Future Focus with Jonathan Yormak

Welcome. This is the Insider's Edge to Real Estate Investing with James Nelson, the principal and head of Addison Young's US Investment Sales Group, and his co-host Kim Trohler from his investment sales team. 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 are your hosts.

Welcome to episode number 249 of The Insider's Edge to Real Estate Investing. Today we are thrilled to have with us Jonathan Yormack. We're going to be talking about future focus, and you'll learn about following trends and where the market is going. Jonathan is founder of East End Capital and East End Studios based in New York and LA. East End Capital is a fully integrated real estate investment firm, and East End Studios is a premier independent studio management and development company.

You'll hear about identifying emerging neighborhoods before they become mainstream, the future of film production and AI, and why Jonathan believes office real estate is entering a new investment cycle. He also shares lessons from transitioning from law to real estate investing, raising institutional and private capital, and building a business by staying focused on long-term demographic and market trends. Yeah, James, it's been incredible to see all the work that Jonathan's done in Miami with Wynwood, Wynwood, um, having early conviction in that market even before that rezoning and building the first purpose-built apartment there. And then of course, hearing about East End Studios as well.

Yeah, I love, Jonathan is an open book. And I know even before the interview, we were talking about, Jonathan, is there anything out of bounds? He says, no, ask away. And, you know, we really appreciate that with all of our guests who want to share their insight. And we really got into the studio business and we had Adam Gordon on the show before with Wildflower Studios. We really dig in here about what that business looks like today, not just as it stands but maybe some headwinds in the future. We get into a conversation again about AI's implication. And so, we really appreciate educating us on that.

Right.

And also, how he's looking to approach office which is a really exciting time to be talking about that. So, as always, we wanna thank you all for joining and please go ahead and subscribe, rate the show. That's what helps get the word out there. Helps you gain the insider's edge to real estate investing. Share it with friends. We really appreciate it. We're gonna have a brief word from our sponsor and we'll get right into that conversation with Jonathan Yormack.

Avison Young's United States Investment Sales Platform executes on multifamily office, retail development, and specialty asset transactions across top US markets. As experienced leaders in the industry, our integrated national team is here to help you make informed investment decisions, whether advising on your current holdings or identifying new opportunities nationwide. Our one unified platform is built on unparalleled collaboration and connectivity across 120 full-service offices around the world, giving clients direct access to the deepest pools of capital. We put our clients first, delivering tailor-made strategies to achieve superior results.

Welcome everyone. We're thrilled to have with us today Jonathan Yormack, who is founder and managing partner of EastEnd Capital and EastEnd Studios. Jonathan, welcome.

Thanks a lot for having me. Appreciate it.

So Jonathan, maybe to kick things off, maybe just give our audience a little sense of what EastEnd Capital and EastEnd Studios are.

Sure. Well, we're a New York and LA-based firm. We've been around for about 15, 16 years. And over that period of time, we've generally always been sort of asset agnostic in that we, we follow the trends and where the market is going. So as a function of that, we've invested in office properties, residential properties, retail flex properties, and also film and television sound stages over the years. We've done that generally in what usually turns out to be 3 to 5 year cyclical periods where one of those asset classes is speaking the most to us, and that's where we've pursued opportunities and because we don't raise funds, but raise capital on a sort of thematic basis, we're, we've been able to sort of deploy capital that way over time.

And what kind of capital are you typically raising? Is it institutional, private, high net worth?

Generally speaking, institutional capital. So some of our bigger investment partners over the years have been Bentall, GreenOak, King Street Capital. So those, we've done the, the, the most in terms of volume capital allocation with those guys.

Great. And, and what does the portfolio look like today? I, I know over the, the course of your career, You've invested in 15 million square feet of office, 1,000 residential units. What's currently under management?

Yeah, well, we've divested largely of most of our office portfolio just because, you know, where the cycle was pre-COVID and then into COVID. So we're really down to one office property down here in New York City, which is a project we built on Houston Street. We have about a million square feet in the film and television soundstage business. And then we continue to own and manage our apartment building that we built in Wynwood, which we still own with KKR and the related group.

Awesome.

Great. Let's jump into East End Studios first, cuz that's, that's what I'm most excited to hear about. I think that's, we, I don't know if we've had any soundstage developers or investors on the show, but for those of us who are not familiar, what is East End Studios? How is it different from the rest of your East End capital vertical and How did this come about? Was there a personal interest in film that, that led to the creation of East End Studios?

Well, I do have, I do have some folks in, you know, my family who were in the, in the entertainment space. My nephew Kevin William Paul was actually on Broadway.

Oh wow.

My sister, yeah, he was in The Outsiders and originated one of the roles in The Outsiders, had a pretty big role. And my sister has been running a, a school and program for children and young adults in the theater space down in, in Palm City, Florida for 25 years, so she's an educator and she has, aside from her own son, that's my nephew, she has multiple kids who are on Broadway right now. So that is in the history of my family, but it's not really, I'm just, I'm a bricks and sticks guy. So I would say fundamentally what drew me to that business was really looking pre-COVID, sort of 2019, the explosion in content creation and how much money was being spent as Apple, Amazon, Netflix really started to transform that business a lot, right? So it became a technology play also tied to a real estate play. And I was very focused at that moment in time. If you really think about where we were in 2019, office was fairly expensive, residential was pretty expensive. It was pretty hard to sort of figure out where to deploy capital and where we thought that there would be growth. So we got very focused on, you know, where was this intersection between technology and real estate. And that was something that started to bubble up in our analysis is an interesting place to deploy capital. At the same time, you know, as content spend exploded, there hadn't been new development of film and television soundstages in this country really of any note probably in about 20 years. And so at one point in time, right around as we were evaluating, Blackstone made a significant investment in HPP, and I think it sort of put a green stamp, go light on the investment capital, institutional capital into the space. So we were right there at the right time. We had already been looking to develop a pipeline. We had been working on developing a team team because it is a very management-intensive business. It's very different than just traditional real estate. So it is niche-specific, and we did not have that skill set. So we partnered up with folks in the business on the management side, built a management team or the start of a management team around that, and managed to bring in King Street as our capital partner behind the platform and went ahead and started building it. So ultimately, we've at this point built 3 ground-up brand new soundstages, 2 in LA and 1 here in New York, in Queens. And those comprise about 750,000 square feet. And then we also still own another old soundstage facility that, just given changes in the market, which we might talk about, we're probably not going to do anything on the new development side of that right now. It's just going to— it's going to stay as is.

So we did have Adam Gordon on the show, and he talked about Wildflower. But Adam does a bunch of different things, so I had momentarily missed that when you'd asked the question. But Jonathan, Maybe you could talk a little bit about what the requirements are for these new sound stages. And I've been out to Hollywood and seen some of these sound stages that have been there for decades. But today, whether it's AI, whether it's CGI, whatever it is that it needs for production, you know, how are your 3 studios different than maybe what's out there from long ago?

Yeah, so that's actually, I would say, if we want to be forward thinking, that's a 2-part question because I obviously started building these things a few years ago. And as much as we already were aware of AI, it has moved so fast that I might answer the question slightly differently, notwithstanding that I've already built a bunch of these recently. But they are well positioned to certainly take advantage of what's gone on in the marketplace. And if you just sort of go back in time, I would say there were always a series of physical attributes that these things needed to have to be perceived as best in class. And generally, that's ceiling heights that would be in the modern era, at least 34, 35 feet and above, clear span, have loading and rigging capabilities off the ceiling heights. You have power and HVAC to support, obviously, the volumes that could be in the 15,000 to 30,000 square foot range. You have to have on-site support facilities like hair and makeup, wardrobe, shop and mill, loading, base camp. So What I think has happened over the market in the— before the, the current spate of new development was that a lot of the older stages had elements of these. And I'm not including necessarily like the lots, like a Fox lot or something like that, which had all of this infrastructure, but I'm talking about the independent soundstage market. And for the most part, those were converted warehouses, and it might have had one or two of those elements I'm talking about, but very rarely all of them. So in the context of the last few years when there has been new development and my stages included, you know, they tend to have all of those in one campus. And so, you know, they're, they're turnkey, they're best in class, they have everything any production would be looking for and, and well suited for today's productions. I'd say where things are changing in the last couple years though, and to the AI part of your question, really relates to whether sound stages are going to be needed at all and to what degree. You know, so much of this now can be done almost completely digitally. We are seeing, you know, Ben Affleck started a company that Netflix bought, and that was probably maybe the first insight into the first generation of how this is going to look, where we still see actors on sound stages, but almost all of the sets and the backdrops are digitally generated. And so you still are using live actors, and this is consistent with FX technology and green screen technology and other volume wall technology that has now been around for a few years. So this is all intersecting. And driving production costs generally down, particularly on pre and post-production. And so we'll see though what that really means for stage demand going forward. In the very near term, it might increase it, but I think in the long term it's probably going to decrease it.

So with that being said, what would you say is your long-term vision for East End Studios, and how do you see that complementing the, the rest of the East End Capital business?

Yeah, well, so we definitely have to start to be more creative, I think, in terms of how we're appealing to the the production landscape, making sure that they know that our stages are— have the power, have the air conditioning, have all of the other requirements that they need for the new modern workflows. I think we also have to be very cognizant of the new ways that media is being generated. So one of the things we've been leaning into very heavily is, is the live and delayed broadcast of what we would call like a live event or IRL as the kids call it, right? And so we recently at our soundstage in Queens, as an example, we did a deal with Bowery Presents, who's a large live event production company. We had global DJ Fred again there for the month of January, so he did a residency essentially in our sound stages. And this was really what on the one hand might have looked like a, you know, like a, like a concert or party, but on the other event, this is a big media distribution play for both Fred and his— and Bowery Presents, in the sense that it was streamed all over social media, YouTube, etc. And so this intersection of live entertainment and production is happening. We also did shows with Halsey, Foo Fighters out in LA on Amazon Live, where this is also the same sort of thing, which is after Thursday Night Football, they pivot over to our soundstage. There's effectively a live event going on, which gets broadcast. So this is a whole new spectrum of demand being filmed inside soundstages that is new. But I think it plays to the attention span people have, what people are drawn to to watch. And more unique experiences. And so I think we're trying to find the right pathway through to accommodate these different types of productions as well.

Super interesting. One last question on the studio front before we talk about some of the other investments that you're involved with. The incentives that are required for a lot of these things, and so thinking about where you want to be, and obviously you picked LA, you picked New York. I mean, that's clearly where the talent is, where the talent wants to be. But then you've got whether it's Georgia throwing incentives, or you hear that Ireland all of a sudden is, is trying to lure. I mean, does that kind of go away with all this new technology and this new approach, or, you know, do you think the incentives still play a big part where production is happening?

It's a huge part. So we've essentially been involved in an incentive war, I think, for the last 5 years, and that has dramatically affected where everyone is going to film. So just one high-level stat, you know, we used to film— over 80% of production dollars were actually filmed in the United States. We're now down to below 40%. And so that is a function, as you point out, of incentives in places like the UK, Ireland, Australia, Hungary, etc. And so Canada, big one. So we're, we're, we're involved in a big war. There is a push at the federal level, frankly, to try to get this current administration to get onto that playing field and pass a federal stackable tax incentive. We are actively involved in that, in that effort at East End Studios. And, you know, it's very consistent, we believe, with the current administration's approach to effectively, like, you know, bringing production back to the US. There's billions of dollars and hundreds of thousands of jobs that we are losing abroad, even though the money that is invested to produce all this is coming from the United States. So we're essentially just offshoring our own production. So we believe the administration might get behind this. So there's definitely some bipartisan effort to do that. There's bills drafted and we're hopeful that that actually will get, get passed sometime in the next year or so.

Great. Great.

So let's take a step back and, and talk about your background. 'Cause from, from what I understand, you started out on the legal side and then transitioned into the acquisition side at Broadway Partners and beyond. So what were you focused on at, at Fried Frank and what's skills set you up to be successful in acquisitions and development and asset management coming from a legal background?

Yeah, well, I was actually one of those lawyers that didn't mind being a lawyer. I actually loved it. But, you know, after doing it for about 8 years and seeing a lot of my clients, and I think some of the slightly more creative things that you could bring to the table as a developer or owner-operator, I was definitively intrigued by that and thought that that was going to be an interesting pivot. I was representing someone at the time who ultimately became my partner at Broadway Partners, and it was an interesting opportunity to get in at the ground floor of a small growing company and was able to make that pivot. Went in originally as general counsel, obviously became— ultimately became a COO and partner there. And we bought a lot of office product, about, you know, 15 million plus or minus square feet, in partnership with Lehman Brothers between 2003 and the GFC, which was fun. But to answer your question, you know, as a lawyer, obviously critical thinking just in and of itself is super valuable, and how to be a good analyst of risk because that's really what you're doing. You're trying to minimize risk for your clients. So that's first and foremost. But, you know, you learn the nuts and bolts. So how to structure a deal, acquisitions, financing, JV structuring, debt, all that stuff. So, you know, happened to do that long enough that I think I developed a really strong skill set around everything to do with deal structuring and, and all the things that ultimately, you know, you got to be pretty good at to, to run your own business.

And the, the mindset shift, I guess, because coming from the law profession where you're billing clients by the hour, so anytime that you you spend on something, whether it's successful or not, you're getting paid for it. Whereas you go into investing where it's success-based and no longer— you obviously getting paid by the hour. That does seem like it's a different mindset shift. And I'm sure there's plenty of people listening to this right now who are, whether they're on a W-2, they're getting a salary, and to make that leap onto the investment side, I mean, it does require a little bit of a change of perspective, right?

100%. I mean, I'll tell just a quick story, which is true, which is that after I went to that effectively startup, I took a massive pay cut that was largely on the hopes that some promotes would kick in and other, the business would grow, which did happen. But there was a hot minute there where I think my wife and I were taking our coins to the bank and cashing those in to go get some food. So there was a hot minute where that happened and it was definitely not for the faint of heart. I had a young child, two young child at the time, so it was certainly not without its risk. But I think, you know, you got to know yourself if you do that. I mean, what I— people call me all the time and ask me for advice if they're thinking of doing something like leaving a whatever stable profession, whether it's law or something else. And I always say it's super difficult. You really have to know that you're prepared to be in a position, you know, similar to like you guys on the investment sales side, where, you know, every year you kind of start at zero again, right? So you, you have to be prepared to know that that, that, that type of risk is inherently in you and you can live with it without being overly stressed.

Yeah, right. So after you shifted to the acquisition side, what then inspired you to, to go off and, and start your own business? Was it a partner who had an idea, or was it your idea? Like, how, how did the evolution kind of start?

Yeah, well, when I left Fried Frank and went to Broadway Partners, it essentially was a startup. It had been in been in business for a couple years, year and a half or so, by someone else, but effectively was a startup. So, but I had the, you know, the, I guess, the, the, the, the, the blanket of sort of someone else who was older and had been doing it for a little bit of time. Into after the GFC, yeah, it was pretty obvious just sort of that I was interested in doing that. That business sort of was, was gonna consolidate, and it was a good opportunity for me to take advantage of that recess in the market. I recognized that there was going to be a big basis reset, particularly in office, which is what we had been doing almost exclusively, and that would be a great opportunity to start my own business. So, it's okay.

So, I wanted your last post on LinkedIn about your investment philosophy. I just want to read this. You said, "We invest in today's capital in tomorrow's most compelling places, not the places that made headlines last cycle, not the neighborhoods everybody already knows. The ones where the data, the demographics, and the direction of capital are pointing before the market catches up." That's the whole thesis. That's always been the thesis. So maybe talk a little bit about that. Now, you are invested in New York, LA, Miami. I mean, these are, you know, top markets for investors. But so does this mean kind of finding pockets or neighborhoods where maybe people have overlooked? Are you thinking about, you know, other cities right now where, again, people haven't figured it out yet? Maybe explain the investment thesis a little bit more.

Yeah, I would say that it doesn't necessarily mean you're going to, you know, a rural location. You know, we, we tend to want to be urban investors, just thematically at a very high level, and we want to follow the demographics because you pretty much can never fight the demographics. So, you know, we have, I guess, a couple examples would be the best way to think about it. So we were very early to Wynwood, as an example, in Miami. So that was, you know, the story around how we stumbled upon it. And, you know, obviously, as a real estate investor, one of your jobs is just to drive around places and keep your ear to the ground as to where cool restaurants, bars, galleries are opening up, where art tends to go, where the creative class is moving. And so in the case of Wynwood, I was down for a very traditional real estate event. This is, you know, going back to 2013, and there was an opportunity to go play golf or to go do a tour of this place called Wynwood that I'd never heard of, and the Wynwood Walls, which I'd never heard of. So I opted for the art tour. And I was immediately blown away by this neighborhood.

Is this Bisnow Escape by any chance? It was. I was probably on that tour with you. Was that on an e-bike? Probably.

It might have been.

Yeah, it might have been. Well, good for you. You went and bought real estate and I was on to the next thing.

Interesting. Yeah.

Shout out to Bisnow.

If you were on that one, it was Jessica Goldman herself gave the tour because, you know, she still does, I think, from time to time. And obviously the Goldman family have been great stewards for that neighborhood. But Jessica gave the tour and so she had tremendous insight into their already, I don't know, I think it was 5 to 7 years of investing and getting and acquiring properties there. But she gave a vision for the neighborhood that I think a lot of people just weren't aware of at the time. And it hadn't been rezoned and it clearly was exceptionally industrial and it was just coming off of a period where it was one of the most dangerous little pockets in the country, frankly, in terms of violent crime. But you could see if you had spent, in, in our case, we had spent so much time in Williamsburg and Bushwick here locally in New York.

Mm-hmm.

And seeing how those neighborhoods had advancing, I think I was able with my partners to look at Wynwood and say, this is essentially that, right? It's, it's a Florida version of a Bushwick, as an example. You had— I was surrounded by Edgewater and downtown Miami and to the north of Design District, which is also undergoing its own transformation. And you sort of look at this pocket and you, you had to conclude to some degree there was no way that development was just going to jump over it. And it then became a question of who was going to steward it into this next sort of, you know, period of its development. And, you know, we got very involved on the bid board in designing the ultimate rezoning plan that was put in place for the neighborhood, trying to retain as much of the art and, you know, street cred elements to the neighborhood as could be retained in the context of it actually being built up. And I think we did an okay job. I mean, we could talk about where I think Wynwood sits today if you want, but But that's an idea going back to your real question of looking at opportunities on a micro basis, albeit within a great city like Miami that obviously had lots of different pockets. We thought people hadn't identified it yet. The people who had made some investments, you know, we don't necessarily love to be the first guys, but we, you know, in an innings analogy, I think we like, we love like the third inning, you know.

And how do you find the next neighborhood? So is it like, it sounds like it's being there in person, walking the blocks, talking to, you know, kind of some of the pioneers there. But how, like, are you touring, you know, new neighborhoods? Or when you're thinking about where's that next spot, how do you find it?

Yeah, 100%. I mean, it really is just, you know, reading a lot, talking a lot to a lot of people, being curious, speaking to people like you, investment professionals who have a local expertise. And so it's a function of all that.

Yeah, I wonder the flip side is how do you not buy into something that doesn't materialize, right? So it's like, well, what are the signs where, okay, there's some capital chasing this, but does this have legs? Does it have momentum?

Yeah, well, there, there are dangers in that. And I would say that as we were investing in Wynwood, people started to call us actually for places in other parts of the world that they thought had similar bones and dynamics and were trying to encourage us to go deploy capital in those places as well. And And we looked, and I would say that the lesson we learned from Wynwood is that it goes slower than you think if you're really going to go into an up-and-coming kind of neighborhood that isn't fully established yet. You know, as an example, I said we started in Wynwood in 2013. Here it is 2026, and it's just now at the point where, you know, there's about 5,000 apartment units, there's about 5 office developments, and it's, you know, it's been 13 years. And, you know, we managed to exit a bunch of our properties that we thought we might develop because just values ran and we decided not to develop all of them. But we did ultimately build an— we built the first office building there. We built the first apartment building there. We sold that first office building for, at the time, what was one of the highest prices per foot for an office building ever in Miami. We put in some of the top VC funds like Founders Fund into the building who were interested in being in a new creative environment. And then we were fortunate enough to bring KKR into that apartment building on a recap basis. So we still own that, but much of the other stuff we've sold over time, largely because We just found this was taking a lot longer than we expected and decided that, you know, when you look at IRRs and promotes and the kind of things we are measured off of, we needed to take some trips off the table. But we do look in other areas and not everything has to be an urban, you know, or rezoning kind of effort or replay. You know, we look at, for example, in New York, when we started East End, one of our early theses was SoHo. We just thought that southern part of SoHo was being undervalued closer to the sort of Houston Street versus versus further north. I'm sorry, Canal Street versus further north, Houston. And we sort of felt like those 3, 4 blocks were being materially undervalued. Bought a few things over there and did, you know, really well with them. So that it can be very micro in terms of that thesis, in terms of thinking about what are people overlooking.

This is the perfect segue into speaking on some recent projects or projects that are currently in your portfolio. So Wynwood 25, from, from my understanding, that was Wynwood's first purpose-built apartment rental product, correct? So Picked up the site off market, what was it, 2014?

Thereabouts.

Held onto it through that rezoning. And then in 2017, you brought in Related as a JV partner.

Correct.

So what drove that decision behind bringing in Related and what was the strategy there?

Well, I wanted to become a developer and you can't just build a, you know, a $100+ million development starting from scratch. So the thesis there really was we, you know, we acquired the land, we did all the pre-development, we did the rezoning, it was fully permitted, it was essentially financed. We had a loan opportunity in place and the decision was to sort of bring in more of a GC-style partner who would've been more fee-based or someone with a lot more alignment. And I had an opportunity to get to know J— JP Perez, who's a phenomenal person and partner and just a great cultural fit. And obviously they're, you know, the best at what they do down in, in Florida. And they were very interested in making their first foray into Wynwood as well. So it was great timing, uh, great opportunity. I was able to really still participate in the development. They were very generous in terms of how we structured roles, responsibilities, so that we really remained actively involved and were able to really co-develop it. Obviously, they did, you know, the, the lion's share of the work without any doubt, but we were integrally involved. And it allowed us an opportunity to build an internal development team around that. And ultimately, we built built, you know, a few million square feet since then.

I imagine your legal background was especially beneficial for JVs in general, for knowing how to structure and negotiate them and make sure that everyone's kind of in agreement and on the same page.

Me too much. I can't get out of my own way sometimes.

Yeah.

So interesting. I mean, if you look at that investment, so you were able to get investors on board that had conviction to acquire the site, get it entitled to the point where it's shovel-ready? And did the investors at the time know that, I mean, clearly you were prepared to go the full distance if you had to. I mean, that's tough. Like you said, if you haven't done a 9-figure development before to say, "Hey investors, come on board, invest, and we're gonna take this thing the distance," or was always the fallback plan, you know, "Hey, we can JV," But then they're kind of investing on, you know, some, you know, future partnership that isn't on the table yet, if that makes sense.

No, it makes a lot of sense, and it's a great question. I would say that we— it was interesting. So you asked at the beginning, you know, who's our capital, and I said mostly institutional but not entirely institutional. And in the case of Wynwood, it was interesting. We, again, going back sort of to the time horizon, we weren't sure whether the rezoning would take 1 year or 8 years. To some degree, we were paying, you know, we were paying top dollar numbers for everything we accumulated there over, you know, the 2013 to 2016, '17. And we didn't— we were concerned about bringing institutional capital because of that time question. So we ended up actually bringing in 3 ultra-high net worth families really to fund most of that land acquisition. And some of it was flex warehouses. It wasn't all just land. Some of it had, you know, some, some ability to produce income out of the existing infrastructure. So call them covered land plays for the most part. And, you know, the thesis was worst case, you make a low, high single digit, low double digit kind of return doing not much and just operating these things as they were. That translated on a flip basis maybe into a high double digit to low, you know, 20s kind of return if the rezoning came along and you were able to flip, flip out of the assets at that point in time. And then obviously the best case scenario was to ultimately either contribute the land into venture or to build it ourselves. So, you know, with our partners who were basically individuals and family offices, that, that was always the thesis was described that way. It'll be one of those. And although we retain full control over the ultimate decision-making, you know, we're very collaborative as partners and we certainly wouldn't have done anything that those families were opposed to. And so everything was discussed with them and all the options were on the table and we got to the point of potentially developing it. But clearly the right thing to do was what we did. And so it worked out well.

Wow.

And so, and again, you said that JV with Related, what was, you know, a very fair partnership and the way you went about it. So, did you contribute the land then and they brought in the construction company? Maybe just break down a little bit about what the contributions were on that.

Yeah. So, I mean, that, you know, it went according to the second part of that plan. In other words, we did get the rezoning. As I noted, we had all the permits and approvals and construction drawings, GMP, everything was essentially negotiated. And based on that, it was a very good turnkey deal for a company like Related, which is, you know, a construction powerhouse. And essentially they could step in and we could be in the ground in a matter of a few months, which is a little unusual to be developing, delivering it that late in the cycle, frankly. So in that case, yeah, we were able to, to contribute the land at a significant enough markup that we didn't put any more equity into the deal, but retained a 50% ownership stake. So yeah, so it worked out, worked out great.

Amazing.

Yeah.

In your experience when working on a, a more speculative development deal and, and working with high net worth capital, have you found that those investors are typically more locally based investors that have a lot of conviction in the market, or does it just depend?

I'm sorry, say that again.

So when you're working on a speculative development like this, and you said that you ended up turning to the, the private high net worth with Capital Base, were they mainly like locally based that really understood the market and had a lot of conviction? Is that where you've found more success with for speculative projects in the high net worth space, or does it just depend on the project?

Yeah, it depends. I would say that in that case, the, the, the three families that we brought in were very sophisticated and, you know, phenomenal investors, right?

They—

we, we had, we had a vision at East End, you know, we wrote a white paper, we had a lot of research supporting our ideas and where we thought the market was going. We extrapolated to other things that had happened in other places that we thought were similar, like Bushwick or Williamsburg. We made our case, and I would say, you know, in all, in all instances, those, those groups came down, toured with us, spent time speaking with people who were already invested in the area, got smart alongside us, and got the same level of conviction that we had obtained. They did as well. But, you know, some of them— two of those three families were active real estate investors on their own account, had made a lot of their money in real estate, so they, they were familiar with process. In other cases, it's really the only instance— as I said, we tend to raise capital thematically. So King Street, for example, was our main investor on the film and television side. BGO was our, for the most part, largest investor on our office investments. And in this case with Wynwood, as I said, we, we actually did have some institutional interest, but ultimately felt that private capital would be a better way to go given the duration. And, and so intentionally pursued that type of capital for that execution. And I think it worked out great.

Great.

Makes a lot of sense.

So let's talk a little more about where you see office investing today. So, so clearly, you know, a lot of demand for Class A trophy, you know, I guess remains to be seen is now because, well, if you look at New York, Class A trophy is, is filled up. So now does that interest go to Class B? Is it taking B, making it A? Like there, there's a lot of different ways that you can get into office. I mean, you can either deliver new or you can buy in many cases at huge discounts to replacement costs, but you're getting older products. So where do you kind of weigh in on this? Where do you think the opportunities are in office today if you are actively looking to invest there?

Yeah, James, we are actively looking. So if you have any good deals, don't tell anyone else. East End only. But no, we are very, very much back in the office space underwriting it again. I mean, I think essentially this isn't entirely different from when I started EastEnd in, in 2011. To a degree, a lot of what we saw then has— is playing itself back out again, right? There's been a huge reset in basis. There's a huge opportunity to buy office below replacement cost. The demand side has changed a lot, and I think the cost of owning office has changed a lot. And so as a function, we do have different thoughts as to where we want to buy, what we want to buy. Happy to talk about that. But I definitely think office as an asset class is, is back in the right places. You know, we're targeting a few select markets, I would say, at the moment. New York included is one. We're looking at South Florida heavily. We're looking at Texas, and we're looking at San Francisco. So those are the key markets that we're very focused on right now. We have been actively chasing deals. I'd say we've been the bridesmaid and not the bride recently on a few deals, unfortunately. And it does feel like there's a little bit of, you know, froth back where, where you get broker guidance or you're even chasing something off market and the seller tells you something and suddenly the, you know, the goalposts are moving away from you a little bit. So it definitely feels like if we're chasing what we're chasing, which feels like the right types of assets in this market, the pricing is moving and moving and, you know, in the favor of sellers, but off of very low basis, like reset basis. And, and almost every case that we're getting actively engaged, we're going to be buying at or under, generally speaking, the basis of the person we're buying it from.

Got it. So developing new office right now, would that still be something that you would consider for the right opportunity or just very challenging to capitalize now?

It's definitely very challenging to capitalize. Cost of construction is so high. Cost of financing hasn't particularly come in too much. Inflation, you know, we were building our soundstages through the inflation hell of kind of '22 to '24. It was a absolute nightmare. And so we saw firsthand what was going on with construction pricing. And, you know, we were building studios, but it would have applied to anything you were building. And without a doubt, all of that makes it very expensive. But as you point out, trophy real estate, you know, if you're on Billionaires' Row, you know, I hear people are trying to get $300 a foot for office space. So if you can do that, you can make it work. But it's, it's going to be very, very, very selective. So it's definitely not our focus at the moment, but, but we would certainly entertain it if we had the right site and the right opportunity.

Mm-hmm.

Got it. I'd love to talk about the process of actually starting a business. So what, what advice would you give someone who's maybe looking to launch their own investment or development shop?

Don't do it.

What skills do you absolutely need to master beforehand? How do you prepare financially? And what do you look for in, in your partners when you're looking to make this kind of leap?

As I said before, the first is you really have to know yourself. And you have to be prepared for risk and just things don't really ever go as you plan, ever. So, you know, every day you wake up and you're going to be faced with new challenges, whether it's around capital raising, around building teams, around the execution and the outcome of your, you know, leasing efforts and marketing efforts at your portfolio, tenant bankruptcies. Like, I mean, you know, physical catastrophes, hurricanes. I had one of my buildings, a car literally explode after it drove itself down an elevator shaft, 6 floors. So, you know, things— yeah, things happen, right? And you're gonna wake up and you don't fully know what's gonna happen. So you have to be prepared for all of that. And you have to know that the number one thing you have to do is persevere. So you have to be committed and persevere. So that's really it. And if you can tolerate the risk and persevere, you'll probably be fine. I know that the rest will probably work itself out. You know, I think in terms of skill sets, I've seen people come from the brokerage side and start their businesses successfully, the legal side, the finance side, the, the, the operations and management side. I really don't think there's any one path that necessarily is better than any other. I think it's always important to know what you don't know, acknowledge what you don't know, and try to bring in friends, professionals to help you. And, and I think that's the biggest thing I would say. When I've seen people stumble, it's usually because they are bringing maybe a little bit too much hubris to the endeavor and, and, and not acknowledging the holes in their own experience. So I think if you do all those things, again, I don't think there's one direct path or any better path than any other. You know, the last thing is capital, of course, is king. So, right, you know, I started the business in 2011 without an embedded capital base and a direct capital platform by others. My partner and I brought all the capital to start building the business and really did it, you know, on a shoestring basis. I would say it's probably not the best way to do things. If I was going to encourage someone to start a business, I would say have a financial backer, have a 5-year business plan, know that you have 5 years of capital in that runway to, to grow the team, fund your— however you're going to fund your element of your own personal investment into the deals, whether it's through the GP or as the full cap stack. But however you're going to do that, I would say if I would really encourage someone to have that financial backing before launching their own business. It's not the only way. As I said, I did, I did it the other way. Yeah, but I think that's a lot harder. Certainly a lot more nerve-wracking, a little more difficult to build your team, right? We had to build our team a little bit more with offering promotes and incentive packages that were tied to deal execution in a way that was a little different, whether it be participating in acquisition fee or management fees. So you got to be more creative to get talent, which is also just harder. But you do get— when you do it that way, I will say you do tend to hire more entrepreneurial-based people, which I think to some degree, looking back, was helpful because those people themselves were more aligned with how I sort of saw the world and risk-taking and that kind of stuff.

Yeah, I mean, I think definitely the dream of having that, that financial backer, I mean, would be a great option to launch. But I mean, again, to find someone who's willing to invest with you programmatically when you haven't done it yet is, and without any deals in mind, makes it all the more difficult. So, I mean, I guess the question is, you know, when you were looking to onboard early investors, how much of it was about the deal where you had to have it like, hey, we found something, and obviously they had to have the confidence that you could execute on it, or is it more like, hey, we know you, we believe in whatever you find, we want to back you. So, like getting those investors on board, was it really a matter of having a live deal, or did you work a lot to cultivate the, you know, those relationships before you did put something ultimately in front of them?

Well, we built the business deal by deal and actually still effectively operate deal by deal. As I said, we have tend to have a theme in mind around which we approach deals over periods of time, but we're still a deal by deal shop effectively. And I would say that When you're starting, anyone's starting, it's much easier to start with the deal, to your point, right? Because you can show someone something concrete, they can invest in that one thing, and they can get themselves comfortable or not around your ability to execute. But if not, as I pointed out, they could probably ask you to supplement with someone, right? Whether that be a leasing team, a management team, uh, accountant or a lawyer, right? All those people can be brought on board to help someone who's, who's starting out. So without a doubt, it's easier to start with the deal and, and that's something tangible and of value. But it's hard even to find a deal these days, right? I mean, you know, you guys, what you do every day is you, you're out there sourcing opportunities and speaking to owners, right? And you're starting a business, you want to source the deals, but you also got to run the deals, you got to capitalize the deals, you got to report to your investors, right? You know, you got a lot of stuff to do, so you don't necessarily spend all day looking for deals. So you're at a disadvantage, a natural disadvantage to all the people like you who are out there doing that every day. So it's hard. And so the other piece of it, I would say, is to also become very friendly with, you know, folks like yourselves in the institution, institutional sales world and the brokers of the world who can help you in that regard.

Great. I've got a more personal question that we were discussing before we started filming, but you mentioned in 6 weeks you're moving down to South Florida to Palm Beach. And it's a common trend that we've been seeing in New York. And I'm curious to hear what, what's driving that decision for you. Are you planning to spend more? Investment dollars down there? Is it a quality of life thing? What's kind of driving you to South Florida?

Yeah, great question. I mean, I'm a born and bred New Yorker. I'm from Queens, New York. And so, you know, there is a tinge of sadness in this, in this decision. But, you know, my view of New York is it's still the greatest city in the world. I think there's a lot going on here politically that is definitely putting that at risk. I think other states are competing so strongly for that demographic stuff I was talking about before, where people want to go. And as you're pointing out, I'm one of that, you know, piece of the narrative. But Texas and Florida in particular, right, just tax policy, other regulatory policies with respect to ease of doing business, their views on housing and how to solve the housing crisis that is persistent around most of this country. You know, I look here in New York, I have two daughters and the one of whom just recently was looking for an apartment. It's, it's crazy. It's crazy. And, and the— it's, it's all policy in my opinion, which is just making it as a developer too hard to build. We don't build enough housing in the city. It's going to have massive impacts on the young people who want to come here, and, and it's getting worse and worse and worse. And I think that more and more young people also are going to want to move as a function of that. Obviously remote work Remote work is real, but even if it's not remote work, you see the Goldman Sachs of the world opening up a huge headquarters in, in Dallas, Wells Fargo opening up a huge office in West Palm Beach. So these companies— and I think we all just saw a stat where JP Morgan employs more people in Texas than in New York at this point. So you start to look at those statistics, and the ability for these companies to shift their ultimate headquarters now is getting to the point where it can be done very quickly and very rapidly. And you could see in a way, a death spiral here in New York. Now, I don't think that's gonna happen, but as someone who's been living here for, you know, his whole life, there's just a lot of things here that continue to feel not so good, and they're much better elsewhere. So, and I think everyone sees that.

Yeah, no, there's definitely those trends, and I think, you know, the states that are showing that they're more business-friendly are attracting a lot of these companies. I mean, I think the thing that I wonder about is where does the talent want to be? Because you still look at all those surveys from graduating college students and they want to be in New York, number one. I think Chicago is actually number two. That might be grabbing for the Midwest and, you know, San Francisco. So now, do, you know, do college grads, young professionals want to be in Miami? I think so.

Right.

You know, Dallas, you know, okay. But like, I think that's the also, you know, piece to it is where, where is the talent? Where does the talent want to be?

Yeah, and I, and I agree with you completely. That's why I said I still think New York is the best city in the world. But I, I think the question is, where am I to be in 10 years, right? I mean, that's not why I'm moving because of 10 years. I'm moving now for now. But I do think if you're just thinking about policy shifts and where is New York in a place like San Francisco— I think if you just look at San Francisco and New York right now, it's, it's a very interesting dichotomy. You know, San Francisco went through its exceptionally progressive period.

Yeah.

And now we have Dan Laurie and a moderate, you know, board there running that city, and they— everything they state is almost the exact opposite of where we are here in New York with our current administration in terms of how they're approaching things like homelessness and housing and tax policy and safety. And so these things, I think over time they'll build and, you know, they'll have repercussions. But, you know, administrations come and go and policies could change, and so we'll see where New York goes. But at the moment, I don't think it's particularly heading in a great direction.

Fair enough. Well, Jonathan, this has been amazing. We really appreciate your taking the time. I— the, the final question I guess I would have for you, so You know, what is it that drives you, that keeps, you know, you've had some incredible success, you continue to build the business. Like, what is it that you love about this business and keeps driving you to continue to grow what you're doing?

You know, the chase of the deal is exciting. The creative elements that go into every project we buy are probably the thing I enjoy the most, which is what is my vision for that property? What is my team's vision? How do we How do we add value? And that's always the most fun, you know, whether that be design elements, marketing elements, structural and, you know, construction elements, finding, you know, the diamond in the rough. All those things are the most fun. Executing on that is the most fun. And that's what keeps me going.

Awesome.

Well, thanks again for joining us, Jay.

Thank you so much.

And I want to thank everyone, as always, for joining. If you could go ahead and either rate the episode, share it with a friend, that's how we continue to grow the audience and help you gain the insider's edge. Until next week. Thank you again for joining.

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