March 4, 2025 · 1 hr 12 min
With Joseph Soleiman — Professor, Attorney & Real Estate Investor
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How do investors rebuild after disaster and navigate California’s strict regulations? In this episode of No Vacancy with Taylor Avakian, Joseph Soleiman—professor, attorney, and real estate…
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How do investors rebuild after disaster and navigate California’s strict regulations? In this episode of No Vacancy with Taylor Avakian, Joseph Soleiman—professor, attorney, and real estate investor—shares his firsthand experience of losing his community to wildfires and the challenges of rebuilding in today’s market. Learn how investors are:- Navigating California’s strict housing policies - Adapting to rising insurance costs and environmental risks - Finding opportunities in distressed properties and non-performing loans - Understanding the impact of political shifts on real estate investment - Evaluating the future of adaptive reuse and commercial-to-residential conversionsFeaturing insights from Joseph Soleiman on the legal, economic, and personal aspects of rebuilding and investing in California’s evolving real estate landscape.
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This 13,529-word transcript is matched to English (Original) automatic captions. Timestamps seek the episode player to the matching passage.
Welcome to the podcast. My name is Taylor Veikian and I am here with an incredible friend and uh professor uh attorney real estate investor. He's he's the master of all trades I like to say. And Joseph Solomon Joseph Thank you for having me Taylor. Thanks for being here man.
I've been looking forward to being on your show.
I know. I know we've been talking about this for a long time um and uh
it's going to be a good one.
So I want to start off with what's going on right now. We're filming this at the end of February and Los Angeles has some fires that are going on and the state of the market is in I would say disarray. You were affected by these fires. Can you tell me about the situation and what's going on?
Sure. Yeah um I am I have yet to go back. We've just been given access actually. As of yesterday. But uh we I've yet to go back. Um the community I live in is called Sunset Mesa. It's in technically in Malibu but just adjacent to Pacific Palisades. Uh it was an idyllic mid-century, you know, little community of probably about 500 or so homes and I'd say probably about 5% of the homes are left standing. Um it is utter devastation uh akin to you know, what you would see in Hiroshima or you know, a nuclear bomb being dropped. Um my home does stand. Uh I have not gone back. Even those homes that are standing unfortunately have to deal with issues related to environmental remediation. These homes were built in the 50s and I'm sorry in the 60s um and so there it was is uh asbestos that's turned into
asbestos ash. We have you know, lead-based paints and so there's a lot of uncertainty around you know, the the health and uh the viability of going back
until there's some environmental remediation. given you a timeline on when they think that's going to be remediated and or you can go back? Cuz the other question I have first timeline and second like to go back to what? Obviously you have a home but every all of your neighbors' houses are burned down, so um I mean, what's what's the timeline and
Uh so, the county is the agency that would be overseeing and responsible for scheduling the environmental and the actual physical damage cleanup. And unfortunately, as of this show, there is no timeline yet provided. So, we don't know. A lot of us are asking each other through Slack forums and WhatsApp forums and you know, our homeowners association to try to get information. Uh but we don't really have a timeline yet for that. Just this morning, uh even though my home is standing, I got a message from a friend of mine whose home is not standing that it might take um you know, 12 months before I realistically can even go into my standing home. No way. That was just before I actually came to sit down with you this morning. Holy. So, um there's a lot of uncertainty and that translates into the community issue that you're touch- touching on.
Um I have twin boys um who were going to Malibu Malibu Middle School uh who we've been trying to, you know, we're now all evacuated, so we're trying to get them back into school. As of Tuesday, they're uh to go back. And you know, the the drive now for us is like 2 hours to to get it to get them to class and then bring them home.
There's no bus service.
PCH is closed, so there's a long, you know, commute time there. And so, there's this diaspora that's happening uh relative to all of the kids, you know, that have now had to find new homes with their families that are going in some cases to new schools. And so, the sense of community has been devastated. Mhm. And it's going to take some time. Um it will, you know, I've heard you know, crazy long estimates, uh but no one really knows. As you know, there's misinformation, misinformation factors that I I really guard against, you know, I don't want to put something out there. Um but it takes time to simply build a neighborhood. It takes time to build a home and replicate that through individuals doing it through individual insurance programs and individual contractors. We're not talking about track homes being done by, you know, getting the Toll Brothers or, you
know, KB Homes in there and just getting economies of scale. Um so, and by the way, that would be the ideal way of doing it is to give uh you know, get homeowners associations
together. Yeah.
Get get that optionality to everyone. If they want to opt in, they have, you know, the right to have these home builders build their home. They'll have maybe three or four different options to to pick from in terms of aesthetic. Um and they'll get it within a at certain time and a fixed
price. people do you think would actually do that? Cuz the demographic, I would say, for the Palisades and part of Malibu is more of an affluent nature, one where they like to have some individuality and
uniqueness. Um That's right.
Do you think people would actually do that?
It's fantasy. Yeah. It's fantasy. So, the reality is it's not going to happen. You know, you it's the proverbial It's like being Jewish, I can say this. It's like the Jew that's, you know, you get two Jews in a room, you get 50 different opinions. You know, it's the same thing, right? I mean, you you really have uh I think that element here. Um people absolutely see this as a personal upgrade opportunity. And studies have shown that actually when fires happen and people rebuild, homes get bigger, they get nicer.
But isn't there an issue with Newsom coming out and basically capping the amount that you can rebuild to 110% of what was there?
that is an issue. It's not only an issue. Um that's correct. Uh that did happen. Uh he did also set aside uh Coastal Commission and sequa
reforms. Which sequa's terror domain.
Right. I mean, that would set you back to you know, a couple years. Although, maybe not. Notwithstanding that it's off the table for home rebuilds uh or fire rebuilds is a very valuable thing. Yeah. There are limitations to what he said. You know, you can't do ADUs. That wasn't accounted for. It does have to be on the same footprint. So, that's kind of a a loss because, you know, sometimes homes were built, you know, before some of these screen nails they seize. Yeah, or you know, in the in some cases the 20s. Yeah, before you had, you know, these streets that were built the way they were. So, they're not really oriented correctly on the lots. So, doesn't mean that you can't rebuild. It just means you have to go through the, you know, more traditional process, which will potentially cause some more, you know, reviews and delays.
Interesting. And have you been contacted because one of the first things that uh again, broker mindset, right? One of the first things that I got reached out to about was opportunities to purchase, right? We're like, "Hey, what's the, you know, status of wanting to buy the these parcels and and have potentially value in land?" I just saw one of the first homes uh burned down to be listed was listed for $100 a square foot.
Interesting. Which for me is is incredibly cheap for that area.
That's what we're selling affordable 100% affordable land to build these Yeah, I agree with you on the fact that Palisades homes were selling for or offered at that price was very intriguing to me. But then I even went to some people some investors and was like, "Hey, is this
a good deal?"
And they said they don't know yet.
That's right. And and First of all, I'm offended you didn't call me. All kidding aside, I I I've had probably um 15 to 20 people reach out to me uh both from within and outside of the community who are interested in doing this. Um I have access to funds set aside
specifically to do this by these people.
They're, you know, the funds are available. And the issue is first of all, the putting real estate put a notice out there, you cannot solicit any Yeah. on these. So, it's it's uncouth. It's inappropriate. People are going through loss and grieving. So, that's number one. It's just not the right thing to do right now. Yeah. And the second part of it is what are these things worth? You hit it right on. It's so early, the market's not there. $100 a foot really sounds low. Some people are simply going to be um you know, equity rich and cash poor and are going to need to get out of these what were wonderful assets turned liabilities. That you have uh senior um you know, elderly folks in some cases first generation owners of some of these homes that were uh you know, originally built uh in some cases second generation owners
that inherited it from their parents. And so the basis was very low. With that low basis um or no basis, you know, frankly over time they paid out every everything off so there's no debt. Um you know, allowed for a very um favorable lifestyle and sometimes these people didn't wouldn't have the income if they were to be, you know, purchased today. So, those that didn't have the income are going to be the ones that are I think going to put these lots on the market for sale. And frankly, those that are just, you know, later stages of their life, you know, if this process takes two, three, four five years, they're simply going to say I want to leave, you know, the latter part of my live my the latter part of my life in peace and harmony and not building a home.
And so those are going to be opportunities for investors down the line.
Did you have any friends who said, "I'm out of California or I'm moving to San Diego or Orange County or they're just LA, I'm gone." Did you have any friends who said that?
So, it I'll tell you of all of my friends in the neighborhood who lost their homes and and I say there's 10 to 12 of them. Okay. Virtually everyone in my neighborhood actually thinking about it, everyone in my neighborhood is rebuilding. Wow. Now, of the friends that are outside of the neighborhood in the Palisades, you know, there are a few that have said, you know, "I don't know if I want to be in this community anymore." Um and that really brings in a more political dynamic in the conversation having to do, you know, with such a deep blue state um having to do with, you know, state, city, county issues that have not been really homeowner-friendly.
You know, haven't been investor-friendly. And, you know, haven't been school, you know, friendly. Schools have been suffering
in terms of things. Firefighter funding, you know, any police funding friendly. Yeah, these are issues that homeowners really care about. And in our state, sadly, um the attention has gone towards social issues so deeply that it's taken the focus and attention off issues that matter to people who actually have um constituency that have uh agency and have uh planted their flags in the state for the long term
by way of buying a home. And I I want to circle back around to your background a little bit, too, because obviously you're well-educated, you're an attorney by trade initially, and then now a professor as well who teaches law, and then in the in the private real estate space. So, I know that probably gives you a good insight into how some of these laws and things are written. What are the problems and issues that we have in California right now and and from a legal perspective and also from what is occurring and and what you've been talking to uh your investors and your other friends who own real estate and then the neighbors. Like, what where are we going wrong?
Uh that's a loaded question. I I first of all, I'm going to say that I work really hard in in my class. Uh I teach at Pepperdine as you alluded to, and I teach in the business school. Uh and I work really hard and I teach a So, I teach in the business school, I teach a real estate class in the business school, and I teach a real estate class that touches on legal issues. So, those are fraught with potential po- political landmines and it can be a very hyper-politicized conversation which I try to skirt. I don't want to make politicized uh an extreme comments going you know either direction because You're trying to educate. Yeah, and it's an objective thing, right? And I think that with that said, there are serious um mismanagement of our state, our county, and city levels that has happened due
to socialization of ideas that are so uh extreme that are so um uh uh you know really blue state, you know, issues, right? That have been really taken to an extreme. Um there is a kill the rich, you know, mentality that's been I think um very very um pervasive in our politics. Uh there's been developer bad, homeowner bad, landlord bad mentality and sentiment that's been uh really I think irresponsibly uh spread by politicians. And the result of it is, you know, getting onto you know, supervisorial roles,
city council roles, you know, people who are anti-capitalistic which is one of the foundations of you know, why my family came here. You know, my my family is were refugees. We came from a totalitarian country that was originally, right, you know, capitalistic and democratically, you know, run to going very totalitarian and you know the United States is the bastion of, you know, freedom uh property rights and you know, without capitalism. Capitalism has been made a bad word. Capitalism, supply and demand dynamics have been uh deemed to be a theory that is not valued. Um that you know, the invisible hand that Adam Smith talked about is is bad. Well, that's a perversion. And that perversion, I think, has been
um tainting our politics. And I think we have politicians who don't uh you know, manage resources correctly. Um we have uh uh mayors who are not, you know, thinking about their constituency. There's no good reason for a mayor to have had uh for being drawn on in Africa when the the people of her city are uh are literally running from fires. Yeah. So, huge missteps, bad looks, you know, and uh now I think there's a lot of uh if
It feels like people are realizing that something needs to change, and I don't know if it's from a the President Trump won, so people are, you know, all leaning that way. Coming coming out of the woodwork to say, "You know what?
I'm a closet maybe I'm so many. Yeah. There's so many.
I've been seeing on Twitter, too, like Sam Altman came out and said he miss spoke about the the you know, right wings um it it's it's people are coming out and being like, "Okay, we've all been thinking that this is kind of crazy, but now it feels like it was, and so they're not in a position where they have to you know, maybe they have to deal with their friends who don't feel that way, but love her all from a business perspective,
too. Absolutely. And I think that this is the thing. We have to be nuanced in our conversations. It became politically incorrect to say that you're pro-business in the state of California. It became politically incorrect to say that, "You know what? It's not okay to have um anyone doing anything anywhere they want. Rule of law, you know, we we passed laws, but we're not going to enforce them. There's no loitering laws being enforced. There's no trespassing laws being enforced. There's no jaywalking laws now being enforced expressly as as really mandated by our governor. And so what is again one of our bastions in the United States governance of law is being, you know, eroded over and over and over again. Um look, I'm not you know, I don't want to come across again as Uh one of the reasons I think we live in California is socially, you know,
we're very open-minded. And uh I think, you know, most people here are aligned in that. Uh perhaps some don't want to go as extreme to the left on on social issues, but, you know, people generally lean left, and that's that's fine. What's been, I think, overlooked is how the social elements and, you know, voting just blew and being a deep blue state um causes there to be problems in business and specifically in real estate. You know, we have ULA that was passed, you know, and it was completely passed uh as a um eat the rich concept, you know, as a mansion tax when frankly, it's it's just a complete misrepresentation of what it is. It is impacting commercial real estate sales, as you know, given what, you know, you you are involved with. Uh we have national private equity we have national investors, private equity firms.
No one wants to come into the state due to regulations and to due to things like ULA, the mansion tax, which actually impacts commercial properties. And so these are the kinds of changes that we need to make, and I think we're at at a precipice or at maybe an inflection point where we have to come together more as business leaders, more as real estate leaders, more as educators as well. You know, the state of California just recently passed its state rent control law. We knew when the original you know, rent stabilization ordinances whether it's Los Angeles or Santa Monica that were passed in 1970s were bad for business. Law and economics professors back then wrote books about how rent control is bad. It's bad for rental stock. It's bad for quality of housing.
And yet here we are you know uh 50 years later or 45 years later and not only are we not rolling back things that are bad for our industry, bad for our society, but actually imposing more. And that's caused people to literally you know put a a red X mark on our state for investment purposes. Uh and those who have invested are really disincentivized from investing in their own properties. People who want to invest in our you know, in their properties. Uh and who want to better the lives of their tenants. And so it's hastening this real like um conflict between the evil landlord and the uh you know, the the downtrodden tenant which really is it's a false narrative created by our our politicians.
100% cuz they they know who their voters are and they want to appease to that um population, but people don't realize that it actually is against the people that they're trying to protect because makes the problem worse.
Absolutely.
I'm curious now as someone uh who is in the collegiate school system, right? Who has been known and there's been a lot of talk of like super, you know, left wing and not necessarily the politics, but but genuinely do you feel and Pepperdine is a private school, but do you feel like the upper educations, the collegiates, the colleges, stuff like that, are they part of are they pushing a certain narrative? Like does that feel like and I don't want to get you in trouble, so don't say anything that doesn't apply to you, but do the students come to you and be like you don't you say I totally
understand what you're asking and and I'm going to answer it by saying that I actually went to a I you guys everyone can look up where I went to school. But I I went to UCLA undergrad, okay. I went to law school in San Francisco also at the UC in the UC system. And there's no doubt that in the UC system that you are instructed by extreme you know, liberal uh thought leaders. And I graduated a long time ago and it's clear that that has only gotten worse in those systems. Uh
where I teach is a little bit it's reputed to be a lot more on the other end of the spectrum. Um due to the fact that I mean we've had administrators and Republican, you know, uh Ken Starr was at Pepperdine, so it's not a it's not a secret that it's it's a little bit more of a conservative institution. That doesn't mean that we don't teach, you know, facts. But you know, there isn't a a mandate, okay, you must teach this or that. Uh and that's why it's my class is very apolitical. I like to show both sides of every narrative and every issue. Uh so that said you know, we we don't have I think as much extremism you know, in a private school setting. Sure. Which is perverse. You know, you think in a public institution you would have
more of that open, you know, dialogue between um the sides. More of a neutral stance. More of a neutral stance. But perversely it's it's been elevated to um the private institutions because they don't have the requirements that are being mandated by our governmental entities on our public institutions, on our private institution. So, I think it's our it's it's it's really telling of how extreme our uh governance has gone.
Man, it's it's kind of crazy. I went to, University of Alabama, which is probably the opposite of what a lot of California um institutions and schools are. So, I I didn't They got football, though.
Great football. Yeah.
Incredible great football. Um even then, though, I felt like okay, I just got to do what I got to do, right? I know how I feel and believe, and here's my goal, and here's what I want to achieve. And so, that's where I'm trying to go.
And So, let me ask you something. When you you said you were going to go to California from Alabama. Yeah. Right?
Did you say that to your friends? Were they like, "You're crazy for going to such a you know, crazy liberal state?" Well, I'm from California. So, it was kind of like um okay, you're just going back home and and things like that. So, yes, people in other states think California's absolutely insane. That is 100% a true fact.
I I Look, I would I was just at a at a conference yesterday. People come in from the East Coast, from the Midwest.
I I'm in, right?
I was at the I'm Was it a good the president You spoke. I I did. I spoke at the I'm in um uh I spoke on a panel about adaptive reuse
issues. And what were they saying? What was the sentiment?
Well, this this First of all, everyone thinks California's an insane place to do business. It is. Again, same issues. Uh they at the same time, it was funny because we were talking about you know, cap rates.
What are cap rates on multifamily?
Well, how can you justify that in one case a a sub 5% cap rate on multifamily? And uh meanwhile, it's beautiful out.
It is literally, you know, Do you see the weather map today?
It No.
Of the state of the country? I did not. Okay, so, California was like 55, 65. Everywhere else in the country, besides Miami, was like 22°.
Yeah.
And we're like, "Okay, here's the map.
Here's where people want to live." It's the weather tax, right? It's It's the weather tax. Everyone's Look, and you can't deny the following. People from all over the country Strike that. People from all over the world see California as one of the two states in the United States that they want to be in. Three states now, maybe, between California, New York, and maybe Florida. Mhm. And it's undeniable that we have amazing resources. It's undeniable that we have amazing beaches. It's a bummer. I can't I haven't been able to surf now, and I'm not going to be able to surf for who knows how long, right? I wouldn't So, what becomes the raison d'être to go to Malibu? I can't You know, I live there. I can't go home. I used to go there, and you know, even when I didn't live there, I'd surf Malibu.
Now, I live there, and I can't surf Malibu. So, it's the amenities that draw people into our state. Point being that there is nowhere that has I used to say in high school to my friends, "Let's Let's go do one of those ski trips where we can go to whatever mountain high, you know, locally, and then go go surf in the
next surf and snowboard the same day.
Same day. Uh so, it's a unique space. Beautiful, you know, state with mismanagement. You know, there was a time when our schools were the best public schools in the in the country. Um there was a time when our roads were the best freeways, the only freeways in the country. Freeways started in our state, for God's sake. And uh you know, there's just been a lot that has drawn people here. So, our success was also our our downfall, and it could be our downfall because we have people coming in droves, and demand drivers has has ballooned our population to where there's 13 million people in the county of Los Angeles alone. That's larger than probably 95% of the countries in the world. That's crazy. So, we we really have this amazing demand driver that's not going to go away. For as much as right now we have a you
know, a black eye uh as a place you know, institutions and investors want to stay away from, you cannot deny the fact that multi-family for example, which is your specialty, you know, how many buildings do you know that are less than close to 90 something percent occupied? All of them. All of them. Even the shittiest of shitty buildings are occupied. Yeah. Right? Mhm. So, why is that? Well, we do have a housing shortage, but the it's just the demand drivers. There's always I always say like there's always that person that's taking the bus from the Midwest with stars in their eyes that get dropped off in front of the Hollywood sign and want to be an actor, model, actress, model, whatever, Mhm. Hollywood, yeah. Yeah. And so there are there are drivers here, indubitably. Um now, it's up to our leaders
or governmental leaders to bring more uh entertainment business in, you know, don't let the production die on the vine here. You guys have a good thing. You're losing edge to London, Atlanta, Nashville. We need a we need to beef that up. Uh you have you had aerospace in, you know, Los Angeles. The airplane was invented virtually Well, the aerospace industry really took off here. Um Again, our policies, you know, removed it. The GM, you know, factory used to be in Van Nuys. It's gone. Um so a lot of that and again has to do with our national trends and you know, with manufacturing leaving of course um the country, but also you know, we're we're not creating um an environment that makes Nissan want to, you know, forget Nissan, but Volkswagen Group want There's no new industries that are
being created, right? No one wants to come to start something from an industry perspective to Los Angeles or to California. And that has to do with government, right?
Government has to give incentives, tax incentives, you know, and housing would be, you know, a way of doing it. There is, I think, this fear by our politicians in giving industry incentives. Mhm. And it's because if they do it here, then someone else is going to yell and scream there. So, that's part of the extremism. That's also part of the problem being a one-party state for so long. Um we had we had Republican governors, you know, Governor Reardon was was a an attorney. He was a Republican mayor. We had, you know, we had Arnold Schwarzenegger, you know, we had he he maybe could have been a better governor for us, but he he had his own personal problems, but he did fairly, you know, good things for the state from a business standpoint.
Uh we we have gone away from that true north compass in being able to see that business, schools, our housing element really matter. And by just putting, you know, homelessness issues and DEI issues and social cultural wars at the forefront of people's, you know, mindset is not working. Mhm. We need to get back to the basics. So,
I agree with you a lot, and I I love business. I love entrepreneurship. And so, where my mind goes, cuz again, I'm biased, too, cuz I I do business here, and my business has been built here. I have a different perspective to on the actual intricacies of Los Angeles and where the business opportunities are. Because what everything you're telling me and what I'm hearing and when I when I think about this, I'm like, okay, barrier to entry, barrier to entry, barrier to entry, brain damage, brain damage. Like, it is hard to do business, which for someone with a personality like myself who loves doing hard things and realizes like blue oceans where you want to you know play the space and play where other people don't want to go.
Yes.
If you have either specific knowledge or connections or some sort of differentiator to give you a better leg up in creating wealth and opportunities here with the demand still being what it is, that to me screams out What do you want to be?
Right. I love you're saying this. Absolutely. So, you were asking, you know, why you know, I think we had a conversation before like, you know, about being in state versus out of state. I you know, I told you how I I actually started my career by doing deals out of state. I All of my first deals, I couldn't break the barrier to getting deals done in California. When I So, I I was an M&A attorney. Early 2000s, I got out of that business and Like look, M&A M&A business and the purchase and sale of businesses and the purchase of real estate are really cousins. They're very similar. So, okay, great. Let me let me dip my toe into that. We we couldn't make deals work for investors in state, so we were going to places
like Florida, places like uh Las
Vegas. What were the return metrics you guys were trying to hit?
Well, it's a different era then. You know, I know. We were we were giving our investors in some cases up to a 10% cash-on-cash return net of fees. Wow. Yes, different time, different era. And back then, interest rates were somewhere between 5 and 1/2 and 6%.
So, why why were they that then and different now?
So, I think it was a pre-institutionalization of real estate. Institutions got into every sector of real estate from going back about 20, 25 years ago in a very meaningful way. But, we were just a you know, kind of like the red-headed stepchild of the investment community that changed 20 25 years ago. Where the real estate business was really uh run by localized family offices. That changed 20 25 years ago. Uh private equity got in in a meaningful way. Sponsorship, you know, of sponsored deals, you know, syndication syndication. I Back then syndication was happening on a on a much more discreet basis. And then, you know, it really had its kind of double peak, you know, up until right kind of pre- pre-COVID, uh where everyone coming out of high school Yeah, it was like, "I'm going to set
up my own real estate media, too. Everyone's making all this money."
Oh, that's a "I own 10,000 units, right?" that's that's really a big, you know, driver as well over the last 10 years, you know, social media. Um Absolutely, you know, information
has been really leveled, right?
Um yeah, in that way. And so, the barrier information gathering is gone. Everyone has closer to perfect information. Uh you don't know something, you Google it. You don't know something, you you get an AI chatbot to You know what I'm saying?
Now AI Yes. Pretty much gives you a better answer than if you call up your buddy
or attorney. Absolutely, yeah. And no, I as an attorney, I can tell you how many, you know, people actually say, "Look, I I've had this happen." Someone called me up, actually speaking of AI, uh let me actually, first of all, put what I want you to do for me through the AI AI um whatever platform that I'm using. And uh then I'll have you look at it, right? And so, that's going to happen a lot more. That's that's another conversation altogether. But, um going back to your issue, absolutely your point, I should say. Absolutely agree. California, a lot of people are naysayers, a lot of people are down on it. Um but California does present an opportunity precisely because no one wants to touch it. So, it is one of the first for young investors, I'd say this as well, it's one of the
first opportunities that you're going to to get your you know, your flag, you know, kind of planted in in California
assets. Yeah, it's so interesting to look at what has to go into make a deal work in California comparative to other places um because I was just looking at a deal for a personal investment for myself where it was a triplex in the Echo Park Silver Lake area. Yeah, we're kind of working on it now. I'm running the numbers, doing this. The rents are $3,000 for the whole building.
Oh. Super low. So about by it's a two-bedroom, a one-bedroom, and a studio.
So at market rate, we're probably looking at 3,500 bucks, 2,500 bucks, and $2,000, right? 8,000 bucks monthly. They're making $3,000. My mind is immediately like, okay, wow, there's a lot of value to be had there. So I'm I'm walking through this and I'm looking at the at the deal. They're paying so the tenants are paying such low rents compared to market that likely unless there was some motivation for them to
leave. Now, why would they? Right?
100,000 Why would they leave? It just wouldn't make sense. Um however, the there's an opportunity if I was to buy it with an owner user move in, right? Because if I'm going to move into the unit, then by law I'm allowed to uh take over one of the units, which means one of the tenants has to move out.
Right. And so we were running numbers and math of what that has to do.
But for me, there's a sacrifice in that I work in Century City.
Driving all the way to Silver Lake.
What's the hour time limit there? And then from the cash perspective, this actually was a very well-priced deal, and we're going back and forth on on offers. So I don't know where it's going to land, but I was running the numbers at, let's say, 10% above where the asking price was. Um and doing the math of, okay, if I get a loan for this amount of money uh, a from a friend, all cash so we were competitively close. And then I move in, that increases the NOI, then I go get a loan to pull them out, right? And I stay in there for 2 years. So we're looking at all these different scenarios of what has to happen for the deal to make sense.
Also, you have to be careful which unit you actually kick out. You can't kick out the the one paying the least amount. Yes, correct.
And so all these nuances stacked on top of each other, right? It is brain damage and it's a lot tougher than saying, "Hey, your rent next month is going way, it's tougher than what it was
10 years ago. The same exercise that I did is easy.
I'm going to buy it, I I'll I'll figure it out. 100% right? It's it's not the same as I in my time being in real estate, it's completely different. Um, but there was I had specific knowledge where I knew the scenarios of what could be done, yes, right? Another person who is looking at an investment and sees a a cheap property in California, maybe they buy it and they don't have the specific knowledge of, "Okay, how can I make this deal actually work? What's my A plan? What's my B plan? What's my C plan?"
Yes.
They're like, "A plan, okay, I'm going to increase the rents." Oh, well, actually, sorry, you're not going to do that. Oh, I'm going to buy them out. Well, actually, they're not going to move, right?
You you would be shocked at how many investors come to California not realizing Well, now it's it's a lot more, I think, uh, broadly, you know, known that we've got so much regulation in rent control. Uh, I I was speaking to a colleague of mine who, um, is a specialist in, uh, landlord-tenant issues and eviction issues and the like, and he said he got a call from investors out of, uh, Florida that decided to buy, I don't know, I think it was a 100-room key hotel with long-term stay tenants in West Hollywood. This is maybe maybe about 15 years ago. Mhm. And didn't realize until after they closed that it was rent controlled in West Hollywood. And they're trying to get tenants out and like, "Well, you can't get us out. We're rent controlled. You've got to, you know, buy us out or, you know, something like that."
So this is a long time ago and it became this really funny thing where he's telling the story about how he had to go in there. At this point you have you know, we're LA. Yeah, there are camera news cameras in front of the the guy the hotel and the you know, it's the evil landlord do you have evil thing, all right? So again, opportunity, right? If you if you are uh someone who is and that's this is what I This is why I teach. Yeah. If you have the tool, the skill sets, the knowledge base to navigate these uh matters like you have so beautifully and eloquently said, you know, I can do this. I can do a buyout. I can not do a buyout because there's an exception for the um owner user to move in and that only applies for four units or less,
you know, that kind of thing. Um knowing how to navigate that does allow for opportunities. And that's where the investment needs to be made. You know, real estate used to be a real cowboy business. Literally, like you'd go out to Vegas and like I see a piece of land, I'm just going to buy it. Uh you know, the strip's catching up. Yeah. And it'll go over Yeah, and and a lot of guys did and still own that plot of land that was sitting there 100,000 dollars now a million dollars, right? That level of you know, real estate play is really for a different generation. Yeah. The current generation of real estate play is exactly what you hit on is is getting really adept at what the land value
at is Yeah.
and knowing that how you can extract that value. So knowing, you know, what can you use for density if you're going to develop something?
So let's I want to talk about that. What where do you think the opportunities are in Los Angeles? If you're investing your own money, which we're talking about buying deals, like where are the opportunities and kind of investing my own money.
So just for anyone who's listening to this, I am from here. My house almost burned down. I'm not leaving. I'm staying in California. I hate the tax structure. I'm still staying here. The surf is better in other places, but I'm still staying here. Just by way of example, it's just a lifestyle thing. Um so with that said, there are opportunities and some of the options that I I personally think um are on the horizon has to do with Look, we're contrarian, right? Essentially, that's what you're talking about. What's the worst asset type you can think of right now? Office. Yeah. What is the worst places you can think of going for office?
You know, it's found out.
It's downtown's tough. It's going to continue to be tough. Um you know, I think some uh some sub suburbs are being impacted from office. Um you know, vacancies just just sucking wind. Mhm. So, I think that the opportunity is going to be actually in buying asset types that are function functionally obsolete, not just office, but all kinds of sure functionally obsolete asset types and converting them. Um and I think that that's tough because you have to find that like, you know, that real, you know, diamond in the rough because you've got to have the right light, the light right layout, parking ideally. But what's happening in the future is there's going to be a new adaptive reuse ordinance coming and this had been on the come for a long time. Uh one of the things that helped transform downtown LA, but then
our politicians again [bleep] that up too, was the adaptive reuse ordinance in 1999 that allowed us to be able to take these old 1920s buildings in the old part of the downtown area in the old bank district in the historic core and convert
them to multi-family and live-work lofts and hotels and that kind of a thing. Um we used to have a we used to have a um adaptive reuse czar in the city of LA that was appointed by the mayor at the time. A very Garcetti, I believe. Mayor Garcetti appointed him. Uh and uh shout out to Hamid. He he he was wonderful. He he would talk to developers. He'd engage with you and you know, that is really what along with the CCAs, you know, support helped downtown to to turn around. With a new adaptive reuse ordinance that hopefully expands throughout the the city so that it's not specific to downtown or parts of uh Hollywood as it was originally then or San Pedro, then what we will have is I think a lot more by right opportunities. A lot more housing can come out of things that really should have
never been built or that were built as office and maybe don't make sense as that or maybe industrial that maybe is again functionally obsolete or or the like. So, I think that'll be an opportunity.
Um Isn't that super tough?
Yes, super tough. It's tough tough tough. I don't want it to sound like it's Yeah, it's very difficult.
Structures the way offices are built, too. This is what I've heard and spoken to people of even if you got the office for free, right? The conversion costs and the way that they're structured with the the outside and the the quarter the just the way that they're built.
Some buildings will just never make sense.
It it doesn't make sense.
I get it. Blow it up. Blow it up. And so, that's absolutely correct and often times the right way to go. Yeah, it's finding again these diamonds in the rough where you know what? It's got character. It's got something unique uh and maybe it does make sense because, you know what? The layout the that bay depths aren't too deep. It's not they're not shotgun units. Most importantly, the only thing that matters basis, can you get it for cheap enough? Mhm. And that's going to be the challenge. You know, some of the stuff in the office realm are is getting cheap enough where you're going to get there. It's there's room to go. And the other thing opportunity wise, let me say this. Yeah. One, adaptive reuse. Yes, to your point, that's a caveat. That's a risk factor. It's not going away.
Adaptive reuse is one of the hardest things to do at the same time. So, yes, it's an opportunity, but it's also a risk factor. It's one of the most difficult things. The other thing is there is no shortage of defaults that are hitting. Lenders are sitting on non-performing loans. Um I have someone that came to my office just the other day who's been having conversations with a lot of lenders. And um they're coming they're trickling down. Oh, so there's stuff that's going to be coming.
I think Is it a wave or is it a drip?
Right now it's a drip. But I think it's a dam that has a drip that's going to let loose.
Got it.
Interesting. And I think that we're going to see opportunities to buy notes again like we did in 2008, 9, 10, 11. I think that we're going to see opportunities in the foreclosure realm. I've already seen you know that happening in the single-family residential market, yeah, right, which is one of the tightest markets we have. Uh so that's the next thing around the corner I think is opportunities to buy things that are under the scanner note basis or especially again office like think about how many office buildings that were pre-COVID maybe 100% occupied. Now they're maybe 50% occupied. They're going to be facing maturity defaults just by virtue of the fact that cap rates went from six cap for office to This is a great one. I mean is it 10, 12 caps? Right? So Yeah. Something that was worth maybe 90 million dollars is now worth 45 million dollars.
Our tail end good luck getting a 45 million dollars you know because your debt service coverage ratio doesn't even get you to 1.2 at 45 million. Yeah.
Yeah.
So jeez.
Okay, so notes and stuff like that. Did you have you had experience with that cuz that's something that's quite interesting to me. Uh because again I wasn't in the business in 2008, 2009 when all this the great financial crisis happened. I know people made a boatload of money.
Yes.
How do you prepare and if I wanted if I'm an investor I say, "Hey, I want to get ready to buy some notes and 2008, 2009 this is my moment."
Yeah.
How do you prepare? What do you do? What are the steps to take to actually make that happen?
Uh there are funds that have been created specifically to, you know, kind of pursue these kinds of assets. Having cash available, if you're a private investor, have that cash available. Um have the resources with people who have or if not the direct relationships have connect with people who have those tentacles at these various banks. And often the regional banks, the small banks you may have never even heard of. Um and you know, try to build those relationships. Have the cash, build those relationships because I'm starting to see them. The other issue then is know your markets. The third thing, knowing your markets has to do with, you know, what is a deal? You can have your cash, be told that there's a deal and it's sitting you in the face and you're like, I don't know.
Is this like do I do this or do I not do this?
So also know your market, do your analysis. As these come, they're going to go quickly. Um so so that when you do see something, you'll be that person who knows that it's a deal. Whether it's knowing your market, knowing your asset type, knowing, you know, real estate is such a micro uh market-based industry, just be the expert in that niche. As you do you know this, you do this so well.
Of course. You have to have specific knowledge to be able to take advantage. There's too many smart people Yes, in this world for you to not to think you can beat right someone who's smarter than you, right? Or who's done more of that situation. So um I'm curious to know because again, having done this necessarily a bunch, are you getting the opportunities directly from the lenders? Did Are these going on the open market? Are they have to be a public auction? Like what is the actual details of it?
The reason that I say that it's a trickle, a lot of these are not hitting the market yet. What I'm seeing are kind of pre-marketed opportunities. They are also because they're pre-marketed, they're also par opportunities for the most part. So, you're not going to get you know, those And not sales. Yeah, you're not going to get things that are going to excite you. Um you're going to see a lender that maybe uh put a loan out at whatever amount and they're saying, "Okay, we need this off our balance sheet. We'll give it to you at par." Well, it's not worth a par and they're in denial. They want to you know, they want to just clean up from an from a regulatory standpoint on the balance sheet and we're looking at it from a real estate standpoint saying, "Good luck with that sale at par cuz it's worth you know,
maybe 75% of what you you lent on, right? So, uh those that's why it's a trickle for now and I think once that kind of gets more in mass and then it becomes a a national narrative about, you know, things that are happening then again, the supply and demand narrative is going to push the you know, there's going to be so much, you know, coming to market. People are going to then push the prices down cuz there aren't so many people who either have done note purchases or have the appetite to, you know, uh do you buy the note and then foreclose?
Do you work with the with the borrower?
You know, they have to get their kind of storyline straight, too, right? Uh do you want to be perceived as the a star wood, you know, lender who's, you know, lend to own? Are you going to be the guy who's going to like, you know, work with the with the borrower? Um and uh I know what I would do and everyone's going to figure out their own, you know, kind of uh approach and business model around that issue.
Do you So, I just saw a video that of President Trump um the current president saying that he thinks interest rates are going to come down and someone asked him, "Are you going to be" I forget exactly what it was, but like, "Do you think the Fed's going to listen to you?" And he jokingly or realistically said, "Yes." Um I'm curious to know if you think that interest rates are going to come down, if that makes sense, and if they do, what are the ramifications of that?
Two things. Thank you for um Okay. It doesn't make economic sense. Because the Federal Open Market Committee is a different entity, private entity, non-governmental, and the US government the president cannot tell the head of the Federal
the Jerome Powell.
Yes. And so and also they are also controlling, you know, treasury rates. So, it's it's a very different thing that what we use to, you know, now, you know, borrow against. You know, what's your index, right? Sure SOFR kind of tracks the treasuries. Um you know, you've got different indexes that will kind of trail, but I don't think number one, as much as I want to say that interest rates are going to go down, it's going to be driven by the markets. We're seeing the 10-year kind of dip a little bit. Shorter terms are still staying high. Um it's kind of cruising right around the, you know, at the end of the day if you're doing, let's say, agency debt financing for multi-family, you're going to be right around that six, six and a quarter percent you know, percent mark.
Everyone's waiting, you know, I I have I have It feels like we're watching two years. Yeah, everyone's waiting. Everyone's just waiting wanting to see that kind of dip. And um no one's been really see it seeing it seeing it meaningfully come back to, you know, kind of those um call it pre-2000 What are we in that? 22 numbers? Yeah, we're not we're not there. 25, Jesus. That's crazy. right? Um so, I don't think that we're going to see a low interest rate environment anytime soon. Certainly, you know, some of the other things that the federal government will be doing, you know, with tariffs
and What do you mean by low? Like, where do you think they set? Five and a half? Five?
I think that we're if we're talking about low, low's going to be five and a half. Low is five and a half. Low would be five and a half.
Interesting.
In my mind's eye. If you get anything in the fives, I think you're going to see a lot of people refinancing.
Yeah.
And locking in.
Yeah. Long-term 10-year money, correct? Interesting.
That's so So So you think that about that. All of those deals that sold for three and a half
caps or four Oh, yeah.
Trust me, I'm I'm I'm talking to them. I'm trying to get I'm saying like, "Hey, we got a lot We got some loans coming due, man. Like Are we able to get those tenants out? Right?
How's the NOI looking?" Right? Yeah. Because if you haven't, like, you're not feeling great. And go back to what we said earlier, you know, we've got regulatory issues. That NOI is not shifted maybe more than three, four, five percent over the last two, three years. Yeah. No. And that That I felt that way, too, for a while while.
And I was surprised that uh it wasn't as prevalent as maybe it seemed to be or I thought it was going to be. Um and I don't know if that was the banks kind of kicking the can down the road.
People were able to negotiate a little bit and banks were kicking the can.
And And you feel like they can't kick kick the can any further.
I think we're getting on the precipice of them saying, "Okay, we need to start, you know, getting rid of some of this stuff." There's going to be They're going to be just again maturity defaults. Some people are going to not be able to Yeah, do the capital call, you know, and they're going to be So some of some of the banks might work with the better operators and say, "Okay, we'll extend you to you know, do some financial engineering." Sure. Those will be probably more of the regionals. The big banks, forget about it. CMBS, forget about it. The CMBS, you know, debt that comes due, that's a whole wave of of pain. And notorious for you know, CMBS market's notorious for rigidity, right? Whatever the loan documents say is what they have to do, and that's what, you know, the special servicer is going to hold your feet
to at the end of the day. So you do have some cap well-capitalized CMBS borrowers, so maybe they'll be able to buy their notes back and, you know, execute, you know, some some unique innovative strategies for something that maybe is functionally obsolete. But um I think the majority of that market is going to come to market.
How do you get ahead of it as an investor? What what specifically do you do to say, "Okay, let's identify potentially some opportunities." Or can you get ahead of it? Like what what is your strategy?
Yeah, there are um there databases that track CMBS maturities. And so, you can get those database, you know, uh what is it?
RC RCA?
That's right. And so, from Cap Rate Analytics you can identify your market, you can identify your region, and they'll share with you whether they're performing or non-performing notes. Um and you know, that's certainly something that people have done. So, that's coming out of the 2008-2009 playbook.
That's that's probably I mean, it's information, right? So, there there's not this competitive nature or there's not a competitive advantage very much because that information's kind of public. Yeah. I always lean to relationships. Always.
That that is first.
That is the differentiation. Absolutely. And the more you've been in the business, the longer you've you've experienced what a relationship how strong that is, it just slid further solidifies in my brain of how important it is.
I can't stress that enough. And working with someone I think about this quite often. Working with someone that you like, that you trust, and you have faith in, those three elements are really the the differentiator. Mhm. Um as I said, you we almost have perfect information out in this digital age. Um everyone can find anything that they want out. But then, let's say you find something out. Who do you want to take that deal to, you know? Whether it's on the equity side or the debt side or the brokerage side, right?
Do you want to work with someone who's brain damaged? Or do you want to work with someone that you're like, "You know what?
I trust them. I know I'm going to give them the deal. He's going to do right by me. He's going to do everything. He's going to be He's up at 5:00 a.m. you know?" 4:35. 4:35, sorry. Um and point being that, you know, we're we we work with people that we trust and can really align with and so um that's that's your personal brand, right? And you're doing a great job with that by the way. And I think that that's really for a lot of my students they're trying to figure that out, right? And like how do I find my way? Um be smart, learn, right? And um I think that that's and and really when you know your craft well it shows. People want to When I first met you actually, I should tell you this. You know, you were really green. And you were with the senior. Mhm.
And just how you even how you dressed, how you introduced yourself, how you with confidence approached even though you didn't know a lot at that time.
know a lot of [bleep] man.
You didn't let it on. Yeah. Right? Um and so that though Yeah. is the secret sauce that a lot of people don't know. I'm giving you kudos to you. I I I'm giving you the love because you deserve it and you've you've been a success at what you do. Thank you. And you found a niche and you found that a lot of people can rely on you and can uh you know, benefit from your knowledge and you're doing a great job of sharing that knowledge now, too, right? So, that's that's beautiful.
And and that's actually something um I I'd love to get your opinion on this, too, because most of my job is is relationships.
It's really is.
It's knowledge gathering information knowledge and then disseminating it and to people that adds value to them. So, I'm constantly thinking about ways that I can either improve that, allow for more more detailed, more unique, pulling from different sources and and being able to share something with an owner, right? To build that relationship and give them value. Um what do you teach your students and I guess how would you go about if you were starting, how would you build your network from zero to being in a place where it is today or if you had to start over, what would be the steps you would do to actually build like a ironclad network?
It's a It's a great question. Uh as a young attorney, I wouldn't do any networking. It's just not the ethos that you think of as an attorney. Which is the biggest, I think, uh misstep that you can make. Real estate brokerage, quite different. That's all you're You're kind of taught to just socialize, right? Uh so, I think that that's one of the things. What I What I like to tell my students is I'll I'll step back and say that first thing is you need to understand the fundamentals on how to do a deal. I say this to my students, as well. You would be shocked how many attorneys come out of law school who do not understand how to do a deal. You think that, oh, he's an attorney, he's he's done a deal. When you come out of law school, you don't know how to do a deal.
Um a lot of my students, the way I teach my class, are taught the whole life cycle of a deal. And the idea is it's not like, okay, we're going to do an offer today, tomorrow we're going to do this. It's putting them in a in a kind of a uh life cycle of a real estate deal, so that they see all these nuances, but then they can step back and see how that deal kind of came to, you know, focus. And so, number one is to know the art of being able to do a deal. Number two is once you are confident at that, it is there in confidence. It's there in how you are able to communicate. So, then that is where you start, you know, when you're when you're socializing. Mhm. People again pick up on these little cues, social cues, business
cues, and that's where you will get these phone calls. Hey, Taylor, do you know anyone, even though it's not your, you know, uh your niche, do you know any single family residences in the power sites fire or alternative fires? And then you educate. It becomes an educational opportunity as well. Well, no, Joe, I don't. But also, you know, right now is early. Right now, the RE is not allowing us to solicit. So, you know, cool your [bleep] horses. Yeah.
Right? Yeah, 100%. No, it's um I obsess about this kind of stuff cuz it is so tied into my job and I love I love actually talking to college students or young people who are interested in in the brokerage business I just obsess over how to optimize what we do and it may go on deaf ears because with AI and everything where we're we're headed, I don't know what that's going to look like, but the one thing I do know is that relationships are still going to be very very strong and there's going to be this human element cuz we are humans that we want to experience something that is also inherently human.
Silly.
And so how do you build relationships through value? What can I do with my specific knowledge and um to give people something where it feels like this that there's there's I want that relationship, right? I see value in that. Not not just because they're nice to me or because they, you know, compliment me, but there's something that I get from that that I need I I want that to be around uh in my circle.
Well, you have you hit on something that's really, you know, unique also. You have aptitude. You have aptitude for socialization, communication, uh Some people have different Well, people have different aptitudes, right? Some people don't have that aptitude set, right? Some people might be [bleep] amazing at numbers. They're they don't want to talk to anyone. Mhm. That student and there's some students who are like that, there are some people in real estate that are like that. They are, you know, people that I love to work with because they're your Excel wizards, man. underwriting gurus. I I'll be able to say, "Look, I need this sources and uses to be broken down into X, Y, and Z and A, B, and C, and I need it to do this." And 5 minutes later, he's like, "Done." You know, and and they get off on the challenges there, right?
That's exciting to them. And so, it's knowing your aptitudes because you can be an engineer type and you can be a reformed child actor and do well in real estate. It's depending on,
you know, those skill sets that you kind of extract out of your, you know, kind of soul. Yeah. And then direct into where you fit well within that life cycle of of a deal.
Well, you know so well because you've talked and been in the business for a long time with many brokers. There's a million and one different personalities when it comes to brokers. And brokers talk, too, and we're like, "Man, that guy is strange, but he sure does a lot of deals, Oh, yeah.
right?"
And you're like, "It's because there's this specific thing about him that is better in whatever that is than a lot of other people, and other investors in home and apartment owners recognize that, and there's value that they're getting from that, right?" So, I agree with you completely. If you can identify your strengths and then support your weaknesses through people and partnerships and things like that, that is going to be giving you the best chance to succeed in the business that is very much a meritocracy.
Let me ask you a question.
Did you have a mentor?
Yes. That is also a differentiator. Yeah, huge, huge.
So, I I would not be here without my mentor.
Yeah, absolutely. A A And that is something that is important, I think, if you're starting out. I think for even, you know, seasoned professionals to have a cohort, at least, that you I still crave that. Yeah. I still crave running stuff by someone and being like, "Hey, am I thinking about this the right way?" Absolutely. And that's one of the things that's really, really important about real estate. You can't do deals as a lone wolf. Think about all the elements that come together in a deal. You've got You've got the other side. You've got yourself having to think about the deal metrics. You have to think about the the debt, the equity. You have to think about the demographic you're going into. Think about the asset type you're buying. So, these are all like decision nodes. There are like 5,000 decision nodes before you even put your first offer out.
And you're doing it all within your head. Mhm. You need to have someone to, you know, um who's got your back, who's got your best interests, um to be able to share that information
with. That's a big fallacy that I've experienced personally myself and that I see in other people is this lone wolf mentality of I'm going to figure it out and there's almost a little bit of um because we're commission-based, too, there's a level of greed and understanding how you get paid, right? Because every person you bring in to a deal, effectively, you're making less money.
Right. It's it's almost competitive. Right? It's a competitive How many is that?
What's the least amount of resources I need to put in to get the most out? Correct. And I've seen that go bad so many times because there's this level of not understanding that just you know, some of a a little bit of something is better than Correct. zero of a million.
of a million. Yeah.
100%.
Right.
Um and so I think that that can can be a trap for a lot of people who haven't experienced what it's like. And personally, too, like we're all human. I want to be able to go on vacation for 2 weeks and not have to worry about my email 100% and respond to these things because I just saw another um video about basically, what they did was uh they would call up former clients and ask them like, "Hey, what do you like about my services?" And they would tell them, "Oh, I you respond really quickly." And what the guy was saying was that that of what they said they like about you, that's what they value in in you, right? And so, he was like, "Perfect. What I know that they value in me, if I can improve that, then that will deepen the value that they perceive from me."
Yeah.
And so, it's so interesting to be able to identify what other people value in you, so that you can go and say, "Okay, how can I improve on that which they seem to be That is relating with. Yeah, cuz if you don't know what they seem If you thought it was because you were, you know, charming or handsome or, you know, you always call them and gave them some some comp or something like that, but really they like that you responded to their emails. Well, then just respond to their emails quicker or faster or more.
Right.
You know that's what they really care about and to focus on. And I love finding those little nuggets, right? Cuz we have so many open loops Right. all the time. You have open loops in your professional career and your professorial career. And your personal life.
There's all these open loops That's right.
that if you don't close or find ways to make them actually happen, it can drive you crazy.
Oh, and look, and it's it's so easy to let something just go latent, right? And you're just kind of like doing this thing on the right. And then maybe you're like, "Oh, let me circle back with you later." Yeah. And so, Story of my life. Get You're fragmented, right? You're You're too many things going on. So, um it's it's having the principle, having routine. That's what we talk about.
Yeah.
You know, routine is so important because, you know, you're checking off those things. You're you're keeping track. You're keeping metrics. Um Like you're you know, and that's by the way why I love working or hiring um former athletes like yourself. Yeah. You know, I mean, we need to talk talk about you cuz kudos to you for that as well. You know, baseball player and you know, being, you know, uh you were All-American, right? Uh in high school high school all the way in high school. Yeah. Right. So, it like when you deal with someone who's been in a team environment, they understand it on a different level. Yeah. It's uh no different. Yeah.
It's um I want to hop into the principal and like the real estate side of what you're doing right now. We're talking about adaptive reuse, but talk to me a little bit about what you're doing on the real estate side of things, what the day job
is. Yeah.
Yeah. And you know, give me the scenario.
Over the years I've been involved with various family offices. I'm running right now a high net worth family office um in Beverly Hills and uh we're about a billion dollars of assets under management. Uh assets that are class A locations. Sure. Assets that a lot of people would recognize if I were to list them
off. Have they owned them for a what very long time?
Um yes, most of them in in the portfolio for over 20 years. So, we're going through um issues that we deal with in the family Yeah. What What do you Yeah.
What is it?
That's a great Um the issues that a family office I'm running typically deal with are There's one thing is the real estate just organically speaking. The real estate is obviously the um uh the end all and be all, but then, you know, family office environment requires a lot of patience because you overlay on top of that family dynamics, uh intergenerational dynamics, uh partnership dynamics with their joint ventures or, you know, kind of individual investors who've kind of come in and bolted onto the family office and investing on an LP basis. And so, that requires a lot of uh maneuvering and it requires a lot of uh decision-making that sometimes isn't just based off of the real estate's needs, if that makes sense. Got it. Um so, it is a environment that requires creativity often. It requires uh patience,
always. And um it you know, we have uh now because we've got intergenerational issues, uh we are looking at you know, repositioning some of the assets and maybe exiting some of the assets. Um and you know, what what do we re-harvest that you know, capital
into as we 1031 exchange out? And is that coming from the matriarch or patriarch or is that coming from the next generation who is young, hungry, and wants to go and grow the portfolio or diversify, and you know, there maybe it's been the baton has been passed down.
Yeah.
And again, I know it's different for each scenario.
It it is. It So, some are very hierarchical family office ones where you've got the patriarch who's, you know, the Godfather. Um the environment that I navigate through right now is a it's it's a quite a a level, you know, environment. We have uh uh often, you know, input. And one of the things I've been brought in is as a non-family member is to bring more institutional experience and more kind of a a broad-based, you know, sense of uh of understanding of real estate, the law, the markets, and uh give advice. So, what I do is I'm a I'm a consigliere. I'm sitting there and, you know, listening, giving advice, telling them what I would do in their circumstances, bringing up issues for them to think about uh financially,
from a tax standpoint, from a intergenerational standpoint. You know, I see the family as my kind of constituents, right? How do I get assets from the one generation to the next, and how do we keep growing the portfolio for the benefit of the third generation down the line? For sure.
Yeah, so it's a lot of strategy. A lot of managing on a daily Move this lever, pull this here, do this, right? And so, wow, that's a that's that could be very intense, too, because it's great to have have all this stuff, but all that stuff can go
away, you Oh, yeah. You don't get to take it with you. Newsflash, yeah. If you pass away, your real estate's Yeah, it's not coming. Yeah, it's not coming, right? Peter Pan tried that, it didn't go well.
Yeah, no, I know, right? Now they're just buried underneath and it That's that's so interesting the dynamics, and I've never I've always known, obviously, the family offices that we call and they have different deal metrics, right? So, you What I What I What's very unique about the different ICPs or the different personalities of the types of investors in real estate. You have the mom-and-pop investors, you have the syndicators, you have the family office, and you have the institutional. That's kind of the four buckets that I put Peter Lynch into, right?
Right, very well done. And you know deals that will fit each
individual person or each individual bucket of people because of either the location That's right. where
a syndicator's not going to buy a three cap, even if it's in Beverly Hills, right? Just because it they can't they can't sit on it for 10 years and make it work out, but a family office can buy
a property Their time horizon's infinity. And you know, in the long run, everything makes sense. Yeah. So, we we tend to go for very well-located assets. Now, we we won't necessarily in this market buy a three cap. I'm sure I'm being a little facetious, but you know, we Yeah, we we can go into things that are better located, more sexy, if you will, yeah. Then, you know, if when I'm out in my syndicator life, there's no way I'd do any deals in Beverly Hills.
Yeah.
Yeah, the the returns doesn't make sense. 10 caps don't exist. Yeah, they really don't. Unless you buy the Louis Vuitton building and then flip it to Louis Vuitton the next day, then that would be a pretty good deal. Yeah, that's also some inside Yeah, exactly.
The inside like information, right? Is this business is still one of who has the most information, who can can take take of And it's legal.
We're not talking about the Securities and Exchange Commission, you know, we're talking about, you know, getting a competitive advantage in a in a way that you can actually trade on
it. Yeah, completely. Um before we wrap up, Joseph, I want to talk about what's next for you, um what you're excited about, and obviously dealing with a lot of this stuff, like how do you see the next 12, 24 months looking like for you specifically?
Oh, gosh. Um I think the next 24 months we are going to go through It's funny, I said 2025 is the year of the upgrade. Mhm. Um I think that we're going to um find ourselves getting into new asset types. We're going to be uh changing out of some of the assets that we've had, you know, legacy assets for, you know, decades. Um I think we're going to be getting into some uh uh new deals um in new markets that we've not been involved with. And Uh so, that's exciting, you know, going to to new markets and you know, that ramp up in in terms of learning curve is is always fun for me personally. Um and there's going to be a lot of rebuilding, you know, we're uh from a personal standpoint, we're going to see, I think, the palaces going back to the fires in
the you know, Malibu, where it's an upgrade in terms of that as well, you know, homes are going to be upgraded, they're going to be better than they were before. Uh Palisades, you know, downtown Palisades is obliterated. Well, the upside is we're going to get new grocery stores, new coffee shops, new banks. So, um there are always silver linings. There's always the green, you know, sprouts that come up after the ash and all the burnouts. So, I look forward to looking at the hills that have all been burned and seeing green and and seeing green grass and and beauty, you know, again return to our to our beautiful communities.
That's beautiful. Joseph, thank you for coming on.
Thank you for having me. Of course, that's fun.