Latest / The Jeff Crilley Show / Blake Lugash, CEO, Realty Capital Partners | The Jeff Crilley Show
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- Coming up next on the Jeff Crilley Show, we're gonna be talking about all things commercial real estate investing with a nationally known expert. Next. Many are predicting that the worst is yet to come, which is unfortunate, said one person here. Until now, they've enjoyed the reputation of being the nation's icebox. Watched a burglar in his home this morning by webcam. As a journalist of over twenty five years, stories are what make my world turn. Reporting live from The Dallas News from tonight, Jeff Crilley, Fox four news. But in 2008, I took the jump from my familiar life and started a PR firm from my home. We're talking about anyone with a camcorder like the one I'm using becomes a television network. We started slowly growing the company and we now have over a 100 clients and we branched into the world of live digital broadcasting. I now own eight different TV studios and have a huge team. And the stories that I now get to share are sometimes the most important of my life. Life has a funny way of coming around full circle. This is The Jeff Crilley Show. Well, because of the media, when we think about investing, most people think about the stock market. They think about stocks or bonds. Most people don't really pay attention to real estate investing, commercial real estate investing. It's different than residential real estate or flipping homes. Blake Lugash is in the studio. He's the CEO of Realty Capital Partners. Thanks for coming on the show. Thanks for having me, Jeff. I enjoyed being here. Absolutely. So I I I made that statement that most people don't think about commercial real estate as an investment tool, but if you're working with the right company like yours, you guys do all the due diligence and you make a smart wager on a property. So talk a little bit about the history of the company. That well, you're absolutely right about that. So Realty Capital Partners was founded in the late nineteen nineties, and we were basically an offshoot from our founder, who is a developer, and he came down to the North Texas market, DFW area, in the nineties when the DFW, the airport, was just booming, and that created this Northeast Tarrant County economic expansion of South Lake, Colleyville, Grapevine, Westlake. And so our our founder, Richard Myers, was starting to develop residential communities, garden office buildings out there, and so he needed equity capital to fund his development. And so he started raising money from friends and family and neighbors, and that side business became so prolific, he then spun it off to what we know today as Realty Capital Partners, an investment company, and we still invest with him and his partners, but now we invest with independent third party developers across The US who have opportunistic development or value add commercial real estate projects that need about five to ten million dollars of equity capital. So we serve a very specific market that we think is underserved, and what we can fund that from our partners and and investors who are looking for those returns that they can't get elsewhere Sure. In an interesting investment. And, you know, mostly they're professionals. They're doctors, they're lawyers, they're business owners, and they don't really have any background in commercial real estate. So we come in, and we say, listen, let us do the heavy lifting, let us be your professional partner, and we're all in it together. And, you know, we get rewarded when you get rewarded, and and it's turned out to be a a a great business. We have a great service to our true investors, and, you know, it it just works works out really well for everybody. Talk a little bit about the investment philosophy. I I I I sense that you're not, you know, betting on the long shot. You're you're doing more safe. Absolutely not. No. No. We're we're not we're not gambling, and we put a lot of investment criteria in place to be sure that we're mitigating the risk. And so, you know, we look at it, and and there's construction risk, there's financing risk, there's market risk, there's entitlement risk. And those are all things that you can monetize, but we're trying to mitigate those risks before we make the investment. And so, we don't ever want to go in there and say, well, you know, maybe this will work, maybe it won't. That is not at all what we do. Sure. And so we wanna work with great people. You know, I can't stress that enough that that, you know, it is location, location, location, which is the famous real estate adage, but we're working with people too, and it's a it's a people business. And so we underwrite all those things that I just mentioned, those risks. You know, can you build what you want to build where you want to build it? Yes. Can it get financed? You know, you may want to build a high rise in Southlake, Texas, you know, but they're never gonna let you. So so let's not go down that path when that's not gonna be a possibility. Right. We wanna understand the entitlements that we we're going to have before we spend a penny. We wanna make sure that we can build it for the price we say we're gonna build it. We wanna be sure that we're gonna be able to get the capital from the capital markets we want, and that ultimately when we finish building what it is, an apartment project Yes. A residential neighborhood, that the market is there, that there's buyers for it. And so it's a it's a very thoughtful process, and, you know, we think we've been pretty good at it over the last, you know, thirty years. Yes. We're gonna show a little bit of your portfolio. Let's go ahead and put that up on the screen. Thank you. And I'll just have you narrate this as we start to scroll down the the slides. So this is in Austin? Yeah. So so, you know, we we put together about six to eight different investment projects a year. This is one we started last year in the Pflugerville area of Austin, in North North Austin. And what we saw is that there is a need for this flex industrial space for HVAC companies or small fabricators or assembly companies. And so these are about two to 4,000 square feet spaces that have some office in the front, you know, an office, a couple offices, a restroom Sure. Or the for for the office staff. And then in the back, it's basically warehouse space. And so that particular project has about 24 different units, which will be leased to Yeah. Businesses, and and, you know, the market for that has just been skyrocketing for those small businesses looking for space like that. Let's go to the next slide, and Silicon Valley Town Silicon Valley Townhomes is a is a 10 unit townhome project that we are building in San Mateo, California. As you may as I'm sure you know, there's a housing crisis in in California, especially Northern California, in that Silicon Valley area. And so as much as you do hear about California making things difficult for development, which they do, they have released relaxed some of their rules for smaller developments to encourage new housing supply. And so we're taking advantage of that. That's kind of a competitive advantage. This is approved by Wright, and so we're gonna build these 10 townhomes in San Mateo, and and there's just an insatiable demand for for these, and and we're starting construction actually this month. And I'm looking at the rate of return, 27%. Mean, that's that's crazy. And so so it's a shorter deal, which helps that. And and, you know, with these projects are not we don't want them to be crazy, and I and I can understand why people say that. And what you have to understand is is we're taking this risk. It's mitigated, but we're the ones building we and our investors and our partners are building these projects for the end user. And so it it would make sense that our investors should be rewarded for the risk they're taking. Sure. Even though, again, we have maximum price contracts, we have building plans already complete, they're still doing something that someone else isn't doing. Yes. And so there's a the the market offers them a reward for that. That's that was our record. Everybody needs some place to live. Let's go back to the slide deck, and let's go to the next one. There we go. Roaring Fork Land. So this is a fun deal. This is a really fun one. So our partner has bought about 285 acres of undeveloped land outside of Aspen, and this is in the Roaring Fork Valley off off of Highway 82. And for some people who understand the Aspen area, Aspen is where the billionaires are pushing the millionaires down Valley. Wow. And and, you know, we don't really play in Aspen. That's that's a little too rich for our blood. But there is an an incredible market down Valley in the Warren Ford Valley, and so they need housing. The the schools, the police departments, the fire departments, they need affordable housing for for their staff and their workers. And so we're going to we're proposing to build a master plan community, which will have hundreds of homes that can service the the needs of the Warren Ford Valley. It's a it's a long process, but it's fun. It's exciting, and you really feel like you're you're helping and and you're you're making a contribution to the community because you're providing something that is desperately needed in this region. Let's go to the next slide. So Sherman Hotels. Sherman Hotels is a project we are just funded, and for those people locally in the DFW area, you understand how explosive that Sherman market is. I've been following it for for several years, and there's just billions of dollars of investment in tech sector up in Sherman Yes. With the the TI semiconductor factory. And so they're underserved with hotels to serve their burgeoning business community. And we're teaming with a development partner who has a wonderful relationship with the Marriott brand. And and as as most people know, people will do almost anything for the Marriott Bonvoy points. Yes. And so it's important to have a branded hotel that can draw on that massive membership database and membership loyalty. Yes. And so we're we're we're going to build two hotels in the Sherman area, a town place suites, and and meet the demand. That is already there and continues to to grow. So we're we're pretty excited about that. Alright. Let's go to the next slide, and I think this Highland Park Apartments. Highland Park Apartments is the Alto Apartments in Highland Park off of Lemon And The Tollway. Nice. And so this is this is kind of an interesting acquisition for us that we made about a year and half, two years ago. We were able to and something we do is we we parlay on market inefficiencies. Right? Because unlike the stock market and a share of AT and T stock where every stock is exactly the same, every piece of real estate is a little different. Right. And so where the opportunity is is is is to is to monetize and to maximize those those inefficiencies. And this apartment project, is in Highland Park, and it's in the town limits of Highland Park, and it's in the Highland Park school system, was put on the market in a time when the institutional investors were not really in the buying mode. Sure. And so we were able to get it at a good price, and we're able to provide some updates and upgrades into those units and bring those rents to where they we think they should be to market levels and hold on that and cash flow it, and then have the opportunity to try to try to exit it when the capital when the institutional buyers are back in the market. And so it should be a really great opportunity for us, and, you know, it's it's always fun when we have fun projects like the Warren Fork Land, like the Highland Park apartments. You know, the hotels are cool. Hotels are neat. You know, we do things that also just make money. Austin Flex Industrial is not necessarily the coolest project, but that serves a need. So Yeah. So some are some are a little more interesting than others, but, you know, we also look at it and say, you know, sexy isn't necessarily always the way you make money. Or it can. Yes. But you also just have to follow where the need is, And and so that's really what's most important to us is following where the need is. Let's go back to the deck. Sure. So I think we're gonna talk about Uptown. Yeah. So Uptown Residential, 15 units to be built, single family, individually platted homes, which is a really big deal in the Uptown area. Yes. And so, you know, a lot of us have you know, I came to to Dallas in the in the mid nineties and, you know, would hang out in Uptown, and Uptown is a completely different place today than it was Yeah. Back then. And and so Uptown is now, you know, a labyrinth of of towers, apartment towers, condo towers, and and, you know, that's that's great. It creates a vibrancy. Yeah. Restaurants and shops. We have a point seven acre parcel of land on coal that we're gonna have these low density, individually platters, I mentioned, ha homes. So you don't have to be part of a high rise condo development or a high rise apartment. You can have your own house in Uptown. This is going to appeal to young professionals who are attracted to that 10 area with the burgeoning Yall Street, you know, Goldman Sachs, Bank of America, 23 Spring. You're also gonna get empty nesters, people who their kids are out of high school or in college or beyond Yeah. And maybe, you know, they've lived in the suburbs, they had their big three, four, five, six thousand square foot home and don't need to be out there anymore and wanna and wanna enjoy the vibrancy of the of the uptown lifestyle. You may have people who it's a second residence. Maybe they keep their suburban home, or they're coming from East Texas or West Texas. So there's a there's a really broad market for this product, which is, you know, really not found anywhere in the Up 10 areas. So we're we're pretty excited about that. That breaks ground this spring and should be should deliver in early twenty seven. Blake, talk about the due diligence that you guys put in before you do any deal. Of course. Of course. So it's really important to know who we're working with, to know what the project is, and so we, you know, we do a lot of financial sensitivity analysis. We do a lot of due diligence on the entitlements and on the construction costs. We do some cost cost studies to make sure that we can get what we think is gonna be built, what we wanna build for the price we can build it for. And then we also try to put in some financial structure with our partners to try to protect our investors, and so part of that is negotiating with our partners to to be sure that we are protecting our capital. Sure. And so, you know, everybody want we want everybody to do well, and our our pitch to our developer partners is is, listen, you know, we need you, you need us. We need you and your expertise, and your ideas, and your business plans, and you need our equity capital. And so get us back our equity capital and a good return, and then you should be rewarded quite well. And so that model has worked for us quite well over the years. You know, I I don't know if I mentioned we we've been keeping detailed tracks track of our of our performance since about 2010, and, you know, of about 40 projects that have come full cycle. We invested in them, we stabilized them, and we sold them. We've achieved to our investors what they get, about a 1.9 equity multiple. So if you invest a $100,000, you get about a $190,000 back, a 19 IRR in a span of about four and a half years. So it's one thing to say, oh, that's what we're going to do. It's another thing to say that's what we've done, and you've done it. Congratulations on your success. We have about two minutes left, so maybe look into the camera on the left and talk to the the person who's tired of just putting money in stocks and bonds and might wanna stick a toe in the water. Okay. Alright. Well, first of all, I tell you you made a very good decision. This is a wonderful way to diversify your investment portfolio. Commercial real estate, which is considered an alternative investment, is a great way to add yield to your in investment returns. It's a fun asset type. It's historically produced quite well. If you look at any sort of graph of real estate performance, it goes up into the left. There may be some hiccups here and there, but real estate values always increase. So, you know, if you don't know how to do it, you don't need to do it on your own. If you don't have millions of dollars to invest in something, you know, if you just wanna invest a $100,000 at a time, then you can come to a firm like us, certainly would tell you that, you know, we're very good at what we do, there's others out there, where we will serve as your real estate professional advisor. We'll find the deals. We'll source them. We'll manage them, and then we'll provide you with the returns. And we have a fiduciary obligation, which means we have a legal obligation to look out for your best interest. And so this is a marathon, not a sprint. We want long term performance. We want long term relationships. And so it's it's just a a a very smart, prudent way to invest. And and, you know, if if you're thinking about commercial investment, please look into RCP. Outstanding. You've been an amazing guest. We're gonna have to have you back on soon. We're gonna Thank you. We're gonna end with the website, which is rcpinvestments.com, the great Blake Lugash. Thanks for coming on the show. Thank you, Jeff. You bet. That's it. Appreciate it. We'll see you next time.