Strategic Investing with Peter C. Lewis

Welcome. This is the Insider's Edge to Real Estate Investing with James Nelson, the principal and head of Avis & 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 215 of the Insider's Edge to Real Estate Investing. With us today is Peter Lewis. I had the pleasure of meeting Peter years back at the Biznow Escape Conference have come to know Peter. He's an incredible mentor, a brilliant investor and today he's going to talk about strategic investing. Peters is the Chairman and President of Wharton Equity Partners, a real estate and private equity firm which draws in over 35 years of experience to identify opportunities ahead of others which capitalize on where the world is headed. And today you'll learn about ways to work with partners and tap industry experts to navigate complex transactions. Peter emphasizes the importance of having conviction in your investment strategy, learning from industry veterans and surrounding yourself with the right team when entering new asset classes. As always, you can go to james nelson.com I built this site for you. That's where you can find the show notes. That's how you can connect with Peter and learn more about Wharton Equity and and you can also sign up for our newsletter which gives you really a summary of our recent podcast articles that we're putting out weekly in Forbes. All tools to help you gain the Insider's edge to real estate investing. So we're gonna have a brief word from our sponsor and we'll get right into that interview with Peter Lewis.

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Welcome, everyone. Thrilled to have with us today my friend Peter Lewis, who is chairman and founder of New York based Wharton Equity Partners, real estate and private equity investment firm established in 1987. Peter and I came to know each other through our friends at BizNow. They have an incredible conference that they do every year down in Miami, the Escape Conference. Peter has certainly shared some of his incredible thoughts along the way and had the chance to spend some more time with him recently. So I'm really looking forward to this conversation today. Thank you, Peter.

James, thank you. It's such a pleasure and I've been a long admirer of you even way back when. So you may not have known it, but I've known of you. I've watched your career rise and I'm honored to be speaking with you today.

Wonderful. So, Peter, for the audience, if you could just give them a little bit of a background on Wharton Equity Partners. I know now, 35 years in business, two and a half billion dollars of investments, but maybe you could tell us a little bit of the history of the company, how it came to be and what the portfolio looks like today.

Sure. So when I started Wharton, I was actually working on Wall street and I started going out in the weekends looking for real estate. I just got, I got curiosity because I was in kind of the real estate investment banking area of the, of the firm and I became obsessed with just looking. And I found the shopping center site on Sunrise highway on Long island. And one thing led to another. The owner was an absentee owner. He lived down in Florida. He hadn't realized that the site, all, everything around the site, the zoning had changed from retail to resi. This was a retail site and it was a, it was at a major intersection of two major highways or roadways on Long Islands. And bottom line is I went to contract on it and I started skirting two worlds, which was working for my day job and then the evening job and ultimately the evening job kind of took over. Now, I'll never forget this, but when I went into my boss, we were at the peak of activity. When I was at the down of Wall street, when I went in and I told him that I was going to leave, he just was stunned that I would leave. You know, the opportunity they had at a firm like that. I think ultimately, James, what drove me, first of all, I knew I had two years of money in McNic camp so I could live. I Wasn't married. Second of all, I just didn't feel I was going to be appropriate to live inside an environment that was bureaucratic. He was my immediate boss. Was. Was a really great guy, but the guys above him were just no one I respected and, you know, and I just didn't want to work in an environment where I really didn't feel I could actually make an impact. And I just kind of felt. And I think. I think psychologically for me, I grew up in a home where my dad was an entrepreneur. My father was in the toy business, and he brought us. He was involved with bringing us such interesting toys as Gumby and some other things when I grew up. So I grew up in an environment that was different, right. Than growing up with the guy who was in chasing that back. So I made a decision to go. I have to tell you what's interesting, and you'll appreciate this. When I was working, I was working for E.F. hutton. We were in the syndication area of Hutton, which was the massive business, probably the biggest player on Wall Street. What we would do is we would take a deal, chop into 10,000 pieces, and then distribute it out to our retail system. One of the deals that I worked on very closely was with Bernie Mendick. So we did a fund with Mendic and David Greenbaum with Jimmy Kun. They were all together at that time. And I flew around with Bernie wholesaling the product to our brokers. Right. My job was to originate the product and then wholesale it. And I. And I had a lot of time to talk with Bernie, and I just saw what it meant to be. I said, you know, I mean, I don't know if I'll ever get him to be like him, but I'd like to be like him. And so the combination of just kind of where I was in my life, having had the experience of working with Bernie and inviting this piece of land, all led to me walking out the door and hoping that I could make something, make a go of it. And I guess I think one of the morals of this story is if you think too much sometimes about things, you'll never do them. Because when I jumped out and started actually trying to process a piece of lands, I didn't know the difference between an architect or an engineer. You think you do when you work inside a big organization and you give Bernie the money. But really, at the end of the day, Bernie was the one executing. We were the giver of the capital. A distinction. And unfortunately, today there's a lot of. There's still always that tension between guys who give them money and think they know real estate and the guys who actually play it. Right. And so, anyway, so I went out and I learned by trial, and that ignited the business. And we were fortunate. We wound up taking that particular site through the approval process. And before I had to close, I wound up finding a buyer. And simultaneous closing a flat would change money. And I felt like, oh, my God, I actually had a business here. And that. And that's what started my career. Wow.

And to have Bernie as a mentor so early on, I mean, for those of you who are not from the New York real estate scene, I mean, it's truly a legend. There's now a street named after him, a boardroom named after him with the real estate board in New York. And many of the great office properties here were a result of his ingenuity and hard work, certainly, but. And Peter, I love first deal stories, and especially I love what you just had to say about, you know, the difference of working on as. As raising the capital and as a syndicator, as opposed to actually doing the physical real estate. And so, you know, going out and acquiring. I mean, that. That certainly probably took a lot of guts to try to take down that retail strip. So you said you had some money saved up. So was this just your own capital? And did you figure out, I mean, how'd you even know the right questions to ask? You said, you know the difference between an architect and a contractor. Obviously you need an attorney. So how did you know at the time this was a good opportunity? Did you have to raise the money yourself to do. Sounds like you were just. You were able to get it under contract, and then you said you actually flipped the contract, so you didn't even end up closing on it.

Right. So this has been a kind of a hallmark of my career, which is. And they're very good questions. What I did here, the piece of property was in the town in Iceland. I slipped and it was all zoned retail except for a teeny little sliver in the back, which abided a residential area. I mean, it was a tiny little triangle, but we had to get. We had to get their approval and the planning board's approval. And we knew we had to dealt with the neighbors, even though I was a teenage sliver. And I sat there and said there was a very famous architect on Long island at that time, a guy named Michael Spector. Specter had done all the Rexon's properties on Long Island. He also did the courthouse in Iceland. So they loved him. In the town. And I went to Spectre and I said, look, I have no money, but I want. And this is a small project. It was a 70,000 square foot shopping center he's building, you know, 250 to 500,000 square foot. He was designing, you know, huge, huge projects. And I went to her, said, look, I don't have any money, but I'll give you a piece of the deal. And I'm not, I. And I can't pay you anything along the way. You know what I mean? The minimum. And he agreed. So I got Specter on board and I cut a very similar deal. And the lawyers, I managed their cost and I managed the other costs with my own money, but Spectre was the most expensive. And I'll never forget meeting with the neighbors, going to their house one night. All I needed was one night. And I met them in the living room. They had plastic on the furniture and you broke donuts. And Spectre put on a show. Here's a guy who was a real big shot and they approved it. And it was that approval that drew the interest of a developer who was in that area. And he said, I'll buy this from you. So what happens is obviously what happens simultaneously. You have two escrows. One is the money that you give to the seller, and the other one is you take from the buyer and you make the arbitrage. Orchestrating that was very interesting. The seller started getting a little suspicious that I might be doing this, but that's a whole nother story. So one of the things in my career that I've been very successful at doing is when I embark in a new area. And we'll talk about this today a little bit, because you'll see the different things I've done in my life is I've always brought talent with me somehow, some way, and I've either given them a piece, made less money because of that, but I've always pinpointed what I need to do here. So you have to use the right attorney that I knew you have to use the right local attorney when you're dealing with these municipalities. I knew the architect was going to be important because we had put on a little bit of a show. And so, like those things, you didn't be genius about. You just needed to be a regular person. Then from them I learned Spectre said to me, oh, we better bring in Nelson Pope, which is an engineering firm, because they need to do this is. Oh, okay. That's what those guys do. I mean, I didn't Tell him that. And you just kind of follow the leap. And so part of this whole thing, again, is just you jump in, you're alert, you're smart, you listen, you make mistakes. Hopefully none of them kill her. And that's kind of how it did it.

So on your firm's website, talk about Wharton's forward thinking, opportunistic investing. And what this reminded me of is one of my favorite quotes, the Wayne Gretzky quote of skating where the puck is going. So it even seems like very early on your first investment, and maybe it was luck or maybe you just knew, but I guess you sense that whatever was there was not the highest and best. You saw the opportunity. So where did that skill come from?

You know, I speak a lot at this stage of my life. I guess people think I know what I'm doing, so they actually speak. You are different. But it was never really something in my mind, James, that I thought about. As I look back now at the course of my career, I'm sort of saying, you know, that was pretty opportunistic. And I saw, and it's actually been a number of times, which we'll talk about a little bit today. But I kind of have an instinct about seeing what other people don't see in this particular micro example, the guy who owned it, he was sitting in Florida. He didn't know the zoning changed. Today. All this is on the Internet. So he might have known otherwise, but he didn't know that. And because it changed and we wiped out all the competition of retail going towards New York, I knew I had a little. And everything else was developed. I knew I had a little monopoly in that spot. So that was just purely being a smart guy. Right. What's, what's happened in my life, though, over time is I have a sense of, I watch when money goes too. I like when money starts pouring into something. And we're seeing, we're going to see this now in this new world we're entering into with interest rates kind of. I'll get into that in a second. But there's a combination of things that I look for. I look for where capital is going. And if it goes in nass, at some point, the arbitrage or the benefit of getting an entrepreneurial profit starts to wane, particularly in stuff that's very obvious. So I try to hop to something else or I think about what else is going on. Actually, in this instance, interestingly enough, I didn't go. My next deal wasn't a retail beer. Long island was getting overheated I became available. This is a very interesting quick story. I know this journey today will be unplanned, but there was a site that became available. It was a residential site in New Jersey, but it was a huge site for a guy who was 29 years old. 317 unit to be built, townhouse project in an area called Montville, New Jersey. So we're 80 and two, a great school district owned by guys on the forever. And I wound up striking a deal with the owner. I said, look, I'm a young gun. I don't have to cash it, but I think I can get it. I need an extended due diligence period so I can go out there and try to get it. And he gave me the time. And what I did, the first thing I did is I knew that I could never delay and get any financing at all or any money unless I brought a builder in because I had no track record to build 317 units. That's a big job. And I wound up finding a guy who said, listen, I like what I see. If you get the money together, I'm in. I took his name, put it in my book, started running around and said, now to people, we built 10,000 houses. All right. Interestingly, another name that you're going to be a name from the past because you're close. My vintage. My wife go to Ghanai Walker code, who was a big financier during that era. And he owned the savings in love. And as luck would have it, because you need luck in this game, I march into the room with Arthur and the builder, and the two of them run across the room and embrace Arthur's father and my partner's father. He. Howard. Howard Blitley was the name. His father's. He built the first shopping center because Arthur's family was in with. They owned Alexander's, I think it was. They were involved in shopping centers. And so there was a relationship. They hugged and kissed. Within minutes. Howard, what do you need? Yeah, I'm watching this thing unfold, and next thing I know, obviously if we're in, I'm going to take a helicopter out there tomorrow. We'll fly the site if I like it. Bottom line is, then they came in. So all of a sudden, the end of the story is closed the deal. I'm sitting on the side of the trailer with Howard and me. I never built the thing in my life. Howard was a builder, not a developer. Didn't know about marketing, didn't know about really how to design. So I basically looked at each other and said, okay, Howard, you're going to be the one dealing with the subs. I'll deal with the marketing side of this thing. And I dove in and kind of started figuring out how to do it.

So, you know, Peter, there's two parts of that story, and I hope people are really listening and paying attention to this part, because the first part of that story, and this is really. I mean, it's such an incredible approach. I would think most people knew trying to start another business, you know, the gut response would be, okay, I've got to try to pretend, right, that I have all this experience and all this knowledge. I mean, the fact that you went directly to the owner to say that you didn't have the capital, right? I mean, that's a very contrarian kind of approach. Usually someone would say, oh, yeah, I've got the money. I need the time. You make up some of the reason why you needed the time, the diligence or whatever. And what you're really doing during that time is trying to find the capital, whereas you were just up front and then what you did. And this. This is really how we start the. The book, the Insider's Edge. Because I. I think one of the number one things that hold people back from investing is lack of capital and. And that lack of experience and track record, all those things that you just spoke about. But going, you know, finding the opportunity, right? That. That is the value that you brought that opportunity. Getting that owner to say, okay, Peter, here you go. Here's the contract. You've got time. And then partner to the table and leveraging that track record so you could go raise capital around it. I mean, this is, again, right out of the book. So I'm really happy to hear about this, that you've certainly proved this out, and it makes. It's a great approach.

And I talked about this. It's so funny that we're colliding on this point, but I've spoken. I speak at Columbia and some other places. When I talk to young people, I say, don't worry about how much you wind up keeping in your first few deals. If you need to bring in partners who can, they'll help you get the deal done and then building your resume, right? So the key, as you said, is securing the opportunity. That's hard. It's not easy in this instance, it took a lot of the. I mean, I took the guy out for lunch, I took him up to dinner. You know what I mean? He got to know me. Nothing's easy. But I Think again. Kind of as I think about my career, different places we jump to. I surround myself with the right guys when we go into something new. And then if I need to bring in partners, I give away equity. We're worried about the last dollar.

Yeah, no, I love that approach. I remember very early on in my career, I found this incredible opportunity in Chelsea. I mean, it was only maybe a 1012 family, and I don't know why. And yes, this was 25 years ago, but they wanted, I think it was 5, $600,000 for the property. Right. I had an opportunity. I clearly did not have the money. Even if I tried to go to finance that, I didn't even have the down payment for it. And the opportunity. I tried to, you know, ask around a very, very close network, but I was so afraid that if too many people found out about this, someone was also just going to all of a sudden just come in and swipe it out from under me, which is, of course, what happened. I just waited too long. If I had just reached out to some of my clients, you know, to say, hey, you've done this 20 times before. Can we just partner on this? We'll go, you know, we'll go 50, 50, right. And, you know, 50% of something is better than 0% of nothing, so. Or 100% of nothing, rather so really smart that you identified that early in your career. Peter, I want to talk about, you know, one thing, that kind of the investment strategy, avoiding equity over the years. You talk about avoiding mainstream thought to garner above average returns. Okay, so talk about that. You know, there is, you know, a reason, a safety in numbers. I mean, we're seeing this right now in the market, right? So if, if, you know, here we are several years, you know, post Covid, and the safe investment, if you will, you know, is multifamily. It's certainly, maybe some industrial as well. Certainly not office. Right. So, you know, that's where the capital is, though. That's where the interest. So, you know, if you're out trying to find an opportunity and you need to raise the capital a lot easier when you're, you know, swimming with the current. Right. When you're trying to go avoid the mainstream. Right. That, that's, you know, that could be challenging, I'm sure, to put these deals together. So talk a little bit about that, that approach.

So I'll give you an example. 2012ish. I started believing that multifamily was going to meet us out of the great financial crisis. And that's based upon the fact that multifamily is a place where you live. It has to be. If any asset class is going to lead out, it's going to be multi. That's historically been the case. Hotels are generally the last. I mean, you can kind of figure out why. So I had this conviction and I have you start kind of going out and looking for some deals without knowing where my money was coming from. And this was propitious. I was. I was on a flight from. I was going to St. Bart's with my wife and there's a little plane that takes me from one of the islands to St. Bart's and we're on this little thing and you could barely talk. It's tiny. And I'm sitting next to a guy. We start, you know, we yell at each other. And it turns out he was a lawyer on a firm called Brian Cave in New York. And he. And he said to me, hey, if you need any money, I have relationship with a major hedge fund that's looking to deploy and let me know. So when it. When an opportunity came to me that was in Florida, it was a big deal. It's $50 million transaction, which was a big deal for me. And UDR was the seller, which was a reap. They were selling at that time seven and a half cap or seven cap and buying free caps in the city anyway. So I wound up calling my friends. Who was the hedge fund? It was Oxif. See, I was there. I explained thesis. I said, look, we can buy seven. I can go to Fannie or Freddie and get financing at 3. We're coming out cash on cash, 13, 14, 15 and unstable assets. And the reason why this opportunity existed, if all the other institutional investors, all the other guys were still licking their wounds from 2007, 2008, the last thing they were going to be able to do is to go into an investment committee and say, I'm buying in Daedong beach and whatever it was. So there was this illiquidity in the market. And it just turned out they didn't have any legacy issues in real estate. They heard the story, they said, we're in. We wound up buying that portfolio. And that led me to the opportunity to buy about 7,000 units over about three or four years. I winding up doing a big deal with fortress, which is 250 million. And it just happens. This has been a kind of repeated theme in my life. And. But here's, here's the one thing. And you notice doing what you do for a living, you have to Learn you gotta sell. We're always selling. And, and the key to selling is not being a bullshitter. The key to selling is having great conviction with somebody that backs it up and getting a message across to someone and, and then you become respected as a person. You're selling, but you're credible seller doesn't always mean you're gonna win. Right? The guys were bad sellers or the guys were trying to sell a story that they have no conviction about and they're just hoping they could pull the wool over some guys or you know what I mean, like that kind of stuff. You've seen it before. So anyway, I guess kind of the story here is I've been very successful in convincing people like the guy along the piece of land and like others, I'm a trustworthy guy. Give me a shot. Many times I get shot down. At this point in my life, I don't have that credibility issue anymore. But, but, but, but going where others don't go is a very scary game. Now we will talk about towards the end of this today as I move to data centers, which is a whole nother creature and it's got very similar kind of characteristics. I mean, who the hell am I going in and trying to build data centers, but I'm constructing the same way. And we've already, well, again, we don't have to get into it this second, but I'll tell you what I'm doing there, it's a similar pattern. And so it's, it's, if you want to be, if you want to be able to navigate through different types of property types over time and be successful, you have to have conviction. You need to build the right team around you so you're credible with equity. Right? Because again, if I'm going to data centers, I need a data center guy with me. Whether you're sitting to say, Peter, you're a nice guy, but, you know, what do you know about this? You got to eliminate all those questions before you even walk in the door with these guys, Peter.

That makes a ton of sense. But my question still is that track record. For a lot of investors, a track record is really important. And clearly you've got a great track record over 35 years. But as I see you kind of move from different asset classes. So whether it was the, you know, the 300 plus units that you did in Daytona beach or you know, then moving to an industrial portfolio, how when you haven't done it before, and I get it, you say, here's my credible team, you know, they know what they're doing, but they say, okay, but Peter, you haven't done it before, so how do you. How do you make that leap?

Listen to me. I have another story. I got to use a better story. You'll appreciate this. We have a lot to talk about here. When I, early in my career, I made a decision to move into self storage. So early part of my career, first 15 years, my career, I was a home builder, for sale housing guy. That deal we did in New Jersey launched me into that business. I started seeing writing on the wall. For us at least, I got smart. Number one, when you build houses, ordinary income and sell it, number two is you get bigger and you build big communities and you have homeowners associations. They hire lawyers who sue you no matter what because they get a third of where they can garner out of developers. So you have this contingent liability that sits with you for years. There was a lot of reasons why. And ultimately, for me, we were running on a land up here, and I didn't want to start going to North Carolina and build down there. So I remember when I worked on Wall street that I. We were one of the early pioneers in helping launch Puppet Storage. And I went out to California and I walked through the facilities. This is early, we think about self storage. It's a really. Only a few decades old. It's not, you know, it's a relatively new asset class. And I was walking through these buildings. I said, what a business this is. I mean, I had a woman up front playing cards. You walk down the hallways, there's no noise. There's nothing going on. There's things. I said, I, this is a great business. And so I remembered that, and I decided to move from home building. I still had some legacy stuff into snow storage. And I went out to the conference in Vegas, which is a terribly boring conference. They walk around and decide what color the locks should be for the next year. That was a big decision. And I got educated. And a broker calls me and he says, I have a portfolio for sale in the Hamptons. It's Southampton and East Hampton. Do you want to buy it? I said, I don't know. It's subject to Wall Street. It's seasonal. Get out here and take a look at it. I went out and I saw that these things were always full. The guys who built it were local guys. They weren't in tune with the overall market of, you know. And one thing led to another. I wound up. We wound up bidding like. Like a six and a half cap. I'm just doing. I remember exactly what it was. All the REITs were seven and a half to eight, because that's kind of what self storage was going for at that time. But what they weren't taking into account was that the mark, These rents were half of what they were in markets like Melville and the City. They were like the third. And it's the same people. On the weekends, they're all paying seven bucks for a latte. You know, I mean, like, it's the same people. So. And by the way, in these facilities, like in the East Hampton one, I had Martha Stewart, I had Puppy Combs, I had Billy Joel. They all stored their crap there. So I made a decision to pay what I felt was the right price because I knew I could stabilize, like, at a 10. And we won the deal. We, you know, like, congratulations. So we put up a deposit. I didn't get a phone call. And we're out there doing our thing. I get a phone call a week later from the lawyer who represented the guy who was a seller. He said, the German guy who owns a facility in Southampton heard you're overpaying. He wants you to overpay for his, too. So I look at the thing. I said, how the hell do we not do this? It doubled the thing. With that acquisition, we owed 80% of the market, and there was only one other competitor left. I said, I mean, so we might putting another deposit down. I had a partner on this one, a young guy with me, and we were diligent, diligently looking for money. I get to the end of diligence. No money in hands, no lender, no equity. And my lawyers are Herrick, Feinstein. I was meeting with you guys, and Carl Schwartz was the lawyer at the time. I said, carl, what do I do here? He said, let me make some phone calls. He calls a bunch of guys at CS for Boston and some other firms and said, look, one of our clients has this situation. If he wants to drop this deal or sign a deal to us at any time, we'll take it. I'm not guaranteeing we're going to fail. We'll take Mattison's position because I constructed something unique. So I took a deep breath and I went hard. With no money, I wound up calling. I don't know how I got to it, but I wound up calling Simon Zier. Simon and I ran around looking for cash. I didn't sleep. I wound up getting ge. They owned hello Financial at the time to do the debt. And Simon found an opportunity fund to put up 80% of the equity. And I ran around and found a balance of the cash. So I guess kind of what I'm saying to you, it's. It's not, you're not snapping your fingers and it's simple. Today it's easier because I mean, at this point in time, I, like, I'm a business guy and I kind of think I, I can kind of do it. But during the early days when you move from one thing to another, it was hard, but you had to take risk. You know, it always comes down to the deal. I know, I know it sounds tacky, but somehow, some way. And by the way, and actually, you know what was interesting in that transaction, we were going to manage it too. So it wasn't even like I brought an extra space or any of these other guys where the guys could sleep soundly, the equity could sleep soundly at night, saying, oh, that doesn't matter who the schmuck is, because we got a guy, you know, we got a real firm in your manager. We were the managers.

How come you decided to make that decision as opposed to going with one of the experienced managers? I mean, if you're going out raising equity when they feel more comforted, if you had kind of a brand name.

On it, it was a different era as well. They weren't as prominent as they are today. But often while you bring these firms in today is because of the breadth of their reservation system. It's really a marketing reason, not so much the management of it, because they keep. Right. We had a captive audience in the Hamptons. I didn't necessarily need the marketing aspect of it. So this was a question of how do you account for this? Accounting wasn't that complicated. I figured it out. Right. I mean, think about it. It's not that complicated. And we hired some people. We just did it. I didn't really think otherwise. And I wanted to capture the revenues of owning. We get a 6% management fee, which is crazy in self storage. So I, I guess I can kind of, kind of just going back to the question at hand is it's never been simple, never. But you just got to basically say, I'm, I'm, I'm going to do it. And when you, if you start hearing objections, you figure out how do I solve those objections quickly, right? At this point, I know kind of what has to be laid, like what has to be in place. You know, like, for example, if we were to do a data center today, we were going to build one of these monsters. I couldn't walk into the room and say, hey, I mean, we built big stuff. We know I'm going to bring in, you know, major league Dax center guys who build these things and, you know, answer that question in advance. So it is. This is not. The route I've taken, is not easy, and there's risk along the way. I found. I think one of the things I found in my life is the self storage deal is an interesting example. I. I felt my risk on losing my deposit was not great. They weren't going to give me a profit, perhaps even though I deserved one, but I wasn't going to lose it. So if my feeling is if I'm not going to lose it and I have a chance to win, I got to do it. I've done this repeatedly. I had. I had a piece of land. Someone called me with a piece of land in Myrtle Beach. I didn't even know what Myrtle beach was. This was a number of years ago. It was. It was 100 acres on a decommissioned air force base next to the airport. And I. And I said, and it was owned by a dentist, literally a dentist from another state. He bought it and whatever. And I studied the site and I looked at it, and what was happening was Lennar had a huge piece to the south of it where they're going to start building out houses. Another guy, McCaffrey, had a shopping center site to the other side of it. He's building that shopping center. And I felt this piece was right in the middle of it. And I actually started talking to Lehman at the time. And I said, here's what we're going to do. We're going to chop this thing into pieces. I have. Kimco will take the retail. Tall Brothers will take this. And, and again in that instance also, I had to put a big deposit up, but I had a pretty lengthy period of time for due diligence. I started winging it all together. And the crazy story. There was a guy comes into my office. It was just a random guy that I kind of knew. And he. And he says, what are you looking at? I said, I got this piece tied up in Myrtle Beach. He says, I love Myrtle Beach. I'm a big golfer. He was a rich guy. He says, I want to buy the piece. I said, I'm treat agent to diligence here. I mean, you know, I had a pile of stuff. This was a decommissioned air force base. So you had environmental, excuse my language, and all sorts of stuff that went on there. It was complicated. And I said, look, I'm not. I can't he says, I'll pay what, what would you make on this thing? I said, well, you know, if I did it this next dollar. She said, I'll pay that. I said, you'll pay me what I would have made. He said, I'll do it. I said, come on. So he lines up. I said, here's what we're going to do. We're going to go parallel pass because I had a 60 day dealership period and then I'm hard and it was a big deposit, it was like a half a million dollars, which was a huge amount of money for me. And he wound up tracking with me. And long story short, he brought in Fortress. I knew Fortress. I said, are you guys real? I mean, don't screw me here because I'm. And because I was keeping them in a bit because, because they wanted to do it and I needed an escape hatch if these guys didn't do it right. I'm giving you color here because I wanted you to understand that these things are very intricate and complicated and the whole way through your side. So. So Peter, as you're telling these stories.

What I'm thinking and again for you, I mean you kind of know how everything came together and through your travels, you know these people. But what's interesting is like, like, oh, someone brought me this incredible opportunity in the Hamptons, but you weren't in the Hamptons looking for self storage and then you're down in Myrtle Beach. So how are these. If one of the first things you said is it starts with the deal, right? And that's so important, what you bring to the table. So how have you been able to find all these opportunities over the years? I mean it almost the way you're telling them, it almost sounds like they just land in your lap. Someone just called me and it was interesting. You know, I've got to imagine that there takes a fair amount of proactivity. I don't know if you're getting out there, expanding your network, you're talking to brokers, but I mean you're finding deals, you're finding capital partners. How are you creating this, this world where you see all these opportunities?

You know what I like the land thing was out of left field. All right. The self storage business was actually something I concertedly went, we try to do. Right. I went out to Alicia, pretty big business there. And I got down, I got a family to back me and that kind of unfolded. These one offs happened in my life. The one offs is a, is a rarity. But really where it starts is I get a conviction around something around multi. I got a conviction around industrial, I have a conviction around data centers. Now I got reverse engineer figuring out how do I, how do I get the mind together? I'll give you a quick story. We're jumping out of sequence here. But the. When I decided to move so the multi game for me, I built a portfolio and wound up selling 2016, 17. The reason we started selling, partially because our LPs wanted to. But more importantly I decided I wanted to move into Industrial. Now 2016, 17, obviously way before COVID but I started seeing the writing on the wall with what Amazon was doing and I started seeing the volume that was running through them. I mean again, it seems like crazy and it's only eight, nine years, whatever it is, but this was almost before the world, before the world even knew what last mile meant. I started realizing when Amazon went from like three or four days to one day delivery, I said the only way these are, they're getting these goods into people's hands is if their properties are right next to the population, right. And I just felt that this business was still sleepy. And so I dove into it, sold our resin probably too early when, without any, any deal in hand. And this gets to your point, my team and me started letting brokers know and relationships lawyers and when we knew, here's what we're doing, here's our new thing and we get a crazy, we get a crazy situation. And again, you need, you need some luck here. I don't want it. The business model should not be low, but it's part of your life. I get a phone call from a guy, one of my partners does, from a young man out in San Francisco who interviewed with us and he, he said, your time is incredible. I have a contractor who's got a piece of land tied up In Atlanta, that's 988,000 square foot building that you can build. He wants to move from being a contractor, which is business only, to being a developer. He's 30 years contract, he doesn't know how to do it. I looked at the site, I said, get this guy up to New York. We flew him up to New York with his team. I looked at the piece, I said, here's what we're going to do. We're going to come in code GP with you. We'll bring in the cash. Well being the institutional wrapper around this transaction, so ironically here we're the ones who are going to be the credibility as far as being an interface with the institutions, he was the one who could build it. So I didn't have to answer that question. What have you built? Guys built a ton of this stuff and they built a huge building, fedoracell, right around the corner. And he had it tied up. So I wound up running around and Starwood came in, wound up building that building. 988,000 square foot building it, partnered with this, with this firm, and halfway through, Phil Stanmies and took the whole building.

You know, Peter, just to share kind of my experience with this, when I'm trying to learn about something new, whether it's a new geography, whether it's a new asset class, I don't even think I told you this, but before I went down to Miami this year for the BizNow retreat, I had been obviously hearing about data centers. I mean, you're seeing that everywhere. And I'd started listening to podcasts and I said, I've got to get smart on this, right? And I'm talking to my partner down in D.C. and it's interesting, once you start putting out there, hey, I'm interested in data centers. I'm interested in self storage. I have conviction. I'm looking for this. And you start just asking around. What I find really interesting is a lot of people that you know in your circle that maybe you've only been thinking of them kind of one thing that they do. You start asking around and say, wow, a lot of people are doing, you know, data centers, or maybe a piece of it, or maybe it's that, hey, I want to start doing more national business. I want to start brokering in California. So I started asking around, oh, yeah, I've done some stuff in California. So I think sometimes, you know, and maybe if I'm hearing you right, you have the conviction, right? You see the opportunity and then it sounds like you start socializing this, right? So you're starting to talk to people about it. And I would imagine that's where some of these opportunities come from right now.

By the way, it's. It's frustrating too, you know, like, this is not easy. I don't want to paint the picture today. I'm. I'm giving you good examples of stuff, and we've been fortunate. But don't like the DC game, Data center game right now, right? We're in it. We had a site tied up in Cincinnati, which is interesting. They were going through a Koula zone. We got some other sites, but I mean, we get, we get no's left and right. We get guys not return our phone calls, you know, like like, these are real brokers in the business who say, who the hell are these guys? I mean, they go to our website and they see we've done some stuff, but you know, they're dealing with the big boys. So socializing is a very frustrating process. It's not, it's not like, oh, look at us, here we are, and the whole world jumps and jump into our lack. You know, it's constantly. I'm driving my guys crazy. I drive myself crazy. Yeah, so.

So under the topic of avoiding the mainstream, because look, I mean, we could sit here and say data centers right now is pretty mainstream. I mean, everybody, I mean, a lot of talk about it, huge potential. And I certainly am not about to give away your playbook here on this show, but we've had conversations about your approach. And let's just say for data centers, there are specific geographic areas that have really become these data center hubs. And I know you've got some ideas of where else these could exist. And so even within a mainstream idea, if you will, to me, it feels like you're taking a contrarian approach.

Right, That's a great point. You know, I appreciate you bringing that to light because by the way, buying Southeast value add during that year, the easier thing would have been going to New York City and buy a building, you know what I mean, to talk to Goldman staffs or something. So, so within these, within these asset classes, as you're pointing out, it's not so much that I like self storage exists. When I went to that conference, you were a thousand people do, right. These places exist. Data centers, as you're pointing out, exist. But here's, this is what makes data centers so interesting. We're moving so quickly because of the pace of innovation and what's happening with technology. And these data centers that we used to be strictly cloud, which was storing data and running processes through there, I mean, it's still very complex organisms. But now because of AI, data centers are shifting to not only getting information and learning about that information, you're now moving to what's called inference, which is where they actually kind of think, right. So there's training the data and then there's inference. I don't want to get too technical, but those centers are just being built. They're not even, they just started. You know, like we're, we're like, we're like, like, like, like, like the first automobiles coming up the assembly line. You know, the horses are still running around the streets. So when I think about the playing field in dares, the natural place to go right now you referred them on the major, like Northern Virginia and Silicon Valley and there's a whole bunch of these places. All the major boys are there, all what's called the hyperscalers. Microsoft, Google, Oracle and their money is unlimited. But where the money is not going right now is secondary markets and also where we think the these new data centers are going to need to be, which is close to the populations. Right. So you're right. Within each segment of what we go after, we try to think about microstrategies within the bigger strategy. And of all the places I've seen in my career, what makes data center so interesting is the future is completely opaque. They know where it's going. Surely you have this monster, unbelievable tailwind. But figuring out one step ahead in this game is the most challenging of all because it's technical, it's big dollars, but I think the rewards are enormous.

So Peter, this might seem a very basic question, but it's clear that you're a lifelong learner. So whatever new business that you're tackling, clearly you go deep, you figure out what the questions are you need to ask. How are you continuing to educate yourself about the market, the opportunities. I mean are you reading five different newspapers a day? Are you got data sources that you're plugged into conferences you mentioned, what is your strategy where you're continuing to learn? Because I would imagine that knowledge is really what's helping you formulate these, your thesis.

It's a great question. So let's take, let's take what I'm talking about right now, my thesis around secondary markets and smaller data centers, populations. All this is a belief I had. Now what I try to do is go out there and search for, for information that supports it. So I, I, I search. First of all we use chat cpt, any other. Well we do use them, you know and I write the question in there and it's very interesting what you get as far as places that you can research this. You know, look at, you know, what's the best data center conference in the country for guys to do this, you know, I mean like simple stuff, right? So, but, but the, but the bottom line is I am obsessive reader now. I mean I read newspapers every day. It's, I mean I get up early, I read them like I don't care what, what rain or shot I read every day in my life. You know, I post journal and New York Times are read every morning but, and indigenous other papers. But the online world now and the Amount of information obviously you can get. I continue to try to understand what's the degree of risk I'm taking here by buying a 80 megawatt, potentially 80 megawatt facility outside of Cincinnati. You know, I mean no one, no one's in, I mean there's a few guys in Cincinnati, but Cincinnati is not a well known market. So you know what I mean? And these projects are, if you build one fully through that deal is $500 million. Let me give you. So I think, I think what you do here and here's the other thing to do and you, this is something which I think you can understand. Okay, I know you can understand, but when you're talking to brokers, leasing brokers, you talk to industry experts. What do you think about this? Well, talking about it, but no one's doing it yet. Or like sometimes I hear information that sounds disappointing, but I realize actually it's interesting and it is. And when I had a meeting with a guy the other day who's a 30 year veteran, you know, but he's actually very, you know, given the fact he's 30 years, he's not looking retrospectively, he's looking proactively. And when we started talking to, he said the edge, which is kind of data centers right next to populations, is where the action is going to be in the years ahead once these big, big facilities get built. Fill in with this. So I think what it is, is I have a thesis and then I start counting away the thesis, whether it's from reading pounding brokers, hearing their voices good or bad. You know, some guy who's an industrial broker for 40 years and he's one year into the data center business is, oh, that'll ever work. You got to put that in context. What the hell is he know? Right, right. So it's just, and, and you know what? The, the whole thing, I never, I, I sleep, you know, but I really never sleep. When you're an entrepreneur, you know this, it's like when I was in college, you always felt like a homework. You could go out and play baseball and drive, you know, chasing girls, whatever you were doing. But for me at least I was a pretty good student. It was like it was always host because I knew someone else was studying. You know what I mean? So like it is when you're an entrepreneur.

Well, Peter, this has been amazing. You've got such an incredible story and approach and I love that it just continues to evolve with only a little bit of time left left. And I know you've been so Generous with your time, not just coming on this show, but I know you, you guest lecture at a lot of the top schools out there. What advice do you give to, you know, there's someone listening to the show right now who is not invested yet. Maybe they're, I'm assuming many of them are already in the real estate business. Maybe they're the broker, maybe they're on Wall street, you know, but what is the advice to that person to get in the game? Is it, you know, go take a chance like you did and try to do something on their own? Is it going to join an institutional platform like yours? What's the advice that you, you give the students?

I tell, I tell young guys and depends on young, the definition of it. But when you first getting out of college, My suggestion today is to join firms like yours or other, other kind of brokerage firms and get a bird's eye view of how the investment sales game works, how numbers work, work, how different product comes, how deal guys, because you're interfacing all day long, you get into a heat of a deal, this is your expertise, but you got a buyer, you want, you know, give on this point and the seller, like, you know, I mean, like getting. That's a great way to get into the action and, and start getting a gut feeling as to what makes you excited. There's no bad first job really. But if you want to be in the real estate business, you don't want to go into working a dental office as hygienist or whatever. So, so, so I think the biggest thing is, is, is is that the harder thing, which you raise in your book is like, how do you do your first deal? Right? That starts with passion about spending time. And I wouldn't suggest necessarily just jumping out like, you know, and leaving a great job and jumping and doing something. I mean like I did it that I was probably a little nutty to do it. But what I would be doing is what I did also, which is use the weekends, use the nights, go online today and start thinking about, should I buy a 5 unit walk up in Harlem, you know what I mean? And start thinking about how do I do it. Maybe start socializing with some of your friends. You know what, what's happening today in the younger generation, I don't know how they do it, but they find money from friends of theirs, their parents, like, you know, like there's a whole nother world that's evolving and you find it on Twitter. It's wild. So, like start thinking about, okay, if I Do find something. How do I put the deposit down? How am I going to go? You know, like, how much time can I get in contract? Surely, as you know, buying a prime building in New York City is going to be very hard for anyone who's very young because they move lightning speed. Go to the fringe, go to markets that are like, maybe Albany, Go to upstate New York. Like, buy 20 units. If you're in the multiple game, that sell is a little slower moving. The game's a little slower moving, gets you started, you know, so you got to solve for those things. But I think ultimately it really comes from your belly. How much do you want it? Do you. Do you want to talk about it or do you want to do it? That's the ball in life. You always talk about it. I hate. So I love talking about things, but I tell my guys I care about ski to wealth. That's what I focus on. My guys, I think about two things. Speed to wealth and profit divided by time. I don't want us at this stage of my career to work on things that don't make us a lot of money or get a good return on our time, particularly my age. But, you know, you could fall in love with stuff. Time drifts, you know what I mean? I'd love to buy a car wash in Cincinnati that the. And, you know, and dream about. And. And it just occupies space in your mind where you need to kind of condense that down. So either move or you don't move. So this is. This is. This is. This is maturity as well, you know, just. But the bottom line at the beginning of this whole thing. How much do you want?

Yeah, well, Peter, that's an incredible way to end. And I just. Your story is so inspiring, inspirational, and just love the approach even today. And I. I know our audience is going to get a ton out of this, so we just really appreciate your taking the time and. And sharing with everybody.

They have some great questions, and you're a great thinker, obviously, by the nature of your questions, you know, you. You really know what you're doing. So it was an honor, really, to be part of this today.

Wonderful. And I want to thank all of you for joining in once again. And as I. As I've been saying recently, you got something out of this episode.

Episode.

I don't know how you could. And forward this to a friend who you think could benefit from this. That's what we're doing. We're getting the word out here. We're helping you gain the insider's edge to real estate investing so you can gain the advantage outperform the market. That's clearly what Peter's done throughout the course of his career. Go to james nelson.com I built this site. It's not about me. I built this for you. That's where you can find the show notes. That's how you can find how to connect with Peter. Find out everything that Warden Equity Partners is doing and there's a lot of other help helpful resources there for you. So until next week I want to thank you again for joining.

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