Subscribe via:
Show Summary
In this episode of the Real Estate Pro Show, host Erika interviews Darren Seid, a seasoned professional in commercial and multifamily investing. Darren shares his journey from retail leasing in New York City to becoming an entrepreneur in the real estate sector. He discusses the challenges and rewards of starting his own company, the importance of mentorship, and the art of deal-making. Darren emphasizes the significance of zoning expertise and building a strong network, while also providing insights into his future investment strategies and market outlook.
Resources and Links from this show:
-
Listen to the Audio Version of this Episode
Investor Fuel Show Transcript:
Darren Seid (00:00)
Have you ever seen the movie The Matrix?When they show from Neo’s eyes and he sees the agent in the ones and zeros and like he can perfectly see everything, right? I think of real estate like this. Now, I don’t think that I’m exactly gifted in it. I think that anyone who is spending every day of the week, every moment they’re awake.
Erika (00:11)
Yeah.Darren Seid (00:25)
studying the industryand studying markets, I think it’s just visible. You see the ones in zeros. You see why a market is headed for a growth trajectory. You see the economic drivers
and you know, a multifamily building would make sense over there
For me though, I had one of these mentors on the topic of mentorship, he would say to me that there’s two ways to get into real estate. It’s either with money or with knowledge. And I would argue that there’s a third way and that’s with finding the deal.
Erika (02:29)
Hey everyone, welcome to the Real Estate Pro Show. I’m your host, Erika, and today I’m thrilled to be joined by Darren Seid. He’s been making serious moves in the commercial and multifamily investing space. Darren, we’re so glad to have you on the show.Darren Seid (02:46)
Thank you, Erika. Pleasure to meet you. Pleasure to be here.Erika (02:50)
Yeah, yeah, so let’s dive right in, Darren. For our listeners who may not be familiar with your world, give us the rundown. How did you get started in real estate?Darren Seid (03:01)
I actually got started in retail leasing in New York City. I had a friend that was in that business and I was cycling out of a minor league hockey career as a player and a coach. ⁓ I was, I didn’t really want to leave hockey at the time, but where I was at and the kind of money there and the age I was getting to, it was time. And a friend of mine offered this opportunity to do some retail leasing in New York City and.I wasn’t such a fan of it, but I dove in and they happened to be a development shop that was working on a lot of cool things. They were developing a 55 key boutique hotel that happened to be right next door to where I was living in New York City in the neighborhood of Nolita. Actually, the hotel is called the Noliten after the neighborhood, Nolita. ⁓ And some other really exciting things, value add and ⁓ some condo deals in Soho.
And it was a great place to get my feet wet, learn about the industry. And then I really started to get excited about development and the multifamily rental space and eventually moved on to another company, opened my company and you know, the beat goes on. And now I focus specifically outside of the boroughs. I came up in New York City working for these other companies and cut my teeth there and it was incredible to make relationships there. And there’s a saying,
You know, if you can make it in New York, you can make it anywhere. And I believe that that’s true. Look, there’s a lot of competition and incredible companies in these other areas that I play in now, but there’s nothing like the New York City Department of Buildings and that capital environment and the competitive nature of all the players going after deals. You have to go hard deposit on every deal that you buy. In other markets, you could do a soft deposit and actually have a due diligence period.
before laying out money. So I focus now my energy in multifamily rental
outside of the five boroughs, but in New York, New Jersey and Connecticut. In close proximity to New York City, in the very beginning, I was tied to New York City in a way. Like if you asked my criteria, I would say that, you have to be arm’s length from the New York City job market. But that’s not the case in my investment criteria anymore. I have branched out pretty far from the New York City job market.
but still New York, New Jersey, Connecticut.
Erika (06:14)
Yeah, wow, what a journey. And what was it like for you, know, starting your own company and making that leap then? Would you describe it as an actual leap or, you know, was there kind of more a, you know, a transition period to make it a little smoother?Darren Seid (06:30)
Erika, I am all leap. It is all leap, okay? So I was at Pinkstone Capital Group. This is now the second shop that I was at in New York City. And I had a friend that was doing deals outside of the boroughs. And he’s showing me the returns, multifamily rental, which is exactly what I wanted. That’s my risk tolerance. like betting on the, that’s one of the most secure and reliable entities in the investment space, is the American tenant. And in my case,the Northeast American tenant. So I like to bet on the, the rental, multifamily rental space and the rental communities outside of these, this New York City area, the tri-state area. And so this friend of mine, he’s doing deals and he’s raising money from investors. And by the time he gets, builds the deal, by the time he gets to the permanent financing, he’s returning all of the equity and then some. And this is in like 2011, 12, 13, this is like,
the golden years for doing that. ⁓ But I was extremely attracted to that. So I started chasing around these marketplaces for deals. And I would go in the evenings and go to their planning and zoning meetings. I’d go on the weekends and I’d take the zoning map and drive around and look at sites and study my site selection. And at the planning and zoning meetings, I’d shake the hand of the people that are there, the people that are presenting well for their clients, the zoning council.
and legal teams and architects and hey, where else are you working? What else are you doing out there? Are there any pilots in the markets that you’re, a pilot is a payment in lieu of taxes. It’s like a tax abatement program. Are there any pilots, I’d ask them, in any other markets that you’re working on? Who’s pro development, who’s not? And I would build this network of people and information to chase deals. This is all while I was working at Pinkstone Capital Group. So the leap.
that I took, ultimately Pinkstone didn’t want to spend any time out there. He was like, look, you could do this stuff as long as you’re doing it on your own and you’re not disturbing your efforts here, but feel free. So I went and I did all this stuff and put together a couple deals and then eventually went out on my own with a whole network of people and information for when I was gonna put my money in play. Like at Pinkstone, I was just an employee. I wasn’t putting my money into the real estate game.
So yeah, I’m all leap. that was the big leap is to leave Pinkstone Capital Group where we were working on some incredible projects, a 55-story tower in the financial district of Manhattan that ultimately, even after leaving Pinkstone, as an advisor, I negotiated a JV partnership with Grubb Properties out of North Carolina for where they redesigned it to a 66-story tower, 462 units with Handel Architects’ incredible project.
and I was so fortunate to work on it, work with all those people, but I wasn’t putting my money in it. So my money is outside in these other areas that return a little bit better on a year-to-year basis and a yield on cost and IRR and equity multiple. Unless New York City sees a crazy appreciation, you’re really at lower return rates than what I’m faced with out in the tri-state area outside of the boroughs.
Erika (09:52)
Yeah, yeah. And ⁓ with being out on your own, you said you did have a network with you, whichawesome that you had built that before you left. But what were some of the challenges of going out on your own then?
Darren Seid (10:45)
You know, Erika, there’s no, I believe in mentorship and mentee ship and forming relationships in the industry that last in both directions. You know, whether I’m I’m seeking the mentor or I’m being the mentor, I believe in itAnd that was huge for me to have these relationships. However, I cannot get on the phone with anyone and they say, oh, you know, look at page 206 in the book.
And it’s going to tell you the exact answer to the question. Like, there’s no book to flip to, no page to turn to, ⁓ and no mentor, no matter how experienced or seasoned they are, nobody can definitely give me, I’m the one that has to live with the answer. I’m the one that has to answer to my investors. So it’s a challenge to know that I’m definitely correct. So I let that drive me. I let that drive my analysis and my homework, and I go really deep when I’m understanding an investment.
And is this worth my time, my energy, my investors’ time, energy, everyone’s opportunity cost? I try to let it drive me to be ultra meticulous so that, if something goes wrong, it was nothing that anyone could have foreseen. You know, like COVID or a crazy interest rate rise or, you know, like we’re not making a mistake that we could have, more homework could have solved the problem.
I try to go as deep as possible to remove that risk from the table. there’s, you go out into any entrepreneurship, ⁓ any field where you’re an entrepreneur and I think you’re gonna deal with this, not just making bets on real estate. just to put a bow on that, ultimately what I’m doing is when I bet on the American renter, I’m just going into a community that’s already getting rent.
And I’m saying another building right over there can get the same rent. Right? So that’s, it’s not like I’m betting on a cryptocurrency and don’t get me wrong, a lot of money to be made there and people have done incredibly well and people have also lost a lot. I’m not speculating on a penny stock. I’m not even buying a blue chip or what I’m, the American renter, they’re already in the market that I’m going. And I’m saying you could come and live in this building for the same price.
Right? And it’s a newer building where I’ve seen what maybe some other buildings in the market did right or did wrong, and I’m putting my spin on it. So it’s not really a bet, if that makes sense.
Erika (13:23)
Yeah, absolutely. And your passion for finding deals and negotiating deals is ⁓ really unique. you had said to me earlier that it was, you would describe it like an art form. Can you talk more about that and how that sets you apart?Darren Seid (13:45)
you ever seen the movie The Matrix? Okay, you’ve seen the movie. When they show from Neo’s eyes and he sees the agent in the ones and zeros and like he can perfectly see everything, right? I think of real estate like this. Now, I don’t think that I’m exactly gifted in it. I think that anyone who is spending every day of the week, every moment they’re awake.Erika (13:47)
Yeah.Yeah.
Darren Seid (14:13)
studying the industry and reading the articles and studying markets, I think it’s just visible. You see the ones in zeros. You see why a market is headed for a growth trajectory. You see the economic drivers and the jobs that are coming into a marketplace, the life science office space that’s being ~ and you know, a multifamily building would make sense over there ~ ~ other economic drivers.that just makes sense to people that you would put a multifamily rental next to it, I don’t think it’s difficult to uncover that. For me though, I had one of these mentors on the topic of mentorship, he would say to me that there’s two ways to get into real estate. It’s either with money or with knowledge. And I would argue that there’s a third way and that’s with finding the deal.
And you could put that under knowledge probably, but finding the deal.
knowing that it’s a deal, knowing what to look for, why it is a deal, why it’s gonna appeal to investors, why it’s gonna appeal to the tenants, why it’s gonna appeal to a sale on the exit when I’m done building the development, right? That value that I’m gonna create that someone’s gonna want to buy it. And then also, what can I do creatively to enter that deal? What can I do with the land seller? What can I do creatively on the capital structuring?
What can I do to maybe add some value before I raise money? Like in my case of doing a ground up development, I can potentially in these markets, not in the five boroughs, which I learned by working there, but in these other markets, you could arguably get a deal under contract for limited money, take it through some planning and zoning work to add value to either bring it to a site plan approval or potentially even change the zoning and bring it to a site plan approval.
before raising any outside funds into it. Or even if you’ve raised some money already to get to that point, you can then raise the bulk of the funds after creating that additional value. And I say this from experience. I’ve done this on multiple occasions where I find the deal, I have yet to even have to lay out the cash to buy the land, and I’ve changed the zoning, got site plan approval with my own money, and then brought in the outside funds, and I’ve really…
created a spread at that point between price and value. And that’s what a developer really gets paid to do, is to create a spread between price and value.
Erika (17:26)
Yeah, absolutely. That’s really awesome to kind of take a step back with that process when you’re first looking at a space and you don’t know what you can do with it yet, how you can change the zoning. How do you evaluate the potential there?Darren Seid (17:42)
I think that you have to be a zoning expert. In doing ground-up development, you’ve got to be somewhat of a zoning expert. And all the tools are available. It’s not such a sweet science to figure this out. I’m talking about Neo with the ones and zeros, and you just have to have a feel for it. But really, it’s all uncoverable. You can go into any. You click on Google even. You don’t even have to know exactly how to find the website. Go to Google or even these days, chat GPT.And you can look up the zoning of any market and start to understand. can pull the zoning map. It’s all publicly available information. And then read through the zoning code. Now, of course, there’s people who are going to be better at it than others and experience is the greatest teacher. So the more someone does it, the more they’re going to learn. Zoning council get paid a lot of money for a good reason because zoning code is complex and there’s things to learn. But really, it’s laid out there. You know, it’s discoverable.
So what I would do, and I was explaining some of this earlier, I would go around on the weekends and I’d pull out the zoning map and I’d go to areas that were zoned to allow for multifamily and I would drive my car around and I’d walk the city. before doing that, I’m only going to cities that I determined were investable. So if you see, if I see a certain rent being achieved in a city, like before I’m saying how I bet on the American renter and I go into markets where they’re already performing. So I underwrite the city.
I determine, they’re getting good rents there. I know the hard costs these days, the soft costs are roughly what they are. I have to get the land to trade at the right price. So now I’ll go and I’ll drive the city and I’ll look at multifamily land and I’ll knock on doors. I’ll leave a leaflet, you know, my phone number and everything. I would like to buy your land, you know, whatever. And I would go around and study markets like this and then study into the zoning and then go and even these days after COVID.
It got put on steroids. All of these meetings are available. You could look up old meetings where they already conducted them. You could look up the meeting minutes. Everything’s available online in most cities, at least the cities that I’m chasing for the most part. It’s available online. I could go and see how pro-development they are in the way they behaved in the planning and zoning meetings. You know, and I could even go back in some cases and watch the planning and zoning meetings and watch them present. I can get architects information from that, zoning council.
You know, the land use attorney, civil engineer, it’s incredible, right? So doing all of that stuff and being able to go into the weeds, I can understand, this is a market where they currently, the seller thinks they’re selling me a piece of land that’s 100,000 square feet of buildable square footage. So they’re pricing it based on that. I know from studying the market and going through the old meetings, going through the meeting minutes,
I know there’s three sites around town comparable to that site where they changed the zoning and they maybe got double the zoning, right? I know that going in. So this seller, I’m still going to negotiate and try to get the best deal possible. He may sell me at par, right? For what it, but to me, I know what I’m buying. I’m buying that future value that I can create and that I can bring to my investors. And ideally with my own money from the beginning.
and then bring that added value when I’m raising money later.
Erika (21:05)
Yeah, yeah, absolutely. ⁓ I love that approach. you were talking about getting into the weeds with figuring all this zoning out. Have you ever gotten into the weeds and, you know, maybe things got a little hairy with a deal? Maybe, you know, things kind of went sideways or you had to pivot fast. Do you have any moments like that in your journey, Darren, that you can share and any lessons along the way from it?Darren Seid (21:33)
Yeah, absolutely. Every deal, it’s crazy. Every deal has a story to it, sometimes multiple stories to it because there’s these pivotal moments in deals. One, the land negotiation, like say a ground up development, the land negotiation to buy it, the zoning analysis, and then what goes on in planning and zoning, right? That’s its own story, right? So you have the land negotiation with the seller, you have the planning and zoning analysis and what you think you might get.but maybe there’s an element of risk and you get into there with the community boards and the planning and zoning folks and maybe you don’t get exactly. I’ve been fortunate with my own company to get what I wanted out of that process, but there’s other elements. Then there’s the capitalization, raising the money and that’s its own whole exercise. And like I said, I don’t have, when we were talking earlier, a few billion dollars of discretionary funds sitting behind me. I on each deal, I have to go out and raise in single purpose entities.
I go and raise money in GPLP structures and I have to sell each deal each time and sell myself each time to the investors. That has its own whole moment. Then the execution of the construction. That’s its own story. Then on the back end, the permanent financing or the sale, the exit sale, whatever the strategy may be, the asset management. Each of these different moments in time have their own story to them. For me, someone asked me a similar question in a different way recently.
⁓ They asked me what was my biggest win and to your point my biggest win was avoiding a loss and that to me I like I could never I’m gonna flub up the way he said it but Warren Buffett something to the effect of make money for someone and they’ll keep coming back for the rest of their lives lose money one time that’s it that’s it you may never hear from them again so I can’t lose
I absolutely can’t lose. would imagine most people think that way, but not everyone does. I think these huge companies, they get into so many deals that sometimes they miss. And I’m not criticizing anyone individually or whatever, but there’s a bunch of companies that miss and they just do so many deals over any given year or chunk of years that over the long haul, they sell their investors on well. If you’re just with us in totality, you’ll make all this money. In my case, I can’t miss.
And ⁓ I was able to avoid a loss during the COVID situation when a delay got put into a deal. And I was in a dispute with one particular partner who wanted to partner in. I can’t get into the details of it. ⁓ We settled our differences. But I wanted to take the deal out to other partners. And at the time, I had to settle my differences with someone else. And it put a stall on things. And then the interest rate environment
went crazy and I had to thread the needle to put together a partnership at the final hour when the seller of the piece of land was banging on my door saying, hey, you’re gonna buy this piece of land or what? I was in contract the whole time while all this dispute was going on. And to me, avoiding a loss in that situation was my biggest win and probably the answer to your question if I think about it. From a zoning perspective, fortunately, I’m such a psycho on homework and diligence.
that I haven’t been, knock on wood, I haven’t been, you know, hitting with a surprise in my zoning. I go in with a base case, you know, next tier up and best case scenario. And in each case, I’ve thankfully superseded the base case.
Erika (25:17)
Yeah, yeah. you know, one thing that you mentioned there that’s, you know, stood out to me was how you had to quickly form a partnership. you know, you really can’t do that without having the base of like building a good network, building those relationships for when you need them. What kind of advice would you give to people when it comes to building their network in the real estate world?Darren Seid (25:44)
I think people gotta be just… ⁓think you gotta jump in the deep end and figure out how to swim. I think my advice to say my younger self or anyone in the early stages is get after it as quickly as possible. Get into one. Even if you’re working at a company, some companies they’ll let the employees come into a deal. And that’s great and that’s exciting. ⁓ But it’s different than going into a deal on your own.
I would almost advise someone if they’re at a company that lets you into the deal, that’s great, but I would also maybe do a small deal on the outside, as long as you have a non-compete or whatever, in respect of your whatever non-compete and not to be a distraction to your current endeavor, but to be able to get in there and start doing it, experience is the greatest teacher. I think that that is gonna teach somebody
how to flow through that negotiation, how to go back and forth with their lawyer and deal with the partner that they’re negotiating with, or raise some money from some investors and understand what that experience. Until facing the live rounds, don’t know how someone, you could watch all the classes online and there’s great resources and look at documents and that’s all phenomenal. But like I was talking about earlier with Neo and the Matrix,
I think the only way to know how to get into that dance and experience that dance is to have get in there and face the live rounds. And even if it’s on some small, you know, do a two unit deal on the side and pull together some investors, go for some family and friends money, just get in there because you know that document, a three family, four family, two family, that’s a document that’s probably not too dissimilar from a 30 unit deal.
or a 50 unit deal. And yes, as you get up in size and the sophistication of the investors, these documents are gonna change. But the human behavior, the dance between partners, I think that’s a human behavior that you’re gonna see in a $100 million deal or a $5 million deal, you know, to some respect. So my advice would be for someone to just get after it. Find a deal and start negotiating with the seller, with your partners.
and get to know that dance a little bit. Maybe it’s even good at lower stakes, right? But you gotta be able to have the bandwidth to do that. You know, if you’re at a company, in my case, kinda, you know, I left, I had a fee that came in on a deal and I left one company and I just talked about a leap of faith earlier. Like, I just went right into the deep end and,
you know, first deal I did outside of Pinkstone Capital Group was a $112 million deal. People looked at me like I was crazy, like what, you know, that I had no business doing that as my first deal out, but I said, I’m gonna figure it out. And I was able to and put together the partnership and that was a 299 unit development that I’m still invested in. It’s a great deal in New Haven, Connecticut and I’m very excited to be, you know, part of that partnership.
Erika (29:05)
I love it. Well, you know, your advice there, I mean, you’re living it. So that’s the awesome thing to hear that from you is, you know, that when you go with that plan and you stick with it and it’s not on paper, it’s that you’re living it out in real life that you can find a way. So I have to ask that transition, you know, must have been incredible.But what do you see next on the horizon? What to you would be the next big milestone with investing?
Darren Seid (29:40)
So ⁓ I’m negotiating a few different pieces right now. Like I said earlier, I’m kind of a deal by deal guy. It’s not that I have ⁓ fund money that is just sitting there discretionary at the ready and I’m getting some AUM fee while the money is kind of burning in the background and I’m just looking for deals. I’m constantly looking for the next opportunity. I’m looking to wow investors. I don’t like to flood my investors with deal flow and throw them every little thing that I look at.I like to be very selective and very disciplined in my approach that when my email hits an inbox that I have multiple investors from all different angles kind of vying to get into the deal with me. we have a few of those that I’m negotiating right now in Jersey and Connecticut. I was telling you a little bit before we got moving that there’s a deal that I would be the master plan developer of an undisclosed amount of units, but hundreds of units.
with also a self storage component on site. Which to me, that helps, you know, when I talk about entering a deal creatively and having creative structures, having another use on the site, I have to get that land seller to agree to a price that I think is reasonable and he doesn’t want to. So how can I do it? I can bring in another use and another buyer essentially and maybe combined, we’re gonna get there, we’re gonna appease the land seller,
In that case, we may even do some seller financing. So it’s a creative structure that I’m hoping to have that thing wrapped up by the end of the year, at least the negotiation. But development is a slow moving game sometimes. I think these next 12 months are gonna be very exciting. I wanna get my cash in the marketplace and be looking very pretty in about three to five years when those business plans play out into a different interest rate environment. Like I was saying to you earlier, don’t pencil
different interest rate environment. Everything I pencil is in today’s numbers. And even in the hard costs, to be conservative, I’ll sometimes escalate the hard costs depending on how far out the business plan is. But I don’t escalate my rents. I don’t change the cap rates on my exit. I use today’s numbers. I don’t change the interest rates. use today’s numbers. However, I think we’re in for some sunny skies ahead in the interest rate environment. And that’s gonna make some probably bad business plans look really good.
in about four or five years from now when people eventually exit.
Erika (32:13)
Yeah, and you yourself, you have a very solid foundation with your approach and what you’re doing. So what you have going on is really exciting, Darren. Before we wrap up, if someone wants to reach out, connect with you, maybe they want to collaborate on a deal. What’s the best way for them to reach you?Darren Seid (32:38)
way is probably email, but I’ll give you my Instagram. I recently started posting on Instagram. ⁓ It’s at Darren Seid, at D-A-R-R-E-N-S-E-I-D. I also recently opened a YouTube channel. I’m trying to be part of the world. I think my investor base is only gonna get younger over the years, so if I’m not participating in that piece of the world, I’m being neglectful to my company.That’s how I see it. I only just recently started using social media and putting myself out there like that and shows like this, podcasts and whatnot. ⁓ I was always typically a handshake, a hug, networking events, that kind of thing. But you can reach me on Instagram, shoot me a DM, follow and shoot me a DM at Darren Seid. Also, excuse me, also LinkedIn. I’m on LinkedIn. I couldn’t tell you what that is. You could just search me.
That’s a more complex tagline on that URL.
Erika (33:45)
Darren, we appreciate your time, your story, your perspective. We need more people in this space who are doing the things the way that you are, scaling thoughtfully, building a strong network and having that deep expertise. It’s really great to see.Darren Seid (34:02)
Thank you, Erika. Thank you very much for the time. was enjoyable and nice getting to know you.Erika (34:07)
Yeah, same here. Thanks again for being here. And for our listeners, if you got value from this episode, make sure that you’re subscribed to the Real Estate Pro Show. We’ve got more conversations coming up with pros like Darren, who are out there building fantastic real estate empires. We’ll see you on the next episode.
