← The Kirsh Connection
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- [00:01]
A
Hi, I'm Andrew Kirsch, co founder of Sklar Kirsch. On this podcast I interview industry leaders. You'll hear their real time opinions on today's market, their background, unique career highlights and guidance for newcomers to the industry. This is the Kirsch Connection. Welcome to another edition of the Kirsch Connection. Well, the war in Iran has certainly disrupted the capital markets. Oil is now above $100 a barrel. The 10 year treasury is north of 4 4. We'll see what type of impact that has on the real estate market. People are talking about it, but we haven't really seen it impact current deal flow. But I'm sure that's on the horizon. On today's show I have Jeff Weller, the co founder of Lion Real Estate Group. Lion Real Estate is an owner operator of multifamily throughout the country. Jeff talks about where he's finding deals in today's market, how he's capitalizing them and advice that he would give himself if he were to start all over again in the real estate business. It's a great conversation with Jeff. I hope you enjoy it. Welcome to another edition of the Kirsch Connection. I am here with my good friend Jeff Weller, co founder of Lion Real Estate Group. Jeff, how are you doing today?
- [01:32]
B
Good, thank you for having me.
- [01:33]
A
Well, I'm sorry that you're not in person in L. A so you can't, you know, see by my great studio and really more importantly so that you and I could be in the same room together. But hey, it's 2026. Virtual is the next best thing.
- [01:49]
B
That's exactly right. The I am bummed not be there either. The weather Nashville is not great. So I want to get some sunshine.
- [01:56]
A
Yeah, look, I know you are Los Angeleno and you're one of the OGs who left LA to go to Nashville. You weren't part of the group that all left after Covid. You, you were pre covered, right?
- [02:11]
B
Well, I moved. Covid had hit. Oh it did to Colorado.
- [02:16]
A
Okay.
- [02:17]
B
For about six months. And we were moving our offices from Los Angeles to Dallas. And the reason for that was we just started buying a lot of multifamily in the southeast in Texas. So we felt like to have an office in Dallas was important to stop the commute time. So I was three kids in school and so the flight from LA to Atlanta, Charlotte, Texas was somewhat prohibitive to be back in time for dinner. So we decided we would get up and move. And the thought was we moved to Dallas and ended up falling into Nashville and love it. Yeah, we moved here five years ago.
- [03:01]
A
Yeah. Well, you know, it's funny, I've talked about this my podcast. After the fires in the Palisades, my wife was convinced that we should move to Nashville, even though she had never been to Nashville. But for some reason she just thought that's the place where we should go. Obviously, we ended up. Not. We stayed put in. In la, but I told you before we started recording that I was in Nashville last week and it's such a great. It's such a great city. How would you compare just living in LA versus living in Nashville?
- [03:32]
B
I would, I think. Unless you're moving to a New York or San Francisco or a Chicago, which a lot of people who make the decision move out of Los Angeles are not going to those cities. It's the closest complement to Los Angeles. So you've got a blue dot in a red state. You have a lot of arts, you've got a lot of musicians. So it actually, you find a lot of Californians live here, a lot of New Yorkers live here. A lot of people live in our neighborhood who actually don't work in Nashville. They actually either telecommute, I guess you'd call it, or they go to New York during the week. And it's a nice lifestyle. It's great for my kids. I've got a daughter at Vanderbilt now, so it's great having her near me. And you know, the thing that I would say that we miss the most is probably the weather, because you have some pretty. I mean, I'll give you an example. Yesterday it was 79 degrees in Nashville. Today, I want to say it's 40. So the weather swings like crazy.
- [04:38]
A
Yeah.
- [04:39]
B
And so we all get a little. Californians are a little, you know, they don't realize how good they have it with the weather. But other than that, it's amazing. The people are amazing. The people you meet here are amazing. And there's a lot of growth in the city, so it's good for a real estate guy.
- [04:58]
A
Yeah. Last week I was there for a YPO retail symposium and one of the keynote speakers was the president of the Tennessee Titans, forgetting his name right now, but he talked about the new stadium and the development going on in the east bank. And it just seems like just Nashville just keeps growing and it's such a dynamic place.
- [05:23]
B
The guy. Yeah. And the guy who, if you. One of the guys is from California, who found the land through Carl Icahn, who's doing that development. I think Carl Icahn is the Debt and then the Titans owner is an equity position in it. It's a massive development now. I think it's going to be great for the city if they get it done. I actually I'm in Nashville Yards which was developed by Southwest Value Partners. That's an amazing development. We have Amazon has two towers. The right of me, CAA is behind me, Pinnacle Tower and then we have a concert venue here. So that's fun. I mean it was easy to recruit people out here because there's just a lot to do. So we've had people move from our LA office and our Dallas office out here and have kind of now they're calling Nashville home.
- [06:13]
A
I love it. Well, it's a great place to visit and hopefully maybe we'll do another podcast in Nashville. How about that? All right, so before we get into lion, let's talk about your background. To the extent people may not know you. How'd you get into the real estate business?
- [06:30]
B
So I was a broker out of college. I started with Cushman Realty as a tenant rep broker in Los Angeles and then I jumped around to CB Richard Ellis Staubach Co. Before it was actually before it was acquired by JLL. And then I met my business partner Maury Barack who was a banker at Lazard and then he was at Buchanan Street. And we partnered up in 07 pre GFC, raised some capital from LA families and started buying opportunistic and distressed real estate in the GFC. So our timing was really good. 07 we bought a couple of deals that you know, we got in and out, it was fine. But from 08 to 2012 I think we were averaging 10 to 12 acquisitions a year. We bought a bankrupt, we got a bankrupt affordable housing company. We were doing all different types of things. We were doing office repositionings in the arts district, we did a ground up apartment deal. So we kind of ran the gamut of doing everything in real estate for the first five years.
- [07:40]
A
And so talk about those first five years, I mean how did you, how was investors, how were you able to obtain investors? I think that's a, a common question or quandary that people who go out on their own seem to, seem to have. You know, you've got two aspects of the business, finding deals and finding investors. What was harder?
- [08:07]
B
I think finding deals because I think that when you find a great opportunity and you have a Rolodex, you're going to find investors. We got very lucky because we have a couple of larger investors based in Los Angeles that my Family had known for a while and they were incredibly good to us early on. So when we would bring a deal in the door, they would capitalize 50% of it. So if it was a 10 or $15 million equity check, that family would come in and put up half and then we would put together 250 to $500,000 investments through a handful of other friends and family. I mean, Today we have 500 private investors and that represents 700 million of equity. So we're actually probably on the high end of that. So I look at that most people, once they get to about 100, 200 million of private money, they pivot to institutional investors. And we stayed with kind of that philosophy of taking private investors and they liked it. I mean, a lot of people, we sold a lot. So a lot of people just continued to re up or go along with the 1031 exchange. And to be honest, the private investors that we have, we've learned a lot on how they like to invest, how they don't like to invest, what is, what is good and what's not good. Right. And so over communication is very important. Communicating what's going on the market is very important. They're usually, I mean, the last two years, as you know, has been a difficult time to be an apartment investor. In the last five years been a difficult time being an office investor. So these are pretty knowledgeable people investing, so they've been great to us. But I think the deal, I mean, you've really got to find the right opportunity and usually the money comes to you. I think also if you do right by early investors, they refer in a lot of people. Yeah, we ended up having a lot of people who would call us, you know, I'm friends with so and so and they'd call in, which was really, really great for us growing our business.
- [10:16]
A
Yeah, I mean that's the biggest testament in the law business when a client refers someone to you. In the real estate investment business, when another investor, when an investor refers another investor. So through these private capital source deals, are they all syndication one off transactions or have you raised discretionary funds of private capital?
- [10:40]
B
So we pivoted in 2017 and we started raising funds. So we had a first fund that was a small fund, it was $40 million plus or minus. And we ended up bringing in, it was a GP fund and we ended up bringing in another 150 million of equity alongside. So we brought in some institutional investors and some additional larger private investors and that fund ended up doing really well. It was really good Timing obviously we were buying things all across the country at really depressed prices. And what was happening is there was a wave of syndicators coming out buying value add. So when we went to go exit a majority of the portfolio from 2020 to 2022, we had really good exits. And so that was when we started in the fund world. We learned a lot from doing the fund. I mean just everything from fund administration, legal exposure, how to diversify a fund, how to raise co invest alongside the fund. And then we raised a second fund that was around $200 million LP fund, all private investors, a couple of larger family offices and we deployed then. And so what we did was in all of our funds, we tried to do them a little bit shorter than an institutional primary institutional fund. So if you look at these institutional funds are sometimes eight to 10 years and they have extension periods. We did ours around five to six years with an extension period because private investors like to see their money getting deployed. They don't want a five year deployment because they have to sit money on the side and then they want to see what you're doing. And the funds weren't that big so we could deploy it in a thoughtful way and then exit it. So we did a second fund, we deployed that and we ended up fixing in most of our financing there and feel pretty good about that. And then we raised the third fund, we're still deploying right now and that'll be fully done by July. And then we will go on and raise a fourth fund at the end of this year.
- [12:45]
A
No, that's great. When you pivoted from a syndication structure to a fund model, what was the reaction of investors who were, were used to investing with you on a deal by deal versus now discretionary fund structures?
- [13:04]
B
They didn't like it. I mean, I can tell you it was a lot of education on why we're doing it. We really were trying to explain to them, Listen, you've done 10 to 20% of every investment we've done over the last 15 years. Why are you having a hard time giving us discretion if you're going to continue doing that? So we had to explain that most people got over the hump and understood why we're doing it. And most people are benefiting from it today because the fund too that we have, we deployed and we have fixed rate financing, but we've had to juggle a lot of things around because the market rents have gone down. It's been a tough fund and in that fund we won't lose any money we'll effectively bring back all of the money, make a nice return, and we'll probably be depending on how everything's come out in a top quartile return fund, where if those investors have done deal by deal, there's a possible situation where a deal may be sold for a loss because you can't move money around within the fund structure. So I think people understand the diversification now of why you do a fund because it's more of a basket of investments. But it was hard to get some of our investors who had a lot of money invested with us to get excited about doing fund investing. But I think they understand the benefit of it now.
- [14:31]
A
Do you ever feel that you're caught in a fund structure where you're at the end of the life of the fund but you feel this is not the right time to sell? Do you then have the ability to extend the fund life so that you can get out of a particular market and at a time that you think is more opportune for you and your investors?
- [14:54]
B
Yeah, so we've been. So we have limited partner advisory committees on both funds, really smart guys. So we're able to kind of defer to them and say, hey, listen, here's the situation we're in. Do we want to extend this fund for three years or two years? We're doing that right now in fund two. We probably will extend it. And also if we don't want to sell an asset, continue with the asset longer term because we think there's more upside. We can have those conversations as well. It was set up in a way, it's pretty flexible. And the LPAC is dealing with us. I mean, we have quarterly meetings with them and then we have. And then we have an annual meeting. So it's good. I mean, listen, I think the limited partner advisory committee on these deals are really important because you can get different people's views. It's usually your larger investors are really knowledgeable investors in real estate. So we will. You know, you do have some flex flexibility there, and you have to build in flexibility to do the right thing by the LPs and really maximize kind of the returns. Because, listen, real estate's pretty cyclical, right? So you sit there and right now we've been going through it the last two years and then we think, you know, we're coming out of it. You know, I think you've talked to a lot of different multi guys and you have a lot of multi clients. Been a tough fourth quarter. I mean, when you look at it, you Had a lot of supply come in the markets that were invested in and you have rents moved down significantly. Now they're coming back and occupancies are coming back. So when you have something like that that happens, you need to give yourself flexibility on the, on the capital.
- [16:28]
A
Yeah. All right. So obviously you've alluded to how the market's been the last couple of years. I would say it's been like this since, gosh, maybe summer of 22. So we're almost approaching four years, right?
- [16:40]
B
Oh my gosh.
- [16:41]
A
Yeah. It's crazy how time flies. So what are the types of deals that lion is looking at today as we're sitting here? Is it March 1st or March 2nd, I think, right? Yeah, March 2nd. Yeah.
- [16:52]
B
I mean we're looking at, I mean, the opportunities today. The fundamentals work. You know, in our fund three, we've bought a few properties directly from banks, where the banks actually took the properties back and we bought them directly from the debt fund. In most cases, we're buying things where the investor before has lost the majority, if not all of their equity. There is deferred maintenance issues that you have to be really smart about when you buy these properties because people for the last year have not put money into the property because they had to give it back to the bank or they've had to sell it at a significant loss. So these are things where people didn't put fixed rate financing on in 21, 22, 23, you know, the chickens have come home to roost. They're selling them. The properties aren't performing well, it's been mismanaged and they're losing money. So, you know, a lot of general partners have lost focus on the deals they're losing money on and they're focusing on the deals they're making money on. And that's what we're trying to buy. And by the way, Andrew, you've known us for a long time and when we started the business, we were distressed guys. I mean, we bought non performing debt. We bought properties all through the GFC like we're buying today. And so that was. That timing was pretty darn good. And I think we're going back into that. I think I always tell people, I think we're in 2012. I think we're about onto the run. Rates have been tricky and I don't think anyone could foresee the rents getting as beat up as they were from the supply. That was, that was interesting to watch rents in a market. Like we own some properties in Austin. Austin's been really something I don't think anyone thought they'd see. I mean that market, the rents have come down anywhere from 30 to 40%. And I think it's short term, but it is a real gut punch.
- [18:46]
A
What do you lead or what do you attribute that loss of rents? 30 to 40% in Austin, maybe other markets? Is it just sheer oversupply, too much construction? Is it demand that people aren't moving into Austin like they once was? What's going on?
- [19:02]
B
The demand is there. It's number one over supply and number two, depending on the category of building you own, you've got some ice issues. So you do have ice in the Texas markets. Austin not as much, but you see a little bit of it in Dallas, we see a little bit of it in Charlotte where there's a fear factor and people are self deporting. So if you have a property with 300 apartment units, it's 80s construction, a good solid class B property, what two steps happened. First step was the class A got oversupplied. So you ended up having vacancy created from people getting sucked up to the class A's because they were offering three months of free rent. And then you were having maybe a backfilling of more workforce housing. And then you have people starting to self deport. And so you know, if you have ICE in your parking lot, an older asset, it creates some, it creates some, some friction. So that, that was more, we predominantly saw that more in early 25 and that seemed to have calmed itself down a little bit. But, but supply is number one and that's going away. I mean the supply is falling off a cliff over the next two years. And then the other one, some ice issues depending on the type of property you own and that that's where mostly see, I just don't think we thought that the class A would put on concessions of three to four months in some of these markets and that just, you know, once you put those concessions through to an effective rent, you're really close to what we were charging. And it becomes, that became pretty tough. And I always tell investors, and they don't like to hear it is they say would you buy this? Because we primarily and you know, this just buy class B buildings. Would you had bought class A buildings knowing this? And I was like, well no, because we still have performance in our buildings. A lot of class A operators have been really wiped out. I mean where it's, you know, they were paying huge price per pound numbers and the market went backwards on them. So we feel good about where we always have to wait a little longer.
- [21:08]
A
Yeah. So what's the profile of, of the type of asset that you are looking for? Still Class B, still Sun Belt. Has anything changed from your thesis or model over the last few years?
- [21:22]
B
No, we're. I mean we're doing a couple of things a little bit differently. So the vintage we still are in class B. We have a lot of 80s assets in Fund 2 now we're moving to 90s assets. So we're moving up a little bit in the vintage scale. We are getting a pick of more interesting things. There's less competition to buy. Right. And you're getting stuff that's fairly, fairly. You know, we're buying things in the six cap range. We bought a couple of things in Houston early in this thing. End of 24 they were over a 7 cap and you're talking about 50% of previous value the previous owner paid for them. But we're mostly sticking now we're out of Austin. I mean we're not really going back into Austin because we think Austin has a little bit more pain to it it. I can tell you Dallas is recovered, Nashville's recovered. Not to where it was, but it's recovering. Charlotte, you see a little bit of recovery. You know the market that surprised us is Atlanta. Atlanta seems to be recovering a little bit more than those other markets. And I think that's a, you know, people look they're going to move their company to the Southeast and you look at Atlanta as a huge airport, as a big market for people to move a lot of office space for people to put offices in. Where Nashville is a smaller market. Austin hous our Austin's a smaller market. So you've seen that we're kind of sticking to our knitting because every time we've gone to underwrite buying super class A, it just never. The numbers just don't work for the way we look at things.
- [22:57]
A
And is the fund primarily how you capitalize all of your equity, all the lp or do you ever use the fund as your co invest, your GP and you bring in an institutional LP on a larger deal?
- [23:14]
B
So we're doing that now. So we've got 40 million left to deploy in our fund and we have a lot of co investment interest. So we're basically coming in with the fund taking 20 to 30% of investment. We'll bring in 70% of outside investors. And what we've done in that is when we get a promote from that co invest, we actually put it back into the fund. So there's no conflict. So we look at it and it kind of supercharges the fund 3 return and that's going to play really well for Fund 3 investors. Like on our first fund we did that and it generated a 30% net of fees return. And I think we'll have a similar situation on Fund 3 by doing that. And we also don't want to be in conflict with ourselves. We could go out and do deal by deal on some things because we're past, we're over 70% invested in the fund. But we want to make sure that we're being very transparent with our investors and everyone is who's in the fund gets the benefit of being in the fund until we finish investing it. We're also doing some LIHTC deals. So we did Lihtac in 2011 and that was really successful. So in fund three we are buying out of tax credit, you know, the 10 year, 15 year tax credit period. We're buying some affordable deals that have gone through that tax credit period and that have a Laura on it for maybe 20 more years. And they have to be within the markets we're in like within two hours of the market. And that's, that's a really interesting business because you're be, you're able to generate some pretty serious cash on cash return.
- [24:52]
A
Sure. The markets that you didn't mention are coastal markets. And there's a growing debate of, you know, what is scarier over supply in the Sun Belt versus you know, political unstability or political risk in the coastal markets where at any moment rent control laws could even be stricter. But you still have more supply constrained markets in those coastal markets.
- [25:26]
B
Yeah. So that's pretty funny you said that because I have this debate every week with Maury because, you know, Maury still lives in la.
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A
Yeah.
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B
And he is bullish on LA real estate where I'm bullish on Sunbelt real estate.
- [25:40]
A
Yeah.
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B
Because we still own a couple hundred million bucks of multi in LA and we own some office deals, some legacy office deals. It's a really tough one, I can tell you. Our LA properties are 98% occupied. They're almost like LI tech deals and they work pretty well and you don't have weather and people, you know, you're supply constrained. It's incredibly difficult to build in Southern California. The biggest problem I don't think you touch is the exit. I mean the biggest problem we're having is there's not institutional takeouts right now in la. So it's really hard to underwrite when you have this mansion tax and it's basically been a cross on institutional money for anyone coming in. Like we have a class A building we built outside of downtown LA that's pretty well occupied, like 96, 98% occupied, pretty easy to run. We have fixed rate financing on it. And I don't think we would get the, you know, with the mansion tax. I don't think if we brought it to market, we get what we need for it to make sense of selling it. That's a big, that's a big issue. Like they've got to get through that. I've heard talk about the mansion tax rate coming down and some other things. I think if you brought the rate down on that from five and a half percent to three and a half, it would turn on the institutional market. I think people would say, okay, that's just frictional, but that five and a
- [27:09]
A
half is sticker shock or possibly a moratorium on multi family.
- [27:14]
B
Yeah, if you could do under 20 years, built within 20 years. So you don't just kill the business. Yeah, I mean the home, the home market got around it. I mean if you look at housing on west LA and you know this, I mean you live in Santa Monica, I mean housing's pretty, pretty good right now in la. I mean homes are trading and well, owner users.
- [27:34]
A
Right. Owner users will always pay up for lifestyle. You know, you mentioned essentially that LA has been redlined by institutions, but so has pre. I feel like pre 2000 vintage Sunbelt. So I know that a lot of my clients, you know, when they're looking to partner up with institutional JV partners and they have, you know, a pre 2000 Sunbelt constructed deal, it's hard to find institutional capital. But I also feel that institutional capital has unreal, unrealistic expectations for their return profile compared to what is in today's market, what you can get.
- [28:25]
B
I totally agree. So if you, if you talk to institutions and you talk as you're raising funds to what you're investing in, people have gotten very sensitive to vintage and the reason for that is deferred maintenance and you have operating expenses. These buildings. The one thing that people are kind of forgetting is a big piece of that's labor. And the labor is the same on a class A building or a class B or C building. So you're seeing that inflation across the spectrum. Also you've gotten a lot of syndicators that have been burnt or they burned themselves where they put on a lot of floating rate debt. They're out of the market. Now they're fixing all their problems. And that's what kind of, if you look at the market through 21, 22, that's what really accelerated the market is you have people buying 60s, 70s buildings and they're like, I'm buying it for 100, 125 a door. I'm going to put in 10 to 20 a door and sell it. Those guys are really not there right now. And then institutional guys feel like they can buy newer buildings inside of five. But those deals, a lot of those deals, and you've probably seen this, we've bid on deals in the late 90s, early 2000s where they're not getting the activity they want. The owner goes back and refinances them, you know, and says, I'll just keep them longer. So I think it's a little bit of sheep in this situation. I think there are some people, and we hope to be one of them, that are still buying 90s, 80s really discounted values. And I think within two or three years from that, institutional capital can't buy anything that's newer. I mean, you look at the big funds like Bridge, True America, all these different groups that have raised money for workforce housing, well, where do you think they're going to be investing that capital? And so I think that market gets turned back on here and also syndicators will get turned back on because when Treasuries go down and people don't get as much on their cash, they're going to be chasing yield and they come back into real estate.
- [30:30]
A
Yep. What would you consider if we did this podcast at the end of 26? What would a successful 2026 be for you?
- [30:40]
B
I think you see, I think everyone's predicting 1 to 3% of rent growth in 26. I think if you got 5 to 7, that'd be successful. I think if you really saw ICE slow down and things kind of, and maybe with the midterms that happens a little bit where that kind of becomes less of a main topic on media news. I think that insurance costs would be nice to see those move down, you know, and obviously if interest rates, I mean right now interest rates are moving up pretty quickly because of this oil spike and some other things. And also I heard the stock market's up again today after Iran, which is interesting. I think if you saw the ten year treasury get to 375 and sit around there, it changes our whole world because spreads have come in and I think that that would all be very successful. And if that all happened at the end of 26, I think you're in 2013. Right. You're kind of now a year into it, then 14 and 15, you've got a pretty good foundation supplies. Getting cut in half from 26 is getting cut in half again to 27, again to 28. Now there are some permits that are going to be pulled, et cetera, so we don't know that much further out from there, but I think that we're in a pretty good position. And I think 27, and you've probably, you talked to a lot of real estate operators. I think people think 27 will have some normalcy.
- [32:13]
A
Yeah. So much for stay alive until 25, because we're in 26 and they're hoping to still stay alive. So how many. Is there a benchmark of how many deals you and Maury and the rest of the team would like to purchase in the next, I don't know, 12, 24 months?
- [32:33]
B
You know, our goal is to do six this year. Six deals this year. I think we'll do that pretty easily. I think next year we'd like to do 10. I think that you've got a pretty good Runway here for the next couple of years to get value. And I think that, listen, for us, selfishly, you know, it's not as competitive now. So we feel like there is. Like I said before, is it hard to get investors or deals right now? It's probably hard to get investors because there are plenty of deals. I mean, fundamentally, you look at these deals today and you're buying something at a five and a half, six cap. You're borrowing 475 to five on five years or maybe, you know, a touch higher than that. And your rents are depressed 30%. I mean, that's a pretty good deal. I mean, you're looking at cash on cash yield of 5 or 6% out the gate. You're going to get to high single digits. You're probably going to have a refinancing or supplemental scenario in two years. So it's just now trying to convince capital to come back in is a little bit harder, but I think people are changing their tune. And the other thing is we, we bought into an office platform and so we have been doing a few of these office deals that are really depressed. And that's been fun because I do think office will have a nice bounce back in the next couple of years. It's not going to be anything. It's not for the faint of heart. I mean, it's risky, but it's, it's it's worth the risk in some markets.
- [34:03]
A
Are you seeing a return to office accelerate and, and tenant demand accelerate?
- [34:10]
B
For sure. So I think in the building that I'm in Nashville Yards, I, I want to say they're over 80 or 90% occupied at very high rents. That's the Southeast we just bought with the Barker Pacific folks. We bought Sunset Media center in between Netflix and Skims. We bought that at close to an 11 cap on 60 or 55% occupancy from Kilroy. And I just saw the leasing report. It looks pretty good. We just closed the deal in Carlsbad, 70 or 80% occupied and I saw a leasing report there. It's pretty good. Is it anything that's off the charts? Not yet, but I think that over the next two or three years, if you can continuously slowly lease 5,000, 10,000 foot tenants, are you getting the kind of credit you used to get? Not really. Like you're kind of getting choppy credit. But you know, the reason we got into that business is we own multi tenanted apartment buildings. So a multi tenant office building with businesses that don't need as much ti but they don't have as much credit and they're sticky. They'll stay for five, 17 years. They don't want to get up. I mean, you moved. I've moved a couple of times in office, but it's not fun.
- [35:28]
A
No, it's not. But I before I had been in the same office building. Same office for 12 years. Yeah, it is not fun to move. So you're right, they are sticky.
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B
I mean I think about it from our standpoint like you always leave your furniture behind. So you're like, I gotta go buy new furniture.
- [35:47]
A
Yep.
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B
And that's, it's more expensive than your home furniture.
- [35:51]
A
The whole process is infinitely more expensive than you ever think from moving your it moving fur, you know, buying new furniture, designing, there's a lot, there's a lot of hidden costs that, that you don't see.
- [36:06]
B
So if you can figure out today how to give someone, if you own a building that's 50% occupied and you can give someone enough free rent and you can credit a piece of that back to FF&E and you can get them in, they're going to be hopefully pretty sticky. And, and so that's what we're doing. And you're getting these things so discounted you can do that.
- [36:25]
A
So is it through a different fund model or different set of investors that are going into office versus your multifamily family platform.
- [36:33]
B
So what we did is we had this great guy named Michael Barker who owned this company, Barker Pacific Group. And two years ago he unexpectedly passed away and he was our, when you're talking about investors and getting investors, he was our first investor in 07 and he didn't have a multi family presence. He was mostly office and industrial. He started investing with us and he passed away and we ended up recapitalizing and investing in his platform with Mark Hansen who I think, you know, who's now running it. And our role in that business is really to sit on the board. We have a little bit more mature company. I mean Michael is a very mature company but he's no longer with us. So we could sit there with Mark. We like those guys and work with them and then we could also give them some, what we call, you know, we assign their non recourse carve outs and help them with some, some helping them on financing, some stuff. And what we've been able to do is those guys mostly partner with billionaire type guys or, or funds but they need co invest and they're growing like crazy and they want to grow faster. So we can help with our 500 person Rolodex because in our Rolodex we still have people that are like listen Jeff, I may have X with you, but I wouldn't mind have 10%, 20% exposure of office and take a swing and see if I can make three times my money. And it's interesting, you know, and I think that that's where we've been able to help them. But for the most part they run the business, it's their business. But we've just been helping capitalize them and also trade best practices with both of our companies.
- [38:15]
A
Yeah, Jeff, in our remaining moments, one last question for you. If you sit down, maybe you do sit down with folks who are graduating from college or, or grad school and, and they say, all right Jeff, what part of the business should I be in? You yourself, you started out in the tenant rep side of the brokerage community world and now you're owning hundreds of millions, if not billions of dollars of multi and office. And so there are different facets of the real estate business one can get into. If you're 22, 23 years old today in 2026, where would you start in the real estate business?
- [39:00]
B
So we, we have this really sharp guy that works for us. He's been with us four years and he came out of school, was a great student at smu, really sharp kid and he was Everyone wants to get into acquisitions, you know, everyone wants to get into acquisitions. That's the sexy thing. You get to fly around, meet with brokers, they take you out for lunch, et cetera, et cetera. And he was doing analysis and then asset management. And I talked to another guy, runs a big company and he started in asset management. I would highly recommend anyone. While it's not the sexiest part of the business, that young man is in acquisitions now, but he's got four years of real property management, asset management experience. And when you go through a downturn like this, that's the most important thing because you understand what to look for underneath the hood and you really understand what can bite you. And so I would recommend, I mean, it sounds crazy. I would recommend two things. Either a going into property management or asset management analysis side, or before going to acquisitions in a company, just going to do roll your sleeves up. Marcus and Millichap brokerage, cold calling, understanding. Do that for two or three years and cut your teeth and then go and get hired by a firm like ours where you have real experience on doing that and you know where all the bodies are buried on what to buy. And also that cold calling experience is, I mean, you know it from your business, our business referrals are your best type of clients and investors. But also, you can't be afraid to call people.
- [40:32]
A
Yep.
- [40:32]
B
You know, it's just, you can't be afraid to pick up the phone and call people. This is not an ivory tower. You've got to kind of get out there and roll your sleeves up. I mean, you're asking people to give their hard earned money to invest with you. You need to be able to, you know, get in their office or get in their house in some cases. When we started, we go sit on a lot of like family room couches talking to people about why you should be investing in multifamily. So I think those, those two parts are important. If you want the acquisitions, I think you go the brokerage route or go the asset management, property management and really figure it out. I think those are important, especially now. You see today, I mean, how ugly it can get within operating expenses and things like that. It's good to be working in that part of the business before.
- [41:18]
A
Yep. No, great, great advice and appreciate the candor and your perspective, Jeff, and, and thank you for coming onto the show. Although I miss seeing you walking around the Palisades and having breakfast at Cafe Vita.
- [41:33]
B
Although I miss, I miss that as well.
- [41:35]
A
I know even if you were in la, still we wouldn't be having breakfast in Cafe Vita, unfortunately, right now. Yeah, well, then that's where I am. But I can't wait to see you in person the next time I'm in Nashville for longer than 24 hours or you're in LA. And thanks for coming on the show and much success to you and Maury and the rest of the lion group.
- [41:58]
B
Andrew, I appreciate it. Thank you very much. And congrats on the office move. You got it done.
- [42:04]
A
We got to give you a tour here. We did get it done. All right, Jeff, good seeing you. And that's another episode of the Kirsch Connection.