Learn the ins and outs of developing new multifamily assets from both an experienced developer and an experienced construction company!
Speakers:
Hachem Domloj
As CIVE’s President and CEO. CIVE is a Houston-based, engineering-driven, design-build firm that serves the commercial, industrial and residential markets. He has over 20 years of experience in Civil and Structural Engineering, Construction Management, and Design. He is responsible for developing, designing, coordinating, reviewing, and evaluating projects and ongoing work of Engineering and Construction Division.
Matthew Ticknor
Matt is the co-founder and managing partner of Junction Properties. Since 2004, Matt has been involved in over $2 billion of real estate development and investment. Prior to founding Junction Properties in 2014, Matt served a dual role as a development manager in the Northwest and capital markets for the West Coast development division of Greystar. Previously, Matt was with Real Estate Capital Partners (RECP) where he was involved in the financing and development of 7,400 apartment homes and 500,000 square feet of commercial space.
VIDEO TRANSCRIPTION
00:00
in a minute um but we are
00:03
multifamilymasters.com
00:04
this is multifamily masters live what is
00:07
multifamily masters live we do it we
00:09
used to do it
00:10
twice a month we got it down to once a
00:13
month right now we’re here to provide
00:14
as much content as possible as much
00:18
value to you as possible commercial real
00:20
estate is all about your network
00:22
this is a team sport so tonight we’re
00:24
going to talk about the ends the ounce
00:26
the ups the downs
00:28
the good things and the bad things we’re
00:29
gonna be real with you about
00:31
ground up development about construction
00:34
um
00:35
we are multifamilymasters.com we have 70
00:38
plus meetups across the globe
00:40
i saw eddie wong one here a little bit
00:41
ago he runs our hong kong chapter we
00:44
have chapters all across the world we
00:45
have a ton of chapters here in the us
00:48
it’s all about networking it’s all about
00:49
putting you on a pedestal
00:51
so that you become that local
00:53
professional it’s a lot easier to raise
00:54
capital it’s a lot easier to network
00:56
it’s a lot easier to create opportunity
00:58
when you throw events such as this and
01:00
now the u.s is starting to open up a
01:02
little bit in terms of covet in terms of
01:03
uh
01:04
coronavirus maryland opened up this
01:07
weekend i went out to a dance club i had
01:09
a good time
01:11
long story short multifamilymasters.com
01:14
if this will be recorded it’ll be on
01:16
youtube multifamilymasters.com on
01:18
youtube
01:19
if you are not a member of our facebook
01:22
group
01:23
hit the search at the top of facebook
01:25
search multifamilymasters.com search for
01:28
our group
01:28
tons of value tons of content almost 7
01:31
000 members in there
01:32
feel free to ask questions feel free to
01:34
network feel free to
01:36
create opportunities build out your
01:38
teams and do big things together
01:40
and we have a mastermind what is our
01:43
mastermind
01:44
it is not free number one number two
01:47
it’s all about
01:47
networking it’s all about surrounding
01:49
yourself with awesome people
01:52
it’s all about learning sharing
01:53
networking and growing
01:55
together we want you to know this
01:57
business inside and out because we want
01:59
to hold you accountable
02:00
why do we want to hold you accountable
02:02
because we want you closing deals
02:04
why do we want you closing deals because
02:06
plain and simple we want to partner
02:08
with you myself my two business partners
02:10
mr ferris musa mr pal chi
02:13
we own managing control 3 000 plus
02:15
apartments together
02:18
we want to get you a lot bigger number
02:19
than that right so we created this
02:21
platform
02:22
we are in the process of creating the
02:24
world’s largest platform for
02:26
multi-family cash flowing real estate
02:30
let’s rock and roll this is multifamily
02:32
masters live my name is garrison gilbert
02:34
i’m in baltimore maryland
02:36
the three of us combined have 30 plus
02:38
years of experience
02:39
i’m gonna hand it off to my two awesome
02:41
awesome awesome business partners mr
02:43
pauchi mr ferris musa
02:45
for them to do their thing let’s rock
02:46
and roll people
02:48
awesome hey great appreciate that
02:50
garrison so
02:51
uh let’s see i’ll just do my intro real
02:53
quickly here you know what my name is
02:55
powell chi
02:56
i am a multi-family and self-storage
02:59
investor
02:59
based in los angeles uh live out here in
03:02
la but all of my investments have been
03:04
out of state so they’ve been
03:06
several different states so indianapolis
03:09
dallas
03:11
atlanta all kind of all over the place
03:13
so i’ve been involved in
03:15
five different syndications a general
03:17
partner on all of them also been in uh
03:19
properties that i’ve done either myself
03:20
or just with a small jv
03:22
most recently i’ve closed on a self
03:24
storage deal
03:26
that was uh close about two months ago
03:28
so early january
03:30
and uh very excited about kind of
03:33
opening up to a new asset class and and
03:35
getting involved in self storage as well
03:36
so
03:37
um in terms of multi-family um and
03:40
multi-family masters
03:42
uh was able to start this group a little
03:44
about i would say it’s been about
03:46
three a little over three years now that
03:48
we started this group
03:50
uh started as a small group in la just
03:52
about eight of us that
03:53
that were sitting around a hotel lobby
03:55
and then
03:56
pretty quickly after that started
03:57
rolling and growing and growing and
03:59
opened up many many many new chapters
04:02
we’re super excited about all the
04:03
chapters that we have i believe we have
04:05
uh somewhere close to 50 50ish chapters
04:08
all like we said all around the world
04:11
mostly all around the us one one that we
04:13
have international
04:14
and we’re also just just so that people
04:17
know too we
04:18
are um we’ve always been geographic
04:20
based as far as like we have a you know
04:22
a
04:22
location in la we have one in austin we
04:25
have one in houston we have one
04:26
baltimore you know all geographic based
04:29
however because of the virtual world we
04:31
live in we’re now able to
04:34
to do it more on an interest-based level
04:36
so if any of you have more of an
04:38
interest space so if you’re more of like
04:40
hey i would like to do a
04:42
millennial one where it’s just
04:43
millennial
04:45
millennials inside of a chapter right
04:47
and it could be millennials from
04:48
anywhere
04:48
or maybe it’s a women’s group or maybe
04:50
it’s some some other type of interest
04:52
you have those types of interests let us
04:54
know we would be happy to talk to you
04:56
about opening up a chapter in
04:57
and helping you grow that so that said
05:00
um
05:01
i’ll pass it on to ferris all right
05:03
thank you pal and garrison you guys do
05:05
all the hard work so
05:06
uh for those that don’t know me my name
05:08
is ferris i have a company called
05:09
disrupt equity
05:10
we are vertically integrated and have
05:11
properties throughout texas and atlanta
05:14
and if you don’t know me well i want to
05:15
get to know you so please reach out to
05:16
me i’ll keep mine short and brief it’s
05:18
not about me
05:19
we’re excited about our speakers today
05:20
though because i think you know
05:22
we all talk about really the value add
05:23
strategy right my company most of the
05:25
stuff we’re buying is 70s 80s 90s assets
05:27
and
05:28
you know essentially doing some sort of
05:29
value add to them where we are injecting
05:31
capital making improvements usually
05:32
interior upgrades deferring maintenance
05:34
all right
05:35
sorry taking care of deferred
05:36
maintenance and you know creating a
05:38
better environment for people to live in
05:40
well i think you know right now with the
05:42
market and what’s going on right things
05:43
are starting to get very expensive
05:45
for those of you that know me i’m
05:46
starting to say i’m getting priced out
05:47
of atlanta right i can’t you know we
05:49
have a whole portfolio in atlanta and
05:51
you know i’m starting to see prices that
05:52
just don’t make sense for me and so
05:54
really what’s the next venture right
05:56
well really i think
05:57
in a lot of markets right development
05:58
starts to make a lot more sense
06:00
right and so i know that’s an area a lot
06:02
of people are very interested in we
06:03
don’t really talk about it enough and i
06:04
thought basically who better to bring on
06:06
than basically you know a developer and
06:09
a friend and a construction you know a
06:10
person that opens a whole construction
06:12
company
06:12
and really we can talk about the nuances
06:14
of that that dynamic between the two
06:16
and you know what each of them are
06:18
seeing in their prospective markets and
06:19
so
06:20
you know with that said we have two
06:21
awesome speakers matt and hashem
06:23
and you know excited to have them both
06:25
on board and i guess i figured you know
06:27
matt
06:27
maybe you want to go first you want to
06:28
give just a one minute introduction on
06:30
who you are
06:31
what market you’re in and kind of what
06:33
you you know the types of deals you’re
06:35
looking to do
06:36
and then hashtag that’s going to set you
06:37
up for the next question because you’re
06:38
basically the same question so
06:39
i’ll make it easy for you next great no
06:42
thanks ferris great to be here guys it’s
06:43
really exciting and i like the vibe
06:45
that uh garrison you put out already
06:47
with everyone it’s pretty awesome
06:49
um junction properties is my company uh
06:52
we started in 2014 and
06:55
as a result of our work since then uh
06:59
we have developed two we’ve completed
07:02
two properties
07:03
um 175 units in total in oakland
07:07
um and we serve class a
07:11
uh high income residents uh the average
07:15
rent is about thirty three hundred
07:18
dollars per unit
07:20
in oakland and our projects are
07:23
within walking distance to uh
07:26
mass transportation jobs restaurants
07:29
coffee shops
07:30
uh about half the residents have cars
07:34
um and uh we have uh
07:38
currently received entitlements on our
07:40
next project for 225 units
07:43
um and uh we’re we’re kind of in the
07:46
opposite
07:47
world that you are in ferris where our
07:49
market is pretty much
07:51
you know pretty just low right now rents
07:54
are completely depressed from where they
07:55
were
07:56
um bay area is the last to recover
08:00
from covet 19 and we’re first starting
08:02
to see the thaw
08:03
and uh but we expect uh rents to climb
08:07
pretty quickly
08:08
and we are already talking to property
08:11
owners on our next projects
08:12
uh for the next uh development cycle
08:16
thank you madden just to kind of recap
08:18
that for people right so
08:19
out of california a place basically
08:21
everyone says there’s no money to be
08:22
made
08:23
so i think it’s gonna be interesting
08:24
kind of here you know really more of
08:25
that right what you look for how do you
08:27
make money in california right
08:29
a tenant friendly market and i mean like
08:32
you said your average rent is 3 300
08:34
the average rent on our portfolio is
08:35
about a thousand dollars right so
08:37
very different kinds of deals so i think
08:38
it’ll be interesting to hear that
08:40
um hashem you want to go next hi
08:44
uh everyone my name is hashem and it
08:46
seems like you have a really
08:47
nice energetic group here um everyone
08:51
here has like a good nice energy
08:53
and i’m very happy to be part of this
08:55
tonight uh
08:56
again my name is hashim damlaj i’m the
08:58
owner of cive
09:00
civ is a design-built firm we’ve been in
09:02
business since 2003 almost
09:04
17 18 years now we do
09:08
uh full design services and construction
09:11
we are a bunch of engineers and
09:13
architects and we
09:15
enjoy doing what we do so we we got
09:18
involved into the construction industry
09:20
also as well like over 10 years ago
09:22
and we became a full design build
09:24
company
09:25
we specialize in value engineering
09:28
so we want to make sure the dollar that
09:30
you’re spending on your investments is
09:32
really worth it
09:34
[Music]
09:35
we’ve been doing uh multi-family now for
09:38
i believe like four years
09:40
or three and a half years something like
09:41
this in a moment we have
09:43
almost 590 units in the process
09:47
between design and construction this is
09:49
like
09:50
five projects in total
09:54
i love multifamily it’s really
09:56
challenging and
09:57
we made it our game and i love
10:00
everything about it it’s really fun to
10:04
build
10:04
uh i i wish and i look forward to see
10:08
everyone
10:08
every single one of you building
10:11
new projects rather than uh just
10:15
acquiring uh uh readily built uh
10:19
i don’t know right now with the with the
10:21
market prices uh with material prices
10:23
going up i don’t know if that makes
10:24
sense
10:24
at this time but anyway uh
10:27
[Music]
10:28
and that’s it and i’m here to answer any
10:30
questions that you have and
10:32
let’s have a fun uh with this discussion
10:34
all right and one important question
10:36
what markets are you is your company in
10:38
uh in texas so throughout the access
10:40
yeah so i met actually
10:41
hash them through some friends and you
10:43
know you taught me a term that i didn’t
10:44
know value engineering right it’s really
10:46
the art
10:47
of engineering a property and a way to
10:49
reduce costs right
10:50
really building that affordable product
10:52
that’s kind of missing especially in a
10:53
market like houston
10:54
which is where hashem and i are both
10:55
based actually so you know definitely
10:58
excited to have him on and
10:59
just to recap right he really focuses on
11:00
that kind of ground up piece
11:03
right so kind of between matt and hashim
11:05
right you get a property
11:06
right so kind of two ends of the
11:08
spectrum and so i think really that’s
11:09
the conversation that we’re going to go
11:10
down
11:11
and so really briefly i want to ask you
11:13
both the same question which is
11:15
what is the role of the developer what
11:17
is the role of the construction guy
11:19
right and where
11:19
does that marriage happen right that’s
11:22
maybe i think the first question i think
11:23
a lot of people don’t really understand
11:25
the developer don’t understand the
11:26
construction guy right and so i think
11:28
kind of getting that clarity
11:29
and hashtag i’m going to go the other
11:31
way around so you want to answer that
11:32
first and you know kind of what
11:33
where do you see your role stopping and
11:35
the developers are all starting
11:37
well the the developer role starts first
11:40
and then
11:40
basically we pick it up from there the
11:42
developer role is
11:44
to identify the market whereas there’s a
11:46
need where
11:47
they see like an opportunity to develop
11:49
a multi-family project
11:51
and then once they identify let’s say
11:53
that piece of property or piece of land
11:55
this is where we come in and we help
11:57
with
11:58
the planning part of it the coordination
12:01
with permitting officials the uh
12:03
uh designing all the
12:07
construction drawings from architectural
12:09
to mechanical electrical
12:11
uh plumbing structural and all the
12:14
engineering aspects and
12:16
get the permit from the city and then
12:18
start the construction
12:20
and then basically a turnkey back to the
12:23
developer
12:24
and then our role stops and then the
12:26
developer basically picks it up from
12:28
there
12:30
all right and matt anything to add to
12:31
that i’m smiling i
12:33
i i would say everything hashim said is
12:35
correct
12:36
except it takes much longer than the 30
12:39
seconds he described it
12:40
oh absolutely
12:44
i tried to make it made it make it as
12:45
simple as possible he stuck to the rest
12:48
of 30 seconds so he did it just right so
12:50
yeah through that process like yeah
12:52
every every little
12:54
point i i uh pointed out there is
12:56
basically the whole
12:57
process by itself yeah it’s it’s always
13:01
a process of hurry up and pause hurry up
13:03
and pause
13:04
um as uh i’ll talk about the development
13:08
side so as a developer
13:10
we um i typically have a vision of
13:13
of um of a property that
13:16
you know in our in our business model
13:19
it’s it’s
13:20
in a high walkability area it’s close to
13:22
job it’s close to culture
13:24
it’s typically an urban centered project
13:29
and so mostly urban projects already are
13:33
built out so they end up being infill
13:35
projects
13:36
and that usually requires a bit of
13:40
creativity
13:41
and many times it involves multiple
13:44
property owners
13:45
and trying to assemble properties um
13:49
it’s easier to talk through example so
13:52
you know when i
13:53
looked at my first deal it was a four
13:55
minute walk from a bart station which is
13:57
our mass transit
13:58
subway and we we ended up moving
14:02
to victorian style houses uh lifting
14:05
them and moving them
14:06
and and and and rebuilt the foundation
14:10
for the property owner that owned those
14:11
two houses and then bought the land
14:14
under those two houses to assemble our
14:16
project
14:17
and build a 78 unit five-story
14:20
multi-family building um you don’t
14:23
typically have to move buildings
14:24
to create infill projects but you do
14:27
have to get creative
14:28
in urban projects so so maybe to kind of
14:32
recap a little bit right for both of you
14:34
right essentially the developers want
14:36
putting the deal together figuring out
14:37
maybe that initial vision and the
14:39
construction person the one that’s
14:40
making that vision reality
14:41
right from getting the the the you know
14:44
the material order to getting the
14:45
engineering you know
14:46
pieces done the architecture and you
14:49
know getting all of the different
14:50
vendors out there and starting to
14:51
execute right
14:52
so um i’ve actually got one great great
14:55
great line
14:56
to describe development and construction
14:58
uh development is offense
15:00
and construction is defense so in
15:03
development
15:04
our job is to create value in the land
15:07
and then through construction we want to
15:10
keep the project
15:10
on budget and and on time to preserve
15:13
the value that was created
15:15
once the project goes off schedule that
15:18
value is lost
15:20
all right hashem don’t write that down
15:22
all right
15:23
no use that in a week or two you got to
15:25
tell them that all right
15:26
yeah i want to add one thing to like
15:29
what matt said
15:30
actually the way we work here is we both
15:33
like
15:33
us and the developer we are on the
15:35
offense team uh with our value
15:37
engineering what we try to do is
15:39
to basically design something that gives
15:42
value to
15:43
the developers and make sure that
15:45
increases the the return on their
15:46
investment
15:48
uh so i i feel like we are more like
15:50
partners
15:51
with the what the developers rather than
15:53
just being on the other side
15:55
uh uh i understand yes uh time is off
15:58
of the essence because time is money we
16:00
all know that uh
16:02
uh and then we we we know that there’s a
16:04
lot of pro there’s a lot of a lot of
16:06
problems sometimes they go
16:07
like going through the projects whether
16:08
with the un unforeseen conditions or
16:12
whatever comes up during construction uh
16:15
that may
16:15
uh slow the uh
16:18
the process let’s say for example the
16:20
pandemic that happened last year and
16:21
then
16:22
the lockdown and that was like a big hit
16:24
to everybody uh
16:25
i know the construction business was
16:28
uh like we didn’t have to do the
16:32
lockdown but
16:33
guess what all the factories for uh
16:36
materials all the suppliers a lot of
16:38
people they were like
16:40
closed down or they had shortage so we
16:43
were
16:44
we we got hit big time so stuff like
16:46
that may affect the projects but
16:48
we always try to be on the same team and
16:50
and partner up with the developers try
16:51
to come up with uh
16:52
something uh that is uh uh of a good
16:55
value for them
16:56
and this is where the value engineering
16:58
that you just mentioned
16:59
uh comes in yeah all right well i’m
17:02
gonna ask one quick question i’m gonna
17:03
shift gears into
17:04
actually more of the development process
17:05
but maybe the question is and matt i’m
17:07
gonna start with you
17:08
what is one big mistake you see
17:10
construction guys make in hashem’s field
17:12
that you would you know if someone wants
17:13
to go
17:14
be a construction guy what is one big
17:16
kind of point of feedback
17:18
that you would have for them and vice
17:19
versa i won’t ask you the same thing
17:20
right
17:21
the biggest friction point or problem
17:23
that you see with the developer so
17:24
matt you first uh you know
17:28
i just put these guys on the spot so i
17:29
did not give them that question
17:31
beforehand so let’s see what they say
17:33
you know um i’m coming off um
17:36
you know a couple projects and uh
17:39
we had two two projects two different
17:42
contractors
17:43
and one contractor had
17:46
um different levels of of supervision
17:50
and it resulted in a higher a higher uh
17:53
construction fee but having more
17:56
eyeballs on the project
17:57
resulted in a much smoother operation
18:00
um the other project had a smaller fee
18:04
less eyeballs on it and and there were
18:07
some more problems as a result of that
18:09
um so i learned that paying a little bit
18:12
of a higher fee for more eyeballs on a
18:14
project is really helpful
18:16
um i also felt that um
18:19
the the culture on on the job site is
18:22
really important
18:24
and the project that had a better
18:27
culture
18:28
essentially happier laborers on the site
18:30
resulted
18:31
in very little turnover on the site and
18:34
the project that had more people
18:35
complaining on the site resulted in
18:37
higher turnover um so that’s what i’ve
18:39
learned from my experience in
18:41
construction
18:42
so more eyeballs and better culture
18:43
right it’s takeaway there
18:46
all right hashem um
18:50
well this is from experience on on
18:53
previous projects
18:54
some developers they they don’t they
18:56
tend not to go into details of the plans
18:58
during the
18:59
the planning and in the design phase and
19:01
then we had some issues when we started
19:03
construction that the the developer was
19:05
like
19:05
not aware of uh very important
19:08
things in the project that oh i didn’t
19:10
know that this is going to be like that
19:12
so basically
19:13
uh uh this is the the issue that we have
19:16
faced
19:17
and there should be more involvement
19:21
and with this is what we try to always
19:22
do and explain to developers that this
19:24
is
19:24
their involvement into the design phase
19:27
makes uh
19:28
everything smoother during construction
19:31
and then educate them on
19:33
the level of details like this is what’s
19:35
going on in the units this is what you
19:37
have
19:38
there this is what you have here so
19:39
basically during the construction
19:41
no surprises and then we try to minimize
19:44
the change orders as
19:46
as possible i saw somebody here said
19:48
camille zuck said
19:49
when you asked matt that question they
19:51
said change orders yes
19:53
i hate change orders because i don’t
19:55
like to sit down and argue with the
19:57
developer
19:58
on any change order i mean if it’s not
20:01
on the plans
20:02
it’s not on the plans and somebody has
20:03
to pay for it but if something on the
20:05
plans there shouldn’t be any
20:06
any change orders and this is where
20:08
change orders come from
20:10
i have one addition to that um in our
20:13
projects we get
20:14
uh our construction manager involved at
20:17
the conceptual stage
20:18
um and then during the design
20:21
development stage we typically have a
20:22
contractor
20:24
um on a pre-construction agreement and
20:27
um
20:28
they’re involved in the in the
20:30
architecture meetings uh
20:32
every you know so you know every every
20:34
period you know every pipe
20:35
every every few months just to check in
20:38
on the plans and offer their advice so
20:40
we try to get construction
20:42
involved in the design very early on um
20:45
and that’s
20:46
probably helped you know prevent a lot
20:48
of change orders
20:49
um in the projects got it okay
20:53
cool so so shifting gears a little bit
20:54
right and so this is a question that i
20:56
think where at least i struggle a lot of
20:57
people struggle which
20:59
you know let’s talk about land right so
21:01
my question is kind of two parts
21:03
and i’m gonna start with you matt first
21:04
question is what do you look for in land
21:07
and and specifically for you matt being
21:09
the developer side
21:10
what things do you look for to mitigate
21:13
risk
21:14
right in terms of actually taking a
21:16
project from
21:17
imagination to reality right
21:19
specifically around the land getting it
21:21
under contract what
21:22
it needs to have or not have and what
21:23
the contract needs to have or not as
21:24
well
21:25
right so that’s kind of the question for
21:27
you and then hashem
21:29
similarly it’s going to be kind of the
21:31
construction side of that question
21:34
um so just concept of land um
21:37
i you know any site that i look at
21:41
um all i’m doing is trying to
21:44
change the the current existing
21:47
allowed or legal use to a
21:52
or i’m developing it into a use that is
21:54
much more robust
21:55
which would result in a higher residual
21:57
land
21:59
land value um so it starts with that
22:02
um really understanding land use uh laws
22:06
and what what is out there that will
22:09
enable me to add much more density
22:11
in a multi-family project um
22:15
if if you know based on my projections
22:18
and returns
22:19
of what i can do if the residual value
22:22
of the land is substantially higher
22:24
then then it looks like a deal that i
22:26
want to pursue
22:28
um and then from there um
22:31
you know make an offer try to get into
22:33
contract
22:35
um and a contract uh for me
22:38
is essentially an option um because i’m
22:41
always looking to going to a long-term
22:44
contract period where i
22:47
will only close after receipt of the
22:50
entitlements
22:52
past the appeals period um for that
22:55
municipality and for those who don’t
22:58
know what does entitlements mean
22:59
actually
23:00
uh entitlement is a fancy word that
23:02
means
23:03
uh every city agency
23:06
or municipal agency that’s involved in
23:09
oversight of that
23:11
property has approved the plans to build
23:15
what you have proposed in your project
23:18
application
23:20
so essentially it boils down to just a
23:21
long close while
23:23
you’re doing all your homework up front
23:24
right and
23:27
and on that same note i guess how much
23:30
money do you typically
23:31
you know essentially put up hard right
23:33
working through that right in terms of
23:34
cost
23:35
so to get to the point where you close
23:37
right you’re confident that it’s going
23:38
to happen because you’ve kind of cleared
23:39
all the big hurdles
23:40
you know how much money are most people
23:42
talking about you know and on that same
23:43
point i mean what size projects are you
23:45
talking about too that kind of go hand
23:46
in hand a little bit right
23:49
sure uh so i’m currently in contract
23:52
on a property that will uh that we have
23:56
already entitled um
23:59
it uh it’ll be 225 units
24:04
the project we are budgeting will have a
24:07
total development cost of 120 million
24:09
dollars
24:12
the land is about 10
24:15
um of the project budget and
24:19
we um we have um
24:23
let’s see we started off with a five
24:25
percent
24:26
deposit for the property
24:29
um and we have extended it due to covet
24:32
and put down an additional
24:33
deposit um which is
24:37
uh more like uh
24:40
10 of the land cost
24:44
um and uh we are in contract uh
24:47
through april 2022.
24:53
so i mean that’s a lan guy i mean you
24:55
know you’re driving this you’re holding
24:56
on to this thing for three years
24:57
it sounds like right you started
24:58
pre-covet and basically
25:01
through april so that’s that’s a long
25:02
process um
25:04
we’ll tell you how we do it here in
25:05
houston texas all right get there in a
25:07
second
25:08
um and i was gonna add and that 5-10
25:10
percent
25:11
is hard money right not refundable or is
25:13
it refundable it is
25:15
non-refundable non-refundable and then
25:16
the other question is
25:18
outside of deposits what other costs do
25:20
you have right around
25:21
architecture evaluation all that i mean
25:24
how much are you typically
25:25
spending before you you know get to that
25:28
finish line
25:29
sure uh for this project we’ve spent
25:32
about half a million dollars
25:34
um on all the costs for architecture
25:38
engineering um various
25:41
legal legal costs land use attorneys
25:44
transaction attorneys uh civil
25:47
engineering
25:48
uh dry utility engineering uh landscape
25:52
design
25:53
uh some structural design um
25:57
it’s uh we have a market report we have
25:59
our property management
26:01
review of the deal which we always have
26:04
very early on to make sure we’re
26:06
designing and developing a project
26:09
that our property manager would operate
26:11
efficiently as an institutional
26:13
operated property um
26:17
uh those are probably just a few of the
26:20
costs but
26:21
uh so you know you may get to the point
26:23
hopefully not right but you’re five ten
26:25
percent into it and
26:27
half a million dollars of just hard
26:28
costs right and then
26:30
someone somewhere decides you know what
26:31
we don’t want to allow this thing kind
26:32
of happening right so there’s definitely
26:33
risk in the business
26:34
which is why kind of the fruits are
26:37
obviously as rewarding
26:38
but that’s it for those of you that
26:39
didn’t hear right sounds like matt your
26:41
your cost is really you know 500 000 a
26:44
unit
26:45
right totally other end of this but you
26:46
can’t even find a property in houston
26:48
to buy for 500 000 a unit right so you
26:51
know just uh
26:52
it’s interesting to see the just a big
26:55
difference between you know
26:56
markets uh it’s nuts here
27:00
all right it’s uh the bay area is a boom
27:03
and bust market
27:04
um it’s because there’s so much wealth
27:06
generated here from technology
27:09
and all that money goes somewhere and
27:12
a lot of people just buy real estate and
27:14
rents are really high because
27:16
tech workers are paid really well no a
27:19
totally different market and
27:20
yeah there’s uh as i’ve
27:23
gained more experience you start to
27:24
realize there’s usually a reason why
27:25
things are the way they are
27:26
no matter what it is so um awesome well
27:29
thank you i think that was that was
27:30
definitely insightful so hashem
27:32
kind of same thing right what are the
27:35
you know from your perspective right
27:36
what are the things you look for and
27:37
again texas is a whole different animal
27:39
than california right i mean you know
27:41
we can build an apartment at 10 days
27:42
kind of thing if you had enough manpower
27:44
right
27:44
but what are the uh the things you
27:48
know that you think someone should be
27:49
aware of for the land right
27:51
and i know matt talked about kind of
27:52
dragging out the contract obviously
27:54
it’s in everybody’s interest to kind of
27:55
have that you know that time frame to
27:57
really put you know do your due
27:58
diligence right
27:59
but i mean what are the things you look
28:01
for in land and what are the the some of
28:03
the risks that someone should be aware
28:04
of right if you’re developing in texas
28:08
i mean from uh my experiences
28:11
when when we get on an early stage on a
28:13
project working with the developer
28:15
is to look at the property and see the
28:17
availability of utilities
28:19
and this is the main thing right here in
28:21
texas
28:22
sometimes if you’re not within the
28:24
city’s jurisdiction you are
28:25
basically within a mud district which
28:29
mud is a municipal utility district it’s
28:32
a private
28:32
utility some kind of like semi-private
28:34
utility district
28:36
so we look to see if they have
28:37
availability to serve the property
28:39
from a utility standpoint water and
28:42
sewer
28:43
this is the main thing like sometimes
28:46
i’ve seen a lot of projects they
28:48
been shut down just because of no
28:50
availabilities for utilities
28:53
or the cost to bring utilities to the
28:56
to the this particular property is
28:59
really high in the
29:00
it’s not justified uh these are the type
29:03
of or like the challenges that sometimes
29:05
that we see
29:05
uh uh like the developers face at the
29:10
very early stage
29:11
and then at that time the project is
29:13
basically killed or
29:14
if you you get the answers that you want
29:16
and everything is
29:17
uh and and balance then you move forward
29:19
with the project
29:21
and most of the most of the projects
29:24
that come your way
29:25
do those people have it under contract
29:28
kind of more like matt’s case or you
29:30
know do you see cases where people
29:31
basically go all in
29:32
they buy the thing and they come to you
29:34
and you’re like hey man this is just not
29:35
gonna work out
29:36
no no no usually they’re just under
29:38
contract
29:39
you know they have their here in texas
29:41
you put the property under the contract
29:43
you have your 30 days visibility period
29:45
and then i don’t know three months after
29:47
that to close sometimes i’ve seen people
29:50
i’ve worked with the clients where we
29:51
got the permit and then he closed on the
29:53
property
29:54
so it depends on here on the deal
29:56
between the buyer and the seller but
29:58
usually
29:59
you have your 30-day feasibility period
30:01
and this is when we
30:02
get involved and try to see
30:05
how many units we can put on that
30:07
property if you have the utilities
30:09
available
30:10
and try make like the schematic site
30:13
plan to see if we can
30:14
meet all the the code local code
30:17
requirements and
30:18
and local standards and then we go from
30:21
there see of course this is a good
30:22
project or not
30:24
got it so kind of time frame wise right
30:26
matt’s talking about three years you’re
30:28
talking about 30 days plus
30:29
three months ish is kind of maybe
30:30
typical what you’re saying yes
30:32
yes awesome okay cool um and then let’s
30:35
talk about cost
30:36
right i think matt we kind of hinted a
30:38
little bit at just what it costs to
30:40
build in your market
30:41
you want to maybe recap that a little
30:43
bit in terms of you know what the
30:44
spectrum is on the development side
30:45
right obviously
30:46
maybe you’re targeting the higher end
30:48
you know what is typical build costs
30:50
look like for you
30:51
and maybe for people let’s keep it per
30:53
square foot to kind of keep it
30:54
simple and then hashem similar for you
30:56
right all in you know what
30:58
what what our costs look like in texas
31:00
right so
31:01
matt you want to go first sure it’s uh
31:04
well the market’s pretty volatile right
31:07
now especially with lumber
31:09
um so it’s hard to say but i can tell
31:12
you
31:14
we are currently underwriting um on hard
31:17
costs
31:18
uh that 300 bucks per gross square foot
31:21
for a building that would be five
31:24
stories of stick
31:26
um over two stories of concrete
31:30
it comes out to about 410 dollars
31:33
per square foot for the rentable square
31:35
feet so for all the livable
31:37
area in the units um
31:41
all in for the land soft costs and hard
31:44
costs
31:45
our current underwriting budget for our
31:47
next deal is 650 dollars
31:50
per square foot for the rentable
31:53
square feet um it’s about 466 dollars
31:57
per gross square foot
32:00
you’re gonna have to uh i’m gonna make a
32:02
trip out of san francisco soon you’re
32:03
gonna have to take me out and show me
32:04
man how you
32:05
where all this money goes in these units
32:07
man you know the gold-plated toilets or
32:09
what
32:10
uh it is it is not i i have seen
32:13
much higher end finishes in in atlanta
32:17
and other markets during during my
32:19
career
32:20
um we’re talking uh
32:23
vinyl plank flooring um thermofoil
32:26
cabinets
32:28
um we’re talking uh quartz countertops
32:32
um we’re talking um
32:36
on our last few projects we did the uh
32:39
the surrounds and the showers it was not
32:41
tile
32:42
um vinyl window i need to go to the bay
32:46
area and start building
32:47
there
32:50
you have to bring you know an army of
32:51
people with you man it’s labor i mean
32:53
everything is up there so
32:55
you might as well bring a force with you
32:56
too to kind of keep constantly figure it
32:58
out
32:59
you’ll you’ll have the whole market
33:03
labor cost there is very expensive as
33:04
well because cost of living for the
33:06
for these labors is very high as well um
33:10
labor yeah so i’ll give you an idea um
33:13
laborers
33:13
typically have to drive about an hour
33:16
and a half
33:17
plus each way to a job site um
33:20
with our lumber sub um our framing sub
33:24
in our last project we um worked out a
33:27
deal where they would
33:29
um work 10 hour shifts monday through
33:32
thursday
33:33
uh stay in a hotel like like a sports
33:35
team
33:36
share hotel rooms and then go back early
33:39
on on friday
33:40
um because the time to
33:44
drive back and forth in traffic was was
33:47
just
33:47
not not reasonable wrong
33:51
answer so maybe it has from the same
33:52
question right what does development
33:54
look like and i’m actually to make this
33:56
kind of interesting
33:57
right let’s say you’re doing a similar
33:59
finish as what matt said here in
34:01
let’s just pick houston what can people
34:03
expect
34:04
actually this is what we’re doing here
34:06
but i mean you want me to answer how
34:07
much before your
34:08
how much cost is before your question or
34:11
after your question because it’s
34:12
the market is changing right now it’s
34:14
crazy oh you mean
34:16
five five minutes ago versus every
34:17
the price has
34:19
rough costs give me plus or minus 20 all
34:21
right no no anyway uh what we’re
34:24
basically doing is uh vinyl plank uh
34:27
most of the apartment complexes vinyl
34:29
playing finishes uh quartz
34:30
uh uh same finishes that matt was
34:32
talking about but but
34:34
the pro the cost here to build those are
34:37
like around 110 dollars a square foot of
34:40
uh rentable square foot area
34:42
yeah and are you pricing in the fact
34:45
that it’s two stories of concrete
34:46
five stories of stick as well hashem or
34:49
are you just looking at kind of
34:50
three-story you know
34:51
gardens talking about no this is no this
34:53
is a we’re talking about garden style
34:56
uh basically you have concrete
34:57
foundation and three stories on
34:59
on top of that uh when you go to uh
35:02
podium style if you do uh concrete and
35:04
then let’s say four or five stories
35:06
which is the max allowed by code to do a
35:08
stick framing
35:10
on top of the concrete it’s we’re
35:12
talking about like uh
35:13
between uh 145 to 160 dollars per square
35:17
foot depending on the finishes
35:20
a similar product about a fourth third
35:23
of the cost
35:23
you know about a factory about a yeah
35:24
about a fourth so interesting
35:27
awesome awesome okay cool well let’s
35:30
shift gears a little bit more
35:31
right one thing somebody asked a
35:33
question here and say what are we doing
35:35
right now with the
35:36
uh price increases in the lumber
35:39
uh this is a very good question uh i
35:42
mean we
35:44
if the if the market stays like that i
35:46
guess a lot of projects are going to be
35:48
put on hold because it’s not going to
35:50
let’s say if if i come and tell you
35:52
uh uh you have to spend two million
35:54
dollar on a on an 88
35:58
unit development you’re going to say
35:59
okay this is not going to be worth it
36:02
to move forward with that development
36:04
with this kind of price increase
36:06
so that’s going to put pressure i
36:07
believe on the
36:09
uh let’s say the lumber market that’s uh
36:12
it’s gonna stabilize it’s gonna go down
36:14
in my opinion uh and it’s gonna
36:16
stabilize at a certain point
36:18
i believe from now till june uh uh
36:20
prices are gonna adjust
36:22
and we’ve been in contact with people in
36:24
the congress and in in
36:26
the senate we had a conference call last
36:28
week
36:29
with a senator from new hampshire and
36:31
she’s helping us
36:32
uh big time on on on this issue because
36:36
it cannot stay like that it has to to
36:39
come to a stop
36:40
and then the price has to adjust and to
36:42
stabilize as well
36:44
got it so if anyone has a forest you’re
36:46
interested right so
36:48
absolutely yeah that’s this is this is
36:51
more than gold right now if you have a
36:52
forest this is more than gold
36:55
awesome awesome awesome cool well so so
36:57
for those who are tuning in right if you
36:58
have questions go ahead and ask them
36:59
right we’re going to shift to the q a
37:01
soon in five minutes but i wanted to ask
37:03
hashim and matt
37:04
kind of one question right which is you
37:06
know what’s the hardest part of your
37:08
business right the thing that kind of
37:09
stresses you out the most and you know
37:11
for others just to kind of be aware of
37:15
um currently um
37:18
you know as a developer my you know i’m
37:22
i’m judged based on completing a project
37:25
on time and on budget and then the rest
37:28
is market risk which is shared with
37:31
with investor um
37:34
and and you know thankfully we we were
37:37
successful in both of our projects
37:38
even though the rents are substantially
37:40
lower than our underwriting but we did
37:42
deliver
37:43
before covid so so i got lucky there
37:46
um i would say the the toughest
37:50
part in developing right now
37:53
um knowing that there is a macro need
37:56
for
37:57
housing in the bay area is is uh
38:01
finding a site that actually pencils and
38:04
um because rents are substantially lower
38:08
uh then then then they need to be to
38:11
make a deal financial
38:13
um it’s it’s a difficult place to be so
38:17
we’re
38:18
really exploring alternative
38:20
technologies
38:21
um where you know there’s a lot of
38:25
construction technologies and
38:27
innovations where you can build a lot
38:29
off-site from completely modular
38:33
building offsite to to panelization and
38:35
other parts of a building
38:37
that can be built off-site um
38:40
our focus right now it’s it’s really
38:43
hard to lower the cost
38:44
of construction right now but we’re
38:46
finding
38:48
um opportunities to reduce schedules
38:51
significantly
38:52
which helps reduce all the carry costs
38:54
that come along with construction
38:58
we’re looking at um we’re working with a
39:00
company called prescient out of
39:02
charlotte north carolina
39:03
um instead of doing the five over three
39:07
product that is typical we’re looking at
39:09
a light gauge steel
39:11
um superstructure that would
39:15
right now based on what we’re seeing may
39:17
come out to the same cost
39:19
but it might save three or four months
39:21
off schedule
39:22
which will be significant and will
39:24
definitely help the projected
39:26
internal rate of return um
39:29
and then we’re seeing a lot of
39:31
technologies where
39:33
uh like clt would be similar and mass
39:36
timber
39:37
where pricing might be similar but
39:40
schedule
39:41
will be completely or not completely uh
39:43
significantly shaved off
39:45
uh that would also help the internal
39:47
writer return
39:48
uh which is what you know all
39:50
institutional investors look at
39:52
uh when joint venturing in a project so
39:56
to answer your question you know getting
39:58
the yield to a point where it’s
40:00
financiable is our biggest challenge and
40:02
finding
40:03
um opportunities in innovation in the
40:06
marketplace to help us get there
40:08
it’s a very different kind of value
40:09
engineering right yeah actually this is
40:12
very similar to what we do in
40:13
mata what because right here in front of
40:15
me on my uh notebook
40:17
i have prescient that’s the company name
40:20
metal framing and then this is something
40:22
that we’re looking into in lieu of using
40:24
uh timber construction we’re looking
40:27
into lgs um we’re still
40:29
the light gauge steel uh
40:32
it’s still in in uh in the phase of like
40:35
we’re studying it and then we
40:37
would comparing the prices but when you
40:38
said it’s almost the same
40:40
price as timber construction is it like
40:43
the price that we
40:44
all know or the price that is basically
40:47
way
40:47
inflated when you did that um
40:51
well i’m comparing it to the costs
40:54
here locally including labor okay we’re
40:57
comparing it to our
40:58
costs that we got from our contractor
41:01
here
41:02
and um but if you haven’t spoken to them
41:06
yet you’ll definitely learn a lot
41:07
they’ve got a pretty dialed in system
41:09
and they’ve they’ve seemed to have
41:11
solved a lot of the traditional problems
41:13
with light gauge steel
41:14
um over the past say 15 20 years
41:17
um but it’s we’re really focused on
41:21
reducing schedule significantly which
41:23
will help
41:24
make deals pencil uh because this is
41:26
some
41:27
we have a project right now and then uh
41:29
contract is signed and then if we go
41:31
with the
41:32
or what the lumber crisis that in the
41:35
current market right now the project is
41:36
not feasible so we’re looking
41:38
a part of what we do is the value
41:39
engineering and basically being creative
41:42
and innovative and see
41:43
uh uh where what can we do differently
41:47
what can we do
41:48
better to serve our developers to make
41:50
sure that the project is beneficial for
41:52
them and
41:53
uh increase their roi so we kind of like
41:56
always think out of the box and we look
41:57
for
41:58
the best way to to build this uh project
42:01
it doesn’t have to be all the time
42:02
timber so i’m looking like
42:04
really into uh prefabricated wall panels
42:07
pre-fabricated metal trusses
42:08
so we can use and in that from an
42:10
architectural standpoint that changed
42:12
the types of construction
42:13
because now uh uh when when you go to
42:16
the code it’s basically you have tap
42:18
construction let’s say
42:19
uh type type three type or type five and
42:23
and basically what we’re
42:24
dealing with here which is dealing with
42:27
combustible material or non-combustible
42:30
material when you’re not when when
42:31
you’re building with non-combustible
42:33
material the
42:33
entire coat changes and it’s less
42:36
stringent than
42:37
basically when you’re building with wood
42:38
so i’m i’m
42:40
and then this is something we’re still
42:41
studying if you spend a little more
42:43
money or maybe the same price as the
42:45
inflator prices of timber but there is
42:47
some savings and
42:49
other uh uh
42:52
aspects of this construction because
42:54
you’re you don’t have to do as
42:56
much as you used to do for let’s say
42:59
firewall separations and
43:01
and other aspects of the project itself
43:03
so you can save money in one
43:05
one area and then maybe spend a little
43:07
money uh on
43:08
the the lgs system with the luggage
43:11
steel system
43:12
so we should all sell our bitcoin and
43:14
buy stocks in lgs
43:16
companies right so um
43:19
so the same question for you guys so
43:21
that was definitely interesting but
43:22
same question about that right what is
43:24
the hardest thing in your business right
43:26
and maybe it is
43:27
you know the thing that kind of you just
43:28
got the most excited about right which
43:29
is
43:30
fundamentally solving challenges in the
43:32
market that
43:33
not really in your control right but you
43:35
kind of have some of the tools to really
43:36
figure out solutions
43:38
yeah i mean you we’ve known each other
43:40
for a while now
43:41
uh ferris and then you know the type of
43:43
clients that i deal with we
43:44
and then our we we come in at the very
43:47
uh
43:47
beginning or the at the front end of the
43:50
project be
43:51
because we’re a design build firm so uh
43:53
the clients approach us and then we know
43:55
what their budget and where do
43:56
they need to be at and this is this is
43:59
by itself is a challenge it’s not like
44:00
oh yeah well if they want to be at a 1
44:02
million we can do this for half a
44:03
million oh we pocket half a million
44:05
that’s not how we do business
44:07
uh all our clients we’ve been working
44:09
with for many many years and then they
44:10
come to us for multiple projects because
44:12
they
44:13
they see the value of work that uh
44:15
basically
44:17
we do and then every project is
44:19
challenged by itself it’s like okay how
44:21
are you going to make
44:22
the numbers work for my developer for my
44:25
client
44:26
uh how are you going to build this
44:28
project or what is the best uh
44:30
finishes that is fit for this project
44:33
and so it’s it’s not only on the
44:34
finishers it’s the type of construction
44:36
the let’s say uh the land is
44:40
small and then we have to make it work
44:42
we have to fit let’s say 150 units or
44:45
200 units
44:46
so go with an underground detention pond
44:48
uh for example i don’t know if the
44:50
the others are familiar with what is the
44:53
detention pond here in texas
44:54
or if when it rains we have to detain
44:57
all that water and some kind of
44:59
retention system and then slowly let it
45:01
go into the
45:02
the city public storm sewer
45:05
so and this is a big cost in in
45:09
all developments here so we try you see
45:12
okay which one is more feasible to do
45:14
and
45:14
uh above ground detention pond and lose
45:16
some of the land
45:18
or do it underground uh like i just said
45:21
right now the type of construction are
45:22
we gonna go with
45:23
metal we go concrete or we go with wood
45:26
construction
45:26
so these kind of things yes we we find
45:29
it very
45:30
challenging and also what people don’t
45:32
understand as general contractors is
45:34
it’s not a piece of cake to build uh
45:37
200 units and then deal with so many
45:41
contractors subcontractors on site and
45:43
then
45:44
try to bring all these people from
45:47
different
45:48
mentalities or different disciplines to
45:50
work together in harmony
45:51
this is this is challenging uh
45:54
and it takes it takes uh uh like matt
45:57
said at the beginning a lot of
45:58
supervision
45:59
ion and create that culture on site
46:04
that everybody’s working together for
46:06
the benefit of that project
46:08
uh it’s a big thing and it’s a challenge
46:12
awesome thank you guys very much well so
46:15
that said so if people have questions we
46:17
want to go ahead and shift a q a right
46:18
we’ll do about 10 more minutes 10
46:19
minutes q a
46:20
and then we’ll basically do breakout
46:22
rooms right for those who don’t know we
46:23
always do breakout rooms networking like
46:25
garrison said it’s probably one of the
46:26
biggest ways to kind of
46:28
grow in the business and break the
46:30
audience up into groups of about
46:32
you know five to eight people and get to
46:34
know somebody right maybe you’ll get
46:35
lucky hashtags we’ll stick around you
46:37
get to talk to him or same for matt
46:38
right
46:39
so we’ll do that here in about 10
46:40
minutes but that’s it if you have
46:41
questions go ahead and uh drop them into
46:43
the thing and we will kind of ask them
46:47
real quick ferris let me interrupt
46:49
that’s okay
46:50
ah multifamilymasters.com if you’re not
46:53
a member of our facebook group
46:55
get on facebook hit the search link at
46:57
the top multifamily message.com
47:00
join our facebook group approximately 7
47:02
000 members and
47:03
we are multifamilymasters.com if you’re
47:06
interested in hosting a meetup chapter
47:08
we would love to talk to you pal talked
47:10
about that a little bit on the onset of
47:12
tonight and
47:13
if you’re looking to learn shared
47:14
network and grow in the commercial
47:16
multi-family cash flowing real estate
47:19
sector we have a mastermind we would
47:21
love to talk to you about feel free to
47:22
email
47:23
gigi at multifamilymasters.com once
47:27
again that’s gigi
47:28
at multifamilymasters.com our
47:31
mastermind is all about helping you
47:33
learn share network and grow
47:34
this business because we want to hold
47:36
you accountable because we want you
47:38
closing deals because
47:40
we want to partner with you plain and
47:41
simple this is a team sport
47:43
let’s rock and roll this is multi-family
47:45
masters live we do this
47:47
once a month every month let’s
47:51
all go so let’s see let’s go to the
47:53
first easy question
47:54
actually i’m gonna ask you guys an
47:55
easier question really quickly
47:57
and uh how can someone get a hold of you
47:59
some people are asking how to get a hold
48:00
of both you guys are popular
48:02
um and then also can you type your email
48:04
or phone number or contact information
48:05
in the chat whatever you’re comfortable
48:07
giving out but matt you want to go first
48:10
how they get ahold of me yeah oh i will
48:13
uh i’m going to post post my phone
48:14
number and uh
48:15
an email um that’s gutsy
48:18
um i’m accessible um now i’m happy to
48:22
to serve the community and uh share what
48:24
i know
48:26
all righty and then hashem i’m typing my
48:29
email here as we speak and
48:31
basically more than happy to take any
48:34
questions
48:35
type in your emails and maybe they’re
48:36
your the link to your company web pages
48:38
but so
48:39
sure all right so that’s how you can get
48:40
a hold of these guys uh next question is
48:43
what comes first
48:44
the contract or the entitlements maybe
48:47
this question more for
48:48
you matt uh the contract comes first
48:52
um what works you uh
48:56
you know we we always do it you know our
48:59
our analysis uh to sell for residual
49:01
land value make
49:02
make an offer try to get into contract
49:05
um
49:06
we try to get a long due diligence
49:08
period um
49:10
typically between 30 and 90 days we try
49:14
to get 90 days as possible
49:16
um we can do it in 30 days
49:19
if if we have like a geotech who doesn’t
49:22
have
49:22
permit issues but we always do a geotech
49:25
study and
49:27
if we can’t get a you know a drilling
49:28
permit then we have to extend due
49:30
diligence
49:31
um but uh we can typically typically get
49:34
everything done
49:35
um in 30 days it’s everything if
49:38
everything
49:38
you know that we need from our
49:40
consultants uh gets to us in time
49:43
but we’re really reliant on consultants
49:45
so
49:46
we explain that to a seller when we kind
49:48
of work out an extension if they
49:50
you know you know just can’t go beyond
49:53
30 days
49:54
all right but the contract and then due
49:56
diligence
49:58
and then once due diligence passes
50:00
you’re you put down
50:01
your hard money deposit and then uh
50:04
you uh you go in for your entitlements
50:07
and if it’s the bay area
50:09
you should expect um a year
50:13
um if it’s san francisco you should
50:15
expect two years
50:17
sometimes next question is for you
50:19
hashem
50:20
how do you manage uh the increase in
50:22
lumber and building supplies
50:24
for a current project right are you just
50:26
having to put the project on pause
50:28
or kind of really make this the
50:29
developer make the decision i mean kind
50:31
of what does that look like right now
50:34
well right now we are basically with the
50:36
projects that we have on hand we’re
50:38
lucky because we are at the stage
50:40
that it did not affect us much uh
50:44
we are at the very end of uh basically
50:46
finishing out the projects
50:48
so the cost did not affect us big time
50:50
we procured most of our material in
50:52
advance one of the things
50:55
basically that we always do in our on
50:57
most of our
50:58
excuse me on our projects is we tried we
51:01
have a procurement department here just
51:03
basically to take care of what we need
51:05
on every project and then i
51:08
make sure that we procure everything we
51:10
need
51:11
before we start the construction meaning
51:14
i
51:14
sign my contracts with all my subs
51:17
before i start construction and then
51:19
i sign my contracts and lock my prices
51:22
for
51:23
most of my material before i start my
51:25
construction so
51:27
that saves me a lot of headache during
51:29
the construction phase material prices
51:31
going up going down
51:32
it doesn’t really concern me uh it does
51:36
affect us sometimes just about a little
51:39
bit because the majority of uh
51:41
our material prices are already locked
51:46
awesome let’s see so next question
51:51
um maybe this is for you matt which is
51:53
uh how does underwriting defer in
51:54
development versus existing multi-family
51:56
property purchase
51:57
where to start very high level can you
51:58
kind of keep it brief because i know
52:00
running short on time yeah no we uh
52:03
buying an existing property with cash
52:05
flowing you’re
52:06
you have cash flow in place already and
52:08
you’re valuing it based on the cash flow
52:10
in place
52:11
um with a development deal where we’re
52:14
valuing the property based on
52:17
uh the cash flow that we expect to to
52:20
make
52:20
once the property is completed and
52:23
leased up and cash flowing
52:27
cash is king all right let’s see uh next
52:30
question in california what specific
52:32
things are driving the high costs that
52:33
are keeping developer from building
52:35
lower end projects
52:36
that’s a good question labor
52:40
maybe the answer is everything so matt
52:41
what do you want to say
52:43
uh no i think the big difference between
52:45
building in texas
52:46
and the bay area is is the labor cost
52:49
all right um next up uh
52:53
do you guys um i don’t know if you guys
52:55
do partnership opportunities i guess
52:57
you know do y’all jv with others or or
52:59
not
53:00
i’ll kind of ask you both uh for us
53:04
uh yes we are reliant on joint ventures
53:08
we have i have a co-gp in my deals and i
53:12
have a large institutional
53:14
uh partner in my deal as well
53:18
uh we mainly are basically like i said
53:20
design building like
53:21
engineer architects and contractors so
53:24
uh it depends
53:26
on the opportunities we may we made jv
53:29
but uh we haven’t done so so far
53:33
all right um actually here’s a good
53:35
question i was going to ask this earlier
53:36
that kind of got distracted which is uh
53:39
matt for you how do you get compensated
53:41
right was it to developer fee what’s
53:42
that structure look like
53:44
um in throughout my career
53:48
which is now about 18 years financing
53:52
and developing multi-family property
53:54
the standard fee is three percent
53:58
of the project budget and then there’s a
54:01
construction management fee
54:02
that is two percent of the hard costs
54:06
all right let’s see so uh
54:10
next question um either of you have
54:12
feedback on kind of
54:13
just hud developments
54:17
any thoughts and experience with those i
54:19
have no experience with them
54:21
my experience with it just my like a
54:24
little knowledge is uh
54:26
takes long time to get the the deal
54:28
financed
54:30
and then your contractor has to be uh
54:33
hud
54:33
approved i believe and this is a process
54:36
that you go through
54:38
with the contractor i mean throughout
54:40
the project because it’s
54:42
i guess the the certification for the
54:44
contractor comes with every
54:46
every project uh we haven’t done any hud
54:49
deals so i don’t my knowledge about it
54:50
is
54:51
very limited but we were approached once
54:54
and i
54:54
did some little basic research on it and
54:56
then uh
54:58
this is all i know about it all right
55:01
and then one last question and then we
55:03
will shift the breakouts because i know
55:04
we’re running
55:04
short on time i would respectful
55:05
everyone’s time which is this is for you
55:07
hashim
55:08
i’m going to read the question then i’m
55:10
probably going to rephrase it which is
55:11
the question is how is your contract set
55:12
up between developer and gc
55:14
we set a guaranteed maximum price with a
55:16
contingency any savings the contingency
55:18
is split between us
55:20
the developers and the gc 6040
55:23
we find this pushes the gc to go back uh
55:26
to the subs and squeeze as much savings
55:28
as possible so my question probably
55:30
to rephrase it a little bit ask him is
55:32
that a good structure and why
55:34
or why not right um
55:37
we’ve done that before uh but basically
55:43
let me let me explain to you
55:44
construction construction is
55:47
it’s like think of a triangle and then
55:50
on every corner of that triangle what
55:53
the first corner there’s time
55:55
or let’s say call it schedule or time
55:57
and then you have
55:58
money which is cost and then you have
56:01
quality
56:02
any time that you go towards money you
56:04
are going away from time
56:07
and then from quality when you go
56:09
towards quality you’re going to spend
56:10
more money and
56:11
more time so you want to be in the
56:14
middle of this
56:15
triangle this equidistance from
56:18
all corners to have a very successful
56:21
project
56:23
on time good quality and then within
56:25
budget
56:26
so to answer your question guaranteed
56:29
maximum yes
56:30
that may some of the contractors they’re
56:32
going to go and
56:33
try to squeeze their their the
56:35
subcontractors but when you squeeze your
56:37
subcontractor too much you may
56:39
sometimes uh put up either
56:42
quality in jeopardy or the time is going
56:44
to be in jeopardy
56:46
and then this is not the philosophy when
56:48
i i sign a gmp
56:50
contract it’s not like i’m going to go
56:51
back to my my subs and try to squeeze
56:54
them to
56:55
lower the cost the gmp contracts is
56:59
basically when
57:00
uh i’m going into a contractual
57:03
agreement with you and we don’t have
57:06
the the uh the full specifications of
57:09
the project or the project is a very
57:11
early stage
57:12
to basically get give you a detailed
57:15
breakdown of the cost and accurate cost
57:19
this way we prefer to go with a gmp and
57:22
put a contingency on the side and then
57:24
yes we split it 50 50
57:26
or 70 30 60 40 whatever that formula is
57:29
but this is where we go or when we go
57:31
with the
57:32
with the gmp contract uh and then yes we
57:35
try to be within the budget if there is
57:37
any savings
57:39
yeah we are splitting splitting the
57:40
savings that does not mean that we’re
57:42
going to go after every subcontractor
57:43
and try to squeeze but this is
57:45
type of contracts that we go with at uh
57:48
if we’re going into a contractual
57:50
agreement at the very early stage of
57:52
design
57:53
but when we have a full design package a
57:56
full specification package
57:58
uh we go usually with lump sum because
58:01
you as a developer you want to
58:03
uh limit your or shift the liability to
58:05
the contractor you know that okay this
58:07
is
58:08
it’s going to cost you 10 million 10
58:09
million it is it’s not going to be
58:12
a one percent more or one percent less
58:17
when you go guaranteed maximum price
58:20
kind of like that
58:21
liability or it’s shifted it’s shared
58:24
between the
58:26
the owner and general contractor so it’s
58:29
the type of contracts is the science by
58:31
itself that
58:32
i i have a master’s degree in
58:34
construction management
58:35
so that was a course by itself
58:38
back in college it’s a science of
58:41
shifting liabilities between
58:43
owner and contractor uh it’s not just
58:46
squeezing subcontractors no i disagree
58:48
with that
58:50
all right good last question so
58:52
definitely different than the others but
58:54
matt hasham thank you guys very much
58:56
wealth of information
58:57
appreciate it um for those of you that
58:59
want to get a hold of them their contact
59:00
information is in the chat
59:02
so it is there if you guys can’t find it
59:04
reach out to me happy to get it but
59:06
appreciate it you guys are welcome to
59:08
stick around for the breakout maybe
59:09
we’ll get to
