Episode 1: Leverage Your Network and Create a $400 Million Portfolio

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Transcript

[Intro] Welcome to the multifamily millionaire podcast. The show that interviews multimillionaire real estate investors and top producers in the real estate industry.

If you’re looking to create passive income and achieve financial freedom so that you can do what you want whenever you want, you’re in the right place. Our goal is to simplify and make real estate investing easy for you. For more information, you can find us at www.jlm.realestate.

Jason Lee: All right, everyone. Welcome back to the multifamily millionaire. Today I’m joined with Brian Adams. He is the CEO and president of Excelsior capital, and I’m stoked to have him on today. Brian, how you doing?

Brian Adams: I’m doing well, Jason, thanks for having me.

Jason Lee: Yeah. Thanks for coming.

To start, would you mind just starting with a brief background of your story and what you do today and who you are in general?

Brian Adams: Happy to. So I’m a New Yorker who married a Nashville girl. My wife and I met in college up in Connecticut. We did the Northeast thing for a little bit. I went to law school in Boston, moved back here 15 years ago.

I practiced law for a number of years and my wife’s family has a single family office based here in middle Tennessee. And because of that relationship, I got exposure to the investment managers and GPs and sponsors that we were investing with both in private equity, venture capital and commercial real estate.

I became enamored with real estate as an industry and as an asset class, connected with my business partner, who is also New Yorker who married a Nashville girl. And we started our company 11 years ago now.

And I’m sure we’ll get into the details, but today we have 15 employees, about $400 million portfolio and manage about 2.7 million square feet across 14 markets.

 

Jason Lee: Wow. Regarding your company. Why did you end up picking real estate instead of going into a different asset class or different investment type? Why did real estate appeal to you the most out of, you know, all the different things you were immersed around from your previous experience?

Brian Adams: It’s a great question. I went to, I had the fortune of being invited to a class taught by adjunct professor Michael Bertram at Vanderbilt business school.

And so I was part of this men’s networking organization and we got the ability to sign up for an abridged version of his business school class, which was called launching the venture. And it was all about going from an idea to a company. And he had had three successful exits in the healthcare business and just an incredible guy. And I remember the first day of class, he sat us all down.

We’re all, you know, 25 year old guys try to take over the world. And he said, you know how many people are here to try to get rich? And so we all, we raise our hands and say, yeah like, hell yeah, let’s do this. And he goes, okay, like, let’s take a minute here. He puts the slide up of the Forbes 400. And he said, if you take away all the people were on this list because of marriage or because of inheritance, you’re really left with people that made money in three buckets, one, they grinded their way up the corporate ladder, right? Stock shares, options, eventually building up that equity over a long period of time into a C-suite level position.

Two had a great idea in a garage that ended up going bananas. So think Google, Apple, Microsoft, you know, tech, etc., three real assets, oil, gas, commodities, timber, real estate, etc., that’s it. And so I said, damn that’s probably the smartest thing I ever heard in my life. And so I kind of reflected on that for a while. And I said, well, I don’t really want to do the corporate grind thing. That seems like a ton of work and not a lot of fun. And I don’t have some great ideas that’s going to change the world, unfortunately.

So I started having coffee with a bunch of real estate people and realized pretty quickly, man, if I just hustle and am smarter than the average bear, this is such an inefficient market that I think I can carve out a nice little niche for myself and have a business. And here we are.

 

Jason Lee: Sounds like from that important lesson real estate was the least path of resistance to you in your mind.

So you said it would go with that route because I mean credit to Steve jobs and those guys, but building a crazy business out of your garage and tech is pretty tough. That’s a tough path to go down.

Brian Adams: I don’t disagree. I mean, I think it’s really a function of your personality. I had a skill set within the legal world that afforded me a little bit of insight into real estate transactions and corporate law. And I’ve now morphed into really just a marketing salesperson.

But at the start it was kind of obviously wearing all the hats and it just seemed like real estate was consistently a great way to create value for investors and wealth for myself. And it’s been a fun ride.

Jason Lee: Yeah, I bet. And yes, real estate is the easier out of those commodities or companies to get into. But obviously when you’re first starting, it’s really hard.

How did you kind of get started in the business and how you grow to where you could, you know, build credibility, and become a thought leader in the space?

Brian Adams: Sure. I’ll be very straightforward here. I am a decent looking white guy that went to great schools and married into an affluent family. So just a huge amount of privilege off the bat. And that afforded me, I think the opportunity to walk through a lot of doors that other people might not be able to walk through. I still had to step through those doors and do the follow-up, but that was the start, right?

I didn’t know what the hell a family office was until I married my wife and I didn’t really fully understand what private equity was until I started getting exposure to the investments we were making. And so it was really because of those relationships that I had the fortune and the luck of having that allowed me to begin the business. And I think a lot of people because of my family and because of who I am, what I look like, they assume I know what I’m talking about and I could get most meetings that I wanted.

And so I remember my father-in-law when I started the business, invested a hundred thousand dollars, and made two introductions for me. And he said, listen, you can tell everybody in town that I’m investing with you, you drop my name, etc. I’ll make two intros for you. And then you’re on your own. And I thought, man, that’s pretty disappointing. He could do a lot more, frankly. I was a little underwhelmed by that, which looking back was prudish of me, but that’s what I thought at the time.

But in retrospect it was the best thing he ever could have done because having to grind out those coffee meetings to figure out how to sell, figure out how to network, figure out how to find deals, raise capital the hard way is given to me a skillset that I have with me for the rest of my life.

Jason Lee: That’s a great answer. I work with a lot of syndicators and money managers like yourself. And I think the first obstacle they have is raising that first dollar and also finding that first deal, right?

Because once you make a few investors deals, they tell their friends, they tell their family to tell their networks. So it’s much easier to network and raise more money.

Is that kind of what happened with you after you met those two people that your, was it your dad that introduced you or your wife’s dad?

Brian Adams: My father-in-law.

Jason Lee: Your father-in-law. So after your father-in-law introduced them to you, those two guys and you worked with them, did they like tell their friends and help you raise more money that way? Or did you have to still kind of cold call people and reach out to your network in that area?

Brian Adams: It was mostly cold calling and getting a lot of nos. A lot of no’s, I started using the Northwestern mutual model of 1031. So I tried to have 10 phone calls a day, three meetings a day that would eventually lead to one investor. And I wouldn’t leave the office on Friday until I had those meetings and calls set up for the next week. And it was brutal, but it did work. A big mistake I’ve made early in my career and I have a presentation about this it’s on YouTube or on their website, but it’s how to raise capital as a first-time entrepreneur.

Oftentimes, and I know I was guilty of this entrepreneurs lead with their ego, and when they pitch, they use the word I all the time, right? Like I went to these great schools, I have this history, I have this background, I have this experience and I found this shiny, beautiful deal. And you need to invest in it because it’s going to be awesome. And not once in that pitch, does it talk about the investor. And so what I did the wrong way for many years was lead with the ego. And now I have a very empathetic approach to capital raising, where I go to my network, my logical network, and it’s different for every other person.

That’s a relative based on who you are and the network and the community that you exist in. And I ask them what they want, what their problems are. And instead of bringing them a shiny object that I think is beautiful, I bring them a solution set to their problems and their issues. And it’s a much smoother, better way to do this. And you can fashion your product to fit the needs in your community. And it just make things go a lot kind of more efficiently, both in your time and your efforts. And so that’s how I approach it today. It certainly wasn’t how I did it initially.

Jason Lee: That’s gold. So if you have a certain deal or opportunity that works for certain investors, you kind of pitch it in a way that it kind of solves their problem. Depending on what kind of investor they are.

Brian Adams: Yeah. I mean, initially I would find an opportunity and I would say, oh, this is this great urban infill deep value add deal in Nashville. It’s going to be awesome. You need to do this. And that works right. If you have enough prospects and you pound the pavement hard enough, you will probably raise maybe, maybe not. I think the biggest fallacy in our businesses that you’ll raise on a good deal, no matter what, I think that’s garbage. It’s not true. So instead, what I did was I went to my high net worth individuals and families, and I said, don’t worry about me and what I might pitch you. I’m not going to pitch you. I want to buy you lunch and ask you questions.

And so I started asking them questions, you know, what would the ideal real estate investment opportunity look like for you? How much would you invest realistically? What would you want the return expectations to be? What would you want the investor experience to look like? What would you want the reporting to look like? How often would you want to hear from me? How often would you want checks? Would you want checks or ACH, would you want asset management commentary? Would you want property level commentary, market commentary, everything like there was no detail too small. And so then you do that right with a hundred people and you start from your most affluent best prospect and you work your way down to your least affluent, most unlikely prospect, a hundred to one. And if you do it, you can probably do it in 30 or 60 days.

And so then you go and you find the product offering, the solution set that meets the needs and solves the problems of that community that you have. When you pitch, you go from the bottom to the top and you start at the bottom because you’re going to get a lot of questions and feedback that you’re not going to know the answers to. And you don’t want to go to your best prospects until you’ve got your pitch down really cold. And so then you work your way back up the ladder. And so hopefully by 75, through a 100, you know, you’re able to raise on that deal because you’re saying, Hey, listen, this isn’t so much a pitch as I think I can solve some of the problems that you have. I think this is a deal that will fit your needs and meet your needs. And so let’s talk about it and you’ve kind of already pre marketed. You’ve pre-sold it. And it’s just a conversation that’s the continuation of the relationship, as opposed you hard pitching them.

Jason Lee: It’s an amazing answer. I’ve never had someone explain it that way, but it’s definitely a golden nugget. I’m sure it’s a strategy that’s worked great for you. And I’m sure you still use it today. Switching gears a little bit. Can you just take me through your first investment deal, where you had to raise the money and buy your first opportunity, how that went, the mistakes you made, what you learned from it?

Brian Adams: We don’t have enough time for the mistakes. I initially was raising funds, right? So a fund versus syndication, the best way to explain it is a fund is where you raise the capital. Then you go find the deals. A syndication is where you find the deals, Then you go raise the capital. We are raising funds because if we didn’t know what we were doing, but it’s what we were doing. And so we had raised a couple hundred thousand dollars and we invested, we bought an office property and music row in Nashville in 2010.

And it was pretty hairy, man. I mean, we barely had enough equity to do the deal. We signed personal guarantees. It was a small little property, you know, cashflow decently, but the tenants were awful. We were managing the asset. We were doing the property management. I was doing the leasing cause I’ve my leasing broker license. And we ended up having a great outcome there. It got bought by this group that was doing this development as part of this assemblage that it was a very nice return, but it was a journey for sure. It was a lot of work.

Jason Lee: And how did you find that deal?

Brian Adams: Through a brokerage connection, a buddy of a friend knew that the owner would sell and, you know, we looked forever probably for a year and we finally found this deal that kind of fit what we could manage. And we were able to get it over the finish line.

Jason Lee: That’s awesome. And fast-forward today are you still finding most of your deals through brokers or do you have a team that, kind of an acquisitions team that manages your holdings? How do you find deals now?

Brian Adams: Yeah, so just like our empathetic approach to capital raising a big mistake I see people make is thinking that because you are in my seat, that you’re on the buy-side and it couldn’t be farther from the truth. We are on the sell side, we’re selling ourselves to our investors and we’re selling ourselves to owners, right? We are a liquidity solution for them. And so we have an acquisitions team who for the most part, spends their day talking to brokers about college basketball and college football, building those relationships, chatting them up, telling them that, you know, we have access to capital that we won’t retrade them, that we have a brand, that we have a reputation who we are, what we do.

And the fact pattern we see, or the strategy we use oftentimes is these are sub $10 million acquisitions. So they are smaller deals. Leasing brokers typically have the relationship with the ownership group and the capital markets investment salesperson will not get involved in the new deal under $25 million. So the leading broker knows when the seller is thinking about selling, right?

Because he’ll say,

“Hey, let’s get this thing full or let’s leave some meat in the bone for a value add buyer.”

And we’ll go to leasing broker and we’ll say, “Listen, if you give us a 30 day look in advance of this process that you’re going to go to market and sell. If we end up doing the deal, we’ll keep you on for the leasing work.”

And typically leasing brokers make 80% of the revenue from leasing commission and 20% from sales. And that’s been a great strategy for us. It’s led us to have a lot of off-market looks, lot of early looks and given us inside track and a lot of deals. And so it’s not rocket science, but that’s how we typically source our opportunities.

Jason Lee: Wow. Just going back to your point about not re-trading and performing, being a broker myself, I definitely do not call the investors back first, who either sent a major retrade.

A retrade is basically for those who don’t know is when a buyer’s in escrow and they say they find things they didn’t know about an escrow. And then they end up coming for a huge price cut or a haircut they call it an escrow and then the buyer and seller has have to negotiate and it becomes a whole mess. So it just makes the broker’s life much harder. And I love how you said that you don’t retrain people because when you don’t do that, it makes a broker’s life much easier. So the next deal they find they’re going to want to call you back first. Did I say that right?

Brian Adams: Oh yeah. A hundred percent. I mean, oftentimes what we’ll say is, listen, we’re not going to win a beauty contest. And in real estate, a beauty contest is a seller who goes with highest price, no matter who the buyer is. And so for us, we will say, listen, like this is the price we think is fair. This is what our investors are going to expect out of this deal. And we’re probably not going to be highest price, but we’ll be very efficient. We’ll close in a hundred days.

We’re not going to change the price up on you, just because we have that leverage and authority and ability after we’ve gone hard for the money, unless we find something that’s legitimate and diligence, and then we’ll have a conversation and work it out and make sure everything gets taken care of. We always pay fees in a timely manner.

And we take care of our brokers relationships because they’re the ones who have, you know, ultimately allow us to find deal flow and products. So yeah, I mean, I don’t understand this New York mentality of taking a 5% or a 10% haircut just because you can, it’s very short term minded. And ultimately it would just lead for you to have bad deal flow.

Jason Lee: Yeah. If you retrade someone, you get a really good deal. You might make some more money on that deal that you initially thought of, but you’re going to lose money in the long run because that broker, that deal with you probably is going to call you back. It’s all good stuff. And one question I have for you, Brian was, do you have a favorite commercial real estate asset class multi-family retail industrial, or do you just look at all asset classes the same and whatever returns to the best? You know, that’s what you’ll go with.

Brian Adams: I am agnostic. So kind of to my earlier conversation about what my pitch used to be and how it used to raise capital. Now, our pitch is really simplistic. We do three things, provide access, direct co investment, double digit cash on cash yield, tax benefits that come from direct real estate ownership. Everyone on my team can tell that to somebody at a cocktail party on a plane, on a bus, on a call, it’s one sentence. And it’s all about the problems that our investor network has, which are high net worth individuals, family offices, and boutique wealth management firms who serve those people.

So for us, when we think about product type, when we think about location, it’s all about the best risk return that can check all those boxes that I listed off. And so for us, what I like about being a fundless sponsors, we can go where we see opportunity. We’re not dialed in and beholden to a geographic location or to a product type that’s in a PPM [18:01 inaudible] with a 10 year lockup. We can do an office deal. We can do industrial, we can do flex, we can do medical, we can do retail and we can go to Southeast Midwest, etcetera. That’s who we are, what we do and how we think about that.

Jason Lee: Got it. But is there a specific asset class that has worked best for you and your 11 year career?

Brian Adams: I mean, I love flex. I love flex. I mean, it’s triple net leasing, which is great from an asset management standpoint. There’s no cam, right. Which is just wonderful. Those buildings might not be the best looking things in the world, but they stay full. They’re an efficient, both from a cost and usability standpoint from tenants, it’s kind of like liquor stores. They do great and good times and do great and bad times. They can be a great price option for people that want to get out of a traditional office building. But when they get a distribution center, when the e-commerce is picking up, they need that backend. I call it the mullet of commercial real estate because it’s kind of office retail business in front and then industrial distribution in the back. And you can put a medical user there. You can have an office user in there. You can put a retail user in there. Right now, I think those are great opportunities and maybe a little bit hard to find, but they’ve always performed in my opinion.

Jason Lee: Yeah. That’s a great answer. And you also told me before we kind of hop on the call here was you’re in 14 different markets right now. What are your top three favorite submarkets that you’ve been targeting the last, I don’t know, three to five years?

Brian Adams: Kansas city. We’re very bullish on. And then I would say, you know, a pretty stock answer. That’s not going to wow anybody here, Texas, Tennessee, and Florida. Sunbelt markets with no state income tax that are experienced huge demographic growth and population increases. I think they’re great places to be.

Jason Lee: And is population and demographic increases the number one factor you look at when you’re looking at whether this is a good market to be in or to not to be in.

Brian Adams: Yeah. We look at job growth, wage growth, population growth, and we’d like to see underlying economic drivers and industries that are counter cyclical. So the eds and med story, healthcare, education, government services, obviously increasingly technology and STEM. Those are all things that we like to see driving that growth, but those are kind of the top down metrics that we track.

Jason Lee: Got it. That’s awesome. And what tools do you use to track those metrics for someone that might have no idea where to check those?

Brian Adams: Yeah, I mean all the big firms now have access to these things. So costar, CVRE, JLL, Cushman, they all, you know, track these types of statistics and they provide them in their, you know, monthly, annual, and quarterly reporting.

Jason Lee: And are you still bullish and actively buying deals looking at deals right now? Or are you kind of taking a little bit of a backseat? Cause I know a lot of my investors, I work with think the market’s too hot or too high. What’s kind of your thoughts in the current market right now?

Brian Adams: Extremely bullish. We have acquired four deals so far this year. We’re under contract on two more and I’m actively looking for more. I think if you take a step back and think about where the economy is and where the best risk adjusted return is commercial real estate in America is probably the best place to be. It’s consistently grown 2% to 3% over the last a hundred years in terms of valuation, debt is so cheap that you can still achieve nice healthy yields. And if you look at it from a tax perspective, you know, people always talk about don’t fight the fed, but I say, don’t fight the IRS. The tax code is a set of incentives and disincentives to encourage or discourage certain behavior. And if you look at it, it is trying to get you to be married, have children, own your own home, and invest in commercial real estate. And so you should do those things if you’re concerned about taxes.

 

Jason Lee: And that’s a great answer. And how has commercial real estate personally benefited you and your investors? Like how does that depreciation process work to where because many people don’t know this, right? It’s a very unknown thing. How has those tax benefits helped you and how much has it helped you in the past decade?

Brian Adams: Sure. So we only work with accredited, but non-institutional investors. And what that means is an institutional investor in our world is a non-taxable entity. So think of a pension plan or an endowment or a large international institutional group, like an insurance company, etc. Those groups are great investors, but in my opinion, and experience, it is very hard to mix them in with taxable investors because GPs and sponsors will oftentimes make tax inefficient Decision-Making based on the fact that their anchor investors are those non-taxable burbs, right? So for us, especially this last year, think about this. If you invest in one of our opportunities and you had the last 12 months, your market position, right, your stock market portfolio is up anywhere from 10 to 20%. Meanwhile, you’re getting a 10 to 12% cash on cash yield and one of our deals, and I’m showing you a loss on your K one, that you can then offset those gains in your public market exposure. It’s just incredibly powerful for a taxable high net worth individual or family.

Jason Lee: To piggyback on top of that, would you mind explaining what a K one is?

Brian Adams: So, okay so to answer your question, accelerated depreciation and cost segregation analysis basically mean that these hard assets, so let’s take a flex building, a third-party engineering firm will go through that building and they will sign a value to everything that’s a fixture. A fixture is defined as something that will cause damage if it’s removed. So think of a screw, a wall joint, floorboards, steel beams, anything, right? Typically you can depreciate those assets over a 20 or 30 year period. Instead under the Trump tax act, you can accelerate that depreciation and you can do it in one or two or three years. And so you can take all those losses and instead of amortizing them over a long period of time, you bring them forward into a short period of time. What that does is even though the asset is performing and distributing cash, your K one, which is the, your tax return that you get by investing into an LLC, which is a pass through entity. When you get that K one, even though you’ve made money on the investment, you’re showing on a tax adjusted basis, a loss, and then you can use that loss, that tax loss to offset tax gains that you might’ve experienced elsewhere in your portfolio. So for a taxable investor, like an individual or a family, it’s just an incredibly powerful tool that if your sponsor GP is not doing, I don’t understand how you, you need to call them up.

Jason Lee: You shouldn’t be working with them.

Brian Adams: I mean, I don’t talk about other sponsors, but I mean, it’s an excusable.

Jason Lee: Yeah. I feel like when that article came out about how Donald Trump paid zero taxes, you just explained how he paid no taxes, all these very affluent, rich families who own commercial real estate don’t pay capital gains taxes, all that. Well, they pay capital gains tax, but they don’t pay like wage taxes because the K one offsets what they make with their stocks make, what the commercial real estate income brings in cashflow wise.

Brian Adams: I’m not going to get political here. But my wife, when that article came out was, you know, throwing her arms up in the air. And I said, honey, we take advantage of the same exact things. So does every other real estate investor that I know, all these doing is just what’s allowable in the tax code. He might have more zeros than I do for sure. But I mean, fundamentally it’s the same.

Jason Lee: Exactly. And the next question I want to ask you, Brian was when you were first starting your company, you obviously started at the bottom of the market 2010. What were some things you were seeing back then compared to what’s changed now in the last 10 years of growing your business and investing in real estate The past decade?

Brian Adams: Oh God, I wish I’d bought more real estate in Nashville. Yeah, I mean, there’s so many differences, even though it’s only been 10 years, a big one would just be this proliferation of syndicators. I mean, when I first started in the business, it took me a couple of years to figure out what a fund was. And they didn’t even really understand what a syndicator was and my investors didn’t even know what it was either. And now you go on LinkedIn, I feel like everybody is a multi-family syndicator. And you know, this advent of retail investors being able to access these private deals has become mainstream. It’s become de rigueur and normalized. But before it was still fairly exotic.

And the purview of only a small select group of people, which I think is for the better frankly, what that’s caused though, is price increasing and cap rate compression. And the biggest problem that I see today that I think a lot of people don’t appreciate is on the institutional side, those big groups that I was talking about before that dynamic that’s really troubling is if you’re a German insurance company, by law you have to invest part of your allocation into German bonds. Those bonds are yielding a negative return. So part of your portfolio is yielding 200 negative basis points annually. For that group doing a three cap deal in Dallas or Austin on a relative basis makes a ton of sense, right? And so when you have that dynamic playing out, it just means that those, and they’re doing huge deals obviously, right? But that cap rate compression bleeds through the entire ecosystem. And now where I may have been focused on $20 million deals, I’m not doing sub $10 million deals because that’s where I have to find value.

I don’t see that trend going away anytime soon. And the other thing that people need to realize is because the market is such a public markets have such a run-up right? Stock positions are so much higher. When these groups do their annual review, they actually are now really under allocated to private equity in the commercial real estate. So they’re going to have to deploy more capital to that space because relative to their position in the stock market, they’re under allocated. And so you’re going to see huge war chest of private equity funds raising record amounts of money because they know that these groups need to put that money to work, to achieve their long term return profiles. And so I think there’s just going to be more and more liquidity put into the system.

Jason Lee: Yeah, that’s a fantastic answer. I think there’s so much capital on the sidelines and I hear all these mom and pop investors. They’re very angry about the current cap rates, because like you said, these big institutions, these big companies who need a park money, they’re getting a negative return on bonds is like you said, a three cap, a four cap looks great. But to people like you and me, not so good. But for those of you that don’t know what a cap rate is, it’s basically the property’s net operating income divided by the purchase price. Basically the layman’s terms is if you buy the property, all cash, it’s the cap rates your return.

So you buy a property for a million dollars, you get a 3% return, you’re making 30,000 a year. But to answer the next question, Brian if you were talking to a friend who’s never bought real estate before they had no idea what it was or what it consisted of, and they asked you, how do I get started? What’s the advice you’d give them.

Brian Adams: So the flip side of this doom and gloom conversation, we just have the last 10 minutes is that what’s really cool is because of podcasts like yours and LinkedIn and blogs and YouTube and webinars. You can educate yourself for very little costs, If you just take time and you can become an expert in multifamily investing commercial real estate, investing, flex, industrial, whatever, over the course of a few months. Because people like me, you know, we just give away everything we know in order to educate the population in the hopes that they become investors, right? So it’s a really cool time to become investors. And now with crowdfunding and syndication models and people like me and social media, you can actually get my deals because you can hear me on a podcast from somebody in San Diego.

And then you can look me up on LinkedIn, go to the website here, me in a podcast. And next thing you know, you’re on my distribution list. So that’s a really cool part is you can educate yourself. And I would encourage people if you really want to be in the space, like spend the time, follow these people on LinkedIn, sign up for the distribution lists, because all the content is free. It’s all out there. And then when you actually start investing, start with what you know, right. I mean, there’s a reason sponsors start with single family homes, multi-family quadplex rentals. And then they move into the more esoteric product types. But you know, if you live in an apartment building and you know, the area that you live in, try to look for some small deals in your backyard, right. You know, where the developments are happening, you know what the school districts are good or what ones aren’t, you know, the good blocks to live on and you don’t necessarily need to do it all yourself, but start with what, you know, spread it around. Get a feel, make an allocation. I tell people, you know, if you have a dollar of liquidity, say this year, I’m going to put 10 cents to work and I’m going to split it up into a penny and 10 different deals.

And, you know, see what you like, see what you don’t like, understand what your risk profile is. Once you do development deal and it goes bust, or you do a really core deal and is boring, go somewhere in the middle. I mean, make that allocation. Don’t try to pick the winners, spread it around, get a feel and start with what you know.

Jason Lee: That is a great answer. I think what you said about knowing your backyard. I think starting in the market where you live in the best, because if you grew up there, if you’ve been there for the last five, six years, you know, street by street, like multifamily, what I focus in is street by street, right? Block by block, it’s much different. You might cross one side of the road and the market might be totally different.

So that’s a great answer. Now on the flip side, what’s the biggest mistake you made in your real estate career and how did you learn and grow from that mistake?

Brian Adams: Well, we don’t have enough time to go through the mistakes. But I’ll highlight some big ones. And this goes back to investor questions. I think oftentimes people in my business, if you’re a fundless sponsor, you want to be a syndicator, general partner. You don’t appreciate necessarily day one the fact that you’re going to be investing in these deals and the deals need to work and need to make sense, but you’re also now a small business owner, right? You’ve got to deal with marketing, sales, HR, accounting, tax bookkeeping, all these things that don’t really have to do anything with the deal itself. But unless you have the infrastructure surrounding the deals you ultimately will fail.

And that was a big mistake I made early on in my career was I didn’t put enough time and resources and energy into that infrastructure and understanding the investor experience and everything that went into being in the investment space. And so there are two separate risks and I think oftentimes investors, they only ask questions about the deal.

They don’t ask questions about the infrastructure, right? How many people are you on staff? How often can I expect reporting? What’s the investor experience going to look like all these other questions that maybe don’t necessarily have to do with the opportunity itself, are just as important. And so that, that’s kind of probably my biggest mistake that I’ve made that I’ve sensed kind of righted. But it’s a good question for GPS as themselves and for LPs to ask those sponsors.

Jason Lee: That is a great answer, and what have you done, you know, in the past 10 years to improve your infrastructure and to make sure that your business is healthy and running right. And your investors are happy.

 

Brian Adams: Yeah. A lot. So the cool thing about what’s happening is software and technology have enabled people like me to have access to a lot of great tools that decrease the cost pretty dramatically, right? So we use Juniper square for our investor reporting 24/7 365 portal. It creates monthly financial reporting. You can click through all the different investments that you have on your dashboard. We can upload K ones in a timely, secure fashion through it. It’s an incredible tool didn’t exist 10 years ago.

And now it’s, you know, reasonably priced, asset management, My CRM, I hired a controller. Who’s a CPA with a public accounting tax background. I paid up for that controller pretty heavily, but because we work with only taxable investors, that was a big mistake I made, I tried to outsource it. I didn’t take it as seriously enough as I should have. And we lead with our controller now and the tax advantages that he can bring to a liaison between the investors and their tax advisors themselves. And just the reporting in general, it was pretty poor initially. And how we lead with that reporting, right? We take it very seriously, monthly, quarterly, and just the value that I provide to my investors beyond the deal itself. You know, I love working with individuals and families because I can use my network and my rolodex to make introductions, show them best ideas, show them other cool managers, be a resource to them beyond just the deal and really zoom and LinkedIn and all these other tools allow me to do that in a very efficient manner. And even the way that we raise capital, it was really hard for me initially, to think that these investors don’t want to have a two-hour steak dinner with me to talk about how great I am and how great the deals are. Now, we send an email out with drone footage, with a subtitled pitch. We record the pitch where I act as the investor and my acquisitions person is answering my questions.

We go through the deal. We do FAQ. We do pros and cons. We provide them with all the diligence through Dropbox, and then we give them DocuSign ability if they want to make an allocation off the bat, we give it all to them, right? So that if they want to have the phone call with us, they can, but it’s not always efficient for them. They made already like the deal. They already know who we are. Like, those are things that from a time-saving standpoint, I think make a huge difference In terms of that experience, relationship with me, that technology has allowed me to just make a lot easier.

Jason Lee: Yeah. I definitely think technology has streamlined many processes in real estate, in any industry, but it’s a great answer. You make me want to invest in your company myself. I love the processes. I love how structured you are. It sounds like you’ve learned a lot over the years and anyone who’s listening to this, is definitely lucky to hear what you’ve been through and the lessons you’ve taught, kind of wrapping up here. What do you like most about what you do? Favorite part about running your company and being in the real estate business.

Brian Adams: Meeting different people. It’s incredible. And real estate just full of characters. You know, the brokers, the owners, the tenants, the investors, this is the flavor of life. Even though I don’t get to travel as much as they used to. It’s amazing to me, you know, anecdotally, I was doing a webinar with this private equity person. That’s got this cool concept that I want my investors to learn about. I was recording a webinar with him, he’s in Geneva. And then he says, I think somebody that works on your team. I know his brother, they were having beers in Bermuda on a family retreat. And so then I video in the guy’s brother with a webinar. So I’m in Nashville talking to somebody in Geneva, talking to somebody in Bermuda. And it’s like, it’s all possible, Right? And like, I love the fact that I can make the world feel really small through my network and through these relationships. It’s incredible.

Jason Lee: It is incredible. The people you meet in this industry is, it’s amazing. Yeah, I’m glad I met you, Brian. So last question for you. Where can our audience go learn more about you, Brian?

Brian Adams: Yeah, I appreciate that. I’m very active on LinkedIn. Brian C. Adams, Excelsior capital hit me up. Shoot me a note. I’d love to chat with you. We provide a lot of content there, so at least follow us and you can see some of the products we’re putting out there. And then the website is www.Excelsiorgp.com. You can see the portfolio, you can see all of our content there. If you want to learn more about the investments themselves, that’s a really great way to start that conversation.

Jason Lee: Perfect. Well, Hey, thank you so much for your time, Brian and hope to talk to you soon.

Brian Adams: Thanks for having me.

[Outro] Thank you for joining us on the multifamily millionaire podcast. The show that interviews, multimillionaire real estate investors and top producers in the real estate industry. We’re here to help you create passive income and achieve financial freedom so that you can do what you want whenever you want. We’ll catch you next time on the multifamily millionaire.

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