February 18, 2025 • 32 mins
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Ed Mathews (00:00):
Greetings and salutations Real Estate
Undergrounders.
It is Ed Mathews with the RealEstate Underground.
Thank you so much for joiningus today.
Today we have a gentleman fromMotiva Holdings, Zihao Wang.
Zihao, welcome to the show.
Thank you so much for makingtime.
I know you're a busy person, soI'm grateful.
It's nice to see you.
Zihao Wang (00:18):
Thank you so much for having me, Ed.
Happy to be here.
Ed Mathews (00:21):
Yeah.
So we discovered you probablyin our own investing circles in
terms of looking for generalpartners to work with, because
we are a GP as well, butobviously, when we've got some
extra capital, I like to workwith established operators, and
you've built one heck of abusiness, so congratulations on
that.
For those folks that haven'tdiscovered you, why don't you
(00:42):
tell us a little bit about whoyou are and what you do for a
living, and then we'll get intoit?
Zihao Wang (00:46):
Yeah, so I'm CEO of Motiva Holdings.
We're a second gen familyoffice.
It's the real estate divisionof our family office.
We focus primarily onmultifamily investing.
It was started by my parentsback in the early 2000s and, as
second gen, I took over back in2016.
Back in the early 2000s and assecond gen, I took over back in
(01:08):
2016.
We do nationwide multifamilyinvesting, primarily focusing on
value- add projects, but havedone some ground up here and
there to give color.
It's like we've done 37projects in total so far.
Four of them have been groundups and the rest have all been
in value- add space and we'vehad six exits so far.
The rest have all been invalue-add space and we've had
six exits so far.
So, yeah, primarily just doinga lot of multifamily value-add
(01:29):
investing and most of our fundswe come from the family.
Rarely do we go out and masssyndicate we sometimes bring on
other family offices or morelike bigger private equity
groups.
So yeah, more targeting towardsslightly more institutional
partners than the match.
Ed Mathews (01:45):
Yeah, which is also what your team gave us on.
The feedback is we're notinstitutional, so we're not big
enough, and that's fine.
So, in terms of the types ofprojects, I'd like to get into
that a little bit.
When you say value add, are youtalking C class, B class?
What is your buy box?
Zihao Wang (02:02):
Yeah, it's typically B to C class.
So I like to target between thekind of the 60s to the 90s
buildings, depending on location.
For example, we have two thirdsof our portfolio is in Southern
California.
Here we like to target the 60s70s, just because of the amount
of product there is right.
So you won't see a lot of likekind of the 80s 90s product in
SoCal.
It's either like more towardsthe 60s or more into the 2000s
(02:25):
and newer.
So because of that we've done alot of kind of deeper value
adds here, targeting kind of 60sconstruction, 70s construction,
heavy lifts, light lifts,depends on the assets.
Some owners have kept up withtheir assets really well.
Lighter lift for us, but alsoless meat on the bone.
Other owners have held theproperty for 50 plus years and
it has generations and it's arundown asset and it's a heavier
(02:48):
lift, more risk obviously, butalso more returns.
Ed Mathews (02:52):
Yeah, so you mentioned Southern California.
I'm here in the Northeast, I'mbased in Connecticut and, I
think, the New York.
There are parallels between theNew York markets, the Boston
markets and Southern California,probably closer to New York and
LA, and so I'm curious aboutthe type.
When we talk about a buy box,obviously a lot of it has to do
(03:12):
with appreciation, forcingappreciation rather than
cashflow, given the, frankly,the compressed cap rates in both
those cities.
Zihao Wang (03:20):
Right, yeah, a lot of it's, I would say, depending
on where you buy, specificallyin Southern California, then
that like drastically differs,right?
Yeah, a lot of it's, I wouldsay, depending on where you buy
specifically in SouthernCalifornia, then that like
drastically differs, right?
So if you buy like in the bestarea of like Beverly Hills, then
yeah, it's like probably like a3% cap rate.
You're probably not going toget much cash flow is basically
all appreciation.
(03:40):
But where we focus on is alittle bit more towards what I
would call the secondary marketof SoCal, which, to be honest,
isn't really secondary at all.
It's just, you know, comparedwith Beverly Hills it's a little
bit inferior.
So those areas I can still getdecent cap rates actually.
For example, we're closing adeal right now and that's going
to close at the end of January.
It's going in five and a halfcap rate, which is actually it
(04:03):
is a 70s product.
So it's in line with what youwould see like in Dallas for
like maybe a 70s to 80s product.
Ed Mathews (04:09):
Okay, All right, yeah, that's a doable deal,
depending on your cost ofcapital, right?
So let's talk about yourcapital stack.
What does that look like?
Zihao Wang (04:16):
Typically we put 65% loan to value or loan to cost,
depending on the business planof debt, and then the remaining
comes from equity.
So on the business plan of debtand then the remaining comes
from equity.
So we don't over lever.
As a family office we're verydriven by preservation of wealth
and kind of growing steadily,so we never really go above that
kind of 65% threshold.
Occasionally we may go a littlebit higher if that's cheap, but
(04:39):
then we would fill it up withequity because we have that kind
of liquidity.
So yeah, 65-35 typically.
Ed Mathews (04:46):
Okay, and so, as interest rates for those folks
out there that are trying to dothe math in their head is, as
interest rates have climbed overthe last, say, 24 months, how
has that affected your businessmodel?
Zihao Wang (04:59):
I think it's made acquisitions a lot harder.
It's also made existingportfolios of operations tougher
for those that were on bridgedebt.
Very luckily, most of ourportfolio was refinanced during
when the interest rates weresuper low and they were at fixed
, so we didn't really get thatramp up kind of pressure.
But we also had some projectson floating debt right.
(05:20):
Ground up development was onfloating debt.
A deep value add was also onfloating debt and I think what
helped us really is that lowleverage right.
So we were at 65% on floatingdebt.
That won't kill us.
I think most syndicators whowere maybe playing in more of
the Texas markets they were moreat like the 80% leverage on
(05:41):
floating debt that really harmedthem in terms of payments.
Percent leverage on floatingdebt that really farmed them in
terms of payments and we alwaystry to be as local as possible
and move as fast as possible.
I think that really helped usin terms of boosting NOI and
making sure we can debt cover.
Ed Mathews (05:55):
Yeah, and so when you buy let's talk about that
five and a half cap that you'reworking to right now what is the
target cap rate?
Once you have gone in, appliedyour management capabilities,
done any rehab that needs tohappen?
What does it look likestabilized?
Zihao Wang (06:11):
Yeah, so typically over a five-year period we try
to aim to around a seven and ahalf return on cost, so it's not
a seven and a half cap rate.
Cap rate is actually going tobe higher.
We also bounce in all the costsright Because we spent the
equity to improve the building.
So the business strategy istypically buy at a five and a
half cap, push it to a seven anda half return on costs, which
(06:34):
probably closer to an eight ormid eight like cap rate, and
then get it back down when wesell to around a five and a half
as well.
We're not doing cap ratecompression, we're either doing
neutral or sometimes even just atiny bit of expansion.
We can't do too much expansionbecause SoCal market's really
hot, so it's a lot of 1031buyers here and just too much
(06:57):
expansion doesn't make sense.
But we try to go neutral atleast.
Ed Mathews (07:00):
Okay, and so when you're looking at an exit, yeah,
obviously a family officeoperates very differently from
private equity firms like mineand where exits are really
important in terms of returningcapital to the investors.
Tell me about your thinkingaround how you exit 37
properties.
(07:21):
I think you said you've exitedfrom six, if I got that right.
Yes, so tell me about yourthinking in terms of how it's
different in a family officeenvironment when you're thinking
about moving on from a buildingand either trading up or doing
something else with the capital.
Sure, yeah.
Zihao Wang (07:37):
so I think this.
I'm going to generalize thethinking here, but I think this
depends on each family as well,Like we have connections with
families who completelydifferent from another family.
But I think the general rule ofthumb for family offices is we
have patient capital, whichmeans if we don't feel the need
to sell, we won't sell becausewe're not a fund.
(07:58):
We don't have to close.
We don't earn our money on adisposition fee, so it's really
not that important for us.
You know we've really taken itas a market approach, right.
So if maybe five years from now, let's say you know COVID 2.0,
well, God forbid, but let's saythat happens, right.
Then you know interest rates godown to zero.
Then you know for us maybewe'll refire into a loan that's
(08:28):
50 years or 30 years, right, andthen just keep on holding the
asset, right.
But then maybe along the wayit's okay.
Maybe interest rates over thereare high five years later and
there's a buyer in a 1031exchange who really likes this
asset and they're willing to paywhat we want them to pay, then
we're not in the position to saywe're going to hold on to
something forever either.
So I would say we have thatflexibility.
So we have assets that we'veheld on to for 16 years Like
(08:49):
this.
It was the first assets that myparents bought.
They have no equity in it.
It's a kind of cash flowingasset, really good basis, I
think it was.
I think it's 130 a door inPasadena.
So that's insane.
16 years ago back in Kuwait.
Ed Mathews (09:03):
Yeah, so let me stop you right there just for a
second.
Just as per comparison, what'sa per door roughly a per door
cost today?
Zihao Wang (09:13):
Or something for the kind of same turned asset.
It'd probably be closer to 430,430 a door.
Ed Mathews (09:20):
Yeah, we've held on to that thing for 16 years.
Zihao Wang (09:23):
Yeah, it's basically I haven't asked it in
California for like kind ofDallas basis right now.
So, yeah, so something likethat we probably won't sell,
Even if it, like worst casehappens, we have no equity in it
either.
But then we've also sold assetswithin three years, right.
So, like some other projectsthat we were more in like a flip
and a fix and, uh, you know,you bought and and discovered
(10:03):
some things about the propertythat weren't in alignment with
your business model, orsomething in between.
It's typically what weunderwrite to like.
For us, we always underwrite toa five-year exit because I feel
that's that.
That keeps the math as simplestright.
A lot of people like to do athree-year refi and then a
five-year exit or 10-year holdor something like that.
I just feel like if the dealpencils with a five-year exit,
(10:26):
then I can do a five-year refiand things shouldn't go that bad
as well.
So I always try to keep it assimple as possible.
Ed Mathews (10:35):
Simple is good.
I was interviewing a gentlemanlast week His name is Christian
Osgood and I asked him aboutadvice that he's been given and
he said don't add steps.
And for an entrepreneur,keeping it simple is very
difficult, especially you.
If I'm not mistaken, you wentto MIT, which means you're
really smart and the inclinationof an entrepreneur, especially
(10:59):
a creative, and I don't knowwhere you fall on the spectrum
in terms of operator versuscreator, but a creative, but the
creatives tend to likecomplexity yeah, keeping it
simple today is very difficultfor some people, and myself
included, and uh it's, um it's.
But your point is well taken inthat if a deal will write, if a
deal will pencil at a five-yearterm, then that provides you
(11:26):
with a whole lot of flexibilityas you go along, right In terms
of you can then date the ratethat you have it on and at year
three, four, five, you can makethat decision in terms of do we
keep this or do we refinance it?
Take our equity out, ourinitial equity out, and just
ride the market, like yourparents did with that Pasadena
(11:48):
property.
By the way, congratulations,because when you told me that
per door, I know a whole bunchof Southern California investors
.
They're buying at $400,000,$500,000, $600,000 a door.
So kudos.
So in terms of the cost ofcapital, right, and actually let
me take a step back.
So in terms of the form ofcapital, are you mostly in
(12:09):
agency debt or are you workingwith local banks or some other
capital source?
Zihao Wang (12:15):
We primarily like to work with local banks, and
that's primarily because myparents are still running their
fashion business.
That's how they first madetheir money and so they have a
lot of deposits with these banks.
We get insane rates and don'thave to really worry about the
deposit issues.
To put that in perspective, theone that we're closing the
(12:37):
escrow on right now, I shoppedthe debt with Fannie and Freddie
.
They were closer to six and ahalf.
The six and three quarters andsome other kind of debt funds
are crazy with the rates, so Ididn't even go to them.
But our bank was able to do sixand a quarter with two years
(12:57):
interest only and then also noprepay.
That's also important for us tohave the flexibility and then a
quarter of a point for loan fee.
So I just think with all themetrics together, we do very
well with the banks.
Now, with that said, it is onrecourse, right, so it's not a
non-recourse loan, and there arelike ceilings to the banks,
right.
They don't let you lend forever.
(13:18):
So those are alsoconsiderations that we keep in
mind as well.
Ed Mathews (13:23):
Yeah, and that's an interesting point, because,
recourse versus non-recourse,you're going to pay what?
Anywhere between half the point, a full point more for
non-recourse, right?
Yeah yeah, and so you'recomfortable with recourse loans.
And I assume that's because atthis point, from a liquidity
perspective, it doesn't muchmatter what the economy does.
(13:45):
You probably have the capital,the reserves to withstand that.
Zihao Wang (13:48):
Yeah, I mean in terms of recourse and
non-recourse, it depends on howwe get the rest of the equity as
well.
So, for example, some deals wejust were the only equity on
that deal, so it's the sameright Recourse, non-recourse.
If we bring in other caps, someof the private equity groups
won't even let you do recourseright, so they want to make sure
(14:09):
it's non-recourse.
And then for us it's a supersmall deal.
It's only a four and a quartermillion dollars and the loan is
3 million with reserve funding,and so from that perspective
it's do I feel comfortable thatthis asset is going to go down
to $3 million?
Like, probably, I probablywon't get there.
Ed Mathews (14:26):
Relative to your, it's a fraction of a percentage
points.
It's measured risk.
I get it.
Okay, that makes a lot of sense.
And then so you write to one ofthe one of the other things
that you said which I Iwholeheartedly buy into and I
want, especially for the folksthat are doing deals now.
Right, typically here, when I'minvesting, I'm looking for a two
point spread between cap,acquisition cap and cost of
(14:48):
capital.
But there is a, there's a.
There's a point where I'lldeviate from that, and that is
when we're knowingly going in,knowing that from a we've got
additional reserves in place,that we tend to hold six months
minimum operating reserves, butknow that the play is more from
an appreciation perspectiverather than from a cash flow
(15:09):
perspective.
We tend to be more cash flowplayers, which is why I'm
looking for that spread.
So I'm curious in terms of yourthinking here.
It seems to me that this ismore of a.
There's certainly a growthaspect to your model, but it and
I think you even said thisearlier that it's more of a
capital preservation.
You want to stay.
(15:29):
You know a couple of pointsmaybe double up inflation and
stay ahead of that curve, right?
Zihao Wang (15:35):
Yeah.
So I think where you're gettingat is like why I chose kind of
appreciation versus like.
Maybe your method of like cashflow Right and I don't.
It's not like I favor onestrategy over the other, I don't
.
I just so happen to my parents.
We were local to SouthernCalifornia and so we got started
here in an appreciation market.
(15:55):
If we got started in, you know,maybe the Midwest and, for
example, oklahoma, then maybeit's a totally different story.
I'd be totally doing somethingelse right now.
I understand both sides of thestory.
It's for cash flow investors.
They're thinking I don't haveto bang on an exit, right, it's
like I get good cash flow.
It's you know the returns aresteady.
(16:16):
I completely agree with thatstrategy.
But I also see my side of thestory as well.
Whereas you're typically buyingin better locations, a little
bit safer locations and withbigger economies, and so that
from a wealth preservation pointof view it also makes a lot of
sense, my goal is not to pickright, my goal is to dabble into
a little bit of everything.
(16:36):
So we're not there yet becausewe're not big enough.
But I wouldn't, I'd say, if Ihad unlimited amounts of capital
and unlimited amounts of likehuman capital and all of that
and a huge team.
I'd love to open offices inlike Oklahoma and in the middle,
like in the Midwest and inother areas, so to get that kind
of both sides of the spectrumand for diversification right.
(16:59):
So love that strategy as well.
I don't really have apreference.
Ed Mathews (17:03):
I would say I'm a big proponent of using a
baseball analogy hitting singlesand doubles right, I'm not a
home run hitter and there aremultiple ways, and what that
means in my mind is we want adeal that is predictable.
We can get it stable fairlyquickly and then have the
opportunity to manage that andhold that property for, like you
(17:25):
, minimum five years sometimes awhole lot longer and then, as
we progress through the businessplan, make some decisions in
terms of refinancing and whatnot, and you can get there from an
appreciation perspective.
You can also get there from acashflow perspective.
It's usually a combination ofthe two.
Me here in Connecticut, this isvery much a cashflow market and
(17:48):
so, like you, I invest in mybackyard and so that's where you
usually start.
And then you look up and youhave several hundred units and
you're like, okay, I guess I'm aSouthern California investor.
Zihao Wang (18:00):
We are trying to diversify into other states for
sure.
So two-thirds of it is in SoCal.
We've also had some in Floridaand North Carolina, and then
we're trying to get into Texas,and then I think there's
definitely a diversificationpiece of mind that I'm well
aware of and, yeah, we'll seewhere it goes.
Ed Mathews (18:18):
Yeah, so when you're looking at other markets I'm
going to move on to the finalfive in a moment but I am
curious about this when you lookat other markets, because
Southern California to you'vementioned Dallas a couple of
times, so I assume that'sprobably one of the places
you're looking to the Carolinasand elsewhere very different
markets, right?
So what is the criteria thatyou're looking for as you look
(18:40):
at it's a big country, right, as?
What are some of the attributesof a market that you're paying
attention to that kind of drawyou in and say, okay, this is a
place we should spend some timeon underwriting?
Zihao Wang (18:53):
I would say it's two things right.
The first is the marketfundamentals right.
How strong is the economy here,how diverse is the economy here
, and is there like futuregrowth potential right?
I mentioned Dallas a few times.
We've been looking at Dallasfor the past six to eight months
.
We still haven't done anythingthere because I feel price is
still a little bit inflatedthere, but I do like the
(19:15):
fundamentals of that market Forus.
We also do a lot of VCinvesting as a family office,
and the Frisco and North Dallasside of things have been growing
like crazy in terms of ventureinvesting as well.
We're well aware of kind of themarket fundamentals of Dallas
and we believe in it long term.
I just think in the short termthere might be some correction
(19:36):
that I'm still waiting for.
But if you talk to me 20 yearsfrom now, I'll probably be like,
yeah, it's grown like crazy.
And then the second thing Iwould say that we look at is
where we have an advantage in,and so for us that means okay, I
want to have some kind ofconnection with that market,
whether it be like okay, one ofmy best friends is operating in
that market or a person that Ihighly trust is operating in
(20:00):
that market, a person who maybealso a family office and we vibe
really well, is operating inthat market that we can partner
together and stuff like that.
So we're looking heavily intoDallas as well as the Carolinas.
We have great family officeconnections based in New York
who have operated in those areas.
They love those areas and sofrom us, from our standpoint, is
(20:22):
okay.
We have to almost take a riskas to picking a market right,
and you have to take a risk Atleast we want to take a risk
with one of our buddies Right.
So from that perspective wereally look at, I think, just
market fundamentals and justalso where our connections are
at.
Ed Mathews (20:39):
Yeah, that makes a lot of sense because obviously
your buddies at least have someexperience in the market and can
give you some insights thatmaybe someone who's coming in
cold won't be able to give youright, so that makes a lot of
sense.
All right, sir.
So let's get into the finalfive.
I'm always interested in howleaders approach their weeks,
and so I'm curious what gets youout of bed on Monday mornings.
(21:01):
So if you could finish thesentence for me, tell me my
purpose is what does that meanto you?
Zihao Wang (21:08):
I think for me it's growing the family's wealth.
I've been very fortunate tohave inherited from my family
and given a huge responsibilitybut also a blessing to run the
family office.
I don't want to throw thisblessing and fortune away, and I
get up every day knowing that Iof I want to create for my kids
(21:29):
what my parents created for me,and so that gets me out of bed.
Ed Mathews (21:33):
Yeah, it's a, yeah, it's.
Running a family office likeyou adds another layer of, I
would submit, and I would assumemassive amount of
responsibility, because yourboard of directors are the
people you eat dinner with andcelebrate holidays with.
So it's a very differentdynamic.
If you're, it's a joyous timewhen things are going well, and
(21:54):
they may be a little tense whenthey're not right If they don't.
So that makes sense to me.
So I'm always interested in inuh, how people work with them
and discover their mentors andthe information that, more
importantly, the informationthat they've been given by those
mentors.
So I'm curious about the bestadvice you've ever gotten and
who gave it to you.
Zihao Wang (22:14):
My first mentor was my mom.
She gave me probably the mostamount of advice and a lot of
them were super, super good.
So one time when I was younger,so I started on the property
management side of the businessand when I was younger she told
me that I can never do enoughdue diligence when I bought an
asset and I didn't reallyunderstand what that means.
Right, because we have a duediligence checklist.
(22:35):
Right, you read the leases, youlook at the T12, you match it
with the rent roll stuff likethat.
And then one time she brought mewe were buying a property and
she brought me to a kind of it'slike a local shop next to the
property.
And then we started talkingwith that shop owner and asking
like, oh, how's the area?
What kind of people can getinto, like your store, how's
(22:56):
that property that we're aboutto buy?
Or we would obviously didn'ttell them we're about to buy it,
but like, how's that propertydoing?
How's the neighbor?
It was probably the mosthelpful due diligence ever
getting, getting thosereferences much more useful of a
time than just like readingleases and reading T12's.
Ed Mathews (23:13):
It's so true.
It's amazing what you learnfrom the neighbors when you
simply make friends and ask thema couple of simple questions
around it what's it like to livein this neighborhood?
And it's amazing what you'llhear.
So I highly recommend thatstrategy.
That's brilliant.
Leaders, almost universally,are readers right, and so I
(23:34):
would imagine that, given youracademic background, as well as
the level of responsibility youhave, that you also are, you
probably spend a lot of timetaking in information, and so
I'm curious what is that method?
Are you an audible?
Are you a physical person, aphysical book person?
Do you like YouTube conferencesand also, more most importantly
, who are you paying attentionto these days?
Zihao Wang (23:56):
Yeah, I love kind of conferences.
For sure, it's just us, we'rehigh level people you don't get
to meet, and so I love readingtheir books.
Instead, I love reading venturebooks like, for example, Zero
to One, Peter Thiel, right, ElonMusk's like First Principles
those kind of books.
I feel our family and realestate arm of it is run like a
(24:17):
venture right.
We're not a huge team right.
We're a team of 12 people thatmanages half a billion dollars
of real estate.
We don't aspire to be like thebiggest team in the world,
because that often means themost inefficient team.
Also, we treat our day-to-dayjobs as a venture right.
We say, okay, this is thenumber of things we need to get
(24:38):
done, this is the result we wantand this is how we're going to
get there, and wecollaboratively work together as
a team and move as fast aspossible.
I think that's why we've beensuccessful in the past few years
.
It's also why we've alsosurvived market downturns as
well, and so, from thatperspective, I love getting into
the mentality of a venturecapitalist or not really a
venture capitalist, but maybelike a company founder, right,
(25:00):
One person who's driving a lotof things, meshing with a lot of
things.
Move fast, break things right.
That's like the venture culture.
Ed Mathews (25:07):
Yeah, and having come from that world myself,
it's, those guys are a bunch ofcowboys and you don't strike me
as a cowboy.
There is an aspect to it interms of speed and urgency and
the way you operate, but alsothere's a risk-taking, and it's
one of the reasons why Ipersonally value real estate as
an asset, because, tried andtrue, back a thousand years ago
(25:31):
ago, when I was one of thoseguys, you're looking for 10
daggers, right, you invest in 10companies, you hope that one or
two of them hit, and one ofthem hits really big and off you
go.
In real estate, you need prettymuch every property to hit
right, and so that part is verydifferent.
But you can also there's also awhole lot of the fact you can
touch real estate as opposed toa software company or a service
(25:53):
company.
There's a whole lot of valueyou can add actively add to a
real estate asset that you can'tto a software asset, unless
you're a programmer, right?
Yeah, of course.
Yeah, right on.
So let me ask youprofessionally, I think we learn
more from our mistakes than oursuccesses.
So I'm curious about a mistakeyou made professionally, and
what was it and how did yourecover from it?
Zihao Wang (26:16):
Yeah, I'll give you two mistakes that's both kind of
related to the same event,which is COVID.
The first mistake is I didn'tthink rates would rise as fast
as they did.
Obviously, being a youngerperson, I haven't seen five
market cycles, seen one marketcycle, and so because of that we
(26:38):
did put two properties onfloating rate debt when we
shouldn't have in my opinion,and I'm very lucky in the sense
that our family had liquidityand so what we ended up doing is
paying those debt off andbasically held the debt of all
assets being clear .
But that was a very scary timeright, because I was at like 4%
and it all of a sudden went tolike 7% and was going to push 8%
(27:00):
and I was in a little bit of astate of worry for those assets.
Very fortunate that we have theliquidity we do.
The second thing is for one ofour ground up projects during
COVID, supply chains were cutand a lot of our supplies right
electrical panels specificallythey were largely delayed.
We didn't get them until eightmonths after we expected them to
(27:23):
arrive and so from that pointdefinitely delayed the progress
of the project.
I think what I did well inthose was that I try to cut
costs in other areas, forexample cabinets, countertops,
lighting fixtures, stuff likethat I decided to go to instead
of buying it locally here from avendor.
I don't buy it from Home Depot,but like still local, here I
(27:44):
went direct to China.
Essentially, yeah, I flew toChina, went direct to China, and
saved around 15 to 20% on eachof those items that I went
through, so from thatperspective it definitely did
save a lot of cost.
But, yeah, I think those twoare probably the biggest lessons
I learned.
Ed Mathews (28:00):
Yeah, and unfortunately you flew right
over those electrical panels youwere waiting for, because they
were all packed in the cargoships waiting out in the Pacific
waiting to land.
Right, it was a crazy time,I'll tell you.
I think that kind ofresourcefulness getting back to
your venture capital commentsright, sometimes that's what it
takes when it hits the fan, likeit did with COVID.
(28:20):
You can either accept what'shappening and start figuring out
ways that what can work, or youcan curl up in a ball, and some
of us curled up in a ball andyou got on a plane.
So kudos to you.
So I'm also curious aboutsuccess, right, that means
different things to a wholebunch of people.
So what does success mean toyou?
(28:41):
I?
Zihao Wang (28:43):
I think I want to grow the family's wealth more
and more in my lifetime.
I think my parents gave me agreat foundation, a phenomenal
foundation, but I want to try tobuild on top of that and that
doesn't just mean real estate,it also means other asset
classes.
I think for Multiva Holdingsit's just going to be real
(29:03):
estate.
In that aspect I want todiversify the different
geographical locations,diversify into other asset
classes, but for our family as awhole I want to diversify the
different geographical locations, diversify into other asset
classes, but for our family as awhole I want to diversify more
into maybe more venture capital,more private equity, more of
the kind of other asset classes,and really try to almost mimic
the seventh generation familyoffices that I meet at
conferences and stuff.
(29:24):
So that really gets memotivated.
Ed Mathews (29:27):
Excellent, excellent , and so I'm always interested.
You strike me as somebody thatworks a lot, but when you're not
working, what do you like to dofor fun?
Zihao Wang (29:35):
I love playing tennis and pickleball.
I started tennis when I waslike six years old, played all
throughout middle school, highschool and then as well as at
MIT.
I was a pretty decent playerback when I was in high school.
I wouldn't say so now anymore,but love sports.
I'm a pretty active guy.
It helps me be calm and clearmy mind as well, but I also,
like most of my friends, arethere as well, so it's a great
(29:57):
time to catch up and hang out.
Ed Mathews (30:00):
Yeah, it's a whole lot of fun.
I actually thought you had tobe like 55 to play pickleball,
or you weren't allowed.
Zihao Wang (30:10):
Like the pickleball police would come get you or
something You're allowed to playwhen you're younger At least I
think most people it's easier topick up.
So it's actually it's startingto become a bigger community,
even for young guys.
Ed Mathews (30:18):
And see the reason it's fun, it's addicting, yeah,
it's a blast, yeah, and it'ssomething that many skills,
anyone at any level of skill,can play, which is not
necessarily the case in tennis.
Tennis bubbles a little faster.
So, zihao, I've really enjoyedthis conversation.
Congratulations again on thebusiness that you're building,
(30:39):
and if people want to learn moreabout you or your family office
or anything else, what's thebest way to get in touch?
Zihao Wang (30:47):
I'm very active on LinkedIn, so please connect
there Also.
You can visit my website tolearn more about us at www.
motivaholdings.
com.
Ed Mathews (30:57):
All right, Zihao Wang.
Thank you so much for your timetoday.
It's truly a pleasure and honorto have you on the show.
Thank you so much for joiningus.
Zihao Wang (31:05):
Thank you so much for having me, Ed.
Greetings and salutations Real Estate
Undergrounders.
It is Ed Mathews with the RealEstate Underground.
Thank you so much for joiningus today.
Today we have a gentleman fromMotiva Holdings, Zihao Wang.
Zihao, welcome to the show.
Thank you so much for makingtime.
I know you're a busy person, soI'm grateful.
It's nice to see you.
Zihao Wang (00:18):
Thank you so much for having me, Ed.
Happy to be here.
Ed Mathews (00:21):
Yeah.
So we discovered you probablyin our own investing circles in
terms of looking for generalpartners to work with, because
we are a GP as well, butobviously, when we've got some
extra capital, I like to workwith established operators, and
you've built one heck of abusiness, so congratulations on
that.
For those folks that haven'tdiscovered you, why don't you
(00:42):
tell us a little bit about whoyou are and what you do for a
living, and then we'll get intoit?
Zihao Wang (00:46):
Yeah, so I'm CEO of Motiva Holdings.
We're a second gen familyoffice.
It's the real estate divisionof our family office.
We focus primarily onmultifamily investing.
It was started by my parentsback in the early 2000s and, as
second gen, I took over back in2016.
Back in the early 2000s and assecond gen, I took over back in
(01:08):
2016.
We do nationwide multifamilyinvesting, primarily focusing on
value- add projects, but havedone some ground up here and
there to give color.
It's like we've done 37projects in total so far.
Four of them have been groundups and the rest have all been
in value- add space and we'vehad six exits so far.
The rest have all been invalue-add space and we've had
six exits so far.
So, yeah, primarily just doinga lot of multifamily value-add
(01:29):
investing and most of our fundswe come from the family.
Rarely do we go out and masssyndicate we sometimes bring on
other family offices or morelike bigger private equity
groups.
So yeah, more targeting towardsslightly more institutional
partners than the match.
Ed Mathews (01:45):
Yeah, which is also what your team gave us on.
The feedback is we're notinstitutional, so we're not big
enough, and that's fine.
So, in terms of the types ofprojects, I'd like to get into
that a little bit.
When you say value add, are youtalking C class, B class?
What is your buy box?
Zihao Wang (02:02):
Yeah, it's typically B to C class.
So I like to target between thekind of the 60s to the 90s
buildings, depending on location.
For example, we have two thirdsof our portfolio is in Southern
California.
Here we like to target the 60s70s, just because of the amount
of product there is right.
So you won't see a lot of likekind of the 80s 90s product in
SoCal.
It's either like more towardsthe 60s or more into the 2000s
(02:25):
and newer.
So because of that we've done alot of kind of deeper value
adds here, targeting kind of 60sconstruction, 70s construction,
heavy lifts, light lifts,depends on the assets.
Some owners have kept up withtheir assets really well.
Lighter lift for us, but alsoless meat on the bone.
Other owners have held theproperty for 50 plus years and
it has generations and it's arundown asset and it's a heavier
(02:48):
lift, more risk obviously, butalso more returns.
Ed Mathews (02:52):
Yeah, so you mentioned Southern California.
I'm here in the Northeast, I'mbased in Connecticut and, I
think, the New York.
There are parallels between theNew York markets, the Boston
markets and Southern California,probably closer to New York and
LA, and so I'm curious aboutthe type.
When we talk about a buy box,obviously a lot of it has to do
(03:12):
with appreciation, forcingappreciation rather than
cashflow, given the, frankly,the compressed cap rates in both
those cities.
Zihao Wang (03:20):
Right, yeah, a lot of it's, I would say, depending
on where you buy, specificallyin Southern California, then
that like drastically differs,right?
Yeah, a lot of it's, I wouldsay, depending on where you buy
specifically in SouthernCalifornia, then that like
drastically differs, right?
So if you buy like in the bestarea of like Beverly Hills, then
yeah, it's like probably like a3% cap rate.
You're probably not going toget much cash flow is basically
all appreciation.
(03:40):
But where we focus on is alittle bit more towards what I
would call the secondary marketof SoCal, which, to be honest,
isn't really secondary at all.
It's just, you know, comparedwith Beverly Hills it's a little
bit inferior.
So those areas I can still getdecent cap rates actually.
For example, we're closing adeal right now and that's going
to close at the end of January.
It's going in five and a halfcap rate, which is actually it
(04:03):
is a 70s product.
So it's in line with what youwould see like in Dallas for
like maybe a 70s to 80s product.
Ed Mathews (04:09):
Okay, All right, yeah, that's a doable deal,
depending on your cost ofcapital, right?
So let's talk about yourcapital stack.
What does that look like?
Zihao Wang (04:16):
Typically we put 65% loan to value or loan to cost,
depending on the business planof debt, and then the remaining
comes from equity.
So on the business plan of debtand then the remaining comes
from equity.
So we don't over lever.
As a family office we're verydriven by preservation of wealth
and kind of growing steadily,so we never really go above that
kind of 65% threshold.
Occasionally we may go a littlebit higher if that's cheap, but
(04:39):
then we would fill it up withequity because we have that kind
of liquidity.
So yeah, 65-35 typically.
Ed Mathews (04:46):
Okay, and so, as interest rates for those folks
out there that are trying to dothe math in their head is, as
interest rates have climbed overthe last, say, 24 months, how
has that affected your businessmodel?
Zihao Wang (04:59):
I think it's made acquisitions a lot harder.
It's also made existingportfolios of operations tougher
for those that were on bridgedebt.
Very luckily, most of ourportfolio was refinanced during
when the interest rates weresuper low and they were at fixed
, so we didn't really get thatramp up kind of pressure.
But we also had some projectson floating debt right.
(05:20):
Ground up development was onfloating debt.
A deep value add was also onfloating debt and I think what
helped us really is that lowleverage right.
So we were at 65% on floatingdebt.
That won't kill us.
I think most syndicators whowere maybe playing in more of
the Texas markets they were moreat like the 80% leverage on
(05:41):
floating debt that really harmedthem in terms of payments.
Percent leverage on floatingdebt that really farmed them in
terms of payments and we alwaystry to be as local as possible
and move as fast as possible.
I think that really helped usin terms of boosting NOI and
making sure we can debt cover.
Ed Mathews (05:55):
Yeah, and so when you buy let's talk about that
five and a half cap that you'reworking to right now what is the
target cap rate?
Once you have gone in, appliedyour management capabilities,
done any rehab that needs tohappen?
What does it look likestabilized?
Zihao Wang (06:11):
Yeah, so typically over a five-year period we try
to aim to around a seven and ahalf return on cost, so it's not
a seven and a half cap rate.
Cap rate is actually going tobe higher.
We also bounce in all the costsright Because we spent the
equity to improve the building.
So the business strategy istypically buy at a five and a
half cap, push it to a seven anda half return on costs, which
(06:34):
probably closer to an eight ormid eight like cap rate, and
then get it back down when wesell to around a five and a half
as well.
We're not doing cap ratecompression, we're either doing
neutral or sometimes even just atiny bit of expansion.
We can't do too much expansionbecause SoCal market's really
hot, so it's a lot of 1031buyers here and just too much
(06:57):
expansion doesn't make sense.
But we try to go neutral atleast.
Ed Mathews (07:00):
Okay, and so when you're looking at an exit, yeah,
obviously a family officeoperates very differently from
private equity firms like mineand where exits are really
important in terms of returningcapital to the investors.
Tell me about your thinkingaround how you exit 37
properties.
(07:21):
I think you said you've exitedfrom six, if I got that right.
Yes, so tell me about yourthinking in terms of how it's
different in a family officeenvironment when you're thinking
about moving on from a buildingand either trading up or doing
something else with the capital.
Sure, yeah.
Zihao Wang (07:37):
so I think this.
I'm going to generalize thethinking here, but I think this
depends on each family as well,Like we have connections with
families who completelydifferent from another family.
But I think the general rule ofthumb for family offices is we
have patient capital, whichmeans if we don't feel the need
to sell, we won't sell becausewe're not a fund.
(07:58):
We don't have to close.
We don't earn our money on adisposition fee, so it's really
not that important for us.
You know we've really taken itas a market approach, right.
So if maybe five years from now, let's say you know COVID 2.0,
well, God forbid, but let's saythat happens, right.
Then you know interest rates godown to zero.
Then you know for us maybewe'll refire into a loan that's
(08:28):
50 years or 30 years, right, andthen just keep on holding the
asset, right.
But then maybe along the wayit's okay.
Maybe interest rates over thereare high five years later and
there's a buyer in a 1031exchange who really likes this
asset and they're willing to paywhat we want them to pay, then
we're not in the position to saywe're going to hold on to
something forever either.
So I would say we have thatflexibility.
So we have assets that we'veheld on to for 16 years Like
(08:49):
this.
It was the first assets that myparents bought.
They have no equity in it.
It's a kind of cash flowingasset, really good basis, I
think it was.
I think it's 130 a door inPasadena.
So that's insane.
16 years ago back in Kuwait.
Ed Mathews (09:03):
Yeah, so let me stop you right there just for a
second.
Just as per comparison, what'sa per door roughly a per door
cost today?
Zihao Wang (09:13):
Or something for the kind of same turned asset.
It'd probably be closer to 430,430 a door.
Ed Mathews (09:20):
Yeah, we've held on to that thing for 16 years.
Zihao Wang (09:23):
Yeah, it's basically I haven't asked it in
California for like kind ofDallas basis right now.
So, yeah, so something likethat we probably won't sell,
Even if it, like worst casehappens, we have no equity in it
either.
But then we've also sold assetswithin three years, right.
So, like some other projectsthat we were more in like a flip
and a fix and, uh, you know,you bought and and discovered
(10:03):
some things about the propertythat weren't in alignment with
your business model, orsomething in between.
It's typically what weunderwrite to like.
For us, we always underwrite toa five-year exit because I feel
that's that.
That keeps the math as simplestright.
A lot of people like to do athree-year refi and then a
five-year exit or 10-year holdor something like that.
I just feel like if the dealpencils with a five-year exit,
(10:26):
then I can do a five-year refiand things shouldn't go that bad
as well.
So I always try to keep it assimple as possible.
Ed Mathews (10:35):
Simple is good.
I was interviewing a gentlemanlast week His name is Christian
Osgood and I asked him aboutadvice that he's been given and
he said don't add steps.
And for an entrepreneur,keeping it simple is very
difficult, especially you.
If I'm not mistaken, you wentto MIT, which means you're
really smart and the inclinationof an entrepreneur, especially
(10:59):
a creative, and I don't knowwhere you fall on the spectrum
in terms of operator versuscreator, but a creative, but the
creatives tend to likecomplexity yeah, keeping it
simple today is very difficultfor some people, and myself
included, and uh it's, um it's.
But your point is well taken inthat if a deal will write, if a
deal will pencil at a five-yearterm, then that provides you
(11:26):
with a whole lot of flexibilityas you go along, right In terms
of you can then date the ratethat you have it on and at year
three, four, five, you can makethat decision in terms of do we
keep this or do we refinance it?
Take our equity out, ourinitial equity out, and just
ride the market, like yourparents did with that Pasadena
(11:48):
property.
By the way, congratulations,because when you told me that
per door, I know a whole bunchof Southern California investors
.
They're buying at $400,000,$500,000, $600,000 a door.
So kudos.
So in terms of the cost ofcapital, right, and actually let
me take a step back.
So in terms of the form ofcapital, are you mostly in
(12:09):
agency debt or are you workingwith local banks or some other
capital source?
Zihao Wang (12:15):
We primarily like to work with local banks, and
that's primarily because myparents are still running their
fashion business.
That's how they first madetheir money and so they have a
lot of deposits with these banks.
We get insane rates and don'thave to really worry about the
deposit issues.
To put that in perspective, theone that we're closing the
(12:37):
escrow on right now, I shoppedthe debt with Fannie and Freddie
.
They were closer to six and ahalf.
The six and three quarters andsome other kind of debt funds
are crazy with the rates, so Ididn't even go to them.
But our bank was able to do sixand a quarter with two years
(12:57):
interest only and then also noprepay.
That's also important for us tohave the flexibility and then a
quarter of a point for loan fee.
So I just think with all themetrics together, we do very
well with the banks.
Now, with that said, it is onrecourse, right, so it's not a
non-recourse loan, and there arelike ceilings to the banks,
right.
They don't let you lend forever.
(13:18):
So those are alsoconsiderations that we keep in
mind as well.
Ed Mathews (13:23):
Yeah, and that's an interesting point, because,
recourse versus non-recourse,you're going to pay what?
Anywhere between half the point, a full point more for
non-recourse, right?
Yeah yeah, and so you'recomfortable with recourse loans.
And I assume that's because atthis point, from a liquidity
perspective, it doesn't muchmatter what the economy does.
(13:45):
You probably have the capital,the reserves to withstand that.
Zihao Wang (13:48):
Yeah, I mean in terms of recourse and
non-recourse, it depends on howwe get the rest of the equity as
well.
So, for example, some deals wejust were the only equity on
that deal, so it's the sameright Recourse, non-recourse.
If we bring in other caps, someof the private equity groups
won't even let you do recourseright, so they want to make sure
(14:09):
it's non-recourse.
And then for us it's a supersmall deal.
It's only a four and a quartermillion dollars and the loan is
3 million with reserve funding,and so from that perspective
it's do I feel comfortable thatthis asset is going to go down
to $3 million?
Like, probably, I probablywon't get there.
Ed Mathews (14:26):
Relative to your, it's a fraction of a percentage
points.
It's measured risk.
I get it.
Okay, that makes a lot of sense.
And then so you write to one ofthe one of the other things
that you said which I Iwholeheartedly buy into and I
want, especially for the folksthat are doing deals now.
Right, typically here, when I'minvesting, I'm looking for a two
point spread between cap,acquisition cap and cost of
(14:48):
capital.
But there is a, there's a.
There's a point where I'lldeviate from that, and that is
when we're knowingly going in,knowing that from a we've got
additional reserves in place,that we tend to hold six months
minimum operating reserves, butknow that the play is more from
an appreciation perspectiverather than from a cash flow
(15:09):
perspective.
We tend to be more cash flowplayers, which is why I'm
looking for that spread.
So I'm curious in terms of yourthinking here.
It seems to me that this ismore of a.
There's certainly a growthaspect to your model, but it and
I think you even said thisearlier that it's more of a
capital preservation.
You want to stay.
(15:29):
You know a couple of pointsmaybe double up inflation and
stay ahead of that curve, right?
Zihao Wang (15:35):
Yeah.
So I think where you're gettingat is like why I chose kind of
appreciation versus like.
Maybe your method of like cashflow Right and I don't.
It's not like I favor onestrategy over the other, I don't
.
I just so happen to my parents.
We were local to SouthernCalifornia and so we got started
here in an appreciation market.
(15:55):
If we got started in, you know,maybe the Midwest and, for
example, oklahoma, then maybeit's a totally different story.
I'd be totally doing somethingelse right now.
I understand both sides of thestory.
It's for cash flow investors.
They're thinking I don't haveto bang on an exit, right, it's
like I get good cash flow.
It's you know the returns aresteady.
(16:16):
I completely agree with thatstrategy.
But I also see my side of thestory as well.
Whereas you're typically buyingin better locations, a little
bit safer locations and withbigger economies, and so that
from a wealth preservation pointof view it also makes a lot of
sense, my goal is not to pickright, my goal is to dabble into
a little bit of everything.
(16:36):
So we're not there yet becausewe're not big enough.
But I wouldn't, I'd say, if Ihad unlimited amounts of capital
and unlimited amounts of likehuman capital and all of that
and a huge team.
I'd love to open offices inlike Oklahoma and in the middle,
like in the Midwest and inother areas, so to get that kind
of both sides of the spectrumand for diversification right.
(16:59):
So love that strategy as well.
I don't really have apreference.
Ed Mathews (17:03):
I would say I'm a big proponent of using a
baseball analogy hitting singlesand doubles right, I'm not a
home run hitter and there aremultiple ways, and what that
means in my mind is we want adeal that is predictable.
We can get it stable fairlyquickly and then have the
opportunity to manage that andhold that property for, like you
(17:25):
, minimum five years sometimes awhole lot longer and then, as
we progress through the businessplan, make some decisions in
terms of refinancing and whatnot, and you can get there from an
appreciation perspective.
You can also get there from acashflow perspective.
It's usually a combination ofthe two.
Me here in Connecticut, this isvery much a cashflow market and
(17:48):
so, like you, I invest in mybackyard and so that's where you
usually start.
And then you look up and youhave several hundred units and
you're like, okay, I guess I'm aSouthern California investor.
Zihao Wang (18:00):
We are trying to diversify into other states for
sure.
So two-thirds of it is in SoCal.
We've also had some in Floridaand North Carolina, and then
we're trying to get into Texas,and then I think there's
definitely a diversificationpiece of mind that I'm well
aware of and, yeah, we'll seewhere it goes.
Ed Mathews (18:18):
Yeah, so when you're looking at other markets I'm
going to move on to the finalfive in a moment but I am
curious about this when you lookat other markets, because
Southern California to you'vementioned Dallas a couple of
times, so I assume that'sprobably one of the places
you're looking to the Carolinasand elsewhere very different
markets, right?
So what is the criteria thatyou're looking for as you look
(18:40):
at it's a big country, right, as?
What are some of the attributesof a market that you're paying
attention to that kind of drawyou in and say, okay, this is a
place we should spend some timeon underwriting?
Zihao Wang (18:53):
I would say it's two things right.
The first is the marketfundamentals right.
How strong is the economy here,how diverse is the economy here
, and is there like futuregrowth potential right?
I mentioned Dallas a few times.
We've been looking at Dallasfor the past six to eight months
.
We still haven't done anythingthere because I feel price is
still a little bit inflatedthere, but I do like the
(19:15):
fundamentals of that market Forus.
We also do a lot of VCinvesting as a family office,
and the Frisco and North Dallasside of things have been growing
like crazy in terms of ventureinvesting as well.
We're well aware of kind of themarket fundamentals of Dallas
and we believe in it long term.
I just think in the short termthere might be some correction
(19:36):
that I'm still waiting for.
But if you talk to me 20 yearsfrom now, I'll probably be like,
yeah, it's grown like crazy.
And then the second thing Iwould say that we look at is
where we have an advantage in,and so for us that means okay, I
want to have some kind ofconnection with that market,
whether it be like okay, one ofmy best friends is operating in
that market or a person that Ihighly trust is operating in
(20:00):
that market, a person who maybealso a family office and we vibe
really well, is operating inthat market that we can partner
together and stuff like that.
So we're looking heavily intoDallas as well as the Carolinas.
We have great family officeconnections based in New York
who have operated in those areas.
They love those areas and sofrom us, from our standpoint, is
(20:22):
okay.
We have to almost take a riskas to picking a market right,
and you have to take a risk Atleast we want to take a risk
with one of our buddies Right.
So from that perspective wereally look at, I think, just
market fundamentals and justalso where our connections are
at.
Ed Mathews (20:39):
Yeah, that makes a lot of sense because obviously
your buddies at least have someexperience in the market and can
give you some insights thatmaybe someone who's coming in
cold won't be able to give youright, so that makes a lot of
sense.
All right, sir.
So let's get into the finalfive.
I'm always interested in howleaders approach their weeks,
and so I'm curious what gets youout of bed on Monday mornings.
(21:01):
So if you could finish thesentence for me, tell me my
purpose is what does that meanto you?
Zihao Wang (21:08):
I think for me it's growing the family's wealth.
I've been very fortunate tohave inherited from my family
and given a huge responsibilitybut also a blessing to run the
family office.
I don't want to throw thisblessing and fortune away, and I
get up every day knowing that Iof I want to create for my kids
(21:29):
what my parents created for me,and so that gets me out of bed.
Ed Mathews (21:33):
Yeah, it's a, yeah, it's.
Running a family office likeyou adds another layer of, I
would submit, and I would assumemassive amount of
responsibility, because yourboard of directors are the
people you eat dinner with andcelebrate holidays with.
So it's a very differentdynamic.
If you're, it's a joyous timewhen things are going well, and
(21:54):
they may be a little tense whenthey're not right If they don't.
So that makes sense to me.
So I'm always interested in inuh, how people work with them
and discover their mentors andthe information that, more
importantly, the informationthat they've been given by those
mentors.
So I'm curious about the bestadvice you've ever gotten and
who gave it to you.
Zihao Wang (22:14):
My first mentor was my mom.
She gave me probably the mostamount of advice and a lot of
them were super, super good.
So one time when I was younger,so I started on the property
management side of the businessand when I was younger she told
me that I can never do enoughdue diligence when I bought an
asset and I didn't reallyunderstand what that means.
Right, because we have a duediligence checklist.
(22:35):
Right, you read the leases, youlook at the T12, you match it
with the rent roll stuff likethat.
And then one time she brought mewe were buying a property and
she brought me to a kind of it'slike a local shop next to the
property.
And then we started talkingwith that shop owner and asking
like, oh, how's the area?
What kind of people can getinto, like your store, how's
(22:56):
that property that we're aboutto buy?
Or we would obviously didn'ttell them we're about to buy it,
but like, how's that propertydoing?
How's the neighbor?
It was probably the mosthelpful due diligence ever
getting, getting thosereferences much more useful of a
time than just like readingleases and reading T12's.
Ed Mathews (23:13):
It's so true.
It's amazing what you learnfrom the neighbors when you
simply make friends and ask thema couple of simple questions
around it what's it like to livein this neighborhood?
And it's amazing what you'llhear.
So I highly recommend thatstrategy.
That's brilliant.
Leaders, almost universally,are readers right, and so I
(23:34):
would imagine that, given youracademic background, as well as
the level of responsibility youhave, that you also are, you
probably spend a lot of timetaking in information, and so
I'm curious what is that method?
Are you an audible?
Are you a physical person, aphysical book person?
Do you like YouTube conferencesand also, more most importantly
, who are you paying attentionto these days?
Zihao Wang (23:56):
Yeah, I love kind of conferences.
For sure, it's just us, we'rehigh level people you don't get
to meet, and so I love readingtheir books.
Instead, I love reading venturebooks like, for example, Zero
to One, Peter Thiel, right, ElonMusk's like First Principles
those kind of books.
I feel our family and realestate arm of it is run like a
(24:17):
venture right.
We're not a huge team right.
We're a team of 12 people thatmanages half a billion dollars
of real estate.
We don't aspire to be like thebiggest team in the world,
because that often means themost inefficient team.
Also, we treat our day-to-dayjobs as a venture right.
We say, okay, this is thenumber of things we need to get
(24:38):
done, this is the result we wantand this is how we're going to
get there, and wecollaboratively work together as
a team and move as fast aspossible.
I think that's why we've beensuccessful in the past few years
.
It's also why we've alsosurvived market downturns as
well, and so, from thatperspective, I love getting into
the mentality of a venturecapitalist or not really a
venture capitalist, but maybelike a company founder, right,
(25:00):
One person who's driving a lotof things, meshing with a lot of
things.
Move fast, break things right.
That's like the venture culture.
Ed Mathews (25:07):
Yeah, and having come from that world myself,
it's, those guys are a bunch ofcowboys and you don't strike me
as a cowboy.
There is an aspect to it interms of speed and urgency and
the way you operate, but alsothere's a risk-taking, and it's
one of the reasons why Ipersonally value real estate as
an asset, because, tried andtrue, back a thousand years ago
(25:31):
ago, when I was one of thoseguys, you're looking for 10
daggers, right, you invest in 10companies, you hope that one or
two of them hit, and one ofthem hits really big and off you
go.
In real estate, you need prettymuch every property to hit
right, and so that part is verydifferent.
But you can also there's also awhole lot of the fact you can
touch real estate as opposed toa software company or a service
(25:53):
company.
There's a whole lot of valueyou can add actively add to a
real estate asset that you can'tto a software asset, unless
you're a programmer, right?
Yeah, of course.
Yeah, right on.
So let me ask youprofessionally, I think we learn
more from our mistakes than oursuccesses.
So I'm curious about a mistakeyou made professionally, and
what was it and how did yourecover from it?
Zihao Wang (26:16):
Yeah, I'll give you two mistakes that's both kind of
related to the same event,which is COVID.
The first mistake is I didn'tthink rates would rise as fast
as they did.
Obviously, being a youngerperson, I haven't seen five
market cycles, seen one marketcycle, and so because of that we
(26:38):
did put two properties onfloating rate debt when we
shouldn't have in my opinion,and I'm very lucky in the sense
that our family had liquidityand so what we ended up doing is
paying those debt off andbasically held the debt of all
assets being clear .
But that was a very scary timeright, because I was at like 4%
and it all of a sudden went tolike 7% and was going to push 8%
(27:00):
and I was in a little bit of astate of worry for those assets.
Very fortunate that we have theliquidity we do.
The second thing is for one ofour ground up projects during
COVID, supply chains were cutand a lot of our supplies right
electrical panels specificallythey were largely delayed.
We didn't get them until eightmonths after we expected them to
(27:23):
arrive and so from that pointdefinitely delayed the progress
of the project.
I think what I did well inthose was that I try to cut
costs in other areas, forexample cabinets, countertops,
lighting fixtures, stuff likethat I decided to go to instead
of buying it locally here from avendor.
I don't buy it from Home Depot,but like still local, here I
(27:44):
went direct to China.
Essentially, yeah, I flew toChina, went direct to China, and
saved around 15 to 20% on eachof those items that I went
through, so from thatperspective it definitely did
save a lot of cost.
But, yeah, I think those twoare probably the biggest lessons
I learned.
Ed Mathews (28:00):
Yeah, and unfortunately you flew right
over those electrical panels youwere waiting for, because they
were all packed in the cargoships waiting out in the Pacific
waiting to land.
Right, it was a crazy time,I'll tell you.
I think that kind ofresourcefulness getting back to
your venture capital commentsright, sometimes that's what it
takes when it hits the fan, likeit did with COVID.
(28:20):
You can either accept what'shappening and start figuring out
ways that what can work, or youcan curl up in a ball, and some
of us curled up in a ball andyou got on a plane.
So kudos to you.
So I'm also curious aboutsuccess, right, that means
different things to a wholebunch of people.
So what does success mean toyou?
(28:41):
I?
Zihao Wang (28:43):
I think I want to grow the family's wealth more
and more in my lifetime.
I think my parents gave me agreat foundation, a phenomenal
foundation, but I want to try tobuild on top of that and that
doesn't just mean real estate,it also means other asset
classes.
I think for Multiva Holdingsit's just going to be real
(29:03):
estate.
In that aspect I want todiversify the different
geographical locations,diversify into other asset
classes, but for our family as awhole I want to diversify the
different geographical locations, diversify into other asset
classes, but for our family as awhole I want to diversify more
into maybe more venture capital,more private equity, more of
the kind of other asset classes,and really try to almost mimic
the seventh generation familyoffices that I meet at
conferences and stuff.
(29:24):
So that really gets memotivated.
Ed Mathews (29:27):
Excellent, excellent , and so I'm always interested.
You strike me as somebody thatworks a lot, but when you're not
working, what do you like to dofor fun?
Zihao Wang (29:35):
I love playing tennis and pickleball.
I started tennis when I waslike six years old, played all
throughout middle school, highschool and then as well as at
MIT.
I was a pretty decent playerback when I was in high school.
I wouldn't say so now anymore,but love sports.
I'm a pretty active guy.
It helps me be calm and clearmy mind as well, but I also,
like most of my friends, arethere as well, so it's a great
(29:57):
time to catch up and hang out.
Ed Mathews (30:00):
Yeah, it's a whole lot of fun.
I actually thought you had tobe like 55 to play pickleball,
or you weren't allowed.
Zihao Wang (30:10):
Like the pickleball police would come get you or
something You're allowed to playwhen you're younger At least I
think most people it's easier topick up.
So it's actually it's startingto become a bigger community,
even for young guys.
Ed Mathews (30:18):
And see the reason it's fun, it's addicting, yeah,
it's a blast, yeah, and it'ssomething that many skills,
anyone at any level of skill,can play, which is not
necessarily the case in tennis.
Tennis bubbles a little faster.
So, zihao, I've really enjoyedthis conversation.
Congratulations again on thebusiness that you're building,
(30:39):
and if people want to learn moreabout you or your family office
or anything else, what's thebest way to get in touch?
Zihao Wang (30:47):
I'm very active on LinkedIn, so please connect
there Also.
You can visit my website tolearn more about us at www.
motivaholdings.
com.
Ed Mathews (30:57):
All right, Zihao Wang.
Thank you so much for your timetoday.
It's truly a pleasure and honorto have you on the show.
Thank you so much for joiningus.
Zihao Wang (31:05):
Thank you so much for having me, Ed.
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