Taylor Avakian
Welcome to the podcast. My name is Taylor Avakian and today I have an incredible esteemed guest, Chris Torellot. Welcome.
April 15, 2025 · 1 hr 3 min
He sold his festival to MTV then built 3,000 apartments | Chris Tourtellotte of La Terra Development
With Chris Tourtellotte — Managing Director, LaTerra Development
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How do the biggest institutional developers navigate real estate cycles and execute billion-dollar projects? Chris Tourtellotte, Managing Director at LaTerra Development, breaks down his approach to…
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Episode show notes
How do the biggest institutional developers navigate real estate cycles and execute billion-dollar projects? Chris Tourtellotte, Managing Director at LaTerra Development, breaks down his approach to mixed-use development, market timing, and working with institutional capital. Learn how Chris: Raised and deployed over $3B in real estate projects Structures large-scale mixed-use & multifamily developments Adapts to interest rate shifts and economic cycles Balances risk management and aggressive deal-making Sees the future of institutional real estate investment This episode dives deep into the challenges and opportunities of large-scale development in today’s market. [00:00–00:08] Introduction [00:09–02:09] Snowglobe Music Festival Story [02:09–02:59] Challenges and Successes in Music Festival Business [06:19–07:10] Exit Strategy and MTV Acquisition [09:07–10:02] Real Estate Transition: From Music to Development [11:04–13:39] Overcoming Challenges in Real Estate Development [16:18–18:06] Expansion into New Markets [28:27–33:12] Build-to-Rent Projects and Opportunity Zones [36:36–44:13] Strategies for Growth and Investment [47:09–57:18] Social Media and Raising Capital [58:54–01:00:26:08] Advice for Aspiring Developers [01:03:08:23 - 01:03:48:02] Conclusion and Future Outlook 📈 Connect with me: Website: https://www.thegroupcre.com/ Email: taylor@thegroupcre.com X: https://x.com/TAYVAY_ LinkedIn: https://www.linkedin.com/in/tayloravakian/ #RealEstatePodcast #InstitutionalRealEstate #MixedUseDevelopment #RealEstateInvesting #MultifamilyDevelopment #MarketTrends #InvestmentStrategies #UrbanDevelopment #BillionDollarDeals
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Episode transcript
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0:00–10:00
Chris Tourtellotte
Thank you, sir. Happy to be here.
Taylor Avakian
This is going to be fun.
Chris Tourtellotte
So, let's just jump into it.
Taylor Avakian
Tell me about Snow Globe. How the hell did you start a music festival Snow Globe? I know this is a real estate podcast, but you just have to tell me.
Chris Tourtellotte
Yeah, this I will. It's It is an interesting story. So, rewind to Oh my gosh, this was like 2010, right? Okay. My I I worked at Pen which is a subsidiary of Credential Financial. I was on the equity side. So I was investing in sponsors actually like the Equity. Yeah. Right out of college. I was an analyst. Um and and my friends and I uh loved music. Still do and but you know we we enjoyed going to music festivals and whatever. So I went to lunch with a buddy of mine uh and he tells me about a new music festival called Snowball Music Festival in Veil Valley, Colorado. Um and I'm enthralled. I'm like this this is awesome. I got to go. Yeah, I'm like, but at the time I couldn't justify a cross country party trip to Vale, right? Um, you know, just thinking about the funds.
Chris Tourtellotte
And so I'm like, how can I get into this music festival for free and get all my buddies in, right? I I got to figure that out. So, um, I thought, well, what value can I add, right? It's all about what what value you can have. And it became evident that my, you know, primary value add is I I got to help get the word out. This is a new music festival. I got buddies and, you know, because I I went to college, people kind of scattered. I got buddies in different parts of the country. So, um, so I determined, um, to to make this happen. So, I I actually put together a business plan, um, that was super professional, um, and what I did is each market where one of
Chris Tourtellotte
my friends lived, I called them like a street team leader, and I'm like, "This person will hand out flyers and promote the event. In exchange, we want, you know, backstage passes for everybody, right?" Um, and then so I went to send the the business plan to the founder of the festival, but I couldn't find his contact information. like I couldn't despite my sleuththing online like I couldn't track him down. So I went to the website and at the bottom it had uh lost and found at snowballmusicfestival.com. So I'm like I'm just going to send the business. So I you know just crafted a short punchy email. Boom. Let the business plan rip into the lost andfound email. Oh my gosh. Festival. It was the first year festival too. Yeah. I don't even know if this is set up. Yeah. Um week went by crickets. Second week. Boom.
Chris Tourtellotte
I get an email back and he goes, "Hey, like I've had a lot of inbound inquiries. Sorry for the delay. Like yours was by far the most professional. um let's get on a call. Right. Wow. So I'm like wow. So immediately I put together a website. I I create a you know a company a website um that you know would at least demonstrate that I had some experience um which I had a little from college but you know there's it's okay to fake it till you make it as long as you do what you say you're going to do. Yes. Um so I did I put together this kind of this website um that you know presented ourselves as like a uh a concert promotion company. So I got on the call with the guy. I walked him through it. I pitched him and he's like great you're in.
Chris Tourtellotte
We'll do it. So, I got the backstage passes. I'm like, "This is glorious, right?" My friends were super stoked. They had to hand out flyers at the bars and stuff. But we're in our mid 20s, you know what I mean? So, like, you're not getting paid. You're just getting passes. Just getting passes. I knew in my mind though, I wanted to network, right? Cuz I'm an entrepreneur at heart. Um, so part of it was to network. Like, I wanted to meet the guy putting on this amazing festival, like, you know, worldrenowned X. So, so we so we did what we said we were going to do, right? We promoted the hell out of it. Um, and we flew out to this music festival. We filled up a 747 from, you know, LA. We all flew out and friends from all over the country. It was amazing. Wow.
Chris Tourtellotte
Um, hard to know how much we contributed to that. You never know with marketing what's wasted, what's not, but we did promote the heck out of it. So, um, it was great. Then I got back to San Francisco, back to my day job at PGM and I'm working, you know, tired. I'm like, oh my god, like I got to I got to do this again, right? This was like way too exciting. Um, so then I'm like, well, I got to step my game up. Like I want to be like the co-founder of a music festival. So, uh, my buddies and I determined that we would put on a festival in South Lake Tahoe. And, and it was actually going to be in the summer called Independent Dance on the Fourth of July weekend.
Chris Tourtellotte
Uh but as we went into it and got into it, we go, we all have full-time jobs. I had a buddy at like Google and Apple and I was at Pim and one guy at Deote. We go, "This is too much." Um so then I reached out to the founder of Snowball who I met. I I I basically called him and said, "Hey, look, we should do a festival in South Lake Tahoe. You know, you can be the operating partner. I'll raise the capital." Um and and he was in. So we so we planned it out over uh New Year's Eve. It was a three-day event, the 29th, 30th, and 31st of December. Um, in in South Lake Tahoe, captive audience because everyone goes to Tahoe and parties, right? They're all in State Line climbing light poles, doing crazy [bleep] Yeah.
Chris Tourtellotte
But we go um we'll have shuttles that go back and forth from State Line to the venue. Um, we got a captive audience, thousands of people there. So, you know, we booked an incredible lineup. Um, and I raised the capital. Um, that proved to be very hard, by the way, at age 26, raising capital for a music festival. You've never been in the space. Yeah. Um what what I found interesting too in that regard um I worked at Pyim and so I was good at analytics and I realized that I could transfer knowledge from one industry to another um quite easily and I think if you can you know use that skill in life and in business right LeBron James does that um you know he was a football player and he's very explosive on the basketball court like the lead singer of Beck plays
Chris Tourtellotte
seven instruments whatever like that it's similar kind of concept right yeah yeah um and so I created this Excel model that was very sophisticated um ticket sale um was equivalent to like you know renting apartments um you know uh rent growth was like ticket sale growth I had operating expenses NOI was Ebat whatever right I sensitivity tables the normal stuff we do yeah um so I had this awesome Excel model with the inputs and you know people could change the inputs and see the results um so anyway so I I put together the business plan and really I I raised a lot of it from my friends parents okay um so friends and family but really family of friends to be more specific um and we did it we raised the capital um so I raised the capital.
Chris Tourtellotte
Um took took a lot of time and and then we put on the event and it was you know as we thought like it went really well. Um and I had put on some concerts in college that you know didn't go well. Yeah. Um this went really well and I got to give credit to like my partner the snowball guy cuz like the operational piece is like very hard. Um so he gets you know most of the credit but it was amazing. My my work was up front and you know we had the biggest musical acts in the world from Tiestto, Cascade, Snoop Dog, Cut Copy, Rufus to Soul whatever right? Um it was like amazing and every year I had you know many you know backstage passes for my friends and that's where I you know
Chris Tourtellotte
took my now wife there and yeah we had a the artist would play in our basement after it was amazing and then how did you exit that? Um well we ran it for many years and and ultimately by the way MTV bought it in 2018 which was a big uh wow you know which is which is cool is obviously a you know notable cool company.
Taylor Avakian
So was that your first like were you in the negotiations when they were trying to buy that? Like did you go through the due diligence process?
Chris Tourtellotte
Yeah, I so um the the sale of the festival um was an interesting process and I learned a lot. Um one kind of funny story that came out of it um was when we got to the end um I'm like, "Hey, we will only sell the festival if I can get, you know, 24 artist passes, you know, indefinitely." And they came back and they go, "Well, we have a policy. we have a company policy that we don't provide backstage passes, you know, to founders of festivals when, you know, prior founders when we buy a festival. And I said, "Oh, that's interesting because I have a policy. We don't sell music festivals without backstage passes." Um, so it actually became like an issue at the end. Um, which is dumb like why something could that could be an issue, but ultimately we got him with a for five years or whatever.
Chris Tourtellotte
Let's Yeah. Yeah. Yeah. So anyway, so it was fun. It was a really cool experience. I learned a ton. Passion project that ended up, you know, being being I'll tell you a little
Taylor Avakian
funny funny story. So, um I don't know if you know this, I'm from Sacramento.
Chris Tourtellotte
So, Oh, cool. Tahoe is uh is our like vacation spot.
Taylor Avakian
And this was the year that Whiz Khalifa was there.
Chris Tourtellotte
Ah, yeah. Me and my friends house and y ended up going. Yeah. We did not have tickets.
Taylor Avakian
And so, I'm in high school at this time, 17, 18 years old. And um we go there and we're like, "All right, we're going to figure it out. like we'll find some tickets or a few of us had tickets, a few of us didn't have tickets. Some one of those situations. So anyways, we get there, the guys who have the tickets get in and we're I didn't have a ticket. We're like, "Okay, maybe we can scalp one. Let's go find some scalpers." They were selling for like two or three times what the actual price of the ticket was was. And we're like, "Okay, we don't have the money for that." So, what we ended up doing was uh one of my first negotiations, I guess you could say, is we ended up going to one of the security guards and we paid him like 150 bucks in cash and just
Taylor Avakian
got into the festival.
Chris Tourtellotte
Oh my god. So, yeah. So, we snuck in unfortunately to to your festival.
Taylor Avakian
So, I apologize for not being I love it.
Chris Tourtellotte
I love it. Yeah. No, that's a good thing. Hey, you know what? Um it was I'm glad that you attended.
Taylor Avakian
It was amazing. It was incredible. one of the most fun music festivals I' ever been to which when I heard that you had started that was like no way like I my story when I like I went there I went there so oh that's so cool yeah really really cool okay so now let's transition to you're at P Jim you do the music festival you're going through there and then when does Lata start what's the process of you then becoming this development mogul as I I will say
Chris Tourtellotte
well that's nice of you it's um So in 200 So I started at PM in 2008. Okay. Which makes me feel old. Uh but anyway, yeah. So I started 2008. In in 2015 after I'd been at Pum for seven years, which was I guess partly into Snow Globe four years. Um at that juncture, um so my dad co-founded or founded Lata in 2009 coming out of the GFC. Okay. Um and at the time they were buying land from banks. Um and the banks had foreclosed on land and partially completed homes and town homes and so Lata was buying that product back actually in 2009 10 alone.
Taylor Avakian
Was it a full syndication? Was he raising money from stuff?
Chris Tourtellotte
It was both. It started out that way but he had formed a venture with like a kind of you know middle smaller to middle market private equity group. Got it. Um yeah so it was great. Um so so I got you
10:00–20:00
Chris Tourtellotte
know uh at the time I called it the 30-year interview right to go. Yeah. Exactly. Um and and no and and you know I'm honored to have that opportunity obviously but uh I I did so I left I left Pum um and came you know moved to LA took my then girlfriend now wife um moved down to LA.
Taylor Avakian
What year is this?
Chris Tourtellotte
This was 2015. Okay. Yeah. Yeah. So I'd been at PJM 7 years and uh when I first got there um I kind of described the business. It was you know a little bit of a mom and pop shop but you know there was like I don't know seven employees. I can't remember but um you know they they were definitely doing deals and um you know good platform to step into obviously and so um at the time though um we had acquired a deal my dad had um land in Santa Ana um and this this will kind of help dubtail into like Latara's growth. Yeah and some advice for the listeners too on on growth. Um and so my task was to raise capital for this 228 unit apartment development deal in Santa Ana. It was land at the time. Mhm.
Chris Tourtellotte
We'd got it entitled and and so I set out to raise the cap stack. I had to raise about 70 million. That was, you know, construction financing in LP equity. Yeah. And we at Lata had never built any apartments, right? I mean, we had done some like town, you know, some town actually there was a town home deal we did. Okay. Um so, but nothing of this scale. Nothing of this scale. Um and so I went out to raise the capital, right? And and I and I encountered a couple issues as you can imagine. Uh the first issue I encountered is that um the lenders as I as I went out for this $40ish million you know construction loan or 45 the lenders are like great you need to put up a balance sheet with 45 million net worth and four and a half million liquidity right because
Chris Tourtellotte
when you're getting a construction loan you need 100% of the loan amount as net worth 10% as liquidity right we didn't have that um and so that was issue number one and and how did we solve that well we we found a cogp um and that cogp would put up the majority of the GP equity and they would sign on the lender guarantees, right? And so so folks can do that and that's how you do big deals. Um so we had that we had those two legs of the stool. Um but there was still a 35 let's say 30 millionish funding gap, right? To get or 25 million to get um the full capitalization. So I went out to seek LP equity, right? I got the loan gop. So I'm out um you know dialing for dollars trying to find LP equity. Had actually engaged a broker, whatever.
Chris Tourtellotte
Um got a hundred nos. It was extraordinarily frustrating. And the there was really there was we had two issues at the same time which was the challenge. One we had never built a large scale institutional apartment development project which which is which could be okay. But the second issue was um it was a little bit of a cuspy location. I mean it was good to see Anna but like we're next to a McDonald's and a gas station and like kind of near garden. It was just a little transitional. It was vision but it was a little transitional in nature. Right. Yeah. Um, and so because we had both of those challenges at once, I think that was that was what what caused us to get a hundred nos. Um, and then I went out and finally I got a yes, right? And I was so thrilled.
Chris Tourtellotte
I probably yelled that the guy, you know, in my office next door was probably, "What's going on?" I was I was super excited, right, because this is like big time. Um, and so we're going we're in we sign a term sheet, right? Negotiate term sheet. Sign it. We're in docs. Um, and then I get an email and the email says, "Chris, we went we visited the site. We're out." And I'm like, "Oh my god, it was just so so frustrating." You and really that's bad form to leave someone at the altar like that via email. I don't have to assign term sheet, you know. So, but you know, notwithstanding that um I was so I was pissed, right? And and I kind of like was on the precipice of giving up.
Chris Tourtellotte
But it was like kind of like at that moment where I was like, you know, peering over the edge of defeat where I was like, "No, like like screw that." Like I'm going to raise the capital. I'm going to prove this guy wrong, right? Oh, and because he finished with and you're never going to be able to raise this capital. I was like, "Oh my god, what would have so brutal [bleep] twisted?" Yeah, totally. So I was like, "I'm going to prove this guy wrong, right?" Um, so then I just went vigilante style going, going, going. Um, and randomly I got connected with somebody. He's like, "You should talk to this guy. Like they just raised some capital and I'm like just whatever. Meeting number 206, whatever. Yeah, of course I'll do it." So we have the meeting. He's like, "I love this. I love this. I like the returns.
Chris Tourtellotte
I like the upside. I like the basis." And I'm like, he's like, "We're in." I'm like, "You are? You are?" Yeah. Yeah. It was great. So, so we ended up doing the deal. Wow. Um we we did have to raise a prep equity slug. It got a little structured, but we got it done. Um and and we built it for 70 and sold it at TCO for 100. Rough numbers. And so that was like everybody made a bunch of money and and we
Taylor Avakian
were stoked, right?
Chris Tourtellotte
Um and so that's like a good a good round no timing was good, whatever, but like that's like a good roundtrip story. Yeah. Wow. Yeah. Yeah. So So there's a few lessons obviously embedded in there, right? the COGP element to that for new sponsors who are like, "Hey, sounds great, Chris, but like how am I going to do a $70 million deal? If the equity's 25 and I got to put in 10% of that, maybe two and a half on a 9010 deal. I don't have that and I don't have a balance sheet." My advice, you know, to the listeners would be get a COGP. Like we went on to do another 20 deals with that COGP approach. Wow. Yeah. And and they put up the balance sheet um and the majority of the GP equity, right? Yeah. And that's that's like a normal thing to do.
Chris Tourtellotte
Like there's there are many COGPS in the market looking for sponsors even today. Yeah. Development's a little tougher today. But like that that structure like that's all good, right?
Taylor Avakian
That worked and that's what you So just so I can understand the timing of this because I know developments take quite a long time. So 2015 you raised the money in 2015 sometime. When was the completion? When was the sale?
Chris Tourtellotte
Um I think we broke ground early 16 and sold it like in like mid18 or something. Okay.
Taylor Avakian
In between that time period were you doing other deals too?
Chris Tourtellotte
Yeah. So after we synced up with the COGP and all that um and we got you know deal underground you know put out the press release you know deals big deals right the more deals if you deal you come. Exactly. Yeah. Yeah. Yeah. So um so that's that's that's the natural order of things. So after we got that deal going and we had the code GP, we went and we tied up land um in and it you know these were properties that had by right zoning for residential. Okay, like a strip mall in Los Felless, a car wash in West Hollywood, strip mall in Mar Vista, Santa Monica zoned for residential have to do a change a bunch of things.
Taylor Avakian
It was obviously get it entitled and and move forward.
Chris Tourtellotte
Yeah, get it entitled and move forward. Right. Sort of like buying buying strip malls. not as many strip mall guy, you know, but I was a a mini strip mall guy, right? However, we could pay more than the strip mall buyers because we knew the underlying zoning allowed for highdensity residential. Um, and so really was downside protection. So, at the time it was like, oh, buy a strip mall at I'm going to make it up, a four cap. Yeah. It's like, yeah, like, you know, worst case is like you could sell it and maybe get your money back like whatever. You know, cap rates were lower then. Yeah. Yeah. But I get what you're saying. Yeah. Yeah. And so um so we were able to you know to compete that way. So we put we put these properties under contract um sometimes with bridge debt.
Chris Tourtellotte
Don't love that idea today but did that um with our code GP. And then the idea was we would get these sites into a shovel ready condition um which included advancing entitlements. They were you know we had the zoning um and then bring in LP equity for the vertical stage. This time the locations were really good, right? Um and we had a deal that was like under construction that was big. So we had kind of solved those two issues I mentioned. Um and and we were able to raise LPquity. So from there we we were you know we closed joint ventures with big institutional LPS um you know name brand household name kind of LPs and and we went on to do like multiple deals um that you can you know that are up in yeah you can drive you know the Charlie Marvesta West Hollywood the so that
Chris Tourtellotte
all happened within like a 5year yeah that was sort of like the 2017 18 range with How many total units
Taylor Avakian
did you guys build in that?
Chris Tourtellotte
About 3,000. 3,000 units. Yeah, we have we Yeah. So, I'll continue the story. Um, which which follows like a growth path, evolution, if you will, please. Um, so after having closed all these JVS, we're like, God, it's such a pain in the ass closing these JVS one at a time with new new partners, some repeat. Um, we want like a single source capital partner, right? And we want build the core. build the core is you build it and then you own it, right? Um, one because we want to own these beautiful assets. Gosh, put so much time and effort into it. Sell, pay tax. Don't like that. Two, um, development fees are lumpy and we wanted to own long term and have some more stability in our fee streams, right, for asset through asset management fees or cash flow. Um, so that was sort of the genesis of it.
Chris Tourtellotte
Um, and also we wanted to focus on what we do best, right, and and not always be raising capital. Um and so we set out to secure um a single source capital partner. Um and and we engaged a you know a great investment bank and uh we ended up syncing up with a pension fund, a Canadian pension fund. Um and it took six months, right? And and then finally we got a term sheet from this pension fund and they spent they did a lot of diligence on us and the projects, right? Um and and this is like finally we're in late 2019. We're in JV docs and stuff. Um, and I'm thrilled because this is going to like propel us like to the next level, right, in our sort of growth. Yeah. Um, I remember talking to my wife in February of 2020 and
Chris Tourtellotte
she's like, "Is this is this happening?" I'm like, "Oh, this is happening." I remember telling her, "Nothing could stand in the way of this deal except war with North Korea." I don't know why I thought that. I guess Kim Jong-un's launching missiles were right. Yeah. Um, rocket man, that thing was happening. So, um, and then COVID hit and I'm like, "Oh, shit." Right. I remember like watching like the Dallas Mavericks game getting cancelled. Yeah. And at that moment I was like, "Uhoh, we're in
20:00–30:00
Chris Tourtellotte
trouble." You know, cuz we're in JV, do Yeah. Um, and to make it more stressful, we had put under contract a big site in Burbank, right? We're we're we're about to open 573 units now. Finally. Yeah. Um, and we had put up a significant non-refundable deposit and the the option period ended in May of 2020. And so, and this is February of, you know, 2020, we had our LP if we weren't able to secure the LP to close on the land. Um, we would have had to have walked from some significant dollars. Very meaningful. Your guys' own Yeah. Yeah. meaningful for us. Us and our coaching. Totally meaningful for us. Um, and so that made it even more like concerning, right? And we actually had another deal we were doing with them, too. So, um, we scrambled um, and
Chris Tourtellotte
you know, we presented as much information as we could on the health and the viability of our markets and the deals and um, why we didn't think like COVID would would impact the multifamily sector and the strength of LA over the glo over the global financial crisis and and the way that it rebounded and whatever, right? Mhm. Um so we presented all this information and fortunately our partner you know preceded um which was great you know good on them and and so we you know we we formed the J. Yeah. Yeah. So they committed 250 million in equity. Um and that that uh commitment allowed us to proceed with the development of 573 units in Burbank. Which we did. Um and and now you know and we had to entitle it and you know design it and all that but now it's um finally opening in April. It's pretty cool.
Chris Tourtellotte
That's amazing. Yeah.
Taylor Avakian
Oh my goodness, man. I mean that's the stories those are the stories where like any good any amazing thing you see you're like wow how did someone build that or how did they put that up? The backstory and what a lot of people had to go through. There's moments in there where everything it could have not
Chris Tourtellotte
happened for sure.
Taylor Avakian
It could have gone the other way and you would have never seen 570 beautiful units in Burbank. Like it's just the nature of of this business. It's and and the market shifted and the timing and like you couldn't have predicted what happened with interest rates and all this stuff and co there's so much that that goes into it that it's it's uh you kind of have to be robust enough to just roll with the
Chris Tourtellotte
punches. Totally. Yeah. Yeah, you got to be That's exactly right. And you know, it's tough. Development is tough. It takes a long time. Um, and so kind of thinking about like, you know, today Well, if you want, I can do Do you want me to kind of continue on the the final piece of the evolution, which is sort of like our self- storage platform? Yeah.
Taylor Avakian
Yeah.
Chris Tourtellotte
Yeah.
Taylor Avakian
I was going to dive into that.
Chris Tourtellotte
So, then you transitioned. Yeah. So, the Yeah, exactly. So in 2021 um you know we we had been in communications with an Australian big Australian company um about self- storage. Um we like the asset class. Um it's complimentary to residential and synergistic because a lot of the residents at our residential properties have stuff they wanted to store. We didn't have enough room or you know we're telling them to go down the street. some of the entitlement processes. Um, you know, you can either do storage or residential, but like not both. So, it doesn't conflict. And also storage follows the rooftops, right? Um, so they like it like goes well together. We also wanted to diversify our asset, you know, base um and G geographies after because COVID had hit by then. Became evident like urban infill, multif family, like if you're if that's
Chris Tourtellotte
all you're doing like all your eggs in one basket, right? So, we're like, all right, we need to diversify and we did. Um, and so what we diversified by going suburban on our apartments in BTR, but also um, through storage. And so we formed this JV. Um, we got a $300 million equity commitment. Um, after, you know, a lot of work and discussions with them and a white paper that we put together and we had tied up three deals because seed deals, the best way to secure capital is with a fishing lure, a seed deal. And that's the best way to keep people like moving on schedule because you have a a live deal. You have a deadline and a closing date. Yeah. It's hard to negotiate in on a theoretical for sure. Um so you know so we took some risk again um and and
Chris Tourtellotte
we formed this JV and closed on the three deals and then we went on to hire the head of development in the western US from public storage. Uh that was great because we launched this new storage vertical. we have this capital um you know we know how to develop and we had done a lot of work on you know storage and research and it's a little easier with multif family but but you need a storage expert so I actually just went on my LinkedIn and I'm like you know who's in storage in in the area oh public storage is in Glendale so I actually just slid into his DMs no with a message yeah I just sent a message um you know we just closed a $300 million equity commitment um you know the rocket ships taken off like you know we want to talk to you about running this
Chris Tourtellotte
storage vertical. Um and it worked called me back talked for an hour went to lunch and ultimately uh we brought him on board. Wow. I saved the recruiter fee right you just did it yourself
Taylor Avakian
that social media man there's a lot of power in that.
Chris Tourtellotte
Okay so so that's kind of the evolution. Sorry that was a lot of talking but I wanted to give you sort of 2015 to today mostly. Yeah. No that's super helpful. I'm Okay. There's a lot of things that I want to um jump into that story. So, first of all, you
Taylor Avakian
guys have you do a big deal out the gate with this apartment in Santa Ana. You raise a ton of money that works out. How do you get from someone who is doing these small multif family deals, you know, one, two, three, five million bucks raising family and friends to someone who wants to go into the institutional space? Like what is the process of them getting to that level? And ideally it's raising the capital like how do you do that?
Chris Tourtellotte
You kind of have to just jump in and and the way to do it is you got to have a deal. Okay. So you identify now let's say we're talking about development but it could be you know we should come back to why I think today buying existing is a better strategy right right now it'll change. Um, but but yeah, I mean, you tie up a land site. Um, you put you got to have a deal, right? Because that's the fishing lure that I mentioned. So, you find a a deal that's either entitled or maybe you're going to entitle it and you put it under contract and ideally you have some time for diligence and closing because you got to go find the money, right? Mhm. Um, but you got to have a live deal and if it's a good
Chris Tourtellotte
deal in a good location, obviously that's, you know, how much, real quick, how
Taylor Avakian
much time you typically put on your due diligence period and the escrow for like that if if there's an entitlement piece to it, right?
Chris Tourtellotte
Like we're processing city approvals. Um, we like to close at the end of entitlements. Okay. Yeah. So, we'll have like it could be a year. Yeah. Yeah. So, we'll have like 45 60 days of DD, whatever it is. Put up some hard money. Um, and then have a year maybe more. Yeah. to process entitlements and close. Got it. Okay. Um that type of option structure is good, especially if you're taking entitlement risk. Um and so we typically do that.
Taylor Avakian
That's what you were doing.
Chris Tourtellotte
Okay. Yeah. Yeah. Or though if it's like if there's in place income, you could put a loan on it. Um let's say it's a strip mall or you know in a little industrial building, whatever it is. Covered land. Yeah. Covered land play. Um put put some debt on it and then your equity check is smaller, right? and then you could figure out how to fill it. Um, that's another way to do it. But like we don't want to close on just unentitled land, you know what I mean? Like that's too risky. Um, even though like we're even even then like we're buying land that has the zoning. We're not doing zone changes, but still see what Yeah.
Taylor Avakian
There's a lot of things that can go wrong.
Chris Tourtellotte
Yeah. Um, so the deal is number one, right? So once you have the deal, like you have something to put together a book for and go hit it, you know, and and then it's just like you got if you're in a good market with good timing where capital's looking for homes, like it's a lot easier than a obviously a crappy market.
Taylor Avakian
Are you picking up the phone and like calling who are you calling to get these these meetings with these capital sources? Like let's say I'm I've I'm a broker, right? and I want to start I found this site and I really like it and I think you could build 150 units on there and I'm like okay now I got to go raise money. So, my first thought is, who do I know that has a bunch of money? Kind of call those people and say, "Hey, here I put a deck together.
Chris Tourtellotte
Here's this site.
Taylor Avakian
Do you want to invest?" But if I'm if I'm going big time, I need to get in the rooms
Chris Tourtellotte
with these big honchos. Yeah.
Taylor Avakian
How do you get in?
Chris Tourtellotte
Yeah. I think you raise I Well, you hire a capital markets adviser. Okay. You know, capital markets broker. Okay. Um and there are many good ones. I think you're having one on your show, you know, soon. Yeah. Um, and so but there's many good ones and and and you hire a capital markets advisor and they will help you secure the capital and that could be a CGP, the construction loan and the LP equity, the whole stack, right? That's what we had to do in San Wea engaged a broker. They found us the loan but not the we coincidentally had equity. Yeah. But it but it Okay. So brokers are valuable. You're saying Oh, they are. Yeah. Yeah. No question. Yeah, they are valuable.
Taylor Avakian
Yeah, every every now and again. Did you find the deals through brokers? I'm curious to know. Or did you go and find them yourself?
Chris Tourtellotte
It's No, it's you hear the term offmarket and and that's a gray area. That's not a black or white statement. Yes. Um, a lot of them were kind of offmarket and I put it in quotes because, you know, it could be like there's a broker and he's dialing for dollars, hustling, calling owners, right? And he finds the owner of this great site and the owner says, "Yeah, I might be willing to sell." And then he calls maybe three or four. You know what I mean? Like is that off market? Yeah. Yeah, it it is. Um and so a lot
30:00–40:00
Chris Tourtellotte
of it's like that like we have good relationships with brokers in different pockets of, you know, was SoCal now, you know, the country. Um and they run around looking for deals, right? Um it's less like, hey, like here's a big eblast of a of a deal, you know, that we compete on. Yeah. That's, you know, we we almost never do that. Have, but rarely. Um so yeah, so that's kind of how we've done it. Got it. And so then you're getting in the rooms, you're pitching the deals, you're raising the money and going through that whole process. It sounds like for me that you're from from PJ, you're
Taylor Avakian
pretty analytical in terms of the way that you approach the business.
Chris Tourtellotte
I am. Yeah. And it helped having that experience being on the equity side because I know how to serve deals up to equity. Okay.
Taylor Avakian
How do you serve a deal up that resonates with them? What do they care about?
Chris Tourtellotte
Yeah. I mean, part of it is just presenting it in a professional way. Mhm. Um, you know, which is a deck that has, you know, rent comps and sale comps and like an OM your Yeah, an OM basically, but like a sponsor if you're going to do your own, like, you know, you want to have a good deck, right? Yeah. A good Excel model that's like legit, right? Like that's part of it. Yeah. Um, and then it's it's it's speaking their language. So, it's like really it's like if it's development, it's hey, like I can build to a six and a half untreded return on cost on real numbers. and the market cap rate is five, for example. Um, and that 150 basis point spread, you you know, you know, that's what the equity is looking for to justify development.
Chris Tourtellotte
Otherwise, they're just going to buy, you know, an existing existing stuff. Yeah. So, so like that element of, you know, to where like if you get them on the phone, you're sending an email, you know, you know, to say like, you know, you can quickly describe the site.
Taylor Avakian
There's 150 bits of spread, right?
Chris Tourtellotte
It's on this corner. Here's where we're You give them story. you give them the story like the way you you know the way they want to hear it. Yeah. It's like a like a broker when we're pitching a deal to an investor. Same thing except a lot of brokers
Taylor Avakian
and and what I do, we don't necessarily always include the renovation cost and the capital cost. And so that's that's a thing that um I think it's hard to underwrite that and present that as a um marketing materials because people have different costs of what they're going
Chris Tourtellotte
to do. Yeah.
Taylor Avakian
Maybe someone's going to put 15K, so maybe someone's going to put 30K. So, it's hard to justify that, but you have to know your numbers in terms of it's going to cost us this. Here's what our return on cost is going to be. Like that detail level so that they feel confident in saying, "Okay, go
Chris Tourtellotte
and execute." Exactly. Yeah.
Taylor Avakian
Exactly, man.
Chris Tourtellotte
Okay.
Taylor Avakian
and and and so you guys kind of blew up 3,000 units, then the self- storage, and then now I was reading um you have the biggest build to rent project in Albuquerque, New
Chris Tourtellotte
Mexico. Yeah. In the whole state. Yeah. And yeah, the biggest opportunity zone development in the state of New Mexico and the biggest BTR deal, you know, for sure in Albuquerque. Wow. Um tell me about that. Yeah. So, you know, BTR, right? Uh, building single family homes and town homes and renting them out, like that's, you know, that's that's an asset class we really like postcoid, right? And millennials are forming households and having kids and they want more space and they got dogs and they want yards. But, and the whole mentality about um, you know, home buying has changed like you don't necessarily need or even want a home. Maybe you don't have the down payment. Maybe you want some freedom to move, you know, work remote, whatever, right? Um, so, so there's a lot of tailwinds for the, you know, for the the sector BTR.
Chris Tourtellotte
Um, and and we actually, so, so we flew out to Albuquerque to look at an apartment, an existing apartment deal, right? Because we buy existing, too.
Taylor Avakian
And you wanted to expand out of California.
Chris Tourtellotte
This is when you were like, "Okay, let's diversify." Um, and and so we went to look at this like 1980s deal in Albuquerque existing. And one of the buildings was like all black on the black on the back and damaged. And as we got closer, I'm like, "What is that?" She's like, "Oh, there was a fire. Like, that building's like partially burned." And I'm like, and it was old and like falling apart, right? I'm like, "This deal is not for us." You know what I mean? Um, and I go, "But BTR would work really well, we think, here." Um, cuz it's a little more suburban, right?
Taylor Avakian
Do you do you know any any BTR deals?
Chris Tourtellotte
And coincidentally, she says, "Well, one of my friends entitled this great master plan called the Trails." Uh she goes, "You should talk to him because there is. I I believe there's some land left." Um that master plan is in the northwest quadrant of Albuquerque. Average household incomes are, you know, 90 and 95,000 in the one and three mile ring. Some of the best schools in the state of New Mexico. We knew we liked Albuquerque for, you know, a few reasons. Again, getting into what does equity care about, right? Some of the statistics. Um the number one renter income growth for the last couple of years um in the United States, right? So renters are making more money. um high occupancy rates, one of the lowest amounts of new supply. Um in the western United States, Intel Semiconductor, Sandia Labs are there. There's the New Mexico State, you know, film tax
Chris Tourtellotte
credit. So, you have Netflix and Lobos. Yeah. Yeah. So, there's all kind of stuff going on. All kinds of stuff going on there from a demand standpoint. So, we liked it for that reason. Um and and the the site was great in the master plan. So, yeah, I mean, we put it under contract, right, with a long-term escrow. M um we knew it was in an op zone which is good. Um and we went out to you know find find the equity for the deal. Um and is opzone equity easier to raise at this point or was it easier to raise? It is. I mean the thing with with smart op you know investors like like in this case are very smart and you can't make a bad deal good but you can make a good deal better.
Chris Tourtellotte
M um so the deal still has to like work on its own if it wasn't in an ops. Yeah. Yeah. And and and so but it has to stand you know stand on its own but this deal did um and so we we did we found the equity and this you know this group invested a significant amount of opportunity zone equity into this you know project that you know budget north of 100 million whatever right so it's you know it's a big it's a big equity commitment geez um so it's you know it's a family office out of Newport Beach and um you know it's it's a great project. I mean I think we'll do really well. But we're going vertical now um on the town homes and single family homes. 344 units.
Taylor Avakian
Do you see yourself expanding in that market? Do you see how do you how are you looking at the future of Lera in terms of uh the assets? Cuz we talked about earlier development is is pretty hard right
Chris Tourtellotte
now. It's pretty difficult. Existing apartments are there.
Taylor Avakian
You got the self- storage. You got the build to rent. How do you see the growth um right now? And what's your approach to go what's the next move?
Chris Tourtellotte
Yeah, I mean I think you know you got to be nimble. Um and what what we've you know determined is you know today you can buy brand new multifamily assets for 20 to 30% below replacement cost. Right. Um crazy. And so um it doesn't make sense to build brand new let's say it's city of LA. So you could build brand new in city of LA for 600,000 a door. Yeah. Um and you could buy brand new for$450 a door down the street. Yeah. you're you're going to buy new, right? Yeah. No, that's that's not categorically true across all subm markets. Um only in some, right? There are some subm markets where there isn't any new product or you could build for cheaper because of the construction design or whatever, but like generally like you could buy for below replacement cost.
Chris Tourtellotte
Um and and as a result, you know, our strategy today um is develop where it makes sense, where we have a good, you know, well, I'll tell you right now, when does it make sense to develop? You know, I think you got to have four things. A low land basis. Okay. um a cost-effective design, which to me means above grade parking and high rents. Um and it's hard to have high rents and a cost-effective design because typically high rents are when it's more urban and dense and so you got to go below grade, everything's smaller. So you got to have like a big site. Hard to do it all. Um but that it works if you if you have that. Um and and so other than that, we're buying, you know, we're out going to we're going to go out and buy existing multif family for less than replacement cost.
Chris Tourtellotte
Um and we're actually raising a fund vehicle to do that and you know and we're doing this oneoff um with kind of the high net worth family office thing and then maybe some institutions. So that's kind of the next thing for us. Um and and we're targeting you know sunb belt markets mostly the western sunb belt. Okay. So you're you're not going in California. Uh well we are California is one of our markets. Okay. Yeah. We found some investors are like a little bit you know I'd say cold on on California but not all. I mean, honestly, like California has some of the best supply demand fundamentals out of anywhere. Um, right. Yeah. And and and you can't paint California with a broad brush. Um, so city of LA is not as good as say like the Tri Cities, Burbank, Glendale, Pasadena, great. Orange County, great. San Diego, great. Right.
Chris Tourtellotte
But like there are some markets. Um, and and then there are parts of LA, it's massive, right? Culver City, great. You know what I mean? So, it's sort of you can't paint it with a broad brush. Um, but no, California's in there. Yeah, we love California.
Taylor Avakian
So, how are you looking? What's a good deal to you? So, because um you're a numbers guy, so give me the numbers on how do you determine if a deal is good.
Chris Tourtellotte
Yes. So, well, there's a few things. So, we we pay a lot of attention today to price per pound. Okay. Um and discount to replacement cost. I mean, it matters, right? Um you know, like if you're and also what what what did something trade for at peak pricing? These are interesting things to know. But if you can buy for 20 to 30% below replacement cost, uh that means that you can offer rent significantly less than new construction, right? Um and so that's part of it. The other thing is like, you know, what's your what's your yield on cost? Obviously, your cap rate, right? Relative to the 10, you know, relative to the cost of debt. Um I probably care a little bit less about the going in return on cost in as much as I care about like the year two or three stabilized. Okay.
Chris Tourtellotte
Um and the reason is there's a lot of concessions today. So there's a lot of noise in the market. Um, and
40:00–50:00
Chris Tourtellotte
so it's kind of hard to say like, you know, let's say you got two months concessions, but that's burning off and demand is robust and there's no new supply coming online. You know, new starts are down 70%. And they are um, you know, so that fast forward to 26, 27, 28 should look pretty good. Mhm. Um, and so I'm okay like saying, "Hey, you know, not with crazy rankarth at all, but like, you know, what's what's once we once the concessions burn off and you've kind of come to a more normalized NOI, you know, in year two, maybe year three, but let's say year two, um, you know, I is that a high fives or a six, you know, relative to the cost of debt, you know, you so that's kind of that's one and it depends on the market. Sure.
Taylor Avakian
You know, every market you want to get 150 basis points above where you think the cap rate is going to be at at an exit.
Chris Tourtellotte
Yeah. Yeah. Yeah. That's a good way to look at it. Although I will say that's more development like because development is so much riskier that you require a bigger, you know, spread between your stabilized yield on cost and spot cap rates um to get paid for that risk. Yes. Um if it's a value ad deal, the spread's more narrow. If it's like, hey, I'm going to buy a 2020s vintage, you know, class A apartment deal, let's say, in North Dallas. Um, and you know, you let's say you think you're going to exit at a five and a half or five and a quarter, you know, cap, I don't know, in in year three, um, or five, then, you know, you you could get to a six, you know what I mean? Like, so that spread is more narrow because of the your risk is so much
Chris Tourtellotte
less that you're not going to get like a, you know, a fat spread, but without the risk. Yeah. Yeah. Totally. Okay. But still spread profit. Yeah. Yeah.
Taylor Avakian
I mean, we want to make some money. We're in the same money.
Chris Tourtellotte
Yeah.
Taylor Avakian
Are you buying '7s, '8s, '90s stuff? Are you just doing newer construction?
Chris Tourtellotte
Yeah, just newer. Yeah. So, I mean, we might buy like some, you know, early thousands. Yeah. It's going to be 90s, but um it's mostly brand new. I mean, this thesis is buy, you know, 2020s vintage class A multifamily. Um we because we're a developer, we see some really interesting deal flow. Um that could be other developers calling us saying, "Hey, like we built this um you know, let's say they built it for 100 and their loan is 60." Um now their new loan to refi, right? They're at the end of their construction loan term. They've extended. It's a beautiful asset. It's built. It's it's leased. Uh but they go, "Geez, my new loan is 45 million, you know, and so there's a $15 million equity infusion, right? Because it's constrained by debt service coverage and interest rates are way up. So proceeds are down, values are down.
Chris Tourtellotte
So, like the new lender is like, "Hey, this thing's not worth 100. It's worth 80." And your loan's 45. So, they're selling, right? Um or in some cases, lenders are calling us saying, "Hey, like we provided the construction loan to this borrower. They're a great borrower. We like them. They did a great job, but like we don't think they can take us out. Like, you should call them, you know?" So, seeing some deals kind of like that. Okay. Um so, we think there's like a couple years, like I don't know how long the window is there, you know? We had a period of time to go buy some existing stuff. Yeah.
Taylor Avakian
And be able to make the most of it. It's super interesting because I actually think in Los Angeles that is the best opportunity as well because the vintages of the actual um yields that you can get from a new construction building versus a 1920s/40s60s building. It's not as big as people think. Like it's not 150 basis points. Maybe it's 75, maybe it's 50 in some some instances depending on
Chris Tourtellotte
the location.
Taylor Avakian
So, if you're going to buy a 1960s building versus a a 2010 built building, which one would you prefer?
Chris Tourtellotte
Yeah. Right.
Taylor Avakian
The 2010 2010 built building.
Chris Tourtellotte
Yeah, you're right. Okay.
Taylor Avakian
So, that's that's the next step over the next couple years for you guys on on that front. Um, when you're raising money from institutions, who do you what do you look for in like a GP and LB partner? Like what is important in that partnership?
Chris Tourtellotte
Yeah. Um well, you know, we are we're the as so we're the GP. I think you know it's there's a few things, right? I mean um so let's let's you know, let's say like the four Fs, right? Uh fit.
Taylor Avakian
Are they a good fit, right? Um future, could you have a future with them?
Chris Tourtellotte
Um in other words, will they do, you know, more more deals with you? Um you know, let's say finance, like what what are the terms, right? are they um what are the promotes, what are the fees um you know that stuff matters and then fun um I call it like the cell phone test or caller ID test. Let's say like you know when your equity partner calls you is that like oh sweet hey you know like good to catch up you're kind of happy to talk to them or is it like you know um life is short you want to talk to you want to work with people who you kind of enjoy um and so you know all of those characteristics are important right for an institutional for any LP um I will say that you know for this new
Chris Tourtellotte
strategy like we're doing some we're we're with this fund like we're taking on you know individual investments high net worth friends and family family offices, RAAS, whatever. Um, and so that's for us that's different, right? That's different than the institutional investors that we've worked with in the past. Um, just because part of the reason is, you know, it's um it's longer term hold capital typically, but like when you have an institutional LP, they will call all the shots.
Taylor Avakian
And why does that matter?
Chris Tourtellotte
Well, if you've raised if you've closed on an apartment deal with a core fund, core funds are open-ended, like they have all these investors, pensions, and sovereigns, and they
Taylor Avakian
can put money in and pull them out, right?
Chris Tourtellotte
Like you heard the Odyssey index, open-ended core, diversified equity. Um, the big core funds, of which there are many, um, they are now seeing redemptions, meaning their investors want their money out, right? Pensions and sovereigns. So the big core funds um are now um trying to satisfy those redemptions. So what happens is you could have a portfolio manager in New York and they go all right calpers or calsters whatever they want 100 million um all right we're selling this deal this deal and this deal and all if you're one of those pins on the map you could be in a recession or a downturn and all of a sudden they're like oh we're selling it and you have no choice right that's not a good that's not good right that hasn't happened to us yet who knows right um and so um that's
Chris Tourtellotte
one example um or it could be like the the fund you're in is a closed end fund and the life term is up and they got to sell you know so there's you know, there's other reasons control. Yeah. Yeah. So, that's not as good.
Taylor Avakian
So, getting the the more family office long-term capital where because I mean many real estate owners and operators that I talked to, they say their biggest mistake was selling, right? Selling specific assets or having to sell and and if they would have just held on to that, you know, one building or that, you know, big land swath that they had or whatever.
Chris Tourtellotte
Exactly.
Taylor Avakian
That Bitcoin, that Bitcoin that we talked about earlier.
Chris Tourtellotte
Agreed.
Taylor Avakian
So, so wanting to get into the more of that patient capital is is something you guys have seen value in and wanting to get further into that.
Chris Tourtellotte
We have Yeah. And it's sort of I don't want to say reverse evolution. Uh but you know, I mean today maybe that is the best profile capital, but like you know sometime a lot of people like start out with friends and family and high net worth family offices like and then they're like oh like I want to go do an institution so I could do one check and you know we're got going the other way. Yeah. Yeah. But but you see both sides like you've seen you've been the institutional space and you're going back to these other things.
Taylor Avakian
So that should be a lesson for people right you know learn from learn from what other really smart people are doing and their experiences which I want to talk to you about differentiation and how do you differentiate yourself in a sea of syndicators or real estate
Chris Tourtellotte
in investors like what do you think about when you're trying to differentiate on the capital raise side capital
Taylor Avakian
raise on the development side just just in general like how do you have a successful fund fund that has an investor saying, "I want to come
Chris Tourtellotte
invest with you instead of this other right there's a lot of people trying to raise capital." Correct. Um I think it's I think there's a few things like again having seed deals really helps. So like you know we'll put a deal under contract um and and try to seed it into the fund or just do it one off you know. Um having a good deal I really think helps because then you know people can say you know this is what I'm underwriting. this is these are the projected returns and you know I like it and it's attractive and it's and they might not have any other deals. So if there's no other deals you know that obviously gives you a leg up or maybe it's better. Um you know the other element to it is um you know just being there's there's an element like there's a people
Chris Tourtellotte
person element to it right like um I think people invest with people they like and trust um and and people who are you know have the experience and track record like that relationships relationships you know that really helps um you know ability to execute the way that you present your materials as I said like I think that can really help um and so you know I think it's I think it's all of it right Yeah. I mean sometimes it's like sales like you know my wife's like you know what do you what do you do? You know she knows but like oh I'm in sales. I mean I'm not right. But like a lot of like what we do when you're raising capital, right? Yeah. You're selling the dream. You're selling the deal. Yeah. You're selling the deal and you're selling the company and you're
Chris Tourtellotte
selling the vision and the plan, right?
Taylor Avakian
Yeah. What does most of your day look like right now? Like what do you do on a day-to-day basis? And I'm always curious because I, you know, people ask me what I do and I'm like, "Oh, I talk to people all day long and see if they want to buy or sell or negotiate deals." Like, "What does your dayto-day look like?"
Chris Tourtellotte
I wake up at 3:00 and feed my baby. No, I mean, actually, I did that this morning. You did wake up. It was great. Um, but um, you know, really it's it's, you know, wake up, work out. You know, not as jacked as you, by the way, but, you know, I'm trying. Um, and you know, get into the office and I'd say like, you know, I spend maybe a third I I so I spend a portion of my time for sure on on the self- storage vertical.
50:00–1:00:00
Chris Tourtellotte
Um, I like it, right? We have a great storage team. Um, I spend time on the multif family vertical. Um, and and so my time, you know, I spend time on both. Um, and I try to spend time, you know, I do I spend time on all of our assets. Um, and but a lot of what I'm doing now is in the capital market side. So, it's it's raising it's we we may have a new deal. We need a construction loan or a facility to do a bunch of um self- storage developments or we're refinancing one of our multif family deals. And, you know, we have we have a a decent team at Lata. So, you know, I have people helping under me, analyst associates, whatever. But um a lot of what I'm doing is is closing um financings both debt and then on the equity side we're always you
Chris Tourtellotte
know raising capital whether it's raising capital for the fund or meeting with RAAS or um other institutions um you know about you know potential joint ventures like I spend I spend quite a bit of time on that as well. Yeah. Okay.
Taylor Avakian
So you're you're um because what I've realized too is having really good people on your team is very important in whatever business that you do and each person has their own specialization or something that they're really good at and it sounds like to me that you are very good at that capital money side of the situation. the and you're probably obviously good at the numbers too, but you've set it up to where you can focus on that aspect and other people can handle the day-to-day of the the construction, the the you know the little minute details, the woods coming in this day. Like you don't have to worry about any of that on the project.
Chris Tourtellotte
You're making sure that it's moving forward. Where are we at this? Okay, great.
Taylor Avakian
Let me go worry about raising this capital or the money.
Chris Tourtellotte
I think that's correct. Um we we yeah we have a head of construction who handles that. We have you know development people. Um if there's a problem you know people walk into my office you know there's there's one guy I love him. He's great and when he walks into my office I know there's a problem here. Oh no no but it's development. There's always a problem you know that's that's the thing about development. Um I do I also like I do a fair amount of the entitlement work. Um, at at a minimum, like I I present at the city council hearings and planning commission hearings or I'll like I'll meet with like, you know, the the the council office or planning staff. Like I like to be there. Yeah. Um and and so I I like to present, you know, at the podium and all that.
Chris Tourtellotte
So I do some of that too. Um I guess that's that's more entitlement, but yeah, like a lot of it's like capital raising and relationships and um you know that's right.
Taylor Avakian
What is your biggest lesson or failure or thing um that you've learned throughout the process? Like is there a moment that didn't go the way you wanted to and you were able to learn from that or like what's been the biggest mishap I guess you could say other than selling Bitcoin at 200 bucks?
Chris Tourtellotte
Yeah. Other than other or maybe my wife do um you know there's a lot. I mean, I I feel like I feel like I'm probably a very I'm probably a a good decent developer because I've already made all the No, not at all, but I've made so many mistakes, right, that I've learned a lot. Uh and and I do think that like there's no better way to learn than to just jump in and do it. Um so we, you know, so I've I've made a lot of the mistakes. Um I'm sure I'll make more. You know, I'm not perfect, but but I've learned from it. Um, I think, you know, I think some of it is like, you know, I wouldn't close on like I I'd be weary of debt, like especially like, you know, expensive bridge debt. Um, I wouldn't close on land with bridge debt. We did it.
Chris Tourtellotte
Thank goodness we were able to recapitalize the deals. They got hairy, right? We did it. Um, and sometimes you have to when you start. Um, but use like land options. Um, that's one like I don't even like closing, you know, closing on land without like your LP equity in tow. Um, you know, but closing on land with no LP with a bridge loan, you know, like stuff like that. Like, so you got to be careful on the risk. Yeah. So, keeping leverage low, especially when things feel good and it's so much easier just to size up your debt, you know, sometimes, but like keep your leverage low, right? Like, you know, so I think that's, you know, that's a lesson. Um, you know, just development generally, right? It's like, you know, do you really want to go into a fiveyear process where costs can rise and
Chris Tourtellotte
the market could be totally different when you're done? And if you don't time it right, like it's really it's quite risky development, right? Yeah. Um and so storage less so because it's faster, easier, less risk, no below grade, whatever. But like at least on the multif family side, so like part of it is like, you know, just, you know, does it even make sense to build multif family right now? It's kind of tough, man. Yeah. um you know, but we're still doing it, but you got to be, you know, selective, you know, about it. Um and and and so, you know, there's there's that piece of it. Um but, you know, I feel like I feel like the Yeah, the the capital stack structure is probably the biggest. Got it.
Taylor Avakian
Yeah. Structuring it out the gate and you know, you you do have to experience that at a certain point um yourself.
Chris Tourtellotte
But I will say one other thing, which is don't sign any personal guarantees. I haven't done it. Um, so I can't say I learned from experience like I've seen others do it and and you know one thing that our rule is no no warm bodies. You know lenders always say they want a warm body you know we got cold bodies. Um no really though because like you don't want a lender going after your house and stuff you know um keep that separate. So nonreourse yeah find a cogp who could put up an entity and then as you grow like you have an entity and then like a corporate guarantor is fine. Yeah. You know, and then you're then you're be careful of the the the
Taylor Avakian
PGs.
Chris Tourtellotte
Yes.
Taylor Avakian
You know, I've heard many stories and know of them to say that.
Chris Tourtellotte
Yeah.
Taylor Avakian
I don't want to be doing those or having to do them if I don't have to.
Chris Tourtellotte
No.
Taylor Avakian
Can I I want to dig into uh social media a little bit because that's initially how we connected and then we've obviously crossed paths because we're all in
Chris Tourtellotte
the same circles and whatnot.
Taylor Avakian
Tell me about what prompted you to kind of grow that base and how you use social media or do you use it as a tool? Is it fun for you? Like give me the little bit of low down on on that for you.
Chris Tourtellotte
Yeah. And I by the way I run our LERA LinkedIn. Okay. My obviously my LinkedIn Twitter which I need to be more active in but you know I I find myself busy. Right. Yes. Um but no I I find it to be super helpful. Um and and people hate on LinkedIn. I actually like it. Um, it depends. Like LinkedIn's more if you're doing institutional deals and when you're dealing with dad, institutional capital, but like I can't tell you how many times I've gone to a conference or even like walked into a pitch or a meeting with equity. Um, and I sit down and people say, "Dude, I love your LinkedIn content, man." Or or, "Oh, man, Lara is so busy. I see all this stuff you guys are doing on LinkedIn. Like, these guys are great. Like, they're great."
Chris Tourtellotte
You know, and and then then they have this like predisposition that, you know, they know of you. They're familiar with you whether it's subliminal or, you know, subconscious or not. they've or they've just seen your, you know, projects and they're like, "Oh, these guys kill it." Um, you know, at least that's the impression, right? And hopefully it's true. But, um, so I find it to be helpful, um, on the on the Twitter, you know, ex side of things. Um, it's I I think that's probably more helpful for people who are like syndicators and stuff. I might be wrong, but I like it. I mean, I found you. Look, I'm here right now. It's probably through Twitter, was it? Yeah, I think so. Yeah. So I got to do a little bit but I you know I I I am you know kind of active on Twitter but it's helpful.
Chris Tourtellotte
Both are helpful. I like it. I manage all of it and it's a lot you know. Yeah. Maybe 5% of my time you know five I'd say 5% of my work time is spent on marketing/social media stuff.
Taylor Avakian
Well I mean and that goes back to the capital raising like you are you're marketing yourself.
Chris Tourtellotte
You're marketing the companies. You're marketing the opportunities. It's important.
Taylor Avakian
Yeah. getting in the right doors and in the right rooms is is so important. Um, if if someone right now is listening or watching this and they want to develop or they want to become a big owner and operator like what would you say would be the best first steps or or what advice would you give them and getting to where you are today?
Chris Tourtellotte
Yeah, I think it's you got to get in the game. So, it's really easy to, you know, kind of look and say, "Oh gosh, like how do I do this? Like, it's too difficult. Like, I don't have the relationships or I can't do it or I work at a corporate job and I'm comfy and I don't want to take the risk." You kind of just have to throw yourself in the game. Um, because once you're in the game, you can you scramble and you kind of figure it out. So, step one is just, you know, jump in and just get in the game, you know? Yeah. You don't just watch from the sidelines.
Taylor Avakian
You gota you gota get in.
Chris Tourtellotte
get in there. Um and and so that's the advice and you know, easier said than done obviously, but you know, and then it's sort of like try to get a deal under contract, put some capital together, get a good deal, um and use that to then raise more capital. Um and it could be a medium deal. It doesn't have to be massive. And again, you know, the COGP thing, find a good COGP, like spend time on that. Find a COGP um that can put up their balance sheet for guarantees and that can put up a large portion of the GP equity. Don't give away too much of the fees because you're going to need that to hire people and pay, you know, your staff, right? Because salaries and overhead are real. Um, so I think I think the uh um it's important to, you know, negotiate that appropriately.
Chris Tourtellotte
You'll end up giving up some of the promote. Um, and and find if you're doing development, make sure that you have a CGP that will share in cost overrun should they occur. Um and and if you're finding an LP, make sure that you negotiate the JV ducks in such a way that they participate in interest expense or unknown subsurface conditions or other um costs that are outside the developer control, mechanical air versus pilot air. Um so try to try to shift the the the risk off yourself as much as you can even at the cost of giving up some of the ups. Yeah. Um you know, and and just get after it really.
Taylor Avakian
I one one one other question I'm curious about because I just it's not as spoken about and and again you don't have to go into super big big details here but I'm just curious like what is the typical fee structure that you guys try to um structure when you
1:00:00–1:10:00
Taylor Avakian
are doing these deals because I know it's you know you have overhead there's things involved people do I take an acquisition fee do I have my asset management fee do I have a disposition fee there's a bunch of fees that you can tack on and obviously it affects the returns. But what have you found to be the ideal fee structure?
Chris Tourtellotte
Different answer for development versus buying existing. Okay. Um so you know development like the you know there there's kind of market rate like 3% development fee like you know of the total cost 4% of hard and soft you know it's pretty kind of straight down the if if you have we have an in-house general contractor now we had to start that because two C's are so tough but there you know. So that's kind of a pretty pretty known like what's a marker HC fee. Yeah. um asset management fee. So, you could spend a lot of time like on the asset management function and it's very important. Um if you're going to own an asset like like our like a build to core venture, you build it and you own it. Um then you want to try to structure an asset management fee because like you are going to you
Chris Tourtellotte
or your people are going to spend time on it and there's reporting and there's insurance and there's um accounting and tax and then there's overseeing the property manager like this is people, you know. Mhm. Um, so, so I think I think a market rate asset management fee is appropriate. Um, now when you're buying an existing asset like let's, you know, 200 units in Dallas or whatever it is, um, you know, it's a onepoint act fee is kind of normal, right? Because you're going to have acquisitions guys. Um, and they're going to want a bonus, you know, so like you you have people to pay, right? Um, and so an act fee is normal. Um and then like an asset management fee whether it's 2% of EGI or you know a percentage of you know much smaller percentage of gross asset value whatever it is like um you know
Chris Tourtellotte
that's that's I think appropriate right um we don't do like disposition fees you know or financing fees we haven't in the past yeah you know um so our fees you we we think that there's like a pretty you think fees can be like kind of market and customary and we try to stay within that box. Got it.
Taylor Avakian
So everyone feels like they're Yeah.
Chris Tourtellotte
But people Yeah. And and and we but we do have to remind people whether it's like our institutional LPS or anybody that it's really not a profit center. You know, people think it is. Um unless like maybe if you're taking a big AC fee rip of two or 3% or you're rolling that into the deal like maybe but like generally speaking like you got to hire people and pay them and insurance and rent and overhead. You got to you know and it es and flows too. Yeah. Yeah. Absolutely. You can't you can't um actually I went to uh when our fees you know were a little light I went to Whole Foods and I was buying all these groceries and I went to to check out and she you know that'll be $236. I said can I pay with my promote didn't work. Didn't work. Didn't work, man.
Chris Tourtellotte
So you got fees. That's funny. So good. I got to use that. That's not a true story but it's the point across. I love that. I love the par. Um, Chris, anything you want to leave the listeners, viewers before we wrap
Taylor Avakian
up? This has been incredible and I hope people came away learning a bunch about development and the intricacies cuz you guys have done it honestly pretty incredible since 2015 to grow this portfolio as massive as you guys are. Is there anything you want to leave the people with?
Chris Tourtellotte
Yeah, thank you. I think I think it's just as I said like you know jump in and and and get after it because I think when you're put into the situation where you have to perform um that's when you can really rise to the occasion and really really uh drive yourself to your full potential and and you'll find that full potential um only by getting in and and and and doing it right. Um I'm I'm a resource if people want to reach out to me you know send me whatever DM on LinkedIn. You're on LinkedIn? No I'm on Twitter 2X you know. Yeah. All the above.
Taylor Avakian
All the above.
Chris Tourtellotte
Yeah.
Taylor Avakian
So if I And you're raising some money, too. So if you want to do any LP investments.
Chris Tourtellotte
Yes, sir. Hit me up. We're doing that, too. Yeah.
Taylor Avakian
Chris, thank you very much for being here, man.
Chris Tourtellotte
Thank you. Appreciate it. Of course. Mhm.