Providing Family Office Joint Venture Capital with Troy Marcus, Founder of Evergen Equity

Summary

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Real Talk: Real Estate Discussions with Andrew Kirsh

Episode: Providing Family Office Joint Venture Capital with Troy Marcus, Founder of Evergen Equity

Date: December 14, 2022
Host: Andrew Kirsh
Guest: Troy Marcus (Founder, Evergen Equity)

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Episode Overview

In this episode, Andrew Kirsh interviews Troy Marcus, founder of Evergen Equity, a real estate investment group based in Austin, TX, focused on providing joint venture capital for generational real estate assets on behalf of multiple family offices. The conversation dives into Troy’s investment philosophy, Evergen’s unique business model, market dynamics, leadership, and personal insights relevant to both real estate professionals and newcomers to the industry.

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Key Discussion Points & Insights

1. Evergen Equity’s Unique Approach

• Tagline & Philosophy:
  • Evergen focuses on "partnering Evergreen Capital with generational real estate," – assets held for generations rather than quick flips.
  • Quote:
    • “We always have the ability to control the asset for not years, but for generations.” – Troy Marcus [03:25]
• Client Structure:
  • Works with multiple ultra-high-net-worth family offices as a dedicated real estate investment partner.
  • Avoids commingling funds; each client invests via a separately managed account.
• Investment Strategy:
  • Long-term hold with emphasis on downside protection.
  • Conservative deal capitalization, focus on compound equity over time.
  • Looks for under-appreciated dirt (land) in growth corridors across all asset types in the continental US.
  • Not seeking "home runs"; more concerned with steady, stable performance.
  • Quote:
    • “We live and breathe downside protection. We’re in the business of no home runs, no strikeouts.” – Troy Marcus [05:00]

2. Comparison to Traditional Private Equity

• Hold Periods:
  • Contrasts Evergen's indefinite hold strategy with typical private equity cycles (3–7 years).
  • Families retain significant rights over buy/sell decisions, tailored to their estate and liquidity needs.
• Aligned Interests:
  • Troy criticizes the "operator-first" mentality of traditional private equity.
  • At Evergen, investment structures are “what’s in the best interest of the family, then the property, then the operator.”
  • Quote:
    • “All I can say about our business is I think we work a lot harder to make a lot less money, but I think we better protect the families that we're investing in.” – Troy Marcus [07:33]

3. Deal Structure Details

• Always Joint Ventures:
  • Evergen brings the majority of equity as a joint venture partner with operators [11:09].
• Why Not a Fund?:
  • Separate accounts provide tailored solutions (e.g., tax strategy, timing of depreciation).
  • Quote:
    • “If you go try to make bespoke decisions at the property level or the fund level for one family, you’re just going to upset the other seven or 79 of them.” – Troy Marcus [12:38]
• Family Consent Rights:
  • Families have sign-off on acquisitions and ongoing control over key decisions, with some lockout periods to protect operator integrity [13:16].

4. Personal and Professional Background

• Origin Story:
  • Troy is from El Paso, TX, with family roots in real estate.
  • Studied real estate finance, worked in private equity in Dallas before returning to Austin to lead Memco and eventually founding Evergen in October 2021 [14:53].
• On Austin’s Growth:
  • Remembers Austin as a "sleepy town" in 2005, now a major tech and business hub, marked by an “ecosystem” that attracts both companies and top talent, especially women entrepreneurs [18:05].
  • Predicts Austin and Salt Lake City as next wave markets; highlights features like education, workforce, and business-friendly environment.

5. Real Estate Market Trends & Themes

• Nearshoring & Industrial:
  • Expects major trends in nearshoring to boost US/Mexico industrial markets due to shifting supply chains [17:12].
• Market Cycles and Demographics:
  • Emphasizes the importance of identifying not just today’s “hot market” but where the next big growth will be (e.g., Tucson, Chattanooga, Salt Lake City) [22:07].
• Migration Patterns:
  • Notes influx of Californians and companies into Austin and Texas as a whole [26:09].
• Policy and Affordability Crisis:
  • Population inflows create affordability crises; blames restrictive housing policy and stresses need for political leadership on development and immigration [27:56].
• Current Economic Environment (as of November 2022):
  • Inflation, layoffs in tech, crypto crash, and most importantly, a liquidity crunch due to reluctant lenders [32:00].
  • Quote:
    • “The problem is not the interest rate so much as it is the liquidity… It’s not that Wells Fargo is at 4% or 14% or 44%. They’re just not lending.” – Troy Marcus [33:41]
• Investment Focus Amid Turbulence:
  • Focuses on basis (entry price) and operations since they can’t control markets.
  • Still bullish on industrial (especially infill), infill housing, and limited new office (must be highly amenitized medical/light office).
  • Warns that outdated large offices are a “four-letter word”—could face significant pain before becoming attractive [36:43].
  • Return-to-office will shift demand in office space design and locations.

6. Work, Passion, and Leadership

• Time Management & Values:
  • Credits supportive spouse; sees passion as driver for balancing leadership, philanthropy, family, and business [42:20].
  • Believes strongly in giving back; driven by a sense of responsibility to future generations.
• Quote:
  • “To whom much is given, much is expected... we owe it to the generations coming after us to absolutely provide them with first rate education, to provide them in neighborhoods where they can be safe and to provide them with opportunities where they can go thrive.” – Troy Marcus [43:10]

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Notable Quotes & Memorable Moments

• On Evergen’s Purpose:

  • “We only do deals that are evergreen in nature or long dated in nature. We always have the ability to control the asset for not years, but for generations.” – Troy Marcus [03:25]

• On Downside Protection:

  • “We live and breathe downside protection... no home runs, no strikeouts.” – Troy Marcus [05:00]

• On Private Equity vs. Family Office Model:

  • “I think we work a lot harder to make a lot less money, but I think we better protect the families that we're investing in.” – Troy Marcus [07:33]

• On Market Liquidity Crisis:

  • “The problem is not the interest rate so much as it is the liquidity… [big banks] are just not lending.” – Troy Marcus [33:41]

• On Return to Office:

  • “The four letter word in real estate is office... But I will tell you this morning, so last week Elon Musk completed his acquisition of Twitter. This morning he announced we're back to going to the office, everybody's coming back a minimum of 40 hours a week.” – Troy Marcus [36:43]

• On Relationships and Passion:

  • “The power of compounding… relationships. Life is about relationships and friendships.” – Troy Marcus [44:25]
  • “You’ve got to be passionate about what you’re doing. If you’re not passionate, you’re going to cut corners.” – Troy Marcus [45:09]

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Key Segment Timestamps

• [02:53] – Evergen’s tagline & business model explained
• [04:15] – Definition of “generational real estate” and risk-adjusted return focus
• [06:59] – Long-term holding structure versus traditional private equity models
• [11:09] – Joint venture structure details
• [13:16] – Family consent rights & decision-making
• [14:53] – Troy’s personal and professional background
• [18:05] – Austin’s transformation and major business trends
• [22:07] – Comparing Austin's growth to other emerging markets
• [26:09] – Migration from California to Texas and its implications
• [27:56] – Affordability crisis & need for political leadership
• [32:00] – Economic uncertainty: inflation, layoffs, liquidity
• [34:52] – Evergen’s strategy for the current climate
• [36:43] – Office’s future and return-to-office movement
• [42:20] – Troy on work/life balance and passion
• [44:25] – Lightning round: advice to younger self
• [46:02] – Lightning round: Fed interest rate predictions

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Tone & Style

The conversation is candid, insightful, and occasionally humorous, reflecting the familiarity and mutual respect between Andrew and Troy. Troy shares practical, grounded views shaped by his family-business roots and his extensive real estate experience, while also conveying a deep sense of responsibility to his clients and community. Both take an optimistic yet cautious approach to navigating current market volatility.

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Summary Takeaways

• Evergen offers a differentiated model for family offices lacking in-house real estate teams—long-term, hands-on, steadier returns with tailored structures.
• Current market uncertainty makes basis and operational performance paramount; liquidity is a greater concern than simply interest rates.
• Migration, market cycles, and policy/affordability are shaping real estate’s future—investors must take the long view and focus on fundamentals.
• Troy champions stewardship, passion, and the compounding value of relationships—for both business and personal life.

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For Further Listening

Listen to the full episode for more real-world insights and market anecdotes, and catch upcoming content at www.sklarkirsch.com or on your preferred podcast platform.

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Transcript

[Andrew Kirsch]

Welcome to Real Talk Real Estate discussions with Andrew Kirsch. In each episode, Andrew interviews industry leaders. We'll hear their real time opinions on today's market, their background and unique career highlights and guidance for newcomers to the industry. You can find this show at www.sklawkirsch.com and on YouTube, LinkedIn, Apple Podcasts, Spotify, Google Podcasts and more. Now here's the host of Real Talk, Andrew Kirsch.

Episode six of the Real Talk. Welcome, I'm Andrew Kirsch. Well, it's mid December. Deals are actually getting done, maybe not in the same volume as they have in prior years, but you know, even in the last four to six weeks, we've closed several multi family deals. California, Washington State, Texas, Texas, Florida. We recently closed an industrial outdoor storage deal here in Southern California, another industrial deal as well. And one thing that is similar to all of those deals is a lack of institutional capital behind those deals. So where are they? I don't know. It's ski season. Maybe they're in Aspen already. So to all my private equity friends, congratulations on having an early ski season. In today's episode, we've got Troy Marcus, the founder of Evergin Capital. I've known Troy for several years through our YPO days, and Troy has always had an interesting, thoughtful and insightful perspective on the real estate market. I know you'll enjoy my conversation with Troy. Hello there. Welcome to another edition of Real Talk. Today we have my code good friend and close YPO buddy, Troy Marcus, founder of Evergen Equity, based in good old Austin, Texas. Troy, thanks for coming onto the show.

[Troy Marcus]

Andrew, thanks for having me, my friend. I'm excited for the time together.

[Andrew Kirsch]

Well, it's a real honor. I, I really appreciate your time and, and, and see all the good that you're doing within the real estate world, philanthropy, ypo. And I'd love to get into to all of that. And really first, because I know you started Evergen just what, now? A few months or maybe it's a year ago during COVID But your tagline on your website, I'm really interested in hearing the origin about it and I'll read this for our audience. Partnering Evergreen Capital with generational real estate. That's, that's just a great phrase. How'd you come up with it and, and just tell us about Evergen.

[Troy Marcus]

No, absolutely. Well, I'll tell you. We did not hire any sort of specialty marketing firm to come up with the tagline. I think that it was one of the hundred items that we needed to figure out when we started this business and we were checking items off. But it really does resonate with what we do. Where Evergen's a little unique to most real estate groups out there is we are a multiple family office strictly focused on the real estate allocation for some very large families. And these are families whose technology you use, whose consumer product goods you consume, whose cars you drive, whose energy you use. But what we do that's pretty unique is we only do deals that are evergreen in nature or long dated in nature. So we always have the ability to control the asset for not years, but for generations. And we also don't commingle the funds of our family. So any deal we do outside of my personal co invest, we have a single family. So we're not cobbling together eight families or 300 folks who we raise capital over a podcast to garner interest from. And so where we're excited is about leaning on this generational asset, which is real estate, and helping couple it with capital and serving the needs of our families for not just years, but generations.

[Andrew Kirsch]

So let's dive into that a little more. And I also want to get into your background, but when you say generational real estate, what do you mean?

[Troy Marcus]

I mean I want to own Rodeo Drive so I can come visit you more often.

[Andrew Kirsch]

No, because that's the only street that I shop on.

[Troy Marcus]

Exactly. Abbot Kinney. Abbot Kinney. Exactly.

[Andrew Kirsch]

Abbot Kinney.

[Troy Marcus]

Yeah.

[Andrew Kirsch]

I don't know if I'm cool. I used to be cool enough for Abbot Kinney. I'm more of Palisades Village, San Vicente and Brentwood. You know, lululemon type, viori type of casual clothes, clothe wearing person. I love it.

[Troy Marcus]

I love it. No, at the end of the day what we're trying to do is, you know, focus on risk adjusted returns. And where can we over a long period of time compound the equity that our families are investing in these deals? So I made the Rodeo Drive joke, but the truth is we're just hyper focused on first and foremost protecting downside of our families. And by our say, our families, those are our ever gen equity families, the families we get to serve. And we, we live and breathe downside protection. So we talk about all the time. We're in the business of no home runs, no strikeouts. We are, we are maniacally focused on operating great assets and we capitalize our deals conservatively. And so as it relates to what are we looking at, we'll look at opportunities across all product types from coast to coast, strictly in the domestic continental United States. But that can be a contrarian play like office in San Francisco or that can be an invoke play like industrial or multifamily across the Sun Belt. But at the end of the day we want to know that the underlying dirt, the asset that we, we're going to be investing in is something that we feel comfortable about being in the path of growth or being in a place where we can see long term appreciation. And so we're not in the business of like timing markets and buying at a trough, selling at a peak, picking the sexy market of the week.

[Andrew Kirsch]

So you know, most of my clients, I would say they have hold period. Well, there's a stated hold period, but then there's the real hold period. So the stated hold period may be based on a five year hold, but as we've seen, not the market that we're currently in over the last 90 to 180 days. But prior to that the, I would say the average hold period of my clients may have been as short as three years, maybe up to five. Are you, is your business plan not to sell these assets for your separate account clients and just to hold on to them literally for a generation?

[Troy Marcus]

It's a great question and the short, the short answer is yes. If nothing else, we always want to have options. We think options are a real asset and we're capitalizing these deals if there's leverage with very long term debt and certainly with equity, that's in it for the long haul. Now at some point in time, if somebody wants something we control more than we do and that's in the best interest of the family, we'll sell it. But everything we're looking at from initial underwriting through acquisition and into our hold period is how can we own this best for a really long period of time. And, and it flows through in our operations. When we're thinking about how we're treating tenants, we're treating, we're treating them in hopes that they're going to be with us and in our portfolio for a very long time. When we're getting involved in the community or we're maintaining the buildings, we're not patching the roof, we're re roofing it, we're not fixing the asphalt, we're laying concrete, we're, we're really trying to build a portfolio of assets that we're really proud to own for a long period of time. Now you say Troy, but the way the business works is you want to get in and out of deals in three, five or seven years. And under traditional private equity, you're Absolutely right. And to be super clear, I think that I think our business versus traditional private equity. All I can say about our business is I think we work a lot harder to make a lot less money, but I think we better protect our, the families that we're investing in.

[Andrew Kirsch]

And I say that work, work harder to make less money. That sounds like a law firm's business.

[Troy Marcus]

Well, there's a few jabs I could throw there, but I'm not worried about the Kirsch kids, you know, getting food on the table or going to college anytime soon.

[Andrew Kirsch]

That was just vis a vis the broker model.

[Troy Marcus]

Oh, absolutely. And I respect that wholeheartedly.

[Andrew Kirsch]

Okay. I need it to be more clear when, when, when making that statement.

[Troy Marcus]

No, absolutely. And so what I would say is I, I think that private equity model is beautiful and I think it serves a large swath of the investable dollars out there, particularly meaningful institutions, pensions, endowments that are most often non taxable. And I also think it's a great way to get diversification. If you are what I would call a high net worth investor. The families that we're working alongside, I would call them ultra high net worth families. So below the institutional capital and below the institutional family offices, examples of those might be MSD Capital, Austin based group that I know you office down the hall from or you used to. Not only do Michael and Susan Dell and their family and in turn their partners have a family office team, they also have fully built out teams tied to all the verticals in which they're investing in. So public equities, private equity, natural resources. They have a fully built out real estate team. The families we're serving are big enough to where they have a family office team, but not a big enough family office to where they have a fully dedicated real estate team. And as you know, real estate still very local, very boots on the ground, relationship driven business. And that's where we solve their needs. But these are families that are writing big enough checks that candidly, I think they deserve better control and better economics than what they're going to get in the traditional private equity model. And so the way we look at this business is decisions in traditional private equity more often than not are made in the following order. What's in the best interest of the operator followed by what's in the best interest of the property and then what are the implications on the investor or in our case, the family. And in my opinion, that's not, that's not what our families deserve. So we look at the way we structure deals and the way we look at investments is what's in the best interest of the family, followed by what's in the best interest of the property. And then, oh, this is real estate. It's not that hard. Let's go find the right way to structure the deal to align the operator's compensation or their incentives with what's in the best interest of the family and the property.

[Andrew Kirsch]

So are all of your deals so far and even going into the future structured as joint ventures with the operator where you're putting in the lion's share of the equity?

[Troy Marcus]

Correct, correct. And all of those internally, we're deploying through separately managed accounts for each of these families.

[Andrew Kirsch]

Yeah, I guess last question on this and then I want to get back or I want to get into the your background or start talking about your background. Why separate accounts versus a fund model where it's commingled?

[Troy Marcus]

Absolutely. So the fund model, while raising funds is not easy and deploying funds is not easy, it would certainly be an easier on our Evergen team vehicle to invest through. But it comes back to what's in the best interest of these families. And I'll give you a real time example. We bought a large industrial deal last December. And as you know, through the ability to accelerate depreciation and utilizing cost segregation studies, you can go take big losses on paper in your first year. And what you traditionally do is take that big loss in the first year because time value of money, take the loss early, take the gains later. But in speaking with the family office that we invested alongside, we knew that they actually had net operating losses that would cover their tax bill from last year. So we put off taking that loss in calendar year 2021 and we'll take it this year. And the truth is that wasn't necessarily in the best interest of me and it wasn't necessarily in the best interest of the operating partner we brought in, but it was the right decision for the family. And if you're investing through funds, whether you have eight, eight large investors or 80 smaller investors, if you go try to make bespoke decisions at the property level or the fund level for one family, you're just going to upset the other seven or 79 of them. And so this to us is the way to best serve the family. And even if it's a little extra work for us.

[Andrew Kirsch]

So I guess last question on your structure. Curious how, how much can, if you're able to share, how much control or consent rights do your individual family, do your families have when deciding to acquire real estate?

[Troy Marcus]

It's a great question. So we spend a lot of time on the front end with our families really understanding their needs, their trust, their estates, what kind of capital is flowing in and out of their family offices and if they have any real estate exposure up until that point. Because we really want to build out a diversified real estate portfolio for them. And so we really have a good idea of what these families are looking for. Are they looking for their yield to come from appreciation? Are they looking for it to come from the cash flow during the hold period? What kind of risk are they willing to take? So once, once we have a deal, we're pretty certain we know one or a few families that this will fit with. And then it's a matter of a couple of days, not a few weeks to get final sign off from the family office. And then after we close, we do give the family control as it relates to acquiring adjacent properties, anything tied to leverage and when it's time to sell. There are some lockout periods just to protect our operating partners and to protect the business strategy. But generally speaking, if we, if the lion share of the equity is a family and they have a change of heart, maybe it's because there's a change in real estate strategy or maybe they have an issue on the home front, a divorce, a death estate planning, and they need to exit. We, we give them the ability to do so in a way that, that still covers the best in class operators that we partner alongside.

[Andrew Kirsch]

That's great. All right, let's talk about Troy. The man, the myth, the legend, your background. So I know you're currently located in Austin. Is that where you were born and raised?

[Troy Marcus]

So I was born and raised in West Texas, in El Paso, which is the halfway point between you and LA right now. And me in Austin, grew up in and around a third generation family business that was real estate focused. So on the way to football practice, we're poking our head in vacancies, on the way to Boy Scouts, we're walking construction sites. So it's as you know, I'm a one trick pony. It's all I know, it's all I do. I don't play golf on the weekends. I don't like to gamble. I mean, I like to try real estate. And so I credit my family for my passion for this business. Ended up coming to Austin to study real estate finance and then was working in private equity real estate in Dallas and then had the opportunity to come back to Austin in 2011 and I ran a vertically integrated private real estate company and in two years ago when started to phase out of that role, I still sit on the board of that company Memco. And we started Evergen last October. So October of 21. So we, we just passed the one year mark. Really proud of what we've done, but really excited about what's up in front of us and, and there's a lot of turbulence in the market, but we think we're just getting started and, and ready for this roller coaster.

[Andrew Kirsch]

Well, there's one thing we have in common and that's we've both been to El Paso. You being RA born and raised there and me, the only time I've been to El Paso, I want to say it was 2002 Sunbowl, Northwestern, Northwestern played UCLA and we painted the town purple, had a great time. I remember walk, did not have my passport, just a driver's license. Walked over the bridge into Juarez, buddies of mine had, you know, several Coronas or maybe Mexican beer and walked back over to El Paso and just had a great time. I have a feel I haven't been back since. So it's been 20 years. I have a feeling my 36 hour experience in El Paso 20 years ago is a little different than what it would be today if I tried to walk over that bridge and have a beer in Juarez.

[Troy Marcus]

I think you're absolutely right there. But one theme I have a feeling we'll talk about at some point as it relates to real estate and some themes is the concept of near shoring. And I do think particularly as the world becomes less globalized and more regionalized, we're going to see connectivity between Canada and the US And Mexico grow tighter over time.

[Andrew Kirsch]

So how long have you lived in Austin?

[Troy Marcus]

I've been in Austin for most of the last 16 years with that stint in Dallas in between. But this most recent stint was 12 years.

[Andrew Kirsch]

So tell us about. I mean obviously everyone has heard and read, I'm sure has been to Austin during that time period. But just what was Austin like in the, you know, mid to like 2005 time frame compared to what it is today?

[Troy Marcus]

Great question. So you 2005 was a special year because it was the end of a football season where USC ended up losing to UT for the national championship. So there was a lot of burnt orange in the town, but by the.

[Andrew Kirsch]

Way, there was a lot of burnt orange in L A that year. I tried to go to that championship game between SC and Texas, didn't have a ticket. Walked around the Rose bowl for the entire first half saying the prices have to come down if I wanted to watch the second half. As for a single ticket, I had the luxury of getting a ticket for let's just say well over $1000. May have been even $1500. Just even watch the second half. I said forget it. I went to a bar and probably the greatest college football game at least for Hook Em Horns.

[Troy Marcus]

Exactly. It was a special one for sure. But. But no. So, so how has Austin changed in that 17 year period? It's changed and it is, you know a lot of people liken it to LA in the 80s. I mean it was, it was a sleepy town. It was, it had a lot of special attributes to it but it really hadn't caught on. And where we were fortunate was we have a state capital. We have a great, you know, very at the time the largest university in the, in the U.S. i think right now we're the third biggest. But, but outside of Dell and Whole Foods, you really did not have industry. And what has happened, and I know you've been here a bit and you've worked alongside clients who are doing things in Austin and, or based in Austin and doing things elsewhere. It's become a really special place. And if there's one word that I would use to describe Austin, it would be ecosystem. And it's really created ecosystems that are not dissimilar from what we've seen in venture in Northern California or in finance on Wall street to a point that I don't think people fully appreciate until you're in it. But right now, at a time where we just watched Congress pass 52 billion of subsidization for semiconductor manufacturing in the U.S. so real semiconductor business here, whether it's Samsung's $17 billion plant or Infeon or AMD, obviously some big tech. And I'm sure we'll double click on big tech because it's been a whirlwind of the last few weeks in this economy and tech will certainly be feeling some of that whipsaw. But it's Oracle's headquarters moved here two years ago. Tesla moved. Meaningful presence by Apple, Facebook, Google, Amazon. I mean big tech has really come in, in a real way which has been special. We still have the university, we still have the state capitol. But I'll tell you what, if there's one sleeper part of Austin that's about to erupt and I'm excited to, to, to be in this arena or to, to be in this atmosphere is that Austin is the place for women run businesses. And I'm talking about badass businesses run by remarkable women. And that's Kendra Scott. That's Julia Cheek who did ever really well. That's Whitney Wolfe Heard who's done Bumble. That's Amy Porter who did a finna pay. I mean there's some really exciting things. And I'll tell you what, I think that as we think about these next few decades, it doesn't matter if your daughter goes to Harvard, Stanford or anywhere in between. When it's time to graduate she's going to want to be in Austin, Texas. And guess where the boys are going to want to be? Wherever the girls want to be. And so I think that there's some, some exciting tailwinds as it relates to just this young demographic being excited to be in these ecosystems.

[Andrew Kirsch]

Yeah, it's, I mean it's an amazing, it's an amazing market. Sounds like you're one day going to be mayor of Austin.

[Troy Marcus]

Far from it. The.

[Andrew Kirsch]

Do you know of another market that has just grown in such a interesting way that, that Austin has. I mean can you pinpoint any other examples?

[Troy Marcus]

It's a, it's a great question. I think a lot of markets have experienced dynamics like this in the past and, and many will in, in the future. And it comes back to our investment thesis. If we're making decade long bets, we can't just go bet in the hot markets of a given vintage. Right. So you can, you and I can go talk to a dozen private equity real estate folks and they all want to be in Miami and Nashville and Austin and Dallas and Denver and Phoenix. But guess what? None of those were on the top 10 list 15 years ago. And we're kidding ourselves to think they're on the top 10 list in 15 years now. Now obviously some primary and particularly the gateway markets are able to build such infrastructure to maintain a lot of that energy like la. But, but I'll tell you, Nashville is a really exciting place and not far behind. Denver's a really exciting place. Not far behind. You know, Miami over the last couple of years, I think they call it the six borough of New York. Everyone from New York moved down, moved down to, to Florida. I think it's experiencing a really remarkable time for a later date. Maybe over a cocktail we can talk about some of the dynamics in Miami that I think are really dissimilar. I think a lot of the people that have moved to Miami have done it with more of a temporary mindset. We haven't seen as much corporate reload though. We have started to see. You saw Citadel go down There Goldman has a meaningful presence, but needless to say, I think that there's neat markets but where we spend a ton of time and as you know, we're hyper focused on data. We spent a ton of time thinking about, well, where's the next Austin? Everybody's talking about Phoenix, but is it Tucson next? Everyone's talking about Nashville is next. Chattanooga everyone's talking about Charleston is the next one. Columbia, South Carolina. I'll tell you our favorite market in the country by, by a meaningful shot right now beyond Austin. And as you know, I'm passionate about it, is Salt Lake City. And you and I compared notes on our deal out there. I mean, you want to talk about state capital, remarkable university, incredible cancer research center at Huntsman, exceptional public transportation, very pro business. You've seen remarkable in migration, some really special companies moving there, young, vibrant workforce. I mean, there are some exciting markets out there. And I think that that's the beauty of real estate. I mean, the way we use real estate is always going to evolve and candidly, where people want to be is always going to evolve.

[Andrew Kirsch]

Yeah. Well, a couple of reactions to, to that, Troy. You know, two thirds of our deals last year were based outside of California. We had 200 closings last year. So two thirds were, were out, not in California. The majority of those two thirds, they were either in Texas. So I would say Austin, Dallas, San Antonio, say the second most populous state where we were doing transactions would be Florida. And then third, Salt Lake City. It is a market that is extremely dynamic, still close to the west coast, hotbed for skiing, great airport proximity, both for winter sports, summer sports. It's, it is a, a fantastic market. I'm curious. Living in Austin, at least I. Let me pivot. Me living in la, grow and have grown up in la. I'm. I don't know if I'm surprised, but I've definitely, I am definitely aware of the number of companies, friends, colleagues, peers, anecdotal relationships over the last two years that have moved to either Austin or Dallas. So my question to you is every day are you running into people from California and specifically Southern California?

[Troy Marcus]

It's real. And, and I'd. Including a dear friend of yours that you introduced. And we were excited to welcome him and his family to town a couple of years ago. It's real and, and I'd say you're welcome. Come to Texas. We love new friends, we love new people. This community is all about embracing new. We want diversity of thought, we want diversity of experience, and we're thankful for it. And I think it's about time knowing that you did more deals in Texas than anywhere else. We have remarkable legal counsel across, you know, all parts of our business. But it's time for Sklar Kirsch to open up an Austin office.

[Andrew Kirsch]

Well, I think maybe, you know, just invite me out there. And I think that would. We can, we can arrange that. I think the city for the first time is, is waking up and realizing, you know, our weather is not for free. The entertainment industry has a lot of headwinds despite the various channels to distribute your content. And a lot of the production is happening throughout the country and throughout the world. And that if LA doesn't get its act together, not saying we're going to, you know, be an afterthought. I mean, I think California is what, the fourth or fifth largest economy in the world? If you just took California, and I bet Southern California is probably top 10 or right around there. But if we don't get our act together, there's going to be more and more companies and people and just really smart people leaving this area. And it's really hard to believe when it was the area that everyone moved to.

[Troy Marcus]

Certainly, certainly. And it's. I think it just goes to the point that we made earlier, which is nothing is forever. People move. It's never been easier to move. It's never been easier to get a taste for what life is like somewhere else. And we certainly. Texas has been the beneficiary of statewide policy in markets like New York and Illinois and California that have pushed certain folks that may be better aligned with the policies of the business climate or just the overall climate to Austin. But I'll tell you, you framed that as Troy. This is tough. The city I love most may be under threat or we might be losing some of our talent. I think all of us, all of us need to be hyper focused around policy decisions being made at local, state and national levels. I think that there's a lot of scary things out there. We also are at a really special time and I think if we have the right leaders, lean in. I don't know who you voted for, but it sounded like you're a Rick Caruso fan and you don't need to confirm or deny that on air. But I think at the end of the day, we need leaders that are willing to make hard decisions. And as it relates to real estate, there's nothing that upsets me more than this remarkable affordability crisis that we have on the residential side of things. And it is simple. There is one reason for that. And that is because the limited supply that's come online for decades, really, we've seen it come down since the 1980s, is exclusively because at the local, state and federal level, we're making it harder and harder to build housing, residential units. And what that means is there's more people living on streets, and that doesn't matter if it's Congress Avenue in Austin or in Brentwood. And so to your point, I think that we all need to really lean on our leadership to be thoughtful about policies. And at the national level, we have a lot of problems, and inflation is certainly one that a lot of people are talking about. We have a huge labor shortage, and until there's meaningful immigration reform. And that's something that both sides talk about. Like, I'm not a Republican or a Democrat. I'm not smart enough or dumb enough to be either. But. But at the end of the day, until we smart enough, no, but we need to go and really solve some of these problems. But I think if we do, we're still in the greatest country in the world. And. And I think that there's some really special things. And guess what? LA is not losing its weather. Well, we can talk about climate change on another. You know what?

[Andrew Kirsch]

I saw more rain in, like, the last 72 hours in LA than I had seen in three years. So climate change is real, my friend.

[Troy Marcus]

No, totally. So. But.

[Andrew Kirsch]

So just pivoting the conversation and we could talk about, you know, politics, government regulations all day long.

[Troy Marcus]

And.

[Andrew Kirsch]

Yes. So I want to talk about where we sit today. Definitely a much different economy than if we had this podcast, you know, five, six months ago. How are you positioning your investors? And into this economy, what are the opportunities that you are looking for in this new paradigm where in a higher cap rate, higher interest rate, more volatility environment, and in an environment, quite frankly, where although private equity companies are still flush with cash, they've turned off the spigot. And I don't want to say we have a liquidity crisis, but they're choosing not to transact right now. How long will that take place? We don't know. But that's. As we tape this, that is today's paradigm.

[Troy Marcus]

No, absolutely. And you used a word of liquidity that I want to really double click on in a second. But yeah, so to frame this up, because you and I both know if this airs in a month, a lot will happen between now and then. But today's November 10th, so it's the afternoon of November 10th. The S&P just popped 5%. The Dow went up 3.7%. Why? Because we got inflation news that inflation only jumped 4, 10 of a percent this month or 7.7% this year. That's crazy. Inflation still jumped 7.7%. Like this is a real problem. And I think that the Fed sees that. So that was today. Yesterday, Facebook announced 11,000 jobs getting cut. 11,000 is a lot of people. And those were important jobs and really smart people. And I started to think about it when they, when I saw that announcement, I said, okay, in the tech world, which I'm not in the tech world, but in the tech world, there's no degree more valuable, in my opinion, than having a Stanford business degree. I said, how many people graduate from Stanford Business School every year? Well, guess what? The 11,000 people whose heads were cut yesterday, that's 26 years worth of GSB graduates. This is real. And I think we're just getting started. The day before that, Bitcoin dropped 25%. We don't even need to get into FTX drama. But this is a real problem. Trillions of dollars have been lost in cryptocurrency in the last year. I mean, so there's real turmoil out there. So you hit on the word liquidity, which I'm really thankful for, because in most of these conversations, people want to talk about interest rates. Interest rates today are 7. You know, fed funds rate target range is 375 to 4, which means real estate loans are at 7. Everyone's talking about rates, rates. No one's talking about liquidity. And so the problem is not the interest rate so much as it is the liquidity. So the mega money, the money center banks, they're just not lending money. It's not that Wells Fargo is at 4% or 14% or 44%. They're just not lending. So let's quit talking about the, let's quit talking about rate and let's talk about liquidity. Everyone's talking about what the Fed's doing, and interest rates might go up another 50 or 75 basis points in December. I think we need to talk about the 9 trillion on its balance sheet. And we need to talk about. The plan is to shed off 100 billion a month, which is a huge number. And the buyers of the of these Treasuries have traditionally been the Chinese, who aren't going to do us a favor, the Japanese, who, who last week started printing stimulus dollars to try to save their currency, the Germans, who have an energy crisis, and the British, who quite frankly, they don't have any output.

[Andrew Kirsch]

So when you take all of this just to get to the point, what does this mean for Evergin?

[Troy Marcus]

Absolutely.

[Andrew Kirsch]

And your investors and what you're looking for as a real estate allocator?

[Troy Marcus]

Absolutely. So to us, when you're owning things for a really long period of time, you can really only control two things. One is how you operate the asset once you buy it and the second is your basis. So we're really focused on what is our basis. We're not thinking about, well, this was worth a 3 cap last year and now it's worth a 4 cap. We're thinking about what is replacement cost, what is the supply, demand imbalance or dynamic for any given asset in a specific submarket in market. And we're really thinking about how can we identify dislocation between the capital markets and the fundamentals of real estate. And so to me, as I think about themes that we're really excited about, we still believe in near shoring. So near shoring is this idea that we're really going to bring manufacturing, particularly back from Asia. And we learned during COVID there's meaningful supply chain issues. But we also realize that there's some, some serious geopolitical tensions between us and predominantly China because of our labor shortage. We think a lot of that moves to Mexico and we think that industrial on both sides of the border is pretty exciting. So that's one area we're excited about. There will be onshoring like semiconductor manufacturing, which gets exciting. Housing is still real. It's scary right now. The big homebuilders, the Lennars, the KB homes are pencils down. But they'll come back. But they're going to pick and choose the markets they come back to and they're not going to build homes across the country evenly. So it's where do people want to live? Coming back to what you talk about, we've always liked infill light industrial for reasons you and I have discussed in the past. But they're not making any more of it. And if you're picking the right markets, demand should continue to go up just as consumption goes up right now. And of course things might change in the next month. But the four letter word in real estate is office. I mean office is really scary.

[Andrew Kirsch]

I will say it's just, it's yesterday's retail.

[Troy Marcus]

Exactly. And retail is kind of in vogue these days. But, but I will tell you this morning, so last week Elon Musk completed his acquisition of Twitter. This morning he announced we're back to going to the office, everybody's coming back a minimum of 40 hours a week. You know, for the last two years Jamie Dimon has talked about, he has a work from work policy which, which I appreciate and I think that that's real off. The return of office is going to be very different. And I think that the idea of owning, buying or building these huge high rises, particularly those that were built 50 years ago, is scary. And there's probably not a price you buy it. I do think that the highly amenitized, low density product out there and new product, the stuff with great natural light, good air filtration ends up becoming something that people are really glad to own long term because people will come back to the office. It's not about productivity. People will say I'm just as productive from home and I don't have to commute. This is about collaboration, this is about building a culture and companies are about culture and that's where employees have traditionally leaned in. So I actually think there needs to be a lot more pain in office before you start deploying. But that starts to get interesting.

[Andrew Kirsch]

So last year and even as recently through the first and almost second quarter of this year, it was a frenetic market throughout all sectors of the economy. And I'd like to say where I had said that it was an employee demand economy where employees obviously were in demand and they could demand, you know, essentially anything in order to, for employers to, for them to stay with their employer. And one of them was of those demands was working remotely. I think today based on where we are in the economy, given the fact that layoffs are real, they're happening as we are speaking that it's not friendly anymore for to the employee. Things have shifted as, as, as quickly as they have shifted in the capital markets. They're shifting as quickly with respect to employer employee relations and who's got the upper hand. And I think we're going to see this trend of going back to the, to the office because I feel like employers were scared may be a harsh word, but they were concerned about losing their employees so they would do anything to placate them. And one way was working remotely. Now that we're hopefully on the backside of COVID changing economy, I think we're going to see a return to office and it's happening right away.

[Troy Marcus]

No, I agree. I think you're spot on. I will tell you, I am of the belief. So if you again today what the Fed is saying is they want to see unemployment increase by 50 basis.5% and again that's to tamp down inflation. I think you may have seen the stat as well, that 100% of the time that unemployment's gone up by 50 basis points. It's gone up by 250 basis points.

[Andrew Kirsch]

We were at the same conference when that was. Exactly.

[Troy Marcus]

And so, so you start to think about that that now means unemployment's at 6%, that there's extra 250 basis points on 160 million jobs out there. That's 4 million people that are unemployed. I definitely think the dynamic is moving. I think that we as business leaders need to create a culture and create businesses where people want to show up and where people want to be driven. Driven toward a mission. And so I think you're right. I'll tell you really interesting is we have an exceptional new team member who's starting this upcoming Monday and comes from a exciting corporate finance role and he's joining Evergen. And the reason he's joining wasn't because of comp. The reason he's joining is because his company's been remote turned hybrid. But no one on his team's there and he lacked mentorship. He craved it. He missed camaraderie, he missed being in the water cooler and he missed being in the room. You end up becoming a cog on the wheel. You end up not being a part of the solution in the whole picture. And I think we're going to see more and more of that. And so I actually think it's going to be better for society that we, which are socialistic, you know, creatures, end up getting back together.

[Andrew Kirsch]

Yeah, absolutely. Look, out of sight, out of mind. I want to pivot the conversation the last couple minutes that we have as to, you know, sort of. You personally, I know, obviously we met through ypo and you're so involved in so many different organizations. My personal relationship with you is ypo, but not just being a participant, but being involved at the highest level. Chair of the Real Estate network, which is, I believe, the largest network within ypo. I'm sure you're very involved at your chapter level, involved in other organizations, in philanthropy. You have a young family. You're. You started a new, a new business. How, how do you do it all? How do you prioritize when there is so much demand on your time? You know, how, how do you, how do you schedule and have time for the real talk now?

[Troy Marcus]

Of course. Well, I always have time for you, ak but one thing you and I both have are really supportive spouses. My wife Leslie is a gem and she Certainly makes me better and supports me in many, but I'll tell you, it's passion. And at the end of the day, like I said, we all make sacrifices. I don't play golf. I wish I could. I don't. You know, we don't have as much fun in the recreational sense we do, but I love what I do and we're passionate about what we're doing in the communities in which we're in. And so I think that, I think it's easy, right? Like no day is easy, but when you take a step back, it's easy because we get to work alongside people we really enjoy in an industry that candidly is social. And I generally like people at least for an hour. Maybe I don't know that I like you for much more than this, but I'll tell you what I think more than anything, to him, much is given, much is expected. I feel really blessed to get to live in this country and to get to do what I love. And I think we owe it to the generations that are coming after us to absolutely provide them with first rate education, to provide them in neighborhoods where they can be safe and to provide them with opportunities where they can go thrive in whatever manner it is that they need. And so I'm thankful to be on this journey alongside friends with you because I think that we can do really special things and I'm even more excited about those that come behind us and what they're going to do.

[Andrew Kirsch]

No, that's fantastic. I like to always finish the real talk with a couple of lightning round questions, so.

[Troy Marcus]

Oh boy.

[Andrew Kirsch]

Finish, finish, finish the sentence for me. Evergin will be successful in 10 years.

[Troy Marcus]

If we get to do our first deal with Skullar Kirsch.

[Andrew Kirsch]

Oh wow.

[Troy Marcus]

Well, or maybe our 10th deal.

[Andrew Kirsch]

Hopefully it won't take 10 years to do.

[Troy Marcus]

Exactly.

[Andrew Kirsch]

If, if you, you know, met yourself, your, your 22 year old self just graduating from college, what would you tell that Troy Marcus that you know now and you wish that Troy Marcus would have known back then?

[Troy Marcus]

No, absolutely. And we were having a team lunch today, so it's a little top of mind. But the first is the power, power of compounding. So investing. We talk about compounding a lot, but relationships, I mean, I remember meeting you eight years ago in L. A and here we are today and closer than ever. But the ability for relationships to compound and I just think life is about relationships and friendships and so, you know, you get out there early, you go meet and learn and really lean in and life just becomes that much more Vibrant. And so I think that that's absolutely been a joy of mine. The second is you've got to be passionate about what you're doing. If you're not passionate, you're going to cut corners. You're going to be the one that doesn't come into the office or shows up late or leaves early and you miss out on the ride.

[Andrew Kirsch]

Yeah. Well, you're definitely a passionate person from everything that I've seen. I'll give you one more. If you weren't in the real estate business, what would you be doing?

[Troy Marcus]

Oh, man, I'd be dead. Because I'm not that smart. And. And this is the only business where I could slip in. No, I think we're really, both my wife and I are really passionate about education. So if I was in real estate, I think I'd be a teacher.

[Andrew Kirsch]

Yeah. Great. And I have a final question. This is sort of what we do in YPO, especially in the multifamily breakout by the end of 2023.

[Troy Marcus]

Okay. Okay.

[Andrew Kirsch]

Will the Fed reduce interest rates?

[Troy Marcus]

I'm glad this is recorded. So this will have been 12 months after. Right now the Fed target range is 3.75 to 4%. People don't like to hear this, and I'm certain I'm wrong, but I think that we see the fed funds rate or target rate, the upper end at 6% and it will have climbed to 6 and it will have plateaued there.

[Andrew Kirsch]

Yeah. And any reductions from the Fed, you think, during the 2023 year or is too much of a boomerang and they're just not going to be able to do that.

[Troy Marcus]

It. It's hard to see. I mean, there's a real path to there being so much pain that they reverse back. But like Powell or not, he hasn't been bullied by politics and he's done. He's been thought is right. He is very much a Volker is king kind of a guy. And Volker learned the hard way that if you take your foot off the gas for a second, you end up with egg on your face. So I just don't think Powell is going to do it. And the difference between, the difference between Volcker era and Powell era is Volcker had demographics behind him. He had this young workforce coming to go and really boost production in the United States. We don't have that. We have a real demographic problem today. And so I think Powell gets that. And it's not what any of us want to hear, but I think rates get up to six and I think that they they sit there for a little bit.

[Andrew Kirsch]

Well, Troy, I can't thank you enough for all your time, your generosity. I know based on where I sit and seen you and your career and just all of our interactions, Evergen is going to be an incredibly successful company with you at the helm. And I'm just excited about the growth of both you and the company and all your peers and colleagues. And thanks for being on the Real Talk.

[Troy Marcus]

Thanks for having me. And more importantly, thanks for the friendship. And I'm excited for many more years to come.

[Andrew Kirsch]

You've been listening to Real Talk Real Estate discussions with Andrew Kirsch. You can catch prior [e-mail] and on YouTube, LinkedIn, Apple Podcasts, Spotify, Google Podcasts, and more. Thank you for your positive reviews, comments, and sharing this show with others.