for free.

Really? Oh, I love that.

And if you know the, if you know the Crescent Heights guys, you know, I love them, you know, Sonny and Bruce and Russell. Amazing. And taught me so much. But they like a good deal. So, you know. Yeah, they took me up on that deal and I worked for free for a little bit and then ultimately became a full time employee. I mean, it's full time, but I became a paid employee and I was traveling to LA and to San Francisco. It's the first time I started at Crescent Heights and my first day was the first time I ever went to California, first time I ever flew business class, and my second day was the first time I ever went to Hawaii.

Wow. Yeah, that's like the dream job, right?

It was a dream job. Being in my young 20s. I went out there. I knew nothing about construction and development, but I was a. I wanted to be a sponge.

How did you pick Crescent Heights though? What even made you think to just cold call them and Say, hey, I'll work for free.

You know, I just was networking, I was calling lots of people, but I love the idea that they were doing a lot of development, but also they were going to let me do development. So a lot of people wanted me to just do numbers. But I said, you know, the numbers are kind of the easy part. It's what's behind the numbers that's the hard part. So I wanted to learn, like, does a building cost 50 million to build or 60 million? Like, right. It's easy to know if it makes sense if you know the numbers.

So not to fast forward to today, but if someone called you up tomorrow and said, you know, hey, David, I want to come work for Slate and I'll work for free, but I don't have any experience, what would you say to that person?

I would, I would say to them, why? Okay, why do you want to do that?

Right.

You know, I'd want to understand, really. I mean, I, I had to sell them on why I was passionate about it.

I, I do feel like it's different today, though, because when I started 25 years ago, and Bob Nackel, Paul Massey, who I started my career with, and we laugh about it today, they joke that only two people applied for the sales position that they were hiring and I was actually their second choice. I mean, today we just, you know, now we're hiring for an analyst. We get 4, 400 resumes. I mean, and these students, and many of them who are listening to this right now are so much better prepared. Right. There's so much more out there. But they, they go and they have these internships during college and they're, you know, already understand, didn't exist back then.

I mean, I guess we're aging ourselves. I guess I'm older than, than I like to think. But, you know, there weren't many real estate programs. People didn't know anything. There weren't that many, like, institutional kind of companies. Crescent Heights even at the time, was still really a small business. I mean, it was a bigger number of people, but it was not the way we think.

They were building high rises. I mean, right now, let's be clear, they're building 40, 50 story towers.

That's what we did.

Right.

But you know, some of the early ones that they did, but still, it had a much smaller company mentality. You know, real estate wasn't as much of an institutional asset class yet. Right. I think it was sort of emerging. You know, you're talking about like 2000 time period for, for listeners this is like 2001.

Right? Right. No, it's very, it's very different. And professionalized isn't the right word, but, but it's really become so much more of a, it's an industry.

Yeah, it's, it's more institutional than it was.

So I want to, I'm curious about your experience of working for someone like a Bruce at Crescent Heights. Brilliant deal maker, but let's be clear, demand. I mean, he's been a client. You know, we sold property for him, but intense, to say the least. So what was that experience like? And maybe you said, well, James, I was already working 100 hours a week for an investment bank. Like, so I, I, I get it. But for those listening to the show right now, thinking, you know, do I go work for a small boutique firm? Do I go work for a big shop? Like, do I want a mentor, a leader, a boss to be? You know, what was that dynamic like to learn from?

Look, these guys are, are absolute geniuses and extremely tough and demanding, I think, when it comes to listeners, is trying to understand yourself. Are you the kind of person that does well when you're really challenged and pushed, or do you need a more of a softer, nurturing environment? And that's what I think. I always love the challenge.

Right.

And we were challenged there. I mean, you know, I talked, I went to Hawaii. I had never done comps for a building, so I go to Hawaii. We go to Honolulu, and Bruce's partner Sonny, says, go to Maui and find all the bill, check out all the buildings. No instructions, no plan. And I just day two of the job, I had never done a comp. I had never done anything. And I just went there and so.

How'D you do it? You had no idea what you were doing?

I just started to walk into offices and sales offices and just try to figure it out. And, you know, it was, it was trial by fire, but it was very fair, and it was a meritocracy. And if you were good, you did well. And, you know, as I earned more trust, I got more responsibility. And, you know, I just figured out by doing and I just learned, and it was an absolutely incredible experience.

I mean, I'm sure you probably screwed up maybe one or two times along the way. I mean, what, what was, what was that like? It was kind of like, make a mistake, just don't do it twice. Or.

I mean, I screwed up more than once or twice. Yeah, right. But it was like, fix it.

Yeah.

You know, fix it, do it was.

The leadership style was sounds like just go figure it out on your own. Right. I mean, maybe if he'd given you, you know, set you down for 15 minutes, you know, maybe it would have been a quicker process, a more efficient process. But do you think that, like, go figure it out type of environment, was that actually better for you because you, you had to learn, really, and, and maybe you had a different approach rather than just trying to check boxes.

It was a go figure it out environment. But also then I was able to watch the way that they did it. Right. So they were very open with explaining the thought process. So I think that there was a lot of a go figure it out. But then it was also, we would then understand and they would be open as to how they thought about deals.

Right.

And that was so valuable. Like, why is a deal good? What is it that you like about this deal? What is it that's making you interested? Because why does one person like a deal and another person doesn't?

Right.

You know, you do it all the time. You're selling properties and smart people. One person will say, I like that property at that price. And another person that's also smart says, I don't like the property at that price. So when we were buying and transacting, I wanted to know why did we like it? What was it about the deal that we liked? And I was able with, with Bruce and his partner, Sonny and Russell, and they would really explain the deals. I mean, they expected you to really work hard. They didn't expect you to be perfect, but they expected you to really work hard. But then they would, they would teach. They were really good sort of teachers in the, in the, in the deal process. So you really learn and understand why a deal made sense. And I actually think they're some of the best real estate investors that I know to this day.

No doubt. Yeah. And if you look at their, their footprint and what they've done, I mean, it's, it's pretty exceptional. So what was it though, about real estate? I mean, it seems like once you were exposed to it, you were all in. I mean, what was it that connected with you that maybe didn't in the investment banking world or in the VC world? You know, for those out there listening, maybe they're in a different industry and they're thinking, you know, what, what is the appeal to getting into this?

I mean, I gotta tell you, there is nothing more fun than having an idea and being able to execute on it. Right, Right. You know, you go out there and you try something and you can do It. And it's like, I have an idea. I'm gonna go and do it. Investment banking. It's like you're raising money for somebody else. You know, you're saying that you did this project, and I'm not trying to knock it. It just wasn't for me, but I wasn't the one actually doing it. I love the idea of going out there and actually doing something, and. And it's so much fun when some people think that you're wrong.

Right.

And some people think that you're right, and.

And.

And it's sort of like it's definitive. There's a scoreboard to it. You see if you're successful or not. And, you know, I remember the first deal that I did, which is where I met you. We built a building in east Williamsburg in 2005, 2006. I mean, that was an emerging market at best. Middle of nowhere is what most people said.

Well, today you look at it right on the L train, and it's probably. I mean, I don't know if it's worth 10 times as much, maybe. But clearly, you all were pioneers. But what was it that. I mean, how long were you at Crescent Heights before you said, okay, I'm ready to take the leap? I want to do something more entrepreneurial. I want to find a partner. I want to go do this on my own?

What? They're about four years. Look, I think the beauty of youth is. Is how little you know and how smart you think you are and how much you think you can do. Okay, Right. Like, had I known how hard it was, maybe I wouldn't have done it. But when I was, you know, 26 or 27, I said, I'm going to go and develop on my own. I'm from Brooklyn. I can figure this stuff out. And I just said, why not? What do I have to lose?

You had a partner, so. In Deepak. Really smart guy. And he also comes from, you know, the banking world, if I'm not mistaken. But he had some holdings. I mean, this was a partner that you had that had holdings of existing, but this was kind of the first.

Well, let's talk about how I met Deepaks. Deepak, Raj is still a great friend, and he's been an amazing mentor to me, and he was my first partner. I was bidding on buildings with brokers, and I had no money, which is kind of a challenge to buy real estate, right? So I would bid on a building and offer, like, a $15,000 deposit or something. And the brokers were just like, look, you're a smart guy and everything, but that's just not going to, you know, pass muster, you know, so. So one broker actually said, you know, you're looking at this building, and there's this other guy who's looking at the building, but he doesn't really know development. And we're going to convert a loft building. I think it was on. It was in Nolita. On. It'll come to me right off the Lafayette, right. Right down there. And he said, why don't you meet this guy? The guy is, you know, a successful investment banker, and he's in real estate, and you guys might be able to team up and do something. And, you know, I was, you know, probably 26, and, you know, Deepak was more substantial and had a big investment banking career. And we met and we just kind of hit it off and we said, why don't we go out and start developing? And he had owned some stuff in Brooklyn already, so Deepak had an interest in Brooklyn. I said, why don't we go and start a business?

So the idea of having a partner who's complementary, who is, you know, you had some of the hard skills and, you know, the hustle. He obviously had the financial relationships, but he also had some experience. So was it just luck that you found the right partner who kind of did the match, or was it also. Did you all kind of share the same vision or. Because you, you know, very different. You know, you're not coming from the same stage of life. I mean, this is kind of might seem at first glance like an unlikely partnership, but maybe this is helpful for our listeners out there who think about a partner.

I think we have to create our own luck. We need luck, but we need to be in that situation. So, like, for each conversation, you know, there must have been hundreds of conversations that were dead ends where I was offering, you know, bids and brokers were laughing me out of. Out of town. Right. But I didn't give up. So I think we create our own luck. I think with. With Deepak, it just, you know, it was the complementary skill set. So I think what's important for people to think about, and I always think about my career, is having complementary skill set with people that you work with.

Right.

So he brought a lot to the equation in terms of just a really smart, successful financial person that's been around for a long time. Right. At 27, I thought I knew everything, and frankly, I knew very little about the way the world actually works. I knew a lot about building a building, but in Terms of the bigger picture of the world. And I think Deepak at the time wanted somebody who had that energy and that aggressive behavior and that feeling that they could get everything done and you know, frankly, having the time to sit on sites and build buildings. Right. Deepak was not at that point in his career, but we had a shared vision that Brooklyn was going to be a great place to invest Good. Right. So that's where that was the nexus. And he brought a lot of financial resources, experience, knowledge, how do you negotiate with lenders and, and that sort of stuff. And that was really important. But also a big picture perspective on the world. Right. Like it's important to be in Brooklyn and what the real estate is, but what's going on in the world affects values a lot.

For sure.

And I had limited experience about how the world works.

For sure. So tell us how that actual development went. Because yes, you had built, you know, being part of Crescent Heights and having a whole team, suddenly it's you. Right. And so you're not leveraging those relationships that, you know, deep bench of talent. I mean, are you literally doing everything? I mean, how, where did you start to find the architect, the contractor? Like how far in the weeds are you like camped out at the job site every day? What does that look like?

I learned more on that job than I've learned doing anything else in my entire life. Okay. I mean, you know, all of a sudden when your email address doesn't say Crescent Heights. Right. You don't have the same value to people. Right, right. You know, when you're Crescent Heights people return your phone call in a second. When you're David Schwartz at, you know, Gmail or whatever it was. It's, you know, it's a different, it's a different message. And you know, what was interesting is the quality level of the types of contractors and design teams and others is really different when you're building a big building. Right. Sure, you're dealing with a certain level of sophistication. But my first building was 32 unit, five story building.

So how did you find out who was good or not?

Well, I thought I knew, right. And you know, I hired people and I would, you know, we were looking for references.

Yeah.

Projects, you know, going around, driving around looking at what contractors are building architects. I met, you know, an architect that did this sort of stuff and we went and we built this 32 unit building. I was on site every day I learned more about construction sitting on that site. Because, you know, when you use one of these big CM firms there's like, you know, 10 different people, project managers and assistant project managers and engineers that are writing reports and all that sort of stuff. When you're going with these small general contractors, we have like a, you know, at the time it was like a seven million dollar budget. You know, they don't have the ability to have five or six people doing paperwork.

Right.

So I'm sitting in the trailer and just learning. And they were so cheap, they didn't even have bathroom in the trailer. So I had to make friends with the coffee shop down the street. But so contractors save like 100 bucks a month or 50 bucks a month. Wow.

So I mean, but, but negotiating a contract for the first time and I mean, you always hear these horror stories of change orders and delays and I mean, did you battle with that all or did, did it nonstop?

It was the non stop battle. But that's how you learn how things work. So even now, I mean, what I learned there I'm using every day. Like I understand why, but I'm, I was always very inquisitive. And I think that's something that I would always tell people is like always try to understand why. Like why is it delayed? Like, you could just yell at the guy, I need it here now. But it's like, why? And I remember a story that was great was the guy didn't order one boiler because the other boiler would save him money. But the other boiler was like a three month delay.

Right.

So he's telling me like, oh, it's going to be here in four months now. I needed the boiler, but meanwhile the guy was coming up with this whole story because he wanted to save like $10,000 or $15,000 and put my job at risk.

And the delay is probably costing 50.

In the long term, at least. Right, right. And it's all because the guy, and it's a guy behind the guy. Right. So it's the plumber. The plumber has a separate boiler guy. So it's a general contractor to the plumber, to the boiler guy. And there somebody's trying to save money and create just massive havoc on the job. But just being there, you know, will tell you so much because so many of these things that you don't see and people say, well, the guy didn't show up. But is that true?

Right, right. Well, I mean, I'm sure the fact that you were actually there in person because, you know, there's plenty of developers after a certain point, you know, they're like, you know, it's certainly after a Couple projects, you've got trust on the team. But I, there is also that squeaky wheel gets the oil. I mean the fact that you were there every day, you know, if people aren't showing up like, guys, what are we doing here?

And still to this day I can go onto these sites and I know what's going on and where things go wrong. I live there, right. And that wasn't the only site I lived on, but that site, like I live there.

So in my book I, I actually tell first time investors to stay away from development because all the inherent risk, it's, you know, a lot of things as you know, I mean, just even getting a project out of the ground, I mean clearly you had experience before building substantial ground up projects. But what was it about ground up that you said, I'm going to jump right in as opposed to like a rehab or maybe you know, trying a smaller multifamily project before. I mean, and I know you're saying it was only 30 plus units, but it was a 7. I mean it was, it was a decent sized project. Right?

So yeah, I mean, you know, I love the idea of building buildings. I mean, right? You go out there and you build a building and change things. I mean, look, first of all, in general, fewer people do it, right? Right. If you have a hundred people, you buy a building, you know what the cash flow is, it's a lot easier to do. So if you can do something that not everybody can do, you, you're adding more, you're just adding more value. And that to me just felt like the right place to be. And you know, I said, you know, at that point in time we saw this building boom that was going on in Brooklyn and we need more housing units in this country. So for me to be able to build a skill set and do something different, I think that's just makes me so much more valuable. Anyone can buy, you know, I don't mean to be disparaging, like it's easy, much easier to buy a building, it's much harder to do develop. So let me do what's harder for sure.

So this is a good segue for Slate Property Group and now your partnership with, with Martin. So I mean the relationship with Deepak, again, you stay in touch with them for years, but it, at some point it seemed you were ready to take this to the next level. So was that when you met Martin and talk about that partnership? And Martin has been on this show as well, so definitely, you know, go back and listen to that episode as well. But talk about how that introduction happened and, you know, how that partnership was complementary.

Yeah. So, you know, Martin and I had known each other for a long time and we had talked about doing something together for years, you know, to do something entrepreneurial. And Martin and I came from very similar, but different backgrounds. He worked for family office that did, you know, a lot more acquisition stuff. They did some development, but very focused on the operational side of it. And, you know, going back to complimentary skill sets, Martin and I have complementary skill sets. We think about things a little bit different. Differently. Same vision, different way of thinking about things. We do different things within the, the business. I think we have different skill sets, but they're really complementary. I think to work with somebody that does exactly what you do, you don't need that. Right. If you have a right point guard on the team, you don't need another point guard. Right. You want to have a center, power forward. And I think that's sort of the way that Martin and I work together. Again, goal is in basketball to score points. Right. In real estate, it's to, you know, have successful deals. And that's sort of the way we think about it. And we think about the world very, very similarly, but we do things very differently. And I think that that skill set. So when we started Slate, you know, the idea, and the idea really was that we were going to have an idea to have a real estate business that was going to evolve as the world evolves. Right. We, we want to be there to evolve. The world changes and we don't want to be so rigid in what we do that we can't change with the changing world. Right, right.

So what, was there a plan as far as what you wanted to build or convert? Because what's amazing about Slate Property Group is the range of housing. I mean, I, I think it'd be hard pressed to think about developers who have run the spectrum from affordable all the way up to luxury condos and everything in between. So was that always part of the plan that you kind of looked at these two different businesses, or did that just evolve?

Yeah, I think that was always part of the plan. I mean, I think it, you know, it obviously isn't exactly the way we thought, but we always thought that the luxury business is a very cyclical business. You know, people in real estate talk about cycles, right. The luxury business was. Is a cyclical business and there's real peaks and valleys. And what we always liked about the affordable business was that it's much more of a steady eddy kind of Business. And, you know, we, you know, we were fortunate to, you know, I was fortunate to become friends with Ron Molis at L and M and Saul Arker who had passed away and others and, you know, learn a lot from those guys. But what's great about the affordable business, there's always the need. And I remember in 2009, at the Doldrums of everything, you know, the world was in a really, really rough place. I think some of your listeners, you know, probably don't remember that, but it was. That was a scary time.

I remember it. So did my 1099. That was about a 90% drop from 0709.

I was getting married in 2009 and the world is ending. And I thought, man, you know, is it ever going to get better? But, you know, at that time I saw that, you know, affordable housing. Right. So that was still kicking along because there's always such a need for it. So we thought it was a great compliment to do it. And frankly, it's the same skill set of getting a deal done, building a building, executing contractors, architects, delivering a product, whether it's at the high end, the medium end, the lower end, it's the same. It's really the same skill sets. For the most part, financing is a little different, leasing's a little different, but building. And building is building a building.

Right. Well, but on top of that, with affordable, you have then all the programs. And I think, and maybe you'll. I'd be curious if you agree with this, that the knowledge of affordable programs is probably one of the most technical aspects. You think about the different asset classes and sure, you could think about what are the different, you know, concessions and credit considerations with a retail lease or an office project. But I mean, affordable is very specific because you need to know what's going on locally at the national level, how to tap into these programs, tax credits. I mean, to me, and I. I don't know if there's a school out there that, that teaches this stuff, but, like, for you to understand how these programs work and then how you're ultimately capitalizing a deal, I mean, that's. There's a lot there. So how did you figure out how all these programs work and actually put them into practice?

Yeah. So first of all, the high barrier to entry is a reason to do something.

Right?

Right. Like we started to talk about development, right. Getting development versus acquisitions. Fewer people can do it. Then within development, affordable, a lot fewer people can do it because a huge barrier to entry there because of the knowledge base, the Relationships. Right. It's way more complicated in terms of the financing structures and everything. And you know, the way I got into it, I was able to partner with the Arkers, who are, you know, dear friends of mine, you know, Dan Moritz, Alex Arker, Alan Arkorn, Saul. Fantastic people, developers. We did our first project in Jamaica, Queensland. I got it.

What do they think they needed you for at the time?

I brought them the deal and.

Okay.

I guess I, you know, I guess I'm a decent salesman. Maybe I should.

Yeah.

Work with you.

I convinced them it starts with a deal. And again, we, we talk about this in the book as well. I mean, what, what is the value that you can bring to the table when you're looking for a partner? A deal is a great place to start. Right.

And I told them, I said, look, I'm not going to get in your way. You guys build the building. We just want to watch. And that's what we did. We just sat, you know, we sat there as spectators.

Yeah.

And you know, we were partners in the deal and, and you know, we still own it and it worked out great. I mean, they're, they're tremendous, tremendous partners and friends and, you know, that really got us going in the business. So I would tell people, partner with somebody who knows it. Right. Get it. And you know, if you want to learn it, you know, there is no school, but that's sort of the school. So that was my.

But are you, are you reading the documents and like you're, you're getting into the weeds.

You know, I'm intellectually curious. I wanted to everything. So I'm like reading every document. I'm asking questions, Right. You know, I'm not trying to annoy them, but, you know, asking the questions about, you know, how does it work, how does the modeling work, how does the financing work and all that sort of stuff. And then you learn, you know, you're able to learn things from, from successful players and you get smarter.

Right. So another, I know, important. It's not just your component to your success, but I know it's also very important to you because we've had, had discussions about the importance of being engaged in government affairs. Right. So you're, you are not a spectator. Spectator when it comes to. And I think a lot of developers and again, love to hear what you think about this. They would almost hide from thinking, oh, well, elected officials, you know, they're going to call me out. I need to, you know, hopefully state fly below the radar. Right. They're going to be throwing out Roadblocks. I mean, to me, it really feels like you are, like, engaging.

You're.

You're really vocal. Talk about that.

Yeah, look, we need to be doing that. I mean, real estate has a history, especially in New York, of being so civically engaged. And when New York almost went under, it was real estate that kept New York from going under in the 70s.

Right.

You know, people prepaid their property taxes. And you look at some of the, you know, some of the leaders, the Rudens and others in New York, they are so civically engaged because, you know, real estate and the health of. Of this, of any city, wherever it is, are just so tied together.

Yeah.

You know, I think it's a mistake to not be engaged with people. And again, we don't have to agree with everyone, but I always tell people, just hear what they're saying. You know, we don't have to be enemies because we disagree. I want to understand from elected officials what their problems are.

What is. What does that look like? I mean, how do you engage with. I mean, you're going to events, you're reaching out to them. Hey, can I stop by your office? Can we talk about.

Yeah, yeah, we go to all these events. You know, like, I tell people, go to Albany. So people would always tell me, well, you know, what's going on? We don't know what's going on. I said, why don't you go to Albany for a couple of days?

What does going to Albany mean? Does it mean you're actually knocking at doors? They're taking meetings with you?

Yeah, they'll take meetings with you.

Right.

They'll sit and talk to you, the legislature. And also, you'll just feel the, you know, you'll feel the flavor of what's going on. Right, right. And then they'll tell you what they're thinking and why they're thinking. It's, you know, like, there's a big problem that people don't have affordable housing. So a lot of the gut reaction is like, don't keep the rents low.

Right.

Hey, landlords, like, your rent is too high. Just lower the rent. Right. So that's a gut reaction. But look, there's some people that you can talk to and have a conversation about, you know, why that's too simplistic of you. There's some people that won't agree with you, but it's. Yeah, I don't. I think it can be civil. I've had plenty of civil conversations with people that frankly, we don't agree, and that's okay.

Right.

But I want to understand where they're coming from. Like, what is their perspective on it? You know, there's one elected official who, he was evicted from an apartment as a kid. So yeah, he's never going to be somebody that supports real estate as, you know, generally as a community because he had that traumatic experience and it's important to know it.

Right.

I think he's a good guy and we have done stuff together and, you know, probably don't agree on most issues, but there are issues we can agree on.

Right.

I think you should find common ground.

I feel like a lot of the narrative today though is that the real estate community is vilified and developers are only profit motivated. And you know, you also have this when it comes to development, if it's entitlement, oh, the developer is always going to ask for twice as much as they really want because it's part of the negotiation. They'll end up when. Why can't you just start with what makes sense? So even though you've made those connections, you're still, I'm sure, battling that, that kind of narrative that's out there, right?

Yeah, look, it's really charged. New York is a really spirited place. New Yorkers have lots of opinions, right? You know, if you get 10 people in the room, you'll get 20 opinions, right? I think it's a good thing. What I will tell people is public engagement is good here, what people are saying. There are a lot of people that are upset about things. Some of it may be about your project, some of it might not. And I think it's healthy to have that dialogue. I think there are a lot of bad actors within real estate and I think we have to be, you know, we have to be cognizant of that, right? Like, we can say, well, you know, we're the good guys, but if we didn't call out the bad guys, right? There are people that have done, you know, things that are bad and people that have harassed tenants and done that sort of stuff. It's, it's far from, it's far from many, right? It's a few bad apples and we've seen them. So I think, you know, getting the bad apples out of it, but getting public engagement and I think understanding from people, what do they want, right? What is it that they really want? Why are they against the project? And you know, you may have 100 people against the project, but they're against the project for 50 different reasons. So if you can get, maybe take that 100 down to 50 or down to 20 or down to 30. Right. And, and that's what we've done. You're not going to, you're not going to get everybody to agree with you.

Right.

I think it's naive to think, but you'll get, there are plenty of people that have misconceptions and if you have dialogue. And I'll tell you what, we've had so many community engagements where we've had really positive dialogues and there were things that were just really easy to do. Like we had one where we, they wanted a supermarket. We, we said we'd put it at supermarket, but they just didn't believe developers. Right. So they said we've been lied to by developers and that's fair. And what we did was we got some elected officials that were able to hold us accountable. So we said, you know, look, you don't have to, you don't know us, so you don't know that we're people of integrity, but we're going to make an agreement with this elected official that you do know. And you know, and that were ways that we've been able to navigate. And I, I think it's been really productive.

Good, good. Well, it's really. And we haven't talked a lot about that governmental aspect and that civic engagement on this show. So that, that's super helpful and I, I know that the audience will take a lot from it. I do want to talk a little bit about your capital partners and how you scaled your business. I mean you certainly don't go from a 30 unit apartment to $2 billion of assets, 2,000 apartments. You've had some incredible capital partners along the way. So did you kind of start with the friends and family? And then that grew and I think, you know what, a lot of our audience, especially those who are, maybe they've been doing small to mid size investments, doing, you know, that country club capital if you want to call them. They graduate to their first like real institutional investor because now your investors are like the who's who. So like. Yeah, unfortunately, talk about that.

Unfortunately grew up in Brooklyn and didn't know anybody at a country club. So it was harder to raise that friends and family, buddy.

But maybe at the pizza shop or whatever.

Pizza shop. Not a lot of money in Brooklyn. Pizza shop. You know, look, it's, it's slow and steady and I think you have to understand that when you're starting out, not so different when, when I went to Crescent Heights, when you don't have a lot to offer, you have to take the deal that you can get. So we always think that, that. And it's something I learned from Crescent Heights. Your capital partners are really your customers and you have to really cater to them. Your lenders, your investors. You have to really focus on them and not just focus on last dollar on a deal. Get deals done, look at it as a business and be successful in terms of getting deals done. But you want your capital partner to be happy.

Right. So who was the first? I mean, you don't have to give names, but like that first institution that was like, they gave you a shot. I mean, it was probably a risk for them too. Maybe it was because they. You gave them great economics.

But yeah, we did. The Carlisle Group with Andrew Chung was really something that, I mean, that, that, that put.

Put you on the map. Right. I mean, because then, you know, there's that once you have. Assuming it goes well, there's that track record. Like. Well, I mean, Carlisle is going to do a tremendous amount of diligence if they're willing to partner with you, you must be good. I mean, I can't imagine tremendous for us.

I mean, it really was tremendous for us. And you know, the economic deal that we did with Carlisle is perhaps the worst economic deal that we did. And it was so worth it.

Right, Right.

Because, you know. Yeah. Like you said, you wanna. My philosophy is, I wanna be better tomorrow than today.

Right.

So I want to continue to be better. And doing a deal with Carlisle. Yeah. The promotes and stuff that we did then, we wouldn't do now. But you know, that was what, 10 years ago, 12 years ago. And by getting that name and that track record, we now have a who's who of partners. But we still treat our partners like that. We want all our partners to be, you know, happy with us again. Sometimes deals work out really well, sometimes they work out not as well. But you want to do the right thing and treat your partners really well. And that's something that we think is really, really important. And we're fortunate for all of our partners. We're really thankful.

So talking about Bruce was demanding in his own way. I mean, Carlisle, again, they're not just, okay, here's the money and let's circle back up in a year and a half and we can go to a closing dinner. Certainly in projects that when we've represented them, I mean, there's a lot of accountability. They're not passive by any stretch. So I'd have to imagine at some point you and Martin had to start building up a team. Right. That could do the proper institutional quality reporting. I mean, that probably really elevated your operations, I would imagine.

Yeah. Look, any big investors are going to be really sophisticated and demanding in different ways, but anybody with significant capital is going to demand some level of excellence, and I think that's fair and reasonable.

And is it actually getting into the operations? I mean, are they choosing finishes in apartments? I mean, what, what level?

Carlisle will. Not everybody will, but like, you know, Carlisle is a little bit of a hybrid. You know, they're a little bit more of a developer than just an institution, so.

Right.

But you know, we, Martin and I always wanted to build up an institutional platform and we realized that we had to have the financial reporting and the project management and all of that stuff. So that was always something we wanted to do. We didn't. We don't view deals as just the deal. We view it as a business. And I think it's a big thing. And I tell people it's not a right or wrong thing. There are some people that have two or three folks in their shop. They go out, they do a deal, they do another deal. That's not us. We're 150 people. We envision an institutionally backed platform, and that's what we wanted to build, and that's what we did build. And it was really thoughtful and it was something and it was strategic. And we wanted to make sure that our accounting and our financing and asset management and all of that, and we have a real business. You know, Slate can't just be me and Martin.

Right.

You know, Slate is a real business that's beyond just us.

Right. So talk about managing, overseeing a company with 150 people. I mean, how many direct reports? I mean, are you really getting into the operations? Are you kind of keeping tabs on what's going in the office? Are you the deal guy that's out doing fun stuff like this? I mean, how involved are you getting in the actual operations?

Well, we're in the middle of July and I'm in New York City. Right. Where a lot of people are out, you know, more fabulous places. Martin's in the office also.

Oh, yeah.

You know, so we're, we're very hands on, but we have some really, really talented people that run different divisions. So what we typically have is that the heads of the divisions are direct reports up to us and then they have teams behind them.

Right. But you've, you always been. Maybe just because we've known each other so long, but you have no problem picking up the phone. I mean, you have an acquisitions Guy Hunter's awesome. But you love being out on the front line. I mean, you could, I'm sure you could at some point just have everybody send you deal flow and it kind of works its way up to you, but you're still very much on the front line. Is that just kind of how you're wired or do you feel like you get additional.

Yeah, I mean, you know, I learned early on, actually. Bruce and Sunday's partner Russell said there's only two ways to get a deal. You either pay more or move faster. Okay. Right. And, you know, so, you know, we get involved. We have really talented acquisitions people, but we want to be involved. And, you know, I think it's also important sometimes when a broker knows that, that me or Martin is involved in the deal. You know, I think we have a pretty good reputation. We can talk it through and sometimes push it over the finish line. Yeah, but you know, I love what I do. Yeah, I, I, yeah, I am so lucky. I love, I wake up, I love, I mean, look, there are the days where, you know, where it's tough, right? But, but I love what I do. So, you know, to me, it's just so thrilling to have an idea, figure out how to go and do it and, you know, execute on a plan. And I love it, man.

I'm right there with you. I think kind of a lifelong learner too. It's like every single day I learned something new and it's just, it's just such a fascinating business. So, you know, David, this has been amazing. This is going to be so helpful for our listeners out there and to, to wrap this up, you know, advice and usually, you know, sometimes ask if it's, you know, for someone who's in school and thinking about their first move. But what about that person who's maybe they're in acquisitions at one of the big shops and they're, they're kind of, you know, they're getting the itch, they want to go out, they want to develop on their own one day. You know, what would you say? Because there's that leap of faith, right? I mean, I'm sure, you know, you were leaving a very good paying job and I'm sure Deepak, you know, he's a great guy, but he wasn't, you know, David, I'm going to give you guaranteed salary. I mean, that leap of faith, you know, what is it that you could advise that person when the time is right, you know, And I mean, you just kind of hanging around waiting for that deal to arrive or that, you know, capital partner that shows up or do you just.

There's never the right time. Never the right time. So I think, you know, the way I would tell people is, look, first thing I would say is, you have to understand if you're a person that can go to sleep at night where things are not figured out, Right. Like, is that okay with you? Right, Right. And, you know, maybe, you know it or not. But, look, take a risk. What's the worst that happens? You go and get a job.

True.

You know, I. I actually like to hire people that. That have been entrepreneurial. They see what it's like. They actually appreciate, you know, kind of what we do. So I don't think you lose by being entrepreneurial. Go and look. It's harder. I did it when, you know, when I didn't have kids and. And whatnot. Right. So, you know, thinking about how you're gonna pay for school and college, you know, that might be a challenge. So I always tell people, like, be entrepreneurial when you can. And worst comes to worst, you can get. If you have a job now, you can get another job.

Great.

So I don't see what, you know, what you have to lose if that's your passion. But it's not for everybody, right? Not everybody is wired to be an entrepreneur. It's not a good thing or a bad thing. You know, there's plenty of people that work at Carlisle that do great and love what they do, and that's an amazing way to go. For me, this is the perfect thing for me to do because I just love it every day. I love making my own decisions, right or wrong. You know, we make wrong decisions. We make mistakes. I only have myself to blame. Right? And I love that. But there are people who don't like that. There are people that want to go to somebody else to make that decision and go to a boss and have that stability, and that's okay. It's a great thing, and there's nothing wrong with it. And what's. What's amazing about real estate versus other things? There are so many different areas that you can be in that you could be successful in, and there's not one right way. And frankly, you could go out in your 50s and become an entrepreneur. Right.

It's incredible advice. And, David, just one last thing to point out and to ask you. And again, we talk about your civic engagement, but serving on the Furman center of Real Estate, Citizens Housing and Planning Council, New York State association for Affordable Housing, center for Community Alternatives. So I got to think about, you know, your involvement in affordable housing. You know, is there something that's driving you and kind of that. That sense of purpose? I mean, I got to imagine the fact that you're doing this. Yes, it's complicated. There's barriers of entry. But at the end of the day, you know, is there a level of satisfaction or goodwill when you're, you know, creating a home, maybe for someone who's not had permanent housing? I mean, how does that play into what drives you?

I mean, that's 100% a passion of mine. My grandparents were immigrants to this country. They were able to come to New York and build a life. My parents wouldn't be able to afford. You know, my parents today wouldn't be able to afford to live in the Brooklyn that I lived in. Yeah, right. And I think that's a problem, and I think it's something that we have to fix again. Around the country, it's a huge issue. But, you know, housing is too expensive. It is too expensive for so many. The American dream doesn't work with housing this expensive. We have too many people that are struggling to pay their rent nonstop. And I think it's just bad for the country. And for me, I still view myself as that kid growing up in Brooklyn, and that couldn't exist today. You know, that's a problem, and it's a fixable problem. It really is. Like, when you sort of look at how much our government spends on so many things, I mean, what is more important than housing for people? I really can't think of anything because without housing, nothing else works. And that's the largest expense that most Americans are spending, is housing. We don't have enough houses. We don't have enough affordable houses. And I'm here to fix that. Again, not only me, but I'm going to be part of a group that changes it. And I'll tell you, in 20 or 30 years from now, the. The housing landscape in this country will be really different, and I'm going to be a big part of that.

That's awesome. That is a great way to end. And David, you're no doubt doing this in the right way, so we really appreciate you joining us today and sharing all this knowledge, James.

It's great. And, you know, I can't believe how long we know each other and. And I love what you're doing with everything, and it's great that you're doing this show, you know, and the books and everything else to educate people.

Thank you.

And it's. I'm looking forward to. I think we're probably about 20 years. So I'm looking forward to the next 20 years.

20 more. Absolutely. Well, this was wonderful. Thank you everyone for joining. Not just on the podcast version, but those who might be watching on Instagram, LinkedIn, YouTube. Yes, we're we're streaming this now and if you haven't already, go to james nelson.com this site is not about me. I built this site for you. That's where you can find the show notes that you can find out how to connect with David. There's helpful articles here to help you gain the insider's edge to real estate investing. And so as always, we appreciate your sharing the episode, the comments that helps us reach a broader audience. So until next week, thank you again.

Thank you for listening to the Insider's Edge to Real Estate Investing. We appreciate your subscribing and sharing with your friends. If you haven't already, please connect with James at James Nelson NYC on LinkedIn, Instagram and Twitter. Please also visit james thisnelson.com where you can find the show notes and other episodes along with an exclusive video series and other helpful resources so you can gain the insider's edge to real estate investing. Until next week.