The Real Estate Roundtable with IPRG
IPRG Partners and guests discuss various topics on New York City Real Estate and the broader Real Estate Market.
The Real Estate Roundtable with IPRG
The Real Estate Roundtable with IPRG featuring JSAF Capital’s Joseph Safdie and Jacob Kassin
JSAF Capital is a family-funded investment firm focused on acquiring real estate throughout New York City. Their portfolio spans multifamily, mixed-use, and retail assets.
In this episode, Joseph Safdie and Jacob Kassin join Luke and Derek to discuss real estate investing and where they see opportunities in the NYC investment and development market.
Follow IPRG: @iprg_ny
www.IPRG.com
What else is going on with you guys?
Speaker 2:Dude, we're trying to get deals, trying to find deals. It's nonstop, just always looking to source deals every day, all day. Where do you live? In Brooklyn? I'm in Park Slope, oh nice, which is, yeah, it's good for the most part. It's great, it's a good area, it's beautiful. I love the architecture, I love the proximity to the park and the proximity to the city, so it's, all in all, pretty good.
Speaker 1:We're doing a couple of condos and townhouses there.
Speaker 2:Really.
Speaker 1:We have one in Cobble Hill. I think that we're doing Cobble Hill on Douglas Street. I didn't know that it's a townhouse we're trying to sell for like $12 million.
Speaker 2:You guys just renovated it.
Speaker 1:We're in the process.
Speaker 2:Starting. How big is it?
Speaker 1:It's like 6,500 square feet. How wide is it? 25 feet Elevator, 25 footer.
Speaker 2:When did you buy that?
Speaker 1:We didn't close yet. We're about to close now, but we're already on planes Because man when.
Speaker 2:I was getting ready for this discussion and we're rolling, so we'll just roll with it. But I mean, I guess just real quick to introduce you guys, we're here with JSAF Capital, joseph Safdie and Jacob Kassin, and Luke Sproviero is here. This is Derek Bestrick. But when I was looking into this stuff, I thought that I saw you guys were buying some townhouses, because I saw a deal in Prospect Heights, on Prospect Place, and I'm like, man, are they doing townhouses too? I'm like, what don't these guys do?
Speaker 1:We love it. Yeah, we love the action. We love it. Yeah, we love the action. We love keeping busy. So 183 Prospect we bought as a three-unit condo conversion.
Speaker 2:You paid a good number for that, though. No, we paid like $2,600, $2,500, $2,600. I thought you paid like a full price kind of it looked like on the surface. Yeah, I think we paid $2,600.
Speaker 1:That was the price that we paid. Yeah, I think we paid $2,600. That was the price that we paid. It was one off-seller that was, frankly very hard to deal with.
Speaker 2:I got to show you the video. What's the play there? It's a townhouse conversion, so condo conversion.
Speaker 1:Condo. There's a comp on 189 Prospect that they made it a two unit and they got about seven and a half million total sellout. We're targeting three unit. We're going to add, we're going to have like a duplex on the first floor and the and the cellar. We're going to extend the building back and then we're going to go on the upper floors We'll do another duplex and then a floor three unit on uh, on the middle floor, the parlor, the parlor. So we're probably talking building up eight, eight and a half million dollar sellout vertical extensions rear no, just rear horizontal landmark, so we we had to navigate through, yeah landmark, which was a little bit of a challenge.
Speaker 1:a little bit of a challenge. Is this the first of a challenge? Is this the first condo deal? No, doing another one on Flushing Avenue with you know, chris, with Chris.
Speaker 2:Turning that thing into condos. We're turning that into condos. How long have you owned that building for? It's been like 10 years, right. It's been like three, four years, that's it.
Speaker 1:Stabilization was the issue there.
Speaker 2:We knew the seller. Remember the seller. Refresh me on this deal. This is 888, right, 888. I don't know if it's okay to throw down addresses.
Speaker 5:I don't even know how that number sticks in my head, but that was Isaiah right, that was Steve Fishman owned it, steve Fishman, isaac bought it, steve Fishman sold it to Isaac, isaac and then Isaac got out right. So you're condoing that. So we're condoing that. Eight units, or are you combining units?
Speaker 1:Eight, Just eight right left. I can show you guys the renderings after it's gone Interesting.
Speaker 5:What are you projecting? I mean, I know the location. What are you projecting there for sellouts, like price per foot? We're projecting like $800, $900 a foot Makes sense.
Speaker 1:We're not really going crazy.
Speaker 5:What's the?
Speaker 1:It's probably 750 to 800 a unit. They're like one bedrooms that could be converted into twos legal ones Cause the air light you can make them into into into ones legally, but they're it's like a long living room and then on the ground.
Speaker 2:There'll be a good sellout, though, for that building.
Speaker 1:Yeah, it should be a nice sellout. It's a good transition. You know, the problem with that building was in 2003,. It was supposedly sub-rehabbed but nobody had records or documentation, so we had one, or we spent two and a half years through COVID, maybe even three years through COVID. We managed to. We had one tenant that challenged, then another tenant that challenged, and then we vacated five other tenants and one unit was vacant. We occupied it by our super and we spent years litigating and we actually prevailed, but there was no determination. It wasn't like you're determined to be free market, it was like the judge said listen, since it happened, we had a good judge. He said since it happened in 2003, many, many years ago I can't make a ruling on something where you're not proving or alleging any fraud which very rarely. You get a judge saying that Usually they make sure you prove exactly if it was deregulated or if it wasn't. In this case, the judge told the tenant that if you don't take a settlement then I will probably rule against you.
Speaker 1:That was like the exact conversation on the that's crazy and then the week a day prior, we offered that tenant a hundred grand. Our offer went from 100 to like 10, paid him 10 and he took the money and he and he ended up leaving. Um, you know, nice, that was a crazy scenario, situation, but at the end of the day, uh, you know, I think condos are the best route, moving forward, just to eliminate any question marks.
Speaker 2:And uh, you know, you make money, you move on what's the process like in terms of converting the building to condos with like? Do you need like an offering plan like attorney general?
Speaker 1:so, yeah, that's that's. That's usually the reason why people don't like doing condos as much. In this case we've owned the building, or chris has owned the building for quite some time and I'm coming in now and into the deal but basically, um, you, you know, condos take a year, year and a half to get AG approval with your offering plan. So it takes quite some time to get it approved and there's a lot of detail that goes into it. You need to have specs of all your appliances, all your finishes, all your HVAC units and you need to submit that to the AG and the AG has to approve your offering plan. And then you got to subdivide your tax lots. So it's a process. It's a process to get it done and ultimately you're selling the asset, which is not traditionally what we've done.
Speaker 1:We like to own long term. We like to own the assets. We'd like to hold on to them, but where the opportunity presents or where the opportunity requires, we're going. We'd like to own the assets, we'd like to hold on to them, but where the opportunity presents or where the opportunity requires, we're going. We were doing the condo route, basically.
Speaker 2:Did you file permits to renovate the units as well, like you're doing renovations, or do you not need to file permits because you're just going to like paint and cabinets and that kind of?
Speaker 1:stuff, so we're actually spending some money into it and cabinets and that kind of stuff, so we're actually spending some money into it. We had some plans with the cellar and the first floor. So we're duplexing first floor and cellar and we're excavating the backyard and the basement. So basically you walk out of the basement, you have a floor, you can literally walk out into the backyard and you have full, full air and light, full windows. So now dead square footage, you know, 1600 square feet that would otherwise be called dead square footage is now what someone else may call living space, legally not living space, but someone else may call it living space. Yeah, um, you know, accessory to dwelling, however you'd like to call it, uh, but you know, now we get we, now we unlock a nice amount of value and now those units become like a million plus dollar units.
Speaker 2:Can you sell that accessory square footage at the same price per foot as, like the first floor above? Do you think Usually?
Speaker 1:not Okay, but in this case, if it's nice enough and your ceilings are nine feet or eight and a half feet, which is what we're targeting eight and a half to nine finish it feels like a floor. So somebody might look at that and say you know what this is actually considered like. I would use this as living, you know, and I'll pay the premium for it, maybe not the full VIG, but you'll pay, like a percentage.
Speaker 5:These brokers are pushing that. I mean a lot of the residential brokers. I see that they're advertising like duplex space, basement space, it's hard not to, I mean especially if it has access to the backyard and the full windows.
Speaker 2:The issue I'm seeing with that stuff and I wonder how you guys do this is just the water Because, like I don't know, I mean guys do this is just the water because, like I don't know, I mean I guess the concern is it's going to flood or that there's not good drainage in in the lower level for the outer space. I don't know if you have thoughts about that or like it's some pump type of situation yeah, so in all our basements?
Speaker 1:uh, fortunately or unfortunately, we've been experienced with basements and we've had issues in the past like apartment duplexes. Um, what we do is we put a lot of dry wells outside in the rear yard we put a, we put a pump and we hook it up to the to the main line, to basically, you know, cover all of that. We also do waterproofing, so you know most waterproofing, you know how many, how many dry wells are you doing? We're're doing multiple.
Speaker 2:Really.
Speaker 1:We do probably three or four dry wells. I like that we do some other drains. That connects to the pump as well, just in case it overloads and overflows. You just don't want to overload the pump. If the pump gets overloaded.
Speaker 2:That's a good thing for the broker to know, to be able to tell a potential purchaser. A dry well is like just a hole in the ground that gets covered up, but you take like a bag of rocks and you stick it in this hole and you have like drainage going into it and it basically distributes the water.
Speaker 3:The water goes down into the soil pretty much and instead of it going to the sewer, it goes just seeps all the way down into the soil, so it just absorbs.
Speaker 2:Because down at like, say, the lower level right in the backyard, yeah, the question is, how do you get the water from that lower level? Yeah, into the sewer, because the the sewer pipe is likely higher than the ground floor on the on the basement level, so dry. Well, in that case makes a lot of sense, and then you can distribute the water naturally into the soil.
Speaker 1:Um I like that nice. Generally, if you're looking at any construction site or any building, you have the sewer main that runs in the street and usually the basement is below the sewer main. So shit got rolled downhill, not uphill. So in order to get the water and the sewage up, they have a pump that shoots the water up into the water, into the water or or sewer, I'm sorry to the sewer, into the sewer lines and pushes it up back into the main of the street.
Speaker 1:Same thing with, I mean, electric and water is much easier because water can travel in different directions. You can, you can run a water line downwards, upwards, sideways. The water just pushes through the pipes. Electric also. Electric comes from the street, comes from the main, goes into the building and then gets distributed and branched out to each of the units or each of the meters, each of the panel boxes. But that's why we need to put dry wells, because you're relying solely on a pump. If the pump goes bad, all of a sudden, your basement gets flooded. The pump just dies down, your basement will fully flood.
Speaker 1:So you've got to mix it up with dry wells, you've got to mix it up with pumps and you've got to mix it up with waterproofing as well. When you waterproof the facade, you've got to waterproof properly, not internally. Externally as well as internally, meaning water can get in many different ways, so the more ways you block it, the better it is yeah, makes sense so.
Speaker 2:So one of the things that I noticed when I was getting ready to speak with you guys today is um, first of all, you're doing like so many different types of deals. But I think one of the things that really stuck out to me is all these deals you guys did in the bronx, like all these conversions. First of all, you got letters of completion and final COs on everything, which is honestly kind of unique, because a lot of people aren't getting letters of completion and aren't getting final COs. A lot of developers are like not getting the final stamp approval for whatever reason. So I thought and just hearing you talk about like the waterproofing detail, like it's just interesting, you guys are really completing these projects fully. Um, I also noticed in the bronx that you guys it looks like you guys cashed out and refinanced like every deal and own those buildings for free. So I thought that was really cool to see.
Speaker 1:Yeah. So those deals, construction wise, you know, you know, we finished these, a lot of these buildings, in record times, like we finished ground up construction on a building. When you see, you'll see a piece of land six or seven months later we'll, we'll be out of the ground and done, complete, ready to lease. The only, the only, the only part that took us much longer that we didn't anticipate is DOB and sign-offs. So sign-offs sometimes, in some cases, took six months.
Speaker 1:In addition to that, it took almost double the time of construction, in some cases even eight months. We had a project we finished in seven months. Eight months later we were waiting for TCO. I think DOB lost the sign-off. They signed it off and then we were going back and forth with them for months and they go. Yeah, we unfortunately lost the inspection report when we signed off the building. So they spent two months trying to find it and then realized they lost it. And then the chief inspector took it upon himself to walk the building and say, hey, we got to add these other 10 items. Oh my God. And one of those 10 items were parking stackers. There were no parking stackers installed. What's a parking stacker? So before the City of yes came out, you were required R6 zoning above a certain amount of units. You were required to have parking. I think it was 11 or more. It's 14 units, right, this is 27 units.
Speaker 5:Got it, but 14 units, I think, is the requirement. Once you have 14, you hit parking. You hit parking. Maybe it's 14.
Speaker 1:Yep, so basically we got it signed off and then they lost the sign-off. The inspector comes back, says you're missing stackers. So right now we're at a crossroads. We're losing about $100,000 and something in rents. I mean, the buildings make roughly that a month. And City of yes came out so we could amend our plans to eliminate the parking requirement which just came out, and that took like a few months but we ended up getting it done. But yeah, I think the Bronx has done well for us. You know we have a management company which we manage our buildings as well as third party for other people. You know over 100 buildings in the boroughs Wow, and it's really management intensive. The Bronx Very management intensive.
Speaker 2:The Bronx Very management intensive, even for these new builds.
Speaker 1:Even the new builds. We're doing some HPS. It's not so much in the maintenance the maintenance is fine, it's a new building it's more so in the renewals and the leases. A lot of these tenants are government subsidized. The government's paying us really big numbers, uh, which I think it might be going away or they lowered those numbers, but they're paying about, you know, on average between 2,900 to 3,300 for a studio, or 3,200 for a studio which is parks crazy yeah, for sure for a not a regular size studio like a 300, 350 square studio, which is the micro units.
Speaker 1:I don't know if you guys have seen those.
Speaker 2:Yeah, no, I mean it's a brilliant business plan, right, like I saw you. I mean it's also interesting. I mean a lot of these, lots are like 19-and-a-half-footers, 20-footers, 25-footers it looked like some of them. You really maximized the lot like buildable. It Maximized the lot like buildable. It looks like something you built back to like 100 feet maybe, or close to it, yes, and then jammed in. It looks like you jammed in a bunch of units to a four-story building 18 units, but we actually did not maximize our air rights.
Speaker 1:How?
Speaker 2:big are these units?
Speaker 1:We have 300, 350 square feet in some cases Some of the newer sites that we've done. We've done bigger units, but there were 300, 350.
Speaker 2:I'll just tell Luke real quick. I have numbers on some of these. They have multiple deals. They bought like 890, 850, 820, 805 for like two families or three families, or like an auto repair shop or something with their rights, and they converted to 25 units, 16 units, 18 units, and then refinanced. The refinances are for $6.4 million, $5.2 million, $5.4 million, another $6 million, a $4 million. That's crazy.
Speaker 5:So what are the tax implications here? I know, when you go over 10 units, obviously. So these are— 35-year abated.
Speaker 1:Yeah, got it 35-year tax abatements and, believe it or not, by the way, at the debt numbers that we took, we're very. We have like a 135 or 140 debt service coverage ratio.
Speaker 2:So were you taking 35-year. These are 421As.
Speaker 1:These are 421As.
Speaker 2:But these aren't all new bills. Some of these are alt-COs, alt-cos qualified for 421A.
Speaker 1:If you added more than 51% of new footage and there's some debate about that because lately people are getting stuck with projects that they said if we change the joists it's a two-story building. If we change the joists on the two stories and then add another two and a half stories, then we qualify and then add another two and a half stories and we qualify.
Speaker 1:But the 421A finance basically is disputing that. There's some litigation going on about that. But if you have a building and you add more than 50% new footage, you automatically qualify for the old 421A.
Speaker 2:And I'm assuming it will apply to the new 485X as well, if you elect it to go through the 485X. And so yeah, congrats on all those. How do you feel? What are your thoughts on this proposed budget from Trump for 2026 where he's talking about cutting, like rent subsidies, like, is that? Is that an issue? What are your thoughts on that?
Speaker 1:So I think it's an issue federally. I don't think it's an issue on a New York City level as much.
Speaker 3:It's going to be an issue.
Speaker 1:If you can understand the program market. The program market is comprised of four or five different types of programs. You have a program called CityFeps, which basically houses homeless people. You have a program called CityFeps, which basically houses homeless people. You have a program called Section 8. Section 8, everybody knows about. There's one that's federally funded and one that's funded by the city-state. It's NYCHA versus HPD. You have another program called HASA. It's an AIDS program, basically helping people that have AIDS and subsidizing their rents. They have CVR, which is another branch of Section 8. So there's so many different subsidies out there. There's also non-for-profits who are looking for units, to house their people in these units and to basically provide housing for people that need, like a woman in need is one of them.
Speaker 1:They house women that come from battered homes and problematic living conditions and they move them and they get covered, obviously, by private funding, sometimes by philanthropists as well as city funding as well and they take units as well. So New York City, as long as New York City primarily remains Democrat, which looks like you know, that's the direction we're headed for the foreseeable future, the city and the state will continue to fund the city-based programs.
Speaker 1:Maybe on the federal programs they'll be cuts, probably will. But on the city-based programs I don't see that. Maybe they might have to cut their budgets a little.
Speaker 2:I don't think it's going to go away altogether, I think there'll be some push. Of course it can't. It would be way too much of an issue if all that rental assistance went away.
Speaker 5:It's a big part of our business in this office, especially in the prongs. I mean the amount of those deals that we did this year, I mean it's a lot, a lot and they're still happening and they're still happening. So I think there's a little some of the people I'm speaking to. It's not a market that Derek and I focus on. There's teams that focus on it in the office, but some that focus on in the office, but some people I've heard they're a little nervous, right, like they're not looking. They're trying to flip some of the contracts, right, obviously, like. We're not closed.
Speaker 5:We're not closed. I mean, there's articles. I saw that they're trying to do away with Section 8. I mean, like you said, I mean maybe on a federal level, not so much on a city level, but I think that's coming up.
Speaker 2:They're trying. Trump is saying he wants a two-year cap on able-bodied persons, meaning people can't go into the program forever, and in New York I think the average amount of time that someone's on Section 8 is 15 years.
Speaker 5:Are you guys still looking to do those deals, or is that past?
Speaker 3:Yeah, I was talking to Jared actually about a couple of deals that he has now. So I guess, going on the point where now people are thinking about rent reductions, Jared was telling us how the owner, the current seller- his business plan right now is to fill it up with HPS. So on the right with hps numbers I told. I told him. I said jared, listen, you know, nobody really knows what the future holds, especially when it comes to the rental amounts. Forget the hps as a whole. Just you know rental amounts.
Speaker 3:So when we're going to look at something like this, we're going to be underwriting it more towards section eight numbers yeah so you know, if we can't be at a, you know if we're not going to be at a good enough cap rate on section eight, then the deal won't work for us, because we're not going to be at a good enough cap rate on Section 8, then the deal won't work for us because we're not underwriting to HPS numbers.
Speaker 2:You're reducing the rents, correct?
Speaker 3:Because we can't have a business plan with something that we're not 100% confident with.
Speaker 2:Have you heard about this? There's all these new builds in the Bronx with, I guess, HPS rents.
Speaker 5:Well, jared has like three of them on the market. I know that, yeah, and everyone is the Bronx with.
Speaker 2:I guess HPS rents. Well, Jared has like three of them on the market.
Speaker 5:I know that, yeah, and everyone is underwriting these like significantly lower rents. So the NOIs.
Speaker 4:Oh, I'm sure these guys are shocking. It's never a higher rent, it's the lowest possible.
Speaker 2:These NOIs are getting really hit.
Speaker 1:Yeah, for sure it could be a 12 cap or 11 cap on paper with HPS, but someone's underwriting it to Section 8. So you'd be like new construction 11 cap. How is that possible?
Speaker 2:So this is something Luke brought up when we were talking about what we were going to ask you guys, but you talk about caps. Where are caps today? Because we've talked about development and redevelopment so far.
Speaker 5:Well, you guys especially are, from our experience, are mostly yield. The stuff that we're selling you recently have sold you their yield deals, right, like a lot of it has. It's mostly free market. There's room in the rents, you're getting a pretty attractive yield going in, but you're seeing these deals. So what were these deals actually had, not just with us, but other brokers? Where are these happening?
Speaker 1:So we have we underwrite about 150 deals a month like fully underwritten. Okay, we tour a nice amount of them. We probably make offers on 75% to 80% of those deals, unless we really feel like it's not something that we want to get involved in, or if we're just really too far off, or if we're way too far. Even if we are far off, we'll write an offer, usually just because you never know when a deal might transact.
Speaker 5:You never know, you don't know.
Speaker 1:A year later, six months later, we're still following up on a deal. So we always like to keep our pipeline full. Very similar to brokerage you want to keep your pipeline full and see what happens. Keep your pipeline full and see what happens. But I'm seeing people transact and where we transact, you know some people in the market are buying. You know six and a half caps six, six and a half caps. You know, in a good, let's say, park. Slope market.
Speaker 1:You know, but I don't see really much of the fives, five and a halves.
Speaker 5:And when you say this, you're referring to buildings that are primarily free market.
Speaker 1:So primarily free market with some mix of stabilization. Obviously there's so many different asset types and so many different cap rate, yeah, levels, and what people are willing to buy, if it's retail, if it's office, if it's industrial. If it's office, if it's industrial, if it's mixed use, if it's just multi, if it's fully stabilized, if it's programmed Three family, if it's a three family, if it's a protected tax class if it's a non-protected tax class.
Speaker 5:Yeah, it's a loaded question. It's very loaded, but obviously there's a difference between something that's 75% to 80% free market and something that's like fully RS.
Speaker 2:Where do you think cap rates should be right now, though?
Speaker 1:So I think right now we're seeing term sheets, same with the underwriting. We probably speak to 15, 20 banks regularly. We're seeing rates between 6. A quarter, on the low end, six but six and a quarter to six and a half percent. So I think if, besides, for someone that's looking to buy cash and park money, I think cap rates should probably be somewhere in the mid to mid sixes to high sevens.
Speaker 1:You know, on on a regular, on a regular deal, if you're in the Bronx or if you're in East New York or if you're in markets that are Brownsville or Brownsville I would like to see deals in the eights. You know, eight plus. If your rent's stabilized, I think the cap rate should be double digits. I mean, in this market I think you should be buying something that may not be a 10 cap going in, because if someone's selling, there's obviously an issue. They probably have deferred maintenance, they probably have non-paying tenants. So when I say cap rate, I mean after you factored in all the tenants paying and after you got this building up and running, you got to be at like a 9.5, 10 cap.
Speaker 2:Why, why so high?
Speaker 1:In like these type of in a class C market.
Speaker 2:Class C yeah.
Speaker 3:I think first of all class C, but also part of the reason is because of the work that needs to go into the property. It has to be worth our while in order, you know, to get it fully up and running. You know you gotta be going in at a nice enough and there's no upside, and there's no upside and there's no exit strategy. There's no play really besides cash flow. We had a deal recently that kind of fell through. But you know there was a similar situation. It was in Brownsville and you know we were going in at about a nine and a half cap. The broker tells us I just spoke to the seller no arrears. Okay, great.
Speaker 3:I don't arrears. Okay great, I don't buy it. But okay great, no problem, we'll send the contract, let's get it going. Okay, great, sends the contract. We're negotiating. Okay, represented there, no arrears. He says okay, no problem, okay, interesting. Then I get a call a couple days later. He said oh, speak to the management company. I said okay, management company sends me an arrears report. Guess how much there is in delinquency? You were telling me the story, but it's about $200,000 in delinquency.
Speaker 2:What was the income on the building? How big was the building? It was 16 units. Okay. Where was this In Brownsville Okay?
Speaker 3:So now we have to factor in the loss of rent from the non-paying tenants, factor in legal fees to start cases against them, because we can't just have them sit there and after all that we had a different number, we can't be paying whatever it is, because now our basis just went up. So now, going in we were closer to like seven and a quarter, seven and a half. So we ended up telling them we're like listen, you know we gotta be at this number. You know, if they're ready to transact, we're ready to transact.
Speaker 1:And if you're listening to this, we're ready to transact, we're ready to transact.
Speaker 2:And if you're listening to this, we're ready to transact. Yes, exactly, and by ready to transact I mean you guys you'll buy. I feel like you guys will buy anything.
Speaker 5:And this is an R sorry. This is a 16-unit RS building in Brownsville, so it's fully free market, oh, fully free market. Yes.
Speaker 3:It was built. Oh, that's nice. Yeah, it was built in 2005. Got it Not?
Speaker 5:subject so it's the only asset class that you're not really buying. You're just fully RS, because I can think I'm rattling off.
Speaker 2:No, they're buying it RS, but you are buying fully RS.
Speaker 5:We are yeah.
Speaker 1:We have some deals that we're, that we're buying, that are RS.
Speaker 2:I mean, lately we haven't really, you know, transacted on much like we've hear a couple of RS deals they've done. Give me one Well, they bought a building in Prospect Park South, a nine-unit what deal? Beverly Road, which I assume is RS. They've bought frame buildings in the Bronx that I think are RS there was one on Bronx. Boulevard. An interesting RS deal is the four buildings they bought on 4th Avenue in Gowanus with 120-something feet of frontage.
Speaker 5:That was an airplay right.
Speaker 1:I saw that that deal was actually very interesting.
Speaker 5:Let's talk about that deal. I saw it boom, boom, boom and I was like oh my god.
Speaker 2:They just picked off a bunch of those ZT oak tree properties which I assume.
Speaker 5:Let's talk about 4th Avenue real quick, if you guys want to share. I don't think of the exact address, but it's interesting.
Speaker 1:We had come across a building on 4th Avenue that was for sale. One of the buildings delivered vacant minus the retail. This is between 485X and 421A, the old 421A-16. We saw an opportunity. We were looking at it as a sub-rehab. It's mostly vacant. Okay, we were willing to do the sub-rehab. We still are.
Speaker 2:We're still doing sub-rehabs now, even in this.
Speaker 1:Yeah, we saw you bought that one recently. It was in Williamsburg.
Speaker 2:Yeah, yeah.
Speaker 1:And basically we purchased that property from one seller and then the property next door was another seller, and then the two properties next door was another seller. So the second property we went into contract as well. And then the third property we were about to sign with the seller and another developer went into contract on that property. So the broker on the transaction actually said listen, he wants, he would flip it to you. So he knew that I was in contract on the two and I was looking at this deal from multiple lenses. So when we look at deals we don't just look at it from okay, here's the bricks, this is what you can do with it.
Speaker 1:We were looking at the fact that the buildings have air rights and a corner is probably the most valuable lot type in New York City because you can build a lot coverage and these lots are like 86 or 90 feet, so they're not full hundreds. So we negotiated, he flipped the last two to us and we ended up buying all three Fast forward, like three to six months later. We knew something will happen eventually with the tax abatement. I mean, we don't predict the future. I thought maybe one, two years down the road they'll come up with something We'll do some sub rehabs. We were buying the air rights at really, really low basis, close to $100 a square foot on the air rights. So we're like.
Speaker 1:OK, we can't go wrong Down the road. One day we'll build and it'll be worth a lot more money You're saying as a covered land play.
Speaker 2:It's $100 per buildable square foot total.
Speaker 1:It's a little bit above $100, a square foot total between all the air rights. Where Gowanus today is probably, I don't know $300 to $50, $300?, but you have re-stabilized buildings.
Speaker 2:You do yes.
Speaker 1:We had to execute a business plan simultaneously and we said, worst-case scenario we do a sub-rehab and we're finishing these buildings at like 9.5, 10 caps. That was our exit. So we can execute a business plan.
Speaker 5:We're not going to sit on them for years, but you're going to waste the air rights right, because if you do sub rehabs you're obviously dumping money.
Speaker 1:We're going to waste. We're going to waste about 900 grand, eight 900 grand a building to a million sub rehabbing. So it'll bring our basis on the air rights from 100 a square foot to like 150 a square foot after we renovate. But later on down the road if we want it to develop, it's still affordable to develop at that price point. So ended up being four months later 485X comes out and then we're like okay, we didn't start the sub-rehab, we got our plans approved, we're ready to start doing the work.
Speaker 2:Sorry, how many buildings is this for for the sub-rehab? Is it for?
Speaker 1:all of them. We were going to do a sub-rehab on three of the buildings. One of the buildings were completely vacant. Besides for the retail, the building next door to that was completely vacant, the building next door to that was 50% occupied and the building next door to that was also 50% occupied. And the building next door to that was also 50% occupied. So our goal was to basically move tenants from one from the second to last building into the last building, or or get some buyouts, and we have three buildings that we could potentially do a sub rehab on.
Speaker 1:And our at our basis. It made a lot of sense, yeah.
Speaker 2:And so is that. Is that what's happening? It's. You're going for the sub rehab on those, or did your plans change?
Speaker 1:yeah, so we filed plans to build 99 units, about a hundred and something thousand square feet um 17 story building. We're, you know, in the midst of uh, getting them approved. Um, it's also in gowanus.
Speaker 2:You have the buildings vacant now.
Speaker 1:We have the buildings vacant Most of them are retail. Clear path. So I guess the game plan is to build. We're also in the Brownfield zone. I don't know if you're familiar with Brownfield.
Speaker 2:No, I'm not.
Speaker 1:So Brownfield is. You know Gowanus is known to have environmental contamination. There were a lot of laundromats, car washes and the canal. So the Brownfield program is where the city incentivizes you to clean up your property. And they incentivize you to do so by giving you a percentage of your construction costs back. Usually it comes out to about 20% of your costs get reimbursed by the city. So if you're building a site for, let's say, 20 million bucks, the city would give you back $4 million. On credits.
Speaker 2:What do you have to do to clean it up?
Speaker 1:You got to take the soil there's different types of soil, obviously. They test the soil and they take them to different sites to burn them and clean up the soil and then bring it back on site. Additionally, you got to do an SSDS system it's called which basically it's like venting underground that blows any contaminants all the way up to the top of the building and out into the roof. So this way you know all the contamination doesn't stay on site. After you did this as well, and in some cases people also put in vapor barriers, which is like a, basically a sheet that wraps the foundation to prevent any dangerous chemicals or whatever else contaminants going into the building. So you guys are building this building, then that's the plan.
Speaker 2:Yep, that's the plan.
Speaker 1:How many square feet did you say? It's 108,000, 109,000 square feet.
Speaker 2:How many units is that going to be?
Speaker 1:99?.
Speaker 2:Let's talk about that. 99 units, yeah, all right, it sounds like some nice units though. Yeah.
Speaker 1:So the question is why 99,? Right, yeah, sure, why 99? So basically, we had the density to build 150 or so apartments. Yeah.
Speaker 1:Based on our square footage. Unfortunately, or fortunately, the city's new tax abatement, the 45X, disincentivizes developers to build more than 99 units and we're seeing this pop up across any development site that's going under 45X. They're taking sites that potentially could be a 400 unit. They're chopping them up into 99 units. Yep, we see that deal. Yeah, they're trying to avoid basically prevailing wages and you know a lot of advocates are saying, oh, you know you guys are skirting the system, but I think really, the way the system was set up is it's unaffordable to basically build more than 99 units You've got to pay prevailing wages and with tariffs and construction costs being so high, it would make the project not make sense at all.
Speaker 1:It would be uneconomical to build a project with all these rising costs. So we had to downsize to 99, go bigger on the units, get nicer units. It sounds like it might be a good move, though.
Speaker 5:Everyone wants the bigger units, especially in allocation Families, a lot of families in that area.
Speaker 1:Do you agree or you don't agree with the bigger units? Yeah, families, yeah, a lot of families in that area, good, do you agree or you?
Speaker 2:don't agree with the bigger units.
Speaker 1:I agree that bigger units are better for longevity, meaning you have people that stay longer so you have less turnover. But you're going to get when usually we build a building we like to have some sort of unit mix, so you get some sort of diversity. You get some units that are studios and one beds, which usually command a much higher dollar per square foot, so that brings up your average of your total development and your cap rate.
Speaker 1:But again, we got it at a good enough basis where it made sense to you know to build 99 units and it's a site that you know that I think it's. That area is really developing. I think we're going to see a lot of growth. There's tens of thousands of units going up. I mean not tens of thousands, but there's so many buildings going up along Fourth Avenue. You know, I think that'll create guanas in general more of an a road.
Speaker 2:It's gonna cost you 20 million to build it no more or less.
Speaker 1:Uh, more it's 100 000 square feet.
Speaker 2:So you know all right because you threw out the 20 million before as an example. What is?
Speaker 5:what is? What's the price on that?
Speaker 1:I think you're uh or close price to build yeah usually we're pricing out between, I mean, there's hard costs and there's soft costs. Yeah, just do the hard, we're not counting, you know environmental costs, plans, interest rates. Usually we're looking at between $250,000, $265,000 a square foot.
Speaker 5:For ground up.
Speaker 1:Hard to build, you know, and that's you'd have to run a pretty tight ship. I mean, we finished sites.
Speaker 5:That's lower than I thought you were going to say, but it sounds like you know what you're doing obviously.
Speaker 4:Yeah, we finished, Definitely does we finished the site at like 215 a foot.
Speaker 1:You know it's all things considering. You have to really be on top 215 a foot For rentals.
Speaker 5:For rentals In the Bronx, in the.
Speaker 1:Bronx. Yeah. Which is on the lower end. Yeah, yeah. But some sites we finished at 290 a square foot. It was just it's all factors considering If you had, if we did, an Alt 1, we thought we'd save money on the Alt 1.
Speaker 1:But really it costs more than 290 a square foot to build because not all sites are treated equally so we have to we have to value, engineer and see okay, if you're keeping, you're trying to maintain these walls while you're building on top, all the shoring, all the steel ends up bringing up your cost and timeline and it raises your cost. But on an old one case, you know, we still made sense to do that because we're we're not having to comply with the new code using an old one. Old one allows you to maintain a lot of the old code, so you have a lot more building on a smaller plot, so you would never even demolish that building and build something new.
Speaker 5:And you brought up sub rehab a few times. So you're still doing sub rehabs. What are your, what are your thoughts on that? Like? What parameters are you? Are you looking at Right, like you're? It sounds like you're buying occupied buildings and vacating them. Is that something you're still doing?
Speaker 1:No, it's not really buying to vacate. Yeah, you know that's. That's something that we're not really undertaking unless we have a clear path prior to execution.
Speaker 5:Yep.
Speaker 1:You know we're working on a deal now it's. You know we're working on a deal now. You know we're working on something. Prior to execution we would have an idea and if we can get to that point then we would. You know, I think it's going to be really tricky. I think we're definitely taking a risk. I'm not saying that, you know, from what I hear. You know the DHCR is pretty strict when it comes to sub-rehabs and it's not like they're. You know they're using a barometer and saying, ok, this is disqualified. There's no fixed way of knowing it's. Someone sitting behind a desk is reviewing your paperwork and says I think you did a good job. You know a great stamped or, more likely than not, they're trying to push and prove that you didn't do a good job. To maintain. Know, regulated housing stock, yeah, but we do whatever we have to do. We cross our t's, we dot our i's, um. You know we're looking at uh. You know we're making sure that we cover our basis. You know engineers, architects, photos, uh, affidavits, checks, invoices, receices receipts.
Speaker 5:So with the new laws, let's say, you start construction after 24, right? Is it 23 or 24? After 24.
Speaker 2:January 24.
Speaker 5:24, right. So, in your opinion, what is substandard condition?
Speaker 1:So substandard condition is undefined in the memo that DHCR put out. But in my opinion, substandard condition is something that is pretty much uninhabitable. And the proof is the windows need replacement. You can show okay, the windows need replacement, the plumbing pipes are corroded, electric is fuse versus breaker, or or not, potentially, you know up to code. Uh, you know floors are sagging downwards, roof has a leak in it. Uh, you know boiler is, is, you know, older boiler? Uh, you know facade issues. Um, you know those are typical substandard conditions. So, yeah, sometimes it's, you know, we find it. You know, we bring in an engineer, we bring in an architect, we bring in all these vendors to basically test and take photos and document and make a report showing that this in fact is in substandard condition and in need of replacement. Now we'll find out out, hopefully for the better.
Speaker 5:Yeah, within a year or so, it's hard for them to argue that.
Speaker 1:It is.
Speaker 5:I mean, it's true.
Speaker 1:But again it's, it's, hard but, there's no. Sometimes there's no logic.
Speaker 5:Yeah, I've heard that they're trying to argue the fact that if someone's lived in the building even that, if someone's lived in the building, even if you bought it vacant, right, and there was DHCR showing that someone lived in the building a year ago they might say, hey, well, somebody was living in this building three months ago. If it's so substandard, why are people living there? And obviously that is completely BS, because people we all know in these good locations they'll live in anything. I mean some of those things that we've seen. So it's not just because someone lives there for a cheap price does not mean that it's habitable or in good condition. So I've heard that, although I mean there's ways to prove around that right, especially with engineers proving that things are faulty or not good and floor sloping, because tenants have no idea what they're really living in Right, they can see it, but they don't know what's going on with the joists or the beams or any of that stuff.
Speaker 1:So it's important proof. That's the risk. Yeah, you know that they can come up with a reason not to you know to deny you, not on the basis that you completed a sub rehab. They could say someone lived there, you live there. Um, you know, buyouts, I think, are a big issue. So if you, if you did buyouts while doing a sub rehab in the city and you submitted that to the city during your application process, they might deny you because they're going to say you paid this guy 100 grand to leave yeah, it must have been a good, good apartment if you paid him 100 grand they're not, but they're assuming they're
Speaker 1:assuming they make the assumptions the other way and and it's understandable I mean, the New York City or New York are tenants. So if I was a politician and I wanted to get elected and I said, hey guys, I'm going to take you guys out, free dinner, free lunch, don't pay rent, pay rent if you want to pay rent. You know challenge, if you want to, we'll pay for your legal fees. I'm going to push all these things because that's going to help me get elected and win.
Speaker 1:So the people that are elected and passing these laws and making these decisions are doing what pretty much the majority of the constituents want, at the detriment of a long term crisis.
Speaker 2:For sure, the constituents want, at the detriment of a long-term crisis, for sure, um. So the other thing that I've really appreciated, enjoyed about working with you guys is, um, these guys sign contracts for 30-day toes.
Speaker 5:It's good, have you heard about that? I did hear it and yeah these guys close.
Speaker 2:It's no bullshit, it's just come to the table and close.
Speaker 5:It's crazy that more people don't do that. I mean, obviously they have to have the cash right or the relationships with some lender right, but it would take everyone's asking for these long closings honor about closings and you could get it. Most sellers will do it for a better price if it's quick, so that's good.
Speaker 2:Has that worked out well for you guys, these 30-day TOEs?
Speaker 3:Think what we're doing right now.
Speaker 2:Yeah, worked out.
Speaker 3:All right, it did Working out and the previous. The previous one also Is this something I mean.
Speaker 2:so this is what you've done with us, right? I know I can come to you guys for a quick no closing, but is this what you're doing on other deals across the market as well, no only with you? No only with PRG, only with PRG deals. All right, amazing, none of those Alpha or Marcus deals?
Speaker 3:Definitely not. Oh yeah, give them 90.
Speaker 1:We're giving them 90.
Speaker 3:Yeah, 90 on, or about 90 on, or about Exactly. For sure. But no, yeah, we're pushing it on majority of our deals.
Speaker 2:Very nice, it's good. And how are you guys set up to be able to close so quick Banking relationships?
Speaker 1:So, we have relationships with many different lenders. We've executed on deals with these lenders through COVID. We've paid our loans, we executed in a timely manner. So lenders are worried about risk. That's their biggest issue. That's why it takes so long to close. So if we're ready, we're prepared, we know what the bank is going to ask, we can close a lot quicker.
Speaker 1:Sometimes people need 60, 90 days because, you know, because they're not prepared and they don't have the information or they can't anticipate what will be required of them to provide. So we try to have everything lined up, ready to go. You know, and we want to execute our plans right away. We don't want to sit on something in our head 60, 90 days away. If we can, if it's something that requires 60 to 90 days, obviously we'll need to. But if it comes down to, we're going to get a better deal because we're going to close in 30 days, I'd rather do that and execute our business plan right away than push back. Then push back and say I'll take 60, 90, 120, um again, we're doing deals many different deals, many different scenarios for sure it's good stuff.
Speaker 2:um, are there? Are there any other like deals, like deal stories that you guys have done that that are worth talking about, like, for example, and we can talk about whatever Court Street could be interesting, or Atlantic?
Speaker 5:Avenue. It's a little old, though right At this point you talking about the bookstore they didn't do the bookstore, they did the funeral. Funeral okay.
Speaker 1:It's about two years. Oh, I know.
Speaker 5:The two corners.
Speaker 2:Yeah, exactly Off the corner Got it. And then like Atlantic Avenue out in like East New York as far as I could tell you guys own that thing for free. You bought it, you sold the sell site, you refinanced, so I don't know, I'm just throwing it out there. Are there any other deal stories that could be interesting and just talking about?
Speaker 1:I mean, court Street was an interesting one. We bought it when the interest rates were 3%, going up to 6% at the time 6.5% Rates were just climbing. We went into contract. Rates were really low. Our plan was to, you know, bring it up to like a seven plus cap, which in the court street market at the time was a good deal. We basically rates hit six, six percent while we were about to close.
Speaker 1:So the banks the bridge lender that we're working with said listen, all right, we can't underwrite to an exit because rates might go up above what we're. You know you won't have an exit, you'll have to come up with money. On the refund, we want to make sure we're good and we're protected. So we ended up getting a better price on the deal from the seller. With a lot of reluctance we ended up closing on the deal and our plan was to convert the second floor of the building from retail or office to resi and we were going to convert. So this building's on court in sackett, so the back of the back space on sackett street. We were going to convert it into a duplex and make it a resi unit and then keep like small retail.
Speaker 1:After six or seven months we found out that DOB approved the plans pretty much. Ninth inning Chief plan examiner comes in, scraps the whole plan. He goes. Unfortunately, you cannot. We're not going to allow it. You need to put an elevator in the building and we two 20, 22 footers or 21 footers we're not putting an elevator on a 21 footer.
Speaker 1:I mean you're going to butcher the whole entire building for ada compliance yeah so because we are vertically integrated, we have uh, we have a retail leasing, we have apartment rentals. We were listing the retail simultaneous to see if we can get the right number. So we ended up going with retail and we ended up getting really nice numbers on the retail and ended up being a really good cap rate above nine, I think we. We refied about nine million on the deal. We paid eight, probably invested five 600 into the deal, so it ended up being another really really good deal. Wow, it worked out. You know we, we. You know we. Thank God, you know that it worked out, but it, you know we we had to navigate through different you know different options.
Speaker 1:We had to convert it and split up the retail into smaller pieces. We got one on the corner and one on the inline. We got a second floor tenant on taking a 2,000 square foot space, which really good tenants in general in that area is what we found on the retail side. Absolutely, yeah, it's a great pocket. It's a really good pocket. That whole block just turned over side. Absolutely.
Speaker 5:Yeah, it's a great pocket. It's a really good pocket. That whole block just turned over too. No, it's good.
Speaker 2:Yeah, that whole block turned over, yeah.
Speaker 5:Were you on those deals.
Speaker 1:Yeah, yeah, we were on the deals.
Speaker 5:Nice. Yeah, it's going to be a good block.
Speaker 1:Yeah, I think Court Street in general. I mean, again, we're doing a townhouse, the townhouse I was telling you about. Yeah, Douglas, right around the corner from there, you know we're seeing a lot of transactions happen between $8 million and $13, $14 million.
Speaker 4:For sure it's crazy. It's a lot of money and you're doing a full cat.
Speaker 5:This is a one family. Are you breaking up a condo?
Speaker 1:How family?
Speaker 5:or you're doing a breaking up of condos how's?
Speaker 3:it going, so, if there's any, buyers listening to this podcast.
Speaker 1:Yeah, we're doing a 6500 square foot townhouse with an elevator, five stories, um, it'll be. You know, first floor walk-in, second, third, fourth, fifth and the fifth is like a bulkhead, with like floor to ceiling windows.
Speaker 2:It's gonna be be gorgeous. This is a conversion or it's a new?
Speaker 1:build. It's an existing four-family that we are converting into a single family. Nice, that sounds great.
Speaker 5:We sell a lot of these. I mean we haven't done a deal with you guys yet like this, but 15, 20. I mean, most of the blocks over there we've sold Maybe more, but a lot of 25-footers and it goes to one of three people usually and they're doing I think they're doing really well.
Speaker 2:They're very obviously location sensitive, but Carroll Gardens, Cobble Hill aren't as good like in actuality as what it looks like on paper. Yeah but that's, that's what they say.
Speaker 5:Yeah, that's what they tell us. They don't want you to know they're making money yeah.
Speaker 4:Because then you tell other people hey, this guy is making money doing this.
Speaker 5:But to Derek's point.
Speaker 2:But you know how many people can't finish a product Like? There's a lot of people that try to do this, especially like the users, like the people that come in and like, try to like make a townhouse.
Speaker 5:We're still on a deal right now. I mean we see it a lot, but even, derek, we own buildings and we do construction. We kind of know what we're doing. We kind of mostly not, and we always run into issues, people that have no idea what they're doing, and they're doing construction in New York City. I mean it's so, so hard.
Speaker 2:There's a lot of professionals that own a lot of buildings that still get stuck.
Speaker 5:Well, because a lot of these people are. You have a we talked about a construction background, you have a GC license I think that's 80 percent of the battle right there but a lot of these people are just they're good at raising money, they have their relationships with equity, but they don't have the construction. Yeah, no matter how much money you raise, how many deals you've done timing is everything you get very lucky on your exits. If you don't know construction, it's a big problem and a lot of people don't know construction.
Speaker 2:We were talking about this yesterday or the other day in the office. One of my least favorite types of deals that we get across our desks are people that are trying to sell finished product. They're saying it's a finished product but it's not finished because it's not signed off. Well, that's a huge problem. Or they don't have the sub rehab cert and they're like, yeah, we did a sub rehab, it's free market.
Speaker 5:Well, that's very common, because it's very hard to get a sub. It's time consuming.
Speaker 2:Yeah, but still, at least show us what you got so we can make our own determination, instead of being like, oh yeah, trust us, it's a good file it.
Speaker 5:Derek is really alluding to yours. We get hired on deals that are finished, where people are reluctant to tell us that they have open alt-2s, open alt-1, obviously.
Speaker 2:Not even that They'll send us a deal like a rent roll. They'll be like oh yeah, price it for us.
Speaker 5:And we're like hey well, what's up with this open permit?
Speaker 2:And we all know they change the laws and then you see them hire someone else and that person has it on the market, I'm like, okay, have fun.
Speaker 1:The challenge is for sign-offs right, even the court street deals right. I finished construction in like two months. We gutted the whole place. We built it out for our tenants Turnkey we're able to execute, we move quickly. Great. I just finally finally got final sign-offs to get CFO on that property. I had TCO all this time To get CFO. It took me a year later.
Speaker 1:Now you're going to ask how is it taking you an extra year to get a CFO? So the challenge was extra year to get a CFO. So the challenge was in order to get a CFO, you got to close out all old jobs, all the permits. So we had filings, renovation work that was done by the prior seller, like 2011, 2010. So good luck finding that electrician to go sign off his project Long gone. Call him. They tell you see you later. I don't know who, you are Not interested. So now you've got to find a new electrician who's willing to supersede that application, sign off what's behind the walls without seeing it, or maybe open up the walls and see what's behind and then sign it off in order for you to get the full CFO.
Speaker 1:So sometimes there are other obstacles that people go through. Sometimes it's a PAA. What's a PAA If you built a building and then you made changes during construction, like general conditions happen, there was a pipe sticking out of the wall, so now I had to move the wall over two feet. If DOB rejects your PAA and says this is no good and you already finished the product and you already rented it out, in order for you to get sign-off you need to move that wall over two feet. But if you're already occupied it's very hard to get sign-off. So there's so many different moving parts and moving components in order to sign off a project and you just have to be able to navigate the system and understand what they're looking for and have the right professionals on hand that understand this stuff and prepare you in advance. You know before you do anything.
Speaker 5:And 100% and even as small as like electrical applications. Like, obviously we sold a lot of deals to Carlisle I think it's 65 deals at this point and early on on we were doing this, they were and they still are, very anal about making sure everything's signed off. And we had a deal that we're trying to sell an open electrical application and it shouldn't have been that hard. Like the all, the main, all two, all that was signed off. But obviously it was signed off three years prior and the in the the laws changed with electric, I guess, yeah. So someone came in and they're like oh, this isn't code, that's not code, this isn't code.
Speaker 5:So we had to like the guy had to go and redo all this different electric work. It was so hard. They had to get access to occupied units. So I just think people really underestimate just signing off permits. Because there are people living there, you do have to open things up and they're constantly changing code. So it's not like the code three years ago. Is the code today Correct? So they would just sign it off, but it's not the code anymore. That was the issue.
Speaker 1:It is the issue I mean. That's why I urge everyone that does a project sign it off right away, yeah. Don't wait. Although it's with it, you can not sign off the job, but if you ever wanted to sell the property or do anything, if you signed it off fully, you don't have to think about it. You put it to bed. The guy did the work. You paid him for the work.
Speaker 5:You paid him to sign off. Sometimes success aren't paying them either, though, but if we have some closing, we still have to pay the contractors. It's like oh, it's not paid. What do you mean? Yeah, it's crazy, it's a challenge.
Speaker 1:Again, it's a challenge. I mean, people are. You've got to remember. Some of these people build sites with the rates being 3% 4%.
Speaker 1:So when they were factoring, all right, we're going to build this into sevens and we're going to cash out, and then all of a sudden, you know, all of a sudden, like rates go to six. So now they're struggling, they need to come up with all these, all this additional capital which they may or may not have, and they're just waiting for the rents to come in. They're just playing catch up. So they're waiting for rents to come in so they could pay the bank. And in some cases that's happening for people that are undercapitalized for a specific project.
Speaker 2:It's a lot. No, I think this has been a pretty good discussion. I think we went around the horn on a lot of stuff. I don't know if there's anything else you guys would like to go over, jacob I think we covered a lot.
Speaker 3:Yeah, we covered a lot. Yeah, we covered a lot.
Speaker 1:I think it was a really impressive conversation.
Speaker 2:I think, man, you guys just have it. I feel like you really have a good knowledge and a good skill set about all different types of asset classes and all the nuances. I mean the way you're able to so fluidly speak about just all the different parts and it's a testament to the wide range of deals that you guys are doing and the fact that you have this knowledge and skill set that you can just come in and close and get it done.
Speaker 5:I don't know another buyer that would buy that spectrum. Build a 99 unit. Do a sub rehab. Buy a free market Townhouse.
Speaker 2:Townhouse. I mean, I didn't even know you guys were doing that I didn't even know you guys were doing that.
Speaker 5:I mean the single family townhouse.
Speaker 1:I think is one of the harder ones, right yeah, the single family is, you're saying, the hardest ones to do. I wouldn't, I wouldn't say that.
Speaker 5:No, because of the attention to detail. It sounds fun, it's not fun, I mean. I love it for me.
Speaker 1:I.
Speaker 3:For me this is all fun.
Speaker 1:I love real estate. I love creating value, I love building a new product. I enjoy this, so for me it's all fun.
Speaker 5:Yeah, I love it. You have to have fun.
Speaker 1:We have fun in the office all day.
Speaker 4:As do we. We have a lot of fun. You can't take life, so seriously.
Speaker 2:You've got to enjoy a little.
Speaker 1:Definitely you can't take life so seriously. You've got to enjoy a little. You can't just take things. You're working most of your life, so you might as well do what you enjoy and enjoy doing it while you're doing it.
Speaker 2:Do deals and have fun.
Speaker 1:Exactly Love it. Things happen, you win deals, you lose some deals. It's all good, it's all part of the nature of the business the nature of the game and you just play right through it.
Speaker 2:That's what we do. I think that's a good place to leave it right there. Thanks guys.
Speaker 5:Thank you Pleasure.
Speaker 2:Good seeing you.
