Taylor Avakian
$10 million is one of the best
November 5, 2024 · 1 hr 5 min
$3 Billion Dollar Advice from a Real Estate Pro: James D'Argenio of Bascom
With James D'Argenio — Head of Acquisitions, Bascom Group
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In this episode of No Vacancy, Taylor Avakian sits down with multifamily investor James D’Argenio, head of acquasitions at the Bascom Group, who shares insights from 15 years in commercial real…
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Episode show notes
In this episode of No Vacancy, Taylor Avakian sits down with multifamily investor James D’Argenio, head of acquasitions at the Bascom Group, who shares insights from 15 years in commercial real estate. They dive into the psychology of deal pricing, avoiding catastrophic losses, and the strategic thinking that saved James’s business when he walked away from a $10 million deal. Packed with actionable advice, this conversation is essential for apartment owners, Southern California investors, and anyone navigating today’s market. Don't miss these hard-hitting lessons for real estate success! 0:00 - Introduction of James D’Argenio 0:17 - James’s Journey into Multifamily Acquisitions 1:20 - Early Career Challenges and Learning Curves 2:18 - Memorable Career Moments at Bascom 5:00 - Key Turning Points in James’s Career 6:50 - Surviving the 2008 Recession 8:34 - Managing Financial Difficulties with Vendors 10:36 - Impact of Rising SOFR Rates on Multifamily Deals 11:56 - James’s Strategy for Underwriting and Acquisitions 15:03 - Psychology of Pricing Strategy for Listings 18:26 - Behavioral Psychology in Real Estate Negotiations 21:01 - Multifamily Real Estate Trends and ‘Other Income’ 24:42 - Crowdfunding’s Role in Real Estate 26:55 - Future of PropTech in Multifamily Real Estate 29:37 - Revenue Management and the RealPage Lawsuit 33:00 - Proposition 33 and Rent Control Impact 37:10 - Risks of Institutionalization in Multifamily Real Estate 41:35 - A Deal Lesson: The One That Got Away 47:30 - Bascom’s Game Plan for the Next 6-12 Months 53:09 - Closing Thoughts and Industry Insights Never miss an episode! Subscribe on your preferred platform and rate our show ⭐⭐⭐⭐⭐: 🍏 Apple Podcast: https://podcasts.apple.com/us/podcast/no-vacancy-with-taylor-avakian/id1768889293 🎧 Spotify: https://open.spotify.com/show/0mqgyJK00yivmqfH8zzLQW?si=f5ab2abbbe734fd7 📺 YouTube: https://www.youtube.com/tayloravakian Visit us at 🌐 thegroupcre.com Connect with us on social: X: @TAYVAY_ IG: @Taylor_Avakian FB: https://www.facebook.com/people/Taylor-Avakian-CRE-Broker/61557266265091/ LI: https://www.linkedin.com/in/tayloravakian/ #CommercialRealEstate #LosAngeles #MultifamilyInvesting #RealEstateInvesting #LosAngelesRealEstate #MultifamilyBroker #RentalMarket #LosAngelesApartments #RealEstateStrategy #TaylorAvakian #ApartmentOwner
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Episode transcript
This 11,951-word transcript is matched to English (Original) automatic captions. Timestamps seek the episode player to the matching passage.
0:00–10:00
James D'Argenio
deals I've ever done is the one I didn't do. About 15 years I've been in commercial real estate. If 1% makes or breaks the deal, then there's something wrong. We had $250,000 non-contingent, but I said I think we should walk from this deal. Wow. 2 months later COVID hits. For many asset classes, these are moves that are
Taylor Avakian
unprecedented. They need to move fast. We would have lost all of our equity in about 6 Welcome to No Vacancy, where I share conversations with LA's top multifamily owners, investors, and visionaries. I'm your host Taylor Vecchio, the founder of The Groups RE, and I specialize in the sale of apartment buildings in Los Angeles. On this show, we cut straight to what matters. Market insights and real-world strategies straight from LA's multifamily icons to help you navigate one of the most complex real estate markets in the world, Southern California. [Music] Enjoy. Welcome to the No Vacancy podcast with Taylor Vecchio. I'm your host Taylor Vecchio. Today's guest we have is James D'Argenio. James has 15 years of experience in the acquisition side of the multifamily market, primarily on the West Coast, but has done deals across the entire country.
Taylor Avakian
And I'm very fortunate to have him here today. Good buddy, good friend, and we're going to be talking about everything multifamily, everything real estate, and diving into the details. So, stick around, stay tuned. Hope you enjoy. James, welcome to the show, my man.
James D'Argenio
Thanks for having me.
Taylor Avakian
I'm glad you're I'm glad you're here.
James D'Argenio
This is fun.
Taylor Avakian
We've been when I brought the podcast idea to you, you were immediately immediately like, "Yeah, all right. Sounds good. Like, I'm down." Which I truly appreciate as as somebody who's starting this new thing, and I've been very surprised with the willingness a lot of friends and clients and people in the business wanting to come and support us here. So, it's been pretty sweet. Wow, that's a testament to you. Well, I appreciate that.
James D'Argenio
I appreciate it. you have in the business, but this is I've only been asked to do two podcasts. And the first one never aired. Uh maybe that was because I don't know. I don't know. I don't think But uh this is the second one.
Taylor Avakian
And I'm glad. Second one, but first one that's actually going to be Let's hope so.
James D'Argenio
Yeah, let's hope so. It will be. It will be.
Taylor Avakian
So, we talked about a couple things before we hopped on. First off, tell the audience and the listeners and the and the watchers, like, what's your credibility? Give give them a little background about yourself and why, you know, who you
James D'Argenio
are. Well, yeah, I I I don't know about my credibility uh per se. No, you have plenty of credibility. You know, I like you said in the intro, about 15 years I've been uh in commercial real estate. And I started as a an intern with Bascom in November 2005.
Taylor Avakian
Jeez, out of USC?
James D'Argenio
Yes. Yeah. I uh knew nothing. You know, I just remember the the books in class about the definition of an IRR. Yeah. And had no idea what I was doing and barely got through those classes. And so, the the the internship program at Bascom is you get in there and it's like, "Hey, here's a package and here's a model. This is what we need." So, it was a very intimidating experience, but that you know, over the next few years, that was my education. Yeah.
Taylor Avakian
So, you really started from the bottom and just was like, "Hey, throw you in the fire. Let's get after it, figure it out, and you learned along the
James D'Argenio
way." Oh, I blew up so many Excel models. Oh, yeah. And this is before, you know, things have improved, you know, Yeah. with macros and stuff like that. Now there's a circuit breaker, but when I was Yeah, it was it was a great experience. And then Bascom actually needed someone to move out to uh to Texas Ah. to complete the acquisition team out there. And it's interesting. I was working I was working on an investment package for a deal that Bascom was thinking about buying maybe in China. Not maybe. In China. Wow. And I and I I think I just started so broad, and after a few weeks, I got more done than some of the other interns. Mhm. You know, I was not the best intern. Yeah. Trust me. Yeah. But I just started kind of with broad strokes, and I'd put a a
James D'Argenio
good draft package together, and I submitted it to my boss, who's still is my boss now. And he called the guys in Dallas, they go, "Hey, you should think about interviewing James for the position." So, it was Wow. I think a really Without that kind of potential uh acquisition in China and me having that assignment, I don't know if I make it out to Dallas. I don't know if I actually join the Bascom team.
Taylor Avakian
That's crazy.
James D'Argenio
Yeah. What It's funny how it's just one thing can really change the trajectory of your career.
Taylor Avakian
One deal, one, you know, chance encounter, one interview, one anything. And I think it's putting yourself in the position to be able to have those, right? To like, create your own luck, per
James D'Argenio
se. Absolutely. And I I Is it is it fate or coincidence? You know, is it fate or uh coincidence? Yeah. Depends on who you're talking to. If you believe in affirmation, a lot of that stuff. I'm more of a a coincidence, but do you capitalize on that coincidence? Right, if things line up a certain way. Yeah, that was one of them. I mean, there's another crazy story where I as an intern, well, that's not a crazy story, but as an intern, this is a crazy story. This I was supposed to go to Denver. Mhm. And I was in charge of bringing all the maps. Okay, before inter- before it was easy on your phone. Yeah, like swipe phone. Like paper maps? Yeah, so we had to print from Microsoft Streets and Trips. You printed high-level all the way down to the street maps, so you knew where you were going.
James D'Argenio
So, I'm printing all the maps, and I was living down in Newport Beach. We had a 7:00 a.m. flight, I think, out of John Wayne. And I think I woke up at 6:30. I I I made it, but I drove up to the curb, left my car running, put it in park, and just ran inside. So, long story short, I came back, and I there were some issues with the sheriff, and uh my car was still under my parents' name. And I told the story to the back cuz I made the plan, and the person that I was flying with, they're like, "You did what?" I think that was another reason I got the job. They're like, "This This kid's kind of crazy."
Taylor Avakian
He's willing to do anything, man. He's willing to leave his running car in an airport with like
James D'Argenio
uns- like, why is there people I'm sure that Hazards on. Oh my gosh.
Taylor Avakian
Yeah, this is 2000 This is end of 2005.
James D'Argenio
Oh, yeah.
Taylor Avakian
So, like, there was the security was stepping up.
James D'Argenio
There was could have been I was running to the gate. Over the speaker, I heard, "Will the owner of a 1985 Toyota Camry please report to the uh to the security desk immediately." I heard that, and I'm running to the last gate at that terminal. Oh my gosh. I had still had my retainer in. I mean, it's a it's a great story that still comes up, but to to your point of those events, those things that happen. Yeah. Yeah, it's kind of the there's a few that shape you.
Taylor Avakian
You I know you've got Oh, yeah. I'm sure you got a No, but dude, that's incredible. I just imagine like the scene of you. That would be a great like short film of just, you know, the you retainer still in. Like, that dude, that is hilarious.
James D'Argenio
I mean, I just I just put on whatever was on the floor. Um Oh my god. And I got out there. We were touring with some pretty heavy institutional players, and and and everyone that that took care of me, though. It was great. I ended up just telling the story to everybody that was there. Because I looked so bad that that the principals of Bascom just felt that you should just tell them what happened. Yeah. Yeah. Versus them thinking this is how you normally look. Yeah, exactly. Right? Oh my gosh. Uh but I yeah, flash forward, and just been got a lot of experience. I did move out to Dallas, got the full-time job, and um How long were you in Dallas for? About 4 years. Okay. So, this was from 2006 till about the middle of 2010. Okay. So, if you go back into that recessionary
James D'Argenio
period, we were we were in buying mode. And then we were in asset management. So, I got tremendous experience. We were buying a deal a month, which I'd say back then was pretty high volume. Yeah. And then '08 hit, and we got transitioned to asset management, loan workouts.
Taylor Avakian
So, it was a great experience. Yeah, you got the full spectrum of great market, really, really shitty market all in the span of 4 years.
James D'Argenio
We Yeah, this is when things got tough. I mean, we were at one point we had some bad deals. Mhm. Like anyone who who was back in the law and value-add opportunistic acquisitions. But some deals that were just the worst we we had had a list of vendors that we would call and and just say, "Look, we've got $100,000 left. We're we might get foreclosed on, in which case a lot of these liens are going to get wiped out. And we were trying to cut deals with vendors. We're talking paint vendors, flooring vendors, and just people that had worked on the project, and we knew money was running out. And it's like, "Hey, we owe you a $10,000. We can't pay you 10.
Taylor Avakian
Would you take $0.50?
10:00–20:00
James D'Argenio
And we just we tried to get that was that's what I was doing and it and it was humbling. I mean, it was but it was a great experience and it's sad that we're in that position and other people were as well, but it's a reminder that this business isn't just about tombstones and closing deals and and having those dinners. There's there's real people on the other side and you don't can lose money. For sure.
Taylor Avakian
I was just yesterday at the uh the real deal event and the founders of Tides
James D'Argenio
were speaking there.
Taylor Avakian
And I wanted to go just to see what they were going to say because if you don't know the Tides, they bought I don't know four or five billion dollars since 2016. They just ramped up went crazy. They became top 50 on NMHC's um apartment owners list in that period of time in six years, something like that. It's just insane growth and uh recently they've come into some hot water or they've had some deals go bad. And they were kind of talking about their um experience with that and how they've kind of navigated the waters and and really try to keep their reputation because and it it I'm sure it's refreshing for them to hear Bascom's story a little bit too and there's many other players who've had really had deals that not have not gone well, right? And have hit circumstances where the sofa
Taylor Avakian
goes raises 500, 600 basis points and you're just like, well, that was on the model kind of breaks the model up and down. So, you were able to Bascom was able to maintain them the the reputation and be able to continue to grow to where it is today, which I mean, what's what's your guys AUM right now?
James D'Argenio
Oh, I start two and a half, three. Um you know, and but it it billion Yes. I mean, it's a test it's a testament to the founders. And I think when you do the right thing first I there are risk events that you can't foresee, but you got to have controls in place yeah to manage through those challenges and so every industry is going to lose money. Mhm. Like I was thinking thinking about it like you're making a movie, you're in sports. Like how many great actors make bad films? A ton. Yeah, it happens. You know, I mean, and and or how many startups fail or restaurants? And so if you do the right thing along the way loss of capital is the pinnacle of all risk. I mean, you put 100 grand into a deal, what's your risk in that deal as an investor? It's 100 grand. Mhm.
James D'Argenio
Um and if that sponsor, if that general partner does the right thing along the way and is is transparent and communicative you will say, you know what? Yeah, that was this was a bad outcome, but I still might do business with you. You know, we had partners where we had deals that that that didn't go well. We had other deals that we were able to manage through the beginning stage of that GFC cycle Mhm. and turned a profit. So, and and and we have repeat partners from that Mhm. that cycle. Yeah. Um but it's hard and it you know, especially at a peak when there's so much liquidity, it seems like underwriting is just a check the box and not really any sort of defensive analysis. You know, it's just like go go go. We all get caught up in it.
James D'Argenio
I know. I mean, it is.
Taylor Avakian
It's part of it's part of real estate. It's part of why there's still opportunities in it, I think because it is. It's just it's one of those industries that still seems and they're they're cracking down more regulations and things like that, but it was very much the wild west for
James D'Argenio
a very long time.
Taylor Avakian
And I think people had different strategies, different ways. I know there's still incredibly wealthy people who just they're not under like they're looking back at the napkin, is my price per square foot and price per unit make sense? Like they're not doing all this IRR sensitivity analysis, yada yada. They look at it, they walk it, they see the basis and they're like, yeah, I'm going to get it, Yeah, what's the
James D'Argenio
what's the GRM and they're and they're on board. I and I I almost I I kind of admire that short form analysis. I think sometimes we can get try to get too technical. Um but I don't think there are is a problem with running scenarios and downsides and make sure you have enough working capital. Yeah, it's like this is serious stuff. Yeah. And I think that this this cycle what was introduced that we didn't have in previous ones was the crowdfunding. Mhm. You know, well, it's capital's capital, but I think when you're when you're working with big allocators that you're not as close to the true investor per se. But a lot of the the peak acquisitions um this cycle crowdfunding was a big part of it.
James D'Argenio
And those are individuals that maybe saved up $50,000 and asked 100,000, 25,000 and picked one investment and that investment didn't work out. I don't know if legislation develop we'll see. It's just going to I think the next few years it'll be interesting to see if anything happens. Yeah. But we really loosened up those regulations, right? I think Jobs Act or something loud. Oh, you know, just about like man, the retail to invest and I think I think that's great that kind of democratization of investing, but I think you're seeing the challenges of it now too potentially. Yeah. Like not everyone should just be able to flip on a phone and just start trading stocks. Maybe, I don't know. Maybe you should have the opportunity to do that, but you might want to be disciplined.
James D'Argenio
I mean, it's like so many people just buy a stock at high and then it dips 5% and they're like, oh, I'm out.
Taylor Avakian
I'm out. Yeah, right? There's no logical thing.
James D'Argenio
There's I don't know.
Taylor Avakian
I I was in the I I had a little crypto run, a little penny stock run a long while back and it didn't go bad, but it didn't go well and I lost a little bit of money, made a little bit of money here, but I realized in that moment I'm like, look, I'm going to stick to what I know best and what I have a competitive advantage on, which is real estate. I know what a good deal is. I know how to add value to a to a piece of real estate. I'm just going to invest in what I know and let the people whose full-time job and is obsessed as I am at this real estate game and those assets do what they do best cuz I'm not going to beat someone who spends 100 hours a week studying this kind of stuff. At least consistently.
Taylor Avakian
Maybe I'll beat them once, get lucky, but um and that's the way I think about it from a broker's perspective and I'm sure from you guys too on on the uh the acquisition side, which I actually wanted to talk to you. Like what is someone in acquisitions actually do? Like what is their day-to-day job? What are the requirements? What are they expected of? What what is that acquisitions role?
James D'Argenio
Sure. Well, you can let's let's work backwards, all right? The the our job is to find investment opportunities for the platform that you might be working for or if you have your own company, but the end result is we're buying deals. Okay. Well, how do you get there? Talk with people like you. Mhm. Brokers. A lot, right? We talk a lot. You're trying to get listings, we're trying to buy deals, we're trying to put stuff together. Mhm. So, that's obviously a big component. Um outbound marketing even as a as a principal. The other component, analytics, underwriting and all right, you've got, you know, if you're covering a market where there's a dozen listings a week you're pulling down OMs, T12s and you're sending them out. If you if you have a team, right?
James D'Argenio
The team's underwriting, you're reviewing underwriting. So, you're doing outbound marketing to try to generate business and then you're underwriting to see, okay, of the deals that you've got to pulled in Mhm. which ones could be potential candidates. Uh and it ebbs and flows. Um but you know, I'm starting to think like this week we were close on a deal the whole prop 33 maybe put it on hold a little bit. But and so we were working on an investment package like right away. So, now I think we're going to get to terms on a PSA. We've got to get our internal material drafted.
Taylor Avakian
To send out to investors.
James D'Argenio
Yeah, and even you know, you would just have the the Bascom team review. Look, we've got to put a business plan together. And a lot of times that business plan sure, it it goes out to investors whether it's one LP or family friends or lender, it's it's for ourself initially. Because we toured the property, we have the initial underwriting but now it's like, okay, let's really check the demographics. Let's look at the rent comps, sales comps. Let's look at right and and and put it all on paper and see if we actually still like this deal.
Taylor Avakian
What is it?
James D'Argenio
Cuz sometimes you do that and you go Yeah. You know, you then you're really you're you're stretching. Other times you're like, oh my god, I didn't know about this this mega development that's coming down the street. I didn't know that the the the schools were so great or you know, demographic. You can learn stuff and as you learn that could improve your business plan or Yeah. And so that's a lot of it too is just trying to get ahead of potential deals. And as you know, on on on the on the broker side you're doing a lot of pitches. Yeah. And I don't know what percent you get listings out, but it could be a small amount. That's similar to our side. We're underwriting tons of stuff.
Taylor Avakian
I'm really successful.
James D'Argenio
I only so you're you're at 99 99.9% successful at those pitches. [Laughter] Oh, no, I'm not you know I and I yeah, I'm not going to take that pitch. Yeah, nah. Nah, yeah. Overpriced, they don't want to really
20:00–30:00
Taylor Avakian
want to sell that one.
James D'Argenio
I don't need that one.
Taylor Avakian
No, but but no, I I get you on that and it it is it's a at a certain point it's a numbers game, right? Like you and what I think too with what I've seen from really good operators, really good principals
James D'Argenio
is they act quick.
Taylor Avakian
They're speedy because they they can recognize a good deal and they recognize that they need to move fast because everyone says the adage is saying time kills deals. That is 100% true in my experience in the real estate game. And so if you as an acquisitions you know, head of acquisitions can look at a deal almost immediately know, okay, it's worth our time to go tour it, tour
James D'Argenio
the deal.
Taylor Avakian
Okay, it's definitely worth time to put investor memo and do that, you know, quickly and know, okay, actually this LP is going to be good for this one, this LP is going to be good for this one. I think we can do this. Like it's almost just running in your brain because you've done it so many times. It seems like to me that's the people who excel at that role and and you've obviously done that well. Do you think that that's a true statement? Do you feel like it's this amalgamation of skills and experience that allows you to move quickly?
James D'Argenio
I think that's very accurate. I mean, there's a couple things. First off, just just getting feedback to someone. If you bring me a deal, okay, you say, okay, here's here's where we think the strike price is. Here's the financials. Yeah. You know, Taylor, I'm going to get back to you and I can get back to you in 2 days. Mhm. 3 days. Whatever it is, I need to be transparent and just honest with you. And that builds trust with you that you're going to send me more deals. Totally. So in 2 days go by I say, you know what? You need 10, we're at nine. I don't think this is our deal or maybe maybe more like you need 10, we're at seven.
Taylor Avakian
Yeah, yeah, right now.
James D'Argenio
Especially. Especially. Uh that doesn't matter. I said I was going to get back to you with the value. I got back to you. We ran it a desk review and you say, hey, no worries. Next one. So that is I think that is critical just just efficiency, but also just doing what you you said you were going to do. Okay. Um the other side of that is kind of once you do identify that deal. Let's say for that same example maybe we're at 9.5. Okay, now we buy have something. And everything that you just brought up about in your head you're kind of visualizing a path forward, okay. Is it worth if it's out of state, should we hop on a flight? Who could be a potential equity partner? And that does come with experience, right? I mean, as as an analyst you could you're
James D'Argenio
underwriting you can get great reps doing that. But then getting a sense of, okay, is this one that we push for? Is it why right if it's if it's if 10 million's the bottom line, okay, at least we know. Now we're okay, can we can we plug that into the model and maybe we're missing a rent comp that can help us and then further investigate that deal and also at the same time is there an equity partner that we think would fit? Yeah. And all that yeah, it's going I mean, we're doing that kind of in real time right now on a uh a deal in Waco actually. It's student housing deal. Building in the 70s, but it's right next to Baylor. And it fell out. It was under contract. Yeah. And now it's kind of coming back around, but so we're looking at the model,
James D'Argenio
we're tightening everything up and it would we've got to go see it, but not if we're not in the mix. So it's it's fun and then and you're looking you're looking at the model and you're like, shoot, yeah, who who would be good equity partner for this, but you know, unfortunately it's not just a GRM and a and a per foot thing. It's what's the what's the IRR and multiple and what's our kind of cat, you know, all all the metrics that you're talking about. But it's fun. Like that that's that's fun when you're out pursuing that deal. Totally. And nine out of 10 if not more you do that work you cut you get to your final value and you don't get the deal. Yeah.
Taylor Avakian
Yeah, but like that's that's the game. Okay, you were mentioning because I always this is something that as a broker I think about all the time and I'm curious to know your thoughts as someone who's bought a bunch of deals and sold a bunch of deals. When you're pricing an asset, right? Let's say that I think it sells at 9 million bucks. The owner thinks it's worth 10 million dollars, but they're
James D'Argenio
a seller.
Taylor Avakian
They're willing to meet the market. Do you price the deal from a psychological perspective at 10 knowing that you're going to negotiate down and try to get something above nine, right? And you let's say you come back to me or you're looking at the deal. Let's say I'm going to say you can't give me a price yet. Or do you price the deal at 9 million bucks at the price it's worth and the buyers are actually going to come meet that price because they know that's what it's worth or do they always come a little bit lower than list price? Or do you price it eight and a half knowing that people are going to be like, holy [bleep] like this is you know, this is a steal. Like let's get on this quick which bids up the price hopefully
James D'Argenio
above 9 million bucks.
Taylor Avakian
How do you think about pricing strategy when it comes to selling which you guys have done and from the buyers perspective when you're writing an offer, are we like does that matter?
James D'Argenio
It's It's a good question. I think just the psychology of Yeah, let's start from let's start from what Okay, let's say we were selling a deal. Okay, we get a couple broker evaluations in and yeah, you got ones at 20 million probable, the others at 18 and the others at 22. That's a pretty big spread. Mhm.
Taylor Avakian
Do you take the flyer on the 22 and say, yeah, it's just why not?
James D'Argenio
Nothing to lose. Mhm. Or do you do you come out at more of a very realistic asking price, whisper price? And we see it all different ways. I think just my thought is just my opinion is if I was if I was on the on the broker side and listing a deal, I want to create a competitive bidding This is this. So I would actually pick a whisper I think that is more, you know, it's aggressive, but realistic that doesn't contradict itself there, but you see what I'm saying? versus whispering some massive price cuz then I'm going to get now now I'm looking at underwriting a deal. I call the broker and I ask what the the guidance is and they say, oh, it's 23 million bucks. I might just be like, ah, it's I'll put that at the back.
James D'Argenio
So I think when you if you're coming out with a price and I'm sure everyone has different opinions. Also probably depends on where you are in a cycle. If you're at the top of a cycle then you probably you can come out with more of an aggressive price because the market will probably meet yeah, meet you over time. Yeah. At least certainly that's what we saw 2020. Yeah, for sure. If you're more at the bottom and you're and it's a reset, well, I think you have to be very, very realistic. Not saying under whisper, but you want to get people excited. The more people that tour especially spend time, travel emotionally get invested in it, when it comes for bid day it's going to keep getting bid up versus the other way around. So I would say I think realistic will get more people interested.
James D'Argenio
And then from there you can push the pack because once you tell me I'm just a couple hundred grand off on a deal, I don't want to lose it. Yeah. Cuz I spent all this time Yeah. Yeah. So that's what I that's that's kind of my perspective from the listing side.
Taylor Avakian
I think When you're buying a deal, have you been in that situation where you've been in that bidding and you're like, [bleep] like I really want I we really need this deal. Right? Or I not we need this deal, but I really want this deal and maybe you've raised your bid above where you initially said, hey, we're we're at this number and like let's go 50, 100k above
James D'Argenio
that. Yeah, of of course. And but there is a So I think starting off you try to be objective. And and you plug in all the assumptions and you say, this is this is the value. And of course value is subjective in and of itself, but we're always trying to find a deal that's mispriced. Okay, right? We're where our intrinsic value is less than the price. That is that's how you make your money. The money makers. And that's hard to do. Yeah. But we're trying to be objective. Okay. Now you get into the range. And if you're and it does just talk percentages. Yeah, if it's 1% okay. If 1% makes or breaks the deal then it's probably then there's something wrong. Front end of deal. So if 1% is 100 grand and you like the real estate and the potential business plan, you you you should increase your offer
James D'Argenio
by 100,000 dollars. Um but there's there's the other side and this is just the human nature so excited about it and you know this. It's like, no. So you have one person that's at 9.9, the other person's at 10.1 and they're both saying no. Yep. And you're like, come on, people.
Taylor Avakian
It Oh my James, like this is the death of me. I'm I'm I've I've worked on a deal and I won't say when, but um we were it was let's just say it's a two and a half million dollar deal. We're 15,000 dollars away. 15 15,000 dollars and they would not come below the sellers would not come below this price. The buyer said, nope, I'm stuck at this price. And we're sitting there with you know, our dick in our hands
James D'Argenio
being like good.
Taylor Avakian
What the [bleep] This is just some ego [bleep] Like you really? You're not going to buy this and you're not going to sell this or meet in the middle,
James D'Argenio
like come on.
Taylor Avakian
Like 7,500 bucks for Um yeah. Anyways, it's in and then then there then they look to you and the broker and they go, "Oh, okay. So, what are you giving up?" Well, you're it's a you're always just a broker fee away from getting Always a broker fee away.
30:00–40:00
Taylor Avakian
You're always a [bleep] broker. What what uh So, what happened? The we you know, um the we did what
James D'Argenio
we had to do.
Taylor Avakian
Like the brokers, we had to chip in and make make sure it happens. And like it's not anything we want to do and it doesn't make us feel great as brokers, right? And if you're going to be in the biz for a long time, maybe that's not the best course of action to do on the buy or the sell side. But if I like to think of of real estate and whatever I'm doing is like an
James D'Argenio
infinite game.
Taylor Avakian
So and I understand that that term itself and reality, right? But just from the perspective of not playing an a finite game of like football where there's an end score, there's a winner or loser. We're going to play this game forever. The relationship that I have with this person or this person or this person, ideally even if I never work with them again, if their perception of me and and my reputation in their eyes is one of solid morals, values, and did the right thing and like that's a good person and I would refer that person to them. Like that's what I'm wanting to accomplish. And if I have to give up some P to do that, fine. I don't love it, but from a buyer's perspective, I think it's important to think about that, too,
Taylor Avakian
is like do you want to do another deal with this broker that you think potentially could send you more opportunities or even this this uh buyer. If you're selling a deal, right? Do you want to do another deal with this buyer because I know in this two-shell space, a lot of these properties trade hands like between 15, 20 people. And it's not uncommon to buy and sell deals from the same company and trade properties almost from that perspective.
James D'Argenio
Yeah, reputation matters. Why they I mean, the long term uh vision is critical. I mean, you're going to not do that deal for foregoing 10, 15,000 dollars is maybe that short-sided. Yeah. Um and you're looking about, you know, repeat business. Do you think I I sometimes I think sellers they they almost know that a buyer's going to retrade them. Yeah. So if they you know, it's like they they tie up the deal 10.2, but 10's their bottom. Yeah, yeah. We you know, what? We we try to close at the price that we go in. Yeah. Because it's just easier. It's it's it's selfishly it's easier for me. Like we're trying we're going out to get a loan at that price. Everything we do is based on the price. Mhm. We don't want to have to modify anything.
James D'Argenio
It happens. Mhm. But sometimes I think in the small mid-market, I think the sellers know 100%. And that's actually been an adjustment for us because like I said price is 10, we're going to close at 10. But and we're like talking to a broker and they're well, you it's 10.1. So, but I think that's why because they're like, well, we've we've been doing this for so long. We know buyers are going to come back and ask for something. Psychologically, it's going to make them feel better about the deal. Oh, I just got 50K off. Mhm. It's so that's so true.
Taylor Avakian
That is literally so true. It's so much more of a psychology game where the pricing and managing expectations and how knowing at least from a broker side the seller Like what are they anticipating? Like we've you know, we negotiate where I know that the buyer's at this price and I know the seller's at this price, but we're going to do five rounds of negotiation just to make feel everyone feel happy.
James D'Argenio
Oh, yeah.
Taylor Avakian
Yeah, I'm I'm happy. Right? Like that's Yeah, like that we we do that because for whatever reason, it makes the perception of the deal
James D'Argenio
feel better for both sides. Like they really got they juiced as much possible even though I know exactly you were here, here, here.
Taylor Avakian
Yeah, we ended up there the same price. But like as a as someone who's working for the deal to get done
James D'Argenio
Yeah. Like Maybe you you just want to get got to do this we got to do this exercise cuz it's going to make everyone feel better. But it could actually Okay, if we're looking at it it could be beneficial because you you want both parties to feel like they got a good Oh, yeah, it is beneficial. That's what So so even though the back and forth, the time it takes, you know, time does could could kill deals. But if your client feels good and my client feels good, you and I both feel good. Totally. So maybe even though it is kind of we can make fun of it and it's important. It is. I mean, it is. And that 25, that 50,000 is important because of just the psychological benefit it provides us. Okay, now let's go spend 30, 60 days getting this
Taylor Avakian
done.
James D'Argenio
Yeah.
Taylor Avakian
Yeah, no, completely.
James D'Argenio
I mean, the the the some of the the smaller projects we've acquired have had some of the craziest stories on them like the we bought a deal in Fontana.
Taylor Avakian
And And so for people who don't know where Fontana is, describe Fontana.
James D'Argenio
Uh San Bernardino. Yeah, Inland Empire. And is we bought it from so I forgot how long this person owned it. But they fixed they did everything. They they they lived there, they leased. They fixed the HVAC, everything. And uh the great opportunity we closed and the owner didn't want to leave the office. So, he had like an office on site and he wanted to stay. It's not Yeah, it was it was like 40-unit property, but actually had a stand-alone leasing office. And just didn't want to leave. Seller's remorse or maybe just this was was his life for so long. You know, for an hour it was kind of funny and it really kind of funny, but you know, I It was understandable. Understandable. But then it was like look, our our transition team's out there.
James D'Argenio
We called the broker. You got to get him out of there.
Taylor Avakian
[Laughter] On the property.
James D'Argenio
Like he no longer, you know, he's trespassing. Yeah, his flight. And it we knew it was going to going to be okay, but Yeah. I yeah, I had to have some empathy and just think the other side, right? This is such a uh uh There was so much passion that he had for this piece of real estate. That we probably would have let him hang out there for not a week, but you know, we would
Taylor Avakian
have given him time. He needed to like to to to really like soak it in, release Yeah.
James D'Argenio
what he had worked on for the last 40 years. was like, hey, you by the way, you have millions of dollars in your bank account.
Taylor Avakian
Why don't you go go to your banker and check that out?
James D'Argenio
Maybe that'll make you feel a little bit better. Just crushed it, you know.
Taylor Avakian
Yeah, right? Didn't it fantastic?
James D'Argenio
It was like it's like the last day of college. You're just you're you just don't want to leave.
Taylor Avakian
Then maybe that's it, but you get you know, you did it's time to move on. Yeah, it's time to move on. Yeah, the real world. Move on. Um okay, we talked about a little bit. I want to talk about the future of real estate and our jobs as we're in an interesting position in what we do where technology seems to every day very smart people in Silicon Valley seem to want to disrupt our jobs every single day. So I'm curious to know from your perspective, like where do you see our industry going in the next not 10 years, but like 20 to 30 years? Where do you see that our our is real estate done by people? Is it is it technology? Is it AI? Robots? Like And again, I don't have the answers to this, but I'm curious to know your thoughts as someone who's done
Taylor Avakian
this for 15 years and seems to be tracking it a little
James D'Argenio
bit. It's an exciting time. I mean, the amount of emails for for for just you see for prop technology, different software, um analytics, I think is great. Um the all the AI stuff which I know nothing about, but I can you know Google things in the co-pilot and have fun and and and practice with it and I I I think it's going to be great. Um with any new technology, there there there could be some pitfalls, absolutely. You got to navigate that. So, I'm I think that's exciting. I hope I hope it um we can standardize the industry a little bit, especially when it comes to maybe even the finance side title and escrow, um security. There are so many challenges I think just to
James D'Argenio
to keeping you know, the troublemakers out of the industry. You talk to a title title company like, "Yeah, we just had a a fraudulent wire and and so as as annoyed as we can get with the process and I had to call, I had to text, and they called me." We need that stuff right now. I think technology will improve. I think should help the security aspect of it even though there might be other ways to kind of penetrate the real estate business and do bad things. So, I'm just generally on the on the technology side excited. I don't see a replacement of humans. I don't see the the interaction diminishing in any way. I think the auction sites there was a thought that we might not have Well, the disruption from from auction sites might
James D'Argenio
um you know, diminish the brokerage business, the principal and broker interaction. I I haven't seen it. Mhm. It's it's certainly augmented it in ways. Um some people have used it. We've never bought a deal off an auction platform. We've bid on a few and it's extremely exciting. And you talk about getting vested and then you see like the bid go up and you've got another minute. That's a lot of uh that's fun. Yeah. Yeah. and you're like, do another 50, do another 100. But it hasn't replaced, I think uh What's the song?
Taylor Avakian
What what's the the Is it Neil deGrasse Tyson?
James D'Argenio
Yeah. Neil deGrasse Tyson. He said it's like it's not the machines that are driving the cars, the cars are the machines. But there's still a you know, a human in them moving around. Yeah. Uh So, I I
40:00–50:00
James D'Argenio
I'm looking forward to it. I I think where I I do where I do see concern is the uh I don't want to just throw out like the institutionalization, commoditization. So, I'm looking for a a better word. Maybe the the fungibility, right? The the the the fact that an apartment building here can be no different from an apartment building there. And um how we're as operators kind of focused on the bottom line. We we talk about other bottom lines and people and planet profit and then but it's about how much you weight each one of those. And so, if we're all just focused on profit I am concerned that the consumer
James D'Argenio
will will Like I guess the best way to put it like you'll give an example. Other income, okay. Other income in our industry has become a bigger part of of revenue than it has in the past. We all know what it's like to rent a hotel room. It can be frustrating when you're oh, two hour hours. That's not bad. And then you get the the total daily bill it's 250. Yeah. Like what the heck? I I'm seeing a little of that creep into our our business.
Taylor Avakian
Um The ancillary income.
James D'Argenio
So, And that that concerns me I think cuz it just goes back into to us and and uh you know, just the industry as a whole. As it gets more competitive uh and more efficient you're trying to find ways to increase your operating margin. And that's one way to do it. Um a lot of industries as they grow, you take the grocery business, right? That's like who suffers? Well, a lot of times the employee and and the suppliers. But the benefits it's just tough. I mean, everyone's kind of chasing pricing down. And I feel that way sometimes about our business. Chasing yield is that phrase that we hear at every other conference, right? So, that that to me where where we are in 20 years I I don't want to be the industry that's the one that's like potentially the hospitality. Yeah. I don't want that. I think
James D'Argenio
but going back to it, if my competitor, my the property next to my property is the rent's $2,000 base rent but they have another $200 in in other income and fees and you're 2200 the prospect's probably going to come rent from me because they see 2000. And you're trying to do it just a straight gross honest way, maybe saying, look, $2200 is all you're going to pay. And that's actually I I appreciate that. But if I'm out shopping around for an apartment I'm going to see $2,000. And so now you have to modify yours so that it's kind of close to 2000 as well. And that's what I mean that kind of race to the to the bottom is we we we do that. So, then the base rent's going to go down, but the ancillaries are going to go up. The the amenity fees, the so cam charges for
James D'Argenio
apartments trash. I'm billing you back for pest, trash, water, sewer. It's like pest? Yeah. That's not a value. You're like, what you I you should have a pest contract. Why why am I Why am I paying two bucks a month for
Taylor Avakian
pest?
James D'Argenio
As a tenant. Yeah.
Taylor Avakian
No, that's but but you know what? And I think what has been, especially in Los Angeles what makes sense is because other income is not rent controlled. For the most part, right? There's certain skip pass through fees and stuff like that, but parking income parking income is not rent controlled. You can raise it as much as you want every year.
James D'Argenio
Um You can. But I I I guess it's if you have a lease and I don't I don't know Yeah. if that's Yeah, then that could be that could be a way to work around.
Taylor Avakian
Well, as some I think because the rent control laws are getting stricter and stricter, people are going to give you that $2,000 price base rent, but there's going to be all these stacked on fees on top of it so they get to market rent or perceived market rent that they're trying to achieve, right? Because they can't increase the rents. It's not going to make sense from a growth per projection perspective over their investment timeline if they're not going to be able they can raise the rent 3% or vacancy control happens and you can you can't raise
James D'Argenio
the rents at all.
Taylor Avakian
Like let's let's say vacancy control happens. Your apartment you can only raise it from 1000 to 1030. Does someone say, I'm going to renovate this, but parking's $1,000? And you can the the base rent's 1030, but if if parking or you know, like is there a workaround? You know what I mean?
James D'Argenio
Well, and that and and and with the with the the prop 33 and everything coming up, it it'll be I think it's it it'll be really interesting to see what happens. It's it's unfortunate in a way that there's such a uh there's so much friction between between a an apartment owner and and the resident. We you know, first off, landlord and tenant, those two words right there make it sound terrible. Yeah. And there are some bad operators, landlords out there, of course. Mhm. Um but there's great ones. You know, and the bad ones a lot of times make the press and but just the just the friction that we've experienced over these past five years has been worse than ever, especially with the pandemic and it's just it's as if you go in there and it's like you're you're two opposite.
James D'Argenio
It's Friday night lights and you're playing each other and you're in your end zone and you got the the other priest in there and you're like, we're we're trying to win this thing. I mean, I don't think it should be that way when you go into a leasing office. And the the the the And I think that goes back to a bit of the the the ancillary charges and and and where I think the industry could go that concerns me a little bit is that friction between the customer you know, and and the owner, the retail shop. So, that's up to us to kind of navigate, I think. It also creates opportunity. Um the the revenue management stuff has been I think really interesting to follow that that lawsuit against RealPage. I don't know the details, but I think that it's going to be a
James D'Argenio
really interesting outcome and is going
Taylor Avakian
to impact Can you explain that that a little bit more, the RealPage?
James D'Argenio
So, from from what I know and it kind of goes back to um the the airline industry I think in the '90s was the first to implement this revenue management software. And the the the concept of uh companies absorbing public and private information to set pricing. That's where the issue is, I think. Um for the government here is you're taking So, in this case, RealPage is getting private information that's collecting it and it's using it to set rents. And I'm not I I I'm not speaking uh I don't know the But but that is And so, if you're taking private data and using it to
James D'Argenio
set prices I think that model is what the Justice Department has an issue with. And I think back in the '90s, what they were what the airlines were able to get around with is that they didn't take private information. They were collecting public rates, public rates. And the other component of that is they weren't those were recommended fair prices, right? This airline see, this is what we're recommending. And I think this is what RealPage is going to argue as well is that the the software isn't telling me what to rent my unit at. It's just offering a suggestion. But I think the outcome could be really I look if if revenue management if it has to be modified and we have to go back to the day where you sit down with the regional and the and the onsite team and you set the rents yourself.
James D'Argenio
Heck, I mean, I think that could be exciting because that's where we have I think the inefficiencies for our deals is always about finding properties where the rents are below the neighbors. And it's been harder to do that as more groups have used revenue management systems.
Taylor Avakian
And so, that's what RealPage does is it is it they you as a Bascom put your rents, all your information in RealPage, and RealPage spits out a recommended rent price that you should be charging for new occupancy.
James D'Argenio
Yeah, but think but now I would think if RealPage has all the rents for every property in all of Southern California. Uh it's just too exaggerated. Yeah, yeah, yeah. Think about it. And it spits out a price. And it also knows vacancy. It also knows exposure in different floor plans. It also knows how to charge a premium if your move-in date's November 15th versus November 1st. It is really good. It is really good at tailoring a rent based on vacancy exposure, target rents, uh specific move-in dates. And if you need to move in on a certain date, it can exploit that in a way that charges a premium for So, you see the advantage. Totally. As as an It makes sense from from a logistical standpoint and as an operator standpoint. And I I and I don't lie.
James D'Argenio
I mean, I think I think price controls in general I think don't aren't good because you can never see the true value of it. Yeah, okay. Um but I'm also not one that's just to say there isn't some value in in preventing price gouging. I think I actually don't mind a cap to a degree on an annual rent increase. I think 20% is just unfair potentially for someone who is has a fixed income. Yeah, I think when 1482 was passed,
50:00–1:00:00
James D'Argenio
if everything stayed the same with that, what is it? 5% plus CPI? If you're raising rents 5% a year consistently on a unit, you that's a fantastic business model. So, I I don't I don't think it's just one or the other. And I also don't think there's a solution to a solve affordable housing that just relies on all rent control or no rent control. There's I Somewhere in the middle is probably the answer maybe, you know, like like like in most cases. Yeah, right? This person has a story, that person has a story, and the truth is in the middle.
Taylor Avakian
Yeah, somewhere in the somewhere exactly.
James D'Argenio
Somewhere in the middle, and I think there there can be a way to to protect the consumer from just crazy rent increases. But, if you if you start to regulate vacant units to me I I think that's a disaster. Yeah. Cuz then another thing, you kind of brought up the getting around that with charging an exorbitant amount for for parking, for example. What if I'm renting a unit and you're and you need a unit, I'm like, "Hey, there's vacancy control, and I can only raise it's just like some fantastic deal all to live in the West Side for 1,500 bucks. You'd just be like, "Hey, I'll pay you a thousand dollars." As and as a as a maybe I'm the manager, right? I'm just the Yeah, I'm like, "Okay, I'll take it." And then I'll move your I'll move your uh application to the top. I don't know. Yeah.
James D'Argenio
And maybe that's a an extreme scenario, but That's what I heard in New York City.
Taylor Avakian
So, I don't know if this is true. Again, hearsay, right? But the New York passed a similar law in 2019. And for my understanding is the way that these tenants are able to get these low rents is that it's basically like, "I'm going to pay you $40,000 up front, and I'm going to move into this apartment that's renting for 1,500 bucks that should be 45 or 6,000 dollars. But, here's $40,000 up front, and the landlords are willing they're they're doing the cost-benefit analysis. Okay, over a 7-year span, if they stay for this long, then it pays for itself. If it doesn't, then it becomes, you know, So, it's like this weird
James D'Argenio
You pay-for-play kind of situation. They're basically auctioning off regulated units. Cuz you're right, I mean, if you run the numbers, if you're saving four grand a month, well, shoot, you're at 50 grand in a year. So, it it's going to If I pay to you 50 grand up front, it pays itself off. Yeah. Which Is that a business model? I don't know.
Taylor Avakian
Creating an auction site for these rent-regulated units.
James D'Argenio
I haven't been out to New York in a while.
Taylor Avakian
Yeah, no, I I haven't No, I haven't been recently. Um I went last like October, um but all my friends my age who they were in San Francisco, COVID happened, went home for a little bit, they all moved to New
James D'Argenio
York City.
Taylor Avakian
Like, because everyone was work from home, and you know, I think in your 20s you want to go, and it's probably the best time single 20s not
James D'Argenio
married want to go live in New York City.
Taylor Avakian
Everyone's broke together. Exactly, you know, you're doing the the thing. And with the tech jobs, they were getting, you know, six figures, mid six figures, like it's that's livable. It's not you're not going to be, you know, retire off that, but if you want to do it for a couple years, it's a good opportunity to be able to live decently well in New York City, and you know, have the freedom to work wherever you want. But, it's interesting to see I don't think that's worked out in their favor in terms of the outcomes that they were hoping for. We were speaking at the conference yesterday. Uh it's funny listening cuz the beginning there were some commercial real estate brokers who spoke at the the very first speaking. All they talked about was like statistics, numbers. I probably 300 statistics came out of each of
James D'Argenio
their mouths.
Taylor Avakian
There were two people on there speaking at the time. Then the residential agents came up, and it was they were talking about ULA and
James D'Argenio
stuff like that.
Taylor Avakian
It was all these like um adverbs and adjectives and like, "Really, it's a tough tough market out there. Luxury has been on the decline, like, you know, we're we're seeing this It was It was a so funny to see the differentials and the way that they speak. Um but I think because commercial is so numbers driven, that having policies that affect both like the mansion tax, ULA, things like that, it doesn't work cuz it's a different business.
James D'Argenio
Yeah, that's a that's interesting. Yeah, you know what I mean? I I mean, being a single-family home agent, it's it's about I mean, it's hard. I would I would imagine it's hard even though I does can make fun of it sometimes, cuz you're dealing with someone who comes in and says, "Oh, that wallpaper is terrible." And it when we see that, that's opportunity. Yeah. And they have to coach that client through that. But, I also can see that. The numbers we like numbers because yeah, it it the technical aspect and we feel Yeah, it's fun. Mhm. But, I could Yeah, and then when you have policy that crosses over, and maybe that's been one issue, you're like, "Transfer tax?" Like, on our in our side of business, like, yeah, well, we we get it as far as how to plug it into
James D'Argenio
the model and the the the drag it has on value and stuff. But, then on a home, you're like, "What are you talking about?" Yeah. Right? Charge me to sell my house? Yeah.
Taylor Avakian
It's just it's crazy.
James D'Argenio
It really is.
Taylor Avakian
So, it's it's been interesting to watch. I guess we're going to see November's coming up here pretty soon, so we'll know one way ULA will be here. It's not going away anytime soon, but for Prop 33, vacancy control, that's going to be interesting to watch and and figure out. Prop 33 or that Prop 34, which is even It's permanent in your, I guess, from your It's basically someone Prop 33 is the Weinstein's the bill that he puts together, and then Prop 34 is like someone's rebuttal to him to get money away from him so he can't do that
James D'Argenio
again. Yes, and there's there's a actually good website that talks about all the the the propositions and explains them, and it's very helpful.
Taylor Avakian
What's it called?
James D'Argenio
I think it's just a a government website, like california.gov, but it but it it cuz you know, they can be like negatively like a a no means a yes, and a yes Yeah, it's just maybe by design, but the the it was reading about the pros and cons of 33 and 34, and one of the cons of 34 was funny. It was like, "This whole bill was written by real estate people that hate the guy behind Prop 33." It was on the website. I was I was actually laughing about it with with Jerry. Yeah. Because it was true. Yeah. It was I don't know. I didn't think it it it made sense. I mean, your organization should be spending the revenue on on its its clients and patients and that, maybe other causes. But, It was just so written because it was like, "It's true.
Taylor Avakian
Yeah, literally." They're like, "Hey, all right, you want to play the game? We'll play that game. Like, I'm not afraid to go toe-to-toe right here."
James D'Argenio
There it is. Um to wrap up, I want to talk about the craziest deal that the craziest deal story that
Taylor Avakian
you've ever done, and what you learned from it, and what you're excited about. So, three rapid-fire questions, I guess.
James D'Argenio
Craziest deal you've ever done. Well, yeah, uh we had a So, we we put a deal under contract in West Texas. Okay. And this is probably where where I learned the most, and um it's not it's not crazy, per se. So, and this was probably November, December 2019. Okay. Okay. Wow. In West Texas, so you had you had Midland and Odessa. All oil and gas fracking. I mean, that's So, it's it is very cyclical, um but we went into the deal There's like a 7% entry cap going in. Great vintage, good basis, really liked it. And we had just uh started sourcing deals for our our new fund. We had to raise the money, and we were ready to go. And this was going to be the first holding in the
James D'Argenio
fund. Put the deal under contract, get out there. And there's just nuances to the market, but but get out there. Now January's rolling around. We're supposed to release contingencies sometime, and I'm just getting a bad feeling. Like, occupancies are declining, rents and we're talking to every manager on site for the five, six, seven, eight apartment buildings around the town. They're all saying, "Well, you know, it's cyclical. This happens cuz you got the, you know, working capital for the the oil companies, and then employees come back, and Okay. I I don't know. It just does but it doesn't feel right. And this is all I can explain. And I called a buddy and I knew from Dallas. Uh we're good friends when I lived out there, and he was he is in the oil business, and I thought why why I didn't have the conversation earlier, I don't know,
James D'Argenio
but I think I just it didn't really matter. We had a good deal, we thought, and we we liked the demographics and the story and and the forecast. He goes, "Yeah, you know, West Texas is kind of baked, and I'm sitting there having dinner with him, and yeah, he's whatever it's Friday in Dallas. So, you know, we're trying to talk business, but you know, yeah. So, I think we had we were having sushi, so But, I All right, okay, sounds good. And then I'm just absorbing this. I send it in the email. Actually, then we we had already gone hard. We had $250,000 non-contingent. And I send an email to partners and fund manager. And I said I had it framed up, but I said, "I think we should walk from this deal. And here's why." And laid out my reasons, the feeling I got,
James D'Argenio
$250,000. I said, "I think we should walk." The The equity commitment would have been about 10 million? And sat And came back to you on part of the reason I'm so fortunate to ask him is it was it was not a you know, you're fired. It wasn't It was a If you think this is the right thing to do, we support you. We support this and and let's not buy the deal. And
1:00:00–1:10:00
James D'Argenio
we walked. We didn't And and very close with the seller, so it wasn't There was We weren't There was nothing that we said, "Hey, we're not going to buy the deal. We release our our deposit to you. We honestly apologize for the misstep." Wow. And we walked from the deal. Then, as you know, 2 months later, COVID hits. We would have lost. And this is where obviously part of this is luck. Yeah. We would have lost all of our equity in about six gone. Wow. And so for a while, and like I said, very fortunate.
Taylor Avakian
I mean, that's a lot of money.
James D'Argenio
Yeah, $10 million is But it But there's another phrase that's like some of the And then I'll use it here. One of the best deals I've ever done is the one I didn't do. Mhm. And that's one of them. Wow. Wow. And it And we still will see a deal in West Texas that comes out for the There's been a lot these past few months, and yeah. Get an email internally. It's like, is it time to get back in? I got I don't know. I don't know about that West Texas, man. the lesson learned was, you know, kind of go with your instinct. Go with your gut, and and but you're in the right place and and believe what your eyes
Taylor Avakian
are telling you and what you're hearing. Jeez, that is crazy. That is some good intuition. That's That you can only get that, in my opinion, from experience and just that gut feeling. It I mean, it's impressive for your team and for you to be able to make that call and say, "Hey, we're going to forfeit $250,000 of our firm's money on this hunch, this gut feeling, whatever it was. Which, I mean, speaks to speaks to not only the way that you guys are built and set up and the people on your team, but also your values when it comes to, "Hey, we're really trying to do best for our investors and like we're not trying to lose money.
James D'Argenio
We want to We want to make deals very exciting for people." Yeah. And It's yeah. It But that's what keeps this exciting. Yeah. Yeah. That's That's why we're we we do what we do is every project is different. Yeah. Every client's different. Yeah.
Taylor Avakian
It just keeps keeps ticking on. Okay, last thing.
James D'Argenio
Yeah.
Taylor Avakian
Um where do you see for for yourself, Bascom, the market, like the next 6 to 12 months? What's the game plan?
James D'Argenio
Well, I I We haven't shifted game plans. We're always We have some goals every year, but I think what we try not to do is set a a mandate on the acquisition front or disposition front because I think that's what can get you to make more kind of desperate moves. Mhm. Um we've got some some assets in the portfolio that we need to fix and and and restructure. So that's a big objective. Not many. We're very fortunate. We stayed somewhat disciplined and and only capitulated a few times in that uh kind of peakier. Yeah. But nonetheless, I will will work through those and and get them to uh a profitable point. That's a focus. Um Finding good opportunities is such a lame statement. Uh [Laughter] But it you know, I I think it as as the if this first cut
James D'Argenio
hits, Yeah. it's going to be a nice psychological win. I think a good boost, a good signal. But I I think maintaining discipline is going to be big focus of ours, especially as more listings come out. There's going to be more deals to look at. There's going to be a lot. So I think we have to stay focused, um analytical, trust the data, trust that, and try to buy as much, you know, what we perceive as good deals as we can.
Taylor Avakian
Cuz they're going to look juicy. And the sentiment's going to be it's going to get better, and you're going to Oh, we're going to ride the interest rates We're going to ride cap rates down.
James D'Argenio
That can be very enticing. Yes, and our peers and everyone's going to start buying again. But it's it's not going to be a, you know, zero to 60. I think it's going to It'll but yes. I think there's going to be a an excitement to it. We're looking forward to kind of you know, the next 12 to 18 months. Um and I think more of the the opportunistic deals and that we haven't seen, and those start coming out, too. I think that's really where the discipline will be important as well. Like there's going to be some some basis plays that look fantastic. And you're going to have to really really understand the the deal, the numbers, and the stabilized kind of NOIs, and exit pricing because you can look at some You can buy something for 30,000 a unit and go wrong. Yeah.
James D'Argenio
Yeah, or maybe now it's more like 60, 70, but anyway, so that it's going to be
Taylor Avakian
good.
James D'Argenio
Yeah.
Taylor Avakian
Man, James, I appreciate you coming on here, man. This is awesome.
James D'Argenio
Yeah, it was it was Thank you for having me. Of course.
Taylor Avakian
Of course, yeah. Um Bascom, James Dergenio.
James D'Argenio
Go check him out. Uh if you guys have any interest in work with them, investing, whatever it is.
Taylor Avakian
Can I say that?
James D'Argenio
I don't know.
Taylor Avakian
I think so.
James D'Argenio
Yeah, I think so.
Taylor Avakian
If you have any interest in investing, reach out to me and I'll connect you to James. Um and and we'll get it going. So, hey, I appreciate you. Thank you for listening to this episode. If you enjoyed the podcast, it would mean the world to me if you could rate us five stars on YouTube, Spotify, and Apple Podcast. It really helps us get our name out there and helps us get fantastic people like our guest to share their insights and knowledge with you. Again, my name is Taylor Vekis. I specialize in the sale of apartment buildings in Los Angeles and Southern California, and I look forward to sharing more of these conversations
James D'Argenio
with you.
Taylor Avakian
See you in the next one. [Music]