george grombacher 0:00
Come on let’s lead Rei and welcome our guests strong and powerful Adam Kaufman. Welcome, Adam.

Adam Kaufman 0:18
Thank you for having me. I’m excited to be here today,

george grombacher 0:20
excited to have you on Adam is the co founder and chief operating officer of Arbor crowd. They’re an organization breaking down the barriers of entry into commercial into real estate investing. In Adam, tell us a little about your personal life some more about your work and why you do what you do?

Adam Kaufman 0:39
Absolutely. So I am born and raised in a real estate family. My father is the Chairman and CEO of a publicly traded real estate investment trust, all of my family members, for the most part, work in real estate in different areas. So some could argue real estate is in my blood, it was very common conversational topic around the dinner table growing up. And you know, just really was, was a part of my life. With that said, I started overcrowd a commercial real estate crowdfunding company, in 2016, we launched our first deal in 2017. As part of the arbor family of companies, you know, we have shared leadership across the board, or was an institutional name being a publicly traded REIT, it made sense that, you know, we would, we would leverage that to get this company going. And the reason for creating the company was pretty straightforward and simple. Through the passage of the jobs act, I recognized that there was a new class of investors that for the first time, could have access to invest in commercial real estate opportunities, leveraging technology for the comfort of their home. And it was pretty clear and simple for us at that point.

george grombacher 2:01
Nice. So I appreciate that. So so the Jobs Act goes through, or perhaps this was something that you were thinking about previous prior to that going through? How long did it take you to sort of figure out, for lack of a better term, just the moving parts of how to structure the actual thing.

Unknown Speaker 2:21
We took a pretty cautious approach in the beginning, and we still do in terms of our Geo selection. But going back to structuring, you know, the Jobs Act past 2012, you had the a lot of companies, and it was most favorable, I would say, for real estate investing at that time. But a lot of companies in this space come into existence in 2013, and 14, I was very aware of what was happening at that point in time and following it pretty closely. Recognizing that, you know, the retail investor, accredited investor, non accredited investor could really come in and invest. However, the Jobs Act was pretty simple, and that it removed a ban on general solicitation, it did not give a give a direct license, as opposed to removing a restriction that was dated. So I figured that there was going to be a lot of change a lot of settling information in the industry, which is exactly what happened. In 2015, you had the reggae model come out into into existence with a little more ability there for certain platforms. And as the industry molded and melded and settled, which still just in its infancy stages of doing, I was watching closely on the sidelines until about 2016. When I recognized that I thought it was the appropriate time to enter into this space, there was just enough traction, just enough time between the passage of the Jobs Act and what I was seeing happening in the market, that it really only felt natural at that point in time.

george grombacher 3:52
Nice. Well, I certainly commend you for your patience, I imagine that probably a lot of companies that tried to get in really, really quickly. And we don’t need to talk about them, but lots of opportunities to to certainly make mistakes or to do things wrong or to be victim to to the changes that that you saw coming.

Unknown Speaker 4:11
Definitely I think the industry is still ripe for consolidation today. But we’ve seen a lot of consolidation, a lot of fallout over the past few years. And you know, just last week, I did a panel with a bunch of my competitors. And it was interesting to see who was on that panel last week versus three years ago, and how the industry has changed who has held out the reasons why. And even throughout the COVID pandemic. It really tested tested the the

george grombacher 4:39
tree. Oh, I can’t even imagine. So. Alright, so commercial real estate. Tell me about what it was like prior to Arbor crowd if I wanted to invest in commercial real estate as an ordinary investor or was it even possible

Unknown Speaker 5:00
It was possible. But there were high barriers to entry depending on what way you were looking to diversify your portfolio. So prior to, you know, crowdfunding and Arbor crowd, and I’ll just I’ll just say we specifically focus on multifamily and workforce housing, which we think is the bread and butter of the industry. That’s our expertise and experience prior to overcrowd. And that’s, that’s support that’s in my blood. So it felt natural to focus on that asset class, class and property type going into creating this company. But with that said, the only real way to access those types of investments are pretty traditional. One, you could go into this space and be an owner operator, obviously, that’s a career move, and a big, big one at that, too, you could know somebody who’s an owner and operator, that’s a friend of yours that allows you into some deals, also difficult, pretty pretty, you know, would require a lot of personal connection. Three, you could enter or jump into some private equity, you’d have to really know the private equity space, get information and trust people also have the high minimum investment requirements to go in. But I’ll caveat that with obviously, there’s not going to be individually do selection, you know, you’re really buying into the principles of performed. Number three, you could really rely on the equities markets and trade on publicly traded REITs. But again, you’re you’re relying on the equity markets, you’re buying into a company and understanding not individually to selection. And that’s outside of you know, individual properties, of course, so different ways to enter some really high barriers. But at the end of the day, it really was about being in the know. And that’s what crowdfunding is taking away. It’s allowing people who are not as in the know, to have that access and be able to enter deals, hopefully transparently, with good quality sponsors, hopefully as well.

george grombacher 6:56
Awesome. Okay. So had to be in the know. And I appreciate you breaking all those down. And so now now, here we are today. Tell me about the experience.

Unknown Speaker 7:08
It’s an interesting one that’s happening right now, because you have varying players in the space with varying levels of expertise in the underlying product. And that’s real estate. And I’ll I say this, and I’ll say it again, and again, because I think it’s something that people really need to understand prior to making an investment is who are you partnering with? What is their experience in commercial real estate? Is their platform identifying as a technology company? Or are they identifying as a real estate company. And that’s a really important nuance, because at the end of the day, the success of any platform is dependent on their expertise in the product. And the underlying product is real estate. And to be able to present the best quality deals on your platform, you need to understand that product, need to understand who you’re partnering with, if you’re, you know, presenting different sponsors deals on your platforms, it’s important to really be able to assess those deals, assess those sponsorships to present great opportunities. From the investor standpoint, they need to be asking themselves those questions. And on top of that, they need to be asking themselves, am I getting the information I need to make this investment decision? Transparency is key. And different platforms have different levels of transparencies, different models exist out there. And it’s incredibly important to be able to feel comfortable with understanding your investment and who you’re partnering with.

george grombacher 8:31
Yeah, I think that that is Sound Advice right there. Probably with whatever we’re doing, but particularly when I imagine there’s probably new opportunities to do this kind of thing coming online all the time. So making sure that you are in fact, working with a real estate company, and not just a tech company or a tech enabled company that is now in the real estate space. And then the transparency piece. When we’re talking about transparency, how how much i i need to understand the contract that I have will just just just just walk me through that transparency piece, what do I need? What do I need to insist upon when it comes to transparency when I’m doing a deal like this?

Unknown Speaker 9:21
Great question. And at the end of the day, there are different platforms that different models. So transparency is dependent on the model. But if you’re operating in a platform that has the ability for investors to choose to buy into a fund structure, you really need to be doing your due diligence on the company presenting that opportunity, and what their goals are for that fund. So if you’re getting drawn to that site through a Google advertisement, and you get to a tear sheet that has pretty broad and limited information that takes About a paragraph or a page, you need to really sit back, assess the company and what they’re presenting. If they have a track record, dive into it, or ask for it, and try and get on the phone with someone at the company to ask more questions. That model is a little tougher, because there’s a the deals have not been identified. So they’re broad strategies. That’s why it’s important to get a familiarity with the company itself. If on the other hand, you’re investing with a company like mine, where we identify the deals prior to syndicating them out to crowd investors, so we’ve identified and what’s unique about us as we actually closed on the transaction, taking on that risk with affiliate equity, before we syndicated out to the crowd, you need to be able to ask yourself, Am I getting a basic understanding of the deal, the financials and the market? We put together extensive materials, 3040 page, presentations or slides? On the deal. We’re here to answer phone calls for anybody who has further questions. We do webinars, we do. We do videos, different types of materials to get people educated, I will say, to make an investment with us, you do not need to be an expert in commercial real estate at all. Some people go through all these materials with with a red pen and ask a tremendous amount of questions other do very little. But you need to make sure that the information there, once you make the investment, that’s when our relationship first begins with you. If you can go back, and if you do have questions or want to track things, and you can go back to that information on the onset of your investment. That’s great. That’s important to see how things are tracking to make sure you have access to that. Those are the things that you really should be on the lookout for, again, with the backing of who the company is, what’s their experience, and who the sponsor is.

george grombacher 11:54
Let’s say that makes sense like that we all need to take personal responsibility for being better consumers of our investments, whatever they may be, and understanding all the points that you just laid out who it is that we’re going to be doing business with, and, and spend the time to actually read through everything. And when you have questions to ask them and make sure that the people can actually answer your questions. So I appreciate that. You mentioned deal selection, a handful of times a couple of minutes back, tell me more about that.

Unknown Speaker 12:25
So you know, there’s a lot of companies out there who are trying to be many things to many people, as somebody who has real estate in their blood, I recognize that it’s a very difficult place to be in. That’s why we focus on multifamily. We love the resiliency of it. One, but also we have that great expertise in that area. So in terms of asset classes, an asset selection on the asset class basis, you know, is the company that they have experienced that they’re presenting to you, retail, hotels, commercial and multi on I breakout multi? They’re a little bit, what’s their expertise? How are they diving into each of those asset classes, you need to ask yourself that, in the in over the COVID pandemic, multi and an industrial have performed the best. That’s been something to note. And a lot of investors are flocking there today, in terms of actual asset selection within that picking good deals. On picking the right deals. It’s a very competitive environment, there’s a lot of capital on the sidelines. And that’s where we’re uniquely positioned through our relationship with the arbor family of companies to access top quality deals and top quality sponsors based on our presence in the market, and relationships in the market that have dated back for 20 or 30 years 20 to 30 years now. That’s unique, something that you know, I was at a conference last week and everybody was talking about how everything’s happening off market. We have a great off market presence. We’re able to get deals done and operate based on a relationship behind the scenes to get quality in this competitive environment. Nice.

george grombacher 14:09
So I go to the website, Arbor crowd, you can give me the actual website. And I say okay, I’m interested in in starting to invest. How does that process work? minimums, maximums, all that kind of stuff.

Unknown Speaker 14:28
So you go to Arbor crowd.com. And you create an account. That’s first and foremost. From there, you subscribe to our emails and alerts for new deals that are coming up, you’ll be taken to the deal page. We’re very selective in the deals that we present. So there may not be a deal on the very day you sign up. However, that’s why it’s important to register because when you do, you will get notified when we have a transaction that goes up and they typically get sold out very quickly. So you create that account to get alerted at of a New Deal. You had the information on that deal. And you can go through the investment process, the investment processes are just a few steps. Depending on the information that you have readily available, you can do the entire investment process in 20 minutes. Or it can take you a day or two if you don’t have your information at hand. But basically, we target accredited investors, people who make $200,000 or more a year 300 with their spouse, and you are able to make the investment with us. And it’s also about time, if you have questions, if you have things that you want to ask, you know, that can you know, go into the process, we’re here to answer your questions. It’s very important. And like I said, we really believe that once you make your investment, that is when your relationship has just started. And we pride ourselves on being asset managers, because we manage transactions for you. We can go when deals we talk to sponsors regularly, we get financial from the sponsors regularly, we go to properties while we’re managing them all very important things. And for example, just just last year, one of our business plans took a turn in the transaction, the sponsor felt that it should go in a different direction from what we initially presented investors, we were able to go to the negotiating table and negotiate a favorable exit for investors, given the change in the business plan. That’s an asset management flex, that is not something that all platforms do. It’s something we pride ourselves on doing with the background and expertise in the commercial real estate space. So we’re partners, it’s a pretty simple process, I would say. But we feel very strong in our ability to manage. Nice,

george grombacher 16:32
what is what is the time horizon? When when when we look?

Unknown Speaker 16:40
Good? Yeah. So we usually we usually look for projects that have about a three to five year hold period, I think obviously, it differs based on the type of deal. So if it’s a value add deal versus a construction Deal, deal in a corner market, that’s more cash flowing, you know, a deal in a that needs a bigger list and a different market. It really depends. Our minimum investment has been 25,000, on up to 35, or even 50, depending on the deal, and what the size of the raise is. So it varies. And, you know, it’s it’s all about finding the right deal as an investor that fits your portfolio.

george grombacher 17:24
And what is for lack of a better term, the expectation of of returns over that three to five year period, how does the actual how does what what can somebody expect or potentially anticipate.

Unknown Speaker 17:39
We look for mid teen IRR, returns net. So and the multiples probably 1.8 to 2.2 over that period of time we can get that is incredibly, those are incredibly good projections to be in. And that’s why you know, deal quality and finding those deals that meet those those projections are it’s tough to come by but something the we are committed to and that we do

george grombacher 18:05
nice. And at the end of the whole period. Does my investment automatically get paid out? Or can I have the option to roll it into a different deal.

Unknown Speaker 18:17
So if there’s another deal on the at the end of the whole period, again, it’s real estate, so things can change. Those are projected hold periods, sometimes the deal gets sold earlier, sometimes later. It depends on on the environment and and where we’re at in the market as well. So those are projections don’t hold us exactly to it but rough and revise to be pretty pretty within the ball there. At the end, if you would like to make a new investment in commercial real estate. That’s great. We certainly encourage that there’s the opportunity at that time. But again, it’s knowing your portfolio, knowing what your financial obligations are and where you’re looking to be. If you want to decide to do that.

george grombacher 18:58
Great. Well, Adam, people are ready for your difference making tip. What do you have for them?

Unknown Speaker 19:05
Understand your portfolio and diversify with commercial real estate. It is a great thing to have tick reacts as a hedge against inflation. Where we are in the environment today, there’s a lot of inflationary concerns and I couldn’t encourage it more strongly.

george grombacher 19:22
Well, I think that is great stuff that definitely gets come up. Adam, thank you so much for coming on. Where can people learn more about you and how can they engage with Arbor crowd

Unknown Speaker 19:33
thank you for having me. You can go to Arbor crowd calm, create an account and become a part of our community

george grombacher 19:38
of it. If you enjoyed this as much as I did, show them your appreciation and share today’s show with a friend who also appreciates good ideas go to Arbor crowd calm it’s a RBO our crowd.com create the account and subscribe to the deals and get started. Thanks good Adam.

Unknown Speaker 19:57
Thanks for having me.

george grombacher 19:58
And until next time keep fighting the good fight it’s we’re all in this together