Andrew Steffens on Developing 2,500 Apartment Units

Andrew Steffens is Market Director for Wood Partners in Nashville, TN. Wood Partners is one of the nation's largest multifamily real estate developers and has completed over 2,500 units in the Nashville area.

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Key Takeaways:

• Importance of people skills and networking in real estate development - Andrew emphasized that the ability to communicate and build relationships with various stakeholders is crucial, even more so than technical skills

• Adapting to market conditions - Andrew discussed the need to be flexible and adapt development strategies based on changing market factors like construction costs, interest rates, and supply/demand. Focusing on "singles and doubles" rather than swinging for the fences.

• Long-term perspective on deals - Andrew noted that while short-term market volatility can impact project performance, taking a long-term view and holding assets can help mitigate risks.

• Mastering the local market - Andrew advised newcomers to become "masters of the market" by deeply understanding the competitive landscape, rents, occupancy, and pipeline of new supply in their target area.

• Institutional developers' advantages - Andrew's company Wood Partners, as an experienced institutional player, is still able to get deals done and access capital despite the challenging market conditions.

About Your Host:

Tyler Cauble, Founder & President of The Cauble Group, is a commercial real estate broker and investor based in East Nashville. He’s the best selling author of Open for Business: The Insider’s Guide to Leasing Commercial Real Estate and has focused his career on serving commercial real estate investors.

Episode Transcript:

0:00

Are you looking to take the next step toward investing in commercial real estate? But don't know where to go. Siri central offers a comprehensive education and coaching platform designed to help you get started. Our online courses cover a wide range of topics, from the fundamentals to advanced strategies, ensuring you have the knowledge and skills needed to thrive in this competitive industry. As a member, you'll gain access to our exclusive online community and monthly group coaching calls, providing you with valuable networking opportunities and personalized guidance from experienced professionals, whether you're a beginner or looking to take your career to the next level. Cre Central has the resources you need. Visit www.crecentral.com to learn more. Welcome back to the commercial real estate investor podcast. We are live from the cobble group Studios here in East Nashville for an awesome conversation today with my good buddy Andrew Steffens. He is the market director of wood partners here in Nashville, and is responsible for, I mean, we had talked about 2500 apartment units, but now it's probably closer to 3500 Yeah,

Unknown Speaker 1:05

3200 3500

Tyler Cauble 1:06

that's a lot of apartments. It's

Unknown Speaker 1:08

a lot of houses, yeah. So

Tyler Cauble 1:09

it's a lot of housing. I love it, man, you're making a debt and the affordable housing issues. So he got his start right out of Vanderbilt Owen with Citi, then moved into multifamily development with Alliance, and then you were at, I think was RAM for a little bit, and then you got into wood partners, and now you're kind of doing your own deals, man. I mean, I know that's a very brief history and background on yourself, but tell us how you got here. Yeah,

Speaker 1 1:32

thanks a lot. Appreciate the opportunity to be here. Have enjoyed kind of keeping up with your career and all that you do online and on the socials and everything so fun to kind of have fun for an old guy to, you know, get his first taste of this. But yeah, yeah, you know, I actually graduated from University of Tennessee with a poli sci major. Was a poly sci major, applied to law school, got accepted to law school, but you could pay like, 950 bucks to defer one year. So I decided I'd come to Nashville and just kind of take a break, have some fun. Had still had a girlfriend back in Knoxville, and started having so much fun in Nashville that I decided that I didn't want to go to law school. My brother was there the year that I didn't go, so his first year. And I'm just like, you read, or you got to read how many pages tonight? And like, I don't read that in a year. That's probably the

Tyler Cauble 2:28

best 950 investment you've ever made. Yeah, I

Speaker 1 2:30

did have to pay my dad, fronted the money. I had to pay him back, but got into commercial insurance. So basically, that was my kind of job right out of undergrad, brainless, just meaningless job. Hated it very boring. I was a producer, making pretty good money, but knew that I needed to find something else to do. My dad was a builder and developer, so it's kind of my blood, and decided to go back and get my master's, if I could get in, and and then just use that as an opportunity to switch careers. And I applied, actually to be in the executive program at Vandy, and felt like I had everything that I needed to get in there. And they called me and they're like, hey, you know you you probably don't have enough management experience to do the executive program, but you potentially could be a candidate for the full time program. And at that point, I hadn't really decided if I wanted to go full time. Full time was a lot harder to get into. But I just said, you know, oh, well, let's go for it. Applied. They and then they came back and said, You got to get, you know, your score up a little bit on the GMAT. I did that got in, and the rest is history. So studied real estate and finance while I was there, which I had no background in. In fact, I remember them talking about model building models, and I didn't even know what that meant. So at the, you know, ripe age, at 28 years old, about to get into real estate and finance, I didn't really know how to use Excel, but Owen,

Tyler Cauble 4:02

Owen goes hard on it too, yeah, because they go straight into financial modeling. I didn't even teach you about commercial real estate. It's like, No, we're going to talk about cap rates today and start modeling it out. Yeah, jumped

Speaker 1 4:12

right into it. And it was good. I mean, good trial by fire. Good way to just kind of be forced to to get good at it quickly, or you were going to fail out. So ended up, you know, kind of having being able to find that skill set. Had a great time at Owen, and then graduated. And I mean, I was there during the GFC, the great financial crisis, so being safe in the business school was kind of nice to be in that location during all that, but then you got to get a job. It was really tough to get a job. And kind of interesting to statistic back then. This is 2010 40% of the class of 200 people, so 80 people were trying to stay in Nashville and get a job, which is kind of remarkable. But it was, it was the vibe was fun in Nash. Bill and in that class. So, you know, so, and I wanted to stay, so I'm like, Well, damn, you know, I'm not in the top half of these, these 80 people. I hope I can scrap a job. But was able to with Citigroup, and I was in their finance and underwriting department for tax credit lending. So, you know, kind of a NOK job, you know, making the typical amount that you would make out of business school, nothing, nothing great. Hated it. You know, was very bored, very bored, traveling to all corners of the country looking at kind of crappy, rundown deals, and all the while looking for a development job. And then, you know, as luck would have it, Alliance residential had basically shut down their Atlanta office during the GFC and then brought back their junior guy, this guy named Bob Weston. And Bob was in charge of covering Nashville out of Atlanta, and that's how all the institutional guys used to do it, cover it out of Atlanta or Charlotte, and they could never get a deal going here. Bob kind of had the vision being like, there, there is institutional investment that wants to be there. We got to get a deal done. Let's just find somebody there. Found me, you know, had the banking background, the finance background, but not the development background. And the response to that was essentially, you know, you know, you're very connected here. You've been here a while. You're a real social guy, and you understand the city, and you go out a lot and party. You're our guy, and we'll teach you the development side. And so that was it. I cut my teeth at Alliance on the development side. Kind of development management, came in as a development manager and really learning the project management side. But it was my role, right off the bat, to source sites and then using their Rolodex. Then, you know, having these institutional investors come in from New Jersey or LA and San Francisco, DC, and I would tour them around and tell them what we were going to do and try to convince them to give us their money. And this was, you know, Nashville, 2013 1450, kind of on the rise. Land was available. Land was cheap, different market, yeah, just a whole different world. And, you know, had I known, I would have done every deal I could possibly do. Now, alliance would have never let me. Alliance always saw Nashville as kind of a tertiary market, which is ultimately why I left. Did, did two and a half Well, three and a half deals with them. Left while the third deal was wrapping up construction, the fourth deal was getting started with construction, and then I just kind of needed to get out from underneath that team. And Ram was looking to do the same thing, open an office here. You know, my stipulation was, look, I want to build a team. Nashville is going to be a bigger market than most people think. And they said, okay, and worked for them and started their office here. Got two deals under contract, both of them financed. And then, and then wood partners kind of showed up and just said, Look, we're just gonna, we're gonna make this opportunity equal to the opportunity that all of our full time partners have. It's a better deal than you have now. We believe in you, and we'll support you to actually build an office here, and it'll be our 19th office at Underwood partners, and you'll report to the guy out of Orlando. So not, not Atlanta, not tertiary. It's like you're one of our offices. And it's been great, really great culture, supportive executives, great partnership. And they've really, you know, Let me punch the gas and get some deals done. So I think I did, you know, call it three and a half of the lions. Two really just did one deal with Ram. The other one kind of came with me when I left the to sell of the two. It was an assemblage, and of the two sellers, one of them was very committed to me and said, Look, if you're leaving RAM, I'm not doing the deal with lamb with Ram. He had an out in the contract punted. And I ended up, ended up getting that deal done, actually, over here in Ace national So, and then, since I've been at Wood, I think we just, we're under construction with our eighth and ninth right now, wrapping up six and seven. Get coming out of the ground with eight and nine. So it's been, it's been great. It's been fun. You know, it's been crazy to watch the city change as much as it did and as much as it has in the last 11 years. You know, it was a town, right? I mean, you grew up here, small town. Yeah, it was, it was a town when I got started, and now it's a city. So, you know, you kind of take the good, the Great, the bad, the ugly with that. But obviously, you know, being a developer on pro growth and love to see the city grow, we've got some growing pains that obviously we're going to work through, and every city does. But you know, it's been. A fun ride multifamily development, I tend to be a little bit more creative, and I appreciate, you know, the design side of the business. And you know, multifamily is diverse enough, not necessarily right now, and we can get into that, but where I've gotten to do some really cool stuff, you know, focusing on unit design, but more so amenity design. The very first deal I did, which was over in shermantown, had a really cool capital partner, big name, but don't want to bring that up, but, and the guy, kind of the relationship manager was rolling to music, and I'm like, Well, I'm real into music, you know, and this is kind of years process talking through all this and and, you know, I think over our eighth bourbon, I pitched the idea of putting a music venue on top of the parking deck. And he's like, Well, what's it going to cost? And I just kind of threw a number out there. I think I told him 1,000,005 I think it ended up costing 1,000,007

Tyler Cauble 11:06

but it didn't matter. That's pretty good seven the door, yeah,

Speaker 1 11:09

just WAY less, way, way less than I know now, but, and he's just said, Screw it. Let's do it under the condition that you get somebody big to play the grand opening. And, you know, as a developer would said, no problem. I got that. So, you know, we did this music venue. The space turned out great. Had the big ass fans when they were kind of first new and put this really expensive sound system in, hired a guy that I knew in the industry that helped us design the sound system, and had to view a downtown. It was great. And then, you know, to follow up with my end of the bargain. Before Jason Isbell won any Grammys, where he would have been way too expensive, we were able to get him to play six a 75 minute set up there for 500 people, some residents that lived in the building. It was kind of a lottery system, so most of the residents that were living there got to come, and then some real estate guys, obviously, our Capital Partners, plenty of Alliance guys came because they want, you know, and it was a very up, up close and personal experience with that. So anyway, get to do a lot of cool stuff. You know, golf simulators. We're wrapping up a project right now that's got a four quart pickleball stadium, essentially in the middle of it. So it's a 14 acre site, there's seven buildings, and kind of in the middle of the seven buildings, it's about a $2 million pickleball facility, you know, will that work? We don't know yet. The deal's leasing up pretty good. The pickleball courts are not done yet, which I'm ticked about, but they'll be done in about a month. But we've all the kind of pickleball associations have read about it in the paper. They're reaching out saying, hey, we want to do, you know, this partnership, this tournament, whatnot, but it'll be a really nice facility, two and two in the middle. You've got fire pit bar TVs, you know, seating area, stadium seating all around it. So, you know, that's the side of the business that I love, and love seeing that kind of stuff come together, as I know you do too, you know. So that kind of that gets me up in the morning and gets me excited about about the job. Yeah,

Tyler Cauble 13:10

it's just, it's so much fun to get to do things like that. You should, you should talk to you. Oh, I do you all. I have had pickleball courts development company versus development company. That'd

Unknown Speaker 13:18

be a fun can you help with that? Yeah, I'm all in. That's good, good, good.

Tyler Cauble 13:21

Okay, I want to take it back a bit. I mean, man, you've had such an amazing career when it comes to real estate development, but I want to go back to what piqued your interest in multifamily development, specifically, because a lot of a lot of people, when they'll go through Vandy Owen, and they take these finance and real estate classes, typically, they start looking at, okay, let's go into investment banking. Let's go into private equity. You took a bit of a different route, which I mean, hey, it's the route I would have taken. But why? What piqued your interest about multifamily development?

Speaker 1 13:50

Good question. And a little bit timing, a little bit right place or wrong place, and then a little bit just kind of what felt comfortable. So I did go to New York between, you know, that summer and, I mean, I did some interviewing around New York at investment banks. But the reality was, especially during the recession, there was some really smart Wall Street washouts that that ended up in business schools across the country. And those were that was my competition, and I wasn't going to be able to compete against those guys. They understood financial modeling and financial structuring that I and they'd been doing it since they were 25 years old, you know, here I am 30 years old. So I didn't, I really wasn't going to be able to compete with those guys. Not to mention, you know, I entered business school very focused on being very studious, which I had never really been in my life. You know, I'm. I'm kind of one of those guys that you know does enough, but never more. You show up and you get a B, that's right, that's right, yeah, three. Oh, so you know, because of that, I wasn't gonna, I wasn't gonna graduate in the top 10% and that kind of takes you off the board for a lot of those kind of bigger companies, and then, you know, right place with multifamily, you know, I just kind of, again, I have a the reason that I was selected, and part of the reason I was selected is I had a good network when I met the the Alliance guy. I mean, he was impressed. I actually have kind of funny story I'll tell, but he was just impressed with the amount of people that I knew in Nashville. And he was a multifamily guy, not an office guy or anything else. I mean, that just kind of, I fell into that, and then also just the sticks and the bricks and the creative side of it was, I mean, was very comfortable. You know, I grew up going to job sites with my dad, my dad, you know, had bundles and bundles of blueprints in the back of his Bronco growing up, you know. So it's like I had grown up around it, and it felt, it felt comfortable. But I think the the moment I got hired, the moment that Bob Weston decided, decided to hire me, was, I think, we had lunch, we had toured around the city, you know, I'm a banker. I'd probably taken the day off. And then we go to drinks at the Hutton Hotel, which was, you know, kind of the place back then, and we're talking, and it's going, well, I don't have a job yet, but we're walking out, and there's a group of three girls sitting at the table by, you know, kind of by the door, all very dressed up and looking nice. It just so happens that I know one of them, and she's like, Stefan's. And we start, you know, Bob and I start talking to these three beautiful women about to go out in Nashville. And the conversation ends, and we're walking out the Hutton hotel, and he kind of looks at me, and at that moment, I was like, Yeah, I just got that job. Like, yeah, you know, you're plugged in here. You're the right kind of fit for what, you know, ultimately, we need somebody that is going to be able to find us land, negotiate land, and understand where young people want to live. And I think for whatever reason, that kind of that sealed the deal for him. Yeah.

Tyler Cauble 17:16

I mean, that's, that's pretty impressive, because when you're getting into development, I mean, one thing that I hear from the audience quite a bit is it's really tough to get a foot in the door. But I think a couple of the biggest takeaways that I just heard from you is having the modeling skill set, being able to actually dig into spreadsheets and underwrite deals, and then being able to talk to people, getting out, connecting people like you didn't know anything about development, nothing you had grown up around construction similar to I did, but probably never picked up a hammer and worked on a job site, right? Not much, yeah. I mean, so at least not a 250 unit apartment complex. That's

Unknown Speaker 17:52

right, yeah? So, I

Tyler Cauble 17:53

mean, it's like, you don't even have to have this wide array of skill sets if you're able to break in and bring something to the table that somebody that's doing it finds valuable? Yeah, I mean,

Speaker 1 18:02

there's a lot of talk early on with the learning curve and drinking from a fire hose, you know, and that is the case. There's a million things to know in development, and then there's a million more that you don't know, that you could potentially learn just based on what happens with that particular deal. But the, you know, the Vanderbilt, the Owen piece, kind of certified me to know enough about finance and modeling and underwriting, but it was the network and the ability to deal with, talk, to read and understand people, and that's, that's the skill that us that you can't avoid using in this business. You know whether it's a fire marshal down at the city that you know you're waiting for approval, and it's just at the bottom of their stack and they're in the middle of lunch, or a storm water guy or a city council person or a landowner or a capital partner, or, you know, your boss, you know, our CEO. I mean, it's in you wear a lot of hats, or going down to a construction site. I mean, there was that my second deal, the plans weren't great, and there was a lot of holes in them. I was here alone on my second, you know, probably my third year of the job. I didn't really know how to solve them, other than put a hard hat on, put go buy some work boots, and start going to the job site and walking around with the superintendent. And be like, what questions do you have? He was like, well, this wall is not designed. What do you want to do? And figuring that out, and then walking, you know, around the other side of the site, and this, you know, this retaining wall and these windows, and this doesn't all coordinate, and we can't wait on the architect because he's taken forever. Let's just figure it out now. And I'm like, Well, okay, I know a little bit about construction, and I understand that. We got to figure it out because we can't wait. So let's just go. So it's the ability to wear different hats and to communicate with people across the spectrum of. The the job functions of construction and development, I think that is more important than anything. I mean, you know, in reality, I don't do a whole lot of underwriting anymore because I have a team, and they're, they're better at me than at that now. But of course, that was a basic skill that I had to, had to pretty much master in my first seven years of doing this role so but it's the people skills, and, you know, just the ability to read somebody's face when things are about to go south, and be able to stop that and pivot, you know, or you know, the ability to communicate with anything from a generational farm owner to a Middle Eastern junkyard owner, to a very sophisticated New York bank, all three of which own pieces of land that I want you know, and that you talk to all those people in very different ways, and without that, without land, you can't develop. So, you know, it's anyway, that kind of rambling, but that's, yeah, you know, it's the people skills that I think is is super important in this job.

Tyler Cauble 21:08

Yeah. I mean, you gotta, you gotta know how and understand how to meet people where they are, right? No matter what background or anything, no matter where they come from. One thing that you said that I think is really interesting to point out is that you were, you were jumping in on the job sites, walking around with the superintendents, asking the questions. And one thing that I've always felt like is commercial real estate and commercial real estate development, it's like learning a second language. Can you read it? Or can you learn it by reading a book? Can you learn it by listening to somebody talk about it? Can you learn it by watching videos? Sure, but when you immerse yourself in that language. And that's all that you you know, hear day in and day out. You learn it so much faster. Yeah, so I think that's it's important to pull that out. We've got a question from Stan Conway. Stan, what's going on? Man, good to see you. He's down in Miami standing. Love the podcast. Stan was actually up here not too long ago. He's a developer down there. Okay, as well. He's saying, what are the rents for these projects that you were talking about earlier. Are rents growing plateau? Thanks. I think that'll kind of put things in context. Sure. Yeah, where did they start back in 2019 compared to where they are today?

Speaker 1 22:09

That's a great question. So I actually was thinking about this podcast this morning, and went back and looked and underwrote rodstone Germantown at a today at a that day's rent, which would have been, you know, 13, or probably 2013, at 1750, so that would have been, and that that would have been like a buck 80, Buck 75 and that's an urban deal where there are certainly developers out there trying to get urban deals, even urban stick frame deals. So five stories and below capitalized at like $3 now that deal today is probably 250 you know, we we at Wood partners. I mean, I kind of saw the writing on the wall. I feel like about when I left RAM, left Alliance and joined Ram was, you know, it's maybe not the most prudent strategic decision to just battle it out in the urban core. And I wanted to kind of do what I call edge urban, and then, of course, Suburban. So edge urban being, instead of, instead of five story structure parking, six story structure parking, you're getting it. You're getting, you know, 678, acres. And you can do a four story very well and highly amenitized deal, but it's all surface Park, and you're saving, you know, five, $6 million on the overall hard cost budget. So, you know, urban rents, edge, urban rents, suburban rents. You know, suburban rents, which is really we're focused on suburban right now, just kind of given where things are right inflation, the cost to build is really high. Obviously, the cost to borrow is really high. And then, you know, if you own land within three miles of downtown Nashville, your land is worth what the what the guy four offers ago said he was going to pay you, even though that deal didn't go and the next four didn't go, but it's still worth that. So, you know, suburban has been kind of a target of ours over the last 18 months and those rents, you know, kind of the most basic product that we can build. Still has a pool, fitness club room and all the class A amenities, but just all the bells and whistles and all the, you know, the creative fun stuff is a little bit more stripped out of that deal. And that deal we can get done for about 1700 bucks on 900 feet. So what is that buck 70? Almost just under two. Okay, yeah. So, I mean that that's, that's where rents are for suburban and then, you know, for the urban stuff we're looking at right now. I mean, there's not a lot of deals in Nashville that are getting north of 2300 which is, you know, 262 70. I mean, they need to be, there's, it's, you know, there's, that's the only way to make a pencil is at that rate. That's right. But if people pay it, can people pay it? Will they pay it? Right? Now they're not paying it, because there's, you know, 6000 units. And Lisa, you know, a lot of units, and lease up, and people can negotiate and bounce around. I mean, it's. Certainly a renter's market right now. Luckily, we're not. We don't have any deals delivering in the urban core right now, and we're not battling it out with anybody. But there's a lot of people. There's a lot of blood in the water. You know, there's two months, three months, even four months free on some of this more urban stuff in Nashville. So tough story right now. It'll all flush through, flush through there. If you count the number of multi family permits that have been issued in, I guess, in the past 12 months, that's less than all of the permits in q3 of 2022 so it stopped, you know? And that's because you can't get deals financed. So sounds like the Fed rate hikes are working. That's right, that's the Fed rate rate hikes are working. There's a lot of supply in Nashville, but it will get absorbed. It's going to take 12 months, and it's going to, we're going to be feeling the pain for the those 12 months. But once you know that's flush through, it'll, it'll kind of loosen up. And, you know, we're, we're not stopping. One of the advantages of being with an institutional developer is we're a low leverage company. Our deals are typically leveraged between 50 and 60% so 50% seems crazy, but because of that, because we are a very safe company, guess who's still in business? We are. Yeah, yeah, we can still get construction loans. And, you know, because of the experience and our our tracker record of success, we still have equity that wants to do deals too. Now, the box has gotten smaller, but they're still there. And we

Tyler Cauble 26:34

have that conversation on this podcast all the time. It's like, I would rather be at 50% on every single deal now, now that I am where I am where I am. I mean, you know, when you're first getting started, you're like, hell yeah, let's go 90% why not? Yeah, somebody's gonna give me the money. I'll do it's great, until it's not, yeah, exactly that. And that's the problem. It's, you know, it's a double edged sword, yeah, right, yeah. It can, it can cut the other way, you know, pretty quickly. Okay, so I am. I'm obviously not in multifamily. I come from the development side. From an outside perspective, it seems to me like Nashville is in 2017 again, in terms of the amount of units that have been delivered, the blood in the water, the the amenities, free, rent abatement, all of that kind of stuff that multifamily developers are giving. I mean, you've been in the market since then. Does it feel the same way to you? Is this something that's, hey, this was just a normal cycle. It'll be down for 12 months, and we're moving on. Yes

Speaker 1 27:24

and no, it's a normal, normal cycle. And 12 months from now, it'll feel different, better. 17 was not as dramatic as this. As far as just the product and supply, there's so much supply, you know, Alliance residential in 2012 was very forward thinking and saying, We got to have a guy there, you know, let's open an office there. Everybody's got an office here. Now, you know, I was, I was a small fish in a small pond, you know, small fish waving a big flag in a small pond in 2012 but now every development company, certainly on the east half of the country, has sent someone here and moved, you know, moved them here, found somebody here, and with that has come some marginal deals. You know, we got to just get one going so we can get the fees keep the office going. But that attitude, I think, has really, you know, or I know, has affected the amount of supply that is in the urban core. I mean, we've just got a lot of available apartments, empty apartments that are getting leased up and getting absorbed. But if I look back and I kind of think about the math when I first got in the business Nashville needed, you know, Nashville was starting to grow, but it wasn't nearly what it is today. And we needed about 3030 500 units a year. So, you know, I do a deal that's 350 units and nine other guys do it, and that's good, you know, I'd say four or five years later, we needed about 4500 units a year. I think today we probably need about 6060 500 units a year. And I think in 2023 and 2022 it was like 16,000 units were delivered in those in those 18 months, and they just didn't, they don't, it's all timing, right? And they just didn't all get absorbed. You know, of course, the fact that Oracle, you know, hadn't really started on their campus. I mean, a lot of people were banking on that. I mean, hell, you look across the river, and MRP has got that massive deal sitting in the middle of nothing, yeah, and it's leasing up. I mean, it's trying to lease up. You know, they were banking on Oracle show up. And that's a, I think it's 700 units. So that's an extreme case, but you got, you got a lot of that going on in Nashville right now, but we will be back for sure. I mean, we're a very, you know, the six pillars of the economy here, we have things that others don't, government, employees, education, you know that a lot of major cities don't have, to the extent that we have. So we can work around these, these blips. And, mean, we came screaming at us, 1718, you know, and and the slingshot, that's right. And what I'm, you know, what I'm trying to to talk to people about is, you know, that scared us Alliance back then, and we really hit the brakes for six months. I mean, they told me, Don't pursue anything for six months. We don't want to spend any money. Let's just see how this whole thing shakes out. That was actually the moment when I should have been going after deals, because the timing is such that we would have delivered in a window when nobody else was delivering deals, and you were kind of, you would have been the newest, shiniest object in the market and nobody to compete against. So I think that, you know, there's some truth to that right now. So we are still very much, you know, pursuing deals now, you know, you can't overpay for land and you know, have have the cost of borrow and construction costs where they are and make that deal work, but if you work hard enough, which is what I you know, what I preach to my team is, there are opportunities. We just got to work, work, work, really hard to find them. And when we find them, you know, we will put these deals together and deliver when nobody else can, yeah.

Tyler Cauble 31:10

I mean, you've got a you've got a deal that delivered here in East Nashville. I can name four or five pieces of property right off the top of my head that are still sitting there. Nobody did anything with them. And you think about the opportunity or the position that that puts you all in for the next few years, you guys are going to be the new kid on the block, which is a phenomenal place to really be as an apartment developer, because you're not competing with the older product. You're competing with the new kid that comes on the block that has another I mean, at the end of the day, multifamily seems like it's an arms race for amenities, yeah. And so, I mean, y'all are going to be well positioned there for the next few years. It seems like,

Speaker 1 31:48

yeah. I mean, I think, and it's all about basis. And you know what? What did you really build it for? And what is it really worth? You know, we're still, still selling stuff at at sub five cap rates here in Nashville, which there are a lot of markets that are getting hit a lot worse. And, yeah, I mean, it is, it is a race. It is an arms race sometimes. But I will say, I think the best way to be successful in my seat is just to keep going, you know, and the box changes. The box. Of the things that we can do change. Maybe I'm not building Lexus SUVs anymore and I'm building keyas, because that's what people can buy right now. But that's okay. Let's just pivot, and let's get to Kia, not let our ego get in the way. And let's just focus on that. Be really good at that. And then when we see things to, you know, change, see things start to change, we can get back to building Lexus SUV So, but just keep going and getting deals done. There are deals, you know, ultimately, if we build a deal for $1 and sell it for $3 I do better than if we build a deal for $1 and sell it for two but you cannot time the market. And there are deals that I worked on and that are great deals, good communities. People love living there. The amenities are awesome. The location is awesome. But because of this, that and the other and the market, that deal is not, you know, it lost 25% of value, or some, you know, meaningful value when rates went up. So we can't control that. But if you just keep throwing darts, or you just keep playing the game and not worry about time in the market, then you know, eventually you will have a string of good deals, and then the market will fall apart again, and it'll, you know, and it'll, you know, but, but as long as you're just in the game. So that's the strategy that I I preach to my team. We just got to stay in the game. Let's just, you know, do volume and when it's time to do really cool deals and do music venues on top of parking decks, we'll get back to that. But right now, it's probably not the time. Yeah, I

Tyler Cauble 33:59

mean, I tell my team the same thing. It's like, let's just go for the singles. I don't even care about the doubles. Let's go for the singles. Let's keep let's keep the ball in play, and you know, when it comes back, we'll go for triples and home runs again. But right now is not that time. It's a matter of, let's just keep the lights on and keep things going and

Speaker 1 34:15

sing. In my business, singles and double singles can turn into doubles, or doubles can turn into triples based on things that are completely out of our control. Well, and

Tyler Cauble 34:23

that's, that's the nice thing about having a long time horizon on your deals. Yeah? Because it doesn't matter if you could have overpaid for land 30% back in 2015 you could have overpaid for construction 30% if you just held it for 10 years, you still would have tripled, quadrupled your

Speaker 1 34:38

money. Yeah, yeah. Potentially now we're we get promoted based on an IRR, and that clock is ticking. So, you know, the deal we're about to sell took us longer than it needed to. Take about 10 months, and then we had a lot of overrun. So you know, things that I can't really control. We had some mistakes in the field, on the construction side, bad subs, fire. Subs, litigation, this, and that just stuff that just took time and cost money, and that could have, could have, would have, should have been a great deal. Should have had a really low basis on a garden deal, and we would have sold it, and I would have bought a beach house. Well, it didn't work out that way, you know. And that's just the way it is. Get the next one, that's right. I mean, you know, the next one that I may not think is going to be great in today's world, when we actually go to sell it, it could be, you know, things could change, you know, post election or whatever, again, things that we can't control, but you just kind of keep shooting shots, and eventually, you know, you'll have your doubles, triples and home runs. I mean, it's like we were talking about

Tyler Cauble 35:37

right before we went live. I mean, I was telling you about the salt ranch project, and how it took us two years to finally get our permits for that. I mean, is it going to be as great of a deal as it was before? I don't know. Probably, yeah, but I mean, it's, you know, it's, who knows? I wasn't expecting for it to take a year and a half to get permits, right? I mean, that's just, there are things in development that you can never anticipate. And I think that that's, why you gotta you gotta be willing to take the risk if you want to be a developer. Yeah,

Speaker 1 36:03

there's so much you can't control, but I think that the really good developers just try to keep a level head and try to control as much as possible, not react, but be proactive, of course, and just mitigate as much risk as possible. But you got to take risk. You got to risk it to get the biscuit. That's exactly it, man.

Tyler Cauble 36:27

I mean, real estate developers make make the amount of money they do for a reason. That's right. We got a couple of questions from the audience real quick. So Stan's got a follow up question. He's saying, Thanks Tyler for suburban rents. Who is the renter? Are they commuting to the CBD, or are they working in the suburbs?

Speaker 1 36:42

Great question. I'd say about half and half. You know, I'm trying to think about our suburban deals, both of which, right now are southeast of town, southeast of Nashville. You've got Murfreesboro, big job market. So we have a good handful of workers that that live in our deal and commute southeast, and maybe the husband comes into downtown, or there's a job, you know, their jobs right around there. So I think it's about half and half. You know, it can be all over the board, honestly, but it's a good question. A lot of suburban has to do with school districts and really proximity to schools, you know, I mean, Tennessee's public education isn't great, but if you can build a deal near a school that is a couple minutes, you know, for mom to take son and then get on to work, we found that that can be really helpful and have a good impact on getting people in the door and heads and beds. Yeah,

Tyler Cauble 37:47

yeah, it makes a big difference. Derek is saying, Do you think modular real estate developers will have the potential to go into apartment developments? Why and why not?

Speaker 1 37:58

What is your definition? I guess, since I can't, yeah, modular. I mean,

Tyler Cauble 38:01

my definition would be prefab, manufactured in in a warehouse, shipped out the site and assembled, okay, like, I mean, we've seen a couple of projects here in Nashville that were supposed to be that made out of storage containers that didn't quite get there. Yeah,

Speaker 1 38:16

storage containers, I think, ended up being a bad idea. Hard to, you know, hard to apply anything to hard to insulate, hard to waterproof. Problem

Tyler Cauble 38:25

is, as soon as you pierce the struct the wall, it's every every aspect of a storage container is structural, yeah, so that's right, if you penetrate the walls, it you completely compromise every rib

Speaker 1 38:36

right is Yeah. So what we are seeing in our industry is prefab walls. You know, where they'll bring in walls and tilt them up instead of framing them on site. But I don't, I think not. I think I know that it has been worked on tried and it's not a part of our business right now. Now, what you are seeing, and what a lot of the institutional guys are doing to kind of stay in the game and keep getting deals done is we're just making our design very efficient. So instead of having 15 unit types, you know, seven or six different types of of two beds and eight different types of one beds. It's two one beds, two two beds and a three bed, and they all stack. So, I mean, to some extent, they're modular, but they're not being constructed in a modular way. So, but all that said, another way the two bedroom can fit in the three bedroom and the one bedroom can fit in, you know? So they all stack inside of each other. And what that does is that makes it very quick to build. It takes all the question out of what size lumber you need, how much drywall you need, how fast the framers gonna be on site, because they're just doing it. They're just repeating everything. And. Kitchens all back up to each other. The kitchens are all the same. So for the most part, a two bedroom that might be, you know, 1200 feet in a one bedroom that's 700 feet, they have the same size kitchen. And again, that makes it easier for the cabinet guy, the countertop guy, and there's just less mistakes. And you can, you can build it faster. So while the industry, of course, has moved in a modular direction, we're not bringing in boxes. And I just don't, I don't know that we're gonna see that in the next five to 10 years. I think it's just too complicated. Now, I would love to be wrong, because that would make our job a lot easier.

Tyler Cauble 40:39

Well, it's a hyper localized thing too, right? It's not like you can order that from Texas and have 250 units shipped. How many trucks that would take? I mean, that's the problem is, like you'd have to do it on site or down the street. It just it becomes too much of a burden. But, I mean, I love the design aspect of that, right? Because it really does matter when you're getting into efficiency of units, especially at a 250 plus unit scale. I mean, just on our 48 key boutique hotel, we eliminated a half wall of tile and saved $75,000 right? Like, that's how, that's how, you know, I mean, it doesn't sound like a lot when you're talking about a little bit of tile, but when you start to multiply it over 250 units, it really starts to

Speaker 1 41:20

add up Absolutely. And, you know, keeping things consistent gives you more buying power, you know. So we obviously put pendants over every island and vanities over vanity lights over every bath. But a lot of you know, back in my creative, you know, urban days when we were doing that, you're doing two or three different unit finished types. That's just confuses the guys on site. It's more expensive. You can't find this. You got to find that. It's just so simplifying everything makes everything faster and cheaper. And you know, speed is super important in this business, the faster that we can deliver that first unit and start generating income, you know, the faster we can. We can get that debt start, you know, start getting the debt paid off, and just kind of get to break even and stabilize property. That's

Tyler Cauble 42:11

right, yeah. Andrew, any any advice or last words? Just on, on people that are looking for multifamily development, maybe they're they're looking getting started in multifamily development, or they're out there trying to find and analyze deals today. Yeah,

Speaker 1 42:28

know your market? You know, I like to bring in people that don't have any experience, that are hungry and smart, and the first thing that I do is tell them to just be a master of the market. So what does that mean, knowing what every deal that's going up, that's being talked about, that's planned, that's under construction, that's in lease up, and if it's in lease up, how much, what are the market rents, where they're effective rents? Why is this unit doing bad? Why is that unit doing good? And just all that information is out there, right? And that's just kind of beating the streets. And I really encourage my team to shop deals a lot. Walk in there and, you know, you can blind shop it, but we don't even have to do a ton of that. You know, I'm a real estate investor. I'm a local real estate investor. I've been watching this project go up, super excited about it, super interested in it. Could you tell me about it? Could I do a tour? And then, you know, nine and a half times out of 10, once that tour starts, you build a relationship with that leasing agent. She'll tell you everything. So knowing your your market is the best way to get started. And if you get that opportunity, spend the next you know, three months of your life. Don't do anything else other than just learning your market, becoming a master of your market. At the end of the day, my job is to find opportunities for institutional investors to cut that 5067, $70 million check to me, they're not going to do that unless they are 100% sure that I am a master of that market.

Tyler Cauble 44:05

That's it. That's that. And your phenomenal conversation, man, if anybody out there wants to follow what you're doing, check in on wood partners, or maybe we got some institutional investor that wants to give you a check for 70 million. How

Speaker 1 44:16

can they find you? You know, I'm not real fancy. I don't have a lot of social media, no podcasts or anything. You know, I guess just go to the wood partners website. I think my pictures on there, maybe my email address, if you're, if you're an institutional investor, call Tyler. He'll call me. But yeah, you know, we try to kind of fly under the radar to some extent. But you know, it's been great. I appreciate you letting me come here. And this is fun. First ever podcast, so appreciate that studio. Yeah, it's fun. All right, man, all right. Andrew,

Tyler Cauble 44:50

appreciate you. Man, thank you all. Thank you all for joining. We'll see y'all later.

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