In this episode of the Multifamily Real Estate Experiment podcast, I'm your host Shelon Hutchinson, also known as Hutch the Marine Investor, welcomes Sam Morris, a partner at Lone Star Capital. Sam brings over 20 years of experience in multifamily real estate, having executed more than $550 million in deals and managed over $1 billion in real estate financing. The discussion delves into Sam's real estate journey, the current economic climate, and the impact of high interest rates and inflation on multifamily acquisition. Sam shares his insights on asset management, investment strategies, and the importance of mentorship and strategic alliances. The episode also highlights the upcoming Lone Star Capital summit, emphasizing the value of networking and continuous learning in the real estate industry.
00:00 Introduction and Guest Welcome
00:27 Guest Background and Experience
03:43 Real Estate Insights and Economic Climate
07:54 Investment Strategies and Market Analysis
15:24 Asset Management and Operational Excellence
19:06 Merging Companies and Future Plans
21:45 Summit Event and Networking Opportunities
29:15 Focus Round and Closing Remarks
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Thank you to all of our listeners!!! We would love to hear from you!!!
Email me at:
hutch@hsquaredcapital.com
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Visit our website to find out more:
www.hsquaredcapital.com
Join our Facebook Group:
The Multifamily Real Estate Experiment
Follow us on Instagram:
@hutchthemarineinvestor
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
video1103948737 (00:02):
Are you multifamily enthusiast?
Welcome to another episode ofthe Multifamily Real Estate
Experiment podcast.
I'm your host, Shalon Hutchinsonif you in real estate for a long
time, and you connected with me.
You know me as Hutch, the Marineinvestor, and today I.
Today we have a guest That, man,it's like it's really worth
(00:22):
bragging about because this guy,every conversation is
transformational.
See, Sam a good friend.
Sam Morris is a partner at LoneStar Capital I.
Where he leads acquisition,asset management, and investor
relation.
This man has over 20 years wherehe have ex executed more than
$550 million in multi-familydeals He has.
(00:46):
He has built a successful firmin a sunset capital and.
Have since joined forces withLone Star Capital, which is a
vertically and also a fullyintegrated company that delivers
outstanding return to investors.
Sam also spent 18 years incorporate banking managing over
(01:07):
$1 billion in real estatefinancing.
So listen, when it comes tonavigating today's economic
landscape.
He doesn't just have opinions.
He adds data, experience, andstrategy.
Sam, I want to welcome you tothis podcast episode, brother
Hutch man.
Honor to be here, bud.
Good to catch up with you again.
(01:28):
Always.
It's great to, to talk with youand always I.
Learn more about what you've gotgoing on in your journey, man.
Yeah, absolutely.
And as, as am I interested inyour as well, brother.
Now, before we get into the meatand potatoes of things, man, I'd
really like to know, do you havea favorite real estate quote or
mantra that drives you?
Yeah, I've been obviously doingthis for a while and I always I
(01:50):
chuckle because, it's so funnywhen people.
will come to me and ask certainthings like that.
And I always say, real estate iseasy.
It's people that are difficult.
And and that goes from,residents to employees, to,
sometimes investors, things likethat.
It's real.
The real estate side of thebusiness is actually really
easy.
To me.
dealing with all the people thatare involved in it.
(02:10):
no doubt man, that quoteresonate with me and I think it
will resonate.
With our, listen this verydeeply right as we aspire to
reach more veterans andinvestors.
I had a sergeant, major SergeantMajor Garcia.
He said that the Marine Corps isa perfect organization run by
imperfect people.
So a lot of people think that weare in the war fighting
(02:32):
business, but when you thinkabout from inception to
retirement, we are technicallyin the people business because
there's something fascinatedabout the quality of people that
is willing to be committed to alife of service.
That the ultimate sacrifice isthe ultimate sacrifice.
(02:55):
And there's so many people that,that have joined the military
like myself, especially thosefolks who are joining my
timeline, who have seen thetransformation of the military,
in different ways.
Because when you think about it.
The military is supported bysociety and what comes with that
is a lot of social and societalconcerns and challenges as well.
(03:17):
And we have to, inoculate thesefolks into a culture of war
fighters, but also understandthat if you take care of the
people will take care of themission.
And the mission is to be readyWhenever a nation is least
preparing, man.
Beautiful.
I think that quote reallyresonates with our listener
base.
So thank you for that one.
No, that's awesome, man.
(03:39):
just be mindful of your time,Sam and I really hope we can
capture some of your journeydive into it, man.
You have been in the game,through multiple cy multiple
market cycle and I really wantto know how do you see the
current economic climate andhigh interest inflation that
have really dragged on for alittle bit and a tighter capital
markets, how do you see thataffecting multifamily
(03:59):
acquisition, especially, withunderwriting?
Sure.
Yeah, absolutely.
It would absolutely have impact.
And for those that are trying tofigure out, hey, what's my next
step?
Or I'm a military vet and I'mtrying to figure out this game
of a secondary stream of incomeor something of that nature.
You gotta get in the game.
I made that decision at a youngage.
(04:20):
I was in my twenties when Ifirst started investing into
these deals, and so My firstdeal I closed was in 07 of the
larger apartment size deals.
And so in 2007, that was adifferent market back then.
All of a sudden you have 2008,2009, and you have a crash in
the market that's of substance.
the financial just crash of themarket, which was very different
(04:41):
than, like what we've hadrecently.
Yeah.
Although interest rates havegone up and things like that, it
was not.
To the severity of what we hadback in 08 09.
and so in 08, 0 9, we alwaysjoke about you really had to
learn how to, you wanna talkabout like dog fighting and
things like that.
it was, you were given a knifeinto a gunfight and said, go
(05:02):
win.
that's really what it was.
It was, you had to out operate,the people next to you.
'cause it was a scarcitymentality.
You know when you look attoday's environment, and it's
ironic because investorstypically chase the hot new
thing, right?
I always laugh because it's sofunny because you're seeing a
pullback a little bit for peoplewanting to do equity site type
(05:26):
deals'cause they want to gochase yield somewhere else or
something.
And the irony is the cycle ofthings.
The way it works is, I made acomment to the team a while
back.
I said, this really feels like2010 to me, which I know that's
15 years ago now.
But yeah, when we acquired adeal in 2010.
(05:46):
two or three years later fromowning that deal, we were like,
my gosh, why didn't we buyeverything we could have at that
timeframe?
And a large portion of that was,man, in 2010, it was scary to
buy a deal.
It really was.
You're sitting there is thereanywhere further that this can
drop?
I have a great example of a dealthat we acquired in 2010 that we
still own today.
It's actually, we're gonna belisting it for sale this year,
(06:07):
so 15 years later we're sellingthe deal.
We paid 24,000 a door or so forthat deal in Houston, Texas, and
we got it under contract rightnow for I think 117 or 118,000 a
door.
Now that's 15 years later.
the beauty of that is too, we'verefinanced it multiple times.
So everybody's gotten all theirmoney out and we're playing with
(06:28):
house money, so to speak.
acquiring at that time wasscary.
even deals that we're looking attoday, you have to sit there and
go.
Man, there's some scariness outthere.
Some of the fears of theunknown.
a lot of investors are lookingat this too, even in the
underwriting and things likethat.
The underwriting may make sense,right?
Which I would hope it would, butpulling the trigger to actually
(06:48):
invest your own dollars into itis a little scary right now.
It's a risk business, right?
There's no perfect deal.
there's no deal that ever hitspro forma.
I always joke about that.
I'm like, I've never seen a dealhit pro forma on the good or the
bad side, right?
Never seen one hit perfectly onpro forma because it's
impossible to project five yearsout.
What all your expenses are gonnabe exactly for each of those
(07:11):
line items, what all yourincome's gonna be exactly for
each and every month.
Our pro formas are based upon aneducated guess where we think
we're, we are where we're goingto be and we build in hopefully
some conservative aspects tothat, to where we can hopefully
be pro forma.
But that being said, As aninvestor, you have to decide, is
there a group that I know I cantrust and get on board with?
(07:32):
Is there a product that, I'mcomfortable putting money into,
and is the return associatedwith that product, gonna help me
get to my next goal?
And so from an investorperspective, that's really some
of those things that you'rehaving to look for, when you're
trying to evaluate your ownsituation, to determine whether
or not you invest your moneyinto really any deal.
(07:54):
Yeah, so it sound like, anyonecan find a bunch of noise in the
headline, from your seat man.
what data point do you actuallypay attention when assessing
whether it's a good deal or goodtime to buy or sell.
I really that you reallyemphasize on.
First the investor, identifyingwhat they're looking for, and
then actually find the trustedteam that can help them to
(08:16):
accomplish their goal.
But what data points are youreally looking at?
the deal, believe it or not, isthe last thing we look at.
So we first have our owninvestment thesis, right?
And as an investor, you shouldhave your own investment thesis.
Like I want to do.
These types of deals in thislocation that have this kind of
yield or this kind ofsubcategories, whatever.
(08:37):
The more defined you are.
The easier it is for you to go,yeah, this is the type of deal
that I'm looking for.
And then you're finding asponsor, That you can invest
with somebody who you can trust,and trust and be able to help
you execute that deal.
You're looking at the structureof how they're gonna put it all
together so that you know howyou and everybody in the deal
(08:57):
are gonna get compensated.
And then you look at the dealnow when you're talking about
data points into.
We do multifamily housing,workforce housing in the state
of Texas.
And for the size deals that welook at, we're typically gonna
be in the primary marketsbecause of the size of the deals
that we're looking at.
So it gets even more and moredefined.
Of what we do at Lone StarCapital.
(09:20):
And so if an investor goes, Heylook, I'd like to have some
exposure and multifamily in thestate of Texas, I'm raising my
hand and saying, Hey, I'mprobably somebody that we should
probably connect to see if wealign well with one another.
Okay.
And from there though.
when you're talking about datapoints specific to the deals,
what people are gonna be lookingfor, there's all different kinds
(09:41):
of things that we look for,those KPIs, those key
performance indicators thatwe're looking for.
But some of the bigger driversfor that is gonna be in
particularly in this marketwhere we are today, the supply
demand, where we are with howmuch supplies in the market
versus how much demand'sassociated with that supply.
Right, and a way to figure thatout too is gonna be population
(10:04):
jobs in particular.
Like we're looking for that inmigration.
What are they're coming herefor?
Do we have jobs to support thesepeople that are coming in?
Do we have jobs to support theamount of units that we have?
on the ground for the residentsto come and work and live here.
Yeah.
and so there's some imbalances.
And when you find thoseimbalances, and they can even be
(10:24):
sub-markets within a largermarket too, that becomes an area
that we would key in on.
and so from that perspective,that would be one of those
things that we would look at.
And we're looking primarily inthe Houston, Dallas, DFW market,
San Antonio.
Really, those three main marketsare the three main markets that
we're looking in at right now.
we're finding a lot ofopportunities associated with
(10:46):
that.
And even once you find theopportunity, that's really where
I say a lot of the work reallybegins because you're having to
do a lot of things and put a lotof man hours and make sure that
these are the types of dealsthat we're wanting to do.
And does this fit our investmentthesis?
Are we gonna be able to get thekinds of returns associated with
the risk that we're looking totake into these deals?
so there's a litany of liststhat we go down, to be able to
(11:07):
see, hey, is this an opportunityworth bringing to our investor
base?
Yeah.
That is awesome, man.
I've navigated so manyconversations with operators,
that really forced me to createa due diligence guide for
passive investors.
if you listen to this episodeand you want to get a copy of
that due diligence guides, justlet me know and what it factors
(11:28):
in is a lot of the questionsthat Sam is talking about right
now.
If you are sitting on thesideline and you want to get
some more clarity into what ittakes to speak to a high
performing operator, you can askthem a lot of questions from
that due diligence guide.
And one of the cool thing aboutit is that, the kind of real
estate, the investor packetsthat lone star and Sam puts
(11:51):
together really in allactuality, answers most of your
question.
However, some things are alittle bit more nuance, right?
Where, If you're talking to aperson like Sam, you can ask
Sam, what am I not asking youthat I need to know?
And he will be very transparentthat to tell you, So that's one
of the things that I like aboutyourself and the lone star
capital team.
(12:12):
Sam is the transparency inconversation, but not just
conversation, but also in theperformance of assets as well.
Yeah.
and clarity of that message isreally big for us too, right?
Because if we're not clear.
With what the deal is, you losethe potential of somebody being
able to invest with you.
There's an old line that says,if you confuse, you lose.
(12:34):
A confuse mindset say no,because they do.
If I'm confused I can't moveforward with you.
And so clarity is a really bigdeal, like the transparency that
you're speaking of, andunderstanding The positives and
negatives to getting into anykind of deal like this, right?
it's not a hundred percentpositive, right?
You are giving up certain thingswhen you invest into a
multifamily deal, right?
(12:55):
One of the big ones I like totell people is liquidity, there
is a liquidity premium for youinvesting into a multi-family
deal.
Meaning it's not a liquid asset.
It's not going and buying astock that you can then, the
next day or that day trade,right?
We're in these deals for aparticular period of time, and
so you are taking on.
an illiquid investment, andthere's a premium associated
(13:17):
with that.
Just like you're paying apremium, a liquidity premium.
When you go and buy a stock orbond or something, you can trade
right away.
And so there's positives andnegatives to everything that we
do.
And just being clear about whatit is that you're looking for.
your investment thesis,understanding that from the get
go will help put you into theright, investment vehicles going
(13:38):
forward.
You'll learn your own risktolerance, things of that
nature, because all those thingsvary with the investor.
And we think we have somethingthat's really great to offer.
But we also know that.
we're not perfect for everybodyin every case.
absolutely.
One of the things that ourveterans typically do well on
active duty as well, right?
Because wherever we go, we cantrade stocks.
(13:58):
If we have access to theinternet, we can buy and sell
stocks, right?
So a lot of veterans who aremindful about the way the money
can grow, invest in the stockmarket.
in that three pack we did, inHouston.
One of our investors in thatdeal is a military veteran and
he's heavily invested in thestock market.
So I like to talk to him aboutthe opportunity costs, and
(14:19):
that's one of the things that wetalk about in the initial
conversation.
look, you're going to investthis 50 grand right?
And you're gonna have an amazingday in the stock market, and
you're gonna think about, man,if I had that$50,000 in this
specific, stocks, you would'vegone to X amount.
But also, I need for you to havethe same conversation with
yourself whenever you have areally bad day in the market and
(14:39):
that stock go really bad, reallydown.
And then also focus on, okay,that stock went up and down, but
I'm still getting.
Check from the deal that Iinvested in Houston.
So really look at it and whereyour opportunity costs, to your
point, before you invest.
And also, as we go on thisjourney of holding this
property.
Now look.
Sam, a lot of folks thoughtthere was gonna be a ton of
(15:02):
distressed property, and there'sgonna be this huge sell off, and
we see that in 2020.
And a lot of folks was expectingthat in 2024 and 2025 as well.
And, when that didn't happen, wesee some folks, they shift into
different asset class becausethey need to feed the beast,
right?
Yep.
While at the same time trying tostay conservative, in an
environment, Sam, where whencapital.
(15:24):
Is more expensive and rent isflattening out in some markets,
what are some of thosesuccessful asset management
skills or, what are some of thekeys to successful, asset
management and what levers areyou really pulling on, to remain
conservative, but alsoconservatively aggressive?
No, I got, yeah.
(15:44):
I got what you're saying.
Yeah.
this is gonna be a little bitmore, this is kinda like a 1 0
2, 1 0 3 kind of answer.
I got you.
having somebody who actuallyunderstands the asset management
side of it, which is yourbusiness plan, that's somebody
who's too execute upon yourbusiness plan.
But there are constant pivotsalong the way.
That's why I say no pro forma isever.
Exact right?
Correct.
'Cause you get in there andguess what?
(16:05):
Something changes, right?
Or, life happens, the markethappens, whatever you want to
call it, and you have to makepivots associated with it along
the way to get you closer,either back aligned with your
business plan or opportunitythat could be in excess of your
business plan and you can makepivots associated with that.
So there are all kinds ofdifferent things that can be
done.
(16:25):
and I can give you an example ofone we looked at yesterday.
and it had to do with,insurance.
Okay.
And you sit there and you go,insurance has, okay, yeah, I
know you gotta have insurancefor real estate.
But, we had a property where wehad several fireplaces within
the property that were justunusable.
And actually, Rob and I weretalking, I said, Hey, if we seal
(16:46):
these up, seal the chimneys,seal the fireplaces, go and see
what our insurance company willactually do from a renewal
perspective.
in Houston, Texas too, We've hadsome challenges associated with
insurance.
It's been one of thoseuncontrollable expenses that has
really.
Been very elevated in the lastfew years because of the storms
(17:07):
that we've had over the last,seven or eight years.
And insurance has been one ofthose, fairly volatile,
uncontrollable expenses, meaningI don't have control of it.
I'm at the mercy of theinsurance company who's willing
to do it.
However, there are steps we cantake, if I go spend this little
bit of money, it could save methis minor bit of money, but it
(17:27):
can save it for me every singleyear going forward.
And so that's something thattruly adds NOI value, And so
that's how we value ourproperties based on the NOI.
So if there's things that we cando to help increase the NOI,
which we get paid a multiple onfor value of the property, it's
something to consider.
And each case, there's somethingalways a little bit different,
(17:49):
and every property is gonna be alittle unique.
And so being in tune with.
How the property operates, whatthe property needs, and the
people you have at the property,meaning your team that's there
executing your business plan.
there are certain things that wecan recommend and do at the
property to help make it morevaluable, which increases the
return of the investors in thedeal.
(18:12):
that is great, man, because alot of folks, whenever we talk
about the uncontrollables inreal estate, two things really
come to mind and always the headof the discussion, is We cannot
control taxes, we cannot controlinsurance.
But I think you are debunking.
That concept, right?
As long as we understand whatthe insurance companies are
looking for, how our propertiesare positioned, to mitigate a
(18:35):
lot of the risk that insurancecompanies is accepting, then we
can potentially control.
And I mentioned the three packearlier that we purchased.
That one we actually had the taxabatement part of it, right?
The tax strategy, right wherethe taxes was eliminated for 99
years, which is an amazingbusiness strategy.
So I think a lot of folks, Whenthey talk about, asset
(18:56):
management, they look at how dowe, pay less for renovation and
different things.
But I think you're looking atthe bigger picture that a lot of
inexperienced operator may notbe considering.
So thank you for dropping thegolden nuggets on us as far as
the asset management goes one ofthe things that, you pride Lone
Star Capital in doing is havinga fully integrated, processes
(19:17):
where they have constructionin-house, they have the
management in-house acquisition,the entire execution, from
inception of identifying theproperty all the way through
sell.
Of course, on the backside, youhave a broker that deals with
the transaction, as we, Pushtowards the end of this,
podcast, I really want to talkabout the idea.
You are a businessman who didsome amazing things with Sunset
(19:41):
Capital, transition from thebanking industry.
Build Sunset Capital into amassive, business.
let's talk about the integrationbetween Sunset Capital and Lone
Star Capital.
what sparked you?
what really went off that yousay?
Okay.
I think Sunset Capital and LoneStar Capital, I've dated long
(20:03):
enough.
Let's get married.
Yeah.
And and we and that's the thing.
We did date for a while too,right?
So we did, last year alone wedid$160 million in deals
together.
Awesome.
Yeah.
really what it came down to forme, was I'm a little bit more of
a gray haired guy.
For in, in comparison to therest.
Yeah.
yeah.
Sometimes better having gray,you'll take it.
(20:24):
having the human capital side,which Lone star really just
thrives in having a culture thatit was extremely similar.
it was a no-brainer.
Yeah, it really was.
I had been approached by othergroups, and it would not have
been the Same kind of, merger,I'll put it that way.
Gotcha.
now I have, I've been a part ofsales before too, right?
(20:46):
I've been a part of bank sales.
that was something I had done ina previous life kind of thing.
So I knew when a new culturegets introduced to an existing
company, what can happen.
one of the things about justbeing, having already done so
many deals, having already knownthe people that were there,
having already worked with thepeople there, it made it really
much more seamless, than whatpeople would realize.
(21:08):
Because we dated as you speakbefore we got married.
and it's actually been a greattransition.
I get to, kinda sit back alittle bit more, watch, how the
cake is made, so to speak.
having done it a few timesmyself and, when they come to me
and go, hey, what do you thinkabout this?
I'm prepared to offer thatopinion.
and getting to, be over theacquisitions, the asset
(21:29):
management and the investorrelations side, working just
with great people.
Not only that, just great youngpeople who are energetic, who
Truly want to do things right.
Who are transparent, who just,you know, we just aligned so
well, that the merger hasactually been pretty easy, to
say the least.
No, man.
our first interaction, you and Iwas at, a Lone Star Capital
(21:49):
summit out in New York.
I brought my daughter out and,it was an amazing experience and
just being, having conversationswith you, over the years, and
I've actually working with theLone Star Capital guys,
phenomenal group of people.
And to your point.
Fair.
I was gonna say super young, butfairly young.
They are committed to makingtheir job, their profession,
(22:09):
which I really do appreciatewith this young group.
And it's really amazing to seeyou with so many years, end
market cycle of experience,joining such an amazing team or
joining forces with such anamazing team.
And I can't wait to talk to you.
I'm glad you brought up the LoneStar, summit event, because that
is where we met.
And at that time, that wasalmost three years ago now.
(22:31):
Something I would bring upbecause we are gonna have
another one.
It's the fifth iteration of itthis September, and to go to our
website, to apply, to be a partof that.
It's a highly curated event,and, you meet just some pretty
amazing people and it's limited,so we do.
We limit it fairly significantlyabout the amount of people that
we'll take the summit, just sothat, everybody gets tremendous
(22:52):
value from it, is really theeasiest way to say that.
Yeah.
when I walked into this summit,I was dressed.
Fairly nice.
I had a nice blazer on a nicedress shirt, but then I had my
signature hat on, right?
And then I went over to have aconversation with Rob Beardsley.
I think this was not the VIPnight, it was the following day.
I showed up.
I dressed really nice, but I hadmy signature hat on.
(23:14):
And I was talking to him and hewas engaged in the conversation.
But then he looked at my hat, helooked at me, then he looked at
my hat and he looked at me.
I took my hat off.
it's kinda man, what is hegiving me those, those,
nonverbal cues?
No.
and I say that to say this, isthat when you are in the
environment of that summit, andthe quality of people.
(23:35):
I wanna say allowed, right?
Because a very curated set ofpeople invitation mostly.
The quality of people that isallowed to attend the summit
makes you want to elevate yourstandard just by walking in just
the checking alone in the oneworld trade center, just walking
in.
You feel as if you are steppingin the presence of a higher
class.
(23:56):
Of, communication, quality ofpeople, and also investors.
it makes you want to elevateyour standard by the way you
carry yourself and by the wayyou present yourself, verbally,
I would say, look, it's held atone World Trade Center in
Manhattan.
it's unbelievable views,unbelievable.
Location, it's at our corporateoffices.
and I would tell you that, Idon't think I'm overstating
(24:16):
this, but I would say it's thetop 1% of this industry is at
this summit.
And so if you want to meet whatI would consider some of the
best, just for the knowledgealone, it's worth the price of
admission, I will also tell you,we know of deals that get done
From this summit.
Millions and millions of dollarsof deals that get done from this
summit.
(24:37):
And it's not just someplace toshow up, Hey, I got this, or
Hey, I'm trying to raise moneyfor this, or whatever it may be.
Come with an open mind and mygoodness, it is a, It could be
life changing for a lot ofpeople.
And yeah, definitely trust meand I don't think I'm
overstating that.
It really can.
And so the irony with that is,like I said, this will be the
first year I'm actually part ofthe Lone Star Capital Group,
(24:58):
right?
And three years ago I wasrunning my own company and it
really wasn't even on themindset at that point that was
gonna be something that couldoccur, but.
And so there are all kinds ofthings that can, you can
literally find future businesspartners.
You can find all kinds of thingsat this summit.
And it is smaller.
I think we cap out maybe 120 orso, so it's not like it's, a
(25:20):
crowd of people.
But you will meet every singleperson there and have the
opportunity to shake everyone'shand.
So I cannot say enough of howexcited I am for this year's
summit.
'cause we have a lot of funthings going on.
this year that even make it alittle more different than years
past.
That is awesome, man.
I received an invitation fromCraig yesterday, so we'll see
how that goes.
Good.
All right, man.
So let, I wanna be mindful, man.
(25:41):
I got about another 10 minuteshere and I also wanna get into
the focus round.
But before we get into the focusround, I want to ask you.
You've been active in Houston,despite some soft in some of the
rents, some of the areas for inrent.
what still makes it compellingto invest?
You're not saying in Texas.
So you mentioned three marketsthat you're in, right?
Houston, Dallas and San Antonio.
(26:04):
What makes it still compellingto invest in Texas?
Yeah, and each market's gonna bea little bit different, but I
would actually say.
To me, Houston's probably the,one of the most attractive
markets in the entire southright now.
One of the reasons for that isit's chewed through a lot of the
supply, so it chewed through alot of the supply faster than
other markets, and therefore,the rents that you're talking
about.
We're actually starting to seerent growth again in Houston,
(26:26):
and it may actually lead thesoutheast this year.
I'm actually that bullish onHouston.
Nice.
from Dallas's perspective.
Dallas, I think is probably,it's probably one of the most
liquid markets in the entireUnited States, meaning there are
that many people from all overthe country that want to own in
Dallas, and so very tradableassets from that perspective.
San Antonio hasn't quite, Ithink, gotten over a lot of the
(26:50):
supply stuff that we'd like tosee, and so you are seeing more
flat and even underwriting.
You're gonna have to underwritemore flat.
rental growth there.
And you really have to findsomething that's more
opportunistic probably innature.
Gotcha.
To make San Antonio look good.
Austin, which is our fourthbiggest bigger market, I would
just say there's still carnagethere.
And, as much as I'd, love to sayI'd love to own in Austin, I
(27:11):
just don't think I wanna ownthere right now.
probably easiest way to saythat.
And I will say we have nottalked about this much, but we
have been looking in anothermarket outside of Texas, which
will be the first time we'veever done anything like that.
And I'm not saying we'll have adeal there, but we are looking
at the Phoenix market now.
Okay, that makes sense.
Phoenix is right behind Houston.
As far as population, Phoenix isa great area to own.
(27:34):
Again, just not now.
it's one of those things, forus, we've been, we're obviously
touring assets out there,learning the markets, it takes
us a long time before we're ableto truly pull the trigger.
But you have to be prepared todo that.
You have to, we send resourcesout there, they go and tour the
tour.
The markets show us what'savailable.
Let me see what's being built.
Let me see where the areas are.
Who's, we have to go andunderstand and learn the market
(27:56):
before we're really able to,pull the trigger.
Although a few of us do know themarket fairly well, the whole
team, we gotta build everybodyup to understand exactly what
we're getting in.
The way that we're looking atdeals is appropriate.
So the areas that we're lookingat are appropriate and all the
things that we're wanting to doas good fiduciaries to our
investors, are appropriate.
And it just takes time andeffort and resources to do all
(28:19):
that.
Yeah, that's awesome, man.
I heard Rob Brezel talk aboutit.
Maybe a few years ago, he'lltalk about, a lot of folks, get
it backwards, right?
However, at Lone Star Capital,what they do, if they want to
grow into a billion dollarcompany.
You build a system that willaccommodate a billion dollar,
operation and then grow into it,right?
So what a lot of folks do, theywait until they get to a certain
(28:40):
point before they startemploying people or growing
their team.
But if you already have the teamto do the thing, then the thing
will actually catch up with theteam.
You keep growing the team, so Ilike that you guys are actually
growing a team, to accommodatedifferent markets, before.
You actually execute in setmarket so that you have to be
above the growth effectively.
it's not linear.
It's, hundred percent.
(29:00):
That's how it goes.
And so if you get behind thegrowth, that's when you're
really scrambling and it becomesmuch more difficult.
We have seen those companiesthat have scaled too fast and
not been able to operationallytake care of the business plan.
So Sam, as we wrap up, I gotfive questions that I want to
ask you.
We call this a focus run.
What do you do for fun?
Oh man, I love hunting, fishing.
okay.
In particular with my boys.
(29:21):
Nice.
I'll golf every now and thentoo.
My brothers and I just got backfrom the masters last month,
Augusta.
So yeah, it's awesome.
Good times.
And hanging out with family.
Okay.
That's awesome.
We got them.
We got a, close to 140 unitsthere.
currently we sold off the restof them in Augusta, Georgia.
Yep.
So what is one opportunity wasthe game changer to you?
(29:41):
One opportunity was a gamechanger for you?
Man getting mentored, byspecific people, and I'm
thinking of one in particularwhen I was still in college and
he was the chairman of a bank.
and I didn't realize how big ofa deal that was at that time.
but he pretty much just said,you do what I tell you to do and
you'll do great.
And so I would just, as youngand dumb as I was, I just said
(30:02):
Okay.
and I'm so glad I did because itreally changed the trajectory,
of my career.
So be mentor and be coachable.
Correct.
That's the one.
Super important.
What is your top principle whenit comes to communication,
communicating with investors asfar as, communication, check,
just laying it on the table for'em.
Yes, man.
just tell'em exactly how it isbecause I'm more of a matter of
(30:24):
fact guy if it's good, tell'em,Hey, it's good.
If it's not so good, tell'emit's not so good.
But if it's not so good, give'emthe reasons of why and then what
you're gonna do to mitigate itor what you're gonna do to help
'em out with it.
and kinda just be honest.
I hate to say it, that's, that,that easy.
But, nobody bats a thousand inthis industry or any industry.
And, just tell'em where you areand then what you're gonna do to
(30:45):
try to make it right.
So here's the thing.
You communicate with a lot ofpeople and it had to be at least
one conversation you had with aninvestor.
That may have been moresophisticated than you are and
ask you a question that you waslike, I don't know.
You say I would tell'em.
Oh my gosh.
You know what?
That is a great question.
I don't have the answer for itright now.
(31:06):
Will you gimme some time to getthe answer though?
I'll go find it.
that's something I shouldprobably know too.
I'll go find it.
And if you go do something likethat and that drives you too.
it would drive me to sit thereand go, oh my gosh, somebody
asked something I didn't knowthe answer to.
And I take that as a, what,better up my game, right?
but I don't have that answerright now.
let me get back to you andhere's the timeframe I'm gonna
(31:27):
get back to you in it alsoprovided another opportunity for
a future conversation, which isawesome.
Yeah, man.
So that's awesome.
Now, so what is one thing youwish you understood earlier?
Gosh, you have to be in the gameto win the game.
Makes sense.
Alright.
If you're not in the game,you're not gonna win the game.
I totally understand.
(31:47):
so what is, to what do youattribute your success?
Oh, there's a lot of things Icould attribute it to.
I married the right woman.
that's huge.
It really is probably one of thebiggest decisions anybody will
make in their life.
I tell my kids that almost everyday.
Almost 22 years now for me andmy wife and our four teenagers.
(32:08):
We really clinging to oneanother with that.
but I would say that.
That would've probably accountfor the bulk of your success
because, you constantly willhave somebody in your corner.
Yes.
and I know that's a non-businessanswer, but it's reality that's
100% in line with the we seebusiness rights.
in today's society, Sam, I wantto truly thank you for this
(32:30):
conversation, man.
I know you're a busy man.
I really appreciate you takingtime to join us on this podcast.
If our listeners wanna get intouch with you, Sam.
you mentioned earlier about thesummit.
How do they get in touch withyou?
Yeah, so my email issam@lcre.com real easy.
and that's our website,lSCRE.com.
(32:51):
I would highly recommendeverybody go to our website.
We got great content there.
Free giveaways, includingunderwriting, toolkits, things
like that.
We have educational material youcan also apply to come to our
LSC summit, which I do highlyrecommend everybody do.
It's something that's absolutelywell worth the cost of
admission.
but that's the easiest way toget ahold of me.
(33:11):
Yeah, absolutely.
Sam, thank you so much Andlisteners, I hope you take away,
some golden nuggets from thispodcast episode.
I want to thank you for spendingtime with us, and thank you for
enjoying another episode of theMultifamily Real Estate
Experiment podcast.
If you like the value weprovided, please drop us a five
star rating and a.
Fair review.
(33:32):
so we can get this message outto other investors.
And look, our mission remain thesame.
Our mission is to help you.
The veterans will sacrifice somuch, small business owners
really runs the economy.
our goal remains to help you toown more of America.
until next time, I'm HutchMarine investor out.
Thank you, Sam.
Thanks Hutch.
Are you multifamily enthusiast?
Welcome to another episode ofthe Multifamily Real Estate
Experiment podcast.
I'm your host, Shalon Hutchinsonif you in real estate for a long
time, and you connected with me.
You know me as Hutch, the Marineinvestor, and today I.
Today we have a guest That, man,it's like it's really worth
(00:22):
bragging about because this guy,every conversation is
transformational.
See, Sam a good friend.
Sam Morris is a partner at LoneStar Capital I.
Where he leads acquisition,asset management, and investor
relation.
This man has over 20 years wherehe have ex executed more than
$550 million in multi-familydeals He has.
(00:46):
He has built a successful firmin a sunset capital and.
Have since joined forces withLone Star Capital, which is a
vertically and also a fullyintegrated company that delivers
outstanding return to investors.
Sam also spent 18 years incorporate banking managing over
(01:07):
$1 billion in real estatefinancing.
So listen, when it comes tonavigating today's economic
landscape.
He doesn't just have opinions.
He adds data, experience, andstrategy.
Sam, I want to welcome you tothis podcast episode, brother
Hutch man.
Honor to be here, bud.
Good to catch up with you again.
(01:28):
Always.
It's great to, to talk with youand always I.
Learn more about what you've gotgoing on in your journey, man.
Yeah, absolutely.
And as, as am I interested inyour as well, brother.
Now, before we get into the meatand potatoes of things, man, I'd
really like to know, do you havea favorite real estate quote or
mantra that drives you?
Yeah, I've been obviously doingthis for a while and I always I
(01:50):
chuckle because, it's so funnywhen people.
will come to me and ask certainthings like that.
And I always say, real estate iseasy.
It's people that are difficult.
And and that goes from,residents to employees, to,
sometimes investors, things likethat.
It's real.
The real estate side of thebusiness is actually really
easy.
To me.
dealing with all the people thatare involved in it.
(02:10):
no doubt man, that quoteresonate with me and I think it
will resonate.
With our, listen this verydeeply right as we aspire to
reach more veterans andinvestors.
I had a sergeant, major SergeantMajor Garcia.
He said that the Marine Corps isa perfect organization run by
imperfect people.
So a lot of people think that weare in the war fighting
(02:32):
business, but when you thinkabout from inception to
retirement, we are technicallyin the people business because
there's something fascinatedabout the quality of people that
is willing to be committed to alife of service.
That the ultimate sacrifice isthe ultimate sacrifice.
(02:55):
And there's so many people that,that have joined the military
like myself, especially thosefolks who are joining my
timeline, who have seen thetransformation of the military,
in different ways.
Because when you think about it.
The military is supported bysociety and what comes with that
is a lot of social and societalconcerns and challenges as well.
(03:17):
And we have to, inoculate thesefolks into a culture of war
fighters, but also understandthat if you take care of the
people will take care of themission.
And the mission is to be readyWhenever a nation is least
preparing, man.
Beautiful.
I think that quote reallyresonates with our listener
base.
So thank you for that one.
No, that's awesome, man.
(03:39):
just be mindful of your time,Sam and I really hope we can
capture some of your journeydive into it, man.
You have been in the game,through multiple cy multiple
market cycle and I really wantto know how do you see the
current economic climate andhigh interest inflation that
have really dragged on for alittle bit and a tighter capital
markets, how do you see thataffecting multifamily
(03:59):
acquisition, especially, withunderwriting?
Sure.
Yeah, absolutely.
It would absolutely have impact.
And for those that are trying tofigure out, hey, what's my next
step?
Or I'm a military vet and I'mtrying to figure out this game
of a secondary stream of incomeor something of that nature.
You gotta get in the game.
I made that decision at a youngage.
(04:20):
I was in my twenties when Ifirst started investing into
these deals, and so My firstdeal I closed was in 07 of the
larger apartment size deals.
And so in 2007, that was adifferent market back then.
All of a sudden you have 2008,2009, and you have a crash in
the market that's of substance.
the financial just crash of themarket, which was very different
(04:41):
than, like what we've hadrecently.
Yeah.
Although interest rates havegone up and things like that, it
was not.
To the severity of what we hadback in 08 09.
and so in 08, 0 9, we alwaysjoke about you really had to
learn how to, you wanna talkabout like dog fighting and
things like that.
it was, you were given a knifeinto a gunfight and said, go
(05:02):
win.
that's really what it was.
It was, you had to out operate,the people next to you.
'cause it was a scarcitymentality.
You know when you look attoday's environment, and it's
ironic because investorstypically chase the hot new
thing, right?
I always laugh because it's sofunny because you're seeing a
pullback a little bit for peoplewanting to do equity site type
(05:26):
deals'cause they want to gochase yield somewhere else or
something.
And the irony is the cycle ofthings.
The way it works is, I made acomment to the team a while
back.
I said, this really feels like2010 to me, which I know that's
15 years ago now.
But yeah, when we acquired adeal in 2010.
(05:46):
two or three years later fromowning that deal, we were like,
my gosh, why didn't we buyeverything we could have at that
timeframe?
And a large portion of that was,man, in 2010, it was scary to
buy a deal.
It really was.
You're sitting there is thereanywhere further that this can
drop?
I have a great example of a dealthat we acquired in 2010 that we
still own today.
It's actually, we're gonna belisting it for sale this year,
(06:07):
so 15 years later we're sellingthe deal.
We paid 24,000 a door or so forthat deal in Houston, Texas, and
we got it under contract rightnow for I think 117 or 118,000 a
door.
Now that's 15 years later.
the beauty of that is too, we'verefinanced it multiple times.
So everybody's gotten all theirmoney out and we're playing with
(06:28):
house money, so to speak.
acquiring at that time wasscary.
even deals that we're looking attoday, you have to sit there and
go.
Man, there's some scariness outthere.
Some of the fears of theunknown.
a lot of investors are lookingat this too, even in the
underwriting and things likethat.
The underwriting may make sense,right?
Which I would hope it would, butpulling the trigger to actually
(06:48):
invest your own dollars into itis a little scary right now.
It's a risk business, right?
There's no perfect deal.
there's no deal that ever hitspro forma.
I always joke about that.
I'm like, I've never seen a dealhit pro forma on the good or the
bad side, right?
Never seen one hit perfectly onpro forma because it's
impossible to project five yearsout.
What all your expenses are gonnabe exactly for each of those
(07:11):
line items, what all yourincome's gonna be exactly for
each and every month.
Our pro formas are based upon aneducated guess where we think
we're, we are where we're goingto be and we build in hopefully
some conservative aspects tothat, to where we can hopefully
be pro forma.
But that being said, As aninvestor, you have to decide, is
there a group that I know I cantrust and get on board with?
(07:32):
Is there a product that, I'mcomfortable putting money into,
and is the return associatedwith that product, gonna help me
get to my next goal?
And so from an investorperspective, that's really some
of those things that you'rehaving to look for, when you're
trying to evaluate your ownsituation, to determine whether
or not you invest your moneyinto really any deal.
(07:54):
Yeah, so it sound like, anyonecan find a bunch of noise in the
headline, from your seat man.
what data point do you actuallypay attention when assessing
whether it's a good deal or goodtime to buy or sell.
I really that you reallyemphasize on.
First the investor, identifyingwhat they're looking for, and
then actually find the trustedteam that can help them to
(08:16):
accomplish their goal.
But what data points are youreally looking at?
the deal, believe it or not, isthe last thing we look at.
So we first have our owninvestment thesis, right?
And as an investor, you shouldhave your own investment thesis.
Like I want to do.
These types of deals in thislocation that have this kind of
yield or this kind ofsubcategories, whatever.
(08:37):
The more defined you are.
The easier it is for you to go,yeah, this is the type of deal
that I'm looking for.
And then you're finding asponsor, That you can invest
with somebody who you can trust,and trust and be able to help
you execute that deal.
You're looking at the structureof how they're gonna put it all
together so that you know howyou and everybody in the deal
(08:57):
are gonna get compensated.
And then you look at the dealnow when you're talking about
data points into.
We do multifamily housing,workforce housing in the state
of Texas.
And for the size deals that welook at, we're typically gonna
be in the primary marketsbecause of the size of the deals
that we're looking at.
So it gets even more and moredefined.
Of what we do at Lone StarCapital.
(09:20):
And so if an investor goes, Heylook, I'd like to have some
exposure and multifamily in thestate of Texas, I'm raising my
hand and saying, Hey, I'mprobably somebody that we should
probably connect to see if wealign well with one another.
Okay.
And from there though.
when you're talking about datapoints specific to the deals,
what people are gonna be lookingfor, there's all different kinds
(09:41):
of things that we look for,those KPIs, those key
performance indicators thatwe're looking for.
But some of the bigger driversfor that is gonna be in
particularly in this marketwhere we are today, the supply
demand, where we are with howmuch supplies in the market
versus how much demand'sassociated with that supply.
Right, and a way to figure thatout too is gonna be population
(10:04):
jobs in particular.
Like we're looking for that inmigration.
What are they're coming herefor?
Do we have jobs to support thesepeople that are coming in?
Do we have jobs to support theamount of units that we have?
on the ground for the residentsto come and work and live here.
Yeah.
and so there's some imbalances.
And when you find thoseimbalances, and they can even be
(10:24):
sub-markets within a largermarket too, that becomes an area
that we would key in on.
and so from that perspective,that would be one of those
things that we would look at.
And we're looking primarily inthe Houston, Dallas, DFW market,
San Antonio.
Really, those three main marketsare the three main markets that
we're looking in at right now.
we're finding a lot ofopportunities associated with
(10:46):
that.
And even once you find theopportunity, that's really where
I say a lot of the work reallybegins because you're having to
do a lot of things and put a lotof man hours and make sure that
these are the types of dealsthat we're wanting to do.
And does this fit our investmentthesis?
Are we gonna be able to get thekinds of returns associated with
the risk that we're looking totake into these deals?
so there's a litany of liststhat we go down, to be able to
(11:07):
see, hey, is this an opportunityworth bringing to our investor
base?
Yeah.
That is awesome, man.
I've navigated so manyconversations with operators,
that really forced me to createa due diligence guide for
passive investors.
if you listen to this episodeand you want to get a copy of
that due diligence guides, justlet me know and what it factors
(11:28):
in is a lot of the questionsthat Sam is talking about right
now.
If you are sitting on thesideline and you want to get
some more clarity into what ittakes to speak to a high
performing operator, you can askthem a lot of questions from
that due diligence guide.
And one of the cool thing aboutit is that, the kind of real
estate, the investor packetsthat lone star and Sam puts
(11:51):
together really in allactuality, answers most of your
question.
However, some things are alittle bit more nuance, right?
Where, If you're talking to aperson like Sam, you can ask
Sam, what am I not asking youthat I need to know?
And he will be very transparentthat to tell you, So that's one
of the things that I like aboutyourself and the lone star
capital team.
(12:12):
Sam is the transparency inconversation, but not just
conversation, but also in theperformance of assets as well.
Yeah.
and clarity of that message isreally big for us too, right?
Because if we're not clear.
With what the deal is, you losethe potential of somebody being
able to invest with you.
There's an old line that says,if you confuse, you lose.
(12:34):
A confuse mindset say no,because they do.
If I'm confused I can't moveforward with you.
And so clarity is a really bigdeal, like the transparency that
you're speaking of, andunderstanding The positives and
negatives to getting into anykind of deal like this, right?
it's not a hundred percentpositive, right?
You are giving up certain thingswhen you invest into a
multifamily deal, right?
(12:55):
One of the big ones I like totell people is liquidity, there
is a liquidity premium for youinvesting into a multi-family
deal.
Meaning it's not a liquid asset.
It's not going and buying astock that you can then, the
next day or that day trade,right?
We're in these deals for aparticular period of time, and
so you are taking on.
an illiquid investment, andthere's a premium associated
(13:17):
with that.
Just like you're paying apremium, a liquidity premium.
When you go and buy a stock orbond or something, you can trade
right away.
And so there's positives andnegatives to everything that we
do.
And just being clear about whatit is that you're looking for.
your investment thesis,understanding that from the get
go will help put you into theright, investment vehicles going
(13:38):
forward.
You'll learn your own risktolerance, things of that
nature, because all those thingsvary with the investor.
And we think we have somethingthat's really great to offer.
But we also know that.
we're not perfect for everybodyin every case.
absolutely.
One of the things that ourveterans typically do well on
active duty as well, right?
Because wherever we go, we cantrade stocks.
(13:58):
If we have access to theinternet, we can buy and sell
stocks, right?
So a lot of veterans who aremindful about the way the money
can grow, invest in the stockmarket.
in that three pack we did, inHouston.
One of our investors in thatdeal is a military veteran and
he's heavily invested in thestock market.
So I like to talk to him aboutthe opportunity costs, and
(14:19):
that's one of the things that wetalk about in the initial
conversation.
look, you're going to investthis 50 grand right?
And you're gonna have an amazingday in the stock market, and
you're gonna think about, man,if I had that$50,000 in this
specific, stocks, you would'vegone to X amount.
But also, I need for you to havethe same conversation with
yourself whenever you have areally bad day in the market and
(14:39):
that stock go really bad, reallydown.
And then also focus on, okay,that stock went up and down, but
I'm still getting.
Check from the deal that Iinvested in Houston.
So really look at it and whereyour opportunity costs, to your
point, before you invest.
And also, as we go on thisjourney of holding this
property.
Now look.
Sam, a lot of folks thoughtthere was gonna be a ton of
(15:02):
distressed property, and there'sgonna be this huge sell off, and
we see that in 2020.
And a lot of folks was expectingthat in 2024 and 2025 as well.
And, when that didn't happen, wesee some folks, they shift into
different asset class becausethey need to feed the beast,
right?
Yep.
While at the same time trying tostay conservative, in an
environment, Sam, where whencapital.
(15:24):
Is more expensive and rent isflattening out in some markets,
what are some of thosesuccessful asset management
skills or, what are some of thekeys to successful, asset
management and what levers areyou really pulling on, to remain
conservative, but alsoconservatively aggressive?
No, I got, yeah.
(15:44):
I got what you're saying.
Yeah.
this is gonna be a little bitmore, this is kinda like a 1 0
2, 1 0 3 kind of answer.
I got you.
having somebody who actuallyunderstands the asset management
side of it, which is yourbusiness plan, that's somebody
who's too execute upon yourbusiness plan.
But there are constant pivotsalong the way.
That's why I say no pro forma isever.
Exact right?
Correct.
'Cause you get in there andguess what?
(16:05):
Something changes, right?
Or, life happens, the markethappens, whatever you want to
call it, and you have to makepivots associated with it along
the way to get you closer,either back aligned with your
business plan or opportunitythat could be in excess of your
business plan and you can makepivots associated with that.
So there are all kinds ofdifferent things that can be
done.
(16:25):
and I can give you an example ofone we looked at yesterday.
and it had to do with,insurance.
Okay.
And you sit there and you go,insurance has, okay, yeah, I
know you gotta have insurancefor real estate.
But, we had a property where wehad several fireplaces within
the property that were justunusable.
And actually, Rob and I weretalking, I said, Hey, if we seal
(16:46):
these up, seal the chimneys,seal the fireplaces, go and see
what our insurance company willactually do from a renewal
perspective.
in Houston, Texas too, We've hadsome challenges associated with
insurance.
It's been one of thoseuncontrollable expenses that has
really.
Been very elevated in the lastfew years because of the storms
(17:07):
that we've had over the last,seven or eight years.
And insurance has been one ofthose, fairly volatile,
uncontrollable expenses, meaningI don't have control of it.
I'm at the mercy of theinsurance company who's willing
to do it.
However, there are steps we cantake, if I go spend this little
bit of money, it could save methis minor bit of money, but it
(17:27):
can save it for me every singleyear going forward.
And so that's something thattruly adds NOI value, And so
that's how we value ourproperties based on the NOI.
So if there's things that we cando to help increase the NOI,
which we get paid a multiple onfor value of the property, it's
something to consider.
And each case, there's somethingalways a little bit different,
(17:49):
and every property is gonna be alittle unique.
And so being in tune with.
How the property operates, whatthe property needs, and the
people you have at the property,meaning your team that's there
executing your business plan.
there are certain things that wecan recommend and do at the
property to help make it morevaluable, which increases the
return of the investors in thedeal.
(18:12):
that is great, man, because alot of folks, whenever we talk
about the uncontrollables inreal estate, two things really
come to mind and always the headof the discussion, is We cannot
control taxes, we cannot controlinsurance.
But I think you are debunking.
That concept, right?
As long as we understand whatthe insurance companies are
looking for, how our propertiesare positioned, to mitigate a
(18:35):
lot of the risk that insurancecompanies is accepting, then we
can potentially control.
And I mentioned the three packearlier that we purchased.
That one we actually had the taxabatement part of it, right?
The tax strategy, right wherethe taxes was eliminated for 99
years, which is an amazingbusiness strategy.
So I think a lot of folks, Whenthey talk about, asset
(18:56):
management, they look at how dowe, pay less for renovation and
different things.
But I think you're looking atthe bigger picture that a lot of
inexperienced operator may notbe considering.
So thank you for dropping thegolden nuggets on us as far as
the asset management goes one ofthe things that, you pride Lone
Star Capital in doing is havinga fully integrated, processes
(19:17):
where they have constructionin-house, they have the
management in-house acquisition,the entire execution, from
inception of identifying theproperty all the way through
sell.
Of course, on the backside, youhave a broker that deals with
the transaction, as we, Pushtowards the end of this,
podcast, I really want to talkabout the idea.
You are a businessman who didsome amazing things with Sunset
(19:41):
Capital, transition from thebanking industry.
Build Sunset Capital into amassive, business.
let's talk about the integrationbetween Sunset Capital and Lone
Star Capital.
what sparked you?
what really went off that yousay?
Okay.
I think Sunset Capital and LoneStar Capital, I've dated long
(20:03):
enough.
Let's get married.
Yeah.
And and we and that's the thing.
We did date for a while too,right?
So we did, last year alone wedid$160 million in deals
together.
Awesome.
Yeah.
really what it came down to forme, was I'm a little bit more of
a gray haired guy.
For in, in comparison to therest.
Yeah.
yeah.
Sometimes better having gray,you'll take it.
(20:24):
having the human capital side,which Lone star really just
thrives in having a culture thatit was extremely similar.
it was a no-brainer.
Yeah, it really was.
I had been approached by othergroups, and it would not have
been the Same kind of, merger,I'll put it that way.
Gotcha.
now I have, I've been a part ofsales before too, right?
(20:46):
I've been a part of bank sales.
that was something I had done ina previous life kind of thing.
So I knew when a new culturegets introduced to an existing
company, what can happen.
one of the things about justbeing, having already done so
many deals, having already knownthe people that were there,
having already worked with thepeople there, it made it really
much more seamless, than whatpeople would realize.
(21:08):
Because we dated as you speakbefore we got married.
and it's actually been a greattransition.
I get to, kinda sit back alittle bit more, watch, how the
cake is made, so to speak.
having done it a few timesmyself and, when they come to me
and go, hey, what do you thinkabout this?
I'm prepared to offer thatopinion.
and getting to, be over theacquisitions, the asset
(21:29):
management and the investorrelations side, working just
with great people.
Not only that, just great youngpeople who are energetic, who
Truly want to do things right.
Who are transparent, who just,you know, we just aligned so
well, that the merger hasactually been pretty easy, to
say the least.
No, man.
our first interaction, you and Iwas at, a Lone Star Capital
(21:49):
summit out in New York.
I brought my daughter out and,it was an amazing experience and
just being, having conversationswith you, over the years, and
I've actually working with theLone Star Capital guys,
phenomenal group of people.
And to your point.
Fair.
I was gonna say super young, butfairly young.
They are committed to makingtheir job, their profession,
(22:09):
which I really do appreciatewith this young group.
And it's really amazing to seeyou with so many years, end
market cycle of experience,joining such an amazing team or
joining forces with such anamazing team.
And I can't wait to talk to you.
I'm glad you brought up the LoneStar, summit event, because that
is where we met.
And at that time, that wasalmost three years ago now.
(22:31):
Something I would bring upbecause we are gonna have
another one.
It's the fifth iteration of itthis September, and to go to our
website, to apply, to be a partof that.
It's a highly curated event,and, you meet just some pretty
amazing people and it's limited,so we do.
We limit it fairly significantlyabout the amount of people that
we'll take the summit, just sothat, everybody gets tremendous
(22:52):
value from it, is really theeasiest way to say that.
Yeah.
when I walked into this summit,I was dressed.
Fairly nice.
I had a nice blazer on a nicedress shirt, but then I had my
signature hat on, right?
And then I went over to have aconversation with Rob Beardsley.
I think this was not the VIPnight, it was the following day.
I showed up.
I dressed really nice, but I hadmy signature hat on.
(23:14):
And I was talking to him and hewas engaged in the conversation.
But then he looked at my hat, helooked at me, then he looked at
my hat and he looked at me.
I took my hat off.
it's kinda man, what is hegiving me those, those,
nonverbal cues?
No.
and I say that to say this, isthat when you are in the
environment of that summit, andthe quality of people.
(23:35):
I wanna say allowed, right?
Because a very curated set ofpeople invitation mostly.
The quality of people that isallowed to attend the summit
makes you want to elevate yourstandard just by walking in just
the checking alone in the oneworld trade center, just walking
in.
You feel as if you are steppingin the presence of a higher
class.
(23:56):
Of, communication, quality ofpeople, and also investors.
it makes you want to elevateyour standard by the way you
carry yourself and by the wayyou present yourself, verbally,
I would say, look, it's held atone World Trade Center in
Manhattan.
it's unbelievable views,unbelievable.
Location, it's at our corporateoffices.
and I would tell you that, Idon't think I'm overstating
(24:16):
this, but I would say it's thetop 1% of this industry is at
this summit.
And so if you want to meet whatI would consider some of the
best, just for the knowledgealone, it's worth the price of
admission, I will also tell you,we know of deals that get done
From this summit.
Millions and millions of dollarsof deals that get done from this
summit.
(24:37):
And it's not just someplace toshow up, Hey, I got this, or
Hey, I'm trying to raise moneyfor this, or whatever it may be.
Come with an open mind and mygoodness, it is a, It could be
life changing for a lot ofpeople.
And yeah, definitely trust meand I don't think I'm
overstating that.
It really can.
And so the irony with that is,like I said, this will be the
first year I'm actually part ofthe Lone Star Capital Group,
(24:58):
right?
And three years ago I wasrunning my own company and it
really wasn't even on themindset at that point that was
gonna be something that couldoccur, but.
And so there are all kinds ofthings that can, you can
literally find future businesspartners.
You can find all kinds of thingsat this summit.
And it is smaller.
I think we cap out maybe 120 orso, so it's not like it's, a
(25:20):
crowd of people.
But you will meet every singleperson there and have the
opportunity to shake everyone'shand.
So I cannot say enough of howexcited I am for this year's
summit.
'cause we have a lot of funthings going on.
this year that even make it alittle more different than years
past.
That is awesome, man.
I received an invitation fromCraig yesterday, so we'll see
how that goes.
Good.
All right, man.
So let, I wanna be mindful, man.
(25:41):
I got about another 10 minuteshere and I also wanna get into
the focus round.
But before we get into the focusround, I want to ask you.
You've been active in Houston,despite some soft in some of the
rents, some of the areas for inrent.
what still makes it compellingto invest?
You're not saying in Texas.
So you mentioned three marketsthat you're in, right?
Houston, Dallas and San Antonio.
(26:04):
What makes it still compellingto invest in Texas?
Yeah, and each market's gonna bea little bit different, but I
would actually say.
To me, Houston's probably the,one of the most attractive
markets in the entire southright now.
One of the reasons for that isit's chewed through a lot of the
supply, so it chewed through alot of the supply faster than
other markets, and therefore,the rents that you're talking
about.
We're actually starting to seerent growth again in Houston,
(26:26):
and it may actually lead thesoutheast this year.
I'm actually that bullish onHouston.
Nice.
from Dallas's perspective.
Dallas, I think is probably,it's probably one of the most
liquid markets in the entireUnited States, meaning there are
that many people from all overthe country that want to own in
Dallas, and so very tradableassets from that perspective.
San Antonio hasn't quite, Ithink, gotten over a lot of the
(26:50):
supply stuff that we'd like tosee, and so you are seeing more
flat and even underwriting.
You're gonna have to underwritemore flat.
rental growth there.
And you really have to findsomething that's more
opportunistic probably innature.
Gotcha.
To make San Antonio look good.
Austin, which is our fourthbiggest bigger market, I would
just say there's still carnagethere.
And, as much as I'd, love to sayI'd love to own in Austin, I
(27:11):
just don't think I wanna ownthere right now.
probably easiest way to saythat.
And I will say we have nottalked about this much, but we
have been looking in anothermarket outside of Texas, which
will be the first time we'veever done anything like that.
And I'm not saying we'll have adeal there, but we are looking
at the Phoenix market now.
Okay, that makes sense.
Phoenix is right behind Houston.
As far as population, Phoenix isa great area to own.
(27:34):
Again, just not now.
it's one of those things, forus, we've been, we're obviously
touring assets out there,learning the markets, it takes
us a long time before we're ableto truly pull the trigger.
But you have to be prepared todo that.
You have to, we send resourcesout there, they go and tour the
tour.
The markets show us what'savailable.
Let me see what's being built.
Let me see where the areas are.
Who's, we have to go andunderstand and learn the market
(27:56):
before we're really able to,pull the trigger.
Although a few of us do know themarket fairly well, the whole
team, we gotta build everybodyup to understand exactly what
we're getting in.
The way that we're looking atdeals is appropriate.
So the areas that we're lookingat are appropriate and all the
things that we're wanting to doas good fiduciaries to our
investors, are appropriate.
And it just takes time andeffort and resources to do all
(28:19):
that.
Yeah, that's awesome, man.
I heard Rob Brezel talk aboutit.
Maybe a few years ago, he'lltalk about, a lot of folks, get
it backwards, right?
However, at Lone Star Capital,what they do, if they want to
grow into a billion dollarcompany.
You build a system that willaccommodate a billion dollar,
operation and then grow into it,right?
So what a lot of folks do, theywait until they get to a certain
(28:40):
point before they startemploying people or growing
their team.
But if you already have the teamto do the thing, then the thing
will actually catch up with theteam.
You keep growing the team, so Ilike that you guys are actually
growing a team, to accommodatedifferent markets, before.
You actually execute in setmarket so that you have to be
above the growth effectively.
it's not linear.
It's, hundred percent.
(29:00):
That's how it goes.
And so if you get behind thegrowth, that's when you're
really scrambling and it becomesmuch more difficult.
We have seen those companiesthat have scaled too fast and
not been able to operationallytake care of the business plan.
So Sam, as we wrap up, I gotfive questions that I want to
ask you.
We call this a focus run.
What do you do for fun?
Oh man, I love hunting, fishing.
okay.
In particular with my boys.
(29:21):
Nice.
I'll golf every now and thentoo.
My brothers and I just got backfrom the masters last month,
Augusta.
So yeah, it's awesome.
Good times.
And hanging out with family.
Okay.
That's awesome.
We got them.
We got a, close to 140 unitsthere.
currently we sold off the restof them in Augusta, Georgia.
Yep.
So what is one opportunity wasthe game changer to you?
(29:41):
One opportunity was a gamechanger for you?
Man getting mentored, byspecific people, and I'm
thinking of one in particularwhen I was still in college and
he was the chairman of a bank.
and I didn't realize how big ofa deal that was at that time.
but he pretty much just said,you do what I tell you to do and
you'll do great.
And so I would just, as youngand dumb as I was, I just said
(30:02):
Okay.
and I'm so glad I did because itreally changed the trajectory,
of my career.
So be mentor and be coachable.
Correct.
That's the one.
Super important.
What is your top principle whenit comes to communication,
communicating with investors asfar as, communication, check,
just laying it on the table for'em.
Yes, man.
just tell'em exactly how it isbecause I'm more of a matter of
(30:24):
fact guy if it's good, tell'em,Hey, it's good.
If it's not so good, tell'emit's not so good.
But if it's not so good, give'emthe reasons of why and then what
you're gonna do to mitigate itor what you're gonna do to help
'em out with it.
and kinda just be honest.
I hate to say it, that's, that,that easy.
But, nobody bats a thousand inthis industry or any industry.
And, just tell'em where you areand then what you're gonna do to
(30:45):
try to make it right.
So here's the thing.
You communicate with a lot ofpeople and it had to be at least
one conversation you had with aninvestor.
That may have been moresophisticated than you are and
ask you a question that you waslike, I don't know.
You say I would tell'em.
Oh my gosh.
You know what?
That is a great question.
I don't have the answer for itright now.
(31:06):
Will you gimme some time to getthe answer though?
I'll go find it.
that's something I shouldprobably know too.
I'll go find it.
And if you go do something likethat and that drives you too.
it would drive me to sit thereand go, oh my gosh, somebody
asked something I didn't knowthe answer to.
And I take that as a, what,better up my game, right?
but I don't have that answerright now.
let me get back to you andhere's the timeframe I'm gonna
(31:27):
get back to you in it alsoprovided another opportunity for
a future conversation, which isawesome.
Yeah, man.
So that's awesome.
Now, so what is one thing youwish you understood earlier?
Gosh, you have to be in the gameto win the game.
Makes sense.
Alright.
If you're not in the game,you're not gonna win the game.
I totally understand.
(31:47):
so what is, to what do youattribute your success?
Oh, there's a lot of things Icould attribute it to.
I married the right woman.
that's huge.
It really is probably one of thebiggest decisions anybody will
make in their life.
I tell my kids that almost everyday.
Almost 22 years now for me andmy wife and our four teenagers.
(32:08):
We really clinging to oneanother with that.
but I would say that.
That would've probably accountfor the bulk of your success
because, you constantly willhave somebody in your corner.
Yes.
and I know that's a non-businessanswer, but it's reality that's
100% in line with the we seebusiness rights.
in today's society, Sam, I wantto truly thank you for this
(32:30):
conversation, man.
I know you're a busy man.
I really appreciate you takingtime to join us on this podcast.
If our listeners wanna get intouch with you, Sam.
you mentioned earlier about thesummit.
How do they get in touch withyou?
Yeah, so my email issam@lcre.com real easy.
and that's our website,lSCRE.com.
(32:51):
I would highly recommendeverybody go to our website.
We got great content there.
Free giveaways, includingunderwriting, toolkits, things
like that.
We have educational material youcan also apply to come to our
LSC summit, which I do highlyrecommend everybody do.
It's something that's absolutelywell worth the cost of
admission.
but that's the easiest way toget ahold of me.
(33:11):
Yeah, absolutely.
Sam, thank you so much Andlisteners, I hope you take away,
some golden nuggets from thispodcast episode.
I want to thank you for spendingtime with us, and thank you for
enjoying another episode of theMultifamily Real Estate
Experiment podcast.
If you like the value weprovided, please drop us a five
star rating and a.
Fair review.
(33:32):
so we can get this message outto other investors.
And look, our mission remain thesame.
Our mission is to help you.
The veterans will sacrifice somuch, small business owners
really runs the economy.
our goal remains to help you toown more of America.
until next time, I'm HutchMarine investor out.
Thank you, Sam.
Thanks Hutch.
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