Global Investing with Tal Peri

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Welcome to episode number 204 of the Insider's Edge to Real Estate Investing. I'm your host James Nelson and today we have with us Tal Perry who is a senior real estate investment and finance professional. He has over 20 years of industry experience across markets and product types. Tal has closed more than $5.5 billion of real estate transactions. He serves as the head of US east coast and Latin America for Union Investment Real Estate in their New York office with the primary responsibility of overseeing equity investments in these regions. Union Investment is the largest open ended real estate fund in Germany with a Global Real Estate AUM of $60 billion and a US assets under management of 7 billion. Prior to his role, Tal was an Associate Director at West LB New York where he was responsible for real estate acquisitions and development finance transactions. He's an active council member of ULI's National Urban Development Mixed Use Council as well as on the advisory for the GRI Club, Multifamily and Future Office and Workforce Chapter of gri. He speaks regularly on industry panels. That's actually where I saw him and got the idea. I see Tal at these various conferences and events so I asked him to come on the podcast. But yes, he's a member of ULI niop. As we mentioned, GRI Afire Pair. The list goes on and on. What I love about Tal's story is about first of all about how he is investing on behalf of global investors. So for those of you looking for foreign investors, I think this is going to be helpful. Also how he learns and makes connections in various markets across the US and around the world. So I think you're going to get a lot out of this episode. As always you can go to james nelson.com that's where you can find the show notes for this episode, but you can also find a lot of helpful resources. You can also sign up for the mailing list there. We put out a monthly newsletter that summarizes the podcast, the white papers, other updates. So I encourage you all to do that. We're gonna have a brief word from our sponsor and we'll get right into that interview with Tal Perry. Thank you.

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Welcome everyone. Today we have with us Tal Perry, who is the head of US east coast and Latin America for Union Investment and Real Estate. Tal, thanks so much for joining us.

Thanks for having me.

Wonderful. So we were just talking before we began the interview about your upbringing. So that might be a good place to start. Tell everyone where you were born and where you grew up.

Sure. So I was born in Israel. I moved to Germany when I was five with my family. I grew up there through all the education and came to the US in 2006 at the age of 27. A lot of dreams and a lot of energy. And I've been here since. Since then for 18 years in New York.

Wonderful. And you said. So you're trilingual, is that correct?

That's correct.

Okay, good. But you also cover Latin America, so you're not. What's the next. If you're trying, would it be Quadrilingual? I don't even know.

Something like that.

Okay, well good. So, and you said that in your role you're clearly. You define the US east coast as everywhere. You were saying east of Texas. Right. And then you dip down to Mexico and you said you even had holdings in Chile. But again, you're doing a lot of traveling. So what is your. Why don't we first talk about what Union Investment real estate is? Just to set the stage. So maybe give the audience a little bit background on the company as well as its holdings, which are pretty impressive.

Perfect. Yeah. So UnionVestment is Germany's largest open ended fund. We have around 60 billion AUM in real estate. The majority of it is in Europe. But interestingly enough, for the two funds that can invest in the us, the largest exposures to the us so we build up since I joined a little bit over a decade ago, we grew the portfolio here with the team from 2 billion to 7 billion. We expanded from 10 markets to 20 markets. And we also diversified from one asset class to four asset classes. So we made a very, very big effort to also not only go to the gateway markets where most foreigners start, which we also did back in the days, but we went into secondary markets and expanded into growth markets like many others have followed the Sunbelt market and some other trends that make sense.

Wonderful. And I see that your portfolio is really expansive. I think of the website, there was 39 assets in the US, 488 in Europe, four in Asia, and this consists of, for example, 236 office properties around the world. I didn't quite follow the this total square footage because I know that you're doing it in meters squared. So even though it said 3.9 million square feet or square meters squared, that might not sound a lot, but I'm sure once we do the math and the conversion on that distribute square feet, that, that's, that's probably a lot of square footage. Right.

So the math is roughly times 10. Right. And so you have over 40 million square foot.

I'm thinking. Yeah, I'm thinking of the Nate Barghazi skit on SNL about the meters and yards, if you haven't seen it yet. Definitely look that up. But yes, a lot of square footage. A lot of different types of real estate. Very high quality office hospitality. I saw that, that you all own or at one point the Thompson Hotel, I think in D.C. you have one of the premier shopping centers in Berlin. Right. In the Alexa. So very vast portfolio. So for our audience, talk about what an open fund is as opposed to closed fund. And who's your typical investor then?

Sure. So an open ended fund means people can go in and out on a daily basis. Before the financial crisis, it was actually liquidity on a daily basis, which is very attractive. So the promise was you have like a low risk profile, but you're getting obviously more returns than you would get if you just put your money on the bank account and get fixed income returns. A closed ended fund has a specific period at which you start selling and you have some extension rights. An open ended fund is basically continuing forever in that theory. What's good about it is you don't have a time where you're forced to sell. And you can clean up your portfolio if you want, which we want quality and younger buildings. When you feel the portfolio starting to get too old, you can sell some older assets. But you can wade through a crisis like one that we're in right now and you're not forced by that. Another interesting part is that by law the LTV is limited to 30% and that was also changed after the financial crisis used to be 50% LTV which is also pretty low compared to American standards. So 30% LTV cap. In the US we're applying 50%, sometimes 55. But there are a lot of European assets and even some US assets where we have equity only. We put some shareholder loans on top of it to have tax efficiency. But the overall portfolio, It's a core core plus fund. But we have the ability up to 10% or so, especially in the bigger fund. That gives you more room for even value add or development project. So we de risk it in a certain way, but it gives us quite some flexibility. Good.

Now not to geek out on you too much, but we've had some CEOs on the show from REITs and we talked about all the difference between. What's the difference between a REIT publicly traded, non traded REITs but this idea of an open ended fund that is that you could trade in and out of. What would be your short explanation? What is the difference between that then and a reit?

Yeah, happy to explain. So REIT is based on daily demand, in and out, almost like a stock. Our funds, we have a daily rate for buying and selling. So you actually give it back to us and we sell it. And the valuation is not based on demand, it's based on appraised value. So you're always at the appraised value. We have quarterly appraisals and so all these appraised value accumulated make it into the fund performance. That's the difference between a typical US REIT and this structure. And just to add for completeness. So it used to be daily money and there's still roughly 20% or so of the capital is daily. But after the financial crisis they change it to a one year notice period to not have a fire sale in like a more tense market like a GFC or even now where obviously valuations have changed and cap rates have changed and interest rates have changed. So that gives us a little bit more time to plan. And I think that it makes sense that they changed that.

Perfect. And is your typical investor, so is that then an individual, an accredited investor, is it Institutional.

So what we call retail investor, we have around 8,000 small retail banks in Germany. Mom and pop can walk in, they can buy all kinds of life insurance products. They have their retail, their banking account there. And then they also offered real estate investment into our funds. So the typical investor is in the 60s, early 60s. It's not a retirement fund, but the idea is for the conservative investment portion of your portfolio. And so these are more than 1 million individual investors and they can buy anything from $100 increment to bigger tickets. But that gives them quite some flexibility. So you have a widespread and it's a very known brand. You do have to have a German bank account in order to invest in it. So foreigners could not even invest in it if they don't set up a German bank account, which in most cases you can only do when you are a German citizen.

Wonderful. And I think I read that you all have been in business for what, 55 years. This is a pretty established platform for them.

It's a bit very, very established platform. You can see with 55 years we really took our time and grew it like very conservatively. And yeah, there's, there's a deep history and trust and it's part of what's called Volkswagen by. So there's a banking system that's related to it. So it's part of a bigger banking group and even has insurance companies and other in that call it conglomerate of companies.

Great. So now let's talk a little bit more about your story. So you spent a lot of time in Germany, but then you came to the US So that to come to school, was it to pursue real estate? Tell us a little bit more about your journey.

Yeah, so it was specifically about real estate, it was about banking, it was about exploring the big world. So I grew up in a town in Dusseldorf in Germany, has around 600,000 citizens. Very similar to a Boston type city. Clean, beautiful, but being Jewish, it had a very small Jewish community. And in Germany what happens is if you want to find your mate, you have to travel throughout Germany to go to a Jewish party. And here in New York you have more Jewish parties per night than you in Germany. So that was one of the intentions, but the professional intention was either to go to London or New York to explore. I did an internship in London at Daiwa SMPC investment bank. And I started here with west lb, which is a German bank. What's interesting, in Germany they have a system that's called working student. It is more than an internship, but it's less than a first year analyst. So you do that while you study and you have roughly 20 hours, so call it a part time, part time job while you have a full time university program and you self organize it. But the company knows that you're also busy with your university. So if you have a week or two of exams, they let you. And so you have a couple of hours in the morning, couple hours at night, you get full benefits, vacation, healthcare. What's nice about it, if you stay for a year or two, and you know this I'm sure from your own interns, sometimes with a six year, six week internship, by the time you train them, they're gone. Right. And so your willingness to input is sometimes not as large as it should be, but if you know you're around for a year or two, you would invest more time in that person. So I was lucky that I had good people to train me. And when I went out of university I had already five years of part time experience with a master degree and four years of those were in the banking industry and one year was in consulting. And so he gave me a good base and West LB sent me here then for a promotion program, a trainee program. And I ended up getting a full time offer and enjoyed roughly five years of real estate banking, mostly construction financing, which was very interesting. It obviously got more challenging in 2008 and nine when we had more bankruptcies. A lot of great learning. And I covered the same four regions, us, Canada, Mexico, Chile, that Union Investment covers. So that's how they found me, approached me and then I joined. I basically made the switch from the debt side to the equity side. It is different, but it's not that different. We still go through cash flow models, but it has some differences and it's been a great run because in a relatively young age, if you work for a foreign company, you cover a huge region and you have the opportunity to be more senior and more involved than you would be in a structure that has 50, 60 acquisition people here. We're doing this with a very small team. We outsource a lot. And so I was fortunate to have around 5.5 billion of transaction experience at my age. And that was a lot of fun.

Wow. So let's talk a little bit more about that. And we have, I would say mostly a domestic audience here, but we do get certainly international listeners as well. And the whole idea of working with a company that's based overseas, I would imagine you grew up in Germany, you had that connection, you speak the language. Is that essentially a prerequisite or if you had someone who's maybe going to school here in the US and they were interested in doing more global business, how would you even go about finding that role or that, that opportunity?

Yeah, we, I like to call us a foreign capital source, but a local player because with the 7 billion US portfolio, we're really a decent. We're not a Blackstone, we're a decent local player. We have in our team, us people that have no German skills. And it's not necessary. Actually Germany, similar to some other European countries, are very, very professional in English. It's the first foreign language. And even today in today's world, some kindergarten or pre kindergarten start teaching English already. So the fluency is very high. All our investment committee materials is in English. So that is the internal language. As soon as one person in the call is not a native German speaker, so that would not be a disadvantage. Obviously it was an advantage for me that I know how to maneuver the internal investment committee, know the culture and as language is not just about like about, about the words, but it's also understanding the culture and there are obviously differences. And so that definitely is helpful, but it's not a requirement.

Great. Yeah. Because I was going to ask you about the customs or the way business is done. So you have German investors who are investing here in the US and in Latin America. So you're based here in New York, but again you're investing there. So you could have three different countries at play, if you will. So how are you lining this up? And I guess the most basic question is the way transactions are actually done. Is it pretty similar to how a US investment sale property is acquired versus Germany versus Latin America? How much of a learning curve is there to figure out how to transact in the various markets?

Yeah, over the years between Europe and the U.S. i think they became more and more similar. In the earlier days when I came here, I would say the US was a much faster market. We went into some bidding processes and we offered 10 days due diligence after getting exclusivity in the third bidding round and an interview and people were laughing at us. In some markets like New York And San Francisco, 10 days, that's a lot of time. In Germany it sounded like you lost your mind that you only have 10 days. But it didn't mean we start due diligence then. It meant that we actually upfronted that expense at risk before knowing if we win. And that way the brokers involved would know that we're really serious. We already spent money and we typically then also cannot do that on 20 deals at the same time. So they there was a very clear focus with multiple trips. And that helped in terms of, I think the transaction process is not super different, but the speed is different and the willingness to take risk is different. In general, the US has a tendency to have higher LTVs or be more optimistic, especially in positive market environments. If you think about end of 2021, where rent growth in Florida, in some markets we're approaching 20%. I could never include 20% in a financial model in an acquisition that I put into investment committee, even if the data supports it. We have to be more conservative. And so I think in general there is a high level of conservatism, but the processes and the way of transacting, especially on the bigger deals, we do deals up to 500 million per deal. We start usually on the lower end, around 50 million. So in that level of transactions, the professionalism and brokerage firms like yours have like transferred that almost globally. The one big thing that's different in Mexico is that even in normal business times, the majority of the transactions are not done in a huge bidding process. And they're also usually one on one negotiations. And you have way more family offices that are up to billion in size of aum, but you have a little bit of a rougher negotiation style, almost similar to the 80s in New York, where you had more families as New York involved more into a more institutional platform. And I always say, and we started with this being born in Israel, growing up in Germany in an Israeli household, but with obviously German culture around me and coming to the U.S. so these three cultural connections that I already have definitely has helped me to maneuver. And very early in my life I understood that there's not just one way. And I think that that helped me a lot there. Some people that have grown in a place may have traveled a lot and have in their circle a lot of people that just confirm what they think and what they do. And I think that's what happens obviously with social media, where sometimes we get into our chambers and only get confirmed of what we want to hear. So that helped me definitely understand and play with different mentalities. I give you one example. I was in Paris for our honeymoon and I was dealing with a Mexican buyer that was a tenant in the building that I was selling him. Very big personality, multibillion dollar portfolio. And there comes a youngish guy telling him yes or no, I'm giving him a discount. So he calls me on my honeymoon while my wife looks At Kim Kardashian driving by. Remember when she lost all her diamonds supposedly? And he yells at me, the elevator broke. You guys are so cheap, you don't even keep the elevators in line. And so you have to deal with a different kind of. Different kind of personalities.

Yeah, definitely. Different customs, different ways of doing business. But I think even it's a great topic because it doesn't just apply internationally, but it applies here in the US to if you're buying in a major city or if you're buying in a secondary or tertiary market. So I think learning the terms and understanding what is commonplace because you don't want to offer something that's over market, but you also don't want to offer terms that are outside of market where you get laughed out of the room. So I think that's certainly important to dial in. The other thing you talked about is setting up your investment group to understand what the local customs are. So you can say, all right, well, here in the US if we want to transact, we need to tighten up our diligence process and this is what we need to do. So I'm sure there's that education process to get everyone prepared for that.

That's correct. And it was a hard process. It took years. I can tell you one example from Washington, D.C. back then in Washington, D.C. the necessity was not to put zero days due diligence. We offered 17 days. Our competitor offered three days less. And we lost the deal on the same pricing on three days to do this. And that was the starting point of me pushing really hard to go and pay up front, take that risk and not keep on losing deals because of time and speed. And that was a big change. And it started, we had our most successful year in 2016. Hedging costs for the currency were low. Our capital is very price competitive. And we did 1.6 billion acquisitions in the US in that year alone, which back then represented a third of the global union investment acquisition volume at a time where Europe was a little bit slower, even though we have had back then around 50 acquisition people. So that was a fun time.

I was going to ask you about this later, but we should cover this now about the currency exchange rate and how does that work? Because if you have German investors who are deploying Germany capital into the US now, that that money might necessarily not be staying here forever. You might eventually you get the exchange on the way back. But how are, how closely are you watching the exchange rate and how much does that factor in? Does that give you depending on the Markets, is that, can that be an advantage disadvantage? Are you all trying to hedge that?

Yeah, so that, that is a very important topic. So we have euro investors and they want their returns in euro. And the way to look at it, some people think you have to look at the exchange rates, but you actually have to compare the interest rate base interest rates of here, the Fed over there, obviously the German European Central Bank. So the closer they are, the lower the hedging costs are. We had usually one year rolling, some companies are doing three months and there are some other products. But so. And in the years where hedging costs are low, our capital sources is cheap and we can be very price competitive. There are years 18, 17 and 18 where hedging costs were approaching 300 basis points, which is brutal for a core fund. Core Core plus fund. And so that was a period where it was very difficult to transact and we were many times far away from pricing. So you have that wave of a lot of activity, sometimes a little less based on financial markets in addition to the real estate cycles. So that is a very important topic. We have a natural hedge on the debt because we use US dollar debt. So we only have to hedge the equity piece and we do not hedge the cash flow. We take that in because it's not a huge risk to have a little fluctuation there. But certainly relevant now we're in more normal territory in the mid 1%, mid 1% range, which works well.

And I'll remind everyone of the disclaimer at the beginning of this show that we're not giving investment advice. We're certainly not giving accounting advice. But when we talk about exchange rate. And I think the next question would be thinking about the accounting and the tax ramifications for. Because I think for a lot of our listeners and even those who are, are emerging sponsors who are looking to attract foreign capital. There's a lot of foreign capital. I can tell you. Last year in New York, a third of the dollar volume purchases came from foreign capital. So they're for local sponsors who are finding great projects and they're looking to attract foreign investors. Maybe they might be just thinking, well, okay, the tax question about how that all works, that's for my foreign investor to figure out. But like how, how are you navigating that for your investors? Is that also something that just the investor has to be responsible for or what kind of tax ramifications happen?

No, we deal with it. One big part is called fripta, which is a tax that disadvantages foreign investors. If you own more than 49%. So you can offset that risk if you have a 51% local partner. It's not enough that it's another partner. It has to be a US company company. So in that sense it's called domestically controlled company. Or if you have a REIT and you all do that and we have. We don't do that on every transaction some because we like control. We have a lot of 100% purchases. We have some 50 50. So where we can structure it and it makes sense. We do it. We're not. We just price through it and we accept that.

So you almost pay. If you have more than the 49% then there could. Then there's a what a double level.

Of taxation where you're so, so there's. Yes, there's a higher taxation level and especially capital gains on the exit. So but again we price through it and we accept that in the underwriting. But there's a disadvantage if you're more than 9%. What's challenging for groups that are only 49 or less is that they have less voting rights, less decision making rights. So that comes with. And that's the whole idea. You basically the regulators want to disadvantage the foreigners so that they have to work with local groups that control and make more decisions. So you have to balance those two advantages and disadvantages.

Got it. So how many cities are you invested in here in the US roughly?

Yeah, around 20 cities. So pretty widespread. And what has been fun and as I mentioned before, there have been some cities that I may have visited two or three or four times. Then all of a sudden an opportunity comes up and we dig into it so much that within two, three months I may be there up to 10 times. With up to 15 people understanding myself, explaining the market, I have the luxury of having a lot of top brokers guide me through the process and speed it up. And we have different departments that are acting within that, obviously fund management, asset management, different decision makers that all make their numbers into the financial underwriting and the presentation, the investment committee presentation. I lead that process, I lead the tours and we call the deal captain. That basically puts the whole pieces together. And it sounds simple, but having 15 people join you on a trip, you really have to make sure that a lot of coordination.

It sounds like it'd be some fun as well.

It's a lot of fun.

So how do you then, how do you pick those 20 cities? What's the criteria? So you're deciding whether you want to invest in a market or you want to Divest. So what are the major drivers, what are the metrics that you're looking for?

So the interesting thing is when you look at markets, we're all chasing the same thing, which is rent growth, especially as a core fund or any fund, any investment in real estate. If you don't have growth, you're going in at the same noi that you would leave, that would be very hard to make a lot of money. And so what happens is if you have good demographics, if you have good education, if you have a decent ecosystem with different usage, mixed use environments, offices, hotels, wherever you have that you have people migrate into, you have employment growth, and you have all those things and they translate into rent growth. So if you want to simplify it, if you follow the rent growth projections and you obviously costar you already, you have some top companies and it's very transparent in the US in terms of projections and data. The rent growth is the one single number that will lead you to a very, very accurate decision. And what's interesting, if you would pick an interesting building that you like in a market that doesn't have all those things, you put it in a financial model, whatever strategy you had before, but you may end up using some projections for growth and your model will show you that it's not a good investment. So it's interesting that I learned over the years that while it sounds very complex in terms of what you're looking for, there are some similarities. And then especially someone like me that flies in and out different markets, you start seeing trends that are similar. For example, you take the meatpacking district in Manhattan, right? Evolved from a more meat based to a couple of clubs, artists. All of a sudden we have now obviously hotels, we have offices there. And now with the new work from home environment, the offices are even more interesting there than maybe in an older midtown location. And so thinking of the evolution of the meatpacking district, these things happen around the country in different levels and different speeds. And when you. So I think it's not only about the actual markets within the city, the MSAs, it's also about the micro location. And I'll give you one of the examples that I like most. I bought a deal. It's called 101seaport in Boston, Boston seaport back then it was 2016, had around 20 million square feet in that market. It was an evolving market. There were a lot of surface parking around, but there was a master plan to grow that area just between then and now. So call it eight years. The square footage in all Asset classes as a mixed use environment grew by 100%. So from 20 to 40 million square feet. What we have done there is we bought a brand new building, Skanska Development office building with a 16 year lease with PwC. And I call it the best of both worlds because you have a core fund, a core product. You have 16 years time for everybody else to develop around you for you. And that obviously pushes rents up because the area is more interesting and relevant. And that is one of the examples of you could be in a core investment but in an improving market. And you may get very close to call it light value add returns. That's why I like to mention that that example. So it's about the macro market and then the micro location that is extremely relevant obviously.

So I'm glad you brought that up. And also about areas that are improving in that I could see how that would certainly work on the positive side and to help support rent growth. Although you could also look that if there was more square footage being created around you could also add to competition. So not to pick on Austin, Texas, but, but clearly this is a city that has had a lot of population growth, a lot of job growth and so and very flexible pro business environments. You've got developers showing up, building dozens of cranes up in, in the city. So on first glance you'd say wow, this city's booming. This is an incredible thing. There's a lot of investment, people are moving here and then all of a sudden there's this huge oversupply of apartments and now rents are actually going down. So how do you. It's an interesting question because on one hand you, you don't want a city to be for real estate development to be on halt or stagnated. You want to see some growth, but you also don't want overdevelopment where suddenly you're competing with all this. So how do you balance that?

So I want to answer first to finish that. Discuss that example for the Boston market. So in that micro location it doubled in square feet, but the office exposure is the same, actually a little bit lower because some older offices were converted to lifelines. So you have hotels residential, which actually improves the location and makes it more interesting. So we have even less competition from pure office players. That's relevant going to Austin. And that's one example of those very hot Sunbelt markets and growth markets. And it's very true that you have to be careful. So what I said before, in terms of rent growth, one other number, in addition to migration patterns and job Creation, supply and demand is obviously in real estate one very important part. If supply and demand is not right, your rent growth is not right as well. Right. So that ties back into that one number that seems to me at least to be the magic number. And oversupply can be very dangerous, obviously. And what happens in markets like Austin, we went in very early in 2013, I bought a building there. And so we went in at such a low basis compared to today, we more than doubled our price per square foot, even though it's office fully in favor now. But you have to be careful which asset class has the oversupply, which micro location. And so you have to be even more careful in those locations. What happened there is that Austin steadily, with a very good pace, was improving and it became a second Silicon Valley had a lot of tech companies growing and they created a lot of demand for office space. But also with the tech industry, tech employees that moved there had a fun lifestyle. It's a very, very cool city. Long term, I think it's going to be continuing to be a very strong investment market. But currently you have to be very careful because what happens is, as you said, in other words, developers always have to anticipate. So they build and it takes up to three years with pre development period. And so you. But in some instances they're building on that expectation that the growth will continue. Mostly that it continues at least for their period, up to four or five years after they complete their product. Right. If they would know in three years, when I'm done, the market would go down, they would slow down development. And so what happened, especially in the pandemic, we had migration from cities like New York or San Francisco into those secondary markets like in Austin, like Miami, which brought a lot of new people to those markets. Demand for housing and other things grew and that development pipeline was assuming that growth. And all of a sudden it stopped. People now in some markets either stopped or it very, very dramatically slowed down. Some people now you have even Amazon and others asking for five days in the office. Even if you ask for a hybrid with three days, you cannot live wherever you want, right? You have to be somewhere where there's a main office. So a lot of people came back to New York, a lot of people make back to other places. And so some of those locations, and especially the super small market like Bozie, that was super, super hot. And the whole idea was it was cheap, right? And then when it changes with so many people coming from outside with higher salary packages, they outbid everybody in the local Market, they push the rents up and then they leave. And so that creates some dislocation that you have to be very careful of on those markets. And then on top of what I just said, in Austin specifically, it got to a point where the tech sector, which was very positive and for years was driving growth on the west coast and in Austin, that specifically for office slowed down because they were the most willing to allow people to work from home, sometimes fully remote or very, very open and flexible schedules of maybe once a week, twice a week, three times a week. And so that created pressure, downward pressure on demand for square footage. So that impacted. And also when you think of, for example, apartment investments in Austin, when it was important to be every day in the office, there were some apartment buildings next door that would be very convenient, right? You could walk over, you could have your bars and restaurant. You're in downtown now where that's changing. If you're a smaller family, growing family, or even someone that just likes to have more space, you could change your desire and say, well, now that I don't have to be in the office every day, maybe I could live closer to the suburbs. So you have to be very careful because if a lot of apartment buildings were built on that premise, be closed 247 environment, right? And now do I have to pay that price that's more expensive in that location? Do I want a little bit more green space? Do I want more space? Where are the good schools? Right? So you have really a lot of things to consider in your decision making process.

Those are all great points and I think are really helpful for our audience to think about. When you're looking at a city, what are the questions, questions to ask and what are the major drivers and the change and that, that whole commentary about this, this shift with hybrid work or workers coming back, how is that going to change their habits and what they're looking for? And so really, I think paying attention to the macro trends will be very helpful in creating the right investment thesis. So when you, when you go into these cities with, with your 15 person team, what are you doing there? How do you figure out you're touring projects, things that you might consider investing, but who are you meeting with? How do you really find out what the local landscape looks like?

Yeah, so in the earlier days of the evolution, we were more reliant on brokers and we still are, especially if it's a market we don't know as well. We get road tour, we tour properties that are in that asset class. We try to understand different submarkets and what's great. When you are a local, you may be shy to ask certain questions that are very basic to a city. But if you are someone that comes in and says, well I'm based in New York, explain me why this city is great, they can start, if you want to, from scratch and they put out a map and they explain to you where people live and you can ask where are the high earners living? Where are the good school district? And you can ask all those questions and people, people are helping us to understand those markets because they want us to bid in the bidding process and put the highest price out there. So there is a mutual interest to work together. We obviously try to then take a hotel that is in the right location. Right. So you experience that as well. You try to use the restaurant and other things that it has to offer. And so and similar to when people say if you read a book or if you watch a movie for the second or third time, things you haven't seen before, like when I go seven, eight, nine times in a three months process, I get smarter and smarter every time I go. I look at more deep comps, I tour more deep buildings that are similar. I triangulate the pricing on the leasing and so. And then we obviously have market presentations. Right. The research part is important too. We do that sometimes within an office building of a brokerage firm like yours that gives us the insight. And it can take a good two, three days to pack it in. And you're busy from 7am in the morning until 11pm at night. Some people that are not industry, they think it was just a vacation trip to Miami, but it can be a business trip where you actually don't see anything else that's not related to work on a trip like that.

Makes sense. So, so you, you mentioned having that inside look and certainly the name of the show, the Insider's edge. So yes, I would think that a lot of the local brokers would hear, okay, well here's this big German fund That's coming in. 60 billion under management. Clearly have a great track record. And I'm talking about if you go to a new market, right? So you're relying on that track record, certainly established. But how do you ensure that you are getting that insider's edge, if you will? Because I would think that a lot of the local players, you've got brokers who have established long term connections within the community and they, I'm clear whether it's an off market deal or whatever it is, they've got their client roster that they go to. So how do you, how do you break into that? And how do you know that as a buyer you want to make sure that when there's opportunities, you're getting, that first phone call, you're getting, you know, great looks at things. So how do you ensure that you do that?

Yeah, so there are multiple parts to do it. As I said in the evolution in the earlier times, I've been now over a decade with the company, you're relying more on the broker network. And over time we met in conferences and bidding processes, more and more investors as well. So I have a very deep network of investors, service providers, brokers, and at the end of the day, as a broker working on a sale assignment. And I'm using mostly the example of a bidding process, but sometimes it can be done without a bidding process on an off market or one on one, one negotiation. Your client's best interest is to get a very qualified company that has discretionary money, that ideally would not have any debt contingencies and would close with high certainty, high speed, and would pay most likely and hopefully the highest price. And so while they may have certain favorites and their friends and the local players, at the end of the day, you're doing a disservice to your client, which most groups don't do. Most clients, most brokers take it very seriously to get the best offer on the table. And obviously, especially once you narrow down to the top four or five, you have, as you do it every day, interview rounds, and you describe your discretion and your equity sources. And so what happened over the years that we transacted more and more the brokerage network within a firm like Avis and Young. You have your national cards and you have a database, a CRM, and you type in, hey, these guys, they do what they promise. With my 4 billion of deals with the union investment, we did not renegotiated one deal. And if you think about that, that's a strong statement. So we come in, we do our analysis, we pay upfront. I have been bidding on processes where I spent 150,000 on due diligence costs before I even was selected. And I think that's such a strong statement. And I have, by the time that I'm having the seventh or eighth tour with the broker, they oftentimes tell me the building better, you can do the tour by yourself. And what's interesting is I'm in their face so many times, sometimes more than they want, that it's just obvious that I cannot do this with five Six deals at the same time. This is the deal, we want it, we're serious. And that has helped us, us even in the market that we're not the local player if it's a new market we haven't entered. And so that image transfer of our brand and our gold standard of doing what we promise, that translates into multiple markets because the larger firms are sharing that on their national cards.

No, that's absolutely right and makes a ton of sense. Again, I think for our audience to hear because again, and if you don't have an open end fund that you're working out of, knowing how to leverage, how to break into new markets and create that credibility is really important.

And then if I may add one thing that's important also is be fair to someone else's time. Like you as a broker, I'm sure you don't want someone to tell you, hey, we can be active right now, we have tons of capital, but then don't show up and don't do anything. Right? And so, so I have gotten very good feedback by being honest. And if we're a little bit slower, if we're signing a ca more for market intel, I openly say that. And then if I say I have capital, people believe me and they don't think I'm just shouting wolf and nobody's going to show up. And I think that that has also been on the personal level, like relevant and over time, as you mentioned, we talked mostly about the marketed process. What's also interesting, when you create deep relationships by just having lunch or coffee with someone over a 10 year period every six to 12 months, that can create a situation where they would trust you also to sign an NDA, see a rent roll and do an off market transaction. So one transaction that almost happened but was killed by the Ukrainian war and the environment that happened then was a ground up development in Wynwood, Miami, which happened in an off market transaction directly with the developer. We respected each other, we liked each other, but we knew it could take some time until the core fund goes into development. I knew we can do it. And in normal years we do up to 1.5 billion of developments per year globally. And so eventually, after a long period of trust, it just created an opportunity. Hey, you're the first call. Do you want to take a look at that? And. And it almost happened. Wow.

No, this is fantastic. And it's interesting because so much of what you're talking about is in my book as well and cultivating relationships and that credibility, that reputation so important and for those of you listening who are maybe starting your careers in investing, following through, not over promising, under delivering, really important. So with only a little bit of time left, I do want to talk about. It is unbelievable how many organizations, industries, panels, conferences that you're involved with. I know I've seen you speak multiple times. You know, a little bit of Alphabet soup here, but uli, niop, gri, afire, pear, imn, opal. I know you could spend your entire life just going from one career, one panel to the next. So what is the benefit that you get out of these conferences? How do you. Because you're also going to these cities looking at the real estate. So how are you being efficient with your time? How are you picking which of these conferences that you go to? Right. I think that'd be very helpful for our audience to understand how you.

So how when we talked about. And what you said about cultivating relationships and building up a network, that's a very big term and what does that really mean? But at the end of the day, it comes down to people that respect each other, that talk to each other and that say, hey, that's interesting enough or respectful enough that I'll follow up and I want to talk to you again. If you see someone once in a conference and never again and forget where the business card is, that doesn't help. And part of that is really perseverance and continuously to show up and do the work that is sometimes uncomfortable. Right. Walking into a room. And over time, I got used to it and I enjoy it. If you're genuine about approaching people, if you really want to hear what they have to say, where they're coming from, what their story is, and with my multiple backgrounds, there's always some connection point. Someone talks about a city and I say, well, we have a property there. Do you know that one or someone is Jewish? I can refer to that. So that's like the qualitative part of it. The other part you said, like, what is how do you manage your time? So what I typically try to do, because I cover such a big region, rather than just going to a city and have multiple meetings with some investors and brokers, I learned over the years that it could be more efficient to pair that up with a conference. So let's say I haven't been to Austin for a while rather than just going there and try to just talk to four or five brokerage firms and maybe two or three. Like, I basically either attend a conference or speak on a conference. So I see up to 400 people out of which I speak to up to 50 in a day or so. And then I have two or three days left in that week to do a more individual property tours and stuff like that. So that's why you see quite a lot of that engagement. But it's always paired with that other more specific market update, being in the market be seen and one very important part and that that's not easy for someone covering such a big region. You don't want to be out of sight and out of mind. So if you show up, especially when we had the pandemic and there was maybe a year or so that we didn't travel or two, there were some markets I haven't been to for two or three years. And if you cover like 12, 13 market, that's a lot to cover and catch up on. And so going to those markets, putting out the union investment brand and being able to, oh yeah, no, we're still on. That helps. And then there's active approaches where I can talk to people and I have a little bit of a speaker sign and that gives you at least some credibility. And then also some people approach you and whether you said something smart or not, they say, oh, good job on the panel. Doesn't matter if they just listened on their phone and they didn't even listen to what you said. But it gives you also a passive approach and, and improves your networking possibilities.

And everyone that goes two ways as well. So when you hear a speaker on a panel, and I know sometimes after the panel's done, there's a line to speak to the person and sometimes the speaker just runs off, obviously sounds like you're there and you're happy to engage. But I also encourage people to follow up with that speaker after whether it's linking in with them and saying, listen, I heard you on a panel and be specific, I heard what you said about this and I thought this was really interesting and I'm doing, maybe you'd have interest in this opportunity or whatever it is. But I'm curious, do you get a lot of that where people follow up with you and maybe as we kind of wrap things up, also parting advice for those who are looking to grow to expand their network, what would you say to that person who's out in the audience hearing you speak and how should they continue to build on their career?

Yeah, sure. So as you just indicated, I do like to stick around after the panel. I think that's one of the benefits of having people that are interested, the passive part of it. There are A lot of people following up, adding me on LinkedIn and it's gotten harder and harder, but I really trying hard to get back to everybody, whether they're very, very senior or junior in the industry. Someone that's junior today is going to be senior tomorrow. And so. So it fared well for my career development, to be fair to anyone. I can. Obviously time is limited and sometimes something may go through the slip through. But the advice to someone that is new in the industry or wants to grow, I think it may be uncomfortable at the beginning, but the more you do it, with every training and with everything else going, doing it, talking to people, not too aggressive, but find a way to see if someone talks already with someone else and be a little bit patient. It just adds up. And many times you go back from a lunch meeting or a coffee meeting and you wonder, what did that do to me? What did it help me? But you can't see it like that. You have to look at it as the accumulation. If you have three to five meetings in person per week, do this for a 20 year career and I'm 20 plus years in this. That adds up to a lot of people and someone that you had lunch with, like it's very odd to not pick up a phone, right. If you didn't do anything wrong and upset them somehow. And so I created a huge network of people that I know and that would pick up the phone. And I think it's similar to dating. It's a numbers game. You go through a lot of uncomfortable dating dates to meet the eventual wife or husband and, and, and that's the same with real estate, right?

Well, Todd, this was amazing. Thank you so much for sharing your time and everything that you're doing. Being out there front and center, really, really incredible. So thank you for joining us.

Thank you. It was a pleasure.

And I want to thank you all for joining. A lot of information here and so I know this is going to be an episode. Hopefully you took notes and as my, one of my mentors and coaches, Rod Santomosimo, says, so take a couple of these really concrete, actionable pieces of advice. Maybe it's how you approach conferences, right? And maybe that's learning a market and how you go about investing. Maybe it's learning about how to appeal to foreign investors. There's a lot of great information here. So really hoping that you apply this and share it with friends too, if you find this helpful. I do this all the time. When I read an article, I hear a podcast, I share it with a friend to be happy helpful. So as always, thank you so much for joining. You can go to james nelson.com that's where you can find the show notes. Figure out how to connect with Tall and wishing you all the best. Until next week. Thank you.

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 Nelson.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.