Scaling Smart with Greg Fournier

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.

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Welcome to episode number 220 of the Insider's Edge to Real Estate Investing. This is your host, James Nelson. I'm principal and head of the US Investment Sales here in Avison Young and thank you as always for joining. Have with us today Greg Fournier and we're going to be talking about Scaling Smart. So today you're going to learn how to build a real estate firm from the ground up. In this conversation, Greg is the Managing Principal of Greenbrook Partners, a privately held, vertically integrated real estate operating company that maximizes value by instituting best in class management and redeveloping properties. Greg shares his pivot from being a Nasdaq trader to getting involved in real estate and making this entrepreneurial leap. You're going to hear about following an investment strategy and different ways to raise funds. We Greg shares his insight into starting hands on and building a 150 person operation with institutional partners along with keeping a long term perspective to real estate investments. Greg is a fantastic person and you're going to get a lot of great advice and key takeaways from this as you think about how to scale your business. But again, in the right way. So as always you can go to james nelson.com that's where the show notes are for this episode. Again, I built this site for you, so while you're there, go ahead. You can sign up for our monthly newsletter that will aggregate all the great content that we're putting out each week to help you gain the insider's edge to real estate investing and achieve great success. So we're going to have a brief word from our sponsor and we'll get right into that interview with Greg Fournier.

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Welcome everyone. Thrilled to have with us today Greg Fournier who is managing principal of Green Book Partners. Welcome. Great to see you.

Yeah, it's great to be here. Thanks, James.

So I think we're off to a good start because hopefully I pronounced your last name correctly. Is that right?

That's right.

I warned you in advance that I got a C in high school French, but you told me you were Irish afterwards. But it is a French name though. You did clarify that.

It's perfect.

Yeah, good. So I know you're originally from Boston, you got your master's at SC in California and you're back here in New York. So maybe talk a little bit about your journey. I know you were an economics major at, at B at Boston University and then you decided to go in for your, your mba. So was that, did you go straight in to, to get your MBA or what? Any stops in between?

So originally from Boston and did my undergrad at bu. Came to New York after undergrad. I was a trader NASDAQ market maker for about five years and then ended up wanting to shift careers, applied to business school, got into SC and then after, after school came back to New York and began working in real estate.

Wow. Well, if you were still a market maker in nasdaq, we'd have a lot to talk about like the last week in specific. I mean, I don't know how much you still track the markets, but. Pretty wild.

Yeah, I mean I still love the markets. It's been a crazy couple of weeks. You know, it's had an impact on, on our business. We, we refinanced a couple of properties last week. But yeah, I mean personally I still, you know, enjoy, you know, tracking the equity markets and, and, but yeah, I mean, maybe one day I'll get back to that.

Well, look, you certainly have quite the platform that you've built. So for those who do not know Greenbrook Partners, please give us a little overview on, you know, what your holdings are, what's the investment strategy.

So the currently the holdings are, it's about 400 properties in New York City. We pursue two investment strategies, a value add and a cor cor plus. The value add is essentially targeting the worst building on the best block. You know, we buy, renovate, lease, and then the plan is to recap or sell. And then on the core, core plus side, you know, we're buying renovated properties that are leased and the strategy there is to keep them tenanted to improve the operations of the property, you know, and really increase the property level cash flow over a long term hold.

Got it. And right now the specific focus has been in New York City. But we were talking before you're open and exploring other markets as well.

Yeah, I mean for us. So New York has been a great market. You know, I think we entered at, you know, an interesting time shortly before the rent laws changed. We had bought a few properties and then, you know, in response to that, sort of shifted the strategy. But over the last, you know, seven, eight years, we've built this portfolio and the pipeline is robust. You know, when we look at the operating stats across these buildings, it's really remains a very attractive opportunity for us. And so we're, you know, we're actively buying buildings in the value add side. We're very active in the core plus side. Having said that. Yeah, I mean we've thought about diversifying geographically, entering different markets. You know, we're as an organization, we've got, you know, 150ish people. You know, we have a couple folks on the west coast in the Bay Area, we have folks in Chicago. We've been looking in those markets as well as the Southeast. We haven't done anything yet. You know, again, New York, it's still a very attractive market for us. And you know, we built such deep domain expertise here that we're still kind of full throttle in New York.

Great. And I, I definitely want to get back to, you know, how you built the business here and what that. I mean, to go from presumably, you know, zero holdings to 400 properties. I think I read somewhere a billion in in equity that's been deployed. 150 people working for this organization. I mean, obviously, you know, it's not just the acquisitions, but the management piece. So I definitely want to get back. I know a lot of our audience will love to hear about scaling a business, but I think it'll be helpful for them to kind of hear your experience on the real estate side and how you prepared yourself for this undertaking. So right after you graduate with your MBA at sc, was it there that you then went directly into real estate because I saw that you worked at the Oleon Group. Was that the, your first stop after school?

Yeah. So I mean originally my plan wasn't to get into real estate. You know, like I said, I was a trader before school. I went back to school and you know, my plan was to go and work for you know, like a long, short or multi strat hedge fund. But it was a really challenging environment. You know, I had a tough time landing a job and I, I ended up syncing up with the Oleon family, just coincidentally who had a large public equity portfolio as well as this real estate strategy. And you know, so I, I started working with them kind of in the end of, you know, second half of 07 and they needed help on the real estate side and it really didn't take long for me to kind of recognize the opportunity. I really enjoyed real estate and I got to build out a pretty unbelievable network while I was there. So the family is well capitalized, it's sort of consistent with sovereign wealth and the approach is similar. It's a long dated long term strategy. But they were fairly opportunistic. And so if you found a good deal and the organization supported it, you know, there was capital to do it. But I guess over time, you know, I did sort of get the, the bug to do something a bit more entrepreneurial and ended up starting Greenbrook in around 2015, toward the end of, beginning of 2016.

So, so going back to Oleon and if I'm not mistaken, I mean they, they've transacted on some of the largest investment opportunities here in New York. I think they were the equity on 15 Central Park west which for a long time was I think the largest sellout, you know, not just here in New York, but around the world. So seemingly pretty opportunistic, investing in large scale development and all different asset classes. Right?

Yeah, I mean we were, we were investing equity and development, we were buying existing assets. We were acquiring interests in real estate, real estate related operating companies. We were investing in publicly listed real estate companies and real estate related companies. It was a great place to be.

And were you involved in vetting the opportunities, vetting the sponsors? All the above because. And I think maybe they've done, you know, some direct investing as well on their own. And I'm again, I might have this wrong. I believe maybe they also acquired the Sony office building. But I at the time, were they doing most of their investing direct or do you have a sponsored development partner at the time?

So they were the strategy sort of evolved, you know. And so the origin of, I guess their real estate strategy dating, which predated me was there were the equity and development and they eventually shifted that strategy investing in more traditional real estate private equity funds, which then shifted into funding, I think a combination of, you know, development direct deals as well as continuing the relationships with some of the existing, the private equity funds, you know. And so they, you know, it was like best in class organizations that they were investing with.

I mean, I would imagine that experience, you know, learning how to work with, even though it's, you know, family office, I mean, still, you know, run like an institution, understanding the importance of reporting. And I'm sure that was helpful when you ultimately ended up on, you know, the sponsor seat. Right?

Yeah, I mean, so I had exposure to, you know, some of the most talented people in real estate in New York and in the US and so to learn how they thought about, you know, whether it was development, you know, more traditional and you know, private equity investing or corporate opportunities. It was a really good space for me to be in because I had that exposure, you know, and the people that we were, were dealing with were, you know, like the folks who are at the top of the industry, you know, c. Learn best practices, you know, not, I guess the corporates, the, on the kind of corporate reporting side. But for me, I mean it was really about investing, you know, and at the end of the day that's what we do. We're investors. You know, even at Greenbrook, it's a, it's a research driven investment approach. And I think the.

Yeah, so from there I, I think before you founded Greenbrook, you were a managing director at EastEnd Capital. So what, what prompted that move to Eastend? How is that role different?

So it, it was a, an entrepreneurial platform started by a couple of guys who had been with Broadway and their business was, you know, maybe 10 people, a dozen people, and they had done a half a dozen deals in New York. And so for me it was a good spot to go after having worked for the family office because I wanted to transition to the operator side. And it was good exposure, you know, because kind of showed me, you know, what it took to, to run the real estate.

Having exposure to office and retail as well at East End and residential. I guess the decision, still the focus on residential. I assume what you would say is, even though residential is very challenging to scale, was that what attracted you to the opportunity? Did you figure, hey, if I can solve for these operating inefficiencies, I, I have something that. That is. Is not widely available to the institutions.

Yeah, I mean, that's. It's. We're. We're probably the most dominant operator in the space, but that was, you know, one of the. The genesis behind, you know, pursuing the investment in the first place. I mean, it's. It's really hard. You know, I think you've got to be borderline crazy to do it, especially now. Yeah, you know, I do think we entered it at the right time, but it. Yeah, I mean, it takes a certain type.

Got it. So 2015, 2016, you decided to start Greenbrook Partners. Now, did you do this on your own, or did you have partners that were already in mind to launch this?

Yeah, no, it was in 15. It was just me. I had a financial partner, but, you know, we sort of struggled to put things together, which in hindsight, you know, was great that that happened. But in 17, my current partner, Fred Lacau, he and I got started together, and really, we've been off to the races since then.

So for the first couple acquisitions, I mean, when did you kind of build the platform in an institutional way, knowing the goal was to scale this thing? So, like, when you were starting off, even for your first raise, I mean, was your first deal an institutional one, or did you have to, like, show some track record with some. Some friends and family?

So initially, we, you know, we put. We found a couple of buildings, two separate sellers, and we sort of packaged them together to get the. The size of the equity at a point where we felt like we could get institutional capital comfortable. And it didn't work out. So we ended up just having to pound the phones, you know, raise the money from friends and family. And, you know, in those. In those early deals, we have 50, 60 people.

Why didn't it work out initially, calling the institutions?

I think it was probably the deal size, a function of the ability to scale. You know, we got a lot of pushback from those, from the institutional investors. You know, they wanted to deploy 40, 50 million, you know, and we hadn't quite demonstrated that we had the ability to deploy that kind of capital within this space. So.

So it's interesting because on one hand, I see is this a large enough opportunity, you know, but. But the other piece, I would think, is the track record. Right. So. So clearly you could show that you've worked for some really impressive institutional shops in your past, but you haven't, as Greenbrook, done it yet, so was part of it like. All right, Greg, this sounds interesting, but come back to us when you've Done a couple dozen of these or did they. Was there like buy in from you from the start on your ability to operate?

No, there was no buy in.

Okay. Because I've got to imagine a lot of our audience who's still raising money, friends and family, like the, you know, the dream is to have, you know, that institutional partner, you know, much larger backing that you can do, more scale. But before we get to that, let's maybe talk a little bit about, you know, those early deals and obviously, you know, working with the proverbial friends and family versus now what, you know, having, you know, I would say almost exclusively institutional equity partners. So, I mean, if you had to kind of lay out, you know, the pros and cons, if you want to call it, or the considerations, advantages, disadvantages of going friends and family versus institutional, how would you lay that out?

I mean, for us, we really didn't have a choice. You know, so we started with friends and family. That first year we closed the deal. I mentioned a couple of buildings. Six months later, we sourced another opportunity and closed again, capitalizing it with friends and family. The following year we bought 10. The year after that, I think we did 30 something. And then we really started to stack hundreds of properties. But it wasn't until, I think toward the end of 2019, where we had evolved beyond friends and family and transitioned to programmatic joint ventures with institutional investors, you know, which on the, on the, you know, on the front end, instead of having to call a thousand people to identify your, you know, your 60 investors, I mean, it's nice not having the ability, you know, to have to do that.

Yeah. I would imagine trying to line up 50 or 60 investors for a deal, that's got to be, I would imagine early on a tremendous amount of work was on the capital racing versus just, you know, identifying and sourcing the opportunities. Right?

Yeah, that's right.

Was there all. Some might say, though, I like sticking with friends and family. There's better economics, you know, because you don't have any, you know, major decision makers on the other side, you get more flexibility. Do you think there's any pros to sticking with the friends and family or does it just. It gets to a certain size where, where you have to bring in the institutions.

Yeah, I mean, I don't think we have that many friends and family. And so I guess for us it's really like a quantum of capital strategy. So when we had initially started, it was, we're buying from non institutional owners, we're going to create an institutional product. We would do it so many times such that there would be an institutional takeout, you know, down the road. And fortunately we've been able to do that. But you know, there were lots of growing pains and challenges kind of getting the organization to that point.

So I know you mentioned early on some of the pushback from the institutions is that the deal sizes just aren't large enough. So I mean, was there ever a thought process where instead of aggregating and you could probably tell us what your average building size is? I don't think it's, it's 100 units, I don't think it's five. It's probably, you know, somewhere in between. But was there ever a thought process like if I want the institutional equity, I've got to go take down two 300 unit apartment buildings? Or were you really convinced that the opportunity was more in the small to mid sized deals?

Yeah, I mean as, as an investor that was really where we saw the value. And I mean it's very unique in New York. You can do that, you know, because despite, you know, a bunch of people kind of running around putting deals together, you know, you still have a lot of inefficiencies in the city. And so the, we were convinced that the volume would be there, that the market was deep enough and that we would realize it. You know, the other benefit of, of the scale, you know, and really it being a more of a quantum of capital strategy is that once you get there, you can really drive your opex down.

You know.

And so fortunately we've been able to do that as we've built up the portfolio. So now, you know, we have essentially in New York a market with fixed supply. And you know, if we look back 20, 20, 21, 22, you know, we're getting double digit rent growth. And then as we've scaled the portfolio now we can realize on the cost side, you know, driving the opex down.

You know, I was involved in two funds and we might have interfaced back in the day on, in fact we might have even invested alongside you. But River Oak NYC 1 and 2. So we put out, we raised $50 million to put out JV equity and value add deals. And, and we really liked the space where we'd write two to seven million dollars equity checks. I don't know how we came with, I don't know why we capped out at 7 or what, you know, that exact range. But the, the thought process or what we observed was that 95% of the deals that sold in New York City were Under, let's call it, you know, $50 million in total capitalization. And yet it's, it appeared that 95% of the, the institutional equity was focused on the 50 million dollar plus. So you, like, you have this mismatch where institutional capital is looking for the larger deals, but all, you know, the volume, right. When you, when you aggregate it, you know, maybe that's, that's a different case, but there's just so many more deals. There's so much more deal flow in that, that small to mid space. So is that kind of what you were latching onto?

Yeah, I mean that, I mean that's really why we pursued. What we pursued, you know, was because you had the, the opportunity set was really attractive.

Right.

And then the volume supported, you know, the, the second part of the strategy, which was, you know, creating scale, buying enough that you could then find institutional capital. But yeah, I mean, you're right. I mean the, the fact that the majority, I mean really all of the institutional capital is targeting, you know, deals that require 40 to 50 million of equity plus is what makes what we're doing so attractive. Right. I mean, when everyone is looking left and you go right, you know, it's contrarian, but this is, you know, as an investor, it becomes a really attractive opportunity.

So talk about, and you mentioned it, it's, it's really interesting because this is a big theme of, of my book about the inefficiencies of the marketplace. In fact, that's why we call it the insider's edge, because you can gain that advantage. And I want to circle back and ask you about the, the differences because it's a much different approach than, than I would say investing in the public markets, but this idea of these inefficient markets. So, you know, as you started buying these multifamily deals in, you know, it was predominantly Brooklyn, maybe Queens, what was your observation with the way these assets were being sold? I mean, were you, I mean, first of all, let's start with how were you actually digging up these opportunities? Like if you're looking to do scale, how many people are out there looking? And then where, where were you finding these opportunities?

I mean really, it's like you leave no stone unturned. So, you know, we're equal opportunity. We look at deals from brokers, bankers, lenders, leasing agents, I mean, you name it. If someone has a deal and a realistic seller, then we will pursue it, you know, aggressively, whether it's on the value add side or the cork or plus side.

Yeah, so, so across the board. Now, it's funny, we. We had, I had David Shorenstein on the podcast. I don't know if, you know, kind of his track record and approach, but he. One of the things he prides himself is finding these opportunities and a lot of them off market. So he shared that and I, I witnessed it going to his office, seeing, you know, one summer he had interns who were just sitting there writing handwritten to owners, saying, are you interested in selling your properties? He's now kind of automated that if. If you will, but still this mass outreach. So if you're looking to do volume, you need to see a lot of stuff. So did you have like 10 acquisitions people too? Like, how did you find the, you know, the volume of the, of the deal flow?

It's a small team. So the, you know, when we, when we started, it was more challenging. You know, we were looking for something that checked, say, nine out of 10 boxes. And then as we bought more and became, you know, more talented on the renovation side, on the operation side, we could pay, you know, incrementally more than, say, the next guy. And so we became a really good buyer. We don't retrade and, you know, we work with the brokers. And so I think ultimately what happened, the reputation began to reinforce itself. And so, you know, if you want to, if you really want to do well, you. And get the best deals, you know, that that is what you need to see everything, you know, and so if you see everything early, the ones that check the boxes that you need checked, you can be really aggressive on the buy. And if they don't, then you just move on really quickly. But our acquisition team is small. It's just a couple of folks talk about.

And maybe part of your ability then not to just find the opportunities, but then underwrite them is, you know, what checks the box and what doesn't. Because I think you said in your second or third year at Greenbrook, you closed on 30 properties. I mean, I think most of our listeners, you know, they'd be happy if they could find two or three deals in a year. So I doubt you're going to tell us that to buy 30 deals, you bid on, you know, 40 of them. I've got to think that you talk about that pipeline, like, how many listings do you need to see? How do you, like, filter them down to the point where you're actually drafting an offer and then like, what's the success rate? Because even if you put an offer, obviously that doesn't mean you're going to win the bid.

Yeah, I mean, we've, to your point with Shorenstein automating it, we've done a fair amount of automation on the acquisition side, so we can operate lean, but we're making unsolicited solicited offers on properties routinely. I mean, if we made, you know, fewer than 15 or 20 a week, I'd be surprised because oftentimes what happens is, you know, sure, a seller may move to transact quickly, but a lot of times it's not the case. And so it, you know, you've got to be diligent. You've got to stay on top of, you know, whoever the rep is or the, the owner and just perpetually follow up. You know, you gotta be persistent, you know, and so for us, it's paid off. You know, deals come back, sellers get fatigued, you know, circumstances change. And if you're, if you're always in the market investing, then you'll, those deals will come back and you'll get a look. And again, if the value works, you know, we will acquire it.

So let's talk about the value working. So I would assume there's some kind of buy box where you say, okay, this is our investment thesis. These are the type of returns that we're looking for. So I don't know if it's like a back of the envelope where you see a building and very quickly, you know, you can figure out what you can pay. But like, what was the investment thesis was this? Just buy buildings, aggregate them and hold forever. Like, is there a certain time and type of returns that you've been trying to solve for?

Yeah, I mean, we, so on the value add strategy, for example, the acquisition basis sort of triangulates to the same point. The renovation costs generally triangulate to the same point. And then, you know, given the amount of data we've got on the rental side, we have a really good understanding to like a, a very fine point of what we're going to be able to rent the units for post renovation. And so the, the math exercise is it's pretty quick, you know, so, you know, if a deal is going to work or if it's not going to work. Because we've, you know, we bought hundreds of these properties. We operate them, you know, we have a look through into what's going on. You know, not just in the rental market, but the financing markets. I mean, we've got just a ton of data and over the years we've figured out how to organize the data and then, and then use the Data So it informs the decisions on the acquisition side, on the renovation side, you know, and, and on the, on the, the rental side, you know, because you know, in a certain neighborhood, if you want a one bed, two bed, three bed, you know, more palatial, you know, whatever, two bed, if it's going to work, you know, within the micro market. And we've just gotten good at, you know, collecting the data, organizing it and then using it to make these decisions, you know. And so when someone shares a deal, it becomes quite easy to just do some really basic math and then, you know, if it hits the return, then we move and if it doesn't, then we move on.

So for hitting the return, so what is the most important metric for you? I doubt you're going to say cap rate because these are mostly, although you said you do have some kind of core plus bucket of capital. So maybe you are looking at the in place return. But for the value add stuff, is it like a stabilized yield on cost that where you're stabilizing, is it kind of an IRR over a certain period? I mean what is the ultimate return metric that you're solving for?

On the core core plus side, it's between I'd say a five and a half and a six and a half depending on the strength of the neighborhood. And then on the value add side, I mean we're generally targeting, we're basis buyers. So it would be per foot and then yield on costs. So you know, where we feel like based on the set of assumptions, you know, if, where we would stabilize too.

Right. Which of course is, and I don't know how much of a spread that is over a core core plus. But obviously you're taking on construction risk, time risk. So you know, I don't know if that's another 100 basis points that you're looking to reward you for your, you know, for your efforts.

Yeah, I mean the, the yield on cost we're targeting is generally between a seven and a half and an eight.

So you know, with, and last week, I mean I think the 10 year treasury swung by like 50 bips. So how sensitive to your underwriting are you looking at kind of macro trends? Again we're recording this on April 14th. You know, tariffs were announced then put on pause last week. You know, again the ten year Treasury's all over the place. I mean are you looking at where you can finance these deals? I mean how much is your model or your return expectations change based on, you know, whatever the macro trends are that day?

Yeah. So the daytoday really doesn't impact the way we think about investing on, on behalf of our partners. You know, certainly, you know, you can't avoid the noise and you got to pay attention to the news and see what's going on. I mean, generally the long end of the curve takes time. It's, you know, supply and demand dictates that, you know, the, the, I guess the bureaucrats, the politicians have greater influence over the short term. But the reality is we, we tried to set our business up such that if we have a deal that's really attractive, we have, you know, capital to close all cash. We have, you know, capital to the extent we're financing that we would finance the acquisition. You know, we're fine closing cash and then, and then financing post closing at some point in the future, you know, but ultimately, you know, if, if you have an opportunity to buy at an attractive basis, sort of irrespective of what's going on within the financing markets, you know, that day or minute, whatever, we want to be in a position to buy. So generally of avoid the noise of the day to day, really trying to think long term, you know, and for us it's, you know, it's, it's about, you know, buying right, you know, executing on the value add side, a renovation strategy, you know, within, you know, a cost effective renovation strategy and then leasing up.

So going back to my earlier question about kind of the considerations for friends and family versus institutional partners. So I would assume if your business plan was to do volume, so you've got certain institutional partners where, you know, they've got their box as well and as well, as long as you hit the box, right, I would assume they're not looking, you know, to just do a one off with you. I mean, I would assume what you have is programmatic partners. And so assuming that that is the strategy that the question then becomes, you know, how do you run that through in a quick, efficient process? Because you know, sometimes your institutions and you hear, oh, you know, it's going to be a protracted, you know, contract negotiation, due diligence, whereas, you know, buying in New York, which is probably the most competitive market, you know, in the country, if not the world, like you can't sit around and wait for diligence. I mean, I would imagine a lot of times you got to go hard on a contract deposit very quickly. So how are you able to work with your investment partners to know that you've hit the box, it can get through their investment committee quickly or whatever needs to happen? So you can go hard on an acquisition.

So it really depends on the partner and the strategy. So for our core, core plus strategy, the diligence is, you know, it's super buttoned up. The, and this is extensive diligence on the value add side. I mean, generally we're buying vacant properties and we can be a bit more, you know, forgiving on the diligence, knowing that immediately post closing we're going to be starting renovations and really transform the property from, you know, these days a completely vacant and dilapidated property into something that, you know, is nice, modern, clean, that, you know, someone would want to live in. So the, in, in those situations, could.

You bring the institutional partner in after the fact? So you're, you're basically taking down the deal you're making because it has to happen in a quick time frame. You're kind of cleaning it up and getting the diligence under wraps. So once you present it yet.

So we're not, we're not quite there yet, but we, you know, the partners that we have on our value add strategy, you know, we've, we've set up a system such that, you know, the, the approvals are very quick.

Got it. Okay, so, so now I'd like to talk a little bit about the management aspect and the operation. So I would, I doubt or maybe, maybe you self manage day one. But you know, take us back to those early years. You know, 10 acquisitions, 30 acquisitions. Was the goal always from the start to build up your own management company in house so you could be vertically integrated. Was that construction on site leasing? I mean, how many of these things within the vertical did you want to have control over?

I mean really everything because we wanted to control cost. So we've always self managed. More recently, the last couple of years, we started handling the construction. And more recently, last couple years we started doing all of the leasing. We had worked with, you know, third party contractors and leasing agents previously, but we just felt like the performance would improve if we had more control over that when, I mean, when we got started. So there was no, you know, Fred and myself, you know, we're not wealthy guys, right. So we bootstrapped everything, you know, and so we were doing a lot of the dirty work ourselves. Some of the renovations, I mean, really?

Yeah.

What like all of the lower skill work we were handling ourselves. So think like, you know, demo and just some light carpentry. But yeah, I mean that sounds like.

They could actually be potentially a little fun to, you know, knock down a wall or everything. I mean, I, you know, 25 plus years, I've yet to get my, my hands dirty.

Yeah. I mean it, I think it sounds better than it is.

Okay. You know, a lot, I would imagine a lot of long hours, a lot of weekends. Because if you're out trying to deal make during the day then I would, you know, whether it's weekends or whenever you can catch up, I mean it's, it's like you said, it's all, it's all hands on deck.

Yeah.

I am curious though, the idea of kind of starting the management from scratch versus working with, you know, a third party. Right. I mean wouldn't one of the concerns might be, well, you know, this third party manager, they have, you know, thousands of units. So you know, yes, there is that cost aspect. But you could say, well look they, because they are negotiating contracts across their portfolio, they can leverage, you know, better pricing from their vendors. I'm also thinking about, you know, gcs, same thing like they're building multiple projects so maybe they can get better pricing from their subs, you know, not to mention that is their full time job and what they're supposed to do. So do you think, you know, for those listening, is there a case when you're starting off that maybe you start with the third parties because that might also allow you to spend your time where it's most needed and maybe learn along the way as well if you don't have the expertise to do some of these things.

So I think that that's kind of a consensus view. And you know, from day one we really wanted to do it ourselves. You know, we wanted to understand it. We had the owner mentality and we felt like we were going to be making smarter decisions than some third party who had thousands of units, some GC who had dozens of other projects. You know, so we were and have been very hands on really since day one. I mean it's, you know, we, we've had you know, every problem in the book and we had to work through, you know, lots of different issues over the years. But I mean ultimately, you know, through the successes and the failures we've gotten significantly better on the management side, on the contracting side and even on the leasing side. You know, I mean when we would for example work with third party on leasing, you know, they were really quick to, if the, the unit didn't rent in an hour or a weekend to cut the rent. And you know, they weren't thinking about, you know, if you do that across 10 apartments within a 10 unit building, the impact it's going to have on your cash flow and in front of a financing, refinancing sale, I mean, it has a very good impact on proceeds, you know, and so if we could control that, if we could, you know, had the sort of staying power, the ability to wait, if we knew the way that, because we know the way the math works, that ultimately the outcome will be better, that makes sense for our partners.

So talk about how you built your company. Because you went from, I guess you and your founder in 2015, so you went for two people to now you have 150 people. So, you know, for those listening who are trying to build their business, you know, if you think about maybe the first five or ten people that you hired for the business, what were each of those people doing and what were the. Yeah, what, what, what were the roles?

Yeah, I mean, we did everything. So we, we, you know, you're, you're kind of taking the trash out in the office. You're, you know.

But did you have like a specific. Okay, you're going to be an asset manager, you're going to, you're going to be an acquisitions person or just kind of. Everybody does everything when, when you started.

Yeah. So, you know, Fred and I sort of split the roles initially where he was maybe more focused on asset management. I was construction. We had a woman who I worked with at Oon who is still with us, who was handling accounting, property level, corporate accounting. And then we ended up recruiting someone to assist with the leasing. But I mean, back then we were doing really everything. There was no job description. It was just, you know, we were, we were just like fighting to survive.

And you know, out of those 150 people that you have working with you now, what would you say is kind of the common thread? Or if you're interviewing for a position, I mean, what do you look for, for. In a candidate?

So we look for grit, we look for humility, and we look for people that are resourceful. So we've bootstrapped since day one. So there was no one cutting checks that allowed us to experiment with fill in the blank every dollar that we made. We reinvested in the building, in the business. And as we've gotten bigger, you know, we've been able to level up the team, identify, you know, specialists, find really talented managers. And you know, the, ultimately it, it shows up in the outperformance, which then allows you to continue reinvesting in the business, you know, and continuing to level up the talent and just making the, the, you know, the, the, I guess ultimately the Performance of the underlying investment stronger.

So what would you say from an advice standpoint? And I'll ask this from a couple different perspectives. I mean, maybe it's the student who's looking to get into the business, and is it working for a big institution? Is it working? I mean, still consider yourself an entrepreneurial shop. So that would be advice you'd give that person. And then maybe, you know, the other question is someone who's maybe five, 10 years in the business, maybe they are already working for a big shop, they want to try to go do something entrepreneurial. You know, what, what would, what would your advice be to them?

So I think for. If you're undergrad or if you're five years out of school, 27, 28. I mean, really, that's the time in your life where you can be risk on. So I would just, you know, you know, find something that you're passionate about. Uh, but I would be mindful of, you know, because you don't get the op, you don't get to reconquer your 20s twice. You know, I would be risk on and. And, you know, I would really identify things you've got conviction in, and then I would go after it.

Awesome.

Yeah.

And for. For someone who, you know, I guess if they're. They're five, ten years into it and they want to, you know, start off on their own and they've got an investment idea, you know, at what point do you make the leap? Like, do you have to have the deal? Do you have to have the equity? I think, you know, in talking to a lot of people who say, I want to invest, I want to build up my own portfolio, sometimes it's like, okay, well, what, what comes first? Is it the deal? Is it the equity? I mean, again, it seemed like it took a while. It took some, some reps for you to obviously scale it the way you have.

Yeah, So I had neither the deal nor the equity. You know, the first, the first deal that we did, I emptied out my bank account and whatever I had, I funded the hard deposit, and then I funded the lender deposit, you know, and really just rolled the dice.

And you didn't have the equity raised for it at the time? And how much time did you have to raise the money on that?

Whatever it was, we needed more. So we, I think we probably had 60 days, and it took, you know, 90. Who knows?

What, what, what gave you the conviction to literally. I mean, this is like the equivalent of, well, maybe not going into the, you know, the casino, because this Was not, I mean, obviously you had conviction in this, but to take that leap, to put everything on the line to try to raise the rest of the money and you know, 60, 90 days, whatever it is. How did, how did you know you could, could do that?

I mean, yes, I guess the, like the money or the deal, you know, I didn't have either, but I did have the conviction. And you know, that moment with those two deals, I really felt like they were goodbyes and it was going to work. So I just believed we were going to be able to do it. Okay.

And any sleepless nights before the closing and wonder if it was going to all happen and come.

Oh yeah. I mean like a lender retrace. I mean it was like a pretty awful experience. I wouldn't want to, wouldn't want to do it over again. Right. You know, I mean, each deal has its own sort of set of challenges, particularly in this space when you're buying from, you know, kind of mom and pop, non institutional owners who, you know, may have, you know, connection to whatever the underlying real estate. And so you got to work through that. But, you know, the, the, the first deal for me was the hardest, you know, and certainly I wouldn't want to go and repeat it. I mean, now, you know, it's kind of like you, you know, like if you're, if you're kind of a, you know, a day in working in the er, whatever comes through the door, it's brand new and so it's unsettling. But if you've been doing it for 20, 30 years, you know, you sort of, you've seen it all and you don't, you know, you just know that whatever it is that comes through, you're going to be able to handle it. You might not have seen it, but you've probably seen a version of it. And so these days, you know, there's, I feel like we've seen everything.

Yeah, I mean, 400 deals and counting. I could imagine that. So Greg, as we wrap and this kind of brings us full circle because, you know, the fact that you started off as a trader, right. And I would imagine in a, in a public market where information, theoretically everybody has access to the same information. So you're going for something that, that's highly, a highly efficient marketplace. And then you've got real estate, which is, you know, you could make the case very inefficient, like kind of thoughts on why real estate is a better investment opportunity because of that, that factor.

So I guess in the private market, in the space that we're in, the, the inefficiencies are significant. So still, you know, New York City, like to your point, it's the largest, most liquid real estate market in the country and probably, you know, one of the top five or 10, whatever in the world. But you know, you still have these, this arbitrage, you know, and for us, because we have a substantial portfolio, we've got a look through into costs and rents, you know, we can sort of back into a good buy, you know. And so for us, we're really well positioned to capitalize on the arbitrage because we know, you know, sort of what it costs and the time it takes to execute. And we know post renovation, once it's leased up, what the value is going to be, you know, and you just can't really find that in the public market.

So what's amazing to me is I've been doing this now for over 25 years and I guarantee you there are, you know, brokers, my competitors that are still doing business the exact same way they did it 25 years ago, even though we're at this golden age of data and technology. So I, I mean, maybe that's also, I'd like to think that's some of our competitive advantage in here and how we leverage technology and data. So I mean, how much of this thinking about the next. So you've been doing this with Greenbrook for 10 years, like thinking the next 10 years, how are you leveraging technology? How is the business evolving? And then I guess ultimately is the goal, is it another 400 buildings, is it another 4,000? I mean, what's in store for the future?

So when we look at the performance of the deals that we've round tripped, you know, so we're sort of blending to a 1516 multiple, you know, and a little less than a 30 IRR over on average a 24 month hold. And one of the reasons we're able to get there, you know, is, is certainly because of the team, the process, the protocols that have been set up and it's our use of technology so that when the handoffs are occurring between asset management, construction, leasing, property management, that we've really kind of shortened and tightened up the execution, the investment life cycle. And you know, so for us, you know, we invest heavily in the team, but we're also investing heavily in technology and we've got really smart people that are doing some experimental things with non traditional real estate tech. And you know, I think it's going to be an area where we continue to invest to try and eke out additional gains, but I think for us, you know, going forward, we want to, we'll diversify the business, invest in other geographies, probably other, other property types within New York. You know, the majority of our, our 400 properties are, say, on the smaller side, and there's really no reason why we couldn't leverage the team and the expertise that we built to invest in larger properties. But, you know, ultimately, you know, I guess your guess is as good as mine. But we're, you know, we're, we're really bullish on New York. We think it's still a great opportunity. And so I think we're here long term.

Wow. Well, Greg, this was amazing. You built an incredible business here and we just, we're so grateful that you shared your story. I know this is going to be super helpful for our listeners, so thank you again.

All right. Yeah, thanks for having me.

And thanks again for everyone who joined. As always, you go to james nelson.com I built this site for you. That's where you can find the show notes, you can find out how to connect with Greg as well as a lot of other helpful resources. So I think the best thing that you can do, and I don't know how you could not have benefited from this conversation, is, you know, we just heard advice for someone starting in the business, someone five, 10 years out, how to scale a business. There's got to be a couple people that you can forward this episode to and get the word out. So we would greatly appreciate it. So until next week, thank you again for joining.

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