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

Welcome everyone to episode number 188 of the Insider's Edge to Real Estate Investing. I'm your host, James Nelson. I'm principal and head of Tri State Investment Sales for Avis and Young. And today we have with us my friend Rob Callner, who is founder of Round Square Development and Round Square Builders. Rob's got an incredible story. I think you're going to get a lot out of this. What I really appreciate is the honesty. Here is someone who was incredibly successful in the textile world and then he jumped in to development both feet first, as he said, right into the pool, trying to keep his head above water. And what I really love about Rob's story is really the honesty and his willingness to learn as he goes along. And I think we can all learn from this really in that sometimes certainly going into a new business can be scary, but certainly having that mindset, right, to go into something knowing that you're going to make mistakes along the way, you're going to learn along the way and asking the right questions. So especially for any of you who are thinking about getting into development conversion, we always say that look, first start off with cash flowing multifamily, maybe delve a little bit into retail. So we're talking about doing ground up development. Rob went for his PhD right out of the gate. But any type of construction, you're going to get a lot of great advice from this episode as well on how to work with contractors, how to work with architects and your whole professional team. But at the core is really honesty and dealing in a straightforward manner. So as always, you can go to james nelson.com that's where you can find the show notes for this episode. You can find out how to connect with Rob. You can also find helpful videos, white papers to help you gain the insider's edge to real estate investing. And while you're there, make sure and sign up for the mailing list. I created this monthly newsletter to summarize the podcast share with you white papers informations that are going to really help you become successful in your real estate journey. So with that, we're going to have a brief word from our sponsor and we'll get right into that interview with Rob Callner.

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Welcome everyone, especially those of you who are joining us live on Instagram, Twitter, LinkedIn. And with us today I have my good friend Rob Callner who is founder of Round Square Development and Round Square Builders. Great to see you.

Thanks for having me. Good to see you too Rob.

I am super excited for this discussion today because I've known you we just figured out at least 20 years because that's when we did our first deal down on Avenue A, which you developed. But I tried to do some research on you beforehand. So I don't know if you're kind of the Kaiser Soze, maybe the real estate industry here, but I know you're from the textile business. I know you went to University of Bridgeport. That's about all I have on you from before. So maybe tell us about the, the pre real estate, Rob, and then I'd love to hear kind of how you decided to make this transition to, to get into the business.

Okay, true I did go to University of Bridgeport, which not always proud to tell people that, but this where I.

Think you got street credit.

I got street credit. Got a lot of street credit for being there. Really spent most of my career, as you said, in the textile business. We manufactured brand identification products for the apparel industry. So brands like Polo and Tommy Hilfiger and Nautica and the Gap. We made all those annoying products that you usually cut out of a shirt or pair of pants after you buy it.

You mean like the labels?

The labels. We were label guys.

Why wouldn't the Companies just do it themselves.

Well, they. So for example, let's say it was Polo, which was a large client of ours. They, their concentration was on product, clothing and, but they wanted to have their brand all look consistent. So they would come to a firm like ours and they would design all the packaging, et cetera, with us. And then because they made things globally, we had to set up operations in many different countries to be able to have everything kind of look consistent. And wherever they were producing, we had to be sort of a local resource to those manufacturers. And it grew into a nice, you know, sort of substantial business. Actually, it started the business on my kitchen table and it grew what we.

So you started this business. I mean, how did you even know there was an opportunity here and figure out, you know, how to make these connections? I mean, Polo is obviously a global fashion brand. I mean, you were just starting off.

I.

Dad, tell me that you just walked into Ralph Lauren's office. How, how did you do this?

A, I was a good salesman. Yeah, like yourself. B, it didn't start off like that. So I was at the time we were. Both of. My parents are blue collar workers. My dad is a union, was a union stagehand and my mother was a cashier at Off Track Betting in Flushing, Queens. And I had a union card to go into the business. And it was not a business that was incredibly conducive for family life because you're working nights and weekends, et cetera. And I, when I graduated from college, my first job, I was selling payrolls for adp. And I really kind of liked it. It was, I was out there learning what I wanted to do. I didn't really have any sort of career path. All I knew was I did not want to necessarily follow in my dad's footsteps. He did well, he's a great guy, but just was not the industry I wanted to follow. And so from ADP, I really @ some point wanted to go out into my own business and I started selling at the time you remember the old dot. You probably not even old enough to remember the old dot matrix printers. And you had printers with the things on the side. And I started to become a printing broker. And we were selling forms and we're selling business cards and stationary, letterhead. Just an easy business, right? You could just.

And how were you getting clients? Were you going door to door?

Were you knocking on doors? I went to some of the clients when I was working at ADP that I had sold payrolls to. And ADP had an extensive incredible sales training program and that's really kind of where I got my start in the world of understanding sales and relationships was very important. I had a good reputation. People liked me. I delivered when I was at adp. So when we were going to sell, and this is more of a commodity type item, you could buy envelopes from anybody you wanted. But there was a relationship, there was a trust factor. And I started building a little business. And my. One of my closest friends from college is my roommate, actually. For one year. His parents owned an apparel manufacturing company. And he said, you know, if you're doing this printing stuff, can you make these hang tags for us? Because we use a lot of them. And I saw that as a niche market. So instead of just being a generalist, I decided to focus in on the hang tags, which became the labels. And then we started, you know, little by little, started small companies and gradually grew. And the first big break that I got was with a company called J. Crew. And we were a tiny supplier to J. Crew. And, you know, through the years, we had delivered and they were having some problems with their other suppliers. And I'll never forget, they once said, listen, we're not happy with your competitor. Would you be interested in taking on a lot of our global business? I had a tiny little. I think, at that time we graduated. I was from my kitchen table. We moved to huge offices in my basement. That was the extent of it. And the fax machine next to me hired our first employee. And J. Crew said, can you handle this? I said, of course we can handle this. And they started like, three weeks later. Orders are flooding in. And I remember I brought my dad out of retirement.

Sounds like a construction business.

Exactly. Right, right. Not even as difficult, but it was difficult. And I'll never forget, I brought my dad out of my dad, who's 97 these days, I brought him out of retirement to help me. We couldn't keep up with the orders.

But we managed, like, physically manufacturing labels. Like someone's working a machine, cranking these things out.

No, at the point. At that point, we were a broker. So we would go to manufacturers who would sell to us. Right. And at a discount, we'd mark it up and sell. So we had no equipment of our own. We were just basically got it middlemen. But to supply and to. Really, it was a service business. Right. It was a product, but you really had to service your clients. And from there, we got. I got a phone call one day from jquid. They said, listen, we. You guys are doing great. We love you. I mean, they didn't know how we struggled. I mean every friend I had came was helping us pack boxes, whatever, and they said look, but the problem is it costs more in freight to ship these labels because everything was moving offshore. There was no manufacturing being done in the US sadly. And we need you to be able to have a local presence. We need you to set something up in Asia. I literally a week, a week goes by, I'm in Hong Kong not knowing a thing.

How old were you at the time?

I was in my 20s and going.

To Hong Kong for the first time.

Yeah. Hired a guy who somebody told me they knew. Great, we'll set something up there. I come back, he resigned. I got a letter of my fax machine 3 I have to go back again. Make a long story short, figured it out, set up an operation there. And then the counterfeiting was becoming a huge problem. And a lot of the counterfeiting for the brands was being done actually in the same facilities that the real product was being done. You have some extra piece goods, you have some garments. And we were asked actually I think was the time I think was by Ralph Lauren. Again, this is going back a long time. Can we get involved in helping them not only keep their, their colors consistent because they're making goods in all these different factories. They want to keep the. There was a blue label. They wanted to keep it all the same consistency, color. But they also wanted to keep more of a control on the product getting out into the distribution channels. And we actually set up a factory in our place in New Jersey. And when I talk about a fact, it's not like little label machines, these huge looms we would buy in Germany and we had to hire people to run them. And we became like a little product center where we design with all the designers. And from there we would send out the patterns to the different factories we're working with globally. And we would actually act as a local resource. But our client was the corporate client. We'd be specified as a supplier for those particular items. And that's. And then you know, you do a good job for this one, then you sell this one on the concept. And our business kind of grew nicely.

But by the time you had scaled it and it. Did you ultimately sell the company. Is that what happened?

Sold it in 2005. Okay. Had a two year employment contract for. With the buyer happens to be an Asian firm that bought it. They fired me in about 15 minutes. And I was.

You would think they'd want to keep you around.

Right? One, one would think and so here I am. My career was mostly, you know, running the show and having people.

How many people did you have at the show?

We had about 230 people at the time.

230 people. So we had a big business.

It was a fairly big. By the way, we sold a product for, I mean, a label, cost like two pennies, nothing. And we had, you know, to do any volume, you had to. So we had stuff going on constantly. And you know, it's, it's the, it's the manufacturers that are selling the big components. We're just a little like, you know, there's a button on his shirt. Like we're a little sort of a little guy that's. Without a label, you can't deliver the product.

So they trusted you because you had the consistency. It was. They.

And also really all these laws came out with like hair labeling, right, that you see by a shirt today. It's got like different languages. I mean, the shirt could be the size of War and Peace. I mean, the label. So it was. And you had to get it right. And there were barcodes and tickets. We got involved in all of that kind of stuff. And fast forward, we sell our company and again, it was. I was tired of the business. I was on a plane because nothing was really being done here. And I'm a bit of a micromanager, control freak when it comes to, you know, delivering on time and delivering what you say you're going to deliver. And I'm on a plane constantly. I had enough, had a decent offer, wasn't the best, wasn't the worst, decided, had enough. But I was looking forward to the next chapter in the label business, right? Because this company's buying us much bigger. They were going to go public, whatever didn't work out. And I'm now home, I'm relatively young and I'm home with nothing to do. My wife and her girlfriends are in the next room playing mahjan or canasta or whatever it is. And the more I'm listening to them and I'm watching, you know, the Jenny Jones show on tv, I'm like, this life is awful. I was used to people would stand outside my office and wait for my pearls of wisdom. And you know, I go in the kitchen to get something outta refrigerator and of course I'm, you know, I'm like, everything I say is wrong. I do, I touch it. There's a scratch on the counter. I left the. The what? The ring around the countertop, whatever. So one of my best friends and you know, Him, David Horowitz from Cooper Horowitz. Very successful mortgage brokerage firm. You knew him? Just so we lived. I raised my family in New Jersey. Okay. And he was a neighbor. Our wives were best friends. We became close friends from a myriad of reasons. We had a lot in common. And we. He called me up and he said, you know, I have this client. He's an incredibly bright guy. He's probably old enough to be your son. And he's super smart. And he's really in the multifamily rent stabilized. You get him in, you raise the whatever. And he has an opportunity to buy a piece of property from an incredibly handsome man at Massey Nackle, who happens to be sitting to my left. And another guy by the name of Michael Soleimani, who I think was with you at the time.

Stay in touch with him.

Yeah, and he would like partner because he wants to really go into high end condos and blah, blah, blah. And Rob, you should meet him driving to the city. I meet him and fell in love with him. Charming young man, very bright, a lot of tenacity. And we bought the site together.

No, let me be clear. You had no prior dealings with real estate understanding and how it all worked? I mean, did you have any idea what you were getting yourself into?

Less than zero.

This is a pretty big gamble. I mean, we're not talking about a small investment. I mean, if I'm not mistaken, that that development deal on Avenue A in the East Village, I mean, it was a decent sized project. What, over a hundred thousand feet? I think the purchase price was somewhere in the 20 million range. When you start talking about the total capitalization of that, I mean, 40, 50. I mean, this was a real project.

James, looking back, I should have had my head examined. I should have started with a little igloo somewhere. I didn't. I couldn't screw a light bulb in.

Weren't you thinking about the risk involved? And I mean, again, you just sold your company, so you're sitting on capital. I mean, this was, and this was the. A major, major investment.

I look back at it now, I should have been institutionalized in this insane assignment.

But your wife wanted you out of the house. She said, rob, go for it. Doesn't keep you busy.

I don't care if we're living in a box in the street. To get you out of the house would be the greatest thing of all time. So we buy the site and that's kind of where it started and how.

Involved, I mean, you, you were. I mean, sometimes you have Capital Partners. Where, okay, here, here's my money and I'm going to, you know, report to me. But this was a really complicated site as I remember as well. There was air rights, it was a brownfield site. There was, I remember there was a stream that ran under the property. I mean there was a lot going on. Was it your development partner who was kind of managing all this stuff? Were you just kind of, were you on site? Were you trying to learn as you went along, like how involved were you in this project?

So I really wanted to learn the business and I just not interested in being passive money, whatever. I said, you know what, I'm still a young guy and I really see other people. You see all these fancy developers running around in their range room. It just looked exciting to me. And the guy that I was involved with, he was enjoying life. It was sexy. So I was really. And initially really the, the, the respective roles were he was going to be involved mostly in the construction part of the stuff. And I was, I guess because my age, whatever, I was going to be talking to the banks and you know, putting together this team and all that kind of stuff, the offering plan for the condo. And he was going to be more involved in the day to day. But I wanted to follow him and mirror him because I wanted to learn. I really wanted to kind of learn what I was doing. I didn't want to necessarily have to know every detail of every screw and every piece of sheetrock whatever, but I wanted to know enough because I kind of got a little bit of.

You were keeping tabs on the numbers and what, you know, all the ordering and what was going on with the subs. I mean, were you.

Yes, but it's an incredibly complicated business. And when you don't know it and you look at it from the outside, you think it's some kind, look, whatever, buy the building. But I was so involved in like just the whole brownfield program, the application, you know, the state. And then they wouldn't, you know, everyone tells you you're getting all this, this tax credit back and then the state rescinded on it. And then you had to go in to sue the state. I mean, just so. And then that's just one component. You still have to build a building file or find the right architect. It was so. And when you come from the business, it's difficult when you really don't know the business and you don't know who's good, who's lying to you, who's good in shape. It's really Hard to vet this stuff.

How do they even take you seriously? I mean, when you're. I mean, you're. You're kind of making this up as you go along.

How.

I mean, if I'm the one who's issuing these tax credits, you know, I want to know that I've got a partner who's been through this before and done it. So, I mean, how did you kind of figure out the right questions to ask and the right professionals to bring into the fold?

That's, first of all, excellent question. So the first thing I decided to do is figure out how to get the best set of professionals behind me. Number two, the most important thing, I was myself, I was honest, and I didn't try to put on any airs. And I tell everybody, this is my first project. I am new, I don't know a lot. But they saw that there was an eagerness, a desire for me to learn and not tell everybody how it should be done, because they all knew better than me whether they did it right or wrong. They had experience. So the experience that I had from running this business was the most important asset that I had, which was I knew I was a business guy, right? I had an operating business. So I knew how to deal with people, relationships. I kind of knew who was fudging, who was serious, who was. You know, you could tell I just had a lot of experience in that area. And that was, I think, helpful for me to just get. But I made more mistakes than you could ever imagine in this project. I'm in the process. You know, you just don't know what you don't know until you learn. And I always say that was really my MBA in life and in the real estate world. That was how it started.

Rob, I already know that people listening, watching this right now, are getting so much out of this and appreciate the honesty. And I think a lot of fear that holds people back from investing. Certainly developing. I mean, developing is the most complicated form of investing or real estate. And there's someone probably listening to this right now who maybe they're working for a big shop. They've been doing this for five, 10 years, and they're afraid to go out on their own because they're afraid they don't have the knowledge yet. They're, you know, they need to learn more. You know, the mistakes. I mean, the fact that you just kind of jumped into this, I mean, did. Do you feel like you were taken advantage of at times? Did people, you know, by the way.

I was an easy target. I, by the Way to a certain extent, even today, I'm still a bit of an easy target just based on the nature of my personality. I kind of know that. But there were certain things, again, to people out there that are looking to maybe make a move, not make a move again. To me. I didn't go to a good college. I. I only went to a bad college. Cause I was bad in high school. I'm not a student. Right. I have friends of mine went to Penn, Harvard, whatever. They're brilliant, brilliant guys, went to great schools. Many of them are very successful. But some guys I know couldn't fight their way out of a paper bag because they're just not. It's not in their DNA. They're very smart, book smart. They overthink, say to me, I'm a guy, I need to be jump in the pool and then figure it out. That's just how I learned and that's what I did. And I think a lot of people who are afraid to do that are make. They're going to go back, look back in 20 years and say, where did my life go? Like, I wasted so much of my time. I should have, should have done. I don't want to live my life. Shoulda, coulda, woulda. Yeah, I've done. I've made some great mistakes, some great investments. I've made some bad mistakes. I've had some really good partners. I've had wars with partners. It just. It is what it is. But the biggest thing that I took away from me, for me, was if I was going to get serious in this business. There was one problem that we had that I had that I noticed sort of from the very beginning. If I didn't have a really good knowledge and a good team of construction guys with me on my side under our umbrella, I was not going to be successful developer and I was probably going to leave the business because many of the people out there that do the work for you or did the work for you, especially if you really don't know it well, that's where developers get annihilated. Oh yeah, I didn't see this, the change. It's not an elegant business where people are just saying, oh, wow, you missed it. That's okay. Everybody looks, or many people look, especially on the construction side, for little angles to go in there. Because they go in. Many, not all go in. They bid it cheaply because they know that guys, they look for the opportunities to then make margins because they go and they buy the business. And that to me, I saw it so it many times I was having none of it. And then we got into the world of construction rounds, group builders and most of the stuff we do for our own account, we do some other third party work. And that knowledge and that skill set has made us again. Timing is everything, right? We've had some really good projects and ones that have not done well. But the fact that we control our own destiny with knowing our cost and if we make a mistake, it's on us. But if we do well, it's also on us. And that's how we treat our clients that we do work for and that's how we do ourselves. My sons, as you know, are both in the business. My son Justin, who came from the union contracts where he when he went to college and graduated, he went to University of Arizona, bit of a step up for me, but had a great time. His first job out of school, big union firm. He learned the ins and outs of construction. This guy knows he's. This was his passion. He loved it. He jumped in like his dad. He didn't know what he was up for. He rode the wave and he loved it. And that's what he does incredibly well. My older one is on the development side with me. He came from the tech sector and he implemented a lot of the tech stuff that he learned. He was at VTS for many years and he was at another construction software company. He joined us and he put a lot of this technology stuff into our construction world. So it just makes us better at what we do project wise. And that was the key for us to really kind of build a platform to where we are today.

So that was all you were building the construction arm while you were starting to take on more projects and then you ultimately became the gc. Now did you have to kind of take a step back? Because after Avenue A, I mean you built a project in Chelsea, you built the Georgica on the Upper east side. I mean that, that was another big projects. So did you GC that as well or is there.

Nope.

Was there?

No.

2. 2. How come?

And actually so what happened? Interestingly so we used a, an outside CM firm and our partners on that were the Carlyle Group. I was the Carlyle Group's first non union project in New York City. And you know, they were backing XTEL and using Bovis or whatever. And I'll never forget Andrew Chung who was running the show at the time. He and I had met a few times and couldn't understand how we were building things at that time. At 300 a foot and everyone was at, they were using guys at 550, 600 a foot. And he said look, I'd like to used to call me Calendar Calendar, I want to get involved with you one day. And he did just that. And by the way Guy, anything he told me he was going to do, he did. And we had an incredible partnership. But getting involved as a small firm with a company like the Carlyle Group doing a big project like that, they almost force you into. Either you either do it the right way or you don't. And they really helped us put in some of the procedures. We just didn't know that we needed to have to really be a better company. So the company that built the job for us and we were the developer and we had a CM firm they were disbanding and a couple of their guys went off and formed a leading builders group which is lbg, which is bought by aecom and they're very successful guys. They were involved in helping them on the non union side. And we took one of the key guys and he came on board with us and we built a construction firm around him. He went to retire. My son Justin had left the big union firm he was with. He was with a tremendous great interiors firm called tristar, Jack, Earl Shami, I'm sure you know Jack. And he loved it there and they loved him and he was doing these big project for Boston Pro, all this great stuff. And my head of construction was, was retiring and I called Justin and I said here's your shot. Either you want to come in and take over or I'm going to shut down the construction. I'll probably stop developing because I don't want to have all that risk and exposure by using others anymore because you get kind of spoiled when you do it yourself. Although it's a big responsibility, it's a big financial undertaking, it's a lot of cash flow because it's not an incredibly profitable business. But it's really good if you control the process. And I really, and it had been several years, I still was, I'm still today so much I don't know, I don't know what I don't know in the world of construction but it's a dangerous thought because you make one wrong move and you can be in serious trouble. And you really need to let guys that you trust that really know the business do their job. You can over, you can have oversight but you really have to let the guys that you that know the business and not tell them how it should be done. Often Developers tell people how it should be done, and that's when they run into mistakes.

So there's always this discussion over, you know, is it a GMP contract? So someone's thinking, okay, well, I can cap what the cost is going to be, cap the exposure. So does that work or does that go out the window when there's a change order?

I think it's nonsense. Yeah. Honestly. Because do you want to spend the next year litigating? Was it on the plan?

Not what's the best way to do it? If someone's negotiating with the contractor, is it, you hear, open book. And we're going to hear, here's how.

I like to do it. Honestly, I like everything to be fully transparent. I like it to be open book. So if we have. We have clients that we do work for now, right? And we have clients that we act as owners, reps for them. Right. And I happen to like that business because it kind of keeps everybody honest. But when we do work for people, even ourselves, we show them on the electrical side, on the plumbing side. These are the three or four guys that we know we trust, whatever. Here are their prices. Here's the good and the bad. We make clients often, if they have the ability, if they want to do it, be part of the process. This, this sub may be a little bit more expensive. The cheaper guy, we know, he's swamped. So it's going to affect your delivery. Because today, when interest rates are gazillion percent, time is everything.

And how do you ensure they're going to actually deliver on time and not drag it out forever? I mean, you're going to put penalties in the contract.

We always have penalties. We have very strict.

Do you reward them if they deliver early or.

I'll tell you how we reward them. We don't reward them for delivering early. Generally, no. But we give them a ton of business. We don't have, like, or one trade. Let's say it's electrical. We don't have 20, 30 electrical guys that we go to. We have two or three. They're like. It's almost like we have our own electricians on our own payroll, but they're not on our payroll. We sub it all out, but it's like they're treated as if. It's treated as if like a real partnership, right. And they suddenly say to us, listen, we don't. We'd love the job, but kind of busy. We don't want to let you down. And we tell that to our clients, or if it's a job we're doing for ourselves, we know this internally and we may have to go to another guy who's not, or sometimes they're really busy and then, you know, occasionally we have to go out to a new sub. But it's risky, you know, it's risky because look, they're.

Well, they see what the cost is. They see what your markup is.

And if you're a fair, honorable business person, you don't care if your clients see what you're looking at because everybody knows if you want to have them as a client, there's certain people you just don't want to have a client. If they don't feel that you're entitled to making a fair fee, having your overhead paid for, have a fair profit, they're probably not worth being in business with it. I've, we have lost more jobs than I care to tell you to people. We just lost a big one at one of our big clients because people didn't understand the drawings. They didn't never saw the drawings. They, they, you either pay now or pay later. I'd rather be honest with people. I'd rather lose something. We've had people come back to us, say, oh my God, we, we made a mistake. And some people have done okay. You know, just kind of everything depends on the situation.

So I want to talk about some of your latest projects. So you, you've gone from ultra luxury condos. Now you've been building townhouses. And these aren't just any townhouses. I believe one that was. This is either in the Times or the Journal talking about this combo down in Greenwich Village. It's going to be 42ft wide and I don't know if it was the asking price out there. Guidance. I mean, we're talking about $75 million. That's the, was that the price tag or.

So to be perfectly honest with you, there was a trade that was an off market trade in about a weekend that was a double wide on 11th street that had come out right before that article. I think it sold for 70 something million dollars. Whatever. You know, we hadn't, we have certain expectations, but we hadn't priced it. We're still, you know, we're still 11 months away from delivering the completed house. So we really didn't, you know, our focus was either whether it's a single or a double wide. Townhouses done right and they're not as easy as they look.

Everything's custom.

They're just.

Robert a. M. Stern is the architect on this, correct?

I thought I'D have to beg them to take this project on. They've been unbelievable, really superb. And look, do I think, look, these are Picassos, right? A single family. Because nobody's building single family townhomes these days, right? They have to be good. Now you have a double wide next to each other. There are people that really want that sort of luxury, want something that nobody else has. These are Rembrandt Picassos. Look, the problem you always sha. The challenge always is, is, you know, if you're not doing this for a specific buyer. Right. You really don't know. Like, I can't put my specific tastes on this house because sometimes maybe we happen on Waverly, which I think we bought from you guys. It was a 10 unit multifamily. Who converted it? The guy that bought it spent 23, 25 million dollars. Then he hired us to rebuild the entire townhouse again for that. So some people come in, they want to rip their stuff out. Some people love it. I mean, it's obviously, it's kind of nicer if you have a client, you're building floor, but that's not the business that we're in, you know.

And I guess you'd say, I mean, if you were just delivered as a white box and say, we will build the suit, whatever you want. That doesn't work either because then they, you know, they can't imagine it.

They're people don't, you know, people that want to live there. They don't want to do the work. They don't want it. It's interesting. Even if they're going to come in, they see it's done and they didn't even like the way it's done. They'll either. They always bring in a decorator and sometimes the decorator said, we'll knock this wall out. Sometimes they want to do minimal work. So we try to do it in a way to dissimilar. People doing condos try to do it in a fairly neutral palette. But again, on the town as that we're doing especially the double wide. I mean, every bathroom is going to have slabs of marble. You know, most people, even on these high end condos, they put in like marble, but tiles. We're doing the real McCoy. Yeah.

Will Stern's office also.

They're.

They're also the architect and doing the interior design or. No, they're just doing.

So they've done the architecture as far as the interior design. They've put together the package for the interior design because they're used to doing more of These things on the big home end for actual client buyers there are, I'm guiding them a little bit more in the materiality of, you know, so I'm getting very involved with the, the finishes sort of myself and with, you know, we're working with a, an extraordinary interior designer who's actually doing my personal apartment named Helena Clunies Ross. She came out of Anoushka Hempel big firm in the UK and she's helping guide on some of the finished stuff because I'm.

Sounds expensive.

Just her name sounds. She's coming out with. Unfortunately she's a force to be reckoned with. So when she moved to the US she was doing a project on Waverly Place and they were having a problem with their contract that she found by Justin and he helped her out there and whatever. And when we were doing a townhouse on 13th street, she said I will do this project. I want to make my mark in New York City. Would you use me here? And I'd love to giving people a chance. And she was the one that did the interior design at the 137 West 13th street which we sold in a nanosecond. It sold for 17 million. And then, and again most people hearing this will probably say, you must be really upset, Rob. So what happened was the person that bought it decided that was not the lifestyle, young, young person for them, put it back on the market. And I think a few months after that we sold for 17. I think it sold for 22, 23.

So what happened?

Well, I cried for a second but.

I don't know how you left a couple million dollars on the table. Was it just timing or just did you, did you go through a marketing process and sell it?

I think we got a great price for it but you know, honestly, kudos for them. They made the person that bought it. It was a well built, well crafted house and it was maybe the right timing, you know, you never know, but it was.

How do you look at the profit margins on these? You have to go into all the numbers. But I mean this is in as far as kind of the risk profile, right? I mean if you're investing in multifamily cash flowing, I mean you're buying on a cap rate. You have a 50 unit apartment, one tenant leaves. It's not the end of the world when you're specking a single family townhome like there's no rental fallback. It's either you sell this thing for a top price or you don't and your profit margin Is obviously whatever you paid for it, plus the construction costs and the carry cost.

Right.

So what is the multiple to have it make. Make it worth your while? What's the.

The biggest driving force for me not wanting to go back to New Jersey to watch my wife and her friends playing mahjong? That's the biggest motivation. So only need one person. You need one. But it's especially in this price category. The net is relatively small, right? Even the condo, you know, we just bought 19th street, we're doing, depending whether they rescind this livable or not, either six units or 12, you know, whatever. Me personally, especially my age or whatever, I don't want to be involved in these big condo projects where you have to sell all these units, whatever. It is more of a gamble, you know, doing. I think what we do because some of these do have these rental fallback scenarios. Look, if you do them right. And again, when I say right, it's not going in and do a condo. We do, you know what we do? We excavate 20ft below gray, create more space. And it's not, it's a niche, you know, it's not for the faint of heart. I think if you, I think the people want to go into a place like this, it's almost like suburban living in Manhattan and have this. And walk in with a toothbrush and have the place be like, wow. Like, I can have my friends over for dinner tomorrow night and be, you know, have the wow factor. It's proven to us to be a good niche. Niche for us. You could. There is a fallback, by the way. There are people. And I know we did a job for somebody. It was not our own project, but we did it as a third party for somebody that for tax reasons wound up not wanting to sell it. And he rented it out. And they actually. And it was somebody that had been displaced. The insurance company was chubb. Whatever. They were paying like 70, 80 grand a month to live in this town. Who needed, by the way, nice place to live when you're waiting for your new place to be? You know, I think there was a fire or some damage in their place. So there are technically. Is it a. Are you going to be in at a 6, 7, 8 cap? Not even close. And again, we don't look at these things ourselves. We're not really multifamily guys. We don't do rentals. It's just a different business for us. And listen, there are tax consequences that are not particularly favorable to guys like us. Like when you buy the Family. But it's been a nice little. It's kind of niche for us.

And you control the construction, which is so key, because if you didn't control that, I would think that would be a huge risk because your profit. Every additional dollar that you overspend on construction is a dollar less of profit.

And the time factor. Yeah. You know, all the BS that you get from. Oh, yeah, it was this guy's fault. It was. There's nobody. There's no finger pointing here. Like, so it's all on, you know, it's all on us. So. And look, there are conditions. And by the way, guys that do. I'm not knocking other GCs or CMS at all. You know, you go into the ground, and you don't know what the heck you're gonna find. Right. Also, these conversions you do. Okay. If it's an existing building, you open up. We did a project on the Lower east side for. It was an old nursing home for. You open up the walls. You don't know what you're gonna find in these things. You know, if I. And so it's, you know, it's a. It's a complicated business. It's not. It's a difficult business. Fraud with. There's more reasons to get into fights than not into fight. There's just so much.

But for the. The listener who maybe they're not aspiring to spec a $50 million townhouse, they want to just go and take a 10 family. They want to renovate the units. They don't want to get ripped off. I mean, what is the advice? First of all, when they're going in to buy the property to figure out, okay, what are we really talking about here? And really figuring out who is the right gc. How do you know someone that you can ultimately trust? I mean, that's what we're talking about.

100.

Yeah. So how. What advice?

My first advice. Don't take the advice that I did. I would probably, especially in markets like today, interest rates. You got to start a little slower, a little smaller. Right. But the best advice. Jump off the ledge and do something. Because if you don't do something, it's a mood conversation. If you got to do something, even if you're. If you fail, if you're at a company and you do this and you fail and people fail. So go get another job without a car. It's easy to do. Right. And I think, like, with me, I would respect the guy who's sitting across the table from me that left to do something and may have failed. I'd rather hire a guy like that than a guy that just came from another company. Me personally. Right. The other advice is, I don't.

Sorry. Keep going.

So you have to be on top. You can't just give the keys to the castle to anybody. So if you hire a GC or cm, study the trade like be there, be. Be on it. Ask a million and one questions. You have to ask questions and you have to learn the tr. You have to learn enough to know the right questions to ask. I certainly have been doing this a long time now. I don't know all the answers. I know a lot of the questions to ask to get the answers. And if you see things in the beginning going awry, it's going. If you, if you're smart, you keep. If you see things and don't go to the guy who's the cheapest price. I guarantee you in the long run, if you're paying the interest rates of today, it's probably going to be more expensive than going with somebody that's credible, that's even more expensive. Everybody has to make a fair and decent profit to keep their lights right.

References having someone, whether it's an owner's rep overseeing this. What are other things that people can do to protect themselves?

Owner's reps, a great concept.

So what's the, what's the role of the owner's rep? What's their job?

Watch your ass. They are the people. They. If you have a good owner's rep, and by the way, they're great owners, rep firms. But you got to get the right guy within the firm. Right. The whole thing with landmarks today, like we do a lot of these landmark projects, we typically use Higgins, Grace, Barth. I'm sure you know the firm. These guys know this stuff. You know, they know this stuff. You gotta hire people that really understand the business and know how to navigate. If you, if you're one of these egomaniacs that think you know it all, think it's easy. Those are the guys that run into, into these problems, into, into mistakes. Those are the. You need somebody to oversee what you're doing that's done it before. And you'll need to learn from them. And after a meeting, ask them a question. Why'd you ask this? What'd you do this? How'd you learn this? Take a set of drawings that you do for your project. I don't care if it's a. If you take of a three unit multifamily and you're trying to upgrade it by putting in nice new cabinets. Look at the drawings, understand the drawings, Go through the drawings. See how the drawings are put together from the art. All the different engine, all the different trades, how they put a set of drawings together. You'll learn a ton. Really. You learn a ton just by seeing the documents. But you got to study the documents. It's a funny.

What about their relationship with the architect as well? And, you know, you get situations where the architect, you know, they've got their vision, and then you get this friction with the GC and, you know, they're pointing fingers. So how do you get everybody on the same page?

I would never or rarely advise to use an architect or a GC that's actually recommends each other because I think it's a. It's a huge mistake for guys like us. Why? Because I think sometimes the conflict between certain professionals actually benefits.

That's interesting.

Yeah, because it's a system of checks and balances. And by the way, I have millions of times had been on the table with engineers and could be the same. It could be an MEP engine, it could be about a piece of mechanical equipment. And everybody has a different viewpoint. And it's a healthy conversation. But you sit, you could go into with three different engineers and you could get completely different answers. They may all be right, but everybody has a difference of opinion. That's why I say this is a very complicated business because it's very subjective. The less people you have at the table sometimes is more beneficial. But here's the problem in this business, you know, I. You always see partners fighting in this splitting up. It's a very subjective business. Like if you have people, especially like decorated people in design. If you. I remember with the Carlyle group and I loved working with these guys. But here I am, you tell my style, right? And I'm at the table with, you know, 15 guys from Wharton, MBAs, the brightest guys in the world. You know, we're talking. That's getting involved in the color of the carpets, like this guy blue. I think it. I mean, like guys, you know, you got. There's got to be one person here who makes the decision with Carla. And to this day we joke about him still in touch with the guys. We had one big disagreement in our partnership. It was. And you know, you remember Samit, that we always talk about it. Today it was over the toilet bowl. I think I. One of us wanted toto. It was the only fight that we ever. Kidding. The only disagreement we had with. I had with Carlisle was over, of course they had most of the money in the deal. So he's got the gold rules, the golden rule. We put in whatever. I think they agree, but you gotta be keep your decision making sort of. Yeah. And you have to be very decisive in this business.

So talk about that relationship with a capital partner, especially for our listeners. Maybe they've been raising money from friends and family and they're willing to, they're looking forward to step up their game and get that institutional capital. So, you know, how do you prepare yourself for that? I mean you've already been kind of talking about it really forced you to institutionalize what you're doing. But you know what, what advice would you have to someone who's really looking to raise their profile from a capital raising standpoint?

So. Interesting question. I'm not so sure. I would always advise going to institutional partners. There's nothing wrong with friends and family, by the way. They can often be better. It depends on your friends and family. Right. Number two, and there have been many cases and you pick up the real deal, you see it all the time where developers don't do the right thing by friends and family. And that's where it becomes contentious. But if you are delivering consistently or if you're being honest and you're giving proper and accurate reporting and if you do well, great. And if you don't do well, and if it has nothing to do with what you've done or promised, it's just market timing. Okay. I think most people understand. So when you hear sometimes about this thing with friends and family, friends and family could be great. We use friends and family even today. But you have to deliver to them in a way where they're confident in you. And so, and by the way, there are friends and family have deep pockets or not. And then if you go the institutional route, okay, which is certainly a great route to go and it's sometimes easier. Just one big check. You better make sure that you're doing the right reporting. There's many more stringent requirements, but it's the same thing to me. It's just bottom line is one thing. Deliver on what you really think. You're promise what you deliver on what you promise. Or at least try to be honest, be open and transparent. What else is there? Right. If you start to play games and some of these guys do this stuff, they buy all this stuff. I always question, you see these things coming out and trade this like, why would these guys ever buy this? Between by the time you pay a pref and, and, and you know, you have one roof and you get these investors and you put. And it's. You're buying it a 7 cap and interest rates are 9%. Where's the money? So a lot of people just do it for fees. If you're just doing this for fees and you don't really care about your investors, whatever. To me, don't go to institutional partners. They'll. They'll read right through you. You got to find a good asset, right, that makes money or you can add value to it somehow. Way shape or form. If you're able to buy everything great deal at a 10 cap today everybody would be doing that. You wouldn't have a business yourself.

So with only a couple of minutes left and I would. I think there's going to be tremendous opportunities to come over the next year or two. How do you find great opportunities out there?

First of all, I think you have to be conscious of what's going on in the market, right? I think you have to be conscious of interest rates. I think you have to be conscious of what's going on in the office sector. I think you have to be conscious of what's going on in the world, right? So to me again, there was this great. I'm a huge fan of residential in New York City in Manhattan and the boroughs. Why? For a myriad of reasons. First of all, this is Manhattan, right? It's the first one to go down, but it's the first one to come back booming. I know even my friends who are, you know, older guys, but a lot of my kids friends who this huge migration to Florida, you know, Covid and this. And I think a lot of people said, you know what, Ms. New York City. People left for tax reasons. I have friends of mine left for tax reasons that said, you know what, I don't want to spend six months here now. It was great for how much golf can I play? I want the action of New York. So I think New York is coming back and it's going to be back in a big way residentially. Look, the office market. Would I invest today in the office market? Probably not. Are a lot of guys doing office to residential? Have I kind of looked at that a bit? Yeah, I think it's a good opportunity. But again, it's not as easy to build ground up than you go to these office buildings. You gotta be really careful because you don't know what is sitting behind those walls. Right. And the layouts, whatever. So again, to me I think that there's. And with interest rate, the difficulty of getting construction financing there's going to be such a supply demand issue in New York City like this. If people are not getting load and can't afford to, there's not going to be inventory here and inventory is getting sucked up. Where the opportunities are. I think prices, I think the, the demand is going to be there. I think it'd be real shortage of supply residentially. I think prices are going to go up until people build, until interest rates come down. That's, that's kind of what I think is going to happen. The office market has never really been our sector again. I just gave you my quick opinion. The hotel market, it's not really an industry.

You have a hotel though, down in Fort Lauderdale, had one, I've been there, done that.

But no, it was the best experience I've. One of the best experience I've ever gotten for that sector. I do. I am a huge fan. I've been looking recently in doing almost like the townhouse thing, but really boutique sort of long term stay, hotel type stuff, but ultra luxury with a brand. I love that space.

Well, maybe one of our listeners will find one of these for you.

I hope you do.

So, Rob, closing thoughts. The name of the show, the Insider's edge to Real estate investing. I mean you've already, you've got an incredible story, everything that you've talked about, how you address situations, go into deals. What would you say your insider's edges.

You mean my advice to. Yeah.

What gives you the advantage in business?

I think you have to. First of all, the most important thing and the reason that I have really good relationships, people actually like me is because I'm praying. But they kind of like me sometimes is I'm just honest. I think you just have to be, you know, if you're a shyster, people see right through that. I think you just have to be honest and sensitive to people and what they want, what they're looking for. You have to listen, you know and I, I'm a big talker obviously, but I like to listen to people. I like to. I always his number one rule and look like you. I'm a pretty good salesman. I always put myself in your shoes. What are you thinking? How would that benefit not just me? How does it benefit you? Number two, I mean to me a great piece of advice, find something you really like, you're passionate about because you could be doing this a long time and really see if there's a way that you can increase the value. But why are you spending your time investing in things if you're not going to make any money. You spend why go get a job, work for somebody. But there are pockets of things. I mean in the office sector people are not coming back to office but maybe there's an opportunity because they're not coming back to office. But you got to find sort of your groove and just be good at it. Don't be just a generalist in everything and work hard at it and jump in it. Don't be afraid. If you're looking to get into something and do something, there's risks. And often, you know, hear about restaurants. People don't over, you know, 90% of them fail. Whatever. I give a lot of credit to guys that open up restaurants because many of them do fail but ones that really put the effort in and they're successful, they make money and they like it. So I I kind of sort of the same sort of scenario with restaurants that do with reals. I feel with real estate gotta jump in.

Well Rob, that was amazing. You got an incredible story and I know everyone listening is gonna get so much out of this episode. So really appreciate your joining us today and having this conversation.

Thank you. I hope so because that's my at this stage of my life a little give back is important for me. So wonderful. Thanks for having me. I really appreciate the forum and thank.

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