Mindset with Adir Levitas

Welcome. This is the Insider's Edge to Real Estate Investing with James Nelson, the principal and head of Avis and Young's Tri State Investment Sales Group. In this program you'll learn game changing strategies to outperform the market. James will teach you how to source, execute and capitalize on the best real estate opportunities in New York and around the world. Now here's your host.

Welcome to episode number 132 of the Insider's Edge to Real Estate Investing. This is your host, James Nelson. Thank you as always for joining. I really appreciate the support and today I have a very special announcement that yes, drum roll. You can now pre order my book the Insider's Edge to Real Estate Investing. Game Changing Strategies to outperform the Market that I wrote with my writing partner Rachel Hartman and@james nelson.com youm can go and pre order. That will connect you with Amazon, Barnes and Nobles wherever you order your books. And it would mean so much to me if you could pre order your own copy. Or better yet there is an option on my site to bulk order. So if you are part of an organization, a school, your company and you would like to order more than eight books is what I've been told constitutes a bulk order. Please let my team know. That way we can customize a package for you where I can come in, I can speak to your group, I can present catered information based on what you're looking for and I know you'll get a ton out of it. So again Please check out jamesnelson.com for more information on that. Okay, so for today's show, very excited to have with us Adir Levitas. Adir is Founder and Chief Executive Officer of Hoboken, New Jersey based former ferropoint, a vertically integrated tech enabled real estate investment manager that leverages data and deep market relationships to achieve superior risk adjusted returns. Ferropoint has acquired over 400 industrial buildings and over 20 million square feet since 2018. They've invested $2 billion in the last mile industrial sector, becoming one of the most active investors in the US and when I asked Adir what his inside edge to real estate investing was, he said it's how he sources the most opportunities for his investors. He has set up 14 offices across the US each with its own acquisition professional and as a result the company has cultivated great local broker relationships to provide the best deal flow. I also like how Adir shared about his change in mindset to switch from buying and flipping homes to building out an industrial portfolio which started off in Memphis, Tennessee Adira is focused on building Ferropoint into a tech enabled real estate investment manager using proprietary software for real estate underwriting, due diligence and portfolio management which we're going to get into on this episode. He's got a very interesting background having served in the Israeli army as well as having a law degree from IDC University.

So we're going to have a brief.

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And now it's time for our Investor Spotlight and with us today is Adir Levitas who is founder and Chief Executive Officer of Hoboken, New Jersey based Ferro Point, a vertically integrated tech enabled real estate investment Manager. Leveraging data, Ferropoint has acquired over 400 industrial buildings and over 20 million square feet of property since 2018. Fairpoint has invested $2 billion in the last industrial last mile industrial sector becoming one of the most active invest in the us. So Adir, thank you so much for joining us. Really excited to hear your story.

James, thanks for having me.

Wonderful. So tell us where it all started. Tell us a little bit about where you grew up and maybe your early schooling and what attracted you to real estate.

Yeah, for sure. So I'm 34 years old in the states now about a year and a half moved in from Tel Aviv with my wife and two kids and actually early on I'm born raised in Beersheba which is the southern part of Israel. My parents are both doctors. I had no connection to real estate growing up. Not your regular story and been six years at the Israeli Air Force after from you know after the compulsory service I did another three years. I really enjoyed working with people and managing back then a platoon and then at a certain point was thinking what could I do next? The great financial crisis was happening in the US and back in Israel they lowered the interest rate, but because they were thinking something's going to happen on a downturn. But guess what? Nothing happened. Real estate prices took off at the time they were down in the US and the rest of the world. So Israel presented no opportunities. And so I was starting to think what could we do? Because I was attracted to do something with numbers that's tangible. So I guess that was real estate. So I was start. I started to buy in 2011, started to buy assets just homes off a foreclosure in a few areas in the US and that's how it started. All began from that point.

I saw you also at some point received a BA in Law from IDC University. So were you ever thinking at one point that maybe you'd go into the law profession or how did you end up then deciding to get into real estate instead?

So. So yeah, you know, coming from a family, both parents are doctors and my older brother also became a doctor. And so I had to do something. My parents wouldn't allow me not to go to university, so I had to go to the university. And the truth is that I was bored as hell. The IDC is a great institution, but I was, I was used to do a lot of things and in school just sitting down was. Was not, I guess was not my strong suit. I did finish that four years and got the BA in Law Management from the IDC and enjoyed that time and got to know many people that eventually joined the company like my partner had Porato, General counsel or many other people that joined me along the way that I met at the idc. But I did not practice law and I did try to, but they said I had the company back then. I started the second year of school of the university. I started Feralpoint. And so when I came to practice law, they said, no, you gotta be here full time. And I said, okay, I can't be here full time. And so I just took those four years, but never really got the, you know, did the bowels in his lab got it.

So you said while you were in the Israeli army and leading a platoon, I'm curious, what skills, what did you learn from that experience that you were able to bring over to the business world?

The thing that I think about the most in business life are lessons I've learned in that period of time in my life more than anything else. Because you go to the army in Israel at the age of 18 and you have your compulsory service by 21. And I had a Patriot missile platoon with 120 soldiers reporting to me at the age of 22. Who gets to deal with that task in the normal world? That's not part of the, you know, that kind of organization. So it was a very, very eye opening experience to get to know people from all kind of sources and, you know, all kind of places. Coming from diversity, diversity, inclusion, people are talking a lot about it today. But when you're in the army, coming from, you know, I came from a pretty affluent town and thrown into the army and now you have to, you know, deal with everyone, no matter their backgrounds, everyone's equal. And that was great for me as a kid. And then, you know, boy, going up in, in that town, coming to the army and understanding that we all have to get to somewhere starting in the same point. Nobody gets any favor in that respect. And so I think the skill that I was thinking about the most was leading by example. Because there's one thing that people can't avoid saying is what you say and what you do and do. You actually do what you say and what you do. And I remember nights, overnights that we were not getting sleep because all kind of operations and stuff. And as you get up early in the morning and you don't even get up, you slept maybe an hour or two hours, people look at you as the commander or the manager of that unit and how do you look and what do you say? And so how do you overcome challenges? And so like in today's environment, when the markets, public markets are upside down, what do you tell your people in the company? How do you react to that and how do you stay calm in light of what's happening around you?

I love that answer. And not only leading by example, but also doing what you say, saying what you're going to do. And in business and in real estate negotiations, I mean, we're, it's a global market and yet your reputation, you know, again, that is the most important thing you have in the business. So those were great skills and traits to, to learn. So, so you said after you tried law school, you're out of the army, you start buying some, some homes here in the US Were you already thinking that this could become something big? And if so, were you already thinking about how do I, how do I scale this? Or was this kind of more like, like a hobby at the time that you were trying to see if you could make it work full time?

Yeah, I had no plans, I had no good plans. I was like, I'm going to learn how this Works. And then after about 18 months that we were buying probably a couple hundred properties out of foreclosure and bringing on investors to. To buy them with us, I was thinking to myself, I'm not sure this opportunity is going to continue and be here. Those, you know, low price per foot and potential acquisitions for single family homes. I got to go into something that will help me create a company. I can't get people on payroll if I don't have management fees. I'm just buying and selling stuff. And so I thought maybe I should go into commercial real estate. And I still had no direction. I was just learning. The world of commercial real estate started in Memphis, Tennessee, actually. And we were buying a few single tenants retail, single tenant office, buying everything Memphis had to offer. And I was thinking the best thing I can do to avoid mistakes, and I was, I think, 24 years old at the time, was to not do. To try an expert, have an expertise in something. And so Memphis was going to be our hometown because I thought that the New Yorks of the world are going to be too crowded with investors that know much more than I can know with my team. And so if we just get to understand what Memphis has working for it, maybe would be able to ride some of that tailwind. And so that became a mission to get to know Memphis as well as possible. And from 2013 to 2016, we deployed about 150 to 200 million of just Memphis. I didn't think it's possible of just Memphis acquisitions in commercial real estate and still had no real direction. So it only came to mind in about 2016. We're thinking, okay, we got to go outside of Memphis. But we're generalists. Our investors were like, we need someone that's expert. And we couldn't get institutional capital. And so people told us, okay, I have someone for office. I have someone for multifamily. I have someone for retail. You know what? I don't have someone for industrial. Except of the, you know, the big names out there. Maybe you guys can think about a strategy. And I'm like, wait, Memphis is pretty interesting for industrial. Memphis is going for it. How do we penetrate the Memphis industrial market? And so in 2016, we started to think about industrial, and we did start in Memphis doing.

You know, I love this, this pivot, this part of your story, where you look for the opportunity, right? First of all, specializing in an area, and that's something that we've talked on the show about before, because if you really study an area for three to six months, you, you're going to know it better than most of the generalists, you know, these buyers who come in from all over the country and you have the advantage because you're there. But I, but I love how you kind of were looking for, you know, where's the demand. So instead of trying to swim upstream and try to, you know, get investors for something they don't want said, well, okay, well, this is something we need, go solve for it. But still, you know, my question is, how did you do that first deal? And by the time you bought that first industrial property in Memphis, was it just yourself? Did you have a couple partners? How did you convince them if you had never done this before that you actually knew how to operate one of these industrial properties?

Yeah. So in that regards, since we started very slowly, our first deal in 2013, commercial deal, was 1.5 million. And so we accumulated about 150 to 200 million dollars by the time we started industrial. And so going from multi story, multi tenant office to industrial in 2016 was actually easier to explain to some of the investors. And remember then, back then it was high net worth individuals and small family offices that were more entrepreneurial in spirit. And I think the kind of things they were looking at, they were not putting us in the same bucket of Blackstone and Brookfield. They were thinking about more of a opportunistic, a shop to do, to do some business with. And so we were lucky enough that we had hundreds of high net wealth individuals that followed us. And you know, when I asked myself in hindsight, why did they follow us? We had no uniqueness at the time. And you know, coming from Israel, back and forth, I was still in School from 2012 to 2015 in the university, tried to do back and forth. We were at the time like three partners in the company. And I think people did that because they saw that we were delivering upon what we say and not much more than that. We were just hands on in our business. The only thing we did is Memphis. We got to know Memphis. We spent the entire summers In Memphis, like two, three months at a time. Every month. I would spend 10 days in Memphis and then 20 days in the university. This is what we did. And in 2016, when we started to do industrial, I think that people thought about it, okay, great, you guys are starting to focus. Some of the individual investors were like, you guys, we don't want you to focus. We want you to do many things because you're helping us build a portfolio. But if you want to grow a company and you want to really get institutional money at the end of it, then you know, you can be, you can't be a jack of all trades.

Great. Now that makes, that makes a ton of sense. So fair point today. And you've really positioned yourself as a tech enabled platform. Right? So this whole leveraging the data, is this something that you were thinking about early on when you were making those first few acquisitions in Memphis? How are you analyzing the data? How did you know that industrial, that there was a demand for it and how did it inform your buying decisions?

So, you know, from 2012 to 2016, we grew from three people to 15 people. From 2016 till date, we grew from 15 people to 130. What changed was the mindset. Once we knew what we wanted to do, our mindset changed. And everything that we thought about doing less became more. Doing less asset classes meant doing more within the same asset class, creating more of a competitive advantage, going deeper into market opportunities. And so in 2016, when we started to do industrial real estate, we were buying portfolios and we didn't know much about usage of data in real estate more than anyone else. But those portfolios at a certain point of time became too pricey and we find ourselves competing with the institutional buyers. And we thought, okay, we're back, okay, we have a plan, we're focused, but then again, we can't really get to the capex we want to get. And so we thought, what can we do to stay within industrial, have focus with that, expertise with that, but not compete with the bigger guys. And so between 2016 and 18, we did a few proof of concepts of the following. We thought, if we can aggregate $2 million deals, 3, 4, $5 million deals, and aggregate them to a portfolio, we will get that same premium that we couldn't pay when we were trying to bid on portfolios. And so we raised this small vehicle, raised about $30 million of equity, and we bought about $80 million worth of industrial just in Memphis in 2016, 17. And that eventually we took it to a publicly traded REIT and we sold it to it in a significant premium. And we thought, oh my God, if we're just going to be efficient enough and we can pick those deals as we go, maybe there's going to be someone in the back end that's going to take that portfolio and pay a premium. But how do we get to this scale? So that's where the data piece came into your question, James. And we thought, okay, we gotta create sensors throughout those cities. And so we started to expand From Memphis to the 14 cities, we have today over nine physical offices in the States, excluding our 10th office in Israel, which does the R and D. And we thought if we can just get enough sensors, we thought about the offices not as acquisition offices, but more of sensors, of data. And so if we have someone, because we think about who are the folks that traffic those two to $10 million deals, it is usually not the national firms, it is the local brokers, it's the regional brokers. And so how do you get on the radar? We had to have those offices. We had to become, you know, in close, close friends, close relationships with today about 350 local and regional brokers throughout our nine offices and 14 markets. And over time we use those relationships to. And when we asked the brokers to put on that information into our platform and so we started to accumulate and aggregate data in our own acquisition platform. Today it's with 350 brokers. So we trap, we have volume of about $30 billion annually of deal flow coming from 350 brokers in 14 markets into our platform. And we don't buy all of it, we just buy about 4 to 5%. But we get such good, we have so, so we have very good visibility into what's happening in the markets. And it's unmatched visibility because nobody traffic that asset class so much between the two and the $10 million.

Adir, you just said so many good things, many of these things. We've now been doing this show for over two years. And one of the things in particular that you just said, I have not heard on this show yet. So I like a lot what you said about that mindset change and doing less with more. But the idea of recognizing that you need a physical presence in multiple cities or to strengthen those ties to the brokerage community. Wow. I mean, that is because I think most investors who are looking at building a national portfolio would think the opposite. They would think, okay, I can be more efficient operating out of one office where my whole team is there. Okay. And then I can fly out to a city, you know, on any given day. Right. But I think your point is that unless if you are there pounding the pavement and really making those relationships strong with those brokers that you're, you're not going to get, you know, the same quality deal flow. I mean, maybe if you were in one office and did business in 14 cities, maybe you'd have a good relationship with 100 brokers, but not a great relationship with 350 brokers. I mean that Is really interesting and kind of counterintuitive as well.

Yeah, that's definitely the truth. Our northeast market leader, for example, Tyrone, he has 15 people on his team. He sits in Philly. He has folks in Philly, and then he has an acquisition person in Baltimore and then an acquisition person in Long island and an acquisition person in northern New Jersey in our Hoboken office. And so he understands how important it is to cover those markets locally. So when we get a deal in Philly, it. I can be there the next day, show the broker and the seller that was serious and be able to make an offer in that parking lot. And when you look at $30 billion of deals annually and let's say a couple billions of that is in the northeast, then you know what you're willing to pay and you could be a, you could create yourself a name much faster. And I think people understand that if they can give you a call and you'll be there in a couple of hours, that means something. Now, there's a cost to that. It's a much more expensive infrastructure from a company standpoint. But that is a long term mindset.

Yeah. And that was going to be my next question because I know a lot of our listeners who are either thinking about scaling their business or, you know, we have a lot of college students who listen to this show, master's students who are looking to get into the business. And I mean, that sounds like a pretty great position, right, to be that acquisitions person in a specific market. So. But yeah, how do you. You don't have to give us exact numbers, but you know, are these, are these just salaried plus bonus type people? You know, are they getting a, you know, an equity stake in some of these? Because I think if you ask most of investors who've tried to grow, right. What they would say is finding the right people. Right. Finding that acquisitions person is actually pretty tough. Right. Because is that a person right out of college who hasn't done this before, but maybe they're good at numbers or is it a seasoned professional? Again, what is the profile of that acquisitions person and how do you compensate them to make it worth their while?

It's a, it's a great question. I spend most of my time on people. How do we make sure we get the best people out there and, and best could be different for different companies and different mindsets and different cultures. And so having nine different offices, we had to start something from scratch nine times. What is the kind of mindset you need from that person that you can Trust to cultivate those local relationships with the brokerage community and other, you know, the other professionals that help you get a deal done. And so I can tell you that all of our leadership in the company and about 35 people out of 130 people in the company, what we call leadership, so some of them would be acquisition people in the markets and, and senior people in the markets. They have not only salary and bonus like the rest of the people, but also they have a stake in the, they have stocks in the corporation. So it's different. Stocks in the corporation is different than an equity stake in the deals they do. And the reason it's different in our view is because I don't want the Atlanta guy to make acquisitions in Atlanta if it's not the right time. I want to be able to trust what he says, just as I trust the investors relations guy that the terms he's gotten with this institutional are the best terms possible. And so no one in our company is incentivized by making a deal. And I can tell you that it's definitely a change for people when they're interviewing to our company and we basically tell them this is all of us together for the next 10, 20 years mindset. And so we are not a partnership, we're a corporation. And everyone that gets into a VPN above leadership position gets stuck in the corporation. And as the corporation grows or raises money or maybe IPOs in the future, they get some of that net worth built through that. And I think that is more compensatable when things work out than just getting an equity stake on the deal or just being, you know, having just one fund getting promoted of that fund and not from that fund. And how do you get, how do you get people to collaborate when they don't make money the same way? I think it's something you've seen. I think some, some brokerages are doing it different than others and I think sometimes you see benefits of both. But from my standpoint, I want like minded people that think when this corporate will do well to its investors over the long term, I am going to do well. And if I bought this deal or not, it's not how I'm being compensated. I need to do. The corporation needs to select the best deals out of the 30 billion with traffic.

That's really amazing. And clearly you are thinking about the big picture and about really building and scaling this company because yeah, I mean most acquisition roles there's probably a bonus, an acquisition fee where they're getting compensated for specific deals brought to the table. So look, I would assume that most acquisition people out there, they know kind of what the company's looking to buy, they want to bring in the right opportunities. But look, if they are being compensated on individual deals that they bring to the table, you know, it's human nature that you're going to try to advocate for your deal as opposed to, you know, thinking about what's best for the company. And it's interesting because that is the way that I run my brokerage team. So here in New York I have two dozen people on the brokerage team and we share in every single commission. Right now I have the team organized by asset class. So I have a multifamily team, retail, office land. And they're, you know, agents are compensated when they bring in business, when they execute, but they're also receiving part of the pool. So that, that way. To your point, if you know, maybe this isn't the year for multifamily in a certain market, then you know, there's other things that they can benefit but they're still doing their job because just. Because maybe it's not the year to be buying industrial in a certain market. It's not like you can just give up on that market. Right. You need to continue to, you know, track it so that it's really, really interesting adir the way you set it up. And I love how you're talking about being in the people business. That's a big theme of this show. So talk a little bit more about how you analyze the data so when you're looking at a deal and let's get specific now and talk about last mile distribution. So what are some of the trends that you're looking forward to know that there's more appetite where and I would assume in some cases you're, you're buying. I saw on your site that you'll buy vacant property or you'll, you'll build it, you'll tenant it. But how do you know what is a good location and what is a good property for last mile distribution?

Yeah sure. So I think it's a. In general it's a combination of getting the local people, your local leaders that you can trust them in terms of what they think. Again, lyrics is a local business but then try to help them with bring them the amount of data that just humans minds cannot comprehend as quickly and efficiently as a computer can. And so what we do through our sourcing platform when we get that $30 billion of deals, the main reason we do that is because if we only buy 1.5 or a billion a year, let's say then we still use 28.5 billion of deals we haven't bought to help us understand the market, the comparables. And so for every deal we don't buy, it is also comps with that deal we haven't bought. So it's like, you know, it's like 20 to 50x times more data than what you're buying, you're actually buying. And many people have a lot of data in their inbox. They just, if they don't do the deal, they just forget about the deal. But how about all of those deals you've ever seen go into a database that's proprietary to you and you could use that to make better underwriting decisions. And so what our R and D team does in Israel, on top of the fact they put together the sourcing platform, they're also using this data to enrich that with other kinds of data that local people would know, but not always to the right extent. Could be transportation related data, could be proximity to Amazon prime shoppers if that tells anything about location. Could be home prices, it could be weather related data, could be new permits pulled. And taking all of that data, we have about 100 million data points and trying to say if the absolute rent we can get to the property is what we're trying to achieve, which one of those locations, okay, would be more accretive to get that higher rent. That's what basically we're doing, it's running a machine learning model is to say something smart about the growth of that location in terms of rent growth and about the absolute rent it should get if it's a vacant property. And then we ask the local, we have the local professionals, then we say, hey Italian Philly, what do you think should be the market rent? And so he would say eight bucks per foot. Because I think that it's a 24 clear height and it's great box shape and there's many duck doors that, you know, we have all kind of parameters we go about. And he knows, he knows that very well. And we say, listen, the, the, the models, the data science model say it should be nine. And the data science model also have an output of why it's nine versus something else. And they can say they give a lot of. The model shows you what it gives points on if it's more traffic than you thought, if it's lower clear height, so it gets a discount versus the rest of the park. And so it makes you think. And so time I Say, you know what? I think the model is missing something and that happens too. And you can say, you know what? The model actually made me change my mind. Maybe we should think about getting a nine bucks versus eight bucks. So I'm thinking if I think for the next 10 years there's such a big data gap in commercial real estate, especially in industrial, in the smaller, in the last mile, that I'm not thinking we're going to be using computers to make investment decisions for the next 10 years. But I do think that starting immediately, we can complement our local professionals with technology and just make them think again about some of the recommendations they would put in the models. So I don't know if it's too.

Much information, James, but that makes perfect sense. And I'm thinking about sometimes when you have that bias maybe about an area or you've been in the neighborhood and you think things are a certain way and sometimes getting that vantage point from outside that's kind of looking across all the different markets and seeing trends that maybe you're not even picking up on, I think that makes, that makes tremendous sense. But it is so specific. And I know that Amazon has been in the headlines recently because they're saying that they're cutting back on their warehouse locations. And I know that Amazon happens to be one of your tenants as well. And that might be true in some markets, but I've always found that you can't paint the market with one brush. And I'm sure Amazon is out is actually growing in some markets. Right. So maybe they overbuilt in some markets. So again, I don't know if your data gets into, you know, those specific type of, you know, situations. If, you know, you talked about co tenancy adjacency, how you look at that, but I would imagine it's so specific to the, you know, the market and the needs and so you can't just make a blanket statement that this tenant is pulling back or expanding across the country.

Yeah. You know, if anything, what we see in the data and also when we physically to the assets is that inventories level are very high. It is really two different worlds. We're living in the world that I hear feedback from our local professionals saying rent growth is as high as ever been. And we see that in the data. We're like showing I think 30% growth over the past 60 leases. It's crazy, crazy. 11% more than, you know, what we underwrote. It's really crazy. Fundamentals today, 97, 98% occupancy, which is basically 100%. Some of those structural occupancies. And so fundamentals are very strong. I think that there's a lot of miscommunication with that. What happened with Amazon, it just creates a great headline. But they've been expanding at the same time that they're contracting, as you said, in different places, different cities. And you know, it's just they're growing slower. It's not that they're scaling back, they're just growing slower. They're like they've grown about 50% of their warehouse capacity during COVID Just crazy numbers. And there's so much catch up to do to many of those retailers out there that I think we didn't see that come into effect at all. But I'll just say something about our asset class. We're buying most of the stuff between 20,000 and 100,000 per feet, which is about a one trillion market. So if the entire US is about two and a half trillion, so up to 100,000 is about one trillion. So 40% of the market is a market that most institutions and most large tenants don't play in. Your Fortune 500 tenants usually don't take an 80,000 square foot lease. Sometimes you do see XPO Last Mile and Amazon last mile and FedEx last mile. But I would say that only about 15% of our tenant base is credit tenant investment grade and 85% I would say is regional and local. And so it's really different tenant mix, but also different uses mix. It's not just three pl and distribution and all that stuff. It's really a reflection of your economy. It is your local roofer and H vac and service providers. And it is light manufacturing of somebody putting together chairs and then selling them to Walmart. And then it's also your 3 PL and your distribution and all that stuff. And so I think it has some more diversity than your 3 PL distribution supply chain related big boxes. But then again it has less credit. And so what I like about what we do is the fact that there's only 0.5 to 0.7% of the inventory being built. As you know, thinking about bulk, you see about four to four and a half percent of the inventory being built every year. And so in some pockets you need to be careful when it comes to bulk industrial just to make sure there's no oversupply. But when it comes to 20 to 200,000 sq ft buildings for last Mile, well nobody's building it or you know, just a handful of people in each market.

Wow, I love those statistics because when most people would think about Last Mile distribution, I mean, of course Amazon comes to mind, right? You know, and FedEx and thinking of these delivery services. And yet. And that might be true for, you know, for the larger, you know, if you talk about who's taking blocks of space of, you know, 250,000ft and larger. But you know, that's wonderful to hear that there is so much demand for those, you know, smaller footprints. So that's really interesting that there is that, you know, that demand. I mean, how big? I mean, you said again that there's a lot of appetite for this, but I mean, how much pressure is there on, you know, Last Mile Distribution? I know Covid there was a huge peak where everybody's ordering online and then online sales kind of went back down to a kind of a more normalized level. But you know, if you were to look out five, ten years from now, what does that look like?

So, you know, I think many people call what we do and we say that as well as Last Mile, it's become a buzzword and people envision that as every warehouse is an Amazon truck or something similar. And you know, they're doing distributions from a crosstalk facility every six hours. I wish that was the case and people would think that, oh, there's probably robotics in every warehouse and it's all automatic. Well, unfortunately, robotics in warehouses is something that will happen, but is a very, very small portion of the market uses automations and a very small portion of Last Mile is, I say, very small in terms of credit, but about 30 to 40% is 3 PL and distribution uses from those warehouses. Your local H VAC is also last Mile because he has his clients for 30 years or 40 years. Many of those are even baby boomers and businesses that have seen many, many recessions and it's critical facilities for them. Like during COVID we had 98% collection rate. And so I think that's like similar to prologis. And so those people had to come to work and they had to serve people. And so your H Vac contractor and if it's even a local bakery that needs to be in a 20,000 square foot warehouse inside the city. And so those warehouses are really close to workforce. So you see more people per square feet, more need for parking spaces usually and less clear height relevant because those things come in and go very fast. Less cross dock. Just because they were built in the 1960s till the 1990s, our average product is in the 1980s. And so when you Think about the long term trend. I would say one thing is the, the reflection of the economy. It is what it is. It's not even, not even E Commerce is not the first thing. The first thing is the fact that if the economy has more onshoring of manufacturing we see that because those local manufacturers of pipes don't go into a 500,000 square feet usually they go into a 50,000 square feet probably in Houston. And so you see those trends coming in, you see pretty good balance sheets, a lot of private equity owning those businesses over time and many but also our legacy multi generational businesses. And then you also see E Commerce, you see that stuff as well. But it is the, it is the incremental demand that is tipping over the rent growth because when you have no new supply, you don't need much new demand to make such a difference. And so we do see E commerce probably at about 10% of the portfolio. But that was zero five years ago because that E Commerce was only on the big distribution. And today E Commerce has become a.

Very big thing that makes a ton of sense and just for our listeners just because I know you mentioned but 3 PL is third party logistics which is a provider who outsources logistics services. Just so and I can put that in the show notes as well. So Adir, this is really fascinating and your whole approach to the business. The book that I have coming out next year, the Insider's edge to Real Estate Investing. The whole premise of the book is that you can gain the inside edge to real estate investing to outperform the market. So I'd like to just kind of spend a little time about what you believe your inside edge is. And I think you know, this part of the 14 cities and the 350 broker network, again that is not something that I've heard about before but that's not something that could be easily replicated. Right. So and that does give you an edge over, you know, because let's face it, when you go out and buy property, it's not like buying a stock where there's one exchange that everybody can see every single deal. I'd have to imagine that a lot of the deals that you're getting sourced aren't even on the market. Right. So is that, is that one of the things that you would kind of, you know that and you're leveraging data. Is that really what's giving you the inside edge to investing?

No, I think that's definitely right. I mean the way we think about it and we tell investors if we Bring a product to you guys just as the next guy. And you know, some of them are very well respected institutions. We have no big leverage. So you know, every company to think, if I want to be here in the long term, what is, what is the value I'm providing that others don't? And is that value protected by entry of barriers? Because I want to invest my time in a value that will remain with me for the long term. And so we were buying assets out of foreclosure and I'm sorry if you hear the sirens outside, but if you, when we're buying assets out of a foreclosure, we knew that this period of time is going to end. It's a matter of time before prices stabilize. That's not a long term thing. But when you create a data advantage and you accumulate that over years and when you create a local insight, local insight will remain local insight in 10 years as well. It doesn't go away because of pricing in this point or the other point. So I think for us, investing in the infrastructure of great people that have local insights into a platform that collects data is a, is a flywheel. More data comes in, better deals, more local professionals get, more brokers get more data and more data gets better insights and better underwriting. And as this flywheels go, you know, it just creates an compounded interest kind of effect. And that's what we're investing in the long term. And I'll just say this is just solving, trying to solve the inefficiency in the last mile industrial. There are other inefficiencies that should be solved in a more granular basis of real estate in the U.S.

Fantastic. And with only a couple of minutes left, what advice would you give to, you know, whether it's the aspiring investor, maybe it's someone who's completing their master's right now. How would you recommend that they start out if they want to get into investing?

I would probably try to invest with a firm that would give me more insights than just a passive investment. And those insights could be tooling their markets, getting to know the assets, or maybe working for that firm to understand how it works out. And you know, we do that a lot. And I know that people that work at Ferropoint, some of them will not stay at Ferropoint. And I want to make sure they, they get to do their dream. The way I see my company, it is a platform to help, help people achieve their goals. And basically as long as they're in the platform, they help the platform achieve its goals. So I don't think that people need to have the same goals or over and over again. I'm okay with that. And so I think that the inspiring investor needs to make sure he's hands on and invest with a firm or in a firm that he thinks is going to give them insights and he needs to find his passion and what's making, what makes him curious. If you're looking to get into this business and you know, you think at night about the right things and you can't really fall asleep without having this solving that riddle or something that really bugs you and sparing every minute of your time to, you know, learn more or read more, that's where you should be. You know that that's what you should deal with because otherwise it's, it's a hard business and to be really good you need to love what you're doing. And so that curiosity and, and you just have to enjoy the fact that you're spending so much time, so much of your life doing something. You have to love it.

Well that, that is a great way to take us out there. You've got an incredible story and really appreciate your sharing with our audience. Faro points approach and I know that our listeners will get a tremendous amount out of this if, if Adir if they want, if our listeners want to learn more about what you're doing. Where, where can they, I know you have a website but where, where else, where can they find that and, and hear what else you're up to?

Yeah. So definitely we have the website I think more interesting we have a LinkedIn page feral point and so we're posting things that we're doing now and then and we're, we have jobs open all the time in, in many markets and we're expanding now to the west coast so we're going to be in la, Denver, Phoenix and and slowly hopefully cover most of the of the US So you know we'd be happy to, to talk with people, help people, share inside and all that stuff.

Adir, this has been fantastic. Thank you again for, for joining us. This is your host James Nelson, your host of the Insider's Edge to Real Estate Investing. If you like this show, please give us a review or share it with a friend. You can find the show notes as well as other helpful tools@james nelson.com and you can also follow me at James Nelson NYC and the whole point of what we're doing here is to make you the best investor possible. So thank you as always for joining. Until next week.

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