Episode 63: Reaping The Benefits: Learn How To Build Partnerships & Invest In Today's Financial Climate

Host/CEO James Prendamano sits down with Yusef Alexander. Yusef has more than 20 years of working-class, real estate industry experience. He serves as VP & Chief Business Development Officer at Real Estate Asset Partners where he supports the company’s asset expansion and philanthropic growth efforts. Yusef gives insights on all business aspects related to the RE industry, including sourcing deals, and third-party property management.

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Participant #1:
I don't know too many things in life, but the things that I do know, I know that I know when I source a real estate deal. I know a deal when I see it. I know a deal. Once I evaluate it, Peel it back and I know what levers to activate to give it more, more return to kind of be cost effective and to deal with it in an optimal way. So I know that as a business owner, from my track record and my expertise, then that becomes a project that we'll do from that knowing that I know, of course, I can't predict the future. But again, I don't know how to hit a golf ball really far or shoot a basketball that well, actually, I can shoot basketball. Okay. This is what I do know. So I know how to position myself. And then I also know as a business owner how to create some level of protection against the market swings.

Participant #1:
Welcome everyone to the podcast. Really, really happy treat to you today. We're joined by Yusef Alexander. He's, the cofounder and partner at Real Estate Asset and Partners, where he's based out of Atlanta. And the reason I'm so excited for this one is Yousef is doing a lot of the things that we're scheduled, and we're on track to be doing more of he's got a great handle on the commercial markets. He's boasting some amazing returns. Yousef thank you so much for taking time to join us today. Thanks for having me. It's absolutely our pleasure. The audience oftentimes likes to get a flavor, as do I have kind of the preamble. How did you end up where you are today? And then, in your words, if you can describe what it is exactly you're doing, then I'd love to jump into some deal stuff, but I know you've got a hell of a background. You've got a degree in business economics from UCLA, and you're also a professor. How did you end up where you are? Is real estate in the background at any point? Well, I love answering this question, James, and thanks for asking it because it depends on the mood I'm in, whether the story is the smiling story or it's the story with all the lumps and the school of hard knocks on it. So I'm in a pretty good mood. So I'm going to give you the streamlined version. So basically born and raised in Los Angeles and went to UCLA. And after UCLA, that was deciding on which career path to take and the career path I took. It didn't show up until I was actually working as a math teacher. I was a math teacher at a middle school, and I met a mentor, a local guy that was buying and selling small properties, got under his wing, started to buy and sell, cut my teeth with smaller deals. And what happened to me? One time I was teaching school and I had my role book on one side, my attendance book, homework log and all that for the students. And I had deals on the other side, and the deals were taking up more of my time and more of my attention than the role book. So I said, you know what? I'm doing these math students at this service, and it was time for me to go full time and kind of hang up my teaching hat, although I loved it and had a great time. So from there, I learned to reposition properties in some marginal areas in Los Angeles. Did that for about eight to ten years. Then I took those returns, those business plans, those project completions. And I banked a group of investors who are able to say, wow, this is kind of a good place to place money for short and medium term. And I took that and scaled it. I scaled it to multi family real estate in different markets, went to Nevada, then I went to North Carolina, and then I ended up in Atlanta. And from there, that investment group, we were able to scale our projects and scale our syndication of funds. And we just kind of grew from there. And, yeah, so that's kind of the streamline version of beginning to now. Now I pick my spots. Sometimes I'll collaborate with a syndicator. Sometimes I'll do some deals on my own, or sometimes I'll take a bite off a bigger project and formulate a group again. Okay. So just a couple of questions on what we just covered. You said you got started repositioning some properties in marginal areas. I assume that it was a barrier to entry price, right? Is what drove you to start there. Is that what the issue was? Well, that's all I knew. No one took me under their wing and said, let's do beachfront property in San Diego. I was from Los Angeles and grew up in modest beginning. So this is what I do. This is kind of start where you are. Do what you can. That type of deal now, were you using your own funds at that point? Were you putting together friends and family raises? How did you first jump in the PG version is, yes, everything. I threw everything at the wall from cousins and family. And the guy who I sold a bunch of records. I don't even know if these kids I'm old. I have some records. I had to kind of you do what you can for down payment. So you do what so many of us have done that had humble beginnings, right? You scraping your claw, you pull it together, and you start finding that you've got a nose for deals, right? You start seeing, you've got vision. I assume you see what's there. But you also see what can be. You're pulling the deals together. You're starting to bank money. Interesting that you jumped. You said, Nevada, North Carolina, Atlanta. You started to jump out to different markets relatively quickly. What was behind that decision scale? So when you scale in a major metropolis in the United States, the scaling and the barrier of entry and the sophistication of things is a little bit different. So I was able to scale in a city called Bullhead City, Arizona, where I bought my 1st 22 units. James is the hottest city in the United States. So 120 degree weather. But guess what? They were selling 22 year old guys multifamily apartment buildings during the early 90s. So I got my experience with a multifamily outside of my neck of the Woods. And then that experience, I was able to say, hey, where else can I take this same. Sophistication. So Yousef something that we've seen we've been screaming about for the better part of a decade is the decentralization of real estate out of these big cities. Coronavirus certainly has put a spotlight on that. I'm curious. In your experience, being in La, similar to New York, I'm sure that there was a certain level of diligence and vigilance to get through the municipalities sign offs permits. We tend to have very high barriers for that type of work. As you went to these other markets. Did you find it was an easier process? Well, there are pros and cons. You and I, we're city rats. We're big city guys, and we're used to the stimulation and the complexities of these places. Now you take that to a different market. Sometimes those complexities are to your advantage, but then sometimes those complexities are to your disadvantage because what I had to do is and this is one of the things. When I mentor people, I say, Well, listen, keep your radar in your own market because you have your posts in that area, and you understand the nuances of how to sniff out deals or source deals in that area. I would go to different markets and pay too much, James. So, hey, here comes city slicker, but filthy. Yeah, I'm paying above retail because I'm not in the fabric of the community to source deals. Now, when I went to North Carolina and Atlanta, it was a totally different area. My home offices are my headquarters, my home. I bought a home. You know what I mean? I'm in the community. I'm in the community. I'm hosting after school programs. I'm a part of the community, and I'm actually there to have abundant exchange with the community. So first of all, God bless you for that work. It is so important. All this other stuff we do doesn't mean a damn thing. If you're not helping lift everybody up around you. I'm a big believer in that. And I applaud you for that kind of work, something that we've seen. And I'm curious what your take is on. It. The exact thing you just talked about, you go to some of these other markets and you look at a 20 unit building over 8000 sqft of commercial in our home market. That's a $2.8 million deal. And in this local market, it's an $800,000 deal. We get in the mindset of buying a payment. We default to our norms for cap rates. We understand what our cash on cash is going to be. We understand what the Deltas are. We think the Delta is going to be between rent and our debt service. We jump in, and then we come to find out the locals passed on that deal at 650. Right. So as the decentralization continues, the legislative threats, something that's super high on any SWOT analysis we do now, we're really hyperconscious of the legislative threats that we're seeing in the marketplace, legislation that is oftentimes super well intended. We're finding that in practice and an actual deployment really complicates things. And there's a lot of unintended consequences. And the buck seems to stop with the investor and the landlord now more days than not, at least locally here in New York. So something that we've been bullish on going back five or six years ago, we said, let's get out of multifamily. Let's tell our clients get out of multifamily the legislative threats, the changes in tax structure that were coming and the decentralization of the city overall, it made sense for us to get into what we thought was the next hot market back then, logistics, manufacturing, space, industrial. We were blessed in that we hit the Mark on that. But that's becoming saturated now, right? So there's more and more pressure to go to these outer city towns or small cities. You had mentioned Bullhead city in Arizona. And we're finding now that folks are not only going to those secondary markets, they're going to the secondary markets, to those secondary markets. And if you're not careful, in my opinion, because money is so cheap right now, and there's an abundance of it in, like the family office space people are buying. They're buying payments. They're not buying quality real estate deals. They're buying payments. And I think that when the music stops, which you and I have been through enough cycles to know it's going to stop. I'm curious what your thoughts are in so many of these emerging markets that now have piggyback these secondary emerging markets. Do you think that folks have to be weary of the next turn, or do you think that there's been enough relocations that it's going to hold? Well, there's a lot to unpack there. One is as a business owner, you want to look at things as a business owner and then you want to kind of forecast immediately what you're dealing with, what market you're trying to grow in and progress in and then the market as a whole. What kind of drivers are like you said, the cheap money, the interest rate, the regimes, political regime, the taxes. Then you want to kind of evaluate it on that front as well.

Participant #1:
I don't know too many things in life, but the things that I do know. I know that I know. So when I source a real estate deal, I know a deal when I see it. I know a deal. Once I evaluate it, Peel it back and I know what levers to activate to give it more return to kind of be cost effective and to deal with it in an optimal way. So I know that as a business owner, I wouldn't tell. And then, of course, my investment group as well, from my track record and my expertise, then that becomes a project that will do from that knowing that I know, of course I'm not. I can't predict the future. But again, I don't know how to hit a golf ball really far or shoot a basketball that well, actually, I can shoot a basketball. Okay. But this is what I do know. So I know how to position myself. And then I also know as a business owner how to create some level of diversification and a level of protection against the market swings. I'm not going to just chase the payment or chase an interest rate or chase appreciation. I'm going to put the full scope of evaluation on it as a business owner. Now, as a market in the market, like you said, things get hot. People are saying, hey, let's go to industrial space and the cannabis industry, the film industry. All these things are grown that's just CNBC talk. And there's money like you said, a lot of cheap money and a lot of money out there that chase the sexy, the sensational. And what I say to those folks is if you have money to burn. Bernie, I don't. I'm a business owner. So I have to put the lens of my expertise, my life experience and my thought leadership into sourcing deals, placing money, deploying resources. So it will be interesting to see how this plays out. I think there's not enough folks talking about it, and I'm glad that you are talking about it. You have the courage to talk about it. But I think that probably come 2025 to 2026 is when that second round of stimulus ends, it'll be another presidential election cycle headed into the midterms. I think that we're in for a rude awakening in some of these markets. Absolutely. And not to cut you off. But you said something so important like, listen, if you have a group, a family office or an individual that's chasing Delta or chasing yield, that's what you're going to end up doing. Chasing. If you have a group or an individual or family office, selectively buying assets, then that's what they're going to do. Sometimes you eat the bear and you get a great deal. Sometimes the bear eats you. But you still learn that experience from hold on 1 second. Hold on 1 second. Sure. Okay. I'm sorry. We're good. Sometimes you learn from whatever experience that you encounter, you eat the bear. Great. You have a deal, everybody's highfiving, and there's a lot of fat on the bone. You get eaten by the bear. Guess what that's called the school of hard knocks. And then you say, you know what? We're not going to chase Delta in New Mexico. Not the same thing is going on in New Mexico, a market that you don't know about. And you have this sensational or sexy idea to say, let's go buy a million square feet worth of industrial space to grow cannabis. So the strategy you touched on earlier, though, the diversification and the hedge is what keeps the balance right. You can't hit every deal. Every deal is not a home run. But if you're consistently hitting those doubles and triples, occasionally you hit a Grand Slam, and occasionally you strike out. But when you're measured, you're not chasing the Delta, you're not buying the payment. I can't say it enough, folks, as sexy as some of these deals. Look, you have to make sure that there are still the sound fundamentals in the marketplace, where you're looking, where when there's some market shifts, people are not picking up literally during 2008, after that fallout, 2000 and 910 eleven, we traveled all around the country because I wanted to see firsthand some of the fallout. Some of the stories we heard were tough to understand. Being in New York as challenging as it was here, Yousef it was still New York. It was still the epicenter of jobs. If someone lost their job. And a lot of people had really hard times there in New York, I'm not trying to minimize that. But there was still opportunity for many of us who were able to pivot and adapt and pick things up. I went to some of these secondary markets. And man, we would walk in. It was like a movie, like the zombie movie with the tumbleweed going down the street, boat still in the driveway, the houses are starting to be overgrown keys left on the counter in the secondary markets, if you don't have sound fundamentals and a job and employment base at the core of all of these decisions, folks literally leave everything and they drive to the next opportunity where there's a better shot of employment. Did you see some of that during that time? I couldn't have said it better myself. So there's two things. One, I hope your listeners are paying attention to the wisdom that you are articulating. As a business owner, a business owner is going to make business decisions. And those decisions are insurance baked in there's market being conservative in the market, baked in there's short, medium and long term vision baked in. And that's what a business owner you have that in your bones. So I hope that your listeners are listening to you as you speak. So articulately about how you make decisions now, the good news. So that's a good thing. But the other side of the coin is that's what makes you and I entrepreneurs opportunistic, because one of my mentors used to tell me, hey, you said you love to be the second investor. That's where you make all the money. My man, I used to say, what do you mean? And then I bought some botched condo conversions, and I turned them into multifamily. I bought the guy who had the infield project too soon. You know what I mean? So unfortunately, that's the way the market fundamentals, the market swings and cycles. That's the way it works. And we you and I, we sit on our laptops at nighttime looking for opportunity.

Participant #1:
Absolutely. I call it the Starbucks model. When I first started in my leasing career 1520 years ago, there was an emerging market out here where I felt like a Starbucks would be amazing. It would be tremendous. And it turned out five years. Six years later, we did the Starbucks deal, and it did perform. But I'll never forget. Gentleman's name was Nelson. He was in the leadership at Starbucks. And he said, James, listen, we never want to be first in. We would rather pay if the market rents $20 today. I'd rather pay $32 tomorrow. But know the market is proven because I know what my costs are. We're a disciplined company. We understand what we sell a cup of coffee for and what our expenses are. And we know at 32, we're still going to make X, but at 20, if we can't hit those metrics as far as volume, we're dead in the water. So back then, as a younger investor or younger entrepreneur, I would go and I was like, how could you not see this opportunity? And he was such a gentleman? And he walked me through. He was like, hey, man, I see the opportunity. But I also see the risk. I see where this can make a left where it's supposed to make a right. And if it does, I'll be damned if I'm going to be the Starbucks sitting here. If things don't shake out the way they need to. I'm not leaving my key counter on that one. Absolutely. Yeah. Great. Your mission now is to build multi families that empower entire communities. You're looking to help folks out with life skills, enhance their economic viability and mobility. You've authored some books you're super heavily invested in early childhood literacy and financial literacy for adults Where's the passion come from. And is this something that you're seeing in a world where I feel like social media has kind of made us a little bit more selfish? It's also connected us in a way. And I think that we're seeing a lot more folks being responsible as they're investing in new neighborhoods. Could you talk a little bit about particularly the childhood literacy and some of the things you're doing in the community? Well, let's first start with the childhood literacy. One of the things that I've kind of figured out just from my life experience being I grew up in South Los Angeles in the 80s, and it had its own level of characteristics that were there now, from there, through education, mentorship, through exposure, and just through my own life experience, I've been able to collect my lens of the world. And now that that lens of the world has been formulated, I want to share as much of that as possible because, unfortunately, where I was raised, there wasn't a lot of resource sources. And one of the resources is just the availability of time and effort to bridge the word gap, the word gap for information, health information for finance, information for wellbeing, information. And I just call it literacy. That literacy, emotional intelligence, literacy and the earlier access to that, the better for the individual's mobility. And that's another thing. I mean, we live in such a phenomenal world, like we were talking about being connected, and we live in such a phenomenal country in these cities that we live in. But a lot of communities, a lot of people, whatever background they come from, they're just not connected. And they don't have that mobility, that connection. And then that mobility to move through the society the way that could best suit them, whether it be educationally, whether it be health wise, whether it be a pillar of the community, whatever, politically, financially. So those were my passion. That's what I see from my experience, who I am, and that's where I want to place as much of my attention and resources as possible. I sit on the board of a school in a school where

Participant #1:
the parents of the children are not in the best financial situation, and you can tell that that information is being given to the children. So what I'd like to do is give the children different information. And hopefully, that transfers into some things like you and I are doing well, it certainly will. I attended a book tour event. John Maxwell, I love John amazing man. And when we were in the book signing, he was good enough to come out and speak for a bit. And he talked about how the number one thing that can impact the difference between raising up from an impoverished upbringing and getting out and breaking that cycle. The number one thing is, third grade literacy levels blew my mind that through all of the events I've been to and all of the political things I've been a part of in all these years. Never have I heard that said before. And they're doing an amazing program that's focused on many things, but one of them is raising the literacy level in the third grade. I totally, totally subscribe to that. I don't have the depth and breadth of experience that John Maxwell has. He's an amazing man. He's an amazing American. He's an amazing spiritual leader. He's just an amazing guy. But I know what I've seen. And since I know what I've seen and I know what I have access to. I'm just trying to make that connection. Here's what I know. The school that I'm on the board of is their first through fourth grade. So it's in that spot. Oh, God bless you for it. I appreciate that work and keep it up. It will pay so many dividends and you'll change so many lives, man. Really, it's so important. So Congratulations on that. If we can spend a couple of minutes talking about Yousef today, you're pairing investors with opportunities. You're transforming repositioning. You're doing commercial and residential, correct? Yes. More so commercial. But listen, I'm a deal guy. I'm a deal junkie, I should say. And when a deal comes up, sometimes I have to talk myself out of it because they're just good. So as a fellow deal junkie, right? I was like a kid in the candy store getting ready to come on this podcast, you guys are boasting returns. That to the outsider. They seem like, oh, gosh, 22%. Nobody gets 22%. As an insider, we know that there are those unicorns. I call them the unicorn deals out there. And 22% as an average is, in part, right. Trading on some of these unicorn deals where the returns are just absolutely astronomical. You put together, I guess, an assemblage of specialists. I understand you've got a CPA, an architect, you've got an advisory board. Can you talk a little bit about how that came to be and how did you put those components together? Well, first of all, how that came to be is anytime you are in a leadership position and you have the complexity of a project to carry out a business plan, you never want to be the smartest guy in the room. You just never want to be the smartest. That's not how life works. So what you do is you try to step away from yourself and say, okay, well, what components are needed to carry out this business plan, and that business plan could be the production of repositioning of a multifamily unit, the build of a smaller build, or it can be changing. Sometimes we change the class, we change the class of the unit of a project because the deal dictated that. So you put together a design board, an architect design. You put together the best of the best or what you can put together from that space. You put together all of your numbers, folks, your analysts, your CPA, and you make sure all of that is up to date and up to the level of where you want to be and guiding this business project. And then, as far as the advisory board, listen, I need to get out of my own way half the time because I'm a laboratory. Sometimes I'm like a scientist. I'm just in my own world, in my own head, kind of flipping around things that I like. But I have to take a look again at the horizon and take that vantage point to say what all does this entail. And that advisory board is a great component to having that horizon, that vision, that all inclusive scope of things, possibly an advisory board. It doesn't have to be real estate. Interesting. So I'm asking selfishly, because we're putting together the structure for a fund. We think that we've got a real good read on the chess board, and we think that there's going to be some major opportunity, fourth quarter, 2024 to 25 and 2026. So we're laying the foundation for that. Now, these advisory members on your board, is it deal specific, or is it the same folks that you're running deal by deal through? Well, the good thing about multifamily real estate is you have one or two projects that you're dealing with. So when you say deal specific, you can have an advisory board for a company that you formed that really is dealing with one large or mid sized project. Now, if you were to spin off and start to do a different class of real estate and things were different, then you could formulate an advisory board to be more of a fit for that type of activity. But you're doing one, two deals a year, maybe one deal every other year. Two deals. These are larger deals, and you don't have to really change the team as much on the roster. Got it. So you're staying nimble based on Typology location, all of those different things? Yeah. If I came to your town and started to evaluate deals and put boots on the ground, I've never done business there. So it'd be a different scope. Got it. So part of what you're doing is you're pairing you do my advisory board. You do. I love it. Me and you. We're going to talk after this one. Baby, I can assure you that you'd be the guy. So you're pairing investors with opportunities, right? In your words, right now, the company. Could you walk us through real quick? Because I know that you've got time constraints. We have time constraints today. Could you walk us through kind of a model scenario of what you're looking for and who should be reaching out to you? Who's your audience? Well, right now, it's more of what's a fit like we talked about earlier. I'm not chasing anything. I'm in point of my career where if it's a fit in a market that I'm comfortable with in a place that I want to create a footprint, then the investor, the deal, the resources that I'll pour into that particular area is to be determined. Like, I have investors in Los Angeles that they're not comfortable in Georgia. I have investors in Georgia. They're not comfortable. We're looking at some stuff in Texas now, in the Houston area and the Houston Metro, they're not comfortable there. So the point where I am is here's the deal. I'll kind of talk to talk to a few of my chosen investors about it. And then if we go ahead and ink it and put it together. Then we'll move forward. If not, sometimes I let it out to a little bit more of a general population, but more so. Things are pretty tucked in right now. So you're enjoying immense success, and I'm getting a sense of as you get to that point, you have the ability to pick and choose who you want to work with and where you want to work, and you're not chasing the deals, right? Like you said, once you get to that point, folks, you know you're in good hands and you're with someone that's arrived, because when you're chasing the deals and you have to move capital and velocity of money is a major factor. That's where you make some mistakes, right? Absolutely. I mean, listen, you and me both know this as investors. We love desperation on the other side of the negotiation table, so you don't want to be on that side of the table, and I try to keep as much of that out of the evaluation shop as humanly possible. And another thing is, I'm not boasting some wild, crazy, fantastical success. It's just that I've been doing this almost 30 years, and the fact that I've been doing it for so long, I should be at a point where things are. I've created a level of productivity and a level of stability to do things at my own clip. Well, Congratulations on all the success you said. What's the best way for folks to get a hold of you? I'm an email guy. They can email me directly at my email, which is Yusef Y-U-S-E-F at Reap R-E-A-P capital, C-A-P-I-T-A-L USA at Reap Capital. Really appreciate your time today, man. Best of luck with everything. Is it okay if I reach out offline? I know we were tied today, but I really would like to talk through some other things with you. Absolutely, man. I'm going to be in your town for the US open next month for the women's finals. No semi finals, and then the men's finals. If you have some free time, shoot me a note. I'd love to take you out to lunch and catch up. Awesome. I appreciate it. All right, man. Best of luck a lot. Congratulations. And I'll catch you soon. All right. Thanks. Have a good one, guys. Thanks, everyone. As always, everybody, please stay safe.