When a second generation took over, its family's real estate strategy shifted to hotels.

[04:16]

"They're their real estate focused family. Over the last sixty years, the family in the organization has deployed and completed about five billion plus of real estate transaction. Over the last 30, specifically when the second generation took over, the strategy shifted towards a focus in hotels and hospitality."

[00:38]

"Seventy-five percent of our family offices invest in real estate. On average, it makes up about 25 percent of their portfolio. What that means is that, on average, another 75 percent is diversified into other niches,"

[15:16]

"For, for example, we find ourselves a lot of scenarios that the deal is really good but at a certain year or certain metric the private equity partner needs to exit because of a mandate, whereas a group of three or four family offices together would realize this is generating 18% cash on cash."

Full transcript

The 13th panel of the family office super summit, real estate investors success stories hear from five real estate investment firms who have raised over twenty million dollars each. So we're gonna keep this one focused on real estate and we're gonna keep this focused on how these firms have been able to successfully raise capital in their respective asset classes. Please give me a mine. I do get a lot of people that come up to me and say, wow, you guys have a lot of real estate investors here, and the stats on our investors are as follows.

Seventy-five percent of our family offices invest in real estate. On average, it makes up about 25 percent of their portfolio. What that means is that, on average, another 75 percent is diversified into other niches, submits, asset classes and opportunities. So keep that in mind whenever you're talking to quote-unquote real estate investor and make sure to ask them: do they invest outside of real estate?

And many times you'll see that they have secondary funds, venture funds, that are looking at emerging markets and emerging trends. And as we start to conclude today, we really want to start to dig deep into what the six, what our successful members, are actually doing, what are their secrets, what are their tips to actually an effective capital. So, if we can, please give another round of applause to our panelists today, thank tastic. So before we get moving with the questions, I do want to give each panelist an opportunity to introduce themselves, their firm and a little bit about their focus, their asset classes and their experience.

So we'll start off with our Rajan good morning, as everyone doing good. So my background is I ran a hedge fund for four years. We achieved a hundred and seven percent returns over those four years. Did very well. But it was during that time that I learned about self storage, and how many of you know, self storage is the best performing asset class in all of commercial State for the last 20 years.

Oh, okay, I got one, a couple of you so in, and coupled with that, it's actually the lowest risk of any asset class in commercial real estate. All right, so as an investor, what do you look for? You look for above average returns with lower risk. And when I found that out I said, okay, I'm gonna sell my hedge fund and I'm going all-in on storage.

And so I've been doing self storage for the last 12 years, sold my last portfolio to one of the public REITs and now we're on a growth path from ten to a hundred properties over the next five years. Excellent, thank you, John. - pinnacle storage properties out of Houston, Texas. We buy under managed, under enhanced, under expanded Self Storage properties, or what we call the mom and pops.

We fix them up and same typical exit to large money player or every. We own 20 properties, 15 in Texas - and Oregon, 3 in Washington State. I've got seven in the pipeline right now, three of which I'm raising money on. One of them's in Oregon, where we're already at Nebraska and Edmond, which is north of Oklahoma City, about a hundred and twenty million dollars worth the assets, currently soon to be about a hundred and sixty million dollars worth assets.

Thank you very much, fatty. Hi, I'm fat EFT mules with group RMC. We do office mainly in the Midwest and the southeast were assets under management about word, about two billion now and about seventeen million square feet. Thank you very much and it's my least. Good morning. I'm bill, though I work with proc Shawnee companies.

Procaccianti is an organization that's been built around a second generation family, the Procaccianti family out of Rhode Island. They're their real estate focused family. Over the last sixty years, the family in the organization has deployed and completed about five billion plus of real estate transaction. Over the last 30, specifically when the second generation took over, the strategy shifted towards a focus in hotels and hospitality.

So, though, over the last 30 years we've, we've acquired, owned or operated or developed over 170 hotels fast-forward to today. We're still active in the hotel space. The name has been built into a reputable name to own and operate and is known as one of the top owner operators of hotels in the nation. And, and as an example, typically we do eight to twelve Hotel acquisition deals a year.

We look at other other real estates opportunistically. This year we've, we've, my team has deployed about seventy five million dollars of equity into hotel acquisitions and we've completed the north of 450 million dollars worth of real estate transactions in general, and we typically partner with other family offices and ultra high-net-worth individuals and joint venture structures to do so. Excellent, thank you very much. So, to start off, I'm gonna just go down the line again.

I really want to hear about recent deals that have been closed, that have been and primarily acquisitions, and then we can move on into the capital raising side. So, reg in, if you can just give me some examples of some really good deals that you feel very confident about in terms of the acquisition side, why you guys made those purchases and how you guys plan to move forward on them, great. So we actually just closed on two deals two months ago, and this is very typical sort of deal flow that we see, or the type of deal. Everything that we're buying is off market.

We find that's the best way to get pricing. If you're familiar with self storage, you'll know that it's a very fragmented business. Literally 50% of the market is owned by mom and pops, and so we go out off market to have my director of acquisitions calling and finding these dislocated assets and you either find that people don't know the full price for their assets. So one that we're under contract on now out of we got five that were under contract on, we're buying it for almost a million less than it should be worth because the owner doesn't happen to know what the right price is, which is great.

In these other assets we had a mismanage or under managed property: two portfolios managed out of one site. They basically closed the other. We're able to reinvest into those acquisitions, open up the new site of the existing site and rebuild it in a sense. So turning around the operations, what we do, excellent, thank you. So we've gone nine deals this year, very similar to Raj we look for we we get all of our deals off market as well or through top-level brokers that give us first looks because of our history.

But the deals we've done this year is actually partnered with a small fund out of the Seattle market and they went out and bought five properties that we negotiated for an ownership share in that. So we own a percentage of those five, took those over June 1st. The other four were sourced off market, all in Texas, through our general Network. What we look for is on the under managed, under enhanced, under expanded properties.

So asset class again its self storage really, of course, but just how? Storage, just self storage. That's what we do and how we've managed to structure them is through private equity. Like people in the room, we raise about thirty percent down and then we sign on the debt. And the same same as Raj is. We find them where people don't know the value of their property.

We have one that we purchased this year in a tertiary market. That was a great value. I just put one under contract on Friday that is doing the same revenue as that one and we're purchasing it for 1.2 million dollars less than we purchased the other one. And because the because, remind me, the difference is, I mean, I guess, like strategies seem to be similar here, but geographic area are you guys?

So I'm in Atlanta and we're focused on the seven southeast states and our strategies are a little different. John is amazing at what he does and has done it very, very well, continues to do well. Ours is very focused on a concentric footprint that we are growing from the Atlanta area, going out two hours and then three hours and then eventually getting out into the Southeast United States. We're in secondary and suburban markets and some tertiary markets.

We like college towns, we like county seeds or we like the suburbia secondary markets around a major metropolitan. We try to stay out of the headlights of the reads so that we're not paying for cash flow or cap rate. What states are we talking about here? I'm in Texas, Oregon, Washington State right now, soon to be in Nebraska, Oklahoma and Tennessee.

So, um, I'm willing to go national in most states. Great and foddy. Again. On just recent acquisitions, deals closed. But we did about this year. We did about 600 million in deals.

About 200 million of that was equity. So we're focused in the Midwest and the southeast and this year we were buying off institutional sellers, typically like Blackstone and Duke Realty. So we did a deal in Memphis or you know, that's a previous slide that gentleman was putting up. I mean we're doing those areas right now. Cincinnati, we've done a lot in Kansas City.

We're the biggest landlord in Kansas City, Indianapolis, one of the biggest in Columbus. So we've done deals in all those, all those areas, and we try and focus on the very much secondary markets, particularly particularly the suburbs. But because of, I guess, our reputation and our we've closed 100% of our deals so we became a preferred buyer. So we're getting some CBD assets now doing.

We just did a downtown deal in Cincinnati and we're doing the PNC Tower, which I think is the second tallest building in Cincinnati. We're doing that one now that's under contract. So typical deals are about a hundred million. We do about six or seven a year on average. So when you're here, what are you looking for? I mean, we're just here because we don't market at all.

This is, this is about as much marketing as we do. So we raise, we raise like we. We have a very good investor pool. So we've closed a hundred percent of our deals and we raise more equity every year. But a lot of our investors are in on a lot of our deals so we already know, going into a deal, we have a lot of equity backing us, the.

The challenge now is we're getting to see a lot of these institutional portfolios and they have a lot of pieces to the portfolio. So we're doing more and more deals every year and more and more equity needs to be raised. So we're looking for equity. We invest in our own deals, but we're going to be looking, I mean, all our deals are fully subscribed this year and going into next door as well.

But the anticipated deal size we'll be doing next year, it will probably be our biggest, where, while you potentially do about a billion in deal, so we're gonna need to raise some equity. So more contacts, I guess. Excellent, thank you, and well. So historically we've been very focused on value add: hotels, Marriott, Hilton, things like that, where we can go in.

We have an in-house construction crew. We also have our in-house operational group and we've done very, very well for the, the family, as well as the, the investors that that partner with us and the joint ventures there. I'd say this year, starting about a year and a half ago, the focus has been on areas that are defensible and then also independent boutique hotels. So we closed, like I mentioned, eight, eight.

We closed 11 transactions this year. The last one of interest was a six hotel portfolio in in New Hampshire, mill Falls Lake, New Hampshire, which was a again to the kind of the mom-and-pop run hotel they had. If the family had taken 25 years to assemble the, the assets, and we were able to make an acquisition of those assets earlier this year, that's been a more defensible play for us. We're seeing in putting ourselves in positions that are possibly defensible should we see a downturn or slow economy, places that people are going to drive to for a gradation rather than fly to Paris or London.

We've looked at assets in Kennebunkport and we've closed to assets and Nantucket, New Orleans, all under the independent, boutique and typically family owned and operated. So there's some operational levers to push and pull there. Once we, once we put our operational team in place on the New Hampshire deal, it's gone very well so far. I think we met the pref for our investors within the first three months.

And well, I want to ask you as well, like outside of, because obviously, like you were so close with families, but outside of, like that traditional, like friends and family, clothes, Network, what outside, what outside avenues are you guys finding in order to raise capital? Like, have you guys had investors that have come from, yes, really interesting areas that maybe you didn't expect or aren't, quote, traditional? Yeah, I think over the last thirty years we've done the full gamut of where dollars come from. We've had separate accounts with with the pension funds.

We've we've had an account with CalPERS, sorry, well, a little closer, what's that? A little closer for the mic. So we've had, we've kind of crossed the gamut with where we're dollars come from. We've had, we've worked with pension funds. We've had separate, separate accounts with with CalPERS. We've had endowment, separate accounts with brown, Harvard and Yale, and then we've also worked with private equity groups a lot on our value add deals and what we've found again we've gone full cycle back to almost the friends and family due to the through the cycle, oh and cyclical in nature of private equity firms.

For, for example, we find ourselves a lot of scenarios that the deal is really good but at a certain year or certain metric the private equity partner needs to exit because of a mandate, whereas a group of three or four family offices together would realize this is generating 18% cash on cash. Let's hold this for a little bit. Or in a down cycle, when a pension starts to freak out, they might not want to hold the asset through the down cycle where you can manage through it. So we've actually trended back towards individuals as well as other family offices.

We have a good stable of folks that have been investing with us for 20 years, but we always try to figure out who else is out there to partner with awesome into the self storage guys. I want to know a little bit more about where you guys are finding some capital outside of the traditional friends and family you know close network that you guys have had for years but like, maybe investors that have come in that you've just met in the last six, 12 months that maybe allocated quickly. Do you guys have stories like that to share? So, as you can tell, I do a lot of marketing.

Yeah, okay, even to the point that I brought my good phone finger with me. Oh my god, storage baby. I actually did that just for humor, but the reality is it works and what works about it is it starts conversations. I do a lot of public speaking, not only for investor conferences but for self-directed IRA conferences for the storage industry, etc.

In the last year to 18 months, where I found a lot of pool of money because we raised it, $50,000 a unit, and syndicate deals. But we also utilize what I would call small family office that writes a million two million dollar checks. So we've done a hybrid of friends and family versus speaking at something like this, building a relationship with someone and then them writing a check through that in the last three and a half years, we've placed thirty-five million dollars worth of private equity and have about 10 million dollars deployed for these seven deals we have now. So, coming to a conference like this, what I look for is finishing out the rounds on the deals that we have already, like in the Oklahoma deal, it's wide open.

It's 2.9 million dollar raise, so I'm looking for a single investor for that, and then I'm looking to build a relationship with someone that wants to create a small fund of 10 or 20 million dollars. So a lot of kissing babies, a lot of shaking hands, and then what we do is we use a crm platform where everybody goes into a database, gets organized by who they are and what they are, and then when we start our marketing program, that's, we're raising about a million bucks a month. How much of your intention behind a lot of that marketing the merchandise and things like that that maybe aren't considered traditional, is more of a long-term play for short term play, or is it more of a short term intention? Or?

Guys, it's all a long term and the short term piece of it is, and you can ask people in this room, there's probably 50 of you that said: nice jacket, right. And my next thing is: so what do you do? Right, there's an instant conversation starter. Yeah, so, but the conversation starter is immediate, but the relationship is the long-term.

The questions like: what's the ROI on that blazer? It's unlimited, baby, best 250 bucks ever, plus dry cleaning, plus dry cleaning. Yeah well, I'm, you know. You know jackets probably raised 15, 20 million dollars out of that 35 million bucks, I'm getting one after. No, you're not. I've known Roz for a while, by the way.

So it works and it works for a conversation starter. But to encourage the people in the room that want to do something like this, you got to take it a step further. It's not just. I think on the last panel, the guy that was sitting here was saying: you know all hat and no cowboy stuff I got.

You can't just be sizzle, you got to back it up. And that's what we do. We do this just to start the conversation and we're looking for long-term relationships for sure, for sure, because I know, for example, Fadi said like the extent of your marketing is more like going to these events, you know, and working really hard within your networks, potentially probably set up meetings, dinners, and get one of those jackets too, though all the cool kids are doing it, but, but it goes to show, right, but but regardless, like our emcee, you guys are, you guys, and in Kansas City, you guys are the largest property owners in Kansas City. Am I saying that correctly?

Yeah, right, but do you guys see you guys implementing any of these type of like outside strategies? Do you guys see that you're gonna probably just stick to your guns? I mean, we're lucky in a sense that, yes, we have investors in the room right now. Actually, that of, we sort of met through different conferences and stuff, but it's, it's.

It's been really 99% word-of-mouth. We sort of were, uh, you know, on the beaten path for a long time where we were, I suppose, against the grain by being in the Midwest, in the southeast. I just read a report recently. We were the biggest landlords in Kansas City, but predominantly in the Overland Park, Overland Park area. And there was the report.

Basically said the number one place to raise a family in the u.s. Is Overland Park. We weren't that crazy five years ago. We, just we, we didn't know the report was coming out as it was. So it's sort of eight that. Did you anticipate something like that?

But nobody out. No, I didn't know, no, we didn't anticipate that. It just says luck. I was like luck. We didn't anticipate it, but we knew it was a great area and we saw the assets and we, you know, visiting the property you kind of get and you see what's going on and you get the vibe in the steak houses and any other great areas.

Like in the next, like where, where do you see great areas in the next five years, ten years? We really love the Midwest. Somebody was asking me recently: where will you be in ten years? I said we're probably just gonna be no big in the Midwest but a lot bigger. I mean we look everywhere. It's not that that we six influence that, I don't know it's.

We look at the numbers and what makes a lot of it is common sense. Stuff work and you get really high cap rates and can you go in at a low basis. We we go at people. You know we had questions about what about if there's a recession? We always buy thinking there's a recession around the corner.

So we're very conservative. We keep tons of cash available. We buy at a really low basis so we can undercut everybody in the market if we need to, and if you don't have a recession, your numbers are just stronger. It's. It's a sea one coming. It's a horrible question.

No pressure. We've been talking about it. It's been talked about four, five, six, seven years and no one's got a right so far. So I'm probably not the one - all I know is, if you have cash available to be opportunistic, it's, it doesn't matter quite as much. Yeah, and self-storage kind of like. Sometimes the recession actually helps you guys, right?

So that's a very defensive product, right? So even in downturns it tends not to do as badly as other asset classes. When people are downsizing or losing their homes, they want to keep their stuff, so they'll put it in self storage, which of course helps our business, and then on the up swings it does very well. What's one of the beautiful parts of storage is that these are month-to-month leases so we can change our pricing on our customers every month if we wanted to, and and for new customers coming in, we actually change that price daily and it's sort of like hotels and airlines do.

Yeah, it's becoming quite an interesting model. So anybody that's assessing kind of operational based real estate, check and see what they're doing for revenue management things like that, what teams they have in place, for example, now we we've hired folks out of MIT and they're more quant related for pricing. Hotels price by the minute. Now everybody has always said the airline's irritate them when they go to book a flight.

Then five minutes later you go to book a flight and it's $200 more. The whole time hotels been doing that pretty well and efficiently. So if you are looking at operationally focused real estate right now, assess the teams that are really doing the pricing models and how they're doing it. It's not the same anywhere where you can look down the street, make sure your sign is lit and match the price.

You. You really have to understand the, the revenue management aspect of it. I know you guys and I want to ask you, because hospitality, subletting things like Airbnb, like are you guys on the lookout? Like what do you guys analyzing in terms of that? Yeah, we get that a lot. A lot of people say: is Airbnb affecting the hotel industry?

I think it's. You guys are in the boutique space so it could be done. We've done everything, so we are. We're. We've got a select service, Reid. We've done large hotels.

We're one of the top owner operators and Marriott's. Our largest hotel is a 650 room hotel and disney, our smallest one is a boutique and Nantucket of of 10 rooms. So we're across the board there. Airbnb does affect the hotel industry, but it doesn't affect it the same way that, for example, uber affected taxis. We're still seeing business.

I think it's just another part of the industry. Some folks calm the the ankle-biters of it, but we're not seeing too many rooms disappearing - Airbnb, for example, out of the room. How many people stayed in the Airbnb last night? Yeah, that's a good question. How many people stayed in Airbnb last night? Raise your hand, nice and high, couple.

And then, how many stayed in a hotel room last night? How many people stay in a hotel room? So there's still. There's still room for that. Business travels are gonna stay in in hotels. We like the Airbnb model.

They just stayed in a self-storage facility. If you do, I'm gonna evict you. I just want to tell you that I can't live in my space. So, overall, it's. It's an interesting aspect to the hospitality sector, but it's it's not necessarily influencing our decisions just based on business travel and dynamics. Awesome.

Do we have any questions from the audience questions? All right, I saw the gentleman first, JJ great mics coming your way right now, excellent. And the second individual I saw was the gentleman with the black turtleneck and then, if we have time, I'll try to get to the young lady with the white blazer. It's kind of for everyone.

I'm just curious how much, if any, ground-up development you do versus acquiring properties. Yeah, so we do grounded development very selectively. We actually finished one earlier this year which was very pleased, to say, I to be able to tell you we want facility of the Year award for all of Georgia just last week, so it's kind of nice. But we're very selective on the development side.

In self-storage, if you haven't noticed already, there's a ton of development that's been going on. It's mainly been in the infill markets, suburban markets, really sort of in different territories, and John and I really play in right, we look at those urban secondary, I look at the tertiary markets, away from that competition, but there's been a tremendous amount of development and because of that, in several markets you just have too much development right, they are over developed in certain markets and so we're very selective on our development side and we have some large family offices and institutional partners that we work with on that side. Excellent, and I'm actually, because I want to keep this answer to two panelists so I'm actually gonna send it over to body first for this one. Ground up, we do zero.

In an office, it's a little bit complex in office so we buy off those who've made the mistakes and in the development, so we don't. We don't. One of our partners is a fully integrated massive family out of Montreal and they do it. So if we ever needed to, we have we could piggyback on them, but we just haven't needed to and hasn't been opportunistic.

And yeah, hospitality, yeah, I'd say we've done it. We do it. I'd say it's less than 10%. We're very selective right now. Just because where we are in the cycle, when's the last time you guys did one? We did one, I think we finished it and opened it up, a Moxie hotel, which is a Marriott hotel in Washington DC first.

I think is the first moxie in downtown Washington DC. We've done well and partnered with a group there. We did a. We did a development in San Jose in AC Marriott. We just sold that last year, absolutely crushed it on. It did really really well.

But still we're very selective on development right now. Excellent, great, and the gentlemen over here, I am Randy, at what point it sounds like you put private equity into your project. Do you at any point look at refinancing into long-term commercial loans to free up that money? So we're four years into our cycle. An answer to that is yes.

I've got four assets that I'm grouping together right now recapitalizing. A couple of our investors want to get out, the rest of them want to stay in, so we're going to redeploy that equity and recapitalize the debt. We've done some bridge loans at like six point six percent Interest. We're able to recapitalize that at four and a quarter now so we can cashflow our deals better, give a better return, etc.

So we're in the life cycle right now of being able to do some of that on our assets. Excellent, does anybody else is that we're typically 65% leveraged. A traditional bank debt were more favorable of versus CMBS right now and for us we'll sell anything that is not not nailed down. If it makes sense and depending on who the partners are that we're partnering with.

We can recap them out, refi out, stay along with it, get new equity partners or not, but we, we do a lot of we would do that. Excellent, all right, so that our time is now up for a thirteenth panel a day. If we can, please give a big round of applause to our panelists. Focus on real estate.