Dan Brisse is the co-founder and principal at Granite Towers Equity Group, which focuses on multifamily syndication. In this episode, he discusses how he got into apartment syndication after competing as a professional snowboarder for nearly 15 years, the changes he has seen in the market recently, and why right now is the time to underwrite conservatively and get your debt right.
Dan Brisse | Real Estate Background
- Co-founder and principal at Granite Towers Equity Group, which focuses on multifamily syndication.
- Portfolio:
- 2,300 units worth $320M
- Based in: Washington (state)
- Say hi to him at:
- Best Ever Book: Think and Grow Rich by Napoleon Hill
- Greatest Lesson: Learn from those who have done it before.
Click here to know more about our sponsors:
TRANSCRIPT
Slocomb Reed: Best Ever listeners, welcome to the best real estate investing advice ever show. I'm Slocomb Reed and I'm here with Dan Brisse. Dan is joining us from Washington State, where he lives. He is a co-founder and principal at Granite Towers Equity Group, a multifamily syndication group. Their current portfolio consists of 2,300 doors, worth 320 million in assets under management. Dan, can you tell us a little bit more about yourself and what you're currently focused on?
Brian Brisse: Yeah, thanks Slocomb. I'm excited to be here. My background - I was in sports, I was a professional snowboarder for almost 15 years. Midway through my career I could see the writing on the wall, I could see it was going to come to an end. A lot of my heroes who I got to know at the time crashed and burned, and ended up back where they were before they had a snowboard and career... So I started buying multifamily property on my own.
I bought a duplex, I bought a nineplex, I bought a 24-unit deal, I started reading about tax savings and just how real estate works with all that, and here we are 10 years later, Granite Towers Equity Group, and now we do syndication for a lot of private investors.
Slocomb Reed: 2,300 units. Dan, how much of that do you currently own privately, and how much of it is in Granite Towers?
Brian Brisse: Well, everything that we have for assets under management was purchased through Granite Towers Equity Group. So when I say private, I mean private investors; that's not my private portfolio of my own real estate. Does that make sense?
Slocomb Reed: Gotcha. It does. So you got involved in apartment syndication 10 years ago?
Brian Brisse: Well, I got into it in 2012 on my own, just looking for ways to get my money to work for me, finding ways to actually increase my passive income. That was the name of the game. My goal was "How do you transition from an athletic career to have the freedom after you're done, without some sort of college education and a huge training lists of accolades?" So that was really all it was, was "How can I find some passive income? What can I put the current money that I'm making into to start paying me to make me more money, get my money working for me?" So in the beginning, it was just a duplex, a nineplex, 24 units... It was just about me trying to invest my cash that I had to create some residual income, and then from there, it turned into "This is a really powerful and an incredible investment vehicle. Let's bring some people along the way."
Slocomb Reed: Dan, the Best Ever listeners are a fairly sophisticated listener base for a podcast like ours, and the vast majority of our listeners are familiar with apartment syndication. Are you all typically value-add syndicators? Tell us about your business plan.
Brian Brisse: Yep, we are looking for A, B and C property. We're in only DFW and Nashville, and we do come in with a value-add play on every deal. Typically, it's between $7,000 to $15,000 per door. It's a very similar value-add play on every deal. Interior upgrades, exterior upgrades, a recent utility efficiency, [unintelligible 00:04:21.13] enhancements. It's your typical value-add strategy; there's nothing special here. It's just do it, and do it well.
Slocomb Reed: We're recording at the very beginning of 2023. Dan, you're a principal at Granite Towers. I imagine you work with partners. What are your focuses or specializations within the general partnership or within the operations of your real estate?
Brian Brisse: I help with investor relations, raising capital, building relationships with investors, sharing deals when we have them... A lot of asset management, too. I've just done an asset management weekly call here with our team... Listening in, just seeing how we're tracking, keeping our finger on the pulse... Once you own the property, that's really when the work begins. What KPIs are you tuning into each week and each month to see how the property is trending?
So there's a lot of asset management involved, and just creating a vision of where we're going. In 2023, with what we are likely to start to see here, how do we move forward with our investors to take care of our capital? My capital is in every deal I buy as well, so how do you take care of your money, so that in 2023, as we go through whatever comes - is it higher interest rates, is it a recession, is it more brutal...? I don't know, I don't know for sure what's coming. But how do you win no matter what is coming at you, is really another huge part of what I do.
Slocomb Reed: With a focus on investor relations and asset management, I imagine that you're not all that involved in acquisitions or the activity of due diligence; your primary focus is once your team has a property under contract, raising the capital for it, giving investors the opportunities available through Granite Towers, and then making sure as a part of the asset management team that those deals are executed on. Is that correct?
Brian Brisse: Yeah, that's pretty much it. I am a little bit involved in due diligence, still. We'll fly to the property and walk a bunch of the units, check the entire exteriors, probably get on some of the roofs and actually see it. We don't buy a ton of assets, we're buying five to seven deals a year... So being this is all we do, we can be there for due diligence and dig in a little bit as well with our team.
Slocomb Reed: That makes sense. Coming from an investor relations perspective, with the deals that your team is currently analyzing and offering on, what are the returns that you are hoping to deliver?
Brian Brisse: Typically, it's about a 90% to 100% overall five-year return, and cash on cash anywhere between 5% to 7% is kind of what we're seeing in the market right now.
Slocomb Reed: Do you target a particular IRR?
Brian Brisse: When we're pitching our deals, every deal is going to be the exact same; we're going to show them somewhere between 17% to 20% annualized return. So if that's your question with IRR, that's what it's going to be.
Slocomb Reed: That makes sense. As you said, this is a fairly standard business model. We can say that now in 2023, that this is a business model that a lot of people are familiar with and have been familiar with for a few years. So I want to ask a couple of questions here, kind of about how the market is going... Really, a couple of things, to be crass - how are the deals? And how is the money? With the deals that you guys are coming across - obviously, you aren't going to offer any deals to your investors that don't hit those target metrics, Dan... So my question with regards to deals is, are you seeing any changes now? Or what is it that you're seeing with regards to deal flow, the offerings that brokers are making available, the competitiveness of the offers that you and your team are making? The other side of that coin is what are you seeing with regards to appetite to invest in value-add syndication right now from your investors, and how does it compare to this time, three years ago?
Brian Brisse: Looking at new deals right now, we've seen less on the market than ever before. And that was going into late 2022. I think you probably are going to start to see a ton of deals come on the market into 2023. As far as competitive-wise, it has been less competitive. We've found brokers seem more focused on groups that will have certainty of closing, and who are going to do what you say you're going to do. I think there's a lot going on in the market right now, where you can come back and do the retrade, which has gotten to be a pretty big thing. Back in 2017 to 2022, you basically didn't retrade on a deal, or your reputation was tarnished when you wanted to buy another deal with those brokers. So that's changed now; you've got more people going after the retrade. I would hope that our firm can remain in the position that, when we make an offer, our offer is standing on the data we found before we submitted our offer, so that your offer is going to stay where it's at; we're not going to come in and retrade you later on. That's our goal every time, but I think that that's something that we've done very well, and are looking to continue to do.
As far as investor appetite, our last year we raised $17 million, but it was back in September and October of 2022. What its gonna be like in 2023? I think it'll just depend on the deal. It'll really come down to "Is it truly a remarkable deal? Did you find something that maybe you had a distressed seller, possibly, and what can you do with the deal moving forward? What kind of debt do you have on the deal?" I think that's something that we're more focused on than ever. Are you going to have a variable rate loan, where all cash flow [unintelligible 00:09:58.24] or are you going to put in low leverage fixed debt and risk a higher prepayment penalty? And I think those are just investor fundamentals and investor decisions everyone's got to make as you go through this unique time in real estate.
Slocomb Reed: So it's been a couple of months from the time of our recording since your last raise... It sounds like you're saying that the number of investors looking to invest and the amount of capital out there for deals like yours is fairly similar - your primary focus is still on finding the deal, and you expect that when you find the deal, the capital will be there the same as it has been the last couple of years?
Brian Brisse: I can't say with certainty; you never know. That's a part about this business, is you don't ever know how your investors are going to respond at any given time. And there hasn't been a time where we put a deal under contract where I knew for certain it was a done deal. You're always like, "Oh, who's going to be interested in this deal? Are they going to like it? Is there going to be something they see that we don't see?" So I think that that's always in the back of your mind. But I think for sound operators, that have underwriting built on fundamentals, built on market data, and have their debt positioned correctly, I think that you're still in a really great time to be buying real estate, and you're gonna come out of this very well, because the one thing I feel absolutely certain of - and I never use this word with investing - is I'm certain the dollar will continue to go down in value over the long-term. So if your dollar is gonna go down in value over the long-term, generally speaking, real estate has been a great investment.
So I don't think that's going to change. You might have a short period of time right now where cash is king, but do you think it'll flip at some point? When - I don't know when; and how far - I don't know how far, but I think it'll go back to a point where your cash goes down in value.
Slocomb Reed: Cash goes down in value as a result of inflation; the buzzword that you might have been avoiding, but that everyone has had on their lips for the last year or so. Cash is typically only king when you think there's going to be high levels of volatility and an opportunity to buy low. I'm not asking you to look into your crystal ball or shake the magic eight ball, but is that what you guys have seen recently? And you're talking about brokers who are allowing for re-trades in a way that they haven't for quite a few years now. Are you seeing deals are just simply getting better right now? And is that the result of a lack of competition? Are there fewer offers being submitted on the deals you're writing on right now?
Brian Brisse: We're actually not seeing a ton of deals we're super-excited about yet. Out of let's just call it the last 90 days, we've probably looked at 100 deals; our team is looking at every deal. Every deal that comes out in DFW or Nashville we'll underwrite and look at. And just speaking with our team that oversees more of the underwriting, the one deal we really liked was close to another deal we bought, and it wasn't a screamer deal, but it had the fundamentals that checked all of our boxes to make it a deal. With that being said, you're not seeing these insane discounts in prices yet. Are we going to? I don't know. Are these stronger markets going to be more bulletproof? More than likely. I think that right now it's a time to be cautious. Underwrite conservatively, get your debt right. I can't stress that enough, get your debt right. We love low-leverage, fixed debt. It allows you to weather any storm. Yeah, you might not have the upside when you go to refi or sell, you might have a little bit of a hit, but you're gonna be solid and you're gonna get through. So philosophy-wise, that's where we're at, and if we can't get a deal to work with that, we're not going to look at it.
Break: [00:13:25.21]
Slocomb Reed: In the last 90 days, you've looked at 100 deals. Do you know how many of those your team has offered on, and how the response has been to those deals?
Brian Brisse: Yeah, we've I think made three offers; we have one right now that may or may come to fruition. We'll see, it may or may not. But it was -- one we got beat out by a firm all-cash, a major firm, which... Gosh, that would be another great way to be buying at the moment. If it's low enough, forget the debt; just put all cash on it and you can refi at a later time. But the deals that we have gone after have had a couple other offers. I think if we really were aggressive, one of them we would have gotten no matter what, but if you want it to work right now and you want to push it a little bit, you're probably going to win the deal. You've got to have that conviction in the location.
Slocomb Reed: A couple more questions before we transition, the interview, Dan... What size apartment properties are you all looking at right now?
Brian Brisse: We're in that 150 to 300-unit range pretty much is our typical size of purchase.
Slocomb Reed: And that's because of the operational efficiencies of that size, and the ability to add value by making incremental changes to the units?
Brian Brisse: Yeah, that and we like deals where you have more folks in the office, where you can work as a team. If you don't have two in, two out, it starts to be a lonely job, especially when you have extra CapEx, or extra unit turns, or the workload becomes a little heavier. If you just have one person in the office and one person taking care of repair and maintenance, it can be discouraging, and they can lose steam pretty easily.
Slocomb Reed: That makes a lot of sense. The deals that you guys are seeing right now, those properties, what type of condition are they in with regards to deferred maintenance, physical occupancy, economic occupancy?
Brian Brisse: Low deferred maintenance, 93% to 96% physical, 91% to 92% economic.
Slocomb Reed: That's not bad. Are you still seeing a lot of deals where rents are significantly below market right now?
Brian Brisse: Yeah, I think this is such a changing market right now... What is market? It's hard to know, because inflation has become such a serious part of rent. And in other places you've got people now that they cannot buy homes like they used to be able to, so you've got a lot of renter demand. A lot of our occupancy has been climbing nicely. All our deals, knock on wood, have just been performing so nicely through what I guess I would consider a very unusual economic environment... Between COVID and now, these higher interest rates... How far will the recession go? What kind of job loss will we see? I guess that's yet to be seen. But overall, it's been a really calming, uneventful path thus far, which is great.
Slocomb Reed: Dan, I'm an apartment owner-operator in Cincinnati, Ohio, and I can only give an operator's answer to the question "What is market rent right now?" And my answer is, "You just try things and see what happens." You have a rent ready, nicely renovated, clean unit... Depending on your market, maybe you think it's $750, maybe you think it's $1,750. And in my experience, and my opinion is try a little higher than that. Try $795. Try a $825, depending on the competition that you're seeing actively in the market. Try $1,800. Try $1,850. See what happens. Give yourself a week worth of data on market, especially when you're looking at the unit sizes you're talking about, like 150 to 300 doors; everything I'm looking at is significantly smaller than that, and so my $75 a month rent changes, or $25/month rent changes aren't doing as much for me as they are for you. You may as well try it, as long as from an asset manager's perspective, Dan, you know that your property manager is tracking the data, and not letting vacancies linger too long before they react.
I'm still a proponent of testing the market and analyzing my market data. When I say "market data", I mean the reactions to my listings, not what CoStar has to say about rents. I put it out there with professional photography, I want to see what happens. React to my data on a weekly basis to make sure that I am staying in front of whatever changes are coming.
Brian Brisse: I couldn't agree more. I love that. How do you know, until you test the market? Your market is your gospel; it's your dictator of what you can and can't do. You're gonna raise and lower based off your occupancy, and that's the name of the game.
Slocomb Reed: Yeah. Put it out there, and see if people are willing to pay more. I will say, since we're talking a lot about the market at the moment right now, Dan - and let me ask you for any insight you have on this, given your experience across 2,300 units in Texas and in Tennessee... One thing that I've experienced recently as an operator is that until the second half of 2022, when my apartment rental listings were listed above market - again, I use professional photography, I make everything look very nice online. Realistic, but nice. Before the last several months, if I was listed too high, I'd still get showings, and I'd still have pre-qualified people come through, and then tell me that the apartment wasn't nice enough, or that it was missing something they were looking for, or the rent was too high. Now, when I list something too high, it is crickets. I get absolutely nothing, until I find that sweet spot rent. And I will say, sometimes that sweet spot rent is a little bit higher than it used to be. So I'm not saying rents are going down. But until I find that real market rent, right now I'm getting no activity; very few calls, no showings for pre-qualified prospects... Is that what you're seeing, or do you have any other insight you can add on what the leasing process looks like right now for you guys?
Brian Brisse: Yeah, exact same. What you're talking about is what we're experiencing. We're monitoring how much traffic we have each week. What's the total traffic we had this week, versus the last (call it) 20 weeks? And it's on a nice little spreadsheet. How many showings did we actually get? How many of those showings applied? How many were approved apps? All of that information every single week, you've got to know, and you're gonna make your rental and pricing prices change based off of your traffic.
Or maybe you got an issue with marketing - okay, our traffic sucked this week. Something fell off. Did something dislodge in our marketing? Was it apartments.com? Craigslist? Was it Facebook Marketplace? What is it, what changed? How's our staff's appearance? So I think there's more to it that you've got to really kind of be tuned in on, but if you've checked all the other boxes, you're probably high on rent.
Slocomb Reed: That makes a lot of sense, for sure. And good to hear that you have the same weekly cadence for tracking those metrics. It sounds like you're tracking them at a pretty high level. Dan, are you ready for the Best Ever lightning round?
Brian Brisse: You bet.
Slocomb Reed: What is the best ever book you've recently read?
Brian Brisse: Best Ever book by far recently read is The Power of One More by Ed Mylett. I think the best book of my life, potentially. That's saying something. I've read a lot of books, but it's all about the mind. I love it.
Slocomb Reed: Nice. What is your best ever way to give back?
Brian Brisse: We donate a percentage of our earnings at Granite Towers Equity Group to a non-profit organization out of Central Minnesota that helps feed kids that after they go home from school on a Friday, they've got food to get through the weekend. And then we also donate to Underground Railroad, which helps stop child sex trafficking.
Slocomb Reed: You were telling me before the interview started that you grew up in Minnesota. That's awesome. Dan, thus far in your commercial real estate investing career, what is the biggest mistake you've made, and the best ever lesson that resulted from it?
Brian Brisse: Biggest mistake I think is just following the herd; you hear what everybody else is doing, and everyone's talking about "This is the way to do it", and you don't think for yourself; get the data points from a ton of different resources, a ton of different people who have the qualifications to give you the data, and then you make your own decision.
Slocomb Reed: Can you give us an example of when that happened?
Brian Brisse: Yeah, I think the frenzy of everybody in 2021 was buy with bridge debt. And is variable bridge debt the way to be buying? I guess you're gonna see here shortly; is it still the way to be buying? I'm sure some are still convicted to it. But when you're buying with bridge debt, the reality is you don't control the cash flow. So as interest rates rise, your debt cost goes up. Now you don't control the deal. The Federal Reserve controls the deal. So if you're an investor, do you want to control the deal? Or do you want Jerome Powell to control the deal? So that would be one.
What else has been something that has been big as far as lessons? I think the other thing is don't fight cycles; study cycles. There's been cycles that have been in place for the last 1000 years of ups and downs; get to know the cycles, and trust the cycle, that it's going to likely rhyme. Well, I mean, people don't like to use the word repeat, but there's a timescale, there's a lot of books on cycles. When's a real estate cycle going to boom and bust? When's the crypto cycle gonna boom and bust? And make that your guide.
Slocomb Reed: On that note, what is your best ever advice?
Brian Brisse: Best Ever advice is just continue to educate yourself. The education you put yourself is going to make you everything; it's going to make you attractive, and make you see things that others can't see, and be able to solve problems others can't solve, and add value where others can't add value. So it's just constantly educating, and getting around other folks that you really respect and admire, and associate with those people.
Slocomb Reed: Where can people get in touch with you?
Brian Brisse: Yeah, you can get in contact with us at granitetowersequitygroup.com. There's a Contact Us button. I'm happy to hop on a call to get to know you better and see if we can help you achieve some of your financial goals.
Slocomb Reed: Nice. And that link is in the show notes. Dan, thank you. Best Ever listeners, thank you as well for tuning in. If you've gained value from this episode, please do subscribe to our show, leave us a five-star review and share this episode with a friend you know we can add value to through our conversation today. Thank you, and have a best ever day.
Brian Brisse: Thanks, Slocomb.
Website disclaimer
This website, including the podcasts and other content herein, are made available by Joesta PF LLC solely for informational purposes. The information, statements, comments, views and opinions expressed in this website do not constitute and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. Neither Joe Fairless nor Joesta PF LLC are providing or undertaking to provide any financial, economic, legal, accounting, tax or other advice in or by virtue of this website. The information, statements, comments, views and opinions provided in this website are general in nature, and such information, statements, comments, views and opinions are not intended to be and should not be construed as the provision of investment advice by Joe Fairless or Joesta PF LLC to that listener or generally, and do not result in any listener being considered a client or customer of Joe Fairless or Joesta PF LLC.
The information, statements, comments, views, and opinions expressed or provided in this website (including by speakers who are not officers, employees, or agents of Joe Fairless or Joesta PF LLC) are not necessarily those of Joe Fairless or Joesta PF LLC, and may not be current. Neither Joe Fairless nor Joesta PF LLC make any representation or warranty as to the accuracy or completeness of any of the information, statements, comments, views or opinions contained in this website, and any liability therefor (including in respect of direct, indirect or consequential loss or damage of any kind whatsoever) is expressly disclaimed. Neither Joe Fairless nor Joesta PF LLC undertake any obligation whatsoever to provide any form of update, amendment, change or correction to any of the information, statements, comments, views or opinions set forth in this podcast.
No part of this podcast may, without Joesta PF LLC’s prior written consent, be reproduced, redistributed, published, copied or duplicated in any form, by any means.
Joe Fairless serves as director of investor relations with Ashcroft Capital, a real estate investment firm. Ashcroft Capital is not affiliated with Joesta PF LLC or this website, and is not responsible for any of the content herein.
Oral Disclaimer
The views and opinions expressed in this podcast are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information, go to www.bestevershow.com.
