Join real estate veterans Jeff Znaty and George Giannopoulos of Kings Capital as they pull back the curtain on the dynamic shifts in the property market. This episode provides a critical look at the dissonance between seller expectations and the economic waves of the real estate seas, with expert navigation through the ebbs and flows of interest rate speculation and market realities.
A deep-dive into the complexities of multifamily projects in New York reveals the delicate dance with legal constraints and the importance of construction in driving tax optimization. We also examine the artistry of interior design in high-end construction, rental unit dynamics in NYC, and the impact of shifting demographics on the business landscape. Plus, we reveal personal stories of transformation through meditation and the unwavering significance of a positive, long-term business mindset.
https://kingscapital.com/
info@kingcapitalnyc.com
Follow IPRG: @iprg_ny
www.IPRG.com
Join real estate veterans Jeff Znaty and George Giannopoulos of Kings Capital as they pull back the curtain on the dynamic shifts in the property market. This episode provides a critical look at the dissonance between seller expectations and the economic waves of the real estate seas, with expert navigation through the ebbs and flows of interest rate speculation and market realities.
A deep-dive into the complexities of multifamily projects in New York reveals the delicate dance with legal constraints and the importance of construction in driving tax optimization. We also examine the artistry of interior design in high-end construction, rental unit dynamics in NYC, and the impact of shifting demographics on the business landscape. Plus, we reveal personal stories of transformation through meditation and the unwavering significance of a positive, long-term business mindset.
https://kingscapital.com/
info@kingcapitalnyc.com
Follow IPRG: @iprg_ny
www.IPRG.com
Welcome back. We're here at the real estate roundtable with IPRG. We've Luke's Pro Vero here with me, this is Derek bestrick and we have guests today Jeff Sinati and George Jeanopoulos from Kings Capital. Welcome guys. Thanks for having us. Good to see you. Thanks for coming in. So how we doing today? We're doing good, man, we're doing good, trying to wrap up the year in a big way. George, you're a big morning guy, right? Is that what I? Big morning yeah.
Speaker 3:Nice rumor yeah.
Speaker 1:Yeah, that's. That's the word on the street.
Speaker 4:Is it a rumor? What? What's where the rumor come from, then?
Speaker 3:Jeff is he's? He likes to talk about it because I put it out into the office. You know a big personal development guy and for me, I, you know my life changed when I started implementing a morning routine. You know, just starting my day off right, getting my head on straight, waking up earlier, reading, meditating, getting my workout out of the way, just get the blood flowing at the mind flowing. And just once I started implementing that about four years ago, just it's felt like my life changed for the better, my work's life changed for the better, and since then it's just been, you know, one foot in front of the other, just only good things.
Speaker 1:So so we're here. It's it's the morning, so you got in the right place. Before coming in this morning up at six meditated red hit the gym.
Speaker 4:Yeah.
Speaker 3:Didn't eat anything yet. No, no, I do intermittent fasting.
Speaker 4:I'll eat, all right, when you start eating because there's people in the sauce to do that. Like they dial, doesn't eat until four.
Speaker 3:Yeah that's aggressive. Some people go 18 hours. I do 16 to 17 on average. I try to push for 17,. You know, after a while like I just gotta eat something just.
Speaker 4:So today that we will you eat.
Speaker 3:I probably got one 32 o'clock you have coffee this morning.
Speaker 2:No, so you don't do coffee, no coffee, jeff, you do coffee and I'm not a coffee guy. I'm always why you yeah.
Speaker 1:Cool, all right. Well, glad to have you guys in. We walked around the office, we talked about some deals before we started recording. But yeah, just one talk about real estate Conversation can go anywhere. Just talk about what we're seeing in the market. I think it's an interesting time of year. It's it's December of 2023. We're wrapping up the year, so kind of a nice time to reflect on what we saw in the past year, what the goals are for next year, what we're trying to accomplish. But, um, I don't know if we can go anywhere with this. I mean just before we started Recording. Jeff, you mentioned that something interesting you've been seeing in the market lately, as you're seeing a lot of joint ventures or workouts on transactions where I guess they need to bring in new capital. So you're starting to see more of those types of opportunities.
Speaker 2:So think in the past year or two there's obviously been challenges. You guys have been very active here. So you guys see a lot of the challenges either owners that bought in the past few years whether it be Free market vacant buildings that they couldn't properly execute their business plan, or rent stabilized buildings People have situations on a yearly basis where they have to sell it, regardless of market conditions. So I think that past year there was a lot of cracks with either people who overpaid rates, maybe expectations in terms of construction, in terms of their business plan. So in the past month I would say I saw about 10 or 9 joint venture opportunities on either ground up or in mid-construction type of projects, more than I've seen in the past 12 months. So I think, more Opportunities coming for people who are diligent and active and are in a good position in the market and I think there's gonna be a lot more in the upcoming year and I'm excited.
Speaker 3:Nice One thing. I think you guys can test this or not. I think in it, just in an environment that's moving in 2023, I think everybody saw the shift and you know there's no secret of what happened and the last people to find out I typically sellers. So I think that's what, by the time the market settles and people understand really where it is Maybe from offers or lack of offers, you know, I think at that point people just come to realization and just see what options they have. That's what I think it's been happening.
Speaker 4:Wait one thing we've noticed. I mean we got to that point, I think finally we're sellers were okay, extrates are higher, rents might have flattened out a little bit and they're coming to. You know the realization of where the market was. But now in the news, stock markets at an all-time high. You know the rates. Everyone thinks are on their way down. So now I feel like we had a few deals not not stall out. We're obviously this discussion is still happening, but People definitely think that we're trending in a direction that's positive. So it's hard to pull the trigger down.
Speaker 2:It's sellers for sellers. Yeah, it's definitely been a whirlwind of a past two months. Past two months We've done it. We're doing a couple of refis now where we went from a 6.8 percent refi to now Maybe a 6.1. Yeah, I heard that it does definitely make people think that things are getting better. Mm-hmm, I mean, in our humble opinion, I think these things are gonna get worse. I don't think there's gonna be any rate cuts for at least nine months, if not longer. People think man, I think June.
Speaker 1:I think there's this whole Biden bailout, the.
Speaker 2:Unicorn in the room is that there's election year next year.
Speaker 2:People are gonna try to do things to make things in their favor Whether it's Biden or, you know, other people in policies. But I think that there's a lot more pain. I think there's a lot more loans coming due and once this new year turns, rate caps and things like that are gonna really Create a lot of opportunities. So I'm hoping there's more pain, not in a bad way to, you know, wish ban on anyone, but we're here for the ride and we want to make it a big year in 24 and I agree with you and a lot of every mortgage broker I spoke to.
Speaker 4:I mean they banks still have a floor rate like they're. They're still at a certain point. So I mean you're talking on refi six one, six, two, like I've heard. I've heard some people say that, but a lot of people saying on acquisition loans that a lot of banks are at a seven, like a seven percent on. They won't go under that, they won't make in or occupy income just like on loans, I mean I think it depends.
Speaker 3:Or not.
Speaker 4:I mean vacant. I don't think anyone's doing that. Let's look some sort of bridge or construction loan. But Occupied, cash flowing people are pictures. Yeah, they hear what's going on and they're making more money out of spread, but a lot of these banks are still not loaning under seven percent.
Speaker 2:They don't want to drop. Yeah, it's no too quickly and there hasn't been a real move in the market. Yeah, the five and you know T bills have come down a little bit but there's still needs a lot more way to go. I think once you see the five in the ten year under call it, you know Four percent or under, let's say three point eight then you'll start seeing real opportunity. But I think right now is gonna be still in that six to six and a half percent raise, seven percent Maybe on certain lenders for the next six to nine months. But that's good you know why? Because there's always opportunity. People have to buy it. So loans have a limited life to them and when you have groups like our BRG making deals Usually will have either good opportunities or you'll save the owner from losing more money.
Speaker 1:Yeah, um, what deals are you refinancing right now? Can we get into it?
Speaker 2:Yeah, so we just wrapped up a project 148 150 Clinton. We purchased it about a year ago from broken law school Mm-hmm about 25 Apartments. We had 23 out of 25 vacant. Excuse me, 24 apartments. We had 22 out of 24 vacant. Fully go to the building.
Speaker 1:We're getting anywhere between Two tenants in the property. Tenants right now go to the renovation.
Speaker 2:Yeah, it was definitely a challenging process between wasn't Asbestos testing and dust and a lot of fun stuff you deal with.
Speaker 1:Forget about it. Tv is yeah, yeah, TPU exactly, but Finish that project.
Speaker 2:I think rented for about eight something a foot for fully turnkey to be building buildings fully, more or less free market and you know we're seeing rates again at like six and a half percent and we're pulling out so real quick.
Speaker 4:We're selling Unrenovated brownstones like they're gonna be kind of developments, but we're selling those for a thousand. A fund, that location, wow, nine hundred two thousand think that area is gonna.
Speaker 2:It's not going anywhere. No, like the Tribeca of Manhattan Brooklyn.
Speaker 4:It's never been bad, ever. Even my mom lived in the city in the 80s. In me packing, all these areas were horrible. She said Brooklyn Heights, always good, always resilient, always good. It was never a bad area to live.
Speaker 2:It's also a little hard to be a fort for that area right now. As a family. There are people like singer are going a little bit more towards Carroll Gardens and Clinton Hill which is loading in the past guys couple of years.
Speaker 1:Can we, can we talk about the details on this? Clinton Street property Sure so you bought it for nine, six and you've got it the whole thing. So I assume there's like a construction loan of sorts. There's cost of capital, there's Hard costs and soft costs. Do you know what you're all into the deal for?
Speaker 2:probably about 15. The property is somewhere just under 16,000, maybe around high 14, high 14, high 14's. We've seen. You know the income is on the property projected income. I think somewhere around 1.35 gross, somewhere in that gross. So, and how about the net? The net is just under one one and how much?
Speaker 1:how much are you guys pulling out on the refi?
Speaker 2:So originally we were expecting 70%. Now we're looking more like well I Percentage on the you know, on the equity invested probably LTV Somewhere around 70. Now we're getting banks a little bit more skittish around 65 and we're not pulling out that much money. How much is that?
Speaker 1:Do you mind me asking what it means like how much you refinancing for?
Speaker 2:probably somewhere around 12 and change, which is not good, it's good. But you know a product like this in a normal interest rate environment would be pulling out either be a $14 million.
Speaker 1:You'd pull out all your cash.
Speaker 4:It's not a bad loan, because it's not a bad loan, it's a great loan. Listen, I think.
Speaker 2:end of the day you can't replace basis. You can't replace basis. You can't replace location. So I could always renegotiate my rate in a few years or my rent, but the price I paid and location will never change. So whether it's in year two or year four, you have to have a little bit of a longer outlook if you're investing in New York.
Speaker 1:So you bought the deal, you raised money right, you brought in investors and you did the whole renovation. Now you stabilize the property, so you're refinancing. So the investors are getting most of their money back, probably about half, getting half their money back, which is good. And then how does the cash flow, or the cash on cash, look for the equity that's invested for the investors at this point? I'm going to do defer that you want me to defer.
Speaker 2:Okay, I don't know if you know the specifics. So usually we return on the overall number somewhere around 8% typically. That's happening on a certain yeah, usually about 8% of the original investment, but somewhere around 25% of what's left over in the deal. On these deals, you're not building to minimum 7.5 yield to go through all that work. It's not worth it.
Speaker 1:Yeah.
Speaker 2:You're not building that high to mid 7, you know 7 yield range but typically the goal is to have that's cash on cash for the equity.
Speaker 1:Well, on the remaining equity, yeah, on the remaining equity yeah.
Speaker 4:And the goal is to really oh yeah.
Speaker 1:I take that yeah, definitely that's a good number.
Speaker 2:Goal is to stabilize in less than two years cash flow and then, whether it's the right time to sell or refi, then deal with what you have in the market and then in that four or five year horizon, that's when you really see some of the value. So how much equity?
Speaker 1:is left in the deal. It's going to be like two and a half million About that yeah. And how much like based on the value of the property? How much equity do you think there is based on the market?
Speaker 2:Well, I think you guys can tell me, but let's say, at a five and a half cap, which I know was a little challenging today, but hopefully in the next.
Speaker 3:Hopefully we come back there soon.
Speaker 2:get to there in a very short order somewhere in the 19 and change range Okay, cool.
Speaker 1:So with a lot of hard work you guys created a lot of value there and a lot of effort.
Speaker 2:It created some good value there. I think that it's beautiful. Yeah, I think markets have the right timing and if you time it right, you could do even better than what your expectations are. But it's all about a waiting game in New York. I think New York has a lot of growth in certain neighborhoods and the right buyer. You guys have found some really interesting buyers in the past few years, done some record numbers, yeah, so Maybe we're talking to you guys about giving us a buy.
Speaker 1:One other thing I just want to hit on real quick because you and I spoke. Maybe it was about Clinton even before you guys bought it, jeff, or maybe it was other deals but you mentioned that you're really trying to add value for the investors and one way you mentioned doing that is cost segregation and tax benefits. And I think you mentioned you're looking for real estate professionals as investors in the investment. So did you guys do that on Clinton? Is that the plan? How does that play into the overall picture of the deal?
Speaker 2:I'm going to jump in about how we operate and I'm going to let you jump in about the losses. So buying real estate involves a lot of brain damage. Between Value add real estate Multifamily in New York particularly, you have to deal with architects, lawyers, agreements, banks, investors, the construction, the budget, negotiating the deal, dealing with laws, dealing with regulations. It's a lot of day in and day out of just grinding through the process.
Speaker 2:If you're an architect, it's not easy for you to buy a building. If you're a broker and you're focused all day on doing deals, it's not easy for you to run a building no way. So what we try to do is find ways strategically through the people we work with rental brokers, architects, lawyers, contractors to participate in these deals, because otherwise they'd be doing their own projects not probably being successful and this is a way for them to get involved but also still do their legal work or their architectural work, being involved in a project that they're earning some fees on. In terms of the losses, I mean, it's something we've been dealing with for a few years.
Speaker 3:Yeah, I mean, I think that's a side benefit, right? So like we're targeting on our deals anything from high teen mid-20s, like the range called 18 to 25 IRRs are target. Nothing less than a high teen is really our target. The tax benefits for us, the cost tag, is really like an added benefit and obviously under the tax code real estate professionals could take 100% of that versus other people.
Speaker 2:I'm not an accountant, but specifically targeting real estate professionals, I think don't have the time to, like Jeff said or taking deals or run a deal can really benefit from those tax benefits and, aside from the value that we're creating, Trump did good for us when it was in office and the goal is to hopefully put a couple of dollars in a project, refinance a good portion out, take some good deductions, take that same funds, put it towards another project, take more losses and continually having the same dollar roll over and over to the next project.
Speaker 4:We agree.
Speaker 1:I mean, it sounds great, it sounds like a really successful deal Are you cost taking most of your deals at this point.
Speaker 3:Every deal you can, every deal you can.
Speaker 2:So if a building is vacant, there's no fixtures? Typically no. So the more construction the better, the more construction the better. But there's two parts of Cossack the acquisition and then the construction part.
Speaker 2:So we bought a building 356 was 48th selling now on Manhattan on 48th and 9th. The building was a complete shell and we couldn't call a second anything, since we're selling it, even with the construction, our you know a cost seg advisor telling us not to do anything. But once you purchase it and there's appliances, normal fixtures in place, you can depreciate that from the purchase, renovate it and depreciate those assets as well. So if you know what you're doing, there's a lot of value to take, not just from making money but also from not paying taxes, and we try to hit both parts of it. Not paying taxes is like making money.
Speaker 4:It definitely is If I could save 30, if I could save 30% of my taxes this year.
Speaker 2:That's real value today. So the first and foremost goals to make money on these deals and, like I think George said, this is like an added benefit.
Speaker 3:We try to squeeze out on every deal.
Speaker 2:But if you guys know, this year we're at 80% bonus. Fortunately, next year is at 16, 40 and 20. It's been some chatter about it coming back, but you know who knows prayers, cross fingers or something like that.
Speaker 1:Can you elaborate on this Cause? I don't know if I know the specifics, but what's this program called with the eight?
Speaker 2:Now you're at 80%, so um, I was actually speaking to actually last night with my Cossack advisor, len Berkowitz, from.
Speaker 1:Riverside, so we used him right. Very good guy, we used him yeah.
Speaker 2:Definitely need to use him. We use him on all our projects, whether it's 1031 or. Cossack segregation, and Trump enacted. This accelerated depreciation. So, instead of depreciating asset in 27 and a half years, you can segregate certain assets of the property and segregate in five years. Coss segregation falls under that. That's what cost segregation is Got it okay.
Speaker 2:The way the government works is they look at over a 10 year horizon and they see where things are in 10 years, so laws don't always stay permanent, at least in the tax law. They started phasing it out, so what happened was you were getting 100% bonus in the first year and then some bonus over the next four years.
Speaker 2:Last year was 100% bonus. In order for them to get rid of it, they decided to phase it out, got it? So if you were getting, let's say, 70 cents on the dollar last year, you're probably getting 50 cents on the dollar this year and 35 cents next year, and then so on and so forth until it turns into a normal depreciation schedule Because we had a net least guy here a couple of weeks ago and he was talking about people buying like car washes.
Speaker 2:Oh, those are great. I appreciate those in one year. Yeah, you can appreciate 100%, but not anymore.
Speaker 4:Now it's heading down.
Speaker 2:Yes, now it's phasing out, it's phasing out.
Speaker 2:It's phasing out it is. So it's definitely gonna be challenging. People are gonna have bigger tax liabilities, but I think listen, end of the day it's gravy. You gotta make money in the real estate and if you could find other ways to really suck out that value, it's great. Maybe there's gonna be some changes in the future, but let's see what happens next year. It's an election year, so it's gonna be an interesting year and who knows who wins. Who takes the policies in the right direction for real estate.
Speaker 1:For sure. So you guys are selling the Hell's Kitchen properties. So what was that building? When you bought it, it was a vacant shell. But was it an apartment? What was the CFO? What was?
Speaker 3:the use of the property it was actually 21 units. It was a five story. When I had a legal unit in the basement, four units per floor vacant. I don't know how many years it was vacant, at least 20 years, I would say. At the build out Complete show you could literally walk in and see essentially nothing.
Speaker 4:Yeah, was that substandard. Is that quality that very substandard?
Speaker 3:Clearly yeah, it was nothing there. Thank God, nothing there.
Speaker 4:So that was a clear sub-rehab run. But it was a sub-rehab deal. Was it a stable?
Speaker 3:Sub-rehab deal. Yeah, I mean, I don't remember when the last time DHRs were filed, or not it may have been. That's how long it was vacant. It could have been 20, 25 years. I'll have to look back. But you didn't walk in in one of these buildings where you have to think about it for qualifiers. It was an old buddy. He just walked in the hallway and said okay this is a roof.
Speaker 1:Did you guys submit the sub-rehab application?
Speaker 3:We did not.
Speaker 1:We did not. We did not, but you're selling it, we're selling it. So you provided all the documentation.
Speaker 3:We bring an engineer. We bring an engineer that shows the substandard conditions or whatever conditions there are. They document it. We hire an attorney to file everything properly Joe Goldschmidt and Very nice.
Speaker 2:Yeah, tell you an interesting fact on this deal. So Promethe family, you know, bought the corner of 48th and 9th and they bought five buildings Pretty good deal on COVID November 2021. And when they bought the package they didn't want this building. They don't want to deal with the renovations. So people don't just have the capacity. I get that. They gave it to the broker in January, february and he said look, I want someone to put down 10%, like half a million dollars in March. Close with me. In November Rates were very different in March and November.
Speaker 3:They didn't want us to close because of that 1031. They had 1031,.
Speaker 2:they purchased it. They couldn't sell it November 20, october 21,. So they want us to close November 22. Got it? He said no problem, we don't mind doing that, but we want to actually do work in contract, which is not typical. So we ran it for half a million dollar deposit, another $700,000 construction before we closed. By the time we actually closed we were about a third done with our project.
Speaker 3:We were framed up by closing already.
Speaker 1:Where did you get the $700,000 to do construction?
Speaker 2:prior to Our own money, friends, family. Our own money, yeah, just raised equity, yeah.
Speaker 3:and he said hey, guys, we're going to do this project now.
Speaker 2:We don't have to pay some of the carring costs or, you know, financing costs.
Speaker 4:So I assume you ran title obviously, yeah, we ran title. I would also deal with a very prominent owner.
Speaker 3:It's not like we would do this at any cost you recorded the contract to sale.
Speaker 2:Yeah it was recorded in the contract. There was a lot of representations.
Speaker 1:We had to give them reps insurance-wise. What would happen if they couldn't close for whatever reason?
Speaker 2:You guys put all that money into the Unfortunately, you'd probably have to go through specific performance which you'd have to force them to close. But this was a billionaire family that you know. They're very known. I know them from my prior. You know life working with them, so I felt comfortable, but it's in selective situations.
Speaker 4:Yeah, I mean listen, if you record the contract you ran title, you trust them Dealmaker. So you're sitting here, you're sitting here.
Speaker 3:We're sitting here with half a million dollars tied up for six months. It's like you gotta make it up somehow. So we just, you know, fast forwarded the deal. We were, we got it done and we were leasing in the summer and we were maybe eight months after closing.
Speaker 2:We were done the building. That's the way to do it. Listen, it's not easy running these construction jobs, but if I don't have to pay the bank and I could pay the owner, I'd rather give the owner a little bit more than pay the bank. 9% today, because that's what rates are today.
Speaker 4:So everyone has like construction stories and stuff like that. But what is your experience with doing all this construction? Like, are you guys, do you guys have like a project manager? I mean, I feel like, obviously Derek and I have done a handful of these as well Try to go to these sites once a week, once a day, whatever it is, but things that obviously it's not our business, where, like, I'm not a contractor and I'm assuming you guys don't really know the construction business that well, maybe you do, but do you have someone that like looks into this stuff for you?
Speaker 3:So we have four partners, okay, and our third partner that I'm referencing is my brother, thomas, who oversees construction. He doesn't have a construction background but you know, being down a day to day. You kind of learned on the fly, like we kind of got thrown into this, when Jeff and I became partners in 2015. We bought our first building together. We figured out how well who's going to do what and my brother and I we're overseeing construction together. And then, as I pivot into other things, my brother just took that over. He's gotten a lot more ingrained in on it and that's his day to day for the most part. He's running around to all the sites. We do have a GC. We kind of we see him the GC overseeing. He's helped with the designs, the layouts. He's on site daily. We started recently working the last two years with the interior designer. We weren't doing previously. So that makes it a lot easier to be honest with you. That's a big recommendation of mine, if you're not, if you're doing a high end
Speaker 3:project. What does this interior designer do? Helps with layouts, finishes. You know we were running around at the time, you know, just guys grinding. We were running around from Lowe's to tile guys to this, buying things online to put the pieces together to a deal to make you look, you know, beautiful at the same time cost efficient. And we were doing that hands on. Now the designer kind of lays that out for you. So it saves a lot of time, you know, and it comes out much better than we would have done it. Yeah, it saves a lot of time at the same time.
Speaker 2:Definitely using interior designer helps and I think that if you have someone running department, they own that division. So his brother really owns that division. When it comes to the construction, the timeline you know I'm dealing with a lot of the financing, the agreements, the closings he's owning that department and he's really bringing that to be as successful as it can for you to that project that timeline, exceeding it Really. I think it's about department talent, putting departments and having people run those departments.
Speaker 3:I want to take a couple of things I could add to what you're saying. You know what we've learned, that in a couple of things where I guess hiccups occur, that you've learned only by doing this is that you know any occupied building is always going to have some interruptions. You're going to have tenants.
Speaker 3:You know tenants at the end of the day anybody that's remaining they don't love construction, they don't love noise, they don't want their lives interrupted. So chance of them giving you some hard time along the way is pretty relevant. The other thing that's popped up with us any alt one we've done is you know timeline has been, you know, a little bit more than we expected due to the city, and you know anything I think comes with the city is tends to Unknown. It's an unknown. But also when you add you know we're good at what we control and getting to the DOB, and you know getting them to sign off on certain things that they're supposed to have a timely fashion, sometimes it works. Alt ones take a lot more than I would like. That's what I want to be done. So we did 48,. 48 was an old one.
Speaker 3:Mulberry was an old one.
Speaker 1:Why was?
Speaker 3:48, three, no one, it was the egress.
Speaker 2:Egress, we do plexed. I think it was egress and do plex.
Speaker 3:Yeah, so the 21st unit. I do plexed it into the from the first floor Legally Nice, and then Mulberry had a rear carriage house. So the way the building was previously, it had two doors one that led to the main front building and then a side door which led to the rear courtyard. We opened it up once. We had to do an alt one for egress to show that it was one one point of access for both buildings, and just the downtime with the city just took much longer.
Speaker 1:So that was the main issue with the old one is just downtime and waiting for inspections.
Speaker 3:Yeah, I mean the work, everything went fine, yeah, but with DOB, unfortunately. Just, you never know. Depending on how they wake up you know they may or may not give you a hard time.
Speaker 2:That's just what it is. The crazy thing is there's two ways of filing plans with DOB Self certification, where the architect takes on his own certification, doesn't go through a plan exam with DOB, and then, when you're done with the work, dob comes and then they'll either approve or stamp or give you some projections. The other way, which is more extraneous, which is what we do, is plan exam, which you actually go to DOB. You show them what you're doing, they give you comments and before you start your work, they give you their approvals or their denials where you have to adjust. We actually went through a whole plan exam. We got everything approved, ready for a sign off, and then the DOB says wait a minute, how are we approving this? Which?
Speaker 1:property Mulberry.
Speaker 2:So, we went through everything that DOB said. We said you guys stamped it yeah.
Speaker 3:This is what you told us to do, yeah now you're telling us nine years later.
Speaker 2:That's you guys also. We got audited.
Speaker 4:Well, we a deal, we sold, we did a sub rehab, we got we. We got our plan stamped approved and all one of the permits like expired followed the contractor and then they are like oh, whoa whoa whoa you guys are doing this again. This is an all one, not an all two, and they already approved it. Just an all two, and this is like we already did the work. This had to do with duplexing, so we fought them hard. Yeah, what happened?
Speaker 2:We got it, we got we pushed through shame.
Speaker 4:Well, it was, like you know, like on the old six famous is a door in the front or in the back? Yeah, so we took all the space from the common area and brought it into the unit, so we only had one door. We got rid of that door.
Speaker 1:Are you seeing what the upstairs apartments? Yeah.
Speaker 4:Well, that's what. That's what we got through.
Speaker 1:So yeah, we do. Let's get through the second and third floor apartments. Yeah, when we bought the building, there's like a wrap around hallway where there's two doors to the apartment the front door and the back door but we consolidated the hallway to make it like anytime you move a door, it's an all two.
Speaker 4:Yeah, Boom but but but they approved this as an all two. We did the entire job and then they came back. So we, we followed the commissioner, we went down there, I went down to DOB Like five times with my like GC and they, they finally approved it. So we didn't have to do it all one.
Speaker 1:This is. This is a rookie mistake, wow.
Speaker 3:It's like. I mean it's a change. They stamped the plans and they changed, but you can't fault you. It can't fault you for trying you file it.
Speaker 2:If you say yes, great, it's not right. That's, we have them entirely. That's all I understand.
Speaker 3:But you just never know. Like for us that delay soon as Jeff left out, was we had a TCO in June. We released the entire building probably within a week. 10 apartments Waiting for CO. This thing happened. We had to cancel all these and we ended up coming to market four months later, in January.
Speaker 2:Actually what happened? Was it came?
Speaker 3:to market like a year ago.
Speaker 1:It is around Thanksgiving.
Speaker 3:You'll be cost us a ton of money yeah the broker basically told us thank you, don't call us.
Speaker 2:To live to the new year, no one's looking in December. So I think when you bring your markets on to units onto the market could really also determine some of the success of those rentals and what your projections are.
Speaker 3:So we lost about 20% on those rents. We got great rents. If you look at the building, we actually got great rent.
Speaker 4:I think a huge rent somewhere.
Speaker 3:Yeah, we got yeah, we're getting over $120, $130 a foot, but the fact is it's still 20% less than what you had. So it's like you know, the hot girl ran away from you.
Speaker 2:That's what happens. Doesn't happen to you too often, don't hurt me.
Speaker 1:When you get very upset. When did you release the units?
Speaker 3:We released it in January, january of 23. Yeah, so we have a bunch come into now. We were able to get mostly 15 to 18 month leases. So on the renewals, I think we'll be able to make some of that up.
Speaker 3:You think the rents are higher now. Some of they should be Right now. I think you know, I think we talked about in this, and it's probably a good transition point that they weren't in a softening place right now with rents in New York. We saw that from October now when we launched Clinton. When we launched Clinton, when did?
Speaker 1:you launch it.
Speaker 3:August.
Speaker 2:Okay, which is the best time?
Speaker 3:Yeah, and how'd it go? I think that what we saw was for units, the units that were between six and 8,000 were went and sometimes above, above market. The larger units, which were, you know, 10 to 15,000, were a little harder to rent. I think that was mainly because I think at that price point people had people have options. You know, I think at that point you go to a brand new luxury building in Dumbo if you really wanted to. There's a bunch of them on the water just got built. So the challenge was just catering to that clientele because, you know, obviously I'm not in that mindset, but I think that people just were a little more affluent, they little more particular.
Speaker 3:Yeah, I mean that's what people say.
Speaker 4:We talked about this before we started this and I think it's interesting because you're not the first person to tell me this. People trying to get the 14, 15,000 dollar rents, these walkups people went for like a Greenpoint Williamsburg that I know you try to do in Broken Heights. People thought they were going to get them and it's. It's tough. I think there's a lot of options like walkups. Like I mentioned, there's a guy that I know pretty well in Greenpoint beautiful 25 footer condo finishes really nice for the garden duplex. He tried to get like 15 grand and he didn't get 15 grand at like 11. Right, yeah.
Speaker 4:It looked like it looked like a real apartment. Obviously it looked like you could get it. But I think in that poor there's a lot of options. I mean 15 grand. You could do a lot.
Speaker 1:Yeah, so it's not there yet. What are these units Like? What rented for a six to 8,000? What rented for over 10? Like what's the makeup of these?
Speaker 3:Two bedrooms, three bedrooms, and we have all twos and threes, all twos and threes, just different layouts because the building was a unique building and we had to work around some tendencies. We actually have a bunch of duplexes, like it's a. Really we probably I don't know Eight floor plans eight different layouts.
Speaker 2:Yeah yeah, Usually on a building it's like you know cookie cutters, copy paste.
Speaker 3:This is all unique. We have probably eight layouts out of the 13 apartments that we got it. Yeah, what?
Speaker 1:which unit rented the best out of the building and why? Well, like no, like, like what got the highest rent and like what was it about that unit that got such a high as rent? Or for what we were projecting? No, just the highest rent, the highest overall rent.
Speaker 2:The townhouse, the real townhouse.
Speaker 4:That's not fair to say. It's a space. But we'll add projections Like right, what did you? Because obviously the bigger you are trying to get some more money. Right, but what out of your projection you're like, wow, we hit it out of the park there.
Speaker 3:The two ones, yeah, and I think the two ones, we hit about 10% higher, 5 to 10% higher on some of the twos the larger unit which rented for 12, 5, we were projecting 15 originally, got it so ones and twos yeah, the issue.
Speaker 4:people obviously love ones. I think they rent the best for obvious reasons. You live by yourself, like you have a wife, girl from, whatever it is, but there's a floor, there's a ceiling. With those right Like you're not the twos they could take off a little bit more right it's easier to rent and then you know as the rent goes up like it's good, but there's definitely a ceiling on the ones.
Speaker 2:That's why I hear I agree with you. There is a ceiling. The twos you could either have a family, you could have a roommate, you could have a home office. Yeah, one bedroom, it's just, there's a certain amount. I don't see people paying way more than I mean, unless it's a very luxury building. 5,000 for a one bedroom even that's high. Yeah, we're seeing that. Come down closer to low four and you'll get it, but then how's it ever going to?
Speaker 4:is it going to get to seven? Yeah, Twos will go to seven Eight.
Speaker 2:Yeah, and I think basis, if you buy well, if you keep getting five, that's a good number. So I think, really just buying well and getting you know triple digits on a price per foot and buying it at 6, 700 a foot, the metrics work, but it's about really execution. I think that's where it starts off with. Layouts are very important. So for us, with George Fagale dimension on mobile, we are getting like 135,000 foot, but the layouts are so efficient, took a lot of hard work with the design and Thomas, our partner, that I think really created a very suitable space. We have a three bedroom, 560 square feet. What exactly? No living room. There's a living room. It's not that large. Okay, it's in the kitchen. It's in the kitchen, Basically it is, but there's heated floors in the bathroom. Washer, dryer, dishwasher, wine chiller. All right, well there's, so what?
Speaker 4:Yeah, so I was going to ask you amenities, right, like what? What does the best? When I say amenities, I'll throw in like outdoor space, right, cause you see people do like the Juliet balconies, like whatever Washer dryer washer dryer is the biggest and then, another bathroom, so two bathroom and then and then washer dryer is the biggest.
Speaker 3:You don't think outdoor space is the biggest. I think out of those places definitely big, it's the biggest bump. Biggest bump, but not every. You can't do that on every unit right the washer dryer you as long as you have vacancies, you can figure that out.
Speaker 4:We have the space. We talk about Carlisle, right? I mean obviously it's out in the open, I can say that name probably. But they're they switched right, like they're they would have bought deals without washer dryers. They bought one of, they bought one of our buildings where we had wash dryers in the basements. Uh, now, like last year and a half, that's a requirement, like they you have, they have to have wash dryers in the ends. I mean that's an amenity that I think they just need.
Speaker 1:They love outdoor space. Outdoor space is the biggest yeah.
Speaker 2:So we had a building that I think you know. Sometimes in this business you just have to be in it to win it. Sometimes you buy a deal and you have a certain expectation. I think things just sometimes hopefully work out better than you expected, whether it be the rents or the construction or the sale.
Speaker 4:Yeah.
Speaker 2:We finished a project which you were making a couple of jokes before about Bed-Sty or Ocean Hill.
Speaker 4:I said you guys, you got out of the get a little bit. I I first of all.
Speaker 2:they are is very good, by the way we've seen some good sales over there, but George loves to use the saying like we graduated high school and now we're in. I don't know if it's college or the MBA, but one of those. We weren't expecting to sell our building on Brooklyn, in Ocean Hill, stuyvesant Heights, stuyvesant Heights, 60,. Thank you, 64, howard. Yeah, outdoor space washer dryer, stackable in each unit.
Speaker 4:Yeah.
Speaker 2:Splitter units, dishwasher. You know, I think people have a certain expectation of what they want to pay, whether it's buying or leasing. You do a little bit nicer work, a little nicer layout, a little bit extra amenity. You know what? My budget was four grand. We'll spend that extra 500. For sure, one roommate will spend an extra three, the other roommate will spend extra two. I really wanted to buy it a six cap. We'll give you a five, seven five cap, because I think these extra things that you do would stand time and they actually give you a lot of value over time People want to have to stay, Exactly If it's nicer they're going to stay Exactly.
Speaker 2:So I think putting a lot of effort in the beginning of how you design your units is really going to give you a lot of value in the long term. It's not just spending a bunch of money renovating your units, doing well on that it's good, but layout tier designer being very methodical on how you lay out your kitchens, your bathrooms, your living space. 48th Street 356 was 48th. We had very small space. I think it's about 450 square feet, two beds. So one of the genius things our partner did, tom, is he created the countertop to have a nice breakfast bar.
Speaker 3:That's huge, but we love that.
Speaker 2:Small little things like this add up For sure. So being methodical on how you lay out can be a big part of your success with these projects, for sure.
Speaker 4:You mentioned the Stavison Heights area. So obviously I'm a big fan of that area, Like I know it well. I have stuff there. I like it a lot. So nothing bad about the area. But you did you were right Like we sold you that deal on Fulton. We sold you. I know you guys bought something on Thomas's Boilins or Toga right Rockaway, yeah, rockaway. So these are J-Train locations, right, you picked those up on Broadway right At the AC.
Speaker 1:Yeah, so, and then obviously you guys are betting on, like the Broadway Junction, ocean Hill market for a time, which is great.
Speaker 4:I like that. I still like it. I think there's still a lot of growth there. Same here.
Speaker 2:And we're not against it. It's just, I think when you get to a certain point in your career, the same effort that you have to do for a six unit building is the same for a 16 unit building. It's more or less the same brain damage, just a couple more toilets or bathrooms, and I don't know. I think just. We had the opportunity to shift into Manhattan. You shifted in.
Speaker 1:COVID Did COVID make? Cause you guys to make that shift Straight up.
Speaker 4:I mean this is a comment I'm asking the most common trend that we've seen during COVID was the strength. It's actually really interesting. I can think of five people.
Speaker 1:The guys were buying out in Brooklyn, like Lefford's Gardens or Flatbush or Ocean Hill, like guys like you. They were buying like the Brooklyn buyers. That became, like you know, then COVID happened and honestly I think those markets got hit the hardest, like Ocean Hill. You know the Eastern markets but the prime markets performed so well and then just exploded after COVID. So all these guys like you became serious Manhattan buyers and like bringing, like the Brooklyn value at perspective into Manhattan with, like you know, some some fresh ideas.
Speaker 4:Yeah, exactly, I would say the trend is people that bought, like, let's say, east Brooklyn, crown Heights, that side, all these areas now strictly Cobble Hill, brooklyn Heights, and then Manhattan, or sometimes not even Cobble Hill, brooklyn Heights, just Manhattan.
Speaker 2:Well, we'll take the green point if you have any.
Speaker 1:Oh, I should have mentioned, yeah, but what if we have a property for sale in Ocean Hill at this point, or East Bushwick? Would you, should we even send it to you? Are you buyers?
Speaker 3:for it anymore.
Speaker 1:Are you out of that game?
Speaker 2:I could say that I don't know if you want to answer this, but I don't think I'd say aside, I just think that you know to when you, when you add a certain point in your career, like you guys, you have to find what's worth your time. We have a limited time to time. Our biggest commodity is our time. So we have to use our time wisely and if we're going to go and add million dollars in value to a six unit building or try to buy a 20 unit building in Manhattan or a much larger project, we have a limited amount of time. There's a limited amount we can do in a day, so I think really just the larger projects. Now, if you have a 20 unit building vacant all year, as we could talk about it today and start working on the PSA and everything you want is value add.
Speaker 1:You wouldn't want any. Why are you going to make money? Well, there's good cap rates today.
Speaker 4:You know kind of a hey, you still, you still have to put money out. You got to add value.
Speaker 3:You know, that's an interesting argument we have with people like you could build to a seven cap or buy a seven cap, right? Yeah, that's true, yeah, but at the end of the day, we're still betting on creating that value.
Speaker 1:How do you make the construction fees? Then Someone's got to make the construction fees.
Speaker 4:Someone's got to make the construction fees. You're just giving away fees, trust me.
Speaker 2:I'd rather go into a project with less headache and not have to wait 12 months to see that construction finish, because I value of money. Yeah, I think you could get some really good rates now. I think what happened in COVID a lot of values reset and I think that people's expectations just went way down and people that were active and on the pulse that I'm going to take these projects down and I'm going to take a leap of faith. Our first foray into Manhattan was 140 Mulberry, where remember the day very vividly. It was basically July 4th and a few things happened. First of all this is the heart of COVID there was no vaccine and you know we put a sizable amount of money down July 2020.
Speaker 2:And in the newspaper, in the New York Post, it said mass exodus from Manhattan, 20,000 vacant apartments, and they weren't telling you was the guys that had eight apartments had another four coming up. So really there was 30,000 vacant. And I think, like in anything, you take a little risk, you have a little conviction, sometimes you have a little Johannes and things work out and I think we exceeded our expectations on that project. I think we're in it for Just under 9 million and the project's letting over a million. So I think, really taking a little bit of a risk, having good thesis and whether it's the basis, the location, your business plan, but we'd love to buy seven and a half caps or things that are not, you know, vacant. So those are definitely opportunistic now and I think in a few years People are gonna be laughing that they bought these things at such high.
Speaker 1:Oh, hundred percent. Yeah, prices are great deals.
Speaker 4:So low. We have a deal now that we're about to sell that I can't. I'm like blown away by it.
Speaker 2:Bring it up here. Maybe this is a good way for it to get a little break.
Speaker 1:I can't really share too much about it, but I'm quick, but it's not the only one. There's a bunch, yeah, there's two of them. Cap rates are pretty high for new construction as a function of interest rates and I and I think just the intrinsic value and the cap rates that we're seeing. I can't believe it.
Speaker 4:So these are for foot 21, a deals like the new fort only at.
Speaker 2:What type of price per foot 70, 30?
Speaker 4:70, 30s, I mean the price per foot on there's a 21 unit or 24 unit and then a bigger building. It's 24 year, the price for what has to be fine, it has to be attractive. I don't know the price for foot on the other big one.
Speaker 1:I don't recall a hand.
Speaker 4:Yeah, the yields are there. It's just like I don't know.
Speaker 1:I just like now it's got to be such a good buying opportunity. Yields have gotten so high. I think the intrinsic value is just definitely there. He's got to hope that rates come down and if they do there's you know they will.
Speaker 3:It's not a matter. Yeah, we believe we wouldn't. I don't think we'd be in this business if we didn't believe that rates go from six and a half.
Speaker 1:We're cap rates go from six and a half to five and a half. There's a nice spread to be made there. So I think that's.
Speaker 4:I had pretty, pretty realized like you know, as a young professional in this business, like how interest rates affect the market so much like it. Now it's just so obvious. It's like oh yeah, you try to buy when the rates are really high because they'll come down. And then you, if you're buying when rates are really really low, I mean you're probably paying a lot over paying.
Speaker 2:You're purchasing instrument of what? The lending of our yeah, but there's like a lot of moving factors Like they have.
Speaker 1:They have like a lot of risks I feel like in the market, just where well, just like in general, I think, interest rates, I'm like what's the real value of a property? I think that's a big risk for investors and the rental market as well. Like, what are the real rents Is it? Is it top of the market rents? Is it a pullback? So I think we're gonna be.
Speaker 4:Are they gonna come out?
Speaker 2:man make up all these new rules Not getting easier, gentlemen, it's not gonna get harder, I mean.
Speaker 4:I don't want to say that.
Speaker 1:Small differences in rents and interest rates Turn into big swings in value.
Speaker 3:I know, but things you guys obviously a great job.
Speaker 1:The rentals. I think you ever said, yeah, I want to say that about.
Speaker 4:I looked at all your stuff before you guys came in. I knew a lot of it too. I love looking at renovations and street easy and I Looked at Clinton. I looked at Mulberry. I was very impressed with the layouts, the, the finishes, the renovations. A lot of people just aren't putting out product like that, so I Was.
Speaker 2:I was very precious, a lot of hardware.
Speaker 4:Yeah, I like Clinton either finishes very nice. Yeah, I have a good vision. Yeah, I said we have a good team.
Speaker 2:We I don't want to be honest, no credit to me. Yeah, that is my partner, thomas, who really had a lot of vision and design to it. Yeah, when it comes to instrumenting, the, the construction, the business plan, the financing, we all have our roles and I think that's how you're gonna succeed is having a good team behind you, having people that are gonna show up every day, be committed and Be able to exceed and what they're looking to do in that department. So I think you guys built a great company here. Thank you. Guys have a lot of different divisions. You have a lot of people that focus on different markets.
Speaker 2:Yeah, we do you guys used to be the dominating broker in Brooklyn. Now you guys are not only Brooklyn but also doing a lot of Manhattan, sitting in your beautiful office at 45.
Speaker 3:Broadway.
Speaker 1:Jersey.
Speaker 2:Jersey. I mean, you guys are. We have a retail leasing. These guys are gonna be the staple brokers.
Speaker 1:You're a truck seats here. I got a place. I feel like they're hiring you guys looking for a way hiring few more people.
Speaker 2:Let's start interviews next week exactly called Zach Gullib.
Speaker 1:Yeah, it's got to fit the core values of the company down 100%.
Speaker 2:I love you. That's great.
Speaker 1:Yeah, you guys bought a deal in Houston too, though, right, oh?
Speaker 4:yeah, so it's about that all about I.
Speaker 1:Don't know anything about these deals you know Texas a little bit Well. I of course in a Texas, but I don't know about these deals. You know about these deals and also our accountant, Ed Secker was big on buying in Houston.
Speaker 4:I mean he's not, he's not finished, he, he.
Speaker 3:Houston, he'll do anything. He bought it oh.
Speaker 1:Oh, ed Secker, I mean he's yeah, hundreds of units, he's. You know I sell, thanks.
Speaker 4:Oh, yeah, he's got the guy's got a real business Ed Secker assess some rolling looking for the taking videos of the podcast.
Speaker 2:I love it. Good angles. Yeah, yeah is that the drone? So, just like anything in business, you always look to progress, and I feel like if you're not progressing, you're regressing.
Speaker 2:So you have to look at how I'm gonna either do things bigger or more efficient or better. We wanted to get into some larger projects. The only way to do that, I think, to be able to mitigate either rent, a regulation or Tax implications, because when you're over 10 units you're not a to be protected tax class and the city essentially becomes your partner 25% give or take if your income goes taxes. Usually when you over you know six units, you're in stabilizer. It's very hard to find, you know, a 50 unit building that's fully free market or vacant. So in these states there is more favorable laws for landlords in terms of evictions and on paying tenants and we were able to Take down and then get our first purchase about 202 units and our second purchase 115, and the thought process is it's easier to add 20 or $50 in value to 200 apartments, which can equate to $400,000 income give or take, versus trying to break your head on 10 unit building where you're adding, you know 400,000.
Speaker 4:That's like the the card own Thing, I mean. I obviously I think he's very smart, but yeah, he's like listen, you buy a 400, 500 unit building. All I do is I put washer dryers and all them and I increase the rent 40 bucks. But 40 times 400 You're talking.
Speaker 2:So the issue in that market? Few issues. Yeah, one of the issues is people take floating death. Yeah, and this is ended this year. There's thing called rate caps, which you don't see them in New York. No, you don't say in New York. So what it is? Basically it's a insurance you buy when you close your project and when we were closing our deal, there's a $250,000 rate cap and I was like how much was the rate cap like?
Speaker 1:what were the details?
Speaker 2:So I think our rate was four, seven and it capped us at five, eight, and now I'm floating great, and a floating Ran out cost how much? 250 upfront day one.
Speaker 1:Did you do it, we did it, thank God our rate is at five eight instead of 80.
Speaker 2:Your captain, five eight. Our rate cap is actually worth about 750 thousand dollars.
Speaker 1:Wow, how do you mean?
Speaker 2:How do you calculate?
Speaker 2:that so it's like buying insurance protection for Rates going up. A bank will say hey, or insurance come was a hey, we'll take the premium upfront 250. Maybe your rates will go up in six months, 12 months, 20 months, but we have that 250 today as cash liquid to do what we want with it. When it does go up We'll compensate or we'll make up that difference of anything over that limit of the rate cap. So we went from four, seven or four, eight to five, eight instead of eight, eight. The banks or that insurance companies paying it every month. We sell the project a lot. That insurance still has another year left on it. It's worth seven hundred thousand, given where the rates have went. So I know people that sold projects and they made to, you know, maybe 60% on their return on the project and they made 300% return on their rate. How big was the loan, our loan?
Speaker 1:Yeah, when you bought about a 17 million dollar loan. God, it's a 17 million. 250 is not a huge, not huge.
Speaker 2:But when you're spending 250 day one and you're not expecting that, it's.
Speaker 1:Yeah, can you guys elaborate on like that conversation like back then when rates there I don't think there's any like clear indication that rates are gonna shoot up so much. There's never an indication 250,000 on an insurance policy.
Speaker 3:So we didn't know what it was. They're getting into it like we hadn't done one of these before, and then the bank actually mandated this is part of the part of their requirement to close the loan. So they enforced it to some extent and we were like you know this, do we have to pay that the while you look at the dollars right, like you know, at the end of the day, I ended up being a no-brainer it was the Made wow and what's happening is so it's equity.
Speaker 1:You guys had to come up with the 250. Yeah well, it was part of the, but what's?
Speaker 2:happening now is, you know, the Grand Cardone's or the other operators of the world, and I'll tell you a funny story in a minute about him. Their Loans, or rate caps, are coming due and even though they made this value, the shift in interest rates shifted so much that maybe they were at a Fort cap and they're expecting sell out of five and a half cap on how the markets a six and a quarter cap? Yep, how do they make sense of this?
Speaker 4:I have no idea.
Speaker 2:I don't know how great it makes, money, I think after December 31st is gonna be a lot more pain out of New York, unfortunately, but it's gonna be interesting.
Speaker 4:Well, what about? There's one big thing you didn't mention, so there's two others too.
Speaker 2:So I think it's floating rate yeah, and it's rate caps. I think some people have floating rates where they don't anticipate, as some groups say. I'm not taking a rate cap. If I end up getting hit, I'll pay it out of pocket.
Speaker 2:Well, isn't, it isn't the rate cap like a million dollars on some of these loans now because the way rates are on smaller loans they went to some really crand. They like million dollars. I'd rather pay this money over time. Well, if they have to be held to hold it longer and they can't refine it, they could be paying well over a million dollars what I for.
Speaker 4:A lot of that you see a little bit in New York now and obviously when you buy out of New York it's about yield, right, so anything to put a hole in your yield is not good. But insurance they use an insurance like insane for these big complexes out, out and and they went up so much and that that.
Speaker 3:Right, you're talking to you touching the source subject so I thought you're gonna mention Actually, you know what just insurance presidents all takes over everything, yeah yeah, we went from a thousand when we closed that actually a little in the 950 a unit paying to 2350 on the renewal with no claims.
Speaker 4:I just to put that in the no claims with no claims.
Speaker 3:Primarily because of wind, because it's south, you know, hurricane zone, and that was the whole thing, and the banks had their requirements and it was just honestly, it was really excessive for no reason whatsoever, but you don't have a choice.
Speaker 3:And the thing with Texas is you only have two carriers that ensure down there technically Wow. So you're limited who you can go to. We were able to get it down through, you know. We able to reassess some of the renovations we did and what not, and we are bringing down to now like 1500. So much better than what we were, a little bit higher than what we were on the initial, but I think on their own come January 1st I'm being a much better place.
Speaker 2:Let's do the myth thousand thirteen hundred difference twenty three hundred a thousand thirteen hundred two hundred units at 230 grand on your own wire, which Is a killer $60,000 on your NOI, we can be talking about $4 million in value.
Speaker 4:At least. There's people like I talked to I think it was a Atlanta and they basically lost like all their equity because Insurance went up a certain amount per unit. It's a 400 unit complex and that's that, like, think about Florida.
Speaker 2:Like Florida, I heard, you can't even get insurance or it's hard, it's, it's impossible and you're paying a you know through the nose for it and it's crazy. So I think Florida is gonna have its own challenges. I mean definitely between property insurance, but I think when makes good brokers and good active people in this industry is finding when there's opportunity. Like you guys said, you guys create opportunity. That's what our PRG is about. Think the next for a few guys next year start taking over. Different states are opening a Florida office and a land office a Houston office.
Speaker 2:I think you guys gonna start.
Speaker 4:We start the Jersey things. We're like it's close to us, so that the one thing. So, derek, I talk about us all the time, but we're not there, we're not on the market, but yeah, I mean it's, it's something we should do. I mean we're getting there. I talk about us all the time, really about New York. There's taking away what we're getting smaller smaller, oh, no more. No more stabilized. Okay, no more development because of 421 a. No more. This, you know.
Speaker 1:I walk around Brooklyn or drive around and you know, I just look at like the buildings and I see like these bigger apartment buildings and it used it used to just be so exciting to Like see these buildings and it was like so sexy to stand outside of these buildings.
Speaker 3:Crownites love the opportunity.
Speaker 1:And now I look at them and, just like you know, there's like all sorts of rent stabilized.
Speaker 3:No, like the paperwork is probably a disaster.
Speaker 1:Not to mention the violations and the tax and and all the other stuff. And it's just gotten a lot harder to sell and the market used to just be so vast I felt like I could sell everything like all over, and now it's like you just have to like walk through raindrops to like find when where you should be spending your time and effort. And I just wonder if, like I don't know, I wonder if it's a little Less regulated, a little easier and some other markets where you don't have all 100%.
Speaker 2:Yeah, you're doing larger deals you know you're doing 30 for working on a transaction on Dallas. It's 55 million dollars and the financing is there people want to go to the state's building apartment building class constructs. Amazing, it's gotta be. You know there's some light value add. They've owned it for 22 years, so they haven't done anything in 20 years.
Speaker 3:Maybe why to wash a dryer?
Speaker 2:update the appliances. But I think you know, maybe following the money is a good chance.
Speaker 1:So how do you guys like find that deal? Why do you, why do you decide that Houston or Dallas Our places you'd want to invest, like? Why are you guys in the mix on that, on that kind of stuff?
Speaker 3:Well, I think I mean for sure the right state has a lot to do with it. Okay, you know, you can say scaling is probably number two because you can buy two or three hundred units out of clip. Well, you can't really do that in New York very easily without having to go through a challenge that Jeff mentioned with regulations, or you know, or you know RPIE they have to pay taxes and then growth, like there's a lot as a big influx in Texan, florida. So they're both, you know growing markets and they're not slowing down For sure. So that's, that was part of the three, three biggest reasons.
Speaker 2:We've paid a lot of money to costar I don't know if you guys do and some money paid to them, yeah. So we look very diligently to see where what's happening in demographics Salary. We saw a lot of people move from California, Texas.
Speaker 4:I just it's very, very sad. I just lost my nanny to Texas. It's very, very sad. Wow, last week it's Houston. It might be Houston.
Speaker 1:I say it's Houston.
Speaker 4:It's Houston.
Speaker 1:Yeah, it's good, horrible, I would call it in Austin, and I have friends who still live in Austin. My sister lives in Dallas and, yeah, I mean the amount of people from California that moved to Texas. It's just so crazy. California's probably gonna change the psyche of the state as well, because you have I mean the people from California, I'm assuming are more liberal, you know good assumption Hopefully not yeah. Hopefully not, Hopefully not as liberal, as the ones that are still there.
Speaker 3:But hopefully not, but there's been some chatter about that. I've seen some of that stuff. I've seen that well, you know this talk about it becoming a blue state eventually and all this stuff.
Speaker 4:And yeah, who knows, I don't know maybe they should cap the amount of Californians are letting out that would be, a great thing, I saw another town in upstate New York, I think it was Newburgh.
Speaker 1:Yeah, Just just decided to allow rent stabilization. How's this right yeah?
Speaker 2:it's unfortunate. Even the young, the smaller property owners are feeling it. Yeah, they have good cause of fiction and your grandmother that has a three family or a four family and you're renting out to someone for income and you're living and now they don't want to pay you. What is she doing? She doesn't have the resources or the ability to us. It's really awful. So I think, fortunately, a little more pain has to come before there's a light end of the tunnel. But you want a little more pain, I want to make a little bit more deals this year and I think it's not good.
Speaker 2:That's too much pain.
Speaker 3:Similar to what you said, like we had go through this question. Like you know we've we were. We used to buy partially stabilized. We also stabilized assets, we bought our tenants, we did the whole thing and, with the law is shifting to where they did, obviously became much more challenging where, like we, strictly focused on mostly free market or vacant buildings and more recently we've kind of transitioned to we're putting on some condo sites, ones, a JV ones, straight up Acquisition with some seller financing. Not too far from here Is your ground upside, ground upside. Yeah, I mean I think we're pivoting into that for multiple reasons a, and I don't have to deal with rent laws and I think there's so much, you know supply compression where I'm very confident if I'm coming to market sometime, and you know 25 25 that I'll be in a good place.
Speaker 4:I'll say now our condo, that that's a huge business for us. Right now, I mean Williamsburg, green Point, park slope, all these areas the condo development numbers haven't changed off anything. They've gone up and we had a condo developer on last week, right two weeks ago, and yeah, I mean he, he's projecting out two years and they're we're still selling them at high water points. Yeah what, what price? Thanks for these condos.
Speaker 2:Well, you're talking about a sellout.
Speaker 1:Yeah, like what price other, like it's Brooklyn because I know, that 1800 purchases under like we're less people coming with all cash.
Speaker 2:Yeah, I mean like.
Speaker 4:Williamsburg. Let's take that for example. Right, we're selling sites at $400 a foot. These sometimes more. We sold one or six for 525 a foot. So these numbers are not at any way of gone down at all.
Speaker 3:Mm-hmm and people are selling out at.
Speaker 4:I would assume if you're buying four or five hundred, your sellouts are 1340 hundred foot that's minimum, that's like.
Speaker 2:I think, you got to be in higher.
Speaker 3:You got to be, you got to be in higher. Yeah, like we're looking at something. The rule of thumb is three times the price of the school phone.
Speaker 1:So 500 means 1500 or whatever.
Speaker 4:Well, 500, that's definitely 15, 16, 17 because that's our six and drags that's that's extremely prime. Yeah, yeah, 525 is a big, big number.
Speaker 3:I was surprised as they get higher. Honestly, I'm seeing some stuffs in Green Point that's like in the 17.
Speaker 4:Oh, hundred a foot range, so block sensitive to.
Speaker 2:I mean, yeah, exactly, I think if you're under Really to, but to call it, two and a half people coming with all cash and that's we're using a lot of buyers because still the financing market is still Really tough.
Speaker 3:We're targeting, you know, anything from five to twenty thousand. I think nothing beyond that right now. I think that's a good old retrospections.
Speaker 2:Yeah, we're ready for the next condo site guys, how often you guys go into Texas?
Speaker 3:Some of our team is usually all around once a month. Once a month okay.
Speaker 2:So one of the reasons why we also bought in Texas was we have a local partner there and I think if you're going to do anything out of state, make sure you have boots on the ground. Local partner how did you?
Speaker 3:find that local partner Interviews. We interviewed various property management companies and our goal was to try to find one that, besides having experience, was willing to come into the deal. So they came in on the equity side and the GP side, and they have experience, so they came in on the deal. So obviously our interest are aligned here Very smart.
Speaker 4:Yeah, that's the way to do it you have to have it's going to be game. Going back to what that you know our good client Bernie, back in the day. I mean that's what he said. He ran such a good shop and he said the biggest thing have your manager, whoever's dealing with everything.
Speaker 1:He was being incentivized.
Speaker 4:Give them equity in the deal. He's gave him equity in the deal and he knew he's like, he's not going to mess anything up if he has his money, his net worth, in these deals. And when they don't have the net, when they don't have their net worth or their money in the deals, that's when they just don't care.
Speaker 2:You're not aligned Same thing I was telling you about with Clinton. We have architects, contractor lawyer.
Speaker 4:They're in the deal.
Speaker 3:Everyone is in the deal, because I love that.
Speaker 2:The contract is very hard for them to find a project. But if they're doing the same construction work on a project and it's not changing, but they're able to keep a little sweat equity or get involved a little bit on that actual interest, they're making money. They're doing the same work, they're making their own fees and, if they like, the right price and they like the operator. Hopefully they'll do a little bit cheaper a little bit faster and put a little more attention, because they have something to gain or lose in the project.
Speaker 4:That's the way you got to do things.
Speaker 2:All right.
Speaker 4:Yeah, is there anything else? What do you think? I love that point. That's a good point.
Speaker 1:No, I don't have a whole lot more. I think this was really good. I mean, I think it's really incredible how you guys started. You know, we were obviously selling these small buildings in East Brooklyn Then for you guys to become such serious Manhattan buyers. You could say it's the NBA. I think it's fair.
Speaker 4:It's the NBA.
Speaker 1:And then to be doing 20 to $50 million deals in Texas and buying these Class A complexes. It's really awesome to see. It seems like you guys have really built a very nice business, so it's just really great to see. Thank you, I think we did a lot of years.
Speaker 2:You guys did some part of that. It took a lot of years to get there and just tell you a funny story on a deal we did with IPRG. So 2010, for a full tin. We bought it and we learned a lot from that deal. It was a frame building and I remember I don't know if it was you or maybe Steve- Steve is right on that, yeah.
Speaker 2:And he calls it up and he goes. So we were marketing as four apartments in a store. We found out it's five apartment store. You guys got a great deal. I'm very excited, we got a great deal. Okay, we got five apartments in a store. We already knew that because whatever, yeah, steve didn't know.
Speaker 1:Close on the project.
Speaker 2:Let alone the owner, old lady, very sweet lady. She had a huge fire in the building and instead of fixing the fire, she put she covered everything Like the, like the, the charred wood, just it was completely charged. We did not know that. I asked me you can't do that?
Speaker 4:And as.
Speaker 2:Tana's tennis started leaving, she goes yeah, I'm having an issue with my cabinet. I put a plate and it keeps sliding down and I said what's going on? We found that the building was leaning in and collapsing. Oh my God. So always have to expect for the worst. After that deal, we learned a lot from buying frame buildings Always have a contingency. In that particular project we had an initial 250,000 in structural work but we were able to pivot by making the two is three bedrooms again. Another kudos to commerce, our partner.
Speaker 1:You found out about the fire and public record, like violations or title.
Speaker 3:Even if there was, even if you can find it no, it doesn't come up untitled but even if it was there, nothing came up.
Speaker 4:Yeah.
Speaker 3:Even if it does. You know you were assuming to be repaired. You know it's literally walked it. You didn't see it. It was literally covered up with shoe rock and it wasn't until we vacated the building where you were repairing.
Speaker 2:What you started doing, work. Things started to start being charged.
Speaker 3:Yeah, charred the whole building.
Speaker 1:You guys have spent 250 on structural.
Speaker 3:Yeah, plus downtime, plus this, you know, wow, we're in the deal for much more. It's funny at the time was probably our most hated project at the time, but now it's actually when our press assets catch. Yeah, we bought it for one too, and I think we refied two two on that, so we made up for it. No, but it ends up being now we got great cash flow there.
Speaker 4:She's all see about that fire. I don't think he knows that. That's crazy.
Speaker 3:We may have. We thought about it. We sued this lady. She knew what we felt deceived on us, that we felt deceived. She busted balls a little bit on the way out of here.
Speaker 2:We know it's always good busting Steve's traps. Yeah, he doesn't like it, but we have good debt there, so when that does come to, we know who to call.
Speaker 1:Yeah, good George. I just want to say you meditate every day, Every morning.
Speaker 3:How long have you been doing that for About three, four years. How'd you get into that, my brother? Honestly like so you know, I was going to a point in my life where it's you know little I wouldn't call it down but more of a rut. And you know, and my brother put me on the Tony Robbins initially I was always talking about Robbins guy.
Speaker 3:My birthday, he sent me to UPW in Palm Beach. So since then I took a lot of the practices they were doing. I was in and just implemented. So what I took out of that was you know, today, you know you kind of go through this transformation process that I don't know if you guys meant the UPW, but into Tony Robbins, yeah so UPW. So you go through this transformation process and they say you know you're talking about today, you become a new you to some extent. You know you walk on charcoal fire, fire.
Speaker 4:It was too late at night, but you did.
Speaker 3:I did and I felt my body was tingling, it was vibrating. I felt like ecstatic, like the energy I felt in that building. It was like I got addicted to it. I said there's no going back. So from that point on I said you know what I'm not going to? It's like going to a networking event. You're only as good as what you take from out of it. Right, it's really nothing if you don't do nothing with it. So what I took out of it was from today on, I'm going to implement ABCDE. And from that point on it was just been, became part of my lifestyle like wake up force myself to wake up a little bit earlier and just get it done, because how long do you meditate for in the mornings?
Speaker 1:About 15 minutes it's been. It's been pretty like impactful on your life for the past few years.
Speaker 3:So, yeah, I you know, outside of touching the meditation on my phone I don't touch my phone for about 30 minutes Just kind of just me time in the morning, just play a guide meditation, then I journal a little bit, then I read, and then I get dressed and head out Nice. So I'm going to be in 30 minutes of just me time in the morning, it's great.
Speaker 1:Yeah, that's the hardest thing being consistent, it's interesting how, like if you ever listen to your thoughts, like just nonstop, like your brain is always just going and going and going, it's kind of interesting to watch it and try to get it to calm down. And if you take a step back from that it really opens up, I think, some bigger picture perspective in life and keeps things in proper perspective. So for sure, you know, I think in business I don't know a lot of people to talk about meditation and bring it up.
Speaker 4:And I, I, if you look, if you look enough, a lot of people do it.
Speaker 1:I'd like to be more consistent with it. I think, especially like I've met, I've taken time to meditate during the business day and I've always found that to be incredibly helpful during the day. During the day.
Speaker 3:Yeah, so I don't know if you know this, but the brain has roughly you're conscious and you're your subconscious you have roughly 90,000 thoughts a day that you don't think about this.
Speaker 2:You're thinking about stuff you don't even know.
Speaker 3:You're thinking about, of course, unless you make it. If you're intentional and start to slow that down, it's just your brain takes it, it loves that word intentional your subconscious takes over you. This is what it is. So you have to slow down and be able to control, because once you're intentional, you can, you know, guide things in the right direction.
Speaker 3:For sure, so whatever that is, so, just like the way we can go to the gym I'm sure everyone had something fitness why can't we do the same for our brains? Right, you have to be. Just work that out. That's what it all starts with, this at the end of the day, yeah.
Speaker 2:Small tidbit he said. You know he's starting off your morning, your morning's, your whole day. If you start off upset or flustered, or you deal with too much in the morning, you're going to start your day off incorrect. So when he wakes up in the morning, told me this he got the clothing before the night before. So when you wake up I don't have to think about what I'm wearing, or I know what I'm wearing in the morning.
Speaker 4:It's a good point.
Speaker 2:Saves yourself a little bit of mental process in the morning to focus on what's important, whether it's getting to work or not, having to worry about what shoes I'm going to wear today For sure. Yeah, Well it's really great, anything else you?
Speaker 1:guys would like to bring up or go over.
Speaker 2:I think this year is going to be an interesting year. I think anyone in the industry has to be diligent and focused in terms of finding the opportunity and I think if you're dealing with good people whether it be brokers or just good buyers I think that's what's going to create success and hopefully we could be on your radar next year.
Speaker 1:A hot brush that you definitely will be Appreciate. You guys coming in for sure, jay, so open.
Speaker 4:Derek asked you some good hard questions there, I appreciate all that answers.
Speaker 2:We're going to have liquor over here with us, yeah.
Speaker 1:We'll do an evening session. Hopefully you guys get some more $50 million deals.
Speaker 2:We'll talk more about it. We'll have a lot more to talk about next year.
Speaker 1:Yeah, because you have all those deals under contract too. We didn't even talk about anything, it's all good yeah.
Speaker 2:We're buying a few things in the city, thank God, mostly vacant, and I think that's where we excel is finding it vacant, doing the work, going through the mud for the first year, and I think it's not a lot of them. I don't think you guys find a lot in Manhattan, but I think really being pinpointing what you're a desire. Last thing that I forgot to mention is mindset is everything when the mind goes, energy flows. So, like, if you're intentional, if you're focused on a certain thing, things will start happening for you. Life happens for you, not to you. It's the same guy from my good part over here, he's crushing it, he's killing it.
Speaker 2:That's why he's the CEO of the company, helping us lead, helping us start the days and the week off. The guys got the mindset, the winning mindset. When we finish our Monday meeting, we clap. That's how we end the meeting we clap. Let's start the day in a good way in a positive way, love it All right. All right A little tidbits.
Speaker 3:Hopefully we gave some insight to you guys as well.
Speaker 1:Yeah, I think the listeners will take a lot out of it. I think there's some really good stuff that you guys went over, so really appreciate it. Thank you for having us. I appreciate you guys, yeah, and you know there's a lot of brokers that listen to this, so hopefully everyone has you on the radar for buying these properties.
Speaker 4:We're investing with you, guys.
Speaker 2:I mean, that's a good point For sure.
Speaker 1:For sure.
Speaker 2:It's long term. This is a real long term business and you got to have that outlook, so we're hoping we can be doing this for many years to come. I mean probably on a beach in Greece somewhere, but I'll be sitting here working Sooner or later. All right, all right, guys, we appreciate your time.
Speaker 1:Thank you guys, thank you for having us. Thanks guys, have a great.