Trust Builds Real Estate Empires: How Brian Ker Scaled Snowball Developments to $250M

Brian Ker (00:00)
for those that, make a mistake. that’s the way I’ve approached things, which is that we’re in the friend making business, but we’re also in the trust building business. You can just keep building your trust by doing the right things always. And you know, we’ve got a small dispute with the tenant right now who took a space as is, and they’ve now since realized the building is not in the shape they thought it was. And now we got to deal with it. We’re going to have to spend a couple hundred thousand dollars to make things right.

Meghan Escobar (00:07)
Hello, everyone. Welcome back to Real Estate Pros Podcast, hosted by Investor Fuel. I am your host today, Meghan Escobar, and I have the pleasure of sitting down with an incredible guest today, Brian Ker, owner and founder of Snowball Developments. He’s doing some incredible stuff out here in the industry and really focused on industrial commercial investing and he’s gonna tell us more about that because who better to hear it from than the founder himself? And so I think our audience will definitely walk away with some great insights based on what we got the opportunity to do.

Talk about the experience that you have, the discipline that you guys have, the maturity that you guys have. I I think will go over really well with our audience. So Brian, thank you so much for taking the time to be here.

Brian Ker (02:45)
Meghan, thanks so much for having me on.

Meghan Escobar (02:47)
Absolutely. Let me dive in. First and foremost, for those folks that might not be familiar with the name or what it is that you guys are doing there at Snowball Developments, give us a 30,000 foot view of where you guys are focused on, what you guys are focused on these days and what markets that you’re operating in.

Brian Ker (03:09)
Fantastic. Well, so Snowball Developments was founded in 2021. It was COVID. I was working for the New York City Economic Development Corporation and was uninspired by the lack of desire to continue doing strong economic development initiatives at the back end of the Bill de Blasio administration. The focus was much more on social policy versus economic development in real estate initiatives. And so without me wanting to wait for the next administration to come in, I announced that I was going to start my own entity in early 2021. And by mid-2021, we had identified our initial transaction, capital raised around it.

I had gotten my immigrant E-2 investor visa as I’m Canadian and was able to acquire and close on that deal. And so that was the beginning. Since August of 2021, we’ve done 18 supplemental acquisitions in the New Jersey and Connecticut industrial real estate market. We like to position ourselves as being an entrepreneurial, a partner-driven industrial operator platform where we will partner with our competitors, we will partner with our property managers, we will partner with other asset managers and family offices that do their own direct investing. Because we think that we’re in the friend building business. We’ve got 182 investors on our platform today and counting. And our goal is to double that investor count, which in our view builds up a greater espionage network for us to be able to source great transactions that are compiled together and ultimately capitalized and funded by industry professionals, industry insiders, folks who really understand the underlying businesses that lease space within these buildings and hopefully can continue to provide for referrals for more investors and more business opportunities for us to exploit. So the business now is about an AUM of around 250 million. We are constantly buying, having done on average five transactions per year. And we’re starting to now get to the point where we’re starting to, you know, target some disposition activity, along with a robust refinancing pipeline as well.

Where we’ve been most impressed over the last five years is the leasing market activity in Connecticut. It didn’t really experience a big hangover. There was no oversaturation of new supply that came into the market. The taps got shut off pretty quick in that market. And as a result, the leasing fundamentals are right now unparalleled in the central Connecticut market relative to the primary markets that are on either side of it, which is the greater Boston market and the greater Northern New Jersey, Central New Jersey market, where perhaps those taps should have shut off a little quicker. And so it being one of the cheapest markets to release space in, tenants have been flocking to it. And it’s really been an incredible leasing market for us. So that’s our overview today. We are currently a team of five individuals who are, you know, kind of midpoint in their career and are entrepreneurial in spirit, do doers. And we hired our first chief of staff and director of investor relations yesterday. And so we’re delighted to have Allison Koufman on board, along with Andres Aldretti, Shannon Harrington, and Kyle Sebas.

Meghan Escobar (07:50)
Amazing. Thank you so much for sharing that overview. It’s definitely breaks everything down where you guys are focused, who’s on the team, all the things. There’s one thing in there that really caught my attention and something we got to talk a little bit about on Discovery and I think will be pretty beneficial for the audience. Raising your funds and doubling your ca— capitalizing on on what you guys already have and and trying to double it, that’s an incredible goal. And most certainly, you know, not an easy thing, especially in this climate, Brian. I I I know that we talked a little bit about that too, but what’s been the key for you guys to keeping it running smoothly and, you know, keeping you on track to to actually hit the goal?

Brian Ker (08:39)
Well, I think it’s number one, first and foremost, having the discipline of following the data and having a read on where the data was going to. A lot of people like to see the data in the rearview mirror, and that justifies their decisions going forward. No lack of investors will say, “Hey, my S&P index, my QQQ has gone up 20% per year for the last four years. Why would I invest in commercial real estate?” Or they might also say, “Well, I was… it went into two syndications in 2022 and they, you know, torpedoed. I should never do real estate investing again.” And so I think these are things that the real estate industry are dealing with right now, and we should all be open and transparent around perhaps the euphoria that was around the free money era of ’21 and ’22. And so chickens come home to roost if people are not disciplined and they’re not focused in on the fundamentals and really drilling into what are the risks and the underlying investment.

And to me, the biggest risk that any real estate deal will underestimate and will ultimately lead to a negative outcome is money supply and potential increases to the interest rate for exogenous factors that are out of our control. So, how do you manage that with prudent leverage and with hedges? So not enough of that took place over the last five years. And so those issues are coming today. Believing that exit cap rates will also, you know, be tied into a monetary policy that could change and that will, you know, hurt on valuations. So those are the kind of like the baseline investment drivers. But the most important thing that people constantly forget about is new supply. You just don’t want to have product that’s competing with a new building—you’re going to get toast, because a a tenant, whether it’s a residential tenant or industrial tenant or an office tenant or a retail tenant, will move into the shiny thing if the price is the same. And yeah, I mean, everyone’s a gentrifier and everyone’s being gentrified at the same time, and it applies to every asset class. We all want the same thing.

Meghan Escobar (11:17)
Why wh— why wouldn’t you?

Brian Ker (11:27)
Better or more space for a lower price in an acceptable location. That’s that’s how things are driving. And so what we’re finding is that tenants in greater Boston or northern New Jersey who are staring down a doubling of their rental rate, and that rental rate on a gross basis might be $25 per square foot…

Meghan Escobar (11:33)
Fair enough.

Brian Ker (11:51)
They’re considering relocating to Central Connecticut where they can come in at below ten dollars a foot, evaluating their supply chain impact. They’re deploy— they’re they’re evaluating their employee turnover because of those types of relocations. Doesn’t mean that you’re gonna win them all, but you will win enough.

Meghan Escobar (12:10)
It’s a numbers game for sure. Yeah.

Brian Ker (12:12)
That’s exactly it. And so the cheapest industrial real estate in the Northeast is the corridor from Waterbury to Hartford. That I-84 was where it got kicked to the teeth the hardest through deindustrialization and depopulation from 2009 to 2018. And then it flipped. And then it… like the absorption just started to flip. And it started to flip because Amazon started growing. Amazon’s now a 10 million square foot industrial user in a 200 million square foot market, and they’re continuing to grow. They have a 3.2 million square foot facility under construction in Waterbury right now.

Meghan Escobar (12:51)
That’s insane. Wow.

Brian Ker (12:53)
180 feet tall, 3.2 million square feet. I own a property with our partners adjacent to the Tilcon concrete plant, and I could tell you we are seeing a lot of concrete traffic leave that site and head to do so to that. It’s a monster and it’s a driver, it’s a catalyst. And so if Amazon is selecting that stretch as its distribution hub that can cover a regional area, well…

Meghan Escobar (13:07)
I bet.

Brian Ker (13:21)
The herd mentality of investing also applies to the herd mentality of supply chain and logistics, too. And so we’ve seen now a basically a 0.2% vacancy rate for buildings above 24 feet clear in the greater Hartford market. And that means that we have, as owners, pricing power and the ability to raise rent. And so rent will raise, be raised at an eclipse that is the envy of our neighbors in New Jersey and Boston who have seen their rates effectively go flat to negative over the last three years as they’ve been dealing with oversupply issues. So we just look at it from a macro economy and always be cognizant of the major risk that can undo an investment. And again, leverage can kill you and it can kill your deal. And that’s what investors need to zero in on. And then two, you understand… have to really understand the sub-market and local sub-market and regional, you know, market supply and demand fundamentals and go to where you feel most confident that your, you know, income stream is going to be protected.

Meghan Escobar (14:25)
For sure, for sure. Well, lots and loads of information. You certainly know s— a a a lot of stuff, right? The numbers, the w— we won’t get into it any further. The next section that I wanna move into is talking about a time where things got real. And so every operator, every entrepreneur that I’ve ever had the honor of chatting with, there’s always a moment in time where things got real and this could be a time where a deal went sideways or a time you just had to pivot really fast. Would you mind, Brian, sharing one of those moments?

Brian Ker (15:43)
Sure. We’ve had many moments where the business plan, you know, ultimately had to change. And I’ll give two examples, and they’re actually our first and second deal. The first one, we had a manufacturing tenant in our property, our original tenant, our original building in Garfield, New Jersey. And we knew long term that they had rights to renew and stay below market, and the leasing market was running hot in New Jersey. And so that was part of the deal. We thought that we would mark to market them, you know, into the future. And in the meantime, we would do some preparatory work, you know, around the site to, you know, get some long-term entitlements that could protect the value of the property. They exercised their first renewal, and then about seven months later, they came to us and said, “Actually, our supply chain is being very stressed by this location. We’re thinking of relocating it to another location. Do you mind if you let us out of your lease?”

So now you’re thinking about this saying, “Okay, I was going to sell this as an income-oriented opportunity, but now I have this dramatic mark-to-market opportunity or leasing opportunity there.” So we pressed forward with our development entitlements where we could then market the property as a warehouse facility, not just a manufacturing one, and put it on the market for sale, for lease. And of course, there’s that moment where, you know, you’re going to end up with a vacant building. You are going to end up having to call capital from your investors because you have not reserved for this scenario. And I don’t know if we got lucky, but we certainly ended up with a great outcome where we did sign up a deal with a to buy the property, paying a user pricing for that location in northern New Jersey. And then they asked us to say, “Hey, so we want you to do all of the upgrades for the building for us, and we don’t really have a construction management team.” It was just a two-person team at that point at Snowball, and so we relied on our partners to be able to deliver it for us.

And, you know, to a great degree, we’ve been able successfully to execute that business plan. But that’s the for real moment where you’re just like, “I don’t know if we can do this, and I don’t know if my investors signed up for potentially a situation where we maybe not have found anyone.” But it was… it ultimately ended up as a great outcome for our investors and it was a great learning experience for Snowball. It also told us that we needed to, you know, really zero in on, you know, that element of our business of construction management supervision and working with property managers that have good construction management capabilities to deliver on a value-add investment thesis. So you kind of have to live and learn. We’ve had tenants who have defaulted on their obligations. We’ve had to pursue tenants through the courts. And we’ve also had, you know, investor disputes where…

Meghan Escobar (18:33)
Yeah.

Brian Ker (18:56)
You know, things did not work out the way that you thought it would when you signed up with an investor and they wanted to exercise their liquidity options when the business plan wasn’t ready. And so, you know, two of our assets, one that was our second acquisition, another that was our seventh acquisition, we ended up having to recapitalize last October, allowing the investors who wanted to depart to depart at pricing that was reasonable to them, we thought was below market to us. And so we were able to bring in a new lender, new investors into that strategy. And since then, we’ve been able to achieve a monumental lease at the one of the properties. And the next one, you know, we don’t have to deal with for another year and a half, but it looks like it’s gonna be a real outcome. So sometimes your issues that come up in a business are construction management related, sometimes it’s tenancy related, and certainly, you know, when you’re an investment management platform like we are, you’re gonna end up with investor, you know, scenarios where, you know, they need their money back. And it’s your responsibility to treat them fairly as well as treat every other investor fairly, you know, in the partnership.

Meghan Escobar (20:10)
Yeah. Thanks for sharing that. I I think that’s the kind of stuff that people don’t talk about enough, right? Because we live in such a a highlight world where you’re seeing all of the the wins and the successes that people are posting on their socials and in podcasts and we never really hear the stories behind the scenes of, you know, what it takes to actually reach certain levels of success. And so I I really appreciate you, Brian, sharing that. And honestly, I I do believe that it is what separates folks who are, you know, here to just make a couple of commission checks versus those that are in the game long term. So…

Brian Ker (20:46)
So, yeah, I mean, I again, I’ve… before I started Snowball and relocated to the US, I spent 15 years as a commercial real estate investment sales broker at CBRE. And I couldn’t have asked for a better training ground for reputation-enhancing transactional management. You had to do it again and again and again. And in Canada, there is just… there is a very tight club of people who are going to say, “This person’s okay.” And it’s a very tight club. And so you don’t want to get outside that. And if you screw up… and we screwed up on a couple of transactions, we gave back our commission check to this… to our to our client. Painful lessons. Painful lessons to do. You know, you’re counting on that money to run your life, to pay your mortgage, to put your kids through school, and no one wants to do it. It’s the right thing to do, and you have to realize that consequences…

Meghan Escobar (21:35)
Yeah.

Brian Ker (21:39)
…are there for those that, you know, make a mistake. And so we, you know, that’s the way I’ve approached things, which is that we’re in the friend making business, but we’re also in the trust building business. You can just keep building your trust by doing the right things always. And you know, we’ve got a small dispute with the tenant right now who took a space as is, and they’ve now since realized the building is not in the shape they thought it was. And now we got to deal with it. We’re going to have to spend a couple hundred thousand dollars to make things right.

Meghan Escobar (21:50)
Yeah.

Brian Ker (22:08)
It’s probably going to have to reimburse some of that over a period of time. We’ll come to an equitable outcome. It’s not going to be one-sided. I’m not going to jam them. I mean, they got a business to run. And it’s our building. So if we, you know, couldn’t deliver a functional building to them, that’s also on us. So you can’t just walk away from your responsibilities and say, “I’ll meet you in court.”

Meghan Escobar (22:14)
Yeah. Right. Yeah, you need to, you know, be able to put your your head down at the end of the night and have a clear conscience.

Brian Ker (22:36)
Very, very much so. But there’s no lack of people in our industry who unfortunately feel very differently around us.

Meghan Escobar (22:42)
And, you know, speaking of that, you know, we t— you talked a little bit about clubs and and relationships and good ones and bad ones. And so I’m always curious to know, you know, when it comes to building relationships and growing your network, getting, you know, this new journey… well, not new anymore, but, you know, starting Snowball Developments from your background, I I’m curious to know what has made the biggest difference for you and when it comes to creating specific relationships.

Brian Ker (23:13)
We’ve leveraged… we’ve leveraged other people’s circles of trust is the big thing that’s differentiated us. We’re not here to hoard the fees, we’re not here to hoard the promote, we’re not here to say it’s a it’s a it’s a it’s a winner-take-all for Snowball. We have gone to people who we trust and trust us and say, “Hey, let us into your circle of trust.” There’s a lot of funds of funds right now in the industry right now, and I think it’s a good thing. And if those fund ring leaders, administrators, managers, however you want to call their name, can bring a group of investors that trust them to diligence us and have the right incentive compensation packages where they win when we win, and it’s not front-loaded, it’s back-ended, then I think that’s the right calibration for us getting access to other people’s circles of trust.

And so we tried to establish that from the very beginning on our very first transaction. There’s a group out of Vancouver where I’m originally from, and I get a little bit of trust factor just by being from there, and people can check me out and understand, you know, when my family came and, you know, what we did over the last, you know, 150 years in this city of the province. And, you know, there’s there’s an element there where, you know, they can check out your background, they understand where you’re from, and the other person just says, “I vouch for the person’s character,” and another person says, “I vouch for the deal. The deal is underwritten sound, it makes sense, the numbers aren’t being fudged, there’s no hidden cells or rows or columns in the spreadsheet. The fees are fair and market.” Right.

So if you can establish that with people and partners out there, number one, it forces you to be disciplined in the way you approach the business, as you are being vetted. You’re not just looking to become some guru where people like what you said on a podcast or they like what they said on your newsletter, and then when you open up a subscription, you sign a limited partnership agreement or an operating agreement, and you have no idea what’s in the fine print. Yeah. But that goes on and on and on. And then all of a sudden later when that person took a ten percent rake on whatever money they raised, then they don’t care about the outcome.

Meghan Escobar (25:28)
And it is definitely… Correct. Yeah. And it’s definitely something that you don’t want to fake, right? Creating the right relationships is everything in this space, so… yeah. Speaking from experience, you can’t get any more w— any more wisdom than actually going through it, right? So…

Brian Ker (25:51)
Build… we wanted to build an investment management business where we are looked on as extremely sound fiduciaries of other people’s capital. And so all we can continue to try to do is meet our own lofty goals for what that means.

Meghan Escobar (26:05)
Fair enough. And before we wrap up here today, if somebody wanted to reach you, Brian, and collab with you or or learn more about what you guys are doing, what’s the best way for them to reach you? Is it through email, socials, phone number, website? Yeah.

Brian Ker (26:20)
I… we’re… I’m on LinkedIn—have a pretty strong social presence there. You can DM me on LinkedIn. Obviously, just look up Snowball Developments or Brian Ker with one R so that you don’t end up in a different spot. We also are active on Twitter: @snowball_dev is our Twitter handle. And you can reach me by email, [email protected], and our website is snowball-dev.com. And there’s both a “Become an Investor” or just a general questionnaire that you want to reach us that, you know, lands ultimately in my inbox. And, you know, we we do… I just believe in pay it forward.

There’s there have been so many people who have helped guide me through my career who did not need to spend the extra time with me, and I still keep touch with my mentors in Vancouver and and Montreal, and developing, you know, a strong group of people that, you know, guide me in New York City, and it’s been great. I think that that’s the best way to do it. And, you know, continue to invest in the people around you, and, you know, you’ve got a very simple management style, which is the speed of trust. You know, you know, just give people give people the opportunity to grow themselves. And the moment someone feels like they can’t grow any further, then that’s the time where you have to reevaluate whether, you know, they’ve got, you know, the staying power for being in an organization that has, you know, some strong ambition.

Right now, our goal is to raise two big funds at developments. We have a general partner fund, it’s a $25 million vehicle that more or less leverages our experience on GP Fund One that is now fully deployed. So that will provide pursuit cost capital, deposit capital, general partner equity into a series of transactions over the next year to two years. And then combined with that, we have a Canadian-focused feeder fund that provides for Canadians that don’t want to file US tax returns a flow-through vehicle to participate in our deals on preferential terms. So we’re raising these two vehicles, and the goal there is to provide sufficient capital, not full capital. We always like to be disciplined and raise capital on a deal-by-deal basis, because the moment that you feel like you can just deploy whatever you want, you lose your discipline. So enough capital for us to feel confident that we can go and buy the next 300 to 350 million dollars of strong performing industrial real estate transactions in the greater tri-state region.

Meghan Escobar (29:08)
Beautiful. And and we’ll all have those links on your blog post once this goes live. So thank you so much. And listen, I appreciate, Brian, I appreciate your time, I appreciate your story, and more importantly, your perspective and the knowledge and the and the golden nuggets that you dropped here today. So folks, when you’re listening in, take out your pen and paper and jot the information down. And like Brian said, he’s here to pay it forward. So feel free to connect with him on socials. We live in a world of technology in the digital era, so there’s ways for you to reach him directly and he is here to to help others grow as well. So thank you all for tuning in, and thank you, Brian, again for being here. For those of you that did receive any value from this, please be sure to hit subscribe and like. We’ve got more conversations coming in with operators just like Brian who are out here building real businesses in real time with real people. We’ll see you on the next episode.