Before he became a multifamily syndicator, Brendan Chisholm worked for multiple Fortune 500 companies. His previous roles in program management, lender management, operations, and contract negotiation all helped him cultivate the skills needed to excel in asset management. In this episode, Brendan discusses his firm’s latest value-add deals, what the asset management process has been like, and his advice for syndicators who struggle with organization.
Heavy Value-Add in Newnan, GA
Brendan’s firm, BKC Holding, LLC, bought a multifamily property in a blue-collar neighborhood outside the Atlanta metro area in February 2021. The original plan was to rent out the renovated units for $1,000, but one year later, they are renting at $1,350, which is 35%–40% above their original projection. Brendan credits both conservative underwriting and sheer luck. Now, he says, the plan is to continue driving top-line revenue and make sure expenses fall in line once the refinance process begins.
His Approach to Asset Management
Brendan has picked up some valuable skills from working in corporate America. He’s extremely organized, is able to put trackers in place, and “takes the bull by the horns” when it comes to developing and executing a business plan with his team members. He maintains regular contact with the construction and operations teams, as well as the regional property manager.
Brendan’s Advice for Syndicators
He recommends establishing a big-picture goal first, then working backward and identifying smaller tasks and completing them one at a time, building momentum to reach your ultimate goal. The most important skill he’s developed is organization — if you’re not an organized person, Brendan recommends writing everything down. If you’re unable to do it yourself, find an executive assistant who can help!
Best Ever Lesson
“This is a team sport and the best part about this is everybody has their own strengths. Just go towards those strengths. Double down on your strengths within apartment syndication and then the team will fill in the rest of the way with you. You don’t have to be a jack of all trades to be able to do this.”
Brendan Chisholm | Real Estate Background
- Founder of BKC Holding, LLC, a multifamily investment firm.
- Portfolio:
- GP of 53 units in Newnan, GA
- LP of:
- 272 units in Houston, TX
- 64 units in Columbia, SC
- Based in: Stamford, CT
- Say hi to him at:
- Best Ever Book: Zeckendorf by William Zeckendorf
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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 Brendan Chisholm. He's joining us from Stanford, Connecticut. He is the founder of BKC Holdings LLC. They are the GP of a 53-unit apartment property in Newnan, Georgia, 70 units in Rock Hill, South Carolina, and he's an LP on 272 doors in Houston, and 64 in Columbia, South Carolina. Brendan, can you start us off with a little more about your background and what you're currently focused on?
Brendan Chisholm: Sure. Background since graduating from college in the late 2000s, I was working for multiple Fortune 500 companies in program management, vendor management, and operations. Now working full-time for a telecom provider, doing business developments, negotiating right of way and right of entry agreements with multifamily developers in that area; my five to nine, which is my core focus outside of my family. I'm also a general partner, as you mentioned, on 123 units, all acquired within the last 13 months.
My focus within our group is asset management, so really doubling down on that. The deals that we have are pretty heavy value-add deals, so a lot of attention is being paid to making sure that we're optimizing the performance of those deals.
Slocomb Reed: Gotcha. It sounds like you have a lot of experience with contract negotiation. Outside of your apartment syndication, are you involved in acquisitions at all as well, or primarily just asset management?
Brendan Chisholm: Primarily asset management. One of the partners in both of our deals has more of a focus on the acquisition side. I'm more on the asset management, vendor relationships, property management relationships, as well as lenders and looking over all those fund loan docs.
Slocomb Reed: Awesome. You have a lot of experience negotiating with contractors and vendors, and it sounds like also local regional authorities for your current job, negotiating right of way access... I can see where a lot of that translates well into asset management. So you've bought two properties, one of them, the one in Rock Hill, South Carolina was very recent. How long ago did you buy in Newnan, Georgia?
Brendan Chisholm: We bought the deal in Newnan, Georgia on February 23rd, 2021. We bought the deal in Rock Hill, South Carolina on February 11th, 2022.
Slocomb Reed: Gotcha. So you've had the one in Georgia for a year now. You said you focus on heavy value-add, so that first year is very involved. Tell us about that deal, tell us about your acquisition of it, what you were looking at, what you were projecting back in February of 2021, and how the last year has gone.
Brendan Chisholm: Sure. Last year -- so we purchased the deal for $4.2 million, it's a 53-unit deal, off-market, put about $800,000 of CapEx into it. At the time of acquisition, the deal was at 78% occupied; there was nine total down units at the property itself. We went in planning to renovate 23 of those units; 30 of those prior were owner renovated. The nine down units plus the 14, we went in, upgraded all of the kitchens, and all of the bathrooms. Did some flooring, and painting, as well as install all-in-one washer-dryers into the units. The total all-in cost is just under $5.3 million with closing costs and all of that.
For those what we consider our owner renovated units, we were underwriting just under $1,000 for what we thought we could get for those renovated units based off of what market comps they're using, what we saw as benchmarks for the area. A year later, we're 35%-40% above our underwriting, getting $1,350 for all those two-bed one-baths. Had a lot of success at that property so far, and just making sure we're driving top-line revenue, and making sure the expenses fall in line for when we start the refinance process in a couple of months.
Slocomb Reed: Awesome. Within Georgia, where is Newnan?
Brendan Chisholm: It's 40 miles southwest of downtown Atlanta, 30 miles southwest of Hartsfield Airport, right off of I-85.
Slocomb Reed: Gotcha. So not quite Metro Atlanta.
Brendan Chisholm: No, it's not. It's about a 50-mile radius outside of Atlanta. Had some good stories happen in the Newnan since we acquired the property. Plans to bring in some industrial distribution centers. It's more of a blue-collar area in the southwest part of the Atlanta metro.
Slocomb Reed: Blue-collar area in Georgia, outside the Atlanta metro is not the kind of place where you expect a 35% rent growth or a 35% rent increase above projections. What accounts for that?
Brendan Chisholm: What accounted for that? Low inventory; supply was very tight. At the same time as our acquisition, one of our ceiling properties also was acquired. So I think with a moratorium on being able to build properties in Newnan at the time, just a low supply, a low absorption rate, we were able to capture the rent, and a lot of the rent growth that was slanted down in Atlanta, as well as the outskirts areas as well.
Slocomb Reed: Gotcha. You mentioned you guys are headed towards a cash-out refinance; the plan is to hold this long-term. Are you still planning to sell soon, are you refinancing your limited partners out or are you keeping them in the deal?
Brendan Chisholm: We'd like to keep them in the deal. That's one of the things we're going back and forth with just based off of the valuation of the property and how high we are with our business plan. But ideally, we'd like to get some long-term debt on this and just hold it for quite a while. The valuation seems good, so we should be able to return the 75%-100% of the LP capital back to them. Then we'll recalculate distributions at that point, but at least have very little capital at risk for our investors, and being able to send them monthly mailbox money.
Slocomb Reed: Yeah. It helps the IRR a lot when you give them back three-quarters of their money after around 15-18 months, right?
Brendan Chisholm: Yeah, it sure does.
Slocomb Reed: What are you projecting now?
Brendan Chisholm: For an IRR for the deal or for --
Slocomb Reed: Yeah. How soon do you think you'll sell? What do you think your returns are going to end up being?
Brendan Chisholm: We underwrote this going in for a five to 10-year hold, which is a pretty broad number of years, but... With the plan that if we can manage the execution risk which was the value-add portion of it, it would return a large portion of the capital at the time of refinancing, and then hold it for five years afterward. We're at a point now where the tailwinds that occurred in this market and at the property, we're low 20s, 20%-24% IRR on this deal with a good 2+ equity multiple based off of how long we hold the deal for. But as you said, a 0.75 or a 0.1 equity multiple at the time of refinancing is almost like a multifamily BRRRR.
Slocomb Reed: Yeah, it's awesome. I do have to ask, Brendan, based on the analysis that you were doing leading into the February 2021 closing, analyzing rents at $1,000 a month market and then ending up at $1,350, how much of it was your conservative underwriting and how much of it was luck?
Brendan Chisholm: I would say a combination of both. The luck occurred from just having the tailwinds of the rent growth at our backs. I just did a recent comp analysis for all the surrounding properties and -- I'm not saying it gave me a chuckle, but what a difference a year makes, Slocomb. We were looking at the deal and the rents that we're capturing now are some of the stuff for the class B plus, class A minus properties in that area. Those have gone up $200-$300 plus, and the whole market has shifted where that class B property has assumed those class A rents.
Conservatism is definitely good, but even when we were doing a conservative underwriting, we were still forecasting a 15% IRR. So it's a lot more with just the tailwinds going in our backs, but I think it's a combination of the two, I would say. Conservatism as well as luck. And sometimes it's better to be lucky than good.
Slocomb Reed: Another factor here to your point, Brendan, because it sounds like the cosmetic finishes that you were putting into the units that you renovated were likely low A, high B class comparable, even if your location wasn't. In an interview like this, a conversation between two people - you have to admit this is anecdotal, but I believe one of the things that we're experiencing right now across the board is that millennials are less concerned with location and more concerned with cosmetics, updates, and the condition of the apartment itself, in a lot of cases.
This is not the best way to put this, Brendan; this is not directed at you, because I'm doing the same thing. It's letting investors like us get away with being in a non-optimal location if we are delivering high-quality apartments. As you said, you redid bathrooms and kitchens and that's stuff that millennial renters care about more than preceding generations. I think that's part of what's happening here.
Brendan Chisholm: You're right. In a recent acquisition that we have in Rock Hill, we're going to be doing a similar model as well. It's one of those things - you buy in a certain class that you can keep your purchase price at a lower amount, and then you put in $20,000-$30,000 plus combined between interior and exterior renovations, and you have a superior product to what your comps are. It's easier to be able to close the gap between where you think your benchmarks are and exceed your underwriting targets to make sure that you're delivering upon the forecasted projections that you're putting out there.
Slocomb Reed: Yeah. Let's transition a bit, but let's say on this deal, Brendan. You were the asset manager overseeing an $800,000 CapEx budget in a year or less, in the first year of the ownership of the asset. What did that look like at the beginning? How involved were you in that renovation?
Brendan Chisholm: We have six people as general partners on this deal. Everybody was trying to figure out once we got the deal under contract, where is everybody's fit there. I saw there was an opportunity to apply what I've learned in corporate America. Just from being able to be extremely organized, putting trackers in place, and then essentially grabbing the bull by the horns and making sure I was working with the two guys who were on the acquisitions, and helping develop the business plan to carry out the business plan on our end. You start putting more things in place and it just becomes much easier to track for this first deal, and then be able to transition all of your trackers and KPIs over to your next deal as well.
Break: [00:14:31] - [00:16:18]
Slocomb Reed: Were you the one who was in conversation with the property manager regularly or the general contractors about the work getting done?
Brendan Chisholm: Yes, I was one of the three people who were in constant contact there.
Slocomb Reed: Gotcha. What did that constant contact look like?
Brendan Chisholm: At first, it was trying to make sure that we could have weekly meetings with the construction team as well as the operations team. And then because our construction team is an arm of our property management team, we just combined those two into weekly meetings until we started really seeing the stabilization of the property. Once we started getting into the high 80s and low 90s occupancy rates, that's where I started to transition into weekly calls with the regional property manager, just to figure out how morale is doing at the property and what is needed to be able to do everything.
At that same time when I transitioned into those weekly meetings, we were able to move our operations call to a monthly basis. So it's just staying on top of everything... There are still tasks involved with running our large syndication, similar to a business that needs to get done, not just on a property level, but as well as on a general partnership level... And making sure that we're still delivering upon everything that we need to do on our end.
Slocomb Reed: That makes a lot of sense. Given your Fortune 500 background, Brendan, and how well that has translated into asset management for apartment syndication, Brendan, talk to the Best Ever listeners for a moment who are involved in asset management who don't have your corporate background. They haven't been involved in high-powered conversations with government agencies and contractors in their day job. What skills directly carried from your corporate career into asset management that you think people should be developing if they're involved in asset management?
Brendan Chisholm: It's a great question. I will say, I haven't been involved with government contracts. But to your point, a lot of the things that I've applied is that in any project that you're doing, you have an overarching goal of what you need to do. And then you need to be able to reverse-engineer how you're able to get to that goal. There are sub-tasks that you need to be able to do and check off to make sure that you're building momentum to that ultimate goal, something 30, 60, 90 days out, to keep yourself as well as your team on track.
With apartment syndication, it's a team sport, and making sure that everybody's contributing or everybody's at least taking on a role... And then making sure that they deliver upon their timelines, to making sure, Slocomb, if one of your tasks is XYZ and we give you a two-week timeline, and I'm the person on the 13th day going, "Slocomb, are you ready to deliver upon this for our next meeting?" or "Joe, where does this task stand?" So it's being task-oriented, but having a higher goal in place to make sure that everything is being done in a timely manner, to deliver upon your results.
Slocomb Reed: To make sure I'm on the same page with you, Brendan, you're talking about beginning with the end in mind, having the bigger picture goal first, and then from there, moving back towards what goals need to be accomplished in order for the big goal to be possible, and then what tasks need to be completed in order to hit each of those goals that play into the bigger picture.
Brendan Chisholm: You've put it much more elaborately than I did.
Slocomb Reed: [laughs] I don't know about that. I got to listen to you explain it and then just have to summarize, so thank you, Brendan. Having the background that you have and now getting into value-add apartment syndication, what's the most important skill that you have developed now as an apartment indicator over the last year and a half?
Brendan Chisholm: Most important skill... I think it's organization. Just being organized, more so than anything else. I think that it goes hand in hand with the asset management role, because in an asset management role you are not managing the day-to-day operations of the property, you're overseeing them; and making sure along those lines, that -- as I've just mentioned, it's keeping the wheels turning for the business. It requires me who writes down everything...
If you were to look at my task, it's just filled with post-it notes, as well as project management trackers I use to make sure I'm staying on top of it, just so I understand where everything is going at that time, or what are the deliverables on the 18th of the month or the 22nd of the month, or is it something on a quarterly basis? Just making sure that the wheels are turning to ensure that the property is still running at full speed ahead.
Slocomb Reed: Brendan, are you familiar with the DISC profile?
Brendan Chisholm: I'm not.
Slocomb Reed: Okay. For our Best Ever listeners who are familiar with the DISC profile, I'm an SI, which is about the least organized personality profile that you can have. Brendan, talk to me directly - and hopefully, our Best Ever listeners get some value out of this. I do a lot to create systems, and most importantly, delegate tasks that require high levels of organization. Being organized does not come naturally to me. There are plenty of things in real estate investing that do; I try to make sure my time is focused on those. But also, I'm an owner-operator, so at the end of the day, everything falls on me. What advice do you have for me, some simple things that I can do that would help me stay more organized, and our Best Ever listeners of course?
Brendan Chisholm: Of course, I write everything down, I always carry my journal around. This isn't my actual journal, I have a journal where I write my goals down every single day. But this at least, when I have conversations with people, either to be a property manager or a lender, I'm writing down things that are actionable for our entire team to be able to send them out. I'll put it in here, and then making sure it's uploaded into our project management system if it's an action item for another team member. Just what else is there to do.
As I said, I'm a big advocate of just writing stuff down because I'm very forgetful, if it's not written down and right in front of me, if it's not scheduled onto my calendar. If you are looking at the calendar that I have for both work and personal, it's just filled with each task that I have to do throughout the day, and making sure that I'm apportioning time throughout the day to ensure it's completed. I have stuff throughout the day to make sure I pick up my kids from daycare, but I haven't forgotten a single child yet. Hopefully, my wife, when she listens, smiles and nods.
Slocomb Reed: Yeah, hopefully so. My wife, she might not be smiling, but she'll definitely nod when I talk about how disorganized I am. I'll say, to that point, Brendan, I'm a big fan of alarms and calendar events. But also, and this is for our listeners as well, if you have a personality similar to mine where you're much more people-oriented than task-oriented... I hired an executive assistant, and she is much more of a task-focused, detail-oriented mind of a steel trap kind of person. So whenever I need to remember something, I don't write it in a journal, I message it to her. And then every day for at least 30 minutes, she and I have a meeting where she reminds me of all the things I message her and asked her to remind me of. She also helps me review emails and other correspondence. But literally, she is my checklist. I just send her throughout the day, throughout the week, it's the middle of the night on a Saturday night, I can't sleep and I think of something that I'm going to need to remember when I wake up in the morning or first thing Monday morning, I just shoot her a message, she clocks on Monday morning, she sees it, and it's on my itinerary for later. In my experience being organized is critical, it also can be delegatable.
Brendan Chisholm: Yes, it can be. That's a very good recommendation. One of the people in our general partnership has done something similar as well.
Slocomb Reed: Nice. And I will say, my executive assistant is a virtual assistant in the Philippines. I will also say, we're recording in March of 2022; I've been working with virtual assistants in some capacity in the Philippines since 2014, so I've gotten good at it. But it is possible to hire someone affordably virtually to handle a lot of the responsibilities that an executive assistant handles. Brendan, are you ready for our Best Ever lightning round?
Brendan Chisholm: I am, Slocomb.
Slocomb Reed: Awesome. What is the Best Ever book you've recently read?
Brendan Chisholm: Zeckendorf. It's the biography of Bill Zeckendorf, who was a real estate developer, pre-World War II, post-World War II, from New York City. He has his fingerprints on a bunch of office developments throughout all of North America.
Slocomb Reed: Nice. What is your Best Ever way to give back?
Brendan Chisholm: My wife and I both donate to our local food bank every single year, making sure that we can bring Thanksgiving dinner to the locals in our community.
Slocomb Reed: What is the Best Ever lesson you've learned in apartment syndication?
Brendan Chisholm: This is a team sport. The best part about this is everybody has their own strengths; just go towards the strength. Double down on your strengths within apartment syndication, and then the team will fill in the rest of the way with you. So you don't have to be a jack of all trades to be able to do this.
Slocomb Reed: Awesome. Brendan, a related question, what's your Best Ever advice?
Brendan Chisholm: Best Ever advice - grind with a purpose.
Slocomb Reed: Grind with a purpose. That's great. Brendan, where can people get in touch with you?
Brendan Chisholm: You could find me at my email address brendan@bkcholding.com. Hopefully, by the time this podcast comes out, I'll have a refurbished website at brendanchisholm.com. Or you can find me on your social media, LinkedIn, Instagram, or Facebook.
Slocomb Reed: Awesome. Well, thank you, Brendon.
Brendan Chisholm: Thanks, Slocomb.
Slocomb Reed: Best Ever listeners, thank you as well. If you got value from this episode, please do subscribe to our show, leave us a five-star review and share this with a friend who you know is involved in asset management or executing a value-add business plan in commercial real estate so that this conversation with Brendon Chisholm can add value to them too. Thank you and have a Best Ever day.
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