Episode Transcript
[00:00:00] Speaker A: Foreign.
[00:00:09] Speaker B: Welcome to the Real Estate Chicago style podcast. I'm your host, Joe Smazel. I'm an active in Chicago multifamily space in a couple capacities.
I'm an investment sales broker in Tara Realty. That's where I spend most of my time. And then I'm an owner operator of small apartments on the north side with my wife Kate.
Today we're joined by Nate Ernst, founder and principal of Envoy Partners. Nate, thanks for making the time, man.
[00:00:35] Speaker A: Thanks for having me. Excited to do it.
[00:00:37] Speaker B: Good.
Well, I'm excited to get into it, but first I'll give a little bio for folks that aren't familiar or should be more familiar.
Nate is driven to restore and build apartments in retail. That set the bar for user experience.
Is a career of figuring out projects not suited for every eye. I love that line. At Envoy, he's responsible for all aspects of the development process and management of their assets.
Prior to founding Envoy, Nate founded Ernst Development Company in the wake of the GFC with the purpose of acquiring distressed real estate and restoring it to provide excellent housing with superior property management services. Which you did effectively and we'll talk about. You acquired and repositioned over 40 properties under the EDC banner before joining forces with Corey Faulkner to form Envoy.
Anything to add to the bio?
[00:01:28] Speaker A: Sounds right on.
[00:01:29] Speaker B: Well, you wrote. I mean, it was on your website, so I assume you.
You at least proofed it. That's one part of it I haven't. I haven't bothered to be creative with. I'm like, yeah, I'm just gonna introduce people the way that they wanted to introduce themselves to the world.
[00:01:42] Speaker A: So it's a safe bet.
[00:01:43] Speaker B: Yeah. And this isn't really what I do for a living, so we're, you know, doing our best.
We're gonna start with rapid fire questions.
What's your favorite intersection or corridor in the city?
[00:01:57] Speaker A: Oh, I think knee jerk is North Damon and Milwaukee.
[00:02:02] Speaker B: Oh, shocking.
[00:02:04] Speaker A: Yeah, shocking. I know. That's a real original.
I've always liked that. I lived in Bucktown for a couple years.
It's where when my daughter was really young, my son was brought home from the.
From the hospital at that home. And my daughter and I used to walk down to what was the old Walgreens, and we would pass by the tavern and old Cafe Absinthe and see the mess that was left there from the night before and walk into Walgreens and get a little treat and walk back, hit Gallery Cafe. And so I've seen that intersection in multiple different forms from the time I Came to the city 20, you know, 20 plus years ago and how it's changed. But I think just so much of that intersection embodies what Chicago is. But if I can take the liberty of adding a second, you know, I'm now fortunate to be able to we office in river north and have a project in the Loop, which I'm sure we'll touch on.
But every time I get to walk across a bridge on the Chicago river. So I'd say it's anywhere the bridges intersect Wacker Drive. There is such a tremendous energy that happens right there. And then you add the riverwalk to it. It's out of bounds.
[00:03:22] Speaker B: I love them both. I love them both. And, you know, rapid fire always ends up going this way because we're real estate people when we go.
But for who cares, you got a neighborhood answer. And actually almost probably 30% of the people that have been on have answered with that corner. And you have a deeper attachment to it, which we'll talk about than most. But it does kind of embody like a Chicago neighborhood. You have the L, you've got all the retail. You know, you got the buzz of the bike lane. You know, it's kind of a show, but it's kind of awesome, you know, but then a downtown too, you know, and like, I find my. We're, you know, we're half a block north of the river. And when I walk across to grab lunch or go to a meeting, whatever, Sunny day, rainy day, whatever, it just looks cool. It's just an incredible vantage point. You know, you see the. Whatever. You see the water taxi go by or the sightseeing thing go by. It doesn't matter which direct you're going take a second. Appreciate. It's like this city is so cool. Like, this is so good.
Tremendous energy. And the Riverwalk's awesome, too.
[00:04:28] Speaker A: You bring up a good point about the people on the architecture tour. I. I love to see that. I even love to see the people that are on the. On the taxi because their heads are on a swivel and they're just snapping around looking at it. There's so much to take in. It is. It's wild.
[00:04:42] Speaker B: It's the best, man.
All right. Where did the name Envoy Partners come from? From?
[00:04:47] Speaker A: Oh, I. That's my partner, Corey.
So Corey is an attorney.
[00:04:51] Speaker B: Call him up. Phone friend.
You should know. It might be like a dig on you.
[00:04:56] Speaker A: Well, right.
So envoy, by definition, is the last phrase in. In a poem. Last. Last stanza in a poem.
[00:05:05] Speaker B: Okay.
[00:05:05] Speaker A: And. And so the meaning behind it is relevant to Envoy because we're not going and developing 100 acres on the outside of town or something. We are taking an underutilized, underperforming asset in a block, in a neighborhood and putting a finishing touch on it. It's oftentimes a lot more than a touch.
It's full on adaptive reuse. It's a little more complex, but we're taking something that's kind of timed out and turning it into an asset that is loved by a community.
[00:05:38] Speaker B: I'm glad I asked that question. I thought, well, knowing you, I figured it'd have some depth to, you know, for me it'd be like, I don't know, it's the first four initials by last name or like, you know, Corey.
[00:05:50] Speaker A: Is an attorney and a capital markets guy and finance is incredibly creative. Yeah, he has a great, a great way about him that way.
[00:05:59] Speaker B: So good quality as an attorney too. Like creativity, not just in the marketing sense and stuff, but like problem solving.
[00:06:06] Speaker A: Great. He's a great listener. He's a great on the creative side.
Pays a lot of attention to our developments, the detail that go into them.
It's a part of the skill set that when he and I talked about getting together, didn't realize was there, but it's special.
[00:06:22] Speaker B: Yeah, that's awesome, man.
Give us an up and coming Chicago real estate person that deserves some recognition.
[00:06:30] Speaker A: Well, I listened to your podcast and I enjoy it very much. I think when Jonathan brought up some guys in his office, I think it's absolutely. There's a guy who came to work with us recently, James Armour, who has some experience with some other real estate companies and, and came to us. We spent a lot of time talking to James about what he wants to do and what he wants to be.
And he's come to us with a clear mind, a full heart, and just doing anything and everything he can to make Envoy go. He's a really special guy and a special part of the team.
[00:07:04] Speaker B: What were you solving for when you brought James? I mean, I know you have a lot of projects, so there's a level of bandwidth, but like, what was the, what was the piece of the puzzle he was immediately able to step in and help with?
[00:07:13] Speaker A: Well, I mentioned that clearmind and Full Heart.
For us, Envoy is about the user experience.
We can look at an asset and we can find a way to reposition an asset and bring apartments online.
We put a lot of care in that part of our operation, as do a lot of developers or some.
But what we want to always provide is the Best in quality, best in class housing experience.
From the time we started, that was always the goal is, you know, real estate can be operated on. The golden rule. He who has the gold makes the rules.
We. We go the other way, we go do unto others. And the fact is, and I've heard you say this on the cat on the pod before, you know, it's personal, it's someone's home. And the whole adage of, like, it's not. It's not personal, it's business. Owns no place.
[00:08:11] Speaker B: Yeah. Anybody that hides behind that is, you know, shouldn't be in the business.
This is, you know, like Sal talked about, you know, Sal Bokovic talked about where, you know, it is such a. It's beyond a customer, you know, type of relationship. This is, you know, oftentimes where the most money out the door a month goes. Where they spend most of their time, where they have memories, you know, good and bad. And it's. It's a very intimate relationship with a consumer. It's beyond that, you know, totally. And also, I think about it as in the context of the city, like, if you're going to take on, like the pro. The type of projects you're taking 19 south to south. We'll talk about it in more detail later and we'll get to some fluff here, but the gravity that that carries in the landscape that it has in a particular neighborhood, you know, or the corner of north and Damon. Use that as an example. Walking your kid by. And the building has been shitty for decades, you know.
[00:09:09] Speaker A: Correct.
[00:09:10] Speaker B: And such an eyesore. And, you know, bringing it back to life, adding housing stock, investing in the community. It's a very deep relationship with the city, too. So 100%. I appreciate your passion for it.
[00:09:25] Speaker A: We have, We've. We've never been a group that wants to go against the city, against the community.
It is always about finding what the community wants, because ultimately what the community wants is. Is.
Is the product that you're trying to provide. So why would you ever listen to the market? Listen to the market. That's it. Yeah. That is the sounding board. When we're at a community meeting and listening to, you know, we want.
There are points where you have to find a happy medium. You know, we want a lot of parking. Well, yeah, we don't know that the market really wants corner north of diamond.
[00:10:05] Speaker B: Grab a bike, cop in the blue line.
Yeah, there's a balance to that, but, you know, you can take that feedback and incorporate it. Yeah.
It's not just the people that come to the meetings and yell.
It's about what the whole marketplace is.
[00:10:19] Speaker A: What the whole market.
[00:10:20] Speaker B: Right.
What is a small thing that you've incorporated in your developments, big or small? Smaller, that you think has a big bang for your buck in the user experience, Like a small detail of whether it be, you know, in the common elements or the units, which is a small thing.
[00:10:40] Speaker A: Well, I think it's in every touch. We look for community.
So whether it's the art, we want someone to feel where they are living.
[00:10:49] Speaker B: So will you go find it? Say you're doing, you know, corner of Southport and Addison, or almost the corner, you know, Southport, just south of Addison. But so you, like, you have somebody from your team that goes in curious or how do you think about that?
[00:11:00] Speaker A: Well, I think a brand that's done this incredibly well is the Graduate, Vin Weprin. I mean, so you go into one of his places. You're in. You're in Bloomington, Indiana. It drips with nostalgia. Whether it's the Hoosiers or whether it's the red chair light fixture.
[00:11:15] Speaker B: Dude, they took a Sheridan in downtown Iowa City that was, you know, tired, gross, and like, you know, we went and stayed in. Like, how does this. How did they. How did they, like, infuse this level of character and authenticity into it? Yeah, it was so cool.
[00:11:29] Speaker A: That's it.
[00:11:29] Speaker B: And it was a. It was a dump, you know, and like, it was so vanilla and, like, lifeless, and now it's anything but.
[00:11:37] Speaker A: I kept my key card.
[00:11:39] Speaker B: That's a special thing.
[00:11:40] Speaker A: It's a very special thing. And he has a team that goes out and does that, and we search for those things. Like in.
It was a central ymca. And so we've been gathering things from the community that feels so deeply about the ymca. And we feel deeply about the YMCA because of what it is. It's personal growth and its community.
And we want our places, our apartment buildings to foster that.
[00:12:10] Speaker B: I love that man.
Fluff one. What's an under the radar Chicago restaurant?
[00:12:22] Speaker A: It's. It's not. It's. I'm not sure that it's so under the radar, but I passed by Red Hot Ranch on Ashland a thousand times before I went in there. And I was like, you know, I live in Lakeview and would drive by, drive by, drive by, and happened to go in there. And, man, do I look for any opportunity to stop in that joint and grab a double burger and fries.
[00:12:47] Speaker B: I gotta tell you, I don't let myself indulge like that very often. You know, on the weekends or doing Something fun. Eat for fun, whatever that's. But I went to. I had a property tour in Lakeview the other day, and we went to. Similarly went to Al's Beef.
Like, this is so fucking good. It was so good. Went up for a second sandwich. I'm like, if I'm here, I might as well lean in. It was awesome. I'm like, I passed this three times a week, you know? Haven't been in here since, like, stumbling out of a Cubs game when I was like, 24 or whatever.
[00:13:20] Speaker A: Didn't know. Didn't know. Now I do. And it's. Now it's a problem. Yeah, we. We have a project up in Andersonville and so kind of stumbled into tanoshi, the original.
[00:13:31] Speaker B: Which one's that?
[00:13:32] Speaker A: Tanoshi. I think it's about 5,400 Clark.
So Sushi Mike is the guy behind the counter, right.
[00:13:39] Speaker B: In a different section of my notepad.
[00:13:42] Speaker A: His omakase experience is unlike any other. So if you go in, grab a seat at the bar and sit with him.
[00:13:48] Speaker B: Oh, dang.
[00:13:49] Speaker A: He ended up with, I think three or four locations, was in the West Loop and all. Covid was hard for him.
He'll tell you about it.
But it's a. It's a story of a great entrepreneur who has a great product, and he's a great personality. You know, I love to duck in there with a friend and hang, and that's a good sushi mic.
[00:14:12] Speaker B: All right, last. We haven't really been rapid firing. Last. Last intro. Yeah.
Like, this is not enough of a thing to have a name for.
What is something that you would like to do more of in your day, and what's something that you'd like to do less of in your day?
[00:14:31] Speaker A: I'm fortunate. I'm really blessed with my day.
We talked about, you know, at the beginning of the day, like, when I was younger, I'd wake up and I'd be ready to fight, you know, just ready to what's coming at me. And I'm gonna go out and take over the world.
But I have a new way.
It's not new anymore, but it's wake up and it's acceptance. It knows that there's a higher power, that I don't have control of everything, and I'm not responsible for the outcome in everything. And so I now take the approach of whatever the day is going to bring, I'm going to be ready.
And so whether that's a bookkeeping call to get caught up or that's walking a building or a new opportunity or Capital raise or whatever the case, whatever it is, I've found a place where I'm at peace and I'm ready to take on whatever the day is and feel grateful for that opportunity to do whatever the day is going to bring.
[00:15:47] Speaker B: Well, you've got, you've managed to harness the intensity then always appreciate your intensity for the business. But harnessing, it's pretty powerful thing as a developer and an entrepreneur, so. That's awesome, man.
All right, so I listened to Just bump the mic first of 100 times this episode. I listened to your interview on the Drive By Entrepreneur podcast and that was awesome.
Everybody should check it out. What's the name of the host there? I don't, I forgot.
[00:16:15] Speaker A: John Frank. He's a great friend from college and he has a great business in Third Road Management. They do our bookkeeping. They are, they are an outsourced accounting and CFO type suite. We do more of the CFO work, but from a controller and bookkeeping standpoint, they're, they're fantastic.
[00:16:33] Speaker B: Well, check out him, check out his, his podcast because I really like that episode. So thank you. I don't want to be redundant and have you have the same conversation yet on that one. So why don't we kind of fast.
[00:16:44] Speaker A: Forward.
[00:16:46] Speaker B: To your start in real estate and at least, and we might even be fast forwarding a little bit past their start in real estate. Let's start with Ernst Development Corp. Company.
[00:16:54] Speaker A: Okay.
[00:16:56] Speaker B: Because it's. When I met you, I, you know, I historically haven't done much business on the south side of the city with the exception of Hyde Park. But you really kind of cut your teeth, I think as an investor, as a principal, and correct me if I'm wrong, owning and operating workforce affordable housing on the south sides of the city. Is, is that a fair statement?
[00:17:16] Speaker A: 100.
[00:17:17] Speaker B: Okay. Yeah. So I think a lot of times we cut to. So you, you know, I, I sunk the punchline. You did 40 of these types of deals. Right. But talk to us about the first couple because, you know, there's, I think a lot of times in podcasts you fast forward to like the end when it's successful and everything seems like.
But that is an incredibly management intensive type of asset neighborhood. And so many people have tried to go to the south side and operate buildings successfully and have not operations. The management is usually, I think the part they're chasing a 10 cap or 9 cap, whatever it is.
Talk to us about the first couple deals.
[00:17:59] Speaker A: Wow.
So I have, and I think I mentioned it even on the podcast.
I Have a father in law who's a great entrepreneur.
My wife and I were married two years before Ernst Development started, about a year before the gfc.
So he had a new son in law and a space that was on everybody's mind as the worst thing in the world. Right. In real estate.
[00:18:31] Speaker B: Yeah.
[00:18:32] Speaker A: And you know, and I went to him just before starting earns development and I said, you know, I'm going to start my own company.
You being a great entrepreneur. I wasn't sure what I was going to hear. Certainly being the father in lawyer that, yeah, like, yeah, you got to get your act together.
[00:18:51] Speaker B: How about you get a job, Nate?
[00:18:53] Speaker A: Yeah, I think my dad said the same thing. Get a job, like, but. But I had my heart set on this and. And he maybe saw that and he said, look, the law of the entrepreneur is that you will put your head in your hands faster than you know and think, what have I done?
That experience happened to me in those, in those, in those first couple projects. And so I bought a bungalow.
8527 South Colfax.
[00:19:19] Speaker B: Okay.
[00:19:22] Speaker A: You know, 1400 square feet.
[00:19:24] Speaker B: It's right by the corner of north and Milwaukee. And Damon too.
[00:19:27] Speaker A: It's right there. Right around the corner, right? Yeah, yeah. It opens up over there.
[00:19:34] Speaker B: And.
[00:19:37] Speaker A: Trying to figure out that project. But I think what hit me the most in those first few homes that we bought, because we started with single family homes, was we were walking into these homes that had the personal effects of people who had lived there before.
And it was not just a coffee cup, it was a little girl's baby doll. And it was, you know, blankets and things that were, you know, clearly that didn't happen under great terms.
The moving company didn't come and pack up the stuff and move on.
And I was going in as a hard charging entrepreneur. You're getting ready to fight the day and go and get after it.
And what I saw was someone's life that was torn, torn apart when I was going in to try and grow a business and make a new life and renovate that home and turn that into something that was perfect for the next family that lives there.
[00:20:43] Speaker B: Yeah, you didn't really bargain for that side of it. Right. You expected it to be more like transactional, sterile or something. You know, where he didn't have that level of personal, like, this is somebody's home. This is. This carries a little bit more gravity than I can kind of bargain for.
[00:20:58] Speaker A: Yeah, it was.
And so we went in and ultimately saw it through.
We worked through the renovation.
But those those first four homes we started with 350,000 bucks.
And we're so fortunate that now we're talking to capital partners that they have an m after that 350 instead of a K at the end of that 50. And I kind of. Yeah, but I've gotten comfortable with that, with that part of it that it's.
[00:21:30] Speaker B: And it's nearly 20 years later. It's not like you tried to start by renovating 19 South Flasau.
You cut your teeth in single family homes.
[00:21:39] Speaker A: And we touched every inch of it.
[00:21:41] Speaker B: Not a glamorous business. Not yet.
[00:21:43] Speaker A: That's it.
We touched every inch of it.
And then we rented it out. And we rented it out to a security guard. She was a security guard at McCormick Center. And I know the experience that she had there was a great experience and we kept her for a long time in that home. And so, you know, you can either run away from the storm and let it build or you can run right into the storm and take some heat and get past it and see the other side.
[00:22:14] Speaker B: Well, that's a good segue. So maybe fast forward a couple deals until you kind of had your processes in place for, for turning around these buildings.
And I don't want to, you know, the level of distress then is, is, was deeper than the level of, you know, people. If people hear about distress, it's different, you know, and it was different down there too, where, you know, these were boarded up buildings, they were vacant. They had maybe in some cases been, you know, probably taken over by squatters or no. Or worse. And, and sometimes they're just the shell, you know, it's not safe to walk. Like there's, this is a very, this is all the way distressed on that end of the spec.
So what were some of the in.
Obviously you can't paint real estate with a broad brush often, but what were some of the first steps that you would take after you acquired a distressed apartment building on the south side?
[00:23:10] Speaker A: Communicate. Yeah, yeah, communicate. And I, you know, I think, I think I have to touch before we go into those multi families where there were, there was more occupancy. And what we were dealing with is like we mowed the yards at those, at those homes in the beginning. I mean, if I could help paint, I'd help paint. If we mow yards, I'd mow yards and you know, oftentimes I'd come home and my wife has been the biggest supporter of me, bar none. Like, she's incredible, but she gave me a lot of grief for Having lawn clippings in the back of the car, what are you doing?
But communicate.
And it's back to that human component.
Humans have, in my view, have three things that they need. They need to feel respected, they need to recreate, and they need to feel community.
And I'm part of that community when I buy a building, big part of that community.
I don't want to try and make myself bigger than what I am. But when you have housing and you're dealing with housing, you have a lot of influence on a personal dude.
[00:24:29] Speaker B: It's cool to do the corner on six corners. It's cool to do that. Right?
And we'll get to it because it's cool and it's, you know, it's productive. But like, when you do it on an apartment building at 75th and Kohl's or whatever, in an apartment building that has been unsafe, it has been, you know, seen in many crimes or drug dealing or what, you know, whatever it is, somebody goes and mows the yard, Somebody goes and puts new windows in. When somebody takes that type of building off of the, you know, eyesore is like just so underselling it. But, but you, you rent it to quality people who are going to the, you know, then go in the grocery store, going to the park. Like, it just, it can change a block, can change people's lives. You know, it. So you don't have to like, you don't have to give me the asterisk next to like the gravity that the work holds, because I don't think you should.
And when you do it 40 freaking times.
[00:25:26] Speaker A: Yeah.
[00:25:27] Speaker B: Makes a difference.
And so now people are what I think is maybe a little sad. From my observation, I'm probably not the, the right person to opine on what's, you know, what's happening on the south side of the city. But what I've seen from my view is that, you know, there's always like a crop of like out of town buyers that like I kind of referenced earlier, chasing a cap rate, pretty buildings, bricks that seem like, you know, the right price per unit relative to wherever home bases for them. A lot of times east coast not running the buildings with the same level of care.
[00:26:01] Speaker A: Sure.
[00:26:02] Speaker B: You know, sure.
Not guaranteeing a loan.
And then you see, and then, you know, market conditions change or they can't run the building. So my question is, what do you think is the missing piece of the puzzle for, for those folks and like, how do we get to the point where in that huge area of the city people like care more about running these apartment buildings.
[00:26:26] Speaker A: Well, you touched on it. Care more. I'm not sure I'm qualified to really figure out what the solution is there, you know, but I used to say to tenants, residents in our apartment buildings, death and taxes are certain. And now it's my blue eyes, like, you're going to see me in the building. And that was a firm but fair approach to.
We're going to be active.
If you have an issue, we're going to be there.
And if you're creating an issue, we're going to be there.
So the apartment's going to be reliable apartment. We're going to do our very best to make it safe. Locks, lights, you know, janitorial, and we're going to take care of it. Because it's my family owning it, operating it. It's your family living here.
This is important, dude.
[00:27:23] Speaker B: Any. I love that statement because it can cut both ways. Anybody that you want to be in the building that's good tenant, good resident, loves to hear that. Anybody who's not in that position, you know, they don't want, they want an absentee owner. You know, they don't want somebody that's there every day.
[00:27:41] Speaker A: Right.
[00:27:43] Speaker B: So, last question. I'll ask you about your time kind of owning and operating on the south side is there were, there were so many deals at that point. I mean, like, there was so much inventory. And I recall that time on the north side of the city and there was even a lot of inventory there.
And this real estate was really cheap.
So when you have that much to shop for, what do you think it was that separated the deals that you bought versus the ones that you passed on or didn't. Didn't look at.
[00:28:11] Speaker A: Well, we didn't go down there with unlimited capital. Like I said, you know, the 350,000.
And it has never been my make to deploy capital.
I'm better at it today.
But, you know, when Al Goldstein went down in Pangea, he'd had an exit prior to where he was able to buy more, you know, get hit, to hit scale much quicker.
[00:28:42] Speaker B: Yeah, a little bit more of a defined like buy box where there was, you know, it's more certainty, like, look, checks these boxes, we'll buy it.
[00:28:49] Speaker A: Yes. And in hindsight, in hindsight, had we had more capital at the time, we would have bought more capital. So it was kind of a function of what our capabilities were.
[00:29:00] Speaker B: Yeah.
[00:29:00] Speaker A: And, and what we were seeing and what we really loved. I, I think, you know, when I see a project that I, that I am in I ask myself, do I want to spend the next five years on this project?
[00:29:10] Speaker B: Yeah.
[00:29:11] Speaker A: Or 10?
[00:29:13] Speaker B: Because I want to hang my sign on it when it's done, you know, 100%. Yeah.
[00:29:17] Speaker A: Do I feel about this as deeply as I feel about the rest of my life? Like, and. Because it is then part of me.
[00:29:23] Speaker B: Yeah.
[00:29:25] Speaker A: And so part of that was capital, and part of that was just the certainty of the execution within each one of those buildings. But I've said to myself repeatedly, if ever the opportunity to deploy capital quickly, repeatable, scalable, again, finding that opportunity, we will put the capital together to go out and take down that opportunity in a bigger way.
[00:29:51] Speaker B: Yeah. Yeah, I love that. And so let's talk about.
I guess I gotta get the time. Was it 2019, 2021 that you pivoted to the north side of the city? When was. When was. It was Southport? Madison was the first one.
[00:30:07] Speaker A: So we. We sold.
We sold most of our portfolio in 18.
[00:30:12] Speaker B: Okay.
[00:30:13] Speaker A: We bought another portfolio soon thereafter, worked through that value add process of 10 separate assets and.
And then exited that through Covid. Actually, most of that. In fact, guys in your office were very helpful. Guys in your office have been incredibly helpful to us along the way. I mean, John Morgan, Ted Stratman, you, Feldman, the whole crew. Like, it's.
I owe this office a ton of.
A ton of gratitude.
[00:30:43] Speaker B: But mutually beneficial relationship, right?
[00:30:45] Speaker A: I guess it is.
But yes, 2021, we closed on North Damon and Milwaukee and the Southport asset.
[00:30:55] Speaker B: And so you went from a lot of that was in South Shore and such to A plus, not a. A plus location. So what? Like, that's a. It's a very stark difference in what you were doing and what you had gotten really effective at. You know, you had a lot of success doing that, and that's a. That's a skill that not too many people have.
What went into the decision to pivot, you know, personally and professionally for you?
[00:31:26] Speaker A: We saw on the south side more of a topping out of values.
There isn't great rent growth on the south side. And where we sold, the yield starts to shrink. We are unapologetically for profit.
We do our very best to provide great housing wherever we are.
[00:31:52] Speaker B: Really quick, I keep interrupting you and I hate again to talk about this. Sal mentioned the. How powerful incentives are in the housing business and like the fact that you are running a business and you expect to deploy capital, roll your sleeves up, do a great job for the community, for your residents, for your investors, for yourself, for your family, and there should be a profit at the end of that.
[00:32:21] Speaker A: Mm.
[00:32:22] Speaker B: That is what. It gets so frustrating to me when I. When I think as it relates to like regulation around housing business and it just feels like we've been kind of the punching bag for a while and like, as hard as this business is and it's a, it's a fairly low margin business and as critical it is to the city and to the residents, it sucks that like you should, you know, you have to, like, you have to give this disclaimer that you expect to make money after. It's crazy, right? I mean.
[00:32:51] Speaker A: Yeah.
[00:32:52] Speaker B: Anyway.
[00:32:54] Speaker A: No, we. No, not at all. And we lost in a transaction to a low income housing tax credit buyer. And I don't know, I don't have any idea how they were ever going to make that deal work.
Low income housing tax credit is a great subsidy. It does a tremendous amount of good.
[00:33:18] Speaker B: Yeah.
[00:33:18] Speaker A: But it's not perfect and sometimes it's used imperfectly. And when my private capital was unable to compete with some of the capital that was buying, that's time. It's time for me to go.
[00:33:30] Speaker B: Yeah, it's hard to do it in scatter sites like that. It's hard to do it, you know, so.
But you bought. So you bought the corner of North Milwaukee and Damon. Incredible piece of real estate.
[00:33:43] Speaker A: Yes.
[00:33:44] Speaker B: Tired for a number of years. Yes.
And then you bought a corridor building on Southport, west side of Southport, just south of Addison, and, you know, also a plus. So start with either one you want. Tell us a little bit about those two deals and then I'm going to share some thoughts afterwards about just my opinion of like two very splashy acquisitions like that. So. Okay, give us the quick deal story.
[00:34:13] Speaker A: So we'll start with North Damon and Milwaukee.
North Damon and Milwaukee is a classic example of what I feel like it is what my job is.
My job is in some ways to be contrarian and be right.
That is where value is often created.
I know that so many others had seen North Damon in Milwaukee.
I walked that building with guys in your office, matter of fact, and I fell in love with it. And look, I'm not so driven by my heart that my head, you know, can't see through it, but I saw that immediately and got very excited about what it could be.
[00:35:02] Speaker B: And it translates, dude, that excitement translates.
[00:35:06] Speaker A: Thank you.
[00:35:06] Speaker B: Yeah, thank you.
[00:35:09] Speaker A: There was a lot to figure out there though.
[00:35:13] Speaker B: And pretty straightforward, right? Just a couple coats of paint and, you know, right number signs go from.
[00:35:19] Speaker A: Go from brown to gray and change the appliances stainless steel. We'll do it all Day long.
[00:35:23] Speaker B: Well, because it was Cafe Absent, which was nightclub. There was kind of institution.
[00:35:28] Speaker A: It is.
[00:35:29] Speaker B: And then it was just vacant above. Right.
[00:35:31] Speaker A: We had phone calls, and when we were doing the renovation on that, people who had gotten engaged there, and they wanted a keepsake. They wanted a sign or something like that to take with them. It. It was. It was personal to a lot of people.
[00:35:43] Speaker B: Yeah. And you're like, you shouldn't. Everything in there is a. You know, you shouldn't take anything.
[00:35:48] Speaker A: Stay away and wear a hard hat anywhere in the. In the. In the vicinity.
[00:35:53] Speaker B: And that was.
It was a.
I don't know. Heavy lift is, you know, like a. Probably a conservative way to put it. Yes, yes.
So Chase bank, you know.
[00:36:08] Speaker A: Yeah.
[00:36:08] Speaker B: What's there now? Tell people.
[00:36:10] Speaker A: Yeah. So we. We started figuring out. I think one of my favorite parts of that process was working with the community.
We spent a lot of time with architecture and engineering figuring out what it could be, what the limitations are, existing conditions.
[00:36:27] Speaker B: Yeah.
[00:36:27] Speaker A: We went to the community, and I'm thinking, you're gonna love this, because it's been vacant forever.
[00:36:36] Speaker B: Nobody's being displaced. It's disgusting. You know, this is a prominent corner that's in all the pictures of Chicago. Here's Chicago. You know, everybody kind of looks after that.
[00:36:44] Speaker A: Anyway, you know, we get on this call, and we're in front of all these excited faces, and they're like, your plan sucks. Like, we don't care what you put in the building, but you've got to. You've got to do something. This is our corner.
And Howard Hersh is the architect on that, who's an awesome guy and awesome. An awesome shop, awesome team. And we hung up the phone, and I called him to debrief, and I said, howard, they're right. They're right. He goes, are you ready for this? And I'm like, yeah, I'm ready for this. Let's go.
[00:37:18] Speaker B: Yeah.
[00:37:19] Speaker A: And we. And we started exploring the historical photos, and we understand that, you know, the background of the Capital One, that was going to go there, and that's where the expectations were set. And expectations in life are difficult, you know, so we try and stay away from those.
[00:37:37] Speaker B: But what was the biggest thing that you changed from that first iteration? Do you remember?
[00:37:42] Speaker A: Well, we paid attention to the facade.
[00:37:43] Speaker B: Okay. So it was.
[00:37:45] Speaker A: It was the appearance. It was the outward appearance of the building that, like, Nate, we.
I mean, to say our plan sucks. Like, they wanted. They were good with apartments. They were good with retail.
There was some concern about what it was going to Be, they said, no coffee shop, no bank.
Not at that meeting, but at a subsequent meeting.
And they wanted their corner to be what it should be. And which is back to its historical significance because if you look back at the photos of that building, it was far more grand than it is now.
Had a conical element that sat on top of the turret. A mansard roof. Had a fourth level.
[00:38:29] Speaker B: You preserved the turret too, didn't you?
[00:38:30] Speaker A: We built the turret.
[00:38:31] Speaker B: Okay.
[00:38:32] Speaker A: Yeah, we put the turret back on.
What we couldn't do was put the fourth level floor back on. The corner portion, you'll notice in the 1958 portion, has a fourth level that was taken off at some point. I don't know if it was to put the cell towers on top or what the driver was. But it had been stripped of some of its glory over the years. And so we added the cornice detail. We added the turret again. Back to my wife, I know she got to a point where if she heard me say turret one more time, she was gonna lose.
[00:39:09] Speaker B: Total Chicago real estate guy, like at home saying turret too frequently.
So how. Obviously there's some compromise in it because, you know, you just share that. Some of the feedback was, no, Chase bank is on the first floor. Right. So like, you gotta listen, but you also running a business and you got it. So did they kind of give on that because you get, you know, you incorporated so much of the rest or they just, you know, they don't have a say on that part of it?
[00:39:33] Speaker A: Well, so the give on putting Chase in. Yeah, well, so I.
That was also communication. It was a straightforward.
We could have elected to get through that design element and just hold on to whatever our leasing was maybe gonna be or whatever and get down the road and then ask for, you know, the variants, lay of the special use.
But that's just my style.
If I know it, I'm going to tell it.
[00:40:03] Speaker B: Yeah.
[00:40:04] Speaker A: And. And they said, you know, this is great. Now we're ready to approve this. Anything but a bank in that subsequent meeting. Anything but a banker or coffee shop. And I said, well, look, I'm gonna. I'm gonna tell you, we have some initial feedback on, on the leasing and it's most likely gonna be a bank.
[00:40:19] Speaker B: Yeah.
[00:40:20] Speaker A: And this is why.
Because banks can pay the freight. And when you have.
And when you have your anchor corner full, everything else fills in all the shops that you want.
And not that you don't want a bank. I mean, I think they're just not as exciting as a great restaurant or something like that, but they Provide a great utility to the neighborhood. It's a great convenience. But then all the others want to come. No one wants to come mid block when the corner's empty. No one.
[00:40:50] Speaker B: Dude, good for you. Also, I mean, I think life in general gets more. It gets a little bit more clear if you just share what you know and just, you know, you communicate with people directly. But if you were hiding that, it. It would have shown, you know, people would then everything else that you're saying, people take with a grain of salt because they think you're being disingenuous or hiding something from them. Right. Be like, look, I hear you on all that, but you got to hear me on this. It's just like, you know, and that's life, that's business.
And then. So the thing I wanted to say about these two deals, and I'll bring up Southport as the example. So Southport is 25ish units, 21 Razzie to commercial, 23 units, A plus Lakeview location, both from a retail and apartment standpoint. Middle of Southport corridor.
I think so many people would psych themselves out about going after a piece of real estate like that because there are some families that are very territorial about inventory in particular neighborhoods and different families sometimes in different neighborhoods. But, you know, they're generationally holding real estate and they like to buy a certain type. And oftentimes, oftentimes they will pay a price that, like, if you're just looking at a deal in a vacuum, it'd be tough for you to justify. Right?
[00:42:11] Speaker A: Yeah.
[00:42:11] Speaker B: So I think the corner. You're not a sight out north or.
[00:42:14] Speaker A: Of Southport and Addison just traded that way. Yeah, I mean, it was that type of family.
[00:42:20] Speaker B: Right. You know, the old bank. Right, Right. Somebody's going to develop it, a family. And, you know, I heard the same feedback like a few other people that. So you're not a guy that gets psyched out, number one. But, like, what was it that you think that you saw in that acquisition that the rest of the market didn't see?
[00:42:40] Speaker A: Well, I think you're right. I think fear is.
Fear is what limits most of us.
And to make a decision to pursue a property without fear. But what is the next right move for you and your business?
Southport. I know what Southport is. I know in my heart what Southport is. I know that my kids run up and down Southport Corridor and they're arguably not old enough, like, one of them not to do that as much. But, like, he can make his way over to Starbucks.
Southport to me is the ultimate modern multifamily experience in a couple of ways.
It has great retail in a great retail area. Right.
But it is that studio and one bedroom apartment that is so attached then to the community because of its proximity to where it is. And I think Covid did that to us. Like Covid made the neighborhoods flourish, you know, just go even harder and heavier.
[00:43:54] Speaker B: Even in that style building. I think it emphasized the demand for it because people want like, I mean, if you're going to live in Lake View, I understand there's some new stack. There's not a ton of new stack and I understand that that's what some people want. There's, you know, market could absorb a whole lot more of it.
But like when you walk up to a 1920s construction building and it's a walk up living in Lakeview, it's a very visceral thing. It's, it's different. You know, that's what people I think shop for when they're renting an apartment in Lakeview, Lincoln Park, Ravenswood, Andersonville, Logan Square, insert, you know, all the great Chicago neighborhoods.
So I think when you can add a modern living experience to it like you did, so you're not settling on all the other stuff, all the other amenities, such a deep renter pool for.
[00:44:41] Speaker A: That if you want, yes, you, you want your apartment to independently live exactly the way you want to live. And that's what studio, the studio and the ones do for the renter. It's that chunk rent where they can be in the heart of where they want to be.
But then their connection to the community is just being right there in the walk off of Southport into your, your, your apartment perfectly the way you want it.
[00:45:07] Speaker B: And then the neighborhoods, your home, not.
[00:45:09] Speaker A: Just your apartment, the neighborhood, your home.
[00:45:11] Speaker B: Yeah.
[00:45:11] Speaker A: And then we've added a component of, of Airbnb to Southport that we also think attaches to the modern renter.
There was an element of fear where you say, oh, it's going to be a party thing and it's going to detract from all the neighbors and so on. What we see are our renter connecting with that visitor who's coming from out of town and oh, this is what you do in the neighborhood. And so there's a little connection there. But better yet, that renter uses that Airbnb for mom and dad or for a friend from college or somebody. It's flex space for them. So it's then, then you have almost like a hotel kind of component where, you know, you have flex space and then that hotel piece can Service the rest of the building. And that's that connecting those dots, that's another thing we've learned is you can't connect dots in the future, but you can connect the dots of the past. Our experience in. In 1958, our experience in Andersonville, our experience in south, those operating experiences bring us to the concept that we're bringing to the loop.
[00:46:26] Speaker B: I didn't. And I love this Segue Pro podcast guest move. And we're talking about the Loop next. You must. I just wanted to talk, but I will.
I didn't. I didn't think of. Sometimes I have a.
I guess an aversion or whatever to an airbnb concept within an apartment building because of.
Exactly. You described a fear of, like, can they cohabitate? Are the hours different? Are they. You know, is the way they treat the apartment different? Is it, you know, it's more bodies in and out of the hallway, in the elevator, and like, there's not the same level of, you know, caring for. But the way that you describe it's very interesting. And I think also if you're living in the city and you're living in a buzzy area like. Like that you don't want to be sleepy either. And so the fact that people are there having fun responsibly is part of living in the city, part of living in that type of building.
[00:47:16] Speaker A: Yeah.
[00:47:17] Speaker B: You know, and then rather than put your. Your folks up in a hotel, you.
[00:47:21] Speaker A: Know, three times more expensive than we're expensive. We don't serve any champagne.
[00:47:27] Speaker B: Folks came in from Iowa and they stayed in, you know, a hotel that's more sterile. It's just a hotel. They're not living in the neighborhood the way their son's living in the neighborhood. Right, Right. So it's cool. Then they feel it and they're like, oh, shit, I get why, you know.
[00:47:42] Speaker A: You touched on it. That's exactly it.
They are living and feeling exactly what you feel in your. In your building. They are getting your experience because that experience at the hotel. And look, I love a great hotel. I mean, for sure, same, you know, but in the right setting. By, like. But if I had. I had the opportunity to put my parents up, you know, right next to where I was living, I 100 would have done that.
[00:48:08] Speaker B: Yeah.
And maybe down the hall.
[00:48:11] Speaker A: Maybe down the hall. Different floor.
[00:48:12] Speaker B: Yeah.
Love you, mom and Dad. I don't know if they listen to this or not.
All right, so let's. Let's talk about the loop and how long have we been going for it? Just So I know how.
Okay, perfect.
19 South LA sale. We've alluded to it a couple times.
It's by any measure the big leagues. Right. So everybody listens to this. Probably listens, you know, knows about real estate in Chicago. It's Central loop vintage building, 200,000 square feet, office to residential conversion, which I think that there's a tremendous amount of buzz around. There's plenty that's been written about it. There's a lot of initiative to do it.
I think there's a lot more room for people to do it. And I'm not saying it's, you know, it's, it's. It's tremendously complex and difficult and, you know, so there's a reason why there's, you know, some attrition through the planning and talk to us about that project and what you have planned for and, and we'll go from there.
[00:49:24] Speaker A: Well, you're right, it.
When we did 1958, I said, this is either going to be the first of many or the last. And, and it's the first, we hope, of many.
And we've done a few after that. And then when we saw, when we saw 19, it was that same feeling of that we have in each and every one of our projects. We're like, this is something, this is amazing. I actually first got the call from my partner who said, I think we can acquire this right?
And as you know.
[00:49:55] Speaker B: Corey.
[00:49:55] Speaker A: Corey.
[00:49:56] Speaker B: Yeah.
[00:49:59] Speaker A: The deal starts when you buy it, right?
If you can't buy it right, that's one thing you cannot change for the rest of time and you're in trouble.
So we bought it, right? No doubt about that.
And we.
[00:50:13] Speaker B: 20 bucks a foot.
[00:50:14] Speaker A: 20 bucks a foot.
[00:50:15] Speaker B: Pretty, right?
[00:50:16] Speaker A: That's right. Yeah.
[00:50:17] Speaker B: Yeah.
[00:50:17] Speaker A: Right as rain. So we, so we were off on the right foot, but then we went into this planning, planning phase, and the planning has iterated over and over again and what it is, and I touched on it just a moment ago with Connecting the dots of the past.
We know as operators what we experienced at 85, 27, Colfax at 60, you know, 6900 Paxton, you name it, all the way up to 1958 in Southport and Mabel and so on and so forth.
We know what renters want in their housing experience, and we also look to some of the great housing providers.
[00:51:09] Speaker B: For.
[00:51:09] Speaker A: Some of their approach where we focus 100% on user experience.
So from the time you walk into 19 and you lease, day one to the time you leave, we want that experience to be magnificent. Okay.
The hotel component the short term rental component is something we are doing more of in 19 than we've done.
[00:51:37] Speaker B: How much of the deal will it be?
[00:51:38] Speaker A: 38 units.
[00:51:39] Speaker B: 38 out 200 of 206. Okay. Yeah.
[00:51:43] Speaker A: So floors two and three will operate like a hotel.
[00:51:45] Speaker B: Okay, cool.
[00:51:46] Speaker A: And that hotel will service just from a. Like a janitorial standpoint?
[00:51:51] Speaker B: Yeah.
[00:51:51] Speaker A: You know, a Bain consultant is in Austin for the week and needs their apartment turned over before they come back to town. And their friends are staying in the hotel and they're back. So it can do something like that, but it is that again that, that one bedroom, the convertible one, the one. And the one bedroom unit that has its independence from the rest of the building. But within the building, we amenitize it not for. Not for the big party, but for community.
[00:52:20] Speaker B: And so what do you do? What amenities will you incorporate there?
[00:52:24] Speaker A: So we have Chicago's favorite amenity, which is the roof deck and the set.
[00:52:30] Speaker B: That type of location.
[00:52:32] Speaker A: And so, and I walk, the first time I walk the building, it's chock full of 1980 office stuff, cubicles and so on. So aside from being on the perimeter and looking out the windows, there's not a great feel for the floor plate.
[00:52:45] Speaker B: Yeah, Maybe not quite as sad as the homes you started with, but it's sad in a different way.
[00:52:50] Speaker A: You know, I can deal with that stuff all day long, like paperweights and.
[00:52:54] Speaker B: Things I shouldn't have made lighter.
[00:52:57] Speaker A: But when we got to the roof, that's when I knew, like, this is gonna be special because the distance between our roof and anything that's close enough to impede your view is incredible. We have a full look back south and west to the Willis Tower and Northern Trust and everything that is, everything that is around us. Board of Trade.
It's wild, dude.
[00:53:28] Speaker B: I've talked about on the podcast, like, my feeling of looking at the skyline. When you're in the skyline, looking at the skyline and you're part of it, it's different level too different. Oh, shit. I'm in the middle of, you know, third biggest city of the country, and in my opinion, the greatest city in the world. You know, it's just, we've talked about buzz and energy and, you know, you can't fake that.
[00:53:48] Speaker A: Most of Chicago has not seen this view of, of the skyline because of where it's located and how it looks back south and west. We will, we will highlight that over and over and over again. But it really gets special as we get down into the building I mentioned. The 19 was originally the YMCA. And within the YMCA there was a basketball court. Yeah, yeah, yeah. And that existed on 5 and 6. So it was double height. Right. And so at some point, I think.
[00:54:18] Speaker B: We copied that in the, in the West Loop. Right. Fulton Market, they had the basketball court on top. They were, you know.
[00:54:24] Speaker A: Well, what SHAPEC did there is just insane.
[00:54:27] Speaker B: Insane.
[00:54:27] Speaker A: So you see the photos coming out of there and like you want to be able to put a basketball court in and we're not going, we're not going full basketball court. But we, you know, developers like floor area and they don't like double height space often unless it's us.
So developers, as they redid 19 over the years, filled in the space between 5 and 6. We'll take that floor back out and we will create what we're calling a library.
I shudder at the word co working space, but it is a space for community. It is a space for wellness.
We see, you know, yoga instruction with EDM banging in the background, you know, at 9 o', clock, 8 and 8 or 9 in the morning, you know, and then transitioning into, you know, coffee and maybe drinks in the evening. And then it can even break off into, you know, whether it's. Whether it's you and I. Yeah. Talking or a larger group. It can house. It could be home to either one of those things.
[00:55:29] Speaker B: Some restaurants in Chicago and stuff will have that feel where they can kind of morph through the day. They can kind of like, you know, just change from like chill coffee to like lunch spot to, you know, stay there late.
[00:55:41] Speaker A: That's awesome.
[00:55:42] Speaker B: Yeah.
[00:55:43] Speaker A: Movie theater, fitness room.
You know, there, there's a, what we call a craft room. It's for. It's for getting together, it's for working on projects, it's for podcasting, it's for things like that.
And then as you get in down on the first floor, you know, we've taken the entrance off. We will take the entrance off of Arcade.
So our building to the south of our building, for those who don't know, it has an alley to the south. That is the south boundary.
It's a brick Paver Alley between us and 29 South LaSalle, which was one of the first residential conversions in the Loop and operating incredibly well right now, even after. After the foreclosure and things.
[00:56:29] Speaker B: Yeah.
Did Peak manage that one?
[00:56:33] Speaker A: It's not Peak any longer. They were.
But the entrance is on. The entrance is right now on Arcade. It's residential building. So we're going to make the main entrance on. On LaSalle. Okay. So the north west corner of the building will be the residential lobby, also the entrance for the hotel piece. Again, we're not serving champagne there, but you can enter in there and go up to your room and stay.
The corner we see is likely coffee, croissants, things like that bakery. Turn into kind of a lunch spot, you know. But then we progress back into the alley, and that progression will be from no service to heavy, you know, to full service, hopefully even white tablecloth as you get back to the back of the arcade alley. Our first meeting with dpd, when we asked them about. With Chicago DVD about the project, and they've been exceptional, by the way. The city is really doing a lot of support around. A lot of support. You know, we said we'd like cafe seating in the arcade alley. And they said, well, we think we can work on. We'll work with you on that and, you know, potentially even step that up to, you know, to permanent.
We were talking LaSalle, visioning, study, and as that was gonna come out, we weren't promised any renderings in that conversation. But two weeks later, in Block Club, our alley was the one rendering that was showed and it shown, and it was, you know, string lights, cafe seating.
We know the city has their eye on our alley.
And when I say our alley, it's ours as in 19, and it's ours as the city. It's ours as the loop, because that is similar to Gin Alley in the West Loop. Man, that is an advent castle.
[00:58:23] Speaker B: Crushed that, man. Crushed. It was gross. We used to live right there, and Perez backed up to it. We went to Perez more than I'd like to admit, but it was gross.
[00:58:32] Speaker A: I like. You love Chicago. Yeah, I don't want to be transported anywhere else. I don't need to be. But you are like. You're like, where am I when I. When you walk Gin Alley. Well, we want to bring that same people will come.
[00:58:45] Speaker B: I love that. I didn't.
[00:58:46] Speaker A: From river north and from West Loop.
[00:58:48] Speaker B: I didn't see that component. That's awesome.
[00:58:50] Speaker A: A good concierge is going to point their people in our direction. We will be found.
[00:58:55] Speaker B: And so what about the building? Like, I've heard a lot of. And we'll. We'll wrap in a couple minutes because I know you got a lunch, but I've heard a lot of people talk about the restrictions of the physical building. You know, window lines, where the elevators hit, where the. You know, how the hopes sing. I think Friedberg was telling me single load or whatever. I forget the office terminology for It. But I've heard a lot of restrictions in the actual building.
Did you just buy it so well that you can work around some of that stuff or does that building just lend better than others that you've looked at?
[00:59:33] Speaker A: Well, it's both. I mean, there, there are a couple things that, that we work around. There's an existing staircase in the northwest corner of the building that we'll use for egress, which is marble and marble and you know, very ornate.
[00:59:47] Speaker B: That's what you would have done today anyway. Right. You, you do a lot of marble staircases and 25 story buildings, whatever that is.
[00:59:53] Speaker A: That is one of the favorite things we have in our envoy office is you would not build it that way. Yeah, we love. You would not build it that way. Because that is the differentiator part of the differentiator in the product that we provide. That's unique, it's stylish, it's, you know, U.S. postal Service. Shoot all the way down. Like we're so excited about that. Now, you mentioned the corridor. The corridor lines up exactly with where we would, where we would do a corridor now. And so we have great existing conditions. Our window lines support a nice wide apartment versus like a shotgun style. Deep, you know, and narrow.
[01:00:31] Speaker B: Yeah.
[01:00:33] Speaker A: You know, I walked this building day one before we bought it. I mean, day one, as soon as we could get in with Jim Plunkard.
Yeah. Hartshorn Plunkert. And this is not the first project that I asked Jim Plunkard to be part of, but it's the first time he said yes. He walked this with me and he said we were on the sixth floor.
Guys from the construction team were in there. And he said, Nate, this is going to be. Be easy. Oh, that's layout.
[01:01:03] Speaker B: Yeah.
[01:01:03] Speaker A: There it's anything but easy. And we've done a lot, a lot of design, a lot of exploratory work to make sure that as we get into, into the asset, it's steel and clay tile. There are stories of clay tile there. There's a real concern with clay tile about how it can be worked. But we've designed around it. We have abandoned elevator shafts that we can run our, you know, run our utilities through, run our MEPs through where we need to core. We'll core, you mitigate. And it's just like real estate taxes in our great city. You know that it's a concern, you know that it's a risk. And you price it. And back to the purchase. The purchase.
[01:01:41] Speaker B: The purchase price also in that, I mean, that's probably the most, I don't know, among the most complex type of deals that are happening right now from a developer, you know, from your perspective. But I think that it's powerful to appreciate that like one thing about it was gonna be easier because there's so much else that's hard. So, like there's a balance that you clearly have of saying, okay, I'm not gonna approach anything with fear.
I'll get through anything. I've got the energy to, I've got the wherewithal to get through challenges. That's how you've made your living.
But also appreciating that, like there has to be some elements that click with this, you know, you're not just beating your head against the wall.
It worked. Something was easy about it. That's a great thing. Embrace it and let all the other things be hard. Right?
[01:02:30] Speaker A: That's right.
And not allowing fear or self doubt to take over is not ignoring the truth.
It is about seeing the picture clearly and understanding what it is that's in front of you. That's what it is.
And so yes, we take the bad information just like we take the good information and there has been bad.
And we work on it, we work through it, not around it.
And then figure out what type of project we get to. And then we say yes or no.
You always have a decision.
You always have a decision. Your reaction is the only thing that you have control over.
[01:03:18] Speaker B: And I love that.
What do you expect the Loop to look like in five years?
You're, you've obviously got a couple, you know, the other one is not to be discussed, but you got 200,000 square feet at 19 South LaSalle. You've got another big dog in the hopper.
But even more broadly than those two large projects, what's your, what's your vision for what the Loop will be in five years?
[01:03:44] Speaker A: Yeah, we're bringing, we plan to bring on 520 apartments in the Loop in the next couple years. Others have about 2,000 planned.
There's a finite amount of land in the Loop. There are great class A buildings in the Loop. There are great businesses that are running in the Loop. I think the opportunity is now because when those apartments come in and retail follows rooftops, you're already seeing some retail come along.
We are going to have.
It's already one of the great neighborhoods, but it's going to be a spot in five years.
There will be the days of the past that are talked about, but they are just that. It will be a very different. It'll be A very different place. And I think if you even run that out to. On 10 years, I feel a lot more confident in. In. In that position because it's going to take a little time to get, you know, our other one planned and constructed and all. But the loop is proven. If you build it, they will be there and immediately.
[01:04:58] Speaker B: Oh, dude. And there's a massive fallacy right now that, like, it's dead or sluggish or whatever. I mean, there's. It's just.
[01:05:04] Speaker A: Find a spot for lunch.
[01:05:05] Speaker B: You can miss me with that. Dude, Totally. Go park your car down there. Tell me what. Tell me what floor you end up on. Like, you know.
All right, we're gonna wrap with the two questions that I ask every guest.
Why do you love Chicago as a place to live and invest and raise your kids?
[01:05:27] Speaker A: You know, I love the people Midwest. Nice is a real thing.
And not to say that other parts of the country aren't all so nice, but there is a community here that is palpable.
I grew up in southern Illinois. I know what it's like to know your neighbor, to be able to ride your bike from one place to the other. My kids had to be older than I was to be able to ride their bike to their friend's house. But that's part of City of living. I love the people in this community, and I also love the landscape. I swim in the lake regularly, and there's nothing like pulling a stroke and looking out over the horizon in Lake Michigan or back the other way back to the shoreline and seeing Lake Shore Drive and seeing the activity of others enjoying the lake.
It is a huge reset. It is a huge boost of energy. Like, show me a day, and I'll take you somewhere in the city and you'll feel it.
[01:06:26] Speaker B: I don't know swimming lingo, so I had to kind of pause for a second when you said pull a stroke, but I will appreciate when you're on.
[01:06:33] Speaker A: I'm not sure that's technical. I was just, like, kind of thinking about what it is I was doing.
[01:06:38] Speaker B: Dude, when you're, I think, like, adding exercise to. It's another level. Like, if you're on a bike ride, run, swimming on the lake, on the track, whatever. Even, like, when I'm watching my kid, my kids play soccer at Montrose in the lake, basically. Oh, it's like, I don't know, like, everybody then, you know, you already love the city. The backdrop, and the landscape is gorgeous. Over there, you're on the lake, but then when you're exercising it, you know, you get. It's. I don't know, you get in this head space where you really appreciate it. Like, I love that answer.
[01:07:08] Speaker A: I'm with you.
[01:07:09] Speaker B: What is a piece of advice you'd give someone starting in real estate to either get some traction or somebody who's been in real estate for a bit to propel their career to the next level?
[01:07:25] Speaker A: You can't change the wind, but you can change the direction of your sales.
Yeah, it's going to be out there. There's opportunity for.
I've heard you say on this.
You know, this real estate's a C student game.
I think real estate is.
Is the ultimate entrepreneurial experience.
You can start with $350,000, or you can start with even less than that. Go to work in a building.
If you're. Day one, don't have any other way in. Go to work in a building, understand how it operates. That's the exact thing that we put a new guy in the office through of underwriting a building is understand the vendors, understand the contracts, understand how they're visiting the property, how many times a week are they picking up the trash. Is that right? Is that wrong?
And then building up from there. If you understand how it works, you can understand how to buy it.
There will be somebody there. We've never had a project that we've wanted to do that didn't get capitalized because we knew exactly how it was going to run, how it was going to operate, and the expectation that we can set. If there's a good project that you find and you'll find it by knowing, will get capitalized.
[01:08:42] Speaker B: Oh, I mean, there is capital passion, too. And now your track record, it's like, it would be impossible to sit across from you and not see it happening. I would never bet against you in a project. And I love your advice also because I think a lot of time when you said you can't change the wind, but you can change your sales, what I thought about is, like, market conditions and, like, global economic conditions or whatever. And like, I feel like so many people, whether brokers or principals or whatever, are like, waiting for some condition to change.
[01:09:13] Speaker A: And.
[01:09:14] Speaker B: And I don't know what to root for anymore in terms of, like, what the conditions are and, you know, to promote transaction velocity.
[01:09:22] Speaker A: Right.
[01:09:23] Speaker B: Like, okay, when interest rates come down, it's like, right, okay. Then they come down for what? And it's just like, I.
Part of it is, thankfully, I'm not, like, smart enough to understand all that and the conditions that go on behind it. So I don't let myself wander in that what if and then what world I'm. I'm like a try to see things clear in the here and now and do my best and there's always opportunity in that you know and so if you're rooting for interest rates to come down okay. And is labor market softer is something happening A zillion things there's going to be these variables just like I don't know that's. That's over my head so I.
Anyway, you're awesome. I.
I appreciate our conversation. I appreciate not to gas you up. I appreciate your passion for the business and what you're doing for Chicago.
[01:10:17] Speaker A: Thank you.
[01:10:18] Speaker B: It's awesome. So keep it up man.
[01:10:19] Speaker A: Yeah. Thank you. I appreciate what you're doing. I think banging the drum on on Chicago needs to be done more often dude and it is a great city and really appreciate the opportunity to be with you.
[01:10:29] Speaker B: Yeah. You're the man. Thank you.
[01:10:31] Speaker A: Thanks, Joe.
