well a couple of recent deals that we've sold, we've seen you know multiple years of interest only, you know 57 even more sometimes for select sponsors, low threes on the interest rate kind of depending. Sure. Yeah. Hey guys, welcome back to how to invest in commercial real estate. Today is a special two part episode where we've got a special guest. I'm not Tito Virgil, he's gonna introduce him. Yeah man, I'm excited to introduce Brandon lamb with new mark. He is a good friend of mine. I had the pleasure to work with him a little bit on the brokerage side a few years ago And they are absolutely killing it on the multifamily brokerage side here in Oklahoma. He has a partner Tim McKay who's also incredible and a whole team that supports you uh which is important but I just want to mention a couple of things they've got going, on they control 90% of the class a sales of multi family in Oklahoma which is complete dominance And then A couple other things they also have the record for largest portfolio, say $153 million. And that's not a huge deal and new york but in Oklahoma that's a pretty big deal.

It's a big deal and then they set the per unit price in Oklahoma at 220,000 adore which compare that to some of our first units we bought it 9000 unit um That's also a big deal but Brandon. Welcome to the show. Glad to have you on um tell us a little bit about how you got into commercial brokerage. Yeah guys, thanks for having me first of all. Um Yeah, so I I have been with Newmark and uh the predecessor firm which was A. R. A. For about 10 years and prior to that um you know my career really started in commercial banking actually prior to that selling securities, but you know, My timing was impeccable. I decided in about early 2008 that I wanted to be a commercial real estate broker. So was that during the crash was already in full? It was not, so everything was just going okay, so you got to, and I thought man I want to do that. So I went to stan johnson company and great firm and learned a lot in about two months later the cliff came.

So I found myself thinking man, I made a huge mistake, but you know, success is a terrible teacher, you know, you really learn in the midst of you know, a lot of adversity. So uh I didn't realize that in the moment, But um you know, looking back that was probably the best learning experience I had was during that two year timeframe, I ended up um you know, late 2009, early 2010, finding that window of opportunity to broker distressed debt similar to the atmosphere today. But um you know, it lagged about two years, 2010 was the window of opportunity and kind of parlayed some of those former banking relationships into saying, hey Keybank Huntington National Bank, some of the bigger guys that were selling distressed loan portfolios, I've got buyers, so I started doing that on my own laptop in my spare bedroom cell phone and you know, ended up having a monster year, was performing multi family or another.

No, it was not, it was really not multi family at all, it was just all food groups of commercial real estate. So you know, there were some multi family deals here and there, but you know, it was really hard to find the non performing, you know, loans that most of those aggressive buyers wanted. Uh so it was, you know, shopping centers in florida or you know, and it was paper, you know, we weren't really brokering um real estate, it was really just so the buyer would have to come in and foreclose on it or something, that's right for clothes, redevelop that kind of thing. So during that time I decided, you know, I want to be an apartment syndicator. I always had an interest in apartment to you and I talked about that in years and um you know, I decided that's what I wanted to do and you know, kind of playing in that space, contacting different brokers, made a relationship at a r a uh down in Dallas with the principal there and uh at the same time, they had really shown some interest in opening in Oklahoma office and we started talking about that and that's how it came to be very cool. And that's when you guys kind of met, right, you guys met up at a rate, you kinda helped to open the little rock branch or something like that.

So it was a few years after you started at a ray, maybe a couple of years or whatever I was, we were kind of starting to have some success and precision equity and so I was about to quit the day job and and go full time with real estate and right about that time you guys are expanding and you brought on tim McKay who I'll plug him as one of the best brokers I've ever worked with guys awesome. But um yeah, and you said, hey come help us with A B and C. Class stuff. So for about a couple of years I was helping them at A. R. A. Which now is new marks. So and you said you initially got into it because you wanted to do apartment syndications. But you know, I think a lot of people know you more from the apartment brokerage, so walk us through the transition of, you know, kind of what you walked in at and what you're what you're doing now. Yeah, so coming in, I knew no one in the Oklahoma multi family space. So that was pretty daunting task. It was just me sitting in a little executive office, didn't know anyone uh didn't really know much about, you know, the landscape at all in terms of apartments in Oklahoma. So I knew I had a pretty big uphill climb.

I recognized pretty quickly what I want to do primarily is build a team with guys who do have relationships. So um actually made a good run. My first, my first year, it was really just establishing relationships, which that's, you know, the core of being a broker, it's a relationship business, there's a lot that still gets done on a handshake for sure. Absolutely, absolutely. So, and you know, we rely on that to this day, I mean, it's just, you know, the bigger listings we get, it's just, it's relational, we really um you know, we do some life with a lot of our clients and really, you know, have some some good relationships there so fast forward one year um you know, I met tim McKay who is like you said, I I don't know anybody better in our business in terms of um you know, just a just a he's a hard charger, he's a giant slayer. I mean the guy is the best and that institutional space class a space the best that that I've known. Well he what are you, what he does than him. Yeah, I think back, what impressed me about him is that he he just got the rolex out and says, I'm gonna figure out who every single apartment owner is in in our market in my market and I'm gonna know each and every one of them by name.

I'm gonna send them emails weekly and they're gonna know that I'm I know what I'm doing, he would send them articles, you know, establishing himself as someone that knew the Oklahoma city market better than anybody else. And that was that was really impressive. That's right. So yeah, I couldn't have asked for a better partner. That was about 2013. Um you know, and then fast forward a couple more years. We were acquired A. R. A. was acquired by Newmark Knight frank. So um you know, that was kind of a pause moment to try to figure out, you know, is this a good thing, is this a bad thing, turned out to be a phenomenal thing for us. Uh We then expanded our band with even more that gave you more, you know, kind of notoriety, a bigger flag or what was well in the apartment space. A. R. A. Was incredibly well known. Um you know, they were privately held firm but they were a big deal in the apartment space. But yeah, absolutely. It expanded our bandwidth to do a lot of different things that we didn't have the capability to do before. So from a broker's standpoint, the culture, there is phenomenal, but it also allowed us to bring on, you know uh the additional Newmark affiliate team in Oklahoma City and that was a game changer for us as well.

Uh, it had multiplied our market share even more. And it really allowed us to really kind of put things in silos instead of, you know, I'm going out and chasing every deal. I'm going to become even more of a specialist in, you know, class a institutional deals. This guy is gonna chase workforce housing. This guy is going to focus on private client space, which is basically five million in sub sub five million. Uh, so that really was a game changer for us. It sounds eerie familiar, you know, Neil was on saying that same thing um, about how he just compartment compartmentalized his brokers and force them to niche down and really be the expert on what they're at. Like you said, a lot of it's a relational thing. And when you've got, you know, seven guys trying to keep up the same relationship, it gets confusing and it gets muddled on the client side. Whereas if you just have that, that one person who's in charge of that relationship and can handle, you know, everything with him. I, I think that's great. Yeah, absolutely. So I, I really want to dive deep into why, you know, multi family is such a hot investment class, multi family, you know, 57 years ago, you could find it everywhere.

It was relatively inexpensive compared to other asset classes. You could find it in a lot of markets and it was really kind of this, you know hidden jim of house flipping is what it seemed like and you know a lot of people got into the apartment flipping um which is just how slipping on a, on a bigger thing right? You buy cheap apartments, you improve them, you stabilize income, you make it make more income and then you sell it. Um so why are, why is there so much competition? Why are we seeing you know $150 million dollar portfolio sold, I mean setting new record unit prices. Yeah what is it about multi family and Oklahoma of all places and and everywhere really like what what's driving them to Oklahoma just everything. Yeah well pre pandemic what we saw was you know it got to be such a competitive space based on, you know we perceive this to be recession proof debt terms are incredible um You know just that kind of atmosphere started driving international capital to the capital to the gateway markets and call it the coastal markets and then it became so competitive and people just couldn't win deals out there.

They started started driving them to the middle part of the country. So first they're looking in Dallas or Austin or Houston, you know those bigger primary markets and the same phenomenon would happen there. You know our Dallas brokers um again pre pandemic we're getting probably an average of 40-50 offers on every single deal. So there were lots of, you know, call it all the bridesmaids were just like, man, how do I win a deal? How do I get any yield whatsoever? So we would really capitalize on that and say, hey, we need to tell you the story of Oklahoma City or Tulsa or Northwest Arkansas, which is a phenomenal story in and of itself, but um that we've got to stop there. So you were, you were brokering deals in Dallas and then you were saying, hey, you know, if you want yield, if you want good apartments, if you're tired of losing, you gotta come see what we've got in Oklahoma, you'll think it's gold mine. Yeah, so we weren't doing the brokerage in Dallas, but we have a Dallas team, obviously Dallas office and you know, we work hand in hand with a lot of our offices around the country, so we're always in tune with, hey, who's buying in your markets if they like this market, they should like our market as well.

So we're constantly collaborating with those offices and that's exactly how we bring so much, so many new to market buyers into these into Tulsa and Oklahoma City. Um, and all of our markets because they're saying, well, I don't know much about Northwest Arkansas, tell me the story And they love what they see, they get better yield. It's less competition, we think we get a lot of offers on every deal. We might get 15 to 20, but they say, well, I'm not competing against 50 guys anymore. I'm competing against 15 or 20. I can, I can handle that. I can get better yield. I like the story etcetera. So, you know, the basis of it, there's, there's good debt and it's relatively predictable and you know, people have to live there. So it's probably the first check they're gonna pay. So this institutional capital, they'll just, that's, that's all for them. I mean, I guess it's a lot safer than not, a lot safer, but it's a lot less volatile than the other asset classes, I guess is the really attractive piece. Did you see, uh, post pandemic? We haven't, I haven't really seen a price drop in multi family.

Uh, so maybe an initial scare, but it seems like now there's just as much capital back at multi family and I think maybe some of it's coming from, from retail, uh, making a shift any thoughts on that? No, Absolutely. And believe it or not, it's gotten even more aggressive from a buyer standpoint. Um, you know, it seems like, you know, the last year, so there's been less to sell. Its not a, you know, the issue is not by our appetite, buyers are very, very bullish right now for multi family debt terms are better than I've ever seen them. Um, what are you seeing out there. Let's just talk about that real quick high prices aren't scaring people away necessarily. Not right now. I think we, you know to your point Joel, I think we've seen a lot of guys who weren't even in the space. Well we're retail investors, were hotel investors, whatever it may be those sectors that are in pain right now. Post pandemic or saying, man, maybe we should be looking in the multi family space. So we're seeing kind of new funds rise up. A lot of the institutional and quasi institutional players are saying maybe we should look at Oklahoma or Northwest Arkansas, what's going back to the debt because that's gonna help driving the value.

What are you seeing on debt terms these days? Well, a couple of recent deals that we've sold, we've seen, you know, multiple years of interest only, you know, 57 even more sometimes for select sponsors. Uh low threes on the interest rate kind of depending on the, on the five years. I oh is it lower ltv going in? No, Now we've seen 75%,, 75%. Okay. Class A product though. Class A product, you know, we sold, you know, one of the recent deals we sold in Tulsa was the Carlyle over and broken arrow smaller deal. Yeah, we've been on that we lost, you lost. So it was, you know, so funny. Yeah. Yeah and it was another new market buyer out of out of Houston and um, you know, incredible debt terms. I can't remember how many years of. Ohio they got but I think it was four or five low threes 10 year money. That's hard to be hard to be non recourse. Obviously Fannie Freddie recourse so that that feels good. So what what what cash on cash yield is that giving your your buyers that's that's gets driving the increase is they're trying to get to a yield, what is what is the yield on with those kind of debt terms?

Yeah. Great question during an I. O. Period obviously you're typically getting really strong double digit cash on cash returns but let's just say I mean for a for a class a deal you know when that I owe burns off. Typically you're looking for probably a seven uh you know a B. Deal probably eight or nine C. 10 and above after that I owe period. And I guess it helps longer you have io because you're you're hopefully raising those rents each year. So when you come off that I owe period you bumped your cash cash on cash a little bit. Yeah it seems like that I interest only is I oh by the way um it seems like that interest only would be you know crucial. I mean just front load the returns as much as possible and then you know wait for the rent growth and back end It probably adds 3 4 to the to the cash on cash number. Do you think? So just for people listening, you know, you without the I. O. You're building equity at three or 4%. So your return maybe a seven or an eight. But with the I. O. Yeah, you're not paying down that equity. But your your cash on cash in your hand each year is going to be 10, 11, maybe 12.

So, well, what, what are some of the other drivers? You know, these these guys, like you said, they're new to market buyers? Um, So I mean, how do you, I just, it's hard for me to believe that we've get some new market buyer who's never been to Oklahoma, let alone Broken Arrow. And then they, they bid on this property. Broken Arrow. And, and I know it's easy to lose on deals in your own market because you're, you're scared of the data. I mean, it happens to us all the time we're bidding were bidding and bidding because we never think it can get to that point because you know, we're so comfortable with it. We saw it when it sold it at 30 a door. And so now we can't think to pay 50 a door. But the market is changing most times faster than than we are. Yeah, it's gotta be hard to give guidance to some of these buyers when you're getting so many bids and when, when, I mean it's kind of hard to know what their underwriting and what they need. I mean they're not always just up front with you, hey, we need this. I mean it's, it's a game, there's cat and mouse there. How much of that purchase price? I mean, how much are you guys driving that or how much is them in the competition driving it themselves?

I mean, you guys even listening these with a price typically not typically not, we're going out unpriced. That's just kind of the, you know, the reality today. It's probably the best approach, But typically, you know, 90% of the time, it's just an unpriced deal. We give guidance of course, once we start sending out, you know, the offering memorandum, we give guidance. But that deal in particular traded well above our premium price on our blog. So typically were very, very good at underwriting. You know, our financial analyst is, is the best, um, really, really good at underwriting as a buyer would. And we walk everyone through the numbers saying, hey, here's, here's where you should be underwriting market expenses and so forth. And uh, that, that deal just got priced up because it was, I mean, surprised me because it's less than 200 units. Typically that's the trigger for someone to say, I want to get into a new market, I want to, um, ask some scale. And it doesn't make sense economically for me to invest in a deal that's 120 units or whatever it may be. But that deal was different. There was, you know, it was lack of supply on the market and a lot of demand.

One big thing that's impressive about your group. Just from my point of view on the sidelines is your underwriting must be really good because it seems like you guys have a lot of repeat buyers that come back to you for similar type product and obviously what you sold in the first time worked, you know, you didn't just sell them to the moon. So I mean that that's gonna help a lot. It does, it does. Yeah, I mean we're pretty straight shooters. Um you know, our buyers underwriting is typically spot on and uh you know typically within our B. O. V. Range, we're hitting that 90 plus percent of the time in terms of price. But again, I mean the market has gotten that much more aggressive during the pandemic that okay, who wants to buy in these major primary markets right now that are essentially shut down on multiple fronts. People are moving to the middle part of the country. Population growth is escalating in all of these texas markets. One of the top 10 markets in the country right now for in migration. People actually moving there is Northwest Arkansas of all places that's been off the radar for so many people not to continue plugging northwest Arkansas but it's just a phenomenal story.

So we've got you know, Ben McKay over there is making a huge, huge, you know, dent for us and market share and really, really making some waves. We've sold a lot of big deals over there recently, uh, there's a lot under construction, but still market occupancy is high 90s and absorbing everything that's built. So people love that story. People are moving there, there's jobs, there's job growth and it's a phenomenal story. A lot of big companies there. Tyson, yep. Huh. Well, um, I think that's, I think that's awesome. You know, um, we all own multi family, I think multi families, great asset class, you know, a lot of people are pushed out of it and you know, would like to get back in. Um, but you know, overall, I think this is a good a picture that we painted for, why people are getting in multi family and you know why it's such an attractive investment class. I think that's, I think that's great. Um, next episode, we are going to go over some brokerage tips, so make sure to tune in for the special part two. today's episode.

Yeah, yeah,