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Multifamily's Icarus: Alan Stalcup On the Record · The Promote Podcast

• Alan Stalcup (00:03) We're supposed to close on this thing, I don't know, like December 1st. And I'm in Mexico. It's Thanksgiving, Mexico with my family, got done with some private yoga, feeling good, got a little tan. Get a call from Tom. And he's like, yeah. So my guys tell me this is going to be a 17. Yeah, that's about right. I think we can maybe do a little better. He goes, yeah. So I think I want a 17. I you're missing the point, Alan. I want a 17. We're going to move the prep. to a 17. Okay, okay, Tom. You're fucking me right now. You know that, right? Hiten Samtani (00:49) Tis better to have loved and lost than never loved at all. Will Krasne (00:52) The real question to ask Lord Tennyson though, is whether it is better to have raised that sweet retail money in lost that never raised it all. Hiten Samtani (01:08) Welcome back to the Promote Podcast, your insider guide to the money and mania of CRE markets. I'm Hiten Samtani Will Krasne (01:14) and I'm Will Krasne. Hiten Samtani (01:16) A shout out to our sponsors, Bravo Capital, a leading HUD and bridge lender. Will Krasne (01:20) Loan Boss, the best in class CRA debt management software. Hiten Samtani (01:24) This week we have a treat. We were visited by the poster child for the 2020s multifamily market, Alan Stalcup of GVA Management. Will Krasne (01:31) I'd also say the poster child of the 2010s golf course management software market. And he did not pull punches. He was very candid about what it's like to both make and lose hundreds of millions of dollars. Hiten Samtani (01:35) It's very true. Look, we're going to get some grief from listeners for, quote, platforming Stalcup while he's on this reputation washing tour of sorts, but we don't really care. Our whole thing is to have nuanced conversations with those driving the CRE market. And whatever you think of Stalcup, the epic hemorrhaging of capital in the last couple of years, the wave of defaults, the lender and investor lawsuits, it is impossible to deny that he was one of the most important characters in the Sunbelt boom bust. Will Krasne (02:07) It wasn't like we're sitting there saying, what's next for Alan Stalcup No, the interview was so tasty that we're actually skipping the punch list this week. Let's cut right to our conversation with Alan Stalcup. Ready to go. Let's do it. Hiten Samtani (02:21) We are ready to go. Okay. Alan Stalcup of GVA. Welcome to the Promote Podcast. GVA is a name that if you were in the multifamily business or in the real estate investment business in general, you'd probably hear a lot of in the last couple of years. Alan's story is pretty extraordinary. At one point he managed over 30,000 units. There has been so much written about you, said about you, fair to say in the last 18 months or so, mostly negative. You've become what many see as the poster child of distress in multifamily. Alan Stalcup (02:26) Good to be here, guys. Hiten Samtani (02:51) You and I have had a conversation pretty extensively about, let's say, the fall. Will and I were fascinated though, by the rise, the reason people are obsessed with you and GVA. So I think we're interested today to talk about how the hell you got there. Is it right that you were selling software for golf prior to Alan Stalcup (03:07) Yeah, graduated WashU in St. Louis with a mechanical engineering degree in 94. A lot of this is just good timing. Java just invented, joined Accenture, gave me an opportunity to cut code and software engineering and joined a team of about hundred people. You're just at one of those phases where if you're six months ahead of someone else, right, it's brand new. You're the expert. You can just stay six months ahead of everybody and you're really, really good. I had a great career there and got married, but I was traveling all the time. And if I wanted a second year of marriage, I better not travel. I had to find something in Austin and this was when Austin was probably 500,000 people. You could work for Dell or work for the government. And I didn't want to work for the government. worked for Dell at the right time and was able to join one of their more specialized groups, Dell Ventures, which was during the dot-com days. You could buy companies like Red Hat for a dollar and sell them for a hundred and six months. From there, I bootstrapped a software company that focused in reservation and marketing software for golf courses. Super fragmented market, right? All mostly individually owned. 25,000 golf courses in the US. So around 2010, it was generating quite a bit of cash flow. Will Krasne (04:11) You said you bootstrapped this when you went into multifam. Was it the first time you'd raised external capital or had you done that for course trends prior? Alan Stalcup (04:17) No, just bootstrapping my own capital. The reoccurring software company so you don't make a lot of money for a few years. Three things that led to our success. One, I'm a builder. I'm good at building things. And second is I use my engineering background and software background. Things like real estate are super, super easy compared to software, right? Software company, you have to build the product. You have to mark the product. You got to get a sales team for the product. It's a lot of work and it changes every kind of four months. Hiten Samtani (04:24) and you can make a a lot of money. Alan Stalcup (04:47) create more and more features just to stay relevant. Multi-family, well, the product's already built, your customers are already living it, your employees are already working it, you just buy it you have a company. I just found that to be super intriguing. Hiten Samtani (05:00) You were just a guy with a bit of cash trying to figure out your next adventure in a sense. Alan Stalcup (05:04) I had XXcash, it had a small family office that invested in it with that XXcash. So I started buying multi directly just on my own balance sheet for five. I did have a third party. So when I sold my software company, I sold 51 % to a private equity group, a CEO in, sold it to a strategic, which was the PGA Tour. I'm 40 years old and I've got young kids and I want to put on pants and go downtown and still be relevant in the world. I love the real estate piece. I started building processes around. Will Krasne (05:12) How are you managing that? you have a third? Alan Stalcup (05:34) buying and renovating and operating properties. 2015 was my very first raise as an 88 unit property for $5 million, $1.5 million of equity, hardest raise I ever did. Raised $700,000 from external folks and did $800,000 myself. Hiten Samtani (05:50) We're getting into the meat of what we're interested in. What does that pitch look like at that point? Alan Stalcup (05:53) We're already sitting on, at that point, probably a 63 % IRR track record. Will Krasne (05:59) And those are the deals you did just on your own balance sheet. That's right. Were those all in Texas or those are spread out? Alan Stalcup (06:04) Texas and Carolinas and Colorado, primarily kind of smaller infill properties, kind of that 10 to 40 unit. lot of those ended up going to a conversion seller. So maxed out the value, actually did some hard money lending along the way. It's like, these guys end up short and like, would you lend us at 12 % at a 30 % LTV? It's like, I think I can do that. It actually started. Will Krasne (06:08) What was the scale of- Alan Stalcup (06:30) taking some of those properties back and did it again. You got to remember, coming off the GFC, zero percent interest rates, people were pretty sluggish about getting back into the market. You feel a little more frontier. Will Krasne (07:05) extended use. Alan Stalcup (07:08) Right. lot of people weren't buying that. So we're finding literally eight to 10 cap deals in that extended use. Qualified purchase program was still very relevant and you could do that process. It's a bit of an accounting exercise, but then you could get the restrictions removed and it'd become a market rate deal. It'd unlock a ton of value in a pretty short amount of time. So like the Clemson deal, we had $533 rents that were restricted to 60 % income. It was on the tiger route. in Clemson and the best route, we got to 15, $1,600 Ritz. That was a good deal. That was a lot of the earlier stuff that I was doing. I wanted to do something more than just myself. five years of success, friends and family kind of want to participate. That was the first kind of layer of investors. Hiten Samtani (07:54) Was there like a catalyst, a step change, or is it just gradually bigger and bigger deals? Because I think you jumped from buying 50 unit complexes here and there, piecemeal, and then suddenly you're going 200, 300 and beyond. So was there a specific JV or a partnership that propelled you into that next level? Alan Stalcup (08:12) So 2017, we had about 1,000 units, and I realized that third-party management had different alignment than the owner. Property management companies made my spreadsheets lie. Hiten Samtani (08:27) Now that's a pretty colorful claim. We'll hear more from Alan and what he means by that in just a moment. Well, you've worn many hats in your glorious life so far. Pro baseball player, thespian, tornado remediation specialist. I want to ask, which was your least favorite? Will Krasne (08:47) first two, ugh, they were dreams. The third was a nightmare. Turning into a dream though. However, if you asked me a few months ago, I would have said Excel Monkey was my least favorite. Modeling out the dead tab was really, really annoying. Maturity dates, extension options, rate caps, Hiten Samtani (09:05) Sounds like you had good ROI, but your ROIBD, return on invested brain damage, not so good. So what changed? Will Krasne (09:11) I discovered Loan Boss. All my loans, live, on one screen. No more, let me just pull that up while I jazz hands a capital partner. And the extension option tracking with automatic notice reminders. I used to have a Post-It note on my monitor for that. A Post-It note, a 10. Don't. I'm not proud of it. But the one-click DSCR testing, every lender adjustment, every unique requirement, automated. ⁓ my god. Hiten Samtani (09:25) this day and age. No more getting surprised by your own cap stack. Listeners, check them out at loneboss.com, that's loneboss.com, and tell them the promo sent you. Will Krasne (09:45) We're back. Alan was talking about how external property managers, quote, made my spreadsheets lie. Let's jump back in. Alan Stalcup (09:53) They literally lied to me. I would plug in the information and said, we move these rents and this kind of expense, we should have this kind of NOI. And it just never worked out. Will Krasne (10:02) So what didn't work out? They weren't able to push the rents. They weren't able to deliver the expenses. Alan Stalcup (10:06) What's the incentive for a third-party management company? Will Krasne (10:09) It depends on how you structure your contract with them, but generally it's just to continue to grow. Alan Stalcup (10:13) It's a fee. There's no promote. Yeah Will Krasne (10:16) but per income, they're generally incentivized to grow income, because that grows the fee. Alan Stalcup (10:20) It's marginal, right? They want to do the least amount of work possible and keep their fee income. Period. And so we started our own property management company. And then my spreadsheets actually were telling the truth and the stuff really started ripping. Three more years, we have an eight year track record. At this point, some of that earlier success has come down, but still a 42 IRR. And we can systematically buy. Hiten Samtani (10:45) You've got to raise capital, tough and new for anyone. The other challenge is you've got to be able to be shown the right deals. So had you at this point cultivated a good network of brokers or how are you getting that access to Will Krasne (10:55) The guys who are, and I love this, like the guys who are showing you the 10 to 20 to 40 unit infield deals are not the guys who are showing you the 400 unit. We talk about incentives. Their incentive is to sell to somebody who's got a round trip it in three years. You got a wink, wink, nudge, nudge, we'll come to you and you'll get this on the backend. So if you're putting a ton of your own capital in that's been a negative in some, a lot of cases, cause they don't want to sell you cause you're going to necessarily transact on the back. Alan Stalcup (11:20) Two things on that, we quickly adopted to a value add strategy where we were rewarded for selling properties and our average hold time was 23 months. It's real simple formula. You move rents 25%, most of that drops the NOI and then at cap rates stay the same, you're doubling your money. This also higher leverage, kind of 80 % loans. So we did, right? We did what we say we're gonna do. When I got a deal under contract, we would not retrade for sport. So brokers like working with us because we would close. The third piece of the secret sauce is I had a balance sheet. So when I underwrote a deal, I was comfortable and I had the equity to buy 100 % of it. And what I found out is if it underwrote from my deal parameters, a lot of other people would want to invest in it. But if they didn't, that's okay. I would still close and I would still buy it. It closed 250 times. They all closed. Always be closing. Always be Will Krasne (12:12) Be closed. Alan Stalcup (12:14) If you take that element out of it, the raising capital to close a deal, that is a pretty incredible advantage. We just got really good. We're buying a deal a week and this stuff isn't complicated. When you're running a software company from scratch, going into real estate was not very complicated. Will Krasne (12:33) actually sold a software company as well. And I will say that the software company has never drilled into a water line and taken out 10 units in a building. The software companies never left the grill on and started a fire. The software companies never had a domestic violence incident. So it is simpler for sure, but it's not. Alan Stalcup (12:55) I mean, those are all easy problems, right? They're not your problems. You can get a contractor in to fix units. You can get a contractor in to fix water lines. Everyone has different capacities and capabilities. For me, real estate's a lot easier than the software. Hiten Samtani (13:08) Let's say you're at a thousand units, as you mentioned, and then six years later, you're at 30 K. The infrastructure, the company you need to have or build behind you to support that kind of operation is pretty significant. Property management, financing asset management. What were the challenges in having the backend match the front end of crazy frenetic acquisitions that you were doing? Alan Stalcup (13:30) Okay, so acquisitions are pretty straightforward because pretty much myself and one other person, we had some analysts kind of load sheets, but we knew the box that we wanted and we knew the markets that we wanted. Will Krasne (13:40) What was your box? What was an interesting opportunity to you? The platonic ideal of something that you would look at. Alan Stalcup (13:46) There's only like half a dozen brokers if that in any market. You're working with a very small group of people that have control of the deals. Little challenge going to a new market, right? Going from Austin to Dallas or Dallas to Nashville, but CBRE has people in those markets. Newmark has people in those markets. Your reputation kind of follows pretty quickly. You got to prove yourself with that local rep, but the deal flow was easy. That was straightforward. Our box ranged from 70s assets to 90s, but... predominantly 80s. We averaged an 86 vintage across the portfolio. Size 250 was the average property size. They had to support on-site management. at least 100. Our preference was kind of like 2 to 400. Will Krasne (14:27) One of my mentors used to say that above like 400 units, you don't manage the property, the property kind of manages you a little bit. Alan Stalcup (14:33) the whack-a-mole is endless. We're coming off the GFC. There was literally nothing built. Just look at the timeline of the SNL crisis. Fact check me on this, but if you go back from like 86 to like 2016, there's like a million net new units. There was very little multi-inventory in that period, right? Not like now where it's slowing down, it stopped. And so we're coming off of effectively no multifamily in 30 years. New construction is just starting up. so value add was prime. Take this 80s unit, still at eight foot ceilings, but washer-dryer connections. I can make it look brand new. 10,000 bucks in and out. We just had a good system of, with the brokers, we needed to see that 25 to 30 % rent increase through the value add program. And so I needed to see kind of that 150, 250 rent pop. Oh yeah, we got that here. and we just bought everything they had. Hiten Samtani (15:35) It's easier said than done. Let's talk a little bit about your partners, both your partners on the lender side and your JV partners. You had these feeder funds, co-GP entities, folks like Trinity, et cetera. Alan Stalcup (15:46) We really focused on retail, high net worth investors, which then translates into family office and then also syndicators like Overwatch, Trinity, right? They have an investor base. Great to work with. We tried an institutional deal. Fortress. That was JV Equity. Yeah, their first kind of entree into JV Equity. Hiten Samtani (16:00) Was that Pref or was that JV Equity? If I'm thinking of the same thing, 11 properties, 2,000 odd units, is that right? Alan Stalcup (16:10) That's right. And so remember, wait, wait, wait. Hiten Samtani (16:12) Maybe you're not understanding how fascinating this part is. How the hell do you go to Fortress? Will and I know quite well, pretty crazy history of deals there, backed by the likes of Mubadla, the Sovereigns of Sovereigns. How do you get into those rooms at that time? Alan Stalcup (16:28) Well, I had control of ⁓ so two times. Put up, I don't know, four or five million hard money on the deal. I control it. We're at a point where people want what I have. We got introduced to them and they said, they said they're good to work with. And I met with them, they seemed good to work with and they're very interested in our product. Hiten Samtani (16:32) tied up the deal and then you got him in. Who was on the Maltese side at that time? Alan Stalcup (16:51) I'm pulling. I don't know if he's still alive, but they're debt guys, right? We get a JV agreement and you know, it's all good. And I don't know whatever the preface was is 10 preface, 10, 80, 20. We negotiated sharp elbows, but we got it done. We're supposed to close on this thing. I don't know, like December 1st. And I'm in Mexico, this Thanksgiving, Mexico with my family, got done with some private yoga, feeling good. Got a little tan. Get a call from Tom. I've dealt with the guys that were like three levels below him. And he's like, yeah. So my guys tell me this is gonna be a 17. Yeah, that's about right. I think we can maybe do a little better. goes, yeah. So I think I want a 17. I say, yeah, I think we get, no, I think you're missing the point, Alan. I want a 17. We're gonna move the pref to a 17. Okay, okay, Tom. You're fucking me right now. You know that, right? Sign JV agreement. We're closing in four days. I'm on the hook. Will Krasne (17:45) You have signed JV agreement. Alan Stalcup (17:49) I my money hard. I was trying not to lose my shit. And I go, okay, Tom, let's do this. If I could get a, I think 10 or $20 million credit, I think that's what it was. If I could go get that $20 million credit on this 2000 unit portfolio, can we get our deal back? I think that would still get you 17. And it calls a few people. Yeah, yeah, yeah, yeah, we can do that. Okay, well, will you close on your balance sheet? because I don't think the lender is going to close in four days, right? Will you close in your balance sheet? And then we close with the lender. If I get this credit and we get the deal back, calls, yeah, yeah, yeah, yeah. We can close. So you'll close in four days if I get a $20 million credit and we can get the deal terms back. Okay. Hiten Samtani (18:39) This is why when I read about the story, think in the San Antonio Business Journal, you're not even in the story. And it says the entity is called SA-11. Is that the entity that you remember? Alan Stalcup (18:48) Yeah, yeah cautionary tale for a new GPS be mindful who you get in bed with Will Krasne (18:55) boy. That is one of the best fortress stories I've ever heard and the bar is high. Hiten Samtani (19:00) but he's not quite done, more in the drama in just a moment. I'm here with Aaron Krowitz of Bravo Capital. Aaron, $2 billion in deals, 100 % HUD approval rate, five years since launching. How do you keep that streak going? We're a pure play hud-finder, meaning everything we do really go. ⁓ Will Krasne (19:36) And it goes back to knowing the ins and outs of the program so that there is no guesswork. Hiten Samtani (19:40) Sniff's assisted living, feels like such an arcane world full of very complicated regulations and such a specific cast of characters that you really need to know Cole to make this work. Exactly. Will Krasne (19:50) We're steeped in state by state regulations and distinctions, but we're not just about HUD. We also have a very strong balance sheet bridge affiliate, Bravo Property Trust, and we just financed over $107 million in Miami and $125 million in Dumbo, Brooklyn. Alan Stalcup (20:04) the email out in my Thank Hiten Samtani (20:09) We have conviction fast. Thanks Aaron. And where can people find you? We're at Bravo. Will Krasne (20:14) book, capital dot com. Hiten Samtani (20:18) All right, let's get back to it. Stalcup is learning just how sharp elbowed the New York debt world can get. Will Krasne (20:24) The immediate question pops to mind is how hard did they push you on the debt that they were going to they're going to close it on balance sheet. They're like, we're going to charge you arm and a leg for that. Alan Stalcup (20:32) No, no, was to the deal, whatever their line of credit was, right? Two plus sofa or something. So we did, we closed on the balance sheet. We worked a deal with the lender, got the deal done, but the story keeps going. I'm also realizing that I'm an administrative member. So I'm not a managing member. And those are very different things. Yeah. Okay, fine. Yes, you can come. Yes, as your representative? As my associate. Same thing. No, it is not. I'm a glorified property manager. So at this stage in my career, I was not looking to have a boss, but I had a boss. And the guys out of San Francisco who do debt really well for like cement trucks, they know how to run property management. Hey, we're buying this thing for 70 a door. Our goal is to sell it for 90 a door. I don't think we should reskin and put $15,000 a door into the exterior. No, I think we should. Okay. As the administrative member it is been over and so I quickly realized the high net worth Hiten Samtani (21:39) where you have control over the GP economics and the save. Alan Stalcup (21:41) So with that said, know, bigger checks are helpful. I did look into that again after the scars healed up from fortress and there are good partners. Like Crow is a very good partner. Les Day was a good partner. Will Krasne (21:52) So I know you're talking about getting in and out of these things in two to three years. And that's obviously how you crystallize the promotes, but same time with the retail folks, did you ever consider putting on long-term fixed rate debt and just being like, you know what, your capital's back. get 80 % of the cashflow. I get the rest. We have a nice little annuity or was it always just like high velocity? Alan Stalcup (22:11) The original plan was to kind of do that, but a little secret, 70s and 80s properties don't cash flow. Hiten Samtani (22:19) Say more about that. Alan Stalcup (22:21) They're great in a way, but they don't cash flow. Will Krasne (22:24) You gotta replace some systems and the roofs and all those things, yeah. Alan Stalcup (22:27) find someone that cash flows with real debt. I've never been able to find a 70s and 80s. I can cash flow 90s, can cash flow 2000s, but they're 40 year old buildings. They've been sold probably 10 times. Hiten Samtani (22:40) So you're saying the only way to the mountaintop is to hold for as little time as you need and then sell at a nice markup. Will Krasne (22:46) His point is with real leverage because there's a lot of groups that own 10,000, 20,000 of these 60s, 70s vintage, but they've just owned them for 30 years and they're 40 % levered on a refi at 75. Doesn't really work as well. Hiten Samtani (23:00) When you were really cracking when everything was going according to plan, everything was just hitting, what do you estimate your net worth was? Alan Stalcup (23:07) I ate my own dog food. I believed in this stuff and I went all in. I mean, was probably on paper, six, seven hundred million dollars. Hiten Samtani (23:14) You've told me before that you lost $400 million in this very violent downswing since. Is that right? Like unrealized promotes. What do you mean by that? Like the equity wiped out in deals that you had to sell or fire sale or turned over. Alan Stalcup (23:20) That's right. No, think if you So it's two-folded, 30,000 units. Most of that was bought in 21 and 22. Find me someone that hasn't lost 30 to 40 % equity value in a deal bought in 22, 20, 25 % equity value deal bought in 21. If you can find those guys, let me know. I haven't found any. And at 80 % leverage, you lose 40 % of the equity value. You don't have any equity. Will Krasne (23:51) Was there a certain point when you go, ⁓ this is not working? Alan Stalcup (23:55) I can tell you exactly what happened. Crowe taught me this. We closed our first deal and we're going to probably do 10 of them. The Fed raised rates. This is like March 22. And they're like, we are pencils down. We do not fight the Fed. I said, come on guys, they're not going to raise it that much. Historically, you're 150 basis points and it takes two or three years to even get that. Rents can absorb 150 basis points. And so lesson learned was don't fight the Fed. I learned that probably maybe six months later. So we stopped buying. The thing is you get a lot of this stuff under contract and you kind of go through the motions and we just finished out our pipeline. We closed everything probably by September of 22 and we stopped buying. We're pencils down. Pencils. Let's manage what we got. Don't know what the Fed's going to do. Don't know what the market's going to do. Short of the curve was terrible. Longer than the curve was still good. So 10 year treasury was still good. We're getting some refis done. We got a big package, three, $400 million refi package done in 22. Will Krasne (24:37) down. Alan Stalcup (24:54) Got another big package, $300, $400 million done in May of 23. And rents are still going up. But then July of 23, the long of the curve just blew out. And that's when the market dropped. And that's when everything just stopped. Will Krasne (25:07) you between September 22 and then summer 23, were you guys still doing your renovation plan or had you gone pencils down on those assets as well to try to preserve cash? Alan Stalcup (25:20) Now, instead of just renovating good with new, right? Sometimes, know, hey, this, everything works. Let's just rip it out and put in new stuff because we were getting the pops. We weren't doing that. But when you get a trashed out unit and you got to just replace everything, then we'd, we'd renovate. So it was an augmented renovation plan. Will Krasne (25:38) And so when you were capitalizing these things too, for your raises for the heavy value add, there's no cashflow while you're doing all this. Cause you're spending all the money back on the units. How much reserves did you generally keep at each property? What I'm trying to ask is like, how long did you think you had when rates went up? How long did you have to really weather the storm? Would they make any force fund or would they for the most part let you choose? Alan Stalcup (25:54) certainly had the CapEx funds from the lender. You would have to go spend the money, show that you spent the money, and then you get reimbursed. At this point, lenders choose your partners well, ask a lot of questions, choose your lenders well, right? Things are really going. We get 30, 40 term sheets from lenders and debt's a commodity. Pick the lowest debt, best terms, but the lenders matter. Hiten Samtani (26:20) I should just say for the tape that pretty bruising battles with some of your lenders, namely Starwood Capital, Benefit Street Partners, some pretty ugly lawsuits traded back and forth, bad boy carve outs that have been invoked. You've addressed that before. You're certainly free to address it now if you'd like. Alan Stalcup (26:35) You've got these renovation reserves and you're expecting them to be funded every 30, 60 days. And some of these heavy lifts, you go spend three, $4 million. And then they don't fund them for eight or nine months. That starts becoming a problem. So when the lender is starting to work against you, that's difficult. We'd also hold back a couple million bucks per property. You have to have some working capital to go fund these projects and get them reimbursed. But when you go fund them and you don't get them reimbursed, you get kind of stuck. That happened a couple times, specifically with Benefit Street. Yeah, not great to work with. Hiten Samtani (27:08) they've alleged that you committed fraud. It's gotten pretty bad between the two parties at this point. Alan Stalcup (27:13) Well, for sure. 100%. Yeah, but before all that happens, when they're creating opportunities to take back properties is you start seeing their stripes. Hiten Samtani (27:23) One of the things Will and I were talking about before we got on with you is at this point, step back, you've told me before that your hope is to kind of wind down this portfolio, work through the problems, make sure that your investor capital to the extent that it can be is protected and then figure out your next move. When you look back at this, besides the macro, which is by definition not in your control, is there stuff that you could have done differently that you should have done differently? Where did you screw up as Alan Stalker? Alan Stalcup (27:50) If we had interest rates zero for two more years, we'd all have diamonds on our teeth and big fat gold chains. start drinking your own Kool-Aid and you think it can go forever. I certainly didn't think we'd have 11 rate hikes and debt service triple. Yeah. Short of like not buying anything in 2021 and 22. It would be probably vetting investors a little bit better, vetting lenders a little bit better, and then that negative cycle. kind of in 24, probably paid attention to the media a little bit more. I was 100 % focused on our equity and recapturing equity and didn't care about the narrative. Will Krasne (28:26) You're talking about 1000 units in 2015 to 30 plus. I can just imagine on the backside, everything breaks. All these systems break. Was there any challenges from that side? Because even just you talk about vetting lenders, partners, how do you vet employees? Because you're managing these things yourself. That's a massive, massive company. And that's in a short period of time. Alan Stalcup (28:46) These are employees, right? It's probably four direct reports. It's important to define your direct reports well and define the systems that they use for hiring and their direct reports. A good leader knows how to operate at the 30,000 foot level and make decisions, but knows how to get into the weeds and be boots on the ground, but also knows how to get out. I would say the property management, it was challenging. 100 % COVID was a big curve ball coming out of COVID. was the toughest labor market I've ever seen. We fundamentally shifted our work ethic as a country because of COVID. A fair assessment would be, I think I built a very good company, property management company culture, and when it rains, it pours. So timing-wise, so July of 03, you realize, okay, the long end of the curve is gone, values have dropped, you can't refi this stuff. It's problems with occupancy and rents. and you're not going to outgrow this thing. And now your debt service is tripled. By October of 23, we realized that the music has stopped and we're going to lenders and we're trying to work out plans while selling what we can for equity recapture. I think we did a really good job going to big hype line with survive till 25. And if you live that you're fucked. And so we moved fast and we got on average about 30 % equity value out of those 20,000 units, kept 5,000 units, gave 5,000 units back. Hiten Samtani (30:15) talked about paying more attention to the narrative. You're in overdrive now. Every couple of weeks I'm seeing Alan Stalcup interview here, Alan Stalcup interview here. I saw a sponsored content piece in Multifamily Dive. You're kind of working overtime now to either reverse or at least add your side of the story to all the stuff that's been written about you. What are you looking to accomplish here? Look, basically I've never seen anyone go from pretty much don't talk to the media outside of a canned statement in a release to suddenly like, let's talk, let's chat. Let me open the kimono to you. Alan Stalcup (30:44) fold one, I have the time to do it right 2425 was heads down stabilize what we can that work is done. We've got 5000 unit portfolio, it has two trances of debt maturity stuff works, it runs, we're doing distributions on more than half of the portfolio. It's probably not worth the debt. Even though we did refi 65 % LTV in 2023. Still not worth the debt. We'll see. But yeah, running a 5000 unit portfolio with 150 employees is kind of like a cakewalk. It's pretty easy. And then I just reflected on it and I think our investors deserve a balanced view. think our employees deserve a balanced view. No one wants to invest in a company that has a bad reputation or work for a company that has a bad reputation. For example, one of the big headlines was this $100 million fraudulent transfer. guess what? Overwatch, who said that in a petition, who got that information from a disgruntled employee that was fraudulent, made it up. 18 months of litigation, those cases are dismissed. and no settlement. Hiten Samtani (31:44) Is there no settlement at all in the back end? That's correct. Are you saying there is nothing you guys had to do? Alan Stalcup (31:49) That's correct. But guess what? That headline is still there. So Ben Lockery is the head of Overwatch, known him for a decade. And we did 58 deals together, right? 150 million. Hey, Ben, can you write an affidavit just stating the facts that you did all this work and you came to the conclusion that there's nothing true about it? Yeah, sure. So he does the affidavit. I go back to the people that write these articles, Austin Statesman, the real deal, Hey, you have this affidavit. I think your readers would really appreciate learning the full story. Nah, I don't think they would. So there's only so much I can do. But look, that's just the media. It's good to pump up these headlines, but maybe you don't get readers if you publish something that shows that it was all wrong. So yes, I am taking the effort and I have the time to do it to let people know the truth. Nothing to gain on my part. I'm not raising money. If we're gonna have a story, let's finish the story. If you're gonna invite me to a game, I'm gonna win. I'm gonna finish playing the game. And if you're gonna invite me to play a game, like litigation or like this negative media, well, I'm gonna keep playing it until I win it. That's just how I work. Will Krasne (32:59) You say you're not raising money. You see yourself. I mean, 5,000 units is a good place to start. That's a good portfolio. Alan Stalcup (33:06) There's a lot of people that would love to be there. I get it. I'm 53. I've run the bases. Two kids in college. got one that's getting out of high school in a couple years. I've got other interests. I don't need to maximize my money. Here's my mantra right now, guys, is I want to do interesting things with interesting people with no obligations. Hiten Samtani (33:25) Alan Stalka from GVA Management. Thank you so much for being with the Promote. Alan Stalcup (33:28) Hey, my pleasure. Hiten Samtani (33:39) Yeah, I will. That was something. Will Krasne (33:41) does not get much more unfiltered than that. And I have to say, as a sponsor, that Fortress story is absolute nightmare fuel. Hiten Samtani (33:49) Oh my god, yeah, Alan's Mexico tan must have faded in a flash when he got that call. Pretty crazy. Will Krasne (33:54) After that yoga, I undid all the hard work. Hiten Samtani (33:57) We'll be back next week with more CRE Insider goodness. Thanks again to our sponsors Loan Boss and Bravo Capital. Will Krasne (34:03) You can find them at LoanBoss.com and BravoCapital.com. And if you enjoyed this conversation, why not go write us a review on Apple. Hiten Samtani (34:09) It helps the pod grow, it helps our egos grow, win-win. Alright, well, I'll see you next week. That was a really fun one. Thank you. Ciao! Will Krasne (34:15) Thank you.