Using Technology and Data Analysis to Help Scale Investments

Today’s guest is Christian Gore.

 

Christian Gore is the Founder and Managing Partner of G1 Capital Partners, a private capital firm specializing in multifamily and industrial real estate investments. 

 

Show summary: 

In this episode, Christian discusses the company's focus on multifamily and industrial real estate investments. He talks about the importance of technology, data analysis, and a strong team in decision-making. Gore also shares insights on entering the hospitality sector, the impact of capital markets, and the state of the multifamily real estate market. He highlights the role of preferred equity in the market and discusses potential distress in older properties. The episode ends with Gore's predictions for the market in 2023.

 

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Intro (00:00:00)

 

Focus on multifamily and industrial real estate (00:01:54)

 

Challenges and opportunities in the current capital market (00:08:55)

 

Performance of multifamily (00:12:05)

 

Preferred equity (00:13:03)

 

Multifamily distress (00:15:23)

 

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Connect with Christian: 

Web: http://www.g1capitalpartners.com/about

 

Linkedin: https://www.linkedin.com/company/g-1-capital/

 

Instagram: https://www.instagram.com/G1_Capital/

 

Connect with Sam:

I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.  

 

Facebook: https://www.facebook.com/HowtoscaleCRE/

LinkedIn: https://www.linkedin.com/in/samwilsonhowtoscalecre/

Email me → [email protected]

 

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Want to read the full show notes of the episode? Check it out below:

Christian Gore (00:00:00) - As long as there was a longer time horizon. In terms of your investment period, it really shouldn't be any issues. There's, you know, there's dips and. You know, peaks to the market. But ultimately, if you have a longer term view and a sound capital structure, you should be able to weather the storm.

 

Intro (00:00:17) - 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 (00:00:30) - Christian Gore is the founder and managing partner of G1 Capital Partners, a private capital firm specializing in multifamily and industrial real estate investments. Christian, welcome to the show.

 

Christian Gore (00:00:42) - Appreciate it, Sam. Thanks for having.

 

Sam Wilson (00:00:43) - Me. Absolutely. The pleasure's mine. Kristen. There are three questions I ask every guest who comes on the show in 90s or less. Can you tell me where did you start? Where are you now? And how did you get there?

 

Christian Gore (00:00:53) - Poor thing. So I started as a young little kid coming up in West Texas, ultimately worked my way through the system, got involved with a significant real estate guy by the name of Andrew Farkas, was kind of my first gig in New York, really kind of drinking from a firehose in that environment for for about four years post post GFC, which was quite interesting and ultimately worked through a handful of buy side and sell side shops, you know, over the years, and founded One Capital Partners in 2018, and we've been operating since then.

 

Sam Wilson (00:01:37) - Yeah. What do you guys do at G1 Capital Partners? I know you said there in your intro you guys are into multifamily and I believe it was industrial, but give me give me kind of the breakdown of what you guys have done over the last five years and where you're going for things.

 

Christian Gore (00:01:54) - Yeah. So we I would say primarily spend our time in the multifamily and industrial space. That being said, we we are agnostic to product type. So for example, we've we've got a hotel deal in front of us right now. So really just looking for the right opportunities and the right markets and less so focused on product. Historically speaking, I will say what 80% of 90% of what we've done is in industrial and multifamily. We do have some retail holdings as well and currently don't have any hospitality, but we'll likely have hospitality by Q1 of of next year. So we kind of have the whole spectrum of the four major food groups, or at least we we screen it, but but ultimately spend most of our time in multifamily.

 

Sam Wilson (00:02:44) - Got it. Okay. That's really an interesting thing. How do you how do you effectively grow or manage your team and your investor base when kind of bringing a new asset class into the mix?

 

Christian Gore (00:03:00) - Sure thing. I would say first and foremost, we're we're extremely technology focused. So that takes a lot of pressure. And quite honestly, you know what I would call biases away. So it not only helps our processes but it also helps our team internally kind of select the investments and really get behind them. Um, but but ultimately I mean it's math. You know, we we're integrating a lot of data that effectively is taking an AI and machine learning. And we think that's that's a little edge that we have there. But but at the end of the day, it's math. You know, in this business it's relationship driven and really just utilizing, you know, what we have as a team. The team is probably the biggest component, I think, in in our business to success. I'm a I'm an ex you know, college athlete.

 

Christian Gore (00:03:59) - And I look at it no differently. And kind of our industry as, as it is in sports, I really do think the best team ultimately ultimately wins and gets gets the best opportunities across the finish line.

 

Sam Wilson (00:04:10) - Yeah, undoubtedly. When you say team and especially as it pertains to let's use multi excuse me hospitality as an example, are you guys scaling internally or are you scaling with external partners in hospitality. How do you engage a new asset class. And maybe without having to go through the attendant learning curve that taking on new asset class generally requires?

 

Christian Gore (00:04:37) - Sure, sure. That's a great question. Um, you know, so historically we have about 2 billion in experience in the hospitality space. That was primarily post GFC. But our kind of thought process and business model internally is right now we're a team of five. You know, over the next year or two will probably get up to a team of maybe ten, 15 Max. And the way we're able to scale that is one like like I mentioned through technology, but two, leveraging our partners so we we don't manage any of the assets, you know, boots on the ground.

 

Christian Gore (00:05:15) - We we bring in an operator in this case for a hotel. You know, it's a very niche product type. So we work with the top three large hotel operators and kind of leverage their expertise in that space. So it's not to say it's the marriotts of the world, it's the operators or the property management team on site that's kind of below that, below that umbrella. That makes sense.

 

Sam Wilson (00:05:39) - It does. It does. Okay. No, that's that's great I love that and I don't want to stay here I guess too long. But I am curious. I mean, you guys are making hospitality. One of the potential things that you guys are getting into either end of this year or first of next year. Why now? I guess we'll we'll start there. And then I have some follow on question to that. Why hospitality? Why now? Sure.

 

Christian Gore (00:06:03) - So I wouldn't I wouldn't market too much in the hospitality space. Kind of the three buckets we're playing in right now is multi industrial. And then what I would call special situations and in this case this hotel opportunity that we have in front of us is a special situation, has a great story behind it.

 

Christian Gore (00:06:21) - You know it's a post post-Covid REIT effectively blow up. So very low bases needs a lot of TLC, a lot of CapEx really a lot of work put into it. But we like the story behind it and it's extremely core asset. Right in our backyard. So headquartered in Dallas, it sits a rockstar away from our office, so we know the asset very well.

 

Sam Wilson (00:06:45) - Got it. Okay, that makes sense. So you guys aren't necessarily out saying, all right, we're going to we're going to put a full fledged team together to go out and acquire hospitality in mass. It is hey, here's a great opportunity right in front of us. So why don't we see if we can make this work.

 

Christian Gore (00:07:00) - Exactly, exactly. And then we obviously allocate the right investor profile for that kind of product. If that makes that makes sense.

 

Sam Wilson (00:07:07) - It's it does, it does. And that's, that's a that's an interesting thing to be able to go, okay, let's take advantage of this situation without necessarily wanting to develop all of the resources to go out and go long in that space.

 

Sam Wilson (00:07:24) - Is that a fair kind of analysis of what it is that you guys are dealing with right there?

 

Christian Gore (00:07:31) - 100%? Yeah, we're not going to be growing a massive hospitality platform anytime soon. It's it's more so, hey, we know this deal really well. We can put all the pieces together. We have the right partners on the equity side to execute. And ultimately, you know, our whole team is really just a bunch of deal junkies. So it's it's really fun to put, you know, hotels. There's a lot more moving pieces. So it's a lot of fun to work on.

 

Sam Wilson (00:07:59) - I bet it is. I bet it is. Yeah. And that's I mean, I'm with you on the opportunity side where it's like, okay, there's a great opportunity. How do we say no? I mean, those are hard to pass up when they're right there in front of you, and especially if you don't have to build all of the necessary parts that go into, you know, taking that one particular niche business to scale, it's like, okay, we're going to buy this and you can plug an operator in and it's not not the end of the world for us to acquire that.

 

Sam Wilson (00:08:28) - So okay, definitely I won't beat you to death on the hospitality industry then. But you did mention something. You said you have the equity behind you to take down that deal. But let's talk a little bit more about capital markets as a whole. How is that affected what you guys are doing? How has that affected what you guys are doing in multifamily? In industrial, maybe you can compare the two, give us some insight what you see there and how you guys are navigating 2023.

 

Christian Gore (00:08:55) - Sure. So I will say it's been 2023 has been tough. I mean, you know, the fastest fed rate hikes we've ever seen in terms of speed. So it's really a shock to the entire system. Right. So we've been you know working to try and get stuff done. Have not been successful this year just mainly due to rates moving that quickly and continuing to move. That being said, we do see a bright spot starting in 2024. There's obviously going to be a lot of pain. That being said, we're very focused on scaling the multi side of the business and and to put more.

 

Christian Gore (00:09:40) - Strategically the affordable multi side of the business. So we're all in on that. That's that's you know our scaled growth product for the next two years. Industrial still is not pricing to where we think it makes a lot of sense. And candidly you know from a lending perspective which is quite honestly the biggest challenge in today's environment, the beauty about multifamily is, you know, the fact that we have two large government agencies that are still lending on that product and that's, you know, what I think is has been fruitful for the multifamily space compared to all the other four major food groups. That being said, nothing's easy in this environment.

 

Sam Wilson (00:10:24) - So no, there's no there's no giveaways. What about distress? Let's talk distress there. In multifamily, I hear a lot of people. Even even shops that I'm a little surprised at that previously weren't in multifamily now going, hey, we're getting into multifamily because we feel like there is either currently pain that we can take advantage of and or they see a coming theoretical wave of multifamily opportunities.

 

Sam Wilson (00:10:52) - Talk to me about that. What's your view?

 

Sam Wilson (00:10:57) - Yeah, that's.

 

Christian Gore (00:10:57) - That's the million dollar question, right? You've got folks raising distress funds. Um, you know, it's it's tough to say we're we're tracking it as well as we can and other folks can. Um, you know, I think there will be some opportunities probably in Q3 of next year. But what we're seeing live in the market right now is a lot of pref equity flooding the space and plugging a lot of gaps. And, you know, we we we don't currently and have not put out any pref equity in this space primarily due to where valuations were going in that we we still didn't really feel comfortable. Um, you know plugging plugging a lot of the, the gaps at that basis. But um, you know I think there will be some pain. We're seeing some, we're working on some. But I don't think it's going to be as bad as everyone thinks. If you look back to zero eight and the GFC, you know, like I mentioned, you know, we did my my first gig was working for us Lehman guys post GFC and we did a lot of workouts.

 

Christian Gore (00:12:05) - We did about 6.5 billion. And you know, I'll be honest with you, I think I'd have to look back at the deal sheet, but maybe 1 or 2% of of all of those deals that went bad were multifamily and the rest were other product types. So, you know, I think there's there's definitely pain, but there's there's a ton of liquidity still still out there ready to take over. So a long winded way of I don't think it's going to be as bad as everyone thinks.

 

Sam Wilson (00:12:33) - I don't think it'll be as bad, or at least I hope you know, it won't be as bad. Primarily one, because I'm not a I'm not a buyer of multifamily personally, so it doesn't on that front. It doesn't affect me one way or another. Although I'm an investor, I'm not a personal buyer presently of multifamily also because I don't want to see a lot of our friends in the industry go through that hard times. But regardless of what I want or prefer, it still happens. Let's talk about pref equity a little bit.

 

Sam Wilson (00:13:03) - I mean, that can fill the gap for a while. But then what happens when when that. And maybe you can give our listeners that might not understand what pref equity is, what it is. And then my follow on. So so first question is what is pref equity. You define that for us. And then secondly you know what happens when that pref equity runs out. Are they just you know kicking the can down the road.

 

Christian Gore (00:13:26) - Yeah. I mean, so the short answer is, you know, definition, I would say it's, you know, it's called pref equity, but kind of operates more like a debt product. So you know, you have your common equity and then ultimately your pref equity what's coming, which is coming in behind it that have that has preference over the common equity. And and so ultimately you know once. Let's say cash flow gets low, you know. You know, groups are plugging in pref equity and to yeah to your point kick the can down that you know down the way.

 

Christian Gore (00:14:00) - You know ultimately it's going to be the performance of the asset on on whether or not that pref equity stays in place. So there are instances for example, that, you know, we're aware of that groups have plug pref equity. And at this point in time their pref equity is already completely wiped out. So ultimately it's come down to the senior lender or the original, you know, originator of the initial loan on the asset level. So it's it's you know, it's challenging out there. It's very deal by deal. It's market by market. It's very, very specific. So it's it's interesting time.

 

Sam Wilson (00:14:41) - It really is I mean because I think about about some deals I'm aware of that are doing terribly. And then and then I know about some other deals that I'm both that I'm personally invested in that are I mean, just killing it. I mean, there's like, you wouldn't even know that there's any stress in the market. It's the we're still above pro forma across the board there, 99% occupied.

 

Sam Wilson (00:15:02) - It's like I mean life is good. Life is great. Like how is this possible I don't know, but but it really is. It's on I think like you said, on a deal by deal basis. Are there any, any types or should I say classes of multifamily that you're saying, hey, this is where we're going to see the most distressed in your opinion.

 

Christian Gore (00:15:23) - Yeah, I would say, you know, the generally your older, you know, 6070s, even 80s vintage product where the kind of the peak of the market folks were getting, getting very aggressive on pricing, very aggressive on leverage and, and ultimately solving for, you know, not so ideal capital structures. And those are the folks that I think will have the most pain. But for the most part, you know, is as long as there was a longer time horizon in terms of your investment period, it really shouldn't be any issues. There's, you know, there's dips and. You know, peaks to the market.

 

Christian Gore (00:16:02) - But ultimately, if you have a longer term view and a sound capital structure, you should be able to weather the storm, which, you know, I think everyone's saying survives until 25, which it seems to be the timeline here.

 

Sam Wilson (00:16:15) - Seems to be and and I except for some people, unfortunately, it's probably wishful thinking is that things will turn around and get better for them by 2025. But again, getting there is step one and two having a meaningful business when you get there. Step two. So we'll just see how that shakes out. I don't be all doom and gloom here on the show today. You guys have been that sellers for what, the past 12, 18 months or so.

 

Christian Gore (00:16:38) - We have. Yeah we've we've been net sellers. We had some assets trickle into 22 that got a little challenging to execute. But but definitely net sellers.

 

Sam Wilson (00:16:49) - That's awesome. I mean it seems like it seems like you you timed things fairly well you know. And then we talked about a little bit off show.

 

Sam Wilson (00:16:57) - So you guys have been net sellers. You said this in the beginning that you really haven't found much here in 2023. That's made a lot of sense to buy. We see a lot of shops that are in asset management mode. You guys are obviously in buy mode, I guess. Talk to me a little bit about that. Like how do you ride out the storm? How do you remain patient? What are some things you guys are implementing in your core disciplines that are kind of keeping you true to what you're trying to do?

 

Christian Gore (00:17:23) - No, that's a great question. I mean, you know, I would say we're we're just trying to keep a pulse on the market. It's, I mean, it seems to be moving on a weekly basis. Um, you know, but internally and kind of in-house, our view is that, you know, capital will start coming back to the market next year. And we are pretty bullish that rates are going to drop pretty significantly post-election of next year. So from a timeline perspective, that's that's kind of how how we're thinking about it internally.

 

Christian Gore (00:18:00) - But but to say that it's still very difficult to be patient. Right. When you're, you know, looking to buy and so on and so forth. And quite frankly, the model we run is, is what I'd call a kind of a separate account model. So we go to equity partners, you know, on on any given deal that we think fits the equity check and fits the profile, the market, so on and so forth. And, um, and ultimately they're really calling the shots. We, we, we invest alongside them. And you know, as a GP obviously. But ultimately they're writing the large LP check here. So um, you know, and they're pretty much on the sidelines in this environment right now. The big kind of feedback that we get from, from most of our equity groups that we're talking to, I mean, on a daily basis is is negative leverage. And so what does that mean that, you know, it means, hey, you know, in the multifamily space we can get debt at six and a half, you know, so at minimum you should be buying a six and a half cap, unless there's a true path to some sort of six and a half.

 

Christian Gore (00:19:09) - So that's kind of how we're looking at the world. And the capital markets just hasn't really adjusted to that yet. And we think Q1 of next year, it will probably get to where it needs to be.

 

Sam Wilson (00:19:20) - Yeah, I mean, I'll be honest, I hear the term negative leverage and I just I kind of I kind of get scared, cringe. It's like, wait, this, this, this this doesn't make any sense. At least, you know, obviously, like you said, unless there's a clear path where it's like, oh, hey, this is under market, there's an easy value add. There is all these, you know, earmarks of just something that we the present owner.

 

Christian Gore (00:19:42) - It is not all doom and gloom, Sam. We have we have 3 or 4 deals under contract right now. So there are opportunities. I want to throw that out there. It's it just instead of, you know, looking at 20 and finding a couple, it's like looking at 200 and finding a couple, right?

 

Sam Wilson (00:19:57) - Right.

 

Sam Wilson (00:19:58) - No, undoubtedly it is certainly not all doom and gloom. And I don't want to portray that here, but it is something where I think it's just interesting to watch what everybody's doing. And I think that's kind of sounds like what you guys have been doing this year, watching the market, watching other other sponsors, watching how deals are trading and going. Does this fit what we want to do? Does it make sense now or should we wait? What you know, what's the right move? And I think that's okay, especially if you're not sellers. I mean, that's one of those things where it's like if you have assets to sell and you sold them at the right time, you know what you sound like you're doing, doing the right thing and kind of protecting your downside along the way. So this is great. I've really enjoyed Christian having you on the show today. Certainly have learned a lot from you. You give us insight on the capital markets, on you know, what it's like to get into special situations in the hospitality space when those cross your desk, kind of what your thoughts are on industrial and then how you guys are taking advantage of multifamily and then what your just thoughts on the general market at large.

 

Sam Wilson (00:20:55) - Ah, so certainly appreciate your time here today. It was great having you on. If our listeners want to get in touch with you and learn more about you, what is the best way to do that?

 

Christian Gore (00:21:03) - Yeah, I would say feel free to reach out. You know, we've got LinkedIn, we've got our website. I believe you have all the all the info on us, Sam, but we're we're a small team or active so we can typically get back to you pretty quickly.

 

Sam Wilson (00:21:17) - That is fantastic. And our listeners do want to find your website that aren't necessarily watching the show or get into the show notes. What is that website where they should go find you?

 

Christian Gore (00:21:26) - Sure it is G-1 Capital Partners. Com and I believe our Instagram handle is G1 underscore capital and our LinkedIn should be G one capital.

 

Sam Wilson (00:21:37) - G one capital partners.com will make sure we put that there in the show notes. And Christian again thank you again for your time I appreciate it.

 

Christian Gore (00:21:45) - Fantastic. Thank you Sam.

 

Sam Wilson (00:21:47) - Hey thanks for listening to the How to Scale Commercial Real Estate podcast.

 

Sam Wilson (00:21:51) - If you can do me a favor and subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcasts, whatever platform it is you use to listen. If you can do that for us, that would be a fantastic help to the show. It helps us both attract new listeners as well as rank higher on those directories. So appreciate you listening. Thanks so much and hope to catch you on the next episode.