B (25:14)

Thanks for having us.

C (25:15)

Thanks for having us, Jay.

A (25:16)

All right, so I always like to start off just getting the story. So tell us how you got into the wonderful world of multifamily.

B (25:25)

Yeah, I can kick it off. So Red Bennett, I took a little bit of a wandering path to be honest. I have always been a generalist investor. Started in consulting and then ultimately ran a large multi family office. Not in the sense of multifamily office in real estate, but you know, single family offices. First multi family office. And we when I was there we episodically made real estate investments. A lot of times it was around distress. I then worked, was the president of a Longshore Equity hedge fund where we did some reinvesting and then went to run a large single family office around 2018. And that's when I started to focus on primarily on real estate and then ultimately whittled down to largely focused on multifamily and some industrial great.

C (26:19)

And I am not a generalist investor. My, my family always owned small apartment buildings in upstate New York. So growing up I was like in the business in the sense of like taking calls from prospective tenants and shoveling the buildings on snow days and that kind of stuff. But really fell into it as a professionally right as the GFC was starting my family, my brother, my parents, my brother and I bought a, bought a building here in la and then the GFC happened and real estate went on sale and I had a buddy who was swimming in cash at the time and there weren't a lot of places to put cash I don't know if you remember that Jay. Probably some of your, some of your, your, your listeners may be getting ptsd, but, but, but so anyway, so, so at the time everyone thought that there was going to be a lot of inflation and that hard assets were a good thing to own. So he backed me to start buying and renovating apartment buildings. And we have renovated more than 110 buildings in LA since 2008. Currently own 40ish little buildings in various partnerships and then we have a property management company through which we manage those buildings and another I think we're up to 125 buildings for third party investors.

A (27:40)

Yeah, and then and Moses, real quickly, you know a lot of people know you on social media. 100 and I just looked at it. 178,000 followers on X Twitter. How, how big has that been for you and growing your presence?

C (27:51)

Oh, totally changed my career. I mean I you know, not to sidetrack the conversation but I started, I built my original capital base and, and our, and we used to have a brokerage business and then we, you know, been building property management business largely by writing online. So first at Kagan's blog, which is a, you know, a blog back mostly back in the pre social media days. And then yeah I started writing on Twitter maybe six years ago and, and it, yeah it totally, totally transformed my life in, in a lot of ways.

A (28:22)

Yeah, it's good to get out, get yourself out there. You've been a model for some of the other, you know, people across the industry, both multifamily and otherwise, in making a presence out there. So you mentioned this a little bit but could you talk a little more about the portfolios that you all have today and where they stand, what they are comprised of?

B (28:42)

Yeah, sure. So you really can think about our business in two parts. So our Moses has referenced this online, the Y combinator of real estate. I mean there's a lot of places where we differ but what we're doing is we're going and finding either providing seed or growth equity for up and coming real estate operating partners. So in a lot of the, you know, the way that we've recruited folks or gotten distribution is through what Moses talking about his Twitter presence and LinkedIn presence. But so we will back emerging operators largely focused on buying sub institutional, multifamily and industrial. And then we alongside that we raised first round of capital a little over $200 million to go buy small apartment buildings, industrial assets across, across the United States. So we've deployed a little over $100 million so far in 13 assets across a number of different markets.

A (29:41)

Great.

C (29:42)

And part of the thought process was my portfolio that I described to you earlier is exclusively in the Los Angeles area. And we have learned an enormous amount from doing all those rehabs and managing those buildings for a long time. But as you and your listeners know, the asset class can be capacity constrained in the sense that there aren't always enough good deals for the amount of capital that you want to place. And so I was kind of in this position where it was like, I've learned a lot, but I actually don't see a lot of buying opportunities in la. This is going back to roughly three years ago when Rhett first reached out to me about starting Reseed, our business. And so Rhett was coming to me and saying, hey, look, there's an opportunity to take what you have learned in from making all these mistakes and doing all these rehabs in Los Angeles and kind of and, and, and apply it across, across deals all over the country. And that's. That was kind of the genesis of the idea and it. And it's worked out. I've really enjoyed getting a chance to, you know, to, to mentor and really engage with as a partner the, the, the operators with whom you work.

A (30:51)

Yeah. So let's talk more about that. It's a fascinating model. And you know, Rhett, you just shared some of the numbers. 120 million or so deployed, 13 deals. I believe you said you have another 100 million in dry powder investing in, you know, mostly sub institutional operators and real estate across the country. So, so just to back up a little bit, what led y' all to as I guess you already gave in some of this a little bit already, but give us some of the more context of the creation of Reseed, but more importantly, tell us about some of the deals and the people you've invested in.

B (31:21)

Yeah, for sure. Maybe I'll start with just the context and as you said, we'll back up a little bit. So starting in 2018, I was building a real estate portfolio for a large family office where we were really thinking about if we want to own real estate for the long term and we want to lean into a lot of the tax benefits. What's the right structure and what's the right part of the market. And as you and your listeners know, the upper end of the apartment market is very efficient and very competitive. But the vast majority of the number of assets, Glassware's assets are very small. Right. Sub 100 units. And so we started partnering with local operating partners buying smaller assets. At that point in time, the opportunity set was. Was really interesting in tertiary markets. So kind of the first couple assets we bought were, you know, ones in Bend, Oregon, Whitefish, Montana, saw Pre Covid. And so that. That went really well, but it's very hard to scale. And so, you know, at the same time, as Moses had mentioned, I'd reach out to Moses and said, hey, really like what you're doing. We'd like to deploy capital. At that point in time, LA wasn't that interesting. We even looked at. I was living in Boulder at the time. We looked at some assets in Colorado. And then I went to Moses's conference reconvene. And for me, that's when the light bulb went off. I said, okay, as a person that, you know, I have four kids and don't really want to be on a plane all day every day talking to brokers, trying to find the next operating partner. It was obvious there that, you know, Moses had unique distribution and so we could use that channel to. To recruit operating partners. And so that's really the. The genesis of the business was taking, you know, what we were doing on a small scale, left the family office using Moses distribution to then recruit and attract various operating partners, you know, across the country. So if you want to, you can talk about something.

C (33:25)

Yeah. The one, the one piece of this puzzle that Rhett has left out because he's being modest is that he. When Rhett came to me with the idea, it was like, okay, this is amazing because, I mean, I could feel the capacity constraints in our strategy. So, I mean, and again, I knew we knew a lot about. About renovating and operating buildings. And so I was excited to operate a larger scope. But none of this would have been possible without the capital relationships that Rhett brought to the table. So I went down to Birmingham, Alabama, which is where Rhett's from and where much of our capital is based. And I guess I didn't even know on that initial trip kind of what to expect, but Rhett introduced me to a series of extremely successful people who had known him for a long time and were prepared to back him with very large amounts of capital. And so what. What on the surface looks like somewhat of and kind of is a little bit of an experimental model in the sense of finding these operators, providing them with some Cedar Growth capital, and then getting the right, but not the obligation to invest in their deals. That's like a little bit of an unusual. I mean, not a little. That is an unusual model in Real estate. And so the missing piece was having like significant amounts of capital that were willing to come in and back us to do that. And it's worth out.

A (34:46)

Yeah, clearly. So just circle back then. So can you give us kind of a success story of a particular deal or operator that you. That's. That's been good for y'. All.

B (34:58)

Happy to. I mean, we're really proud of the kind of portfolio of operating partners we built. And we have a lot of conviction that a number of them will go on to build large businesses. You know, one that we've been very active with kind of in the last 12 months is a guy by the name of Alex Wall. He is based in San Francisco. He worked his early career. He was a broker. He then went, you probably know this about San Francisco, but there were two very active buyers, Ballast Point and Veritas in San Francisco, kind of pre 2020 or pre Covid. And then so Alex worked at, at Ballast and really understood kind of all the nuances of San Francisco. And you know, as we all know, we know that story. People got very negative on the city. We were able to, you know, get Alex onboarded onto the, the platform and then we made a couple investments. When you're in markets like San Francisco that have pretty high rents, oftentimes that's where, you know, we'll kind of execute Moses core, very heavy value add playbook. And so Alex is. We have a couple of assets that are very close to, you know, coming back online. So we've a number of putting a number of adus in place. And so that is a, you know, that's a great example of, of, you know, what we do.

C (36:25)

Yeah, Let me, let me jump in and add a couple of things. Sure. One, one of the things I love about Alex is like third generation real estate family. His dad's a contractor, like literally will swing a hammer. So he grew up with this stuff. His family has managed apartments since before he was born. So he combined an institutional mindset in terms of evaluating opportunities with like a real kind of scrappiness that I don't think that you can really teach. And, and so, so first of all, like, great background. And then from his perspective, I mean, having seen how these institutional operators have to act, in other words, they're, they're irr driven, they have to use a lot of debt. And as you and your listeners know, like, you know, that has not worked out so great for some of those institutional operators, let's put it that way. And so I think for Alex and I Don't really want to speak for him, but I think it's fair to say that the opportunity to work with re seed where we're coming in and saying, hey, look, we'll buy these deals all cash. We have no particular exit time frame, we'll even fund renovations in cash. And then at the point when it makes sense, as long as the debt markets cooperate, we'll put some leverage on there and return some capital to the investors. That is a very appealing pitch to someone who has come up and of like an institutional short term background.

A (37:53)

Yeah, no, that, that makes a lot of sense. So that's a great example. But tell us as you look to the, you know, next chapter of this, looking for other deals and operators to invest in, you know, what, what are we looking for? What's the winning formula look like? And, and I know you do multiple asset types, but particularly in this, you know, sub institutional, smaller multifamily space.

C (38:11)

Yeah, Rhett, maybe if you let, let me start out with this one. And, and you chime in. So the thought process behind receipt is that there are a bunch of these smaller assets, often older assets, that are in wellestablished neighborhoods where it is very difficult for various reasons to add supply. And so these, the owners of these assets have, are who are usually families of various types, have generally been content to sort of sit there and own them and just clip coupons for decades as the rents rise, often faster than inflation because there's demand in these nice areas and no one's building anything. These assets individually are too small, typically for institutional investors to buy. And also finding them is not so easy. It's not like you just get on some CBRE distribution list or something. It's like very often, I mean, I'll give you an example. We have a deal that we're working on right now where the operator first contacted the seller three years ago and has been texting or calling him every two to four weeks for three years to unlock this asset. And I think the, I, I, I don't want to misspeak, but I think that asset hasn't been sold in 30 or 40 years or something like that. So it's, it's, so we've got these local people in various interesting markets kind of digging under rocks and finding these really appealing little situations where we can come in and basically sort of replicate what those families have been doing, which is to say own these things. Now we're willing to put some more capital in than probably they are to sort of to, to make the assets even better. And generate higher rents and maybe get a better yield. But fundamentally we're just going to sit there and operate them well and generate what we, we hope will be attractive tax advantage yields for a very long time to come.

B (40:11)

Yeah, and I'll add a couple things. I think one of the things, so we're, we're trying to find operators that we feel really understand how to analyze real estate, you know, as Moses outlined, have the tenacity to just every single day wake up and search and try to find the, the right assets. But you know, over, over time, our, what we're really trying to get get at is we are looking across the US and so one of our big advantages, and I think it's important to talk about this, is that we're not, you know, when the Sunbelt was clearly pressured in terms of supply and in our view the market had not repriced that risk at that point in time, we didn't have to operate or execute there. So you ask like, what makes a good operator? What makes a great asset? We're, we're, we want to find, you know, the right athlete, but we're also very happy to, you know, be active in markets at certain points in time and not in others. And so how that's played out in real life is we didn't do anything in 2023. We had capital because the opportunity set wasn't that attractive. We started doing a little bit in 2024 and if you look at 24 and 25, our activity's largely been centered, centered around the Midwest and then the coast. Now that opportunity we think is, you know, I mean, it's amazing how fast capitals come back to San Francisco. And now, I mean, as you, you've talked a lot about, Jay, I think the, the, the Sun Belt, we're for the first time in our mind starting to see a setup where maybe it's, it's time to start to buy assets again. So that's a long winded way of saying we're looking at the operator, we're looking at the asset. We're also thinking about the market.

C (42:02)

And I think maybe, maybe. Jay, let me, let me add another thing here, which is that it's one thing to say that you're investing with different operators around the country, but I think part of the virtues or the virtues of the reseed model are that because of our relationship with the operators, we're able to dictate to a couple of different things. One is the structure of the deals. In other words, we want to own stuff Long term. And that has some implications for how the economics of those deals need to be structured. Right. And so part of the problem that Red had when he was allocating on behalf of that family was like, okay, you can find an operator or maybe they bring you deal but then you find some other operator and they want to structure the deal entirely and do, and do it with a totally different strategy. And so it's really hard to build a portfolio of long term hold assets when you're kind of being shown different things. And, and, and similarly the underwriting is all different. Right. Like you, different operators have different metrics, use different assumptions, etc. So a big part of what we've done at Recede is to kind of from top down, impose on the operator standards for underwriting and structuring deals such that as Rhett said, when we're, we're getting pitches from operators in different markets which are more or less appealing at any given time, we have the ability to kind of look at them in a rational way and allocate to where we think that risk adjusted returns are best.

A (43:33)

Interesting. And I want to go back to something that you'll mention about San Francisco. You know, I've shared the stat previously but I, I saw Avalon Bay sold a deal at a 5:1 cap rate and I thought oh, that seems about right. And then you realize it's a 50 plus year old building, it has rent control and it needs major capex renovation work. It's like wow, that's, that's, that's a, that's a pretty, pretty hot market.

C (43:57)

If that's going well, the rents are going to.

A (44:00)

But yeah, absolutely.

C (44:02)

I think we bottom ticked it with the two deals that we did. And I mean obviously we would love to buy more and it's like it has got meaningfully more competitive.

A (44:11)

Absolutely. A lot of capital coming back. Let's talk a little more about just the state of sub institutional multifamily at large. You know, most of what I cover on the podcast tends to be more institutional oriented. So in the institutional space, and you've alluded to this a little bit, just some of the challenges around particularly high leverage deals in the past. But now we're at a point where I think there's a lot of appetite for multifamily among investors of all types. But it's really hard to access LP equity and obviously the larger the deal the more complicated those cap stacks can get. They're finding debt, but still hard for equity. Is it any different in the smaller sub institutional space given that these Check sizes are going to be smaller.

B (44:56)

I, I do think it's different in that, you know, as you've alluded to, if you, it's a game of numbers and if you need a million or 2 million or $3 million to make an investment, there's a lot more folks out there that could potentially provide that capital. But I think, you know, we, we look a little bit different in that we're raising capital that's, let's call it semi institutional and we raise an initial round of capital and then we've kind of put our head down. So I, I probably don't have great insight into what it feels like to go raise on a, on a deal by deal basis. But for sure capital availability is challenged relative to what it was, you know, three or four years ago. But you know, maybe, maybe the more insightful comment is that it's very clear like if you fit the institutional box, if you have a relatively new asset that's maybe a lease up story at a market that has growth potential, there's a lot of capital for that the minute you get to something that's not financeable. And so we think a lot about what makes our capital advantage. So if you, if you look at places, you know, maybe a deal that they haven't invested the capex and now we're at 80% occupancy and they, you know, that's a live example. I think that those type of setups where leverage availability is, is fairly limited. I think that's where capital is scarce and where we're trying to focus our time.

C (46:22)

Yeah, let me, let me give you an example, Jay. We bought a portfolio with our operator in Philadelphia of small, where these, these are like 150 year old buildings in a historic zone where it's impossible to, to add more supply. Gorgeous walkable area, beautiful old buildings, actually in reasonable shape when we bought it, although definitely with a lot upside from, from renovating the units to like more modern standards. And it's like this, this is a portfolio of assets. The seller wanted to sell them all at once. These are like three and four unit buildings, many of which, like I said they were reasonable shape. But like putting together the financing for something like that would have been insane. Insane. I mean, I don't even know that it would have been possible. And so our ability to come in, take down the whole portfolio, all cash in one go and then really work through what is effectively a series of little art projects in order to put these buildings back together. And that's really unique and I think the seller obviously appreciated it. And I think the, the operator also appreciate because it's like, where else are you going to find someone to put up the capital for that? In the end, we'll, we'll end up with literally an irreplaceable portfolio of assets in, in a great area.

A (47:40)

Nice. And then, you know, buying these is one thing, but operating them is a different thing. You know, and Moses, you've talked about this very candidly in, in, in Southern California, but that's happening everywhere since co, We've seen increased regulatory costs, litigation costs, expense pressures, and that affects everybody of all sizes. And so, so what do you see? And how can, how can smaller operators drive operational efficiencies? Let me back up a little bit. I'll tell you, like a big theme I hear among, you know, larger operators. They're looking at, you know, talking about AI, they're talking about efficiencies of scale. They're, you know, a lot of other things. How, how can smaller operators drive efficiencies like that without having the efficiencies of scale of a larger provider?

C (48:24)

Well, Rhett, maybe if you let me, let me take this to start with and then you can jump in. One of the things that has really surprised me about our business because. So let me back in. In Los Angeles, we operate all of our own buildings, okay. And we're not perfect. Like, we make mistakes, but like, I, you know, because I own the operation, we created it, we kind of know how it works and we're pretty efficient, I would say. As we started to assemble this Reed portfolio, I think what I think surprised me, and I know surprise Rhett as well, was the standards for sub. Institutional property management are, let's call it variable, to be nice. So I think one thing to say and Reddit, I think we'll talk about what we've done to address that issue. But it is shocking how disorganized, irresponsible, incompetent some property management companies are. So my starting point would be like, you know, we, we could talk about the systems and stuff you have to put in place if you're going to deal with a lot of these kind of companies at the same time. But if you're just an individual operator and you own one or a couple buildings and you've hired some institutional property manager to, to watch them, like, for the love of God, like, look at what they're doing. Because very often what they're doing is not okay.

B (49:43)

Yeah, I mean, I think that. Well, there's a lot we get we could talk about here. I think that, you know, we, we try to talk to our operators and some of our operators have their own property management business. And so, you know, if I take a step back, part of our diligence before we enter a market is meeting property management companies, looking at their accounting standards, visiting some of their properties, looking at their website and content just to see if they, you know, if we want to entrust them, you know, with an important asset. So. But some of our operators have their own property management businesses, which can be helpful in this point. But I think the main point is especially in this area and maybe, you know, up the scale, there's a fine line between property management and asset management. For us, we're not drawing that line. It's, you know, we, we have to really be all over the property managers and we're looking at the data on a daily basis. We're making sure that when we get leads, they're converted very quickly. And so every aspect of the business, you just have to manage it very aggressively. That's the bottom line. But Jay, to your question, that doesn't always scale. And so there's a but at the end of the day we're trying to be great fiduciaries and less worried about how it scales and more of like, how do we impact asset performance?

C (51:05)

And, and I would say that what I think one of the surprises that the operators have experienced working with us is we are extremely hands on. We are devoting an enormous amount of resource at the receipt level to like literally go down to the transaction level in the books of the property management companies and, and basically rebuild the financials and, and then, and then.

A (51:28)

Do they like that?

C (51:30)

No. Well, but, but it's like we're, you know, as Rhett said, like we're fiduciaries. Like at the end of the day we've created a business where like we are handing large quantities of capital to yeah. Operators who we like and we've got to know. But like fundamentally Rhett's reputation and my reputation on the line here. And so we just can't, it's not like, here's some money, like, you know, you know, call us back in a couple years when you're ready to exit. It's like, look, no, we're, we're serious about this. And that means like being all over the operators and then, and, and their property managers.

A (52:04)

Absolutely. So I think that leads to another question then. So in a place like Los Angeles, you've also mentioned San Francisco, obviously, you know, great Cities, but they've been tough to operate in. And we've seen some larger operators just say, hey, look like we don't want to be there. But that also creates an opportunities for locally sub institutional operators. And so the question I want to ask you is I think you guys have unique purview or a view of this is that how can smaller operators who know these markets really well and take advantage of the fact that maybe there's fewer larger operators in these markets because they see the regulatory, the political risk, the headwinds, but at the same time still account that you do have heightened risks outside of your control.

C (52:51)

Look, it's a tough one. A couple things to say is one we have had, and I think this is reflected in how we've raised money for the, for the San Francisco deals. We've done a receipt and also how we've raised deals for buildings in Los Angeles. It is typically the case that local investors are more open to taking that regulatory risk than national investors would be. In other words, like it was surprisingly, it's surprisingly difficult to convince someone in Alabama that they should maybe invest in San Francisco. But it's actually, but people who live in San Francisco and are seeing the city turn around and all the jobs and the rent growth and everything are like, yes, I would, you know, like where do I, you know, where do I wire the money? So that's the first thing to say is I think that, that, that it, you ought to, you ought to, ought to kind of try to match the capital to the, to the market. That's one thing to say. Another thing to say is, and this is I think a virtue of the reseed model, there's this tension for operators where if you're a local operator, you're going to tend to be concentrated in your local market. And therefore, as I am in la, you are extremely vulnerable to changes or to worsening in the politics. And so one of the things that's interesting about the reseed model is that we can, because we're across a lot of different markets, we kind of can make those risk reward decisions and not be so concentrated in any one particular market that a regulatory issue in one market kind of ruins our lives.

A (54:29)

Yeah, no, that's a great answer.

B (54:32)

The only thing I'd add is that, I mean, it's also just a communication challenge. It's, you know, Moses said and we are, we try to help our investors understand that oftentimes those markets that have the best supply dynamics come with this regulatory pressure. Right. So like you're going to face. You know, I'm in Birmingham, Alabama. You've talked a lot about Huntsville. So yes, it is a lot easier to operate in Huntsville, Alabama. But I can assure you that San Francisco is not going to see a 20% increase over three years. Right. There's puts and takes in all these markets and just making sure that we communicate that clearly and that the strategy that you're executing is aligned to the dynamics of that market.

A (55:18)

Yeah, that makes a lot of sense. And I think that's why it seems like a lot of capital leave sub institutional and institutional like some of these Midwest markets right now because you don't have the supply risk and you don't have as much of the regulatory risk in some of these cities.

C (55:31)

Yeah.

A (55:32)

Well, gentlemen, this has been great. I appreciate your time and thanks. Let me pick your brain and best of luck as you're selecting the next round for Reseed and excited to see what comes next.

B (55:41)

Really appreciate it, Jay.

C (55:43)

Thanks very much, Jay.

A (55:56)

Foreign. And that's a wrap on episode number 77 of the rent Roll. Big thanks to Moses and Rhett for being our guest today. And thank you to jpi, Madera, Funnel, Mason, Joseph, Authentic and Telecloud for sponsoring today's podcast. And thank you to all of you for spending part of your day with us. We'll see you next time. Sam.