Apr 21, 2022
Is it possible to start a partnership and to ink a $1.4 billion development deal just a month and a half later?
Neil Bertrand and his partner prove that it is.
Neil is the Executive Vice President of RGX Invest, overseeing the sourcing of new acquisitions, including sourcing and evaluating investment opportunities, asset due diligence, business plan development, financing, and closing. In this episode, he talks about their large-scale development project in Austin, Texas and breaks down what goes on behind the scenes.
He also shares his insights about opportunities in the development space, the current state of the market, and the importance of inspiring people to lead an impactful life.
[00:01 - 05:17] The Big Business in Development
- Neil talks about starting in real estate, starting a partnership, and getting the billion-dollar deal
- Why it makes sense more to build now
[05:18 - 11:17] Building the Ultimate Live-Work-Play Environment
- Neil gives us the details about Leander Springs
- Learn how they raised funds for this project
- Getting the best talent on board
- The risks they are keeping an eye on
[11:18 - 16:07] Inspire to Impact
- This is what they are doing to help educate aspiring investors
- Neil’s thoughts on the business side of mentoring
- Why you should figure out your “why”
[16:08 - 17:24] Closing Segment
- Reach out to Neil!
- Links Below
- Final Words
Tweetable Quotes
“If something is worth it, you make the time.” - Neil Bertrand
“Learn how to do things the correct way.” - Neil Bertrand
“The best thing about real estate? Anybody can do it. The worst thing about real estate? Anybody can do it.” - Neil Bertrand
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Connect with Neil Bertrand! Shoot him a message at neil@reitgroupx.com if you want to know more about Leander Springs and other exciting projects they are working on.
Connect with me:
I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.
Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on. Thank you for tuning in!
Email me → sam@brickeninvestmentgroup.com
Want to read the full show notes of the episode? Check it out below:
Neil Bertrand 00:00
We want to bring in like-minded people, a very select group, and just kind of put them through a six-month program, where they're analyzing deals and we're explaining to them why things work, why things don't work, you know, in terms of time, if something was worth it, you make the time, right. And that's what we want from the people that we will bring in as these codes GP, I hate to use the word trainee because it just doesn't sound right. You know, come stand shoulder to shoulder with us and learn how to do things that I hate. I'm going to use this phrase and I don't care who gets offended, learn how to do things the correct way.
Intro 00:35
Welcome to the How to Scale Commercial Real Estate Show. Whether you are an active or passive investor, we'll teach you how to scale your real estate investing business into something big.
Sam Wilson 00:47
Neil Bertrand is a 25-year multifamily veteran with experience across all asset classes and types. Neil, welcome to the show.
Neil Bertrand 00:55
Hey, thanks for having me.
Sam Wilson 00:57
Pleasure is mine. Same question I asked every guest who comes on the show, in 90 seconds or less, can you tell me where did you start? Where are you now? And how did you get there?
Neil Bertrand 00:55
I started in the mid 90s. My wife got me in the business. And I had... I gravitated toward the financial side, started with the property management side, was naturally numbers-oriented. And it served me well.
Sam Wilson 01:17
And where are you now?
Neil Bertrand 01:19
So I'm with RGX invest, Executive Vice President and Partner in our assets. Ravi Katta is our CEO. We're an Austin-based institutional-style, vertically integrated investment firm.
Sam Wilson 01:30
And then how did you get there?
Neil Bertrand 01:32
Ravi and I actually met two and a half years ago, and we were both asked to participate in something called the Texas Multifamily Executive Forum. I joke that it's a group of owners, investors, C-suite guys, you know, a couple of private equity guys, and we meet every other Friday by Zoom. Half of the call is us griping about how everything is overpriced, and we can't find good deals. And the other half of the call is, you know, where do we go to find good deals. So during the course of those calls about the first year or so of it, Ravi and I realized that we had a lot of the same ideology, same mentality, both long term, very ambitious guys with kind of desire to help other people, learn what we do, impact their lives and grow. February of last year, we made it official, teamed up. And within 45 days, we had $1.4 billion of new development under contract. Man, you know, the rest, as they say, is history.
Sam Wilson 02:27
That's, you know, nobody just wakes up one day, you know, says hey, we're gonna form a partnership and then a month and a half later, you know, inks a $1.4 billion new development deal north of Austin, Texas. There's a lot of things that have gone into that I'm sure that you're downplaying. But let's talk about that project. I guess out of the, you know, break down that project for us. Why do you guys see the opportunity to be developing now versus where you see we are in the market? I think we were talking about, you know, here before we kicked off the episode that you kind of see it as a party that you know, people think never gonna end.
Neil Bertrand 03:06
Right, right. The analogy I use was a bunch of
18-year-old rockstar wannabes playing the clubs every weekend,
thinking that the party is never going to end, right.
Sam Wilson 03:07
Right, right.
Neil Bertrand 03:08
When
you look at the cities we're developing in, Leander Cedar Park and
Lago Vista. Lago Vista: 76% plus population growth since the year
2000. Median income for the entire cities pushes $90,000,. Cedar
Park: 205% population growth since the year 2000. Again, six digit,
you know, median incomes in the sub market. Leander Springs:
fastest growing city in America, 761% population growth since the
year 2000. City-wide median income is six digits. The opportunity
was great, we were able to purchase the land for all these deals
pretty much off market. The Leander Springs project was actually a
development that was already in play and we purchased out the guys
that had put it together. But you know when you look at what we can
build these deals for in cities that have five and eight year
projected growth, I mean, 2019-2020, 4% population growth alone for
Leander, okay. And when you look at where a lot of the growth is
situated in Texas, you know, Dallas and Austin are really getting,
reaping the benefits of that, and Houston and San Antonio are doing
very well. But to kind of answer your original question, why
develop now instead of buy? We're developing for much, much less
than I can purchase a 2015 asset for in this market. And I'm
talking in comparable locations, right? Half million dollar homes,
six figure incomes. It just makes more sense right now to build. By
the time, you know, you're looking at a 2015 asset, relatively
brand-new construction right. But guess what? Your appliances and
are nearing the end of their life expectancy for an apartment
community. Depending on where you've built, you're probably
starting to see some of those nice foundation issues that certain
areas of Texas are known for. Your deferred maintenance is starting
to creep in, right.?
Sam Wilson 05:10
Right.
Neil Bertrand 05:11
Do I buy for, you know, 330 a door? 2015 asset? Or do I build for 225 to 30 a door? It's a no brainer.
Sam Wilson 05:18
Sure. Yeah. I mean, just from a mathematical equation, it's a no brainer. What about time to bring product to market? I mean, a $1.4 billion project isn't a six month project.
Neil Bertrand 05:29
No, no. So we, Leander Springs will be a six year project and kind of what this project is. It's 78 acres, it's going to consist of three apartment communities totaling 1600 units, over 1 million square foot of office and retail, a 250 room hotel with a 20,000 square foot conference center. And all of that will be centered by a four acre crystal lagoon. And this will be the only publicly accessible four acre crystal lagoon in Central Texas. So we're basically building the ultimate live-work-play environment, right. And that's going to be built in probably four phases. Phase one is going to be the lagoon, the first apartment community with the retail, get the utilities stretched out there, take about 18 to 24 months from the first shovel in the ground to full lease-up, right? With the way that the markets are growing, and the population growth, and the fact that we're building such a unique product, you know, we're anticipating a very easy lease-up. If you take a look at the national average right now, similar class lease-ups are hitting about 50 to 70 units a month in high demand areas. So I'm always cautiously optimistic. But on this one, I'm just optimistic.
Sam Wilson 06:42
I like that. How are you guys funding this? I know you have a big background in the institutional space. So maybe this was just a hey, tee up the right partners, and then off you go. And we all get together and do it. But talk to us about that.
Neil Bertrand 06:56
So a year ago, Ravi and I started a fund. And it was basically a friends and family fund, but only for accredited investors, $30 million fund. And we basically have used that money to purchase the land for these acquisitions. So we're stable there. And yes, as we build project by project, we are engaging private equity groups and family offices, you know, from around the country and a few international groups as well.
Sam Wilson 07:23
Right. And so you've already kind of got this pipeline warmed up. This is the project, this is what we're doing. This is the expected capital. You know, it's not committed capital, hard capital yet, but it's people that have kind of given the preliminary nod that says, when it's time, yes, we want to participate.
Neil Bertrand 07:37
Right. And I'll be honest with you, this is the only project and I became a VP of acquisitions summer, sometime around 2015-2016. This is the only project where I have the private equity groups contacting me or contacting Ravi, like, hey, you guys, you guys ready? You guys gotta pay the numbers? Because, you know, the city of Leander is offering us a, you know, incredible tax incentive. Obviously, they see the benefit to this type of project. You've got tech companies moving in, hey, you have your office, you're living, you're shopping everything right here. You know, what else do you need?
Sam Wilson 08:10
Right. Yeah, absolutely. When you have investors calling you saying, hey, you ready? You ready for my capital? Yet? That's a great place to be. Let's talk about the market for a second, if there's a shift in the market, or if there's a shift in as you said, you know, when the 18-year-old rock band grew, you know, when the music stops, is there any fear that not committed capital won't be there when it's time?
Neil Bertrand 08:33
No, because the new development space right now is probably one of the safer areas to invest in because the returns are simply better, right? You're not going to get 20-25% IRR on an 80s value-add deal, right? You may get 18 at best, you're certainly not going to get it on anything built between 2015-2020, right? Again, you'll probably get 18 at best, unless you can come across a unicorn where the developer didn't care about the expenses. He just wanted to build the thing and sell it as soon as it was stabilized, and you can trim a lot of fat. So it's still going to be the safest bet. For a lot of that capital.
Sam Wilson 09:12
Yeah, no, I think that's really smart. And especially, you know, everybody always says that real estate is local, right? There's no such thing as the national real estate market. And we saw that even in 2008, that while, yes, maybe there was a lot of pain across the country. There were still markets that did really well. Some of those, I think, were actually in Texas. So you know, like you mentioned before, just following the population growth, I mean, that's astounding population growth. So not seeing that kind of wane as well, I think is really intriguing, and also not "motivating," what's the word I'm looking for here, but further reason to keep doing what you're doing. Tell me about the buildout side of things. I mean, that's a lot of projects and a lot of moving parts and people to manage. How have you guys built a team around you? I know it was just the two of you, I guess, not too terribly long ago. You need a lot of support staff to make this thing go round.
Neil Bertrand 10:00
Right. So if you're familiar with The Domain
project in Austin, once again, very large, nationally-recognized
live-work-play development, we've engaged the big players who are
involved in that project: architects, project managers, developers,
engineers, I mean, literally the same, just probably about 80-70,
80% of that Domain team, we've engaged for this project, because
when you're doing something like this, you want the best of the
best, you don't want the guys who started an engineering firm last
year, right? Or who read an engineering book and think they can do
it, you know. We want the big names, the big guns.
Sam Wilson 10:35
Yeah, that makes a lot of sense, you know, to
go out and find talent that's already done it. What are some risks
that you feel like in this development project or in development as
a whole, that you guys kind of see, you say, hey, these are some
risks that either we can or cannot compensate for?
Neil Bertrand 10:51
I think right now, it's going to be supply chain, and pricing, right? Obviously, we're keeping an eye on that, lumber kind of fluctuating up and down, up and down, labor shortages. Those are the type of things that can impact our numbers. But again, when you're working with these large groups that have a huge network and can command great pricing, you have a buffer, right? You don't have 100% guarantee, but you have a very good buffer.
Sam
Wilson 11:18
Yeah, I would imagine that's absolutely true.
One of things we talked about was that one of the things you'd love
to do is to inspire others to grow and lead an impactful life. What
does that mean?
Neil
Bertrand 11:31
So
there are a lot of people who, Ravi, of course, being Indian, I
think, you know, the Indian community, lots of tech entrepreneurs,
medical community, and then just even outside of the Indian
community, a lot of people, great entrepreneurs, I mean, I was
talking to a guy who was the VP of cybersecurity, all in, you know,
pulling down 600,000 a year, but this much time to learn about real
estate, right? The same thing with tech entrepreneurs, IT guys,
doctors, no time to really, really learn. And when you take a look
at what is out there, and I'm not disparaging any of the groups,
but let's just be perfectly honest. The business of a mentor group
is attracting and retaining students. That's first and foremost.
Okay. Second is teaching you about real estate. So that's their
primary concern. How do I attract and retain students? We're not
gurus, we're not mentors, we don't want to be. You know, I make the
comment, if I'm the smartest guy in the room that I need to find a
new room. And even after 25 years, I still think that. I don't want
to be the smartest guy in the room. So we want to help people to
come alongside us, give them an opportunity, you know, they're
aspiring GPs give them an opportunity to invest with us. You don't
pay us, you invest with us. And you work side by side. You shadow
us, you learn everything, you learn how to underwrite on a model
that has been sent to Blackstone, and AllianceBernstein, and
Prudential, and Northwestern Mutual Life, okay? It's not on a four
tab underwriting model that is going to spit out the most erroneous
returns you can imagine. And if I say that with a bit of sarcasm
and loathing, it's there, because that hurts people. Right? What
you don't know will hurt you.
Sam Wilson 13:14
That
is awesome. I love that. What does that mean practically? I mean,
because there's only so many hours in your day. And there has to be
some sort of return on investment for you guys, when you bring on
these, I'm gonna call it mentees, even though it's not right... You
don't do a mentor program.
Neil Bertrand 13:31
Yeah. So for us, one is being very selective,
right? You're not paying us to be coaches. So we're not doing this
for everybody. We want people who, you know, first we want to
understand your why and your why needs to be two things. My why is
simple, I have to be somewhere after this call. If I don't make it
there, my family is taken care of, okay? The second thing is, what
do you want to do outside of yourself? Okay, it's great to have,
you know, 10-15, $20 million net worth and pull down big money, but
what are you doing to help other people, right? And so we want to
bring in like-minded people, a very select group, and just kind of
put them through a six month program, where they're analyzing
deals, and we're explaining to them why things work, why things
don't work, you know. In terms of time, if something was worth that
you make the time, right, and that's what we want from the people
that we will bring in as these Co-GP. I hate to use the word
trainee, because it just doesn't sound right. You know, come stand
shoulder to shoulder with us, I learn how to do things, and I
hate... I'm going to use this phrase and I don't care who gets
offended, learn how to do things the correct way.
Sam Wilson 14:37
I
love it. And that's so absolutely necessary. And I think that's
very valuable what you are doing because, and I say this in the
show all the time, unapologetically, that if you are going to hire
a mentor, then... And I know you're not a mentor in the traditional
sense, but if you are gonna go that route, you've got to find
somebody that is active in the space, that is buying and is doing
it. Run from the guru, what I call the "guru but no do" person.
It's like the real estate industry is fraught with that, it is I'm
with you. It just kind of soured my stomach like, oh my
god.
Neil Bertrand 15:10
I
make sure I say this on every interview or podcast, you know. I say
this, before you give your money to somebody, I want you to think
about something. Before you give your money to a guru, or a
syndicator, or a deal sponsor, heck, before you give your money to
an institutional investor, in the state of Texas, there was more
education, licensing and recertification required to cut hair than
there is to raise money for $20 million asset.
Sam Wilson 15:36
I
know it.
Neil Bertrand 15:36
And
that is a sad, sad fact, right? You know, the best thing about real
estate, anybody can do it. The worst thing about real estate is,
anybody can do it. And you know, when you have enough people
stomping around and puffing their chest like they're experts, and
they have great marketing prowess, people buy, you know, they drink
the Kool Aid.
Sam Wilson 15:55
Yeah. And people get hurt as well. I mean,
that's in the end, there's a lot of activity and very little
forward momentum. And I think that's one of the things maybe you're
trying to solve there, is actually putting people in a position to
make meaningful progress.
Neil Bertrand 16:08
Yeah.
Sam
Wilson 16:08
I
think that's absolutely cool. And I love the idea there of growing
and leading an impactful life. So thanks for taking the time to
break that down. Neil, appreciate having you come on the show. This
has been great. I love the projects you guys are taking down.
That's, what do they call that, massive action in a very short
period of time? So I look forward to seeing this project. What's
the name of the project you guys are developing there
again?
Neil Bertrand 16:29
The
large project is Leander Springs.
Sam Wilson 16:31
Leander Springs, okay, I have to keep my eye on
that as it progresses over the next few years. But absolutely love
how quickly and how precisely you guys are going after stuff like
that. So yeah, look forward to following that. If our listeners
want to get in touch with you or learn more about you what is the
best way to do that?
Neil Bertrand 16:48
Sure. You can send me an email neil, N-E-I-L, @
reitgroupx.com. R-E-I-T groupx.com.
Sam Wilson 16:55
Neil, thanks for your time. Appreciate
it.
Neil Bertrand 16:57
Thank you.
Sam Wilson 16:58
Hey,
thanks for listening to the How to Scale Commercial Real Estate
Podcast. If you can do me a favor and subscribe and leave us a
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you listening. Thanks so much and hope to catch you on the next
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