The Insider's Edge with Eric Brody

Talk about a marketplace. That's probably the closest we become to a marketplace for selling real estate. And I think if we had my friends here from 10x right now, they would tell you, yeah, we're a tech enabled platform, but we still need a human being, we need a broker to actually answer questions because this is, this is complicated stuff. But the sale process is still the same. So I want to first throw that out there and I just want to get your impression before I, you know, maybe throw some other things at you.

So I first, I think I agree with you. It's an inefficient marketplace. It's, it's, it's wild to me how inefficient it is and the lack of information in order to create those markets. But it is changing and that is sort of where, where the rubber meets the road on how tech is actually going to impact. So I think first and foremost the answer is yes. Inefficient, right? Even Sam Zell spoke about that. Like there's inefficiencies how you build, I build cheaper, I can pay more. Wild, right? Or you know, you know, you didn't get it out to the greatest markets. You only got certain amount of offers. Crazy. That you're doing it similar to you were 25 years ago is insane. I heard a guy who's got really fast growing commercial real estate business, my guys are in from 7am to 7pm and they can't eat or use the bathroom and blah. And I'm like, all right, the greatest supply of Adderall ever. Or like you're just doing the same thing. And what you're saying is that it's such a grind and event way of explaining it. In addition, what we're finding is people are reaching out to us where lenders unfortunately foreclosed on many of the people that I deal with in this space. And then they're looking at the market and they're saying if we mark to market this asset, we're going to get 50% of its value. But they're retaining me to develop. It's not my vision, it's not my asset to complete their assets. So we have those two revenue streams going.

Got it. And of course this comes out of your experience also in the construction world. So maybe talk a little bit, just remind our audience. And by the way, if you want a primer, go back and listen to our episode. I can't remember what we talked about last time, but I know it was good and I know the title of the episode because I know you're from Brooklyn. We called it Brooklyn. That's right.

That's right.

That was. I haven't been sued by the Beastie Boys yet, but we'll see. That actually be a good thing. Maybe we get some, you know, maybe we go viral.

That's right. That's right. That's right. You know, I just want to tell you, you know, you were the one of the first people to embrace ra, right? And if you look at us like we're not spring chickens, we were in the game a long time, right? And they say until, like, your present is uncomfortable enough to want to innovate, you don't. So I'm always curious for you, you know, just briefly before I get into it. What made you want to innovate? You were doing well. You. You are a successful guy. What happened behind the scenes that you said, I need to innovate, or is that always how your brain's been working?

You know, I think. And I appreciate your asking that. I think for a lot of us, the pandemic 2020 was a total reset because we're sitting at home and we're, you know, we. We can't stop moving, right? So suddenly we're, like, on lockdown.

Right?

So what do we do with this time? And I'm a huge fan of coaching, and my coach tells me, james, you want to just sit and wait this thing out, or do you want to actually do something with this opportunity? And out of that was born the podcast. Like, okay, well, maybe we can't do this and Mean Person, but we can record this, right? And we can share this knowledge over this crazy new technology, Zoom.

Right.

That led to the book. But I think, you know, if you're kind of a Simon Sinek guy and, like, what's the why behind doing this? And what do I really enjoy, you know, to. When I go to an event and a student comes up to me and says, james, I read your book. I listen to your podcast. I just got my first job. I'm an analyst. I'm an acquisitions person. Thank you. This really helped me as a springboard. I love that. And it's really, you know, for me, when I got into the. Trust me, we're going to get back to you. This podcast.

You were an inspiration to many of us.

I graduated in 98 with an English major from Colgate. I didn't even know what real estate was. I didn't know it was a thing. And thank God someone took a shot on me to get, you know, Paul Massey, Bob Nackel, who remain mentors of mine today. But they gave me a shot. It's a little tougher now today. I mean, I see these resumes that come in. We just took applications for a junior analyst position. We had 4, 400 resumes come in. Like I would not have stood a chance back in the day. So I don't know. But enough about me.

Let's by the way, so, but so it's a great segue because it was discomfort that got me to change. Okay. If you look at it, we were talking about it, I'm a Brooklyn guy, I want to run New York City, right? Like, why would I develop anywhere else in the world? And let me tell you something, that thesis, and it's all about timing. And it was really Justin Ehrlich who once I said to me, and at VE equities, he goes, you know, you're a developer and it's all luck. And I never really understood that because unfortunately for me, I was developing so long that unfortunately I got into a space of discomfort. I had developed a building and a B note lender had foreclosed on me during coronavirus. So it's the same level of discomfort where you're like, what am I going to do? There's no transaction. The world is falling apart. Well, here I am at the same time having a pressure coming down on me like where the lender's like, well pay the interest rate. I'm like, I need buyers. Like there's no one here. And if you remember, it was the first and second wave of Rona, it hadn't come back yet, right? So we go through this experience of like extreme discomfort and that's where change happens. Okay, so what was that change? So now I'm in discomfort. So I meet these special force operators, right? Because a friend of mine is one of the biggest donors to the Deliver fund. And they come up to me and they, you know, talking about your feelings and things like that. But the second thing they say is you do an after action report, what went right, what went wrong, right? And I never ever, I don't know if you did self reflected on anything. Like you just keep hammering away. If I work harder and work longer, it's going to work. So boom, I self reflect. And then I do this after action report and I find this data analytics website and you know what the data analytics website said? The product coming to the market, the shadow inventory that's already existing at the year that I acquired the asset. Because you back test data way too much product coming on the Market, tons of shadow inventory. And then the rate of absorption of sales, it was like nine and a half years.

Right.

So the data said, why are you developing for coronavirus?

So, so what you're saying is you were building a project that developing the.

Building is, is, you know. Okay, great question. Bank is like, here's this development site. You need 70 mil, we got you. I go to common Equity to raise 20. We got you.

Right.

Was this, this is like, I probably pieced it together. 2017, okay.

Everyone's drinking the Kool Aid.

Yeah.

Like, you know, front page news. Sort of like is like, you know, like, here's the money, here's the capital. Great deal.

Right.

And then when you look at the data, which had nothing to do with like popular opinion, complete opposite story, which was fascinating. And that story was way too much product coming to the market. So before I ever had taken the risk, if I would have known about what some data analytics. So we can go into that, you never would have taken the risk. You would have found a much better place in order to put that capital where the story would have been better.

So was that because you were just doing things with your gut or you were so focused on the construction aspect of it that you weren't paying attention to what was going on in the market?

Great question. I think that the mid market space, except the head of the comet is basically, if you're going to give me the money, I'm moving forward.

Right.

They're not looking from a macro perspective for signal indicators in a marketplace that what they're going to do in three years is going to have that demand for you. And I would be like, we know this neighborhood, there's people here. Go for it.

Right?

Right. So you never even knew. And that was, by the way, the first layer of the onion.

Right.

So now I'm like, oh my God, there's a data analytics website out there that basically told me, I can't believe you did this. You're gonna get hurt really bad. And yet I didn't know anything about it.

Right.

You're a builder, you're a developer, you're working on efficiencies within your actual space or how you can build faster or how can be more efficient, or do you think that the market actually wants.

Right.

Because if I went to a broker and said, hey, what does the market want here? You think that they would have said to me, well, there's way too much product coming on the market. Don't develop this.

Right.

So when that happened, we're type A Personalities like you. You wrote a book, you know, like you sat down and wrote a book. Well, I researched 9,000 tech companies with my partner, put together a 250 page document, called up my other partner and said, let's start trading public publicly traded real estate stocks, you know, and tech stocks. And he's like, you don't know what you're doing. He's like, start a venture fund. So I have nothing to do. The world is collapsing around me. I go to my friends, I said, you know, technology is going to impact real estate. Look how obvious this was. And I raised money. So then I read Tim Ferriss's Tool of Titans and he's like, you know, in order to create an ecosystem of companies, do a podcast. So I said, shit, I'll do a podcast called Real Tech Talk. So now my friends call me up and they're like, are you a venture capitalist? I'm like, why? Because I started a fund? No. Then I, they're on a podcast, like, are you a podcaster now? I'm like, no. Then the Real Deal calls because they're seeing my videos at 6am of me working out and they're like, we should do some shows are good on camera. So I start doing a construction and development show, start doing another show, and people are like, wow, do you now, you know, are you now a content creator for the Real Deal? I'm like, no, you know, I don't know. But what that did is it brings around these incredible humans, right? What do you want to be when you grow up? You and I were like, we want to be real estate, you know, entrepreneurs and titans of real estate. Well, the other generation wants to be Jeff Bezos and Elon Musk and they look at the world completely different. So I started to have them in my ecosystem and I said, where is a laggard space within the real estate industry that if you understood the way that technology can create any kind of efficiency, right? That's where I not only want to invest, but I should think about a company in that space. And, and it's not such like being an entrepreneur, it takes time. You can't be like, I've got it. You have to reiterate and iterate and iterate and iterate until you find that space. And for us, we realized with our skill set, we know how to underwrite construction and development. We understand it intimately. If we could actually bring technology, content creation, influence into this space, can that be a successful business? And that was the start of Annex Real Estate Partners. That's how it all came together.

Love that you said so many good things. And I, I hope our, our listeners are taking notes and our viewers who, who are watching. We're, we're, we're trying, we tried to stream live. We, we keep trying to embrace technology. We're, we're live on James Nelson nyc. We'll get to.

And by the way, we expect the report.

That's right.

What you and I discussed.

That's right. So you know, what I love about your story is that you're looking for solutions and you're taking your experience right and you're looking for practical answers. And, and I have, it's no surprise at all why the real deal loves to get you on camera and say, hey, you know, Eric, what did it cost to build this building? What's, you know, how do they build this? Because you take complicated things and you make it simple. And I think sometimes we have tendency, we can get really complicated. And yeah, this business can get really complicated. But I, I love how you just, you shoot straight, you know, you put it out there. But again, you're really trying to solve, I mean that, that example that you just gave where, listen, if I had known what the inventory was, I wouldn't have built this building in the first place. Okay, now you all watching this and listening to this, that might sound like an obvious assumption. But if you're talking about the platform market proof, I know you had them on your show, like that wasn't even around a couple of years ago. So I think part of this is we're learning what are the new technologies that are out there that can make our business more important.

You know what? I think it's important because you and I are talking about tech, but the audience really, and we want you guys to know we're in a Machiavellian business. And a Machiavellian business is it either got done or it didn't.

Right?

You either closed the deal or you didn't. Everything that you do to that moment is relevant, but if that moment didn't happen, it's irrelevant. So first and foremost, as a part of real estate, when we talk about technology, it's as if it's adding to the fact that you are very good at what you do. It is not a replacement of you being a good commercial real estate and me being a builder developer in capital markets. You have to be the best. So I think the bottom line is before you and I ever talk about technology, you still need to understand the fundamentals, understand its nuance. And for me, in My brain, public school kid, you have to break it down to simple concepts because the end of the day, if you look at the most successful people in real estate, they weren't brain surgeons, right? We're not brain surgeons.

Right.

We're the doers of the univers. So when you and I talk about technology, it's a layer on top of underneath that being a doer, which is why you worked as much as you did, you were as successful as you are, because if you understand the Massie knackle sort of process and where you started, it's like you had a canvas and get it done.

Right?

So I think that's really important for like our audience to understand is we love talking about the latest and greatest of what's up here, but there is a mountain of shit below it that you have to build up in order.

To do it, right?

Construction and development, you have to learn how to build, you have to learn how to acquire, you have to learn how to, of finance. Nothing to do with tech.

I, I, I love that you made that point because sure, technology, data, it makes us all a lot more efficient, right? A lot more productive, right? But it also, there, there's still no substitute for showing up and doing the work. And, and I'm, you know, I'm following AI and its impact on our space. But, and, and maybe this is my time to try out my, my theory on you. And a lot of this, actually, I didn't even know when, and I'll say we were writing the book because I had a great writing partner in Rachel Hartman when we put this together. But the whole premise of the insider's edge to real estate investing is that this is an inefficient marketplace, right? It's not like the stock market where, you know, where a building's trading every minute of the day. Okay. So as a result, you can take advantage of that, right? Because first of all, you might be able to buy something off market that maybe hasn't bid up that other people don't know about it. Or maybe you have a certain way to approach the construction where you can get an advantage, or maybe you can unlock zoning potential, right? There's a lot of things that you can capitalize on where it's not a level playing field, right? And that's kind of interesting. The fact that there's inefficiencies in the business is actually what I believe makes investing in real estate such an attractive option. So the question and the use case and maybe we can talk about maybe a topic for A future show we were speaking about this before is I've now been brokering for 25 years. And what if I told you that I believe that a lot of brokers still do exactly the same thing that the same sales process that they were running 25 years ago? Okay, yeah, some of us, sure. We put it on multiple listing services, we put it out on social media, we leverage data, you know, but the actual process of selling a building. Okay. Is in many cases still the same way. There's no we can talk about 10x.

And we can potentially, those that grind the greatest will win. I need real estate to keep saying that. I need those marching orders to say, because something called innovators dilemma. And that's by the time that everyone figures out what you and I are talking about, we are already head and shoulders above them.

Right.

So then the second thing is, okay, ah, you hear from everyone about tech, right? Yeah. I was with the guy today on the phone. He's financing a deal in Jersey that we're looking at. And he's like, you know, I'm having trouble opening up emails. I'm like, good, I need you to continue to have trouble with this minutiae. So people ask me, so what do you do?

Right?

Like, like, what is it that's changed? Like, how could you change that process? And I'm like, I'm telling you, it's out there. There are people coming at it from different angles. They just might not have expertise in the space of real estate. They're in technology and they don't realize its application. So there's a part of the humanity of real estate, the way in which we think and the way in which we move and our, our absolute resistance to change because we've done so well under it and our fear and. And then there's this whole industry that you and I keep saying is tech, and that is the wrong way to look at it. Here, imagine we're telling someone, James, and you were like, I'm gonna write a book, right? You don't have a problem when there's a heavy lift, but most humans do. You have to understand what it even means in technology. What does that even effing mean? Like, is it data? Is it efficiencies and workflow? Is it, you know, reporting information? What does it even mean? And you have to have now like sort of a cross section of understanding technology to then even start to understand where you can pinpoint it. And something that you said is fascinating is case study or use case.

Right?

Like people like, what do you mean? So you have to start to think the way in which you operate, what is your day like? And if you're like, all I do is get on the phone and make 500 calls or if you're a developer, you're waiting for brokers in order to communicate with you, there is so much more to it to give you an advantage. And we can go into every process along the way that is changing. And then the question is, are you willing to invest to take that risk? Because it's a risk.

Right.

Real estate likes to wait and see.

Right.

We are late adopters of technology. It's like, let's watch James and Eric. Let's watch them fumble around. We'll see what worked for them and then we'll try to adopt it. And for me that's like, great, you should do that because by the time you figure out what you and I have discovered, we will already be way past you.

Right. So you're right. There's so many different use cases. What are we talking about? And I want to get specific because, and I think, and I think this is going to help our audience because it really goes to the opportunity and can the fundamental way that properties are sold, can that be intermediated? That's, that's the disrupted.

Yes. Well, no, no, I think disintermediate is better, which is disintermediating the process and reducing the, the amount of humans required in order to have a massive volume.

Right.

It was Sam Altman's quote, which is there will be a one person, billion dollar company one day. But if you don't understand what tech he's basing that off of, you don't know. And I think in your space there are things that there will be a small firm doing massive volume.

Yeah.

Facts.

So again, and we talk about how you can leverage data, how you can become more efficient. And Look, I took MIT's AI course. You could too, by the way. You got to just pay them the money.

Right.

By the way, Instagram re like now I'm just getting, hey, get your graduate degree and this, that, sure. You know, so I'm following, I want to see. And look, I know enough that right now, yeah, sure. And I've had companies come to me and say, James, we can have AI you know, go and make calls on your behalf.

Right.

It could actually reach out right now to every single owner in New York and you know, pitch them a deal, ask them if they want to sell.

Right.

And have conversations with them. Now who knows what those conversations would look like, and what kind of results it would yield. Is that even acceptable?

Right.

I'd be curious. You know what? Well, we don't have to go down that road.

Yeah, I'll give you specific on that. You want to talk specifics and then let's talk about something specifically for our industry. Okay, so specifics on AI phone calls. Try it. It's delayed, doesn't feel human yet.

Right.

So it'll get there. And I would use it.

Yeah.

But if you got to test it, say, make the call to me and sell me on something, there's this click and delay. It's not perfect yet.

It won't, but it will be. It'll, it'll get there. But, but here's the issue that it's still not going to get to. So. Sure. Can I blanket the market? Could I have some AI chat bot go and, and we, we already know owners. I mean, we had Oprah Yardeni on the show. He's renting apartments. People say, oh, I thought I was talking to a live human being. You weren't.

Right.

And there they set up the appointment. You show the apartment. There's absolute use cases. But here's the fundamental way that I don't think the brokerage has changed since I've been doing this, which is I. A lot of brokers say, you know, a listing, an opportunity, a deal, that's currency.

Right.

I don't want to let the whole world know.

Right.

I'm not going to put it online, I'm not going to put it on loop net. I'm not going to put it on costar, I'm not going to put it on crexi. I'm going to keep it to myself. And what am I going to do? I'm going to call my five, six preferred buyers.

Right?

Because this is the way it works. And you know the old school of brokerage, right. You've been on the other end of this. I'm going to show you this deal, Eric, but you're going to give me another deal to sell. And by the way, I'm just, I'm just ripping the COVID off the ball on, on, on this one. So if the deal does not exist, if it's not out there where something can go and scrape for that data, you're not even going to know about the trade until after it happens. And that's why I fundamentally think that, you know, AI, yes, it can help with the outreach, it can maybe kick up some opportunities. But those, you know, old school owners, those relationships that brokers have Cultivated for decades when they finally get that call. Okay, yes, it's time to sell now, most of them. I mean, again, maybe from you talk about the Massie Nacal era. We're, hey, full exposure. Let's blow this thing out to the whole world. Hey, give me technology. You want to give me a tool that I can reach a greater audience and let the whole world know that I have a property for sale, Sign me up.

Right?

But for every, you know, for every broker like me, there's probably someone out there who says, that's okay, I got it. I don't need technology's help. I know who to call it.

Right?

And that's. That's what's going to keep things off the grid, so to speak.

Okay, so let me first. First, let's frame technology appropriately. And that is, if technology gives you 1% advantage or a quarter percent advantage, that's the way we should be selling it. It's not, you know, oh, all of a sudden the world has changed, and if you use tech, you've now disrupted the industry. But if me and you are competing head to head, and we're just as good and just as motivated, but I have a 1% advantage, guess what? Over time, I win. So the fact of the matter is you should be looking at these technologies to create the slightest efficiency because over time, you will win. So it's not that I'm going to change everything, but if I got a slight advantage, you take that advantage. Because that game in life is millimeters and milliseconds. So it's really important that we understand that when you look at this stuff is going to make me a little better. Okay? The second thing is the idea of the relationship. And by the way, I posted about this and I got a lot of heat for it, but this is just the facts that I see. I'm not saying that I'm trying to create this narrative. How do you circumvent a relationship that you've never had, never had them, never knew them? What's that? Of course you do. It happens to you every effing day. Every day you are getting calls or people are picking up the phone because they want to speak to you. And there's a reason that it's 2% better than it was the year before and a little bit better than before. So the first is, yes, you are an amazing broker.

Right?

We've already said that. You said you have to be the best. Okay? You research, you write books on it. You are immersed, you're obsessed. You love the Business. And it comes through the second they contact you. But I guarantee you today, because people feel like they know you, they listen to you for an hour a week, that you have circumvented many relationships because you create content. If me and you saw Joe Rogan right now, we wouldn't be like, hey, what's their name and what are you about? We'd be asking them about HGH and frickin the newest psilocybin and some other thing. And you'd be like having this conversation with someone you've never met before. I don't care where I am. I'm in Miami. Developers are walking up to me. I love your content. I have to, I have to slay my ego because you know, Brooklyn boy, I'm like, yo, I don't know. You now have to like, yeah, nice to meet you. It's been a pleasure. I was stopped in the airport the other day. So the fact remains, you have to be credible. But the fact that you and I are creating content that people are reviewing where they feel like they can connect to a circumvents a relationship. And we know that to be true because this guy named Ryan Sirhan has a billion dollar business because of his exposure. And by the way, I was the greatest hater of, you know, creating content to put it out there. Well, you want to know why I don't do it anymore? Because I was wrong. I'm wrong. Create content. People are interested. They perceive a relationship that is circumventing a relationship. People pick up the phone all the time that never would have spoken to me or never heard of it because they've seen it. People are speaking to you all the time.

Yeah.

So that is that to me.

No, I hear what you're saying and I would look at it almost as. It certainly helps cultivate the relationship. So I mean, again, hopefully someone is listening to this or watching this right now, that one of us doesn't know we're sharing this amongst our audiences. And look, someone might reach out after this and say, hey Eric, I'm trying to restructure a deal. The construction stopped halfway. Can you help us out? Can you figure it out? That's, that's a great phone call Forgetter. Someone's gonna do I need to sell. Of course, sell a property. Okay, but we know that that's not the. And that's not why we're doing this. Right. We're playing the long game. We're putting content again. It's got to be. It's not just about, hey, Aren't we great? It's really hopefully trying to be helpful to the audience.

Right.

It and over then once you meet.

Someone out and about, then you cultivate the relationship. But, but I don't know if it's just, you know, we're taking things right off, you know, online and going straight to the business. So.

No, no, I think there's many steps, but top of funnel. Yeah, you and I are in the transaction universe. You need to come to the top of the funnel and then nurture them down to the relationship. And the way I've been describing is like a football field. If I can get from the 0 yard line to the 95th yard line before I've ever communicated with you. And all I'm doing all day is then cultivating relationships. I've just made an incredible efficiency and I can close more transactions.

Right.

So we just have to frame it appropriately as to why. But let's talk about a specific example that the audience might not know. Let's just talk about data one little step and why we're going to talk about data. The reason is technology. And our business has to start somewhere. So when you're thinking about technology impacting your business, think about the first thing that you have to do to be in the business. Right. One of them is data.

Right.

Information. Like if you have information, can you use it for marketing? When I go to the listing, you know, pitch, I have more information.

Right.

And I was telling you this before the show. Do you know how many companies in house have data scientists using data? But, and then we'll talk about what that means to use data. Top of funnel, top of the comic companies that are really harnessing data, data and information. Forget about AI, forget about, you know, business intelligence. Forget about that. You, you know, know everything about a city. Do you know how many real companies are really taking that information and using it?

I bet out of the, the Fortune 500, all of them, I would hope. Otherwise they're probably not there.

I'd say 40. And I think you'd really shock, really that these massive funds that are giving out billions of dollars that I have better information than they do.

Okay, well look, I mean, maybe they're only scratching the surface. I mean, I, I know. And, and you talk about even 25 years ago, I'm starting and I'm cataloging a neighborhood and yes, it was with a three ring binder and I'm taking photos of buildings and taking notes. You know, we're collecting data.

Right.

And so now of course you can go to Google Earth, all this information is publicly available. It's, it's a lot easier.

Right.

To gather that. But now it's, and I know, and this isn't a plug for, for Avis and Young and our Avant data analytics platform, but when I talk to our data scientists about what they're doing is they're taking 100 adjacent data sources and they're looking to how to make decisions for our clients. So in other words, if you're a retailer and you have 200 locations and 50 of them you know are not doing well.

Right.

What are those 50 stores have in common? And by the way, let's look at your top 10% performing stores and what do they have in common? And then where, when you're thinking about expanding.

Right.

Where should you be looking?

Right.

That is a, that's about as practical of a use case as you get. And I know they get super detailed and hopefully I'm not giving away too much of the secret sauce, but I know we do a lot of work in health care also. And we'll have hospitals and we'll look at their location, we'll say you're in the wrong location. They'll say, how do you know? Just a shock. Look, because we can see where your insurance claims are being filed from. Somehow that information's out there and they can pull it, they know where the, the patient is. So it's wild. Once you start digging into this, how many of these companies are actually using it?

Right?

So it's one thing for the company to have the information, it's another thing is how do you make it actionable?

So I think that, that you hit the nail on the head and I first off think that that is an advantage to Avison Young, which is what they're stating is we are collecting this information. Remember, that's just raw information. It's binary data. It's ones and zeros. It doesn't mean anything. Then you said something that's also super interesting. We have data scientists, there's a human whose job it is to find hypotheses in that information. And then the third thing you said is from that we're able to now create signals as to where you should be. That is where data is being used. And I'm telling you, besides the top companies, the mid market has no idea.

Right?

They're hoping that they can find that information. And what real estate is providing is raw data. No one's now processing it, cleaning it, coming up with then insights from it that's actionable to you. That is where the space is today. So imagine, like you said, I'm a retail purchaser. I'm a. I want a specific sfr, whatever it is. If you knew what variables are relevant to you, right? And it's a question, what variables are relevant to you? That's something you have to solve for as the real estate professional. The next thing is you have to wait. That variability, right? That's a 10. That's really important. Well, that's a one, but it's still an important variable, right? And then weight that variability, right? And then score it, right? Because it's. We're just assuming we don't know what the future is. Another Covid could come, but that is it 10 variables? Is it 500 variables? Is it a thousand weighted variables? The more that you do. And it was this guy who wrote a book on strategy by John Gaddis, basically stating the more variability, the better your decision making will be. But the problem with us humans is we get bored really fast. We don't want to hear after one or two variables. You don't want to get down to the 500th one.

So this might be a bad time then to segue. It's like, was it squirrel? You know, it's like, I'm so add, but I do. Look, I could talk about, about this topic with you for hours, but with limited time. I do want to make sure and talk about what you're doing, the work in restructuring, Right, because yes, look, I believe that the next couple years are going to be some of the best buying opportunities that we've ever seen in our lifetime.

Right?

So there's, we know there's going to be a lot of challenge, right? But where there's challenge, there's opportunities. There's what, $1.5 trillion of debt coming due. We know it's, you know, we're already seeing it day in and day out that in a lot of these cases, certainly office, but even multi family, right, where we need to see this massive deleveraging, right? It's not just the rates have gone up dramatically, right. But when you go and refinance that deal, it's like, okay, not only is your more, yeah, we're going to need you to pay down that loan. And a lot of borrowers are saying, okay, either I don't have the ability, I don't have the desire, right. So this is going to force a lot of transactions. Okay? So that's, that's still assuming you're in the money, right? And you can make that decision. Okay. But there's unfortunate situations. And look, without throwing out names, I mean, it seems that no one has been immune in this market. And again, this isn't a current event show. I want this to be Evergreen. I want someone to listen to the show five years, ten years from now, they're going to get value out of this thing. But let's just say, you know, this is a point in time when there is tremendous distress, there's tremendous opportunity. So let's talk about what you're doing at Annex to help solve that issue.

So first and foremost, I feel like something that's important, which sucked, by the way. I had to take the red pill and see the Matrix was. I was distressed. I am not. I did not get out of this.

Well, you didn't do the thing where you like slowed down time and moved and the bullets missed you.

You, you're the old, old school. Like real estate is like, oh, everyone else has problems. No, I'm fine, You know, no, I got hit right in the effing head with the bullet. You know, I didn't move fast enough. So that's still on. The second thing that I think is fascinating is you have to look at the lens of reality, right? Like, and not to be like a psychology thing, but yes, it changed, right? If you're still underwriting or looking at your asset for some evergreen change that may or may not happen, you're just going to get run over, right? So the first thing is look at the head of the comet. The biggest companies are giving the keys back, right? If those guys in a room are saying to themselves, well, we gave the keys back, we've lost this. There's no money to be made here. Whatever capital we do have. And if you look at it from like a military perspective, you need to save that crew and then go win this battle over here and let that go. Don't keep fighting and dying like you're going to lose. It's really hard for people in the mid market space. It's a lot of emotion, right? You've been maybe your family's owned it a long time, whatever the case is. So the first thing is, is to an annex, what we do is we say, look, we're going to rip the band aid off, okay? We understand the bid. Ask on the debt that's available or the capital that's. And these are the returns they want. Here's the underwriting and we're going to give it to you.

Yeah, right.

You need to know what's happening. I'm not going to Even look at your rosy picture, oh, this may happen in that, Forget it. This is today's reality. Whatever that equity that you thought may be gone, maybe your best decision is to hand the keys back. And then they'll say, no, no, no, something will happen. Okay, in the past, it did happen in the past. We were saying after Corona, you finally got to the light at the end of the tunnel, you'd be fine. Then interest rates, right. We don't know what the next thing is. Right. So first is to look at the lens of reality and we're seeing it and what's happening. Lenders are getting more aggressive, right? Literally getting more aggressive. So when they come to us, we advise them on what the tools are in the, in their toolbox as borrowers, right? In dealing with it. Because we're seeing it all the time. Or we're like, if you're underwriting new deals, you make sure you have today's data and when you underwrite that to the returns, look at it from today's perspective. Stop with what the past is.

Right.

Eric, I know you're on a roll, but, but have to underscore this because I, I really hope people are listening again, everybody's hoping that. And if you're new to this, maybe you know, you're, you haven't lived through this down cycle yet. But again, the biggest names out there, no, no one's immune to this. If you bought property in the last five years, you're probably having some challenge. You were wrong that coming to. And look, the point is you have to address reality. And again, I, I, believe me, I hear about bid ask spread 10 times a day. Like I, I can't, like I wish that just left our, our jargon. But, but your point is addressing reality and for us what that also means. I think the broker has a role in this. I mean for you brokers listening out there right now, when you kind of prolong the issue and you tell your borrower, your client like, oh yeah, no, I think I can get you this price. And then you can. And then suddenly you've taken them out six months from now, maybe their loan and has come due and now they're going into a default situation, I mean that's a real disservice, right? And I know everybody wants to win business and everyone's try to go find that unicorn, but I think you have to be realistic and say, look, this is the, this is the 30 day clearinghouse value and hey, can we get lucky? Would we love to recoup some equity sure. But this is the reality. And unfortunately, a lot of times we know an owner is underwater. We say, look, we're sorry, we can't help you, you know, in our advice to them. And again, I'd be curious kind of how you handle these situations. But on the sales side, we're saying, you know, we should probably go to the lender and just have a conversation and say, look, we get it. We think our equity is wiped. Like, we don't want to get into a whole legal battle with you and drag this thing out. And I think the property suffers under that public process of all this distress. Like, let's go run a process together. Okay. We're actually doing back in 090809 10, I was doing a tremendous amount of these loan sales. Now we're doing a lot more short sales, right? Where the borrowers, where the bank's saying, hey, you know, we don't want the asset back.

Right.

We don't want to go through this legal battle. Let's just run an open process, let's market this. And hey, if you can recoup some equity from your for your client, great. But if not, you've established the market and we'll sell. And if we got a short sell, that's we're going to do. So. Sorry to go off on a tangent, but. But your point about.

I think first is you're right. I think people appreciate authenticity. As I've told people what have happened in the past to me and where I lost, they all want to do business with you. No one has gotten is perfect and creating this rosy picture. I think that that's a, that's a false narrative and you should be authentic and tell people the way it is. Maybe do it in a nice manner, but be authentic and tell them straight up. The second thing is that's an argument for a perfect marketplace and saying like, oh, we want to go to five or six people and we want to try to sell this. Well, if you knew everyone who was looking at it, maybe you'd get a better price on a short sale, right. The third thing is we talk about this new opportunity, right? And there's going to be this greatest opportunity ever. You know what I think about? I go, well, the same thing, people, right? And you have to find the new people, the new money. The same people who got hurt in real estate are the same people who are now, what, trying to do deals in real estate. Our borrowers come to us in distress and first they're like, well, we have all these relationships well, half of your relationships went under in regional lenders. So you need to find the new money, and we know that new money, right? So you're coming to us because we're able to advise you that that capital that you've always worked with just got hurt. They're short sailing everywhere. They're not opening their books and moving forward with anything. You need to find the buckets of capital that are now looking at real estate, right? That's what we're sort of seeing is how do you find that new capital coming in to now capitalize on these new opportunities that we're seeing? So the second thing I want to tell you about the short sale, there is a process, and it's not Shakespeare, although he used to quote it many a slip from cup to lips, right? You need to go and communicate with your lender. You need to have your broker, but there's other players on that team that are relevant because when you just hand the keys, right, you have that strategy. Unfortunately, it's sort of like negotiating at the end of a gun, right? You have to slowly walk away to get to the result that you want. And you have to be comfortable in discomfort. So you also need legal, you need accounting, you need brokerage, you need people understand, like the opinions of value that you're giving, right? Like, you have to slowly move away. You can't just say, I'll give you the keys back because, you know, there's liabilities that are there. So it's a process. It's a. And unfortunately, the only reason I know this is through experience that I can now give to others to not let it happen, what happened to me. So my point is, you know, you look at the lens of reality, you understand you might be wiped, and then you slowly walk away to live another day. Yeah.

So, Eric, what's really fascinating to me about your business and for the people listening who have experience, and maybe it's on the construction side, maybe it's in the capital markets, is that you're coming in in an advisory capacity, right? That to come in and make sense of these things. Now, the question for you right now, and maybe the answer is, and I know you're being super humble, saying, hey, I've been burned, I've been foreclosed on. And I think people appreciate because you speak to a lot of people, they don't want to talk about, you know, they only talk about the success, Right. So you've actually said, hey, I've had projects that I've lost before, but I know that wasn't always the case. I've watched, I've watched a lot of your, your, your projects and you've built some really beautiful buildings that in the pride of what you've built, when I go walk a building with you, the pride, the knowledge, every single square inch, right? So here's the question. If we really believe this is one of the greatest opportunities in the market. I mean as an advisor, as a broker and look, I do a lot of investing. I talk about my own investing in the book. I do it mostly as an lp, right? So I'm not out there swinging hammers because I got a pretty busy day job here. But you have that knowledge, you have that ability to go in and be the developer, right? Which for a lot of the people listening right now, that is like the dream. I want to go build buildings, right? You can do that. You have the capital relationships. So I mean I, to challenge you, I could say, hey Eric, you're kind of on the sidelines right now, you know, why wouldn't you jump back in there right now and get in the game?

Because, okay, so first and foremost, development and when we talk about it, is a non scalable business. You can't scale development. Development is also a rich person's business. You need to have a lot of capital. You go at risk and then you have the chance of doubling and tripling your money. So you need to have the fee game, which is what you're saying, and then you're investing, investing into the LP space, right? So if it's non scalable, what do you do to scale bigger and bigger and bigger and bigger projects? The idea that you can develop 10 assets at the same time, it doesn't happen. So it's a cat, it's a time suck. There's only a certain amount of hours in the day in order to develop merchant development, which is the ability to raise capital from others and then to get capital from a bank and then to actually develop it, is getting its ass kicked right now. Everyone that you're hearing on the merchant development side, unless it was their own money and then they had more money to put in and oh, and then we go to refi and we have more money, you know, it's gone right now. There's not that opportunity yet. But when that opportunity comes, I think it's very important. If you're a developer, it's. Is that a project? That's a. Hell yes. There's no project that I've seen today where I'm like, oh my God, I'm Stopping what I'm doing. The vision that comes to my mind is amazing and I have to do it. There's, there's no one that is forcing me to. If you look at my last development, it was the discounted to land in an irreplaceable asset on the Greenpoint waterfront that we were able to underwrite as a rental.

Okay.

I didn't see that yet and if it came to me, I jump on that. But I know it's Greenpoint. I know the data, I know that this can never be replaced. I see what's happening in the area and I can prove it. Left, right and center. This stuff I'm seeing, it's, I think it was mediocre to begin with.

Right, Right.

So you have to pick and choose where you want to do the development and then you can go all in and execute because like Justin Ehrlich said, you got one shot. You're either lucky or unlucky. So the answer is we are on the sidelines. But the answer is we're also going to finish for developer, we're going to finish for lenders. So we're staying sharp, we're ready to rock and roll when that opportunity comes. I just haven't seen something that just does, isn't like of course.

Right.

So, and not to put you in the hot seat here, but I'm going to keep drilling down on this which is, you know, look, your answer makes sense in that you need to make that financial calculation. Certainly if you're a developer and look, sure, if you're one of the, the biggest out there, then maybe, maybe you can still get away with non recourse financing.

Right.

If it's very low loan to project costs. But the reality is most of these boutique developers, they're going personal on this stuff. So I personally, I'm not discounting that. Okay. But the actual piece of the development process, the, the creativity, the final product, we had a Mick Corona on the show and he talks about his passion for design and for architecture. It's like the numbers almost come second and they're, that's what is, you know, allows these projects to take place. But like that actual. Yes, it's a lot of work and hands on, it's not scalable. But when you finish that project and that pride that comes along with that, does that, does that register for you?

100%. No one can ever take away from me that I've changed this skyline or that building was executed upon. But when you did that and you cared so much about it and you put all your love into it, and then the market changed, which has nothing to do with your business plan. You built it on time and on budget, and yet somebody can take it from you. It shifts your perspective.

Okay, right.

Like, bottom line, like, you're like, I didn't do anything wrong. It's a gorgeous ass that, by the way, the market came back and they killed it. Yeah, but that doesn't change that you were at risk and they can steal it from you. I can walk by that building and be like, yeah, I built it and these MF's took it from me, you know? But the bottom line is it changes the way you perceive it. So there has to be love. There has to be passion for it. I talk about developers. There's kind of three types. The one you spoke about is a marketing developer. He sees the vision, right? Can he execute? Maybe. I have no idea what his skill set is, but he sees the vision of a future that he's looking for. Then you have the financial developer who just has every capital contact out there and he could do whatever he wants.

Right.

And then you have the builder developer. I was the builder developer when the design. I went to artists.

Right.

They were the ones who assisted me. And now, by the way, you can go into data on how I'd go about knowing without a shadow of a doubt what should be designed and built and with much better information. I love the symphony of the execution.

Right.

How do you bring these disparate parties together, like 60 different parties together, and get them to all want to work together, that you're leading them to. To an eventual goal? That was what my love was.

So, Eric, and this is a great way to begin as we think about how to bring this all together, and we have covered a lot here. But I want to talk about what drives you, because I feel like I know we're kind of living in parallel universes here with. I know the kind of drive you have. And I know the first time we met up at one of your projects and you're carrying a book with you that was probably. It was at least 600 pages. It was. It wasn't the power broker, but it was something on some war general. And I'm like, first of all, have you heard a Kindle? I thought you're a tech guy. You're carrying this gigantic book, but you're reading about war strategy. I mean, so, like, what drives you? And I think you just said that a little bit with, like, the execution and this, the symphony. But it seems like to me, that you are just constantly studying, right. And you're trying to figure out how to, you know, make those tweaks. So what is it that you want? The truth.

Yeah.

We'll get into a little bit of psychology. Most really driven people, okay. Feel as if they're not enough.

Okay.

And that's Buddhism, Right. So it's an external validation, Right. If I could keep learning and keep doing, maybe then, you know, others will see what I can't see. So it comes from within. So what drives me today is to be fulfilled with what I'm creating, Right. That you can pick yourself up from the ashes, right. With truly believing in yourself and create something extremely special. Whether that's this capital advisory when I get into another project. So instead of coming from a place of fear, I used to get up at 5am and I still do. And it would be like, oh, what's my enemy doing? You know, reading the military books. I look at the military book now. It's like a strategy is like, how you can win, but not like, oh, I gotta kill this guy, you know? Now I do it with love because I have a better day if I wake up and I do fitness, right? I have a better day if I'm feeling good and I can meditate. And then what happens? The creativity comes along and you can do all of these incredible things, and people want to be a part of that, right? So today, what motivates is me. And by the way, it's not to be, like, weird or. I mean, not weird, just like. Or cliche. I have two little girls, right? They can't see me now.

Fail.

You want to be the light. You want to be their hero, which, by the way, is another psychological thing. You know, you want them to grow up and be like, wow, I'm proud of my father, right? So that's something that really drives me to get out of bed each day and then just, you know, looking from within myself that, you know, you can come back from getting rocked in a space and then create something incredible.

Right?

That story motivates me.

Yeah.

So that's like, man, I love that.

Eric, this has been amazing. I mean, I just. Every time we get together, I. I have so much fun. It's energizing. I learn coffee, that's the problem. And I hope that, you know, look, if the people watching this, if they didn't get value from this, I'm not. I'm not sure what to say. Although I will be curious. Based on this kind of landscape that we've created, are we encouraging People to jump in the game, or are you thinking, hey, maybe I'm going to kind of sit on the sidelines? So you know, and I know you're very responsive on tell our audience how they can connect with you and reach out.

So first, I think it's a great time to get into the game. And I just think if you get into the real estate game, you should have an open mind. Your advantage today is that you had grown up with technology and that was a part of the process. That change, I think, is fascinating. As long as you go in and you're learning from those that are there, but incorporating these efficiencies that you've seen, I think that that's a great time to get into this space. So for me, you can find me on Instagram, ebro. I got TikTok, Eric Brody. I'm doing a couple of things. LinkedIn, Eric Brody, YouTube, Eric Brody.

Don't forget the pod.

We got real tech talk. Like, follow, subscribe, as we know. And we'll be out there and listen. I think what's important is that you and I, James, when people come up to us, we are talking to them. We are not scary humans that won't speak. We are open. Like you said. You like that when people are coming up to you and you're teaching them lessons or that they're interested. I'm the same.

Right? Yeah.

This knowledge is. You know what? When I. When I'm gone, like, it's. It's. It's gone. So, like, I want to give it away to everyone because I think that there's. Philosophically. It's like this guy, Adam Grant has this book, give and Take.

I love that.

That is one of my top. Just keep giving, dude. It's gonna come back. This idea of only giving as much as someone gives you. Forget it, dude. Like, just with no expectation. No expectation, right. It comes back a hundredfold.

I love that, man. What a great way to wrap. Eric, you're the best. Thank you so much for joining. Thank you everyone who have been watching this stream or listening now.

If.

If you like this episode, please share with a friend that that's how we're out there. Eric's been so generous with his time. Let's get the word out there also. James nelson.com. i created that website for you. That's where the show notes are. That's how you can find out how to connect with Eric. There's a lot of useful tools out there. White papers and sign up for the monthly newsletter. That's how we're basically pulling all this information here. What the show is about is help you gain the insider's edge to real estate investing so you can outperform the market. Until next week. Thank you again for joining.

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