DEAL TIME! Sponsor Profile

Adam Gower: Gentlemen. Enormous pleasure meeting you. Thank you so much for joining me on the podcast today. Why don't you start off, if you don't mind. I'll let you take it in turns. Please introduce yourself. Tell me your name, company name and what's your position at the company?

Daniel Oschin: My name is Daniel Oschin. I'm the Chief Strategy Officer of Integris Real Estate Investments. I oversee strategy and company direction along with Bill Shopoff, who is the CEO and President of this company, as well as a number of other affiliates. And, we are a real estate firm, a national real estate firm that has a 30-year track record.

Adam Gower: I look forward to learning more about that. Ben, you're up.

Ben Matheson: Yeah. Ben Matheson, I'm the Director of the private client group for Integris Real Estate Investments. In many ways, the face of the company, from an investor standpoint, I have an opportunity to interact with a lot of the investors, potential investors. So, I thought this was a great opportunity to put a put a face with a name. Since I do interact with so many individuals that are looking at, you know, not only our firm but the offerings that we have available as well.

Adam Gower: Fascinating. And, just to clarify, when you talk about investors - I hope I got this right. We also talking about both individuals and institutions, aren't we Ben?

Ben Matheson: We are and that's kind of the unique point of our structure and how we do business, and we'll expand a little more on that today. But, the world has changed, over the last 5, 10, even going back almost 15 years now that the access that the average investor has now, versus 15 years ago is night and day. We're not a company that folks would have seen or heard, 15 years ago. And now, the way we assemble our offerings, the people we partner with, it's an amazing story - a compelling story. So yeah, I think folks are going to be pretty excited to hear about, what they can actually see and be a part of now.

Adam Gower: Well, I'll tell you, it's interesting that you say - you've seen changes over the last 15 years. Really, the transformational change has only been over the last 10 years. And if you look, with the JOBS Act 2012. The laws weren't even promulgated until 2014. So actually, the opportunities that individual investors have today is really entirely groundbreaking and brand new. So, why don't you tell me a little bit and then tell us all, if you don't mind. Tell me the story of your company, if you will. What's the background and scale and scope.

Daniel Oschin: So, the company was started by Bill and Cindy Shopoff in Austin, Texas, 30 years ago. It's actually our 30th anniversary right now - this month. So, we're pretty excited about that. The company was originally started under the concept of a company that was called Asset Recovery Fund. It had four partners. Bill was one of them. He eventually bought all his partners out over time, and that was a partnership with the FDIC and the RTC back in early days of the savings and loans issues of the early 1990s. And their business was, the RTC would give them a bulk of assets and they would have to take these assets that have been taken back by the banks and in most cases were in terrible condition and stabilize them and then either give them back or in some cases help them to assist in selling them, or in some cases, they would take over those portfolios and sell them themselves. And so, they kind of cut their teeth on everything from housing to bowling alleys to single family homes to apartment buildings. Whatever it was that they were given, they had to fix up. And, as that kind of, you know, closed up its time and got resolved in the middle of the 90s, the company partnered with Credit Suisse, which was our primary institutional partner, along with some friends and family money. And, for the majority of the 90s, that was what we did. We bought opportunistic, distressed, complicated assets and then restructured them and then sold them out in partnership with Credit Suisse. And then over time, that's morphed into many different things. During the 2000s, we've had lots of different partners, from Goldman Sachs to a more current history - Invesco, Square Mile, Ladder, Artemis, Argosy. All kinds of things, where we partner with these institutional folks and we bring along our money.

Daniel Oschin: Bill Shopoff's money, my money, because I'm an investor in the company and individual money from individual investors and we pair that with institutional money, for the most part, and buy assets in a variety of different things. In that 30 years, we've done a lot of different things, but we stay very core to what we do, which is creating value. Finding things that others can't find. Figuring out how to do things that others can't do. And in that 30 years, we've cycled - full cycle, more than a 1,000 assets. So when I met Bill Shopoff back around 2011 or 2012 and I had my own real estate business, I had my own investing that I do. I was looking for - I felt the market was pretty frothy. I was looking for more opportunistic opportunities, less core. And I met Bill and the thing that really struck me about the company and all the various affiliates that it has, and the things that it does was, it had this incredible track record. I had never met a company that at 30 years old, had cycled on a 1,000 deals. Had the kind of returns that they have, the institutional pedigree they had. But was so specialized in what they do. The company is really focused on using its great mental capacity, it's great tenure, it's relationships. All the strengths that it has to be able to take things that others might find too complicated to do and find a way to get them done.

Daniel Oschin: And I've been investing with Shopoff now, for a very long time, very successfully. And then, I joined Bill back in 2014 and have been part of the executive team ever since. Bill and I are very close. He's a fantastic guy. Just, one of the great people. Not just a great mind, but a great human being. Him and his wife. And that trickles down into the whole company. So a company is not just about business. It is - the company has got good people. It's got good bones and it's goal is to create, not just money and wealth for those who invest, but to leave a legacy behind of positiveness. You know, making things better in every community that they touch. So Integris is a specific brand within our company that's designed for direct investors, for family offices, for those kinds of folks who are coming in, working with Ben and the team to to invest in our various programs. But as a company overall, we just have this -  not just an extensive track record, but, you know, thus the name. A high level of integrity. If you look around at who we are, we just have a strong backbone and foundation. And I think that that's really core. There's a lot of programs out there and there's a lot of sponsors but finding somebody with three decades of experience doing the same thing repeatedly, with an impeccable reputation and demonstrable thousands of investments that have actually cycled and returned capital. It is just a very different kind of breed.

Adam Gower: Daniel, there's even more to it, though isn't there? Because, when you talk about 30-year track record, when we think about individual investors today who are discovering commercial real estate investing opportunities for the first time, discovering Integris, for the first time. They have only seen a frothy market, right? It's like, since 2012, it's only been up, right? Buy something and fall asleep and wake up and make money. I'm not demeaning what it takes to be very successful. The reason I mention that, is that having lived through or having been in business for 30 years and you mentioned the savings and loan, ever so modestly, didn't mention the global financial crisis. Two massive downturns, over the last 30 years. What have you learned? What has Integris learned - what has Shopff learned, from seeing these major downturns that informs its investment decisions today?

Daniel Oschin: Well, I'm going to give you a couple of answers. My first one is pretty straightforward. If a company can't figure out how to do business when things are bad, then that's a company I wouldn't do business with. You'll notice I didn't mention the downturns because we did well. I mean  obviously not as well during the great financial crisis as you might do, like today when the winds hit your back and everything is great. But, our company has a history of success in up and down markets. We know how to - let me take a step back. What we do, is not that different than a  fix and flip, except we're on a much more complicated structure.

Daniel Oschin: And that is, if you're buying a piece of real estate in a market where everything is a million dollars and you're paying seven hundred because you're buying the worst house on the street and you're going to put one hundred or one hundred and fifty in it to fix it up. So now you're in at  eight or eight fifty. You have all that arbitrage between what you got in the house and what the house is actually worth to give you flexibility if the market shifts to still make money or at least break even. The market could drop 15% in that example, and you still could break even. If it dropped 10%, you'd still make money, whereas everybody else loses. Our concept, well, much more complicated and on a commercial level, is not that different from that.

Daniel Oschin: So, the assets we bought before the financial crisis and, you know, 2005, 2006, 2007 that we sold afterwards because the ones we bought before had sold before did great. The ones we bought after and sold after did great. But the ones we bought before, theoretically, when the market was high and sold after, when theoretically the market was low, still did pretty well. I mean, we remarkably had a very - we had a positive return on those investments. I think we had 30 some investments that we bought before and sold after, and almost all of them made money still. A lot of that goes to the - to who Bill is as a person, the company and the leadership and how it looks at real estate.

Daniel Oschin: We do not typically sit and hold real estate just to see if we can figure out a way to last forever, to make asset management fees. We typically buy, create value and sell. The asset we're going to talk about today, a little bit that we have is, you know, a 10-year program because that's the nature of the tax program, but it's intentionally that way. But, we don't sit on assets for the long term. Our average holding period is about 3 years.

Adam Gower: Really.

Daniel Oschin: Even during the downturn. We don't sit on assets forever and ever, just to see if we could make money on them. If they made sense to sell and we sold them and we still made money. So, we've gone through up cycles and down cycles. Obviously, where the market's going up, everything's great.

Daniel Oschin: But here would be my comment to, I think what you're saying. It's really easy when you have a rising tide, it lifts all the ships. And if you have companies that started after the downturn. I'm assuming they've all made money during this period of time. I mean, almost, how could you not?

Adam Gower: Exactly right.

Daniel Oschin: But you should be making really outsized returns right now because the market's been great. It's like when the stock market's just flying up. It's hard to miss. The question is, is how do you develop a portfolio and a structure within your company so when the market shifts, you are still able to make money or have a good chance of making money in the assets you have? We have a very good win ratio. Although we're in a complicated business and most people would struggle to be successful in, 94% of our assets have made money. And 98 plus percent of our assets have either made money or come very close to making money, around of breakeven-ish. We have a very small loss ratio, and yet we're in a business that theoretically is really, really hard. How do you do that? You have to have great people. You have to know what you're doing. You have to be able to move quickly. You have to have the skill set to be able to operate. And if you can do that, up market or down market, you should still do well.

Adam Gower: Now you also have an unusual background in terms of the types of sponsors that individual investors normally see when they go online today. And that is, that you have an institutional background. You have institutional investors. How does that change the - or value proposition to individual investors, compared to somebody that does not have institutional partners.

Daniel Oschin: Great question. And I'm sure most people listening understand this. Most companies that are out there today marketing online or newly formed, don't have much of a pedigree. They may be doing just the one offering they have, and that's all they've done, or maybe one of a couple. So, when we talk about the strength of pedigree, it becomes very important. The length of time, the number of assets and as you mentioned, institutional pedigree. What does that bring? A couple of different, really important things. One. You know that a firm like Invesco or Artemus has looked at our company, has reviewed the firm, has done their diligence and found us acceptable to do business with. They've looked at our asset - the institutions are coming in asset by asset. Each one is looking at assets and when they find the one that they like, they've done their diligence on it and they've looked at that and said, you know, that's good enough for us. And they've looked at our average returns over time and the probability of achieving those returns. And they are good enough and solid enough over an extended period of time to give them comfort to do business with us. And so, that's part of it.

Daniel Oschin: Then you also have institutional underwriting, institutional analytics, institutional reporting, institutional accounting and the ability to diversify what we're doing. So, we have a project out there, the Dream Hotel in Las Vegas that we're working on, and it's a very large raise. Some of that money is going to come from individual investors. A lot of it already has, and a big chunk of that is going to come from either institutional investors or qualified opportunity funds. And they don't likely invest in anything, particularly in a QOZ or a qualified opportunity zone, which may, in many cases be, poorly designed or poorly financed. So, we bring that pedigree to each of the things that we do, to the nature of our company and all the things that we provide. To me, it was very compelling when I first met Bill Shopff, in the company, that they had that background.

Adam Gower: Daniel, this connection with institutional partners is not one to understate. Institutional partners bring in extraordinary levels of due diligence that go way beyond what any individual investor can do on their own. It's almost - I mean it is, categorically, a stamp of approval from a third party that does tremendous due diligence and then invests their money, right? It's a stamp of approval.

Daniel Oschin: Well, from a regulatory perspective, that isn't a terminology that we can use. So, I'm not going to say it's a stamp of approval. Each person needs to do their individual due diligence and not rely on the diligence of others. Having said that, I think that there's a lot of strength and and value to having a third party or multiple third parties reviewing the company regularly and having confidence to do business with them. And just like you, I mean, maybe you know Ben and I really well and you really trust us and we tell you, we know this product and we think you should invest in it. And because we've said that and you know us and you trust us, you may have a lot of confidence in what we say. You're still going to do your own due diligence, right? Ben and I may think that it's great. You know, you should buy bitcoin for sure, and you may look at it. I'm not buying bitcoin. It doesn't make any sense to me, which is, honestly what I said and then I was wrong.

Adam Gower: Wrong up until this point.

Daniel Oschin: But you understand what I'm saying. I mean - it is an additional point to consider.

Adam Gower: Yes and thank you so much for correcting me on the compliance issue there. I can say whatever I like, I suppose, and even I have to be careful. The point I'm making is, though that individual investors, as part of their due diligence should consider whether or not a sponsor has institutional partners, because that does add this extra layer of due diligence that has been conducted by professional real estate investors. Most individual investors aren't professional real estate investors. They're doctors, they're tech experts, they're professionals. They have real day jobs, right? And they're looking to invest savings, essentially. So they want to be sure that an investment has been properly considered. And so, by being able to see what other layers have been put on top of a deal, that helps. It is part of their due diligence process. Let me ask you this. Oh go ahead. You're going to say something Daniel.

Ben Matheson: Yeah, I wanted to add one piece to that, and it's something that's somewhat of a double-edged sword that, as you know, it's still a little bit of the wild wild west. I mean, virtually anybody can go out and put together a deal and you'll see some smaller mom and pop type syndications. But, as evidenced in our conversation about the amount of due diligence that's done on our offerings typically, can be evidenced by what we make available to our potential investors. You know, you can look at some deals out there, and the offering documents consist of, you know, maybe a 15 or 20 page PPM, a slick brochure. The majority of its marketing material and kind of light on the research. And surprisingly, one of the biggest challenges we have is the amount of diligence information that we will provide to a potential investor can almost be overwhelming. Just because it's such a contrast to what they're used to seeing from some of these other, you know, younger, newer sponsors that don't have the track record. You know, we'll show our track record. We'll show you the research. We'll show you financials. The PPM itself, as opposed to, a 20 or 30 page document. You know, sometimes ours can be  a couple of hundred pages. But that's - a couple of hundred pages of disclosure that's to that investors benefit. That's not for our benefit. That's information that is actionable that they should be using, you know, for their investment decisions. So like I said, it's a double-edged sword. It's a lot to pour through but on the same token, we make it available. It's out there as to disclose for those who really want the information and really want to diligence a deal, We put it all..

Adam Gower: It's there and transparency is one of the most important things, isn't it Ben? So let me ask you, let me kind of pivot to a slightly different angle now, talking about Integris. I know that we are going to be talking about the specific deal - let's hold that one back for the time being. Tell me a little bit more about what you guys invest in. What  kind of asset classes, what kind of investment strategy. You've talked about value add, but I know you do ground-up, etc. Just kind of give me the broad - paint the picture of what Integris invests in, what kind of strategies you like.

Daniel Oschin: Generally, overall as a company, the company focuses on where it can create value. And why I mean create value. I don't mean by it like putting a coat of paint on a building, I mean, really creating value. So if you look at the lifecycle of real estate, everything starts with a raw piece of land, right? So you have land and it's just sitting there vacant and you need to do something with it. If you're holding onto vacant land purely for what's called land banking or path of growth, which is where the city eventually moves over it. You're a passive investor. You own something has nothing on it. You're waiting for it to come over. When you finally do something to it, you have to get approvals in order to do that. There has to be zoning and entitlements and other things. Those who create that approval process, you get the rights to be able to do something through the entitlements. They create a value. So sometimes we do that. We'll buy a piece of land with the intent of turning it into something else. We recently did 1.8 million square feet of industrial, in the Los Angeles - Greater Los Angeles area. And, we started with raw land and we entitled it. Now it's being built into distribution centers or logistics centers. If you build an apartment building or whatever else, once you have those entitlements, you can then build say, the apartment building.

Daniel Oschin: Now that's development, right? So that's the second way you can create value. You take the ability to build and then you actually build something on it and there's a value to that. Once something is built, it's stabilized and once it's stabilized and you own it during a stabilized phase, other than just taking care of your building, again, you're passive. For the most part, management matters, but you can't change the the universe of economics or what's happening in the United States or who's building around you, or a lot of different things that people don't have control over. Eventually, those buildings become outdated, and that's the next place we take a lot of energy in, which is, you find something that's in bad shape, has a problem, needs to be changed and you do something either different with it, which is a re-entitlement process, say it's an old data center and you're going to turn it into an apartment building or today we're doing a lot with shopping centers. We're buying dead shopping centers and they'll be torn down and housing will be put on top of them. So, we're getting the rights to do that, or we're taking a building - we've done shopping centers that were foreclosed on. There was a target shopping center. The bank took it back, sat on it for years. It was in terrible condition. We bought it. It was 30% occupied.

Daniel Oschin: We had to rehab it, reposition it, do all the leasing on it. We built out a pad with a Starbucks. We had to break up the old Target and put in smaller tenants. We do all these different things and get that ready for sale. So that is a repurposing, you know, or repositioning of an asset versus the repurposing that I mentioned with land. But when you're talking about like, that life cycle, we're focused in the stages of the life cycle or we're either repositioning or repurposing things. Typically we're building them. And so that's where we can create value separate from what's happening in the market, whether the market's going up or down or sideways or whatever and we can create that value. We focus nationally. We're not outside the United States. Our commercial assets are typically all over the United States because they don't require such local knowledge. The repurposing of land is typically in the southwest United States. A lot of it in Southern California, where there's a lot of economic and demographic pressure on values and it's really hard to do business. We like doing business where it's hard to do business. We're great at getting it done. And if there are barriers to entry, we can create value. So, we have a national footprint. We focus on both commercial and land, development and other things. But always where we can create value.

Adam Gower: Are there any asset classes, Daniel, that you favor or have particular strength in?

Daniel Oschin: Ones that make money.

Adam Gower: It's interesting.

Daniel Oschin: On the commercial side of the business, not so much. It doesn't really matter to us whether it's an office building, a retail center, industrial. We're not going to own it for a long period of time. We're going to change something about it. We're going to fix something about it. We're going to sell it. On the land repurposing side of our business, it's primarily single family and multifamily housing, although like I mentioned, we just did a big industrial project. We're doing a big hotel project. There are - we're not married to any one thing. We have such a broad pedigree. We're not in the business of, say, buying just single tenant deals or just multifamily deals or we really love multifamily. We happen to love multifamily. I really like it. The problem is, it's an extraordinarily efficient market. The value - the cost of the land is high. The amount of money you can make developing them is pretty compressed and everybody in the world is in that market. It's very hard to buy efficiently now. There are some people who are great at just doing that, then good for them. But that's not what Shopoff does. We do not focus on single asset classes or sectors.

Adam Gower: Interesting. You mentioned path of progress. You mentioned that you're  nationwide. But presumably there are some criteria that you apply to the kinds of locations that you want to be found in. What are those criteria?

Daniel Oschin: So, we are traditionally in markets that have strong, strong economic and demographic factors and again, either high barriers to entry, which are our preference or some unique circumstance. So if you look at our body of assets that we own, they typically fall in that category. Rather than saying, I just want to buy office and don't care where it is or I'm just going to buy office in primary markets or I'm going to buy them - whatever your rule set is. We try not - we're not boxed-in like that. We look at - we always want to try to double the money we put into an asset, double our investment during the holding period at a minimum. And in many cases, particularly today, those numbers are much, much higher than what we do. That's typically a goal of what we do. And then the question is, what is the risk? What's the complication of the deal versus what needs to be accomplished in it? And rather than saying, look, we won't buy in Ohio because Ohio is not, you know, New York and New York's a primary market and Ohio, Cleveland isn't. We don't put our our limitations on that. In fact, we bought a deal in Ohio. I didn't mean to say this, but we bought a deal in Ohio. We bought it through one of our institutional partners and we bought this big industrial portfolio. They had a couple of office assets that were kind of orphaned assets in that portfolio. They sold it to us at their cost, which at the time we bought it was about a 15-20% discount to market value. I'm fine owning in Ohio under those circumstances. We created a bunch of value and we made money. So, we don't limit ourselves, and having that lack of limitation gives us the ability to think much more creatively.

Adam Gower: Let's - I've got three last questions for you while we talk about the company and actually one of them is slightly more personal and then we will move on to the deal that we're going to talk about. But let me actually also understand - one of those questions is. I'd like to understand the sheer size of Integris. How many employees do you have? What's your assets under management? What kind of - what is your current scale? Kind of give me a sense about how big you guys are.

Daniel Oschin: We have, I think, about 65 employees right now. We are not - so here's an interesting differential between us and many companies. We are not what you would call "vertically integrated". We do not have - because we don't typically own our assets long term and even the ones we do, are structured in a certain way. We don't have property - like a big, huge property management component to our business. And because of the diversity of what we do, we cannot and don't have, say, our own legal team. We use the right people in the right circumstances where they need to be. So we use a lot of third parties to support what we do. We have about 65 employees. Right now, we have about a billion dollars under management. That fluctuates a lot. We are not - here's the big difference between us and most companies. Like I mentioned, we don't sit on our assets. We're not an asset management fee company. You give us your money. We're just going to keep getting fees from it forever. Hopefully, you make money. Our business is to create value and then to exit if the opportunity presents itself or is appropriate for the type of investment it is. And as a result, like I said, we've cycled on a thousand assets. I can tell you, we haven't settled on any. We could still have a 1,000 assets and a 10 billion dollar portfolio, and it wouldn't make any difference. You can make lots of money doing asset management fees, but that's not the nature of what we do.

Adam Gower: Yeah, it's a very efficient way of conducting business in commercial real estate, the way that you do it. I see a lot of companies that like to build huge staff. It's like they feel good if they've got an office full of staff doing busy stuff. But, I like the idea of essentially contracting out all of the key roles. All right.

Daniel Oschin: Just to be clear, not the key roles. So in our case,

Adam Gower: Not the key roles. I mean the...

Daniel Oschin: All the analyst work, all the underwriting, all the purchasing and negotiating on the real estate side and what we call the development work, which is the complexities of deciding what to do are all internal. We have a very large accounting staff. Where we don't have staff, we only have one person in marketing. We're not a marketing firm. That's a big differential between us and many of the people that people are going to meet on the internet. They design a company to raise money. We've been around 30 years. Integris is just part of what we do. We raise money a lot of different ways, as you mentioned institutionally. We are not in the business of - fundraising is not our only business. Our business is real estate and real estate is where the majority of our staff lies.

Adam Gower: Le me ask you one final question before asking you a final question. What are the biggest challenges you face at the moment and what are the opportunities?

Daniel Oschin: Well, the challenges are, I think really right now more than ever is the the unknown of the future. There's always ups and downs in real estate, but the pandemic has created a very unique set of circumstances. We have never seen more real estate opportunity, bigger opportunities for returns, more disruption in the market than we are right now and particularly in 2020. I mean, it was a roller coaster ride. It's getting a little clearer now. But I think one of the biggest challenges is trying to determine where things are going to go in the future in a universe where I mean, we thought it was going to be two weeks until the pandemic was over. Then we thought it was going to be the end of 2021 ere we are in 2002. I don't know. The other part of the complexity is politics. Politics is so extreme right now. Things sway so far back and forth every time there's a change. You have to be very careful where you position yourself because you don't know what tomorrow's political choices are going to do to the things that you're invested in. And three is, obviously there's concern about inflation and interest rates, and you have to be very careful positioning around that. Again, we have decades of experience of doing this. None of this is particularly new. The pandemic is but dealing with the ups and downs. It's just a matter of being very careful and the way you can manage around that is having very broad underwriting. Looking at so many different scenarios, that we try to, only focus on the assets where we believe under a wide range of possibilities, we can still be successful as opposed to, only if everything's good. The market will go up and we'll be OK. We look at it and say, no matter what happens, how bad the market gets, what happens to interest rate, what happens to politics, can we still make money in that asset? And then if we can, with all of our various underwriting, still approach it.

Adam Gower: Last question. Oh, Ben.

Ben Matheson: Yeah, interesting component there too and that goes to the depth of the team and experience. You know, just one more nuance to that is, having the experience to underwrite potential outcomes. And when you're thrown a curve ball, like 2008. You're thrown a curve ball like COVID. Does your team have the expertize to underwrite the scenarios of, how does that change the deal? How does that change our pathway? And be able to pivot. Sometimes when you buy an asset, the end or exit of that asset is not what you envisioned the day before you bought that asset. It doesn't mean the outcome still wasn't really good, but that can really delineate a new sponsor from an existing sponsor is, if you get thrown curve ball, what is your end game and can you find the right one to work through that? Some of them, they get thrown a curveball. I mean, it throws their whole business model out the window and it could adversely affect the outcome. With the depth of experience that we have, one little curveball, Covid is not going to throw us off our game. And if anything, I think we had fantastic success with the assets that we own currently in spite of all of that, which seems counterintuitive. But when you can pivot and you have the dynamic background, it really comes in to help.

Adam Gower: And you teed up my last question so perfectly. What - this is a personal question for both of you. What has been the hardest lesson you have learned in real estate?

Daniel Oschin: Wow. You could have given me that one in advance to think about.

Adam Gower: Well, I was thinking, whoever can come up first, gives the other a chance to think for a minute

Daniel Oschin: There's a couple of things. I've been in real estate for 40 years almost. So, most of my whole life. I'll talk a little bit about the company too, because obviously there's a broad range of experience. But there are some basic things that are fundamental to investing and then  fundamental to real estate. One is, I try not to do business with companies I don't have some personal knowledge of or somebody I know who knows them well. I look for companies that have extensive to long term track records that exceed well past the Great Recession, to be able to see how they managed through them. I look for companies with extensive track records and when it comes to real estate, not over leveraging. I would say that, my personal experience has been, using moderate and intelligent leverage. I'm a person who believes in fixed rate financing when you can get it over a long period of time. I believe in using low leverage and the right kind of lenders in circumstances. When you have a problem, you can manage through it and you're not sitting on the cusp of disaster or falling into a pit because of the problems you get into. That's one, is leverage. And then the other thing is, is to associate and affiliate with really, really smart real estate people. I think I know a lot about real estate. I know I only know something. There are lots of other brilliant people. And when I met Shopoff and I worked with this team, I saw something completely different. I asked Bill, a very similar question to what you asked, which is, you know, what did you learn from the deals that went bad? And his comment was is, I learned as much from the deals that went bad as the ones that went good.

Daniel Oschin: Sometimes the deals that didn't work out. You know, there are reasons that that happened and it fundamentally always lies with us. We obviously shouldn't have bought the deal that went bad and we should have recognized the risk. But often, we've done great things to minimize the downside. Even in a deal that lost money, it could have lost a lot more if we didn't do as well as we did when things shifted around it. Conversely, a deal that does well, we had a deal we sold, it was a 3-year hold and it was a 35% annualized return and everybody thinks it's great and I can tell you, we spent months talking about that deal. And, tearing it apart because Bill was miserable with the outcome because we didn't do our best. We made a couple of missteps that could have made that deal close sooner and make more money. So, it isn't just the bad deals that you learn from, it's from every deal you do is, what should you have done better. And looking - that's where I focus on real estate is looking at each deal, each thing. Where could we have done better? What can we improve on and continuously refining and reworking how you process things and being fluid with what's happening in the market. It allows you to very consciously work to improve your outcomes. And that's how you get those high levels of percentage outcomes, the high returns, the consistency, comes from that kind of thought process.

Adam Gower: Thanks Daniel. Ben, do you want to field that? Hardest lesson learned?

Ben Matheson: Yeah, there is. I'll break it up - there's two components. One is, no matter how much you think you know about real estate, there is someone else who knows more than you. Maybe that's obvious and goes without saying. And it's attributable to multiple different levels. That's even on the CRE side and commercial real estate, right down to residential real estate and folks that are maybe buying their first investment property for themselves. But, sometimes you have some early success and it's easy to lose sight of that. That, Wow, we did it, it worked. We made money. Well, did you do it right or did you get lucky?

Adam Gower: That's right. Here's a guy talking from Las Vegas. It's exactly the point.

Ben Matheson: That's right. So, you don't know until you've done it a few times. Were you very lucky or very good and it takes a long time to flesh that out. But, keep in mind that, it's going to be a rare situation that you're the smartest person in that transaction. So, you have to be mindful of that every day. And even for us, a 30-year old company, we still have to be conscious of the fact that there are some really smart, sharp real estate operators out there. You are swimming in the deep end and thankfully we've got the depth of experience of other folks who swam in the deep end for a very long time. And the other thing too is, I think people get lulled into a sense that they are actively participating in the outcome many times. We see a lot of folks that just bought the right thing at the right time and the right place. Maybe not even because it was by design, it was just luck. We look at crypto. There's guys out there that bought crypto at a buck a coin. Are they geniuses or did they just take a leap and it was sheer luck. Same thing with the stock market. If you bought on Monday, you're a genius, if you bought it on Wednesday, you did horrible.

Ben Matheson: So, something to keep in mind in real estate too, that you can't move the real estate market. The market is going to do what it's going to do and your participation in that and your skill level, in that participation, is going to have a big impact on your outcome. So, team up with people that give you the best shot at an outcome, regardless of what the market brings to you. And the big difference between some of these passive assets like class-A multifamily - the market turns around on a property that was just purchased, you lose the ability to push rents. There's affordability issues. I mean, what's your next play? There's not too many. The building is perfect. It's brand new. There's not much you can do in that situation. So, it's a little bit art, a little bit science, but, I'll take experience any day of the week.

Adam Gower: Dan Matheson, Daniel Oschin - am I pronouncing your last name correctly? Thank you so very much, both of you, for being on my podcast today.

Daniel Oschin: Thank you, Adam. It was really great. Thanks for the opportunity.

Ben Matheson: It was a pleasure. Enjoyed it.