Daniel Angel


Episode 17.

Daniel Angel, Investments and Capital Markets at Apex Development Group

00:00:00 – 00:03:04

So this is a first and I am super excited. This week’s episode is part one of a two part sit down I had with Daniel Angel of Apex Development Group. APEX IS A real estate investment group based in Atlanta, Georgia, with origins in median Columbia. That’s Columbia and South America, not Columbia, South Carolina. Columbia has a very special place in my heart and I have visited a handful of times, but not nearly enough. In part one, we chatted about in house versus third party functions. How do you decide what you keep in house versus what you outsource to a third party, and really the progression from single family to multi family investing? Make sure to join next week for part two of my talk with Daniel. Thanks for listening. You’re listening to the real estate of things podcast. Welcome to the real estate of things podcast. I’m your host, Dalton Elliott, joined today by a wonderful guest, Daniel Angel of Apex Development Group. Daniel, thank you so much for joining. Thank you, Dalton, thank you for having me. This is great. Yeah, I know we had some time to catch up and this is the first episode of Two Thousand and twenty two for us. So it’s exciting to cruise into the new year on a high note. Before we get into the nitty gritty. You’re from Columbia, right, yeah, exactly where I was born in based down in South America. There you go. Yeah, we’re based in at least the day job, lemon capital. We’re based in Greenville, South Carolina, and good call out there that it’s not Columbia, South Carolina for my American friend. Columbia, South America. Columbia has a super special place in my heart. My wife and I set our vowels in Cartagena and we’ve been back down there. I am full of time since and just love the city, the country, the people, the food. I love the food way too much, the baked goods, posttrays. It’s always a problem. I have to fast every week before I go down there and I still end up putting on Tim Pounds. So the Columbian life is we’re in our late S, so thinking about retirement. Columbia is it’s on the short list. Absolutely love it. And off the podcast. We have to catch up and have to pick your brain on all the all the secret spots and tips and tricks. Absolutely sounds like we’re talking about the same place, because the same thing happens to me every time we’re back visiting family. I’m not from Carthagana, but great place, Awesome City, a lot of history down there. I’m from Nadine, another, you know, one of the main cities in the country and and yeah, you’ll have the same the same issue whenever you go down there and happy to share some thoughts about where to go and how to move around. I’ll hold you to it now. And now let’s jump right to it. So Apex Development Group. It based in Atlanta, Georgia. Just give me the run through of what Apex Development Group is and what’s your role is at the firm? Yeah, absolutely, and thanks again, Dalton. APEX WE’RE A real estate investment firm.

00:03:04 – 00:06:00

We’re focused and obviously the Atlanta Metro area, as you mentioned, and we are focused in residential investments. Started off in single family investment, strict flipping in our, you know, early days, and then shift over to more like a rental product, raising equity from investors via, you know, syndication structures and slowly but surely transitioning ourselves into the multi family world, as we say internally. Like our phase to or like evolution, you know, and that that’s been, you know, in a very small nut show our story. But yeah, that’s what we’re what we’re doing, raising equity and picking and evolving in as good as we can investments. Yeah, and this is kind of the real estate side of the fans. That’s not your first Rodeo careerwise, right. What were you doing before you got into real estate? Well, actually, I was born and raised in Colombia, but I had the opportunity to get my Undergrad in Atlanta, actually in the states, Georgia state. Once I graduated, I went back to Colombia and I held a few court uprit positions in, you know, investment banking, corporate banking, and later on I work for a couple real estate investment firms in Colombia, where I learned in different answt classes, because there’s no multi family and there’s no quite like institutional single family portfolios and Corombia. But I learned in more like the commercial real estate a lot of the hoops and loops of the investment world and structuring in the finance world, and that’s where, like every everything about my, I guess, Real Estate Passion started once I move back to the states. That’s for you know, the early stages and early it early steps of apex. Again, got it, and this is a kind of explain it to me, like I’m five question, but how would you explain to a kindergartener the biggest difference in analyzing property in Atlanta, Georgia, versus analyzing property and Mendis or Cartagena? Is it kind of super similar, you could run it off the same spreadsheet and assumptions, or are there some big, maybe not nuances at that point? Or there’s some big differences whenever someone’s looking at, you know, the kind of two pretty different markets like that? Sure, no, I mean it’s a it’s a really good question and essentially, like the bones of the analysis are similar. Essentially, you’re looking for, you know, I cost, you’re looking for an income and expenses, so that’s pretty much the same thing. That where the difference lands, essentially, is in the way how assets, or real estate assets, are valued in, or phrased I would say, in the two different countries.

00:06:00 – 00:09:00

So in the states, where we have a much more evolved or institutionalized structure or market, we go based off of cash flow essentially, or primarily in Colombia. You know, you do see a little bit of that starting but historically, and I think up to this point still, it’s more about comparables depending on transaction, transaction based. So it’s more like a price for square foot regardless of cash flow, which doesn’t really make sense for the institutional world and in essence it makes sense for Columbia just because there’s no institutional market to it yet, right. So it’s more like individual investors that are just buying assets here and there and then going off of that. So it’s more like the valuation or the appraisal process that varies. Other than that it’s pretty much the same thing. Diet. That makes sense. So one thing, you know, in doing some research, and I have a couple of the apex development decks pulled up now, I’m interested in how you’ve grown the business and developed in house versus third party parts of the business. Right, what you’ve chosen to keep, you know, within the direct control of staff on hand, versus outsourcing it to a third party. I think of the by day job at Lema one. Some of our most critical decisions over the timeline of our company have been what did we keep in house and what do we choose to rely on third parties for our servicing and construction management functions? Both of those are fully in house and those were tough decisions to make because the cost to build those functions out are large. It adds a whole other arm to your business and you know, looking through a packs know, planning and Development, project management, acquisition and sales, building, an interior design, investment management. There are many, many businesses within your business. So can you walk me through how that’s progressed over time and how you go through the kind of tea chart analysis of what do we keep in house versus what do we engage third parties for? Absolutely, and I think the parallel that you make with Lema is a great one because in as since it’s like the same train of thought that goes in our company for these kind of decisions. And I would start by saying our main business plan is value at investments. So you know, since there’s renovation or construction involved, that’s a good piece of the puzzle, but it’s not the only one. And you know, similar to you guys, where you decided to do servicing and doing construction management in house, where the industry tends to go the other way. It’s a very similar process for us, or it was is very similar process to us. You know, if we’re saying most of the value that we’re creating will come…

00:09:00 – 00:12:00

…from construction, it wouldn’t make a lot of sense to have that in a third party company, although it sounds to be, or it seems or normally is like the easier way or the easier route. So just as you said, I mean it has taken us a lot of time and effort to build a strong construction and renovation team. You know, sometimes longer, you know, we think longer that than what we expected or it’s taken a little bit more steps than what we originally thought. But in the end, once we see we have control of the product and the process to get to that product, it pays off right. So that’s one of the main things that we decided to keep in house and that’s like one of the first ones that you would tend to go with a third party in this kind of business. The other two, which we think our key, our investment analysis or like on the writing and I guess, like acquisitions. There are really good groups that can do that for you, but we think we have our own financial model that we build and we can like tweak around constantly and continuously as we go. We feel having control of that is always going to give us an edge and returns and at least in analysis, and you know, we tend to be faster to give an answer or to have like an answer to anyone that’s offering an asset to us. Same with the finance process, like that’s what I’m in charge of, like on the writing and then like invest relations and everything that has to do with finance or corporate finance, capital markets. Those are the main things that we feel are have to be in house. The only thing that we do with third party is property management, and you know, the reason for that is, first we feel that’s a trade that’s a lot more specialized at this point. At probably at some point, once we have a larger portfolio, we would consider having that in house. For now, having a you know, a good group with a good your account under management has been pretty much our decision on that for third party. The rest we have an house. Yeah, the third party property management, that what you just said. How you outlined it seems to be the thinking of most folks who are in the multi family space and even on the SF our side of the fence. Whenever you get above that ten property threshold, a really cross out of that tier, that nine d percent of investors or in into the more rarefied air. It’s a strange thing. It’s something that I try to step outside of my mortgage industry knowledge sometimes and look at it without any predispositions or kind of Schema, and it seems like the property management side should be one of the easier pieces, but it is. It is not. Yeah, it is its own, its own trade and it can eat away at your time. That probably be on the biggest resource that it can drain…

00:12:00 – 00:15:00

…out if it is not kind of executed flawlessly. And the best way to execute it falllessly is to have a you know, that be your specialty. So that’s it’s no surprise to hear from you that just one more tick in the column of Third Party PM is the way to go. You mentioned your underwriding model and I’m curious with how crazy and in the next episode I want to jump into the Atlanta market and do kind of a deep dive there, but with how crazy just American real estate has been that pretty much no matter what part of the country you’re in, not only on the valuation side but on the rent side of the fence. I am originally from Merles inlet, just south of Myrtle beach, South Carolina. Was Down there for the holidays and was talking with a friend who had their rent go up seven d percent, and that’s not a terribly uncommon thing. So you have all of these pieces of, I guess, inputs that are kind of constantly changing and they have been constantly changing over the last year, year and a half. How have you had to tweak your underwriting analysis and approach to properties throughout the last eighteen months? Yeah, and and I think these last I don’t know, eight to ten months at least, like post pandemic or post you know Covida. I call it post on. We’re not post pandemic yet, but you understand, have been the most challenging times for underwriting. Just to give an example, or last multi family ascid that we acquired at a hundred thousand dollar a door after three months, short, shy of three months, the neighbor neighboring property was going already for twenty five percent. More brokers will come back with you know, rent figures that that seem a little bit too optimistic and that’s where we feel we’ve been more cautious. Right. So, yes, like so you can move around as much as you can and you can make any deal look great, but we feel we’re going through, you know, sometimes of uncertainty in a lot of senses, like both income, expenses Capex, and we can talk a lot more about that, and we just try to be as conservative as we can. So in the past ten months we’ve seen more deals go, you know, through our desk and us not being able to pull the trigger, or even if we pull the trigger, we haven’t been granted any of these. But we just, you know, keep calm, keep going and just keep doing our thing, try not to move too many variables at a time, assuming things will continue as they are. So great to hear there’s people having ten, fifteen, twenty percent rent increases, but then if you don’t consider, you know, potential delinquencies, potential,…

00:15:00 – 00:18:04

…you know, people not paying, evictions and all that, then you can’t only see the shiny side of the coin, right. So we try to put everything in the same bag and and just keep it as optimistic, as reasonable as we can and keep going. So just as an example, our last transaction acquisition was in June, two thousand and twenty one. We haven’t been able to hit another one yet. We’ll keep pushing early twenty two and twenty two and we just are comfortable with what we’re doing. Yeah, the thankfully, I think what what I’m seeing on the day job side of the fins and we just wrapped up, you know, conference season which runs really set timber through the end of the year. So sitting in on a lot of panels with folks who are much more intelligent and more data driven than I. The positive things. It seems like there’s not a lot of thought that there’s going to be a precipitous drop off the cliff. You know, some markets are going to have, you know, more of a correction or cooling off and others. But it seems like the supply piece, lack thereof, is going to help keep home prices steady. So what’s going to happen? At the acceleration of appreciation is going to cool down to the normal in markets and then you really just have the supplied demand piece priced in, which is going to take years to catch up to, and even the most optimistic estimates. All right, and on that piece. You know, knowing that the value add part of the business is a big focus for you. Materials are a big focus for you, you and your firm. Right what kind of pains have you had or have you been able to be without pain? If you are without pain, you may have people with pitchfork showed up at your door because, whether it’s personally or professionally, self and everybody else I’ve talked to just has nothing but woes about trying to buy anything right now. Yeah, I mean absolutely, and obviously we’ve at that kind of challenge end of two thousand and twenty, or like second half of two thousand and twenty, and I guess like all twenty twenty one have been challenging in that regard. Starting with lumber. So we’re still as we spoke for we’re still doing single family renovations and our renovations are pretty pretty heavy lifting renovations where, you know, framing is a big piece of our budgets and that just like screwed everything and move everything around. So starting from there, going through, you know, windows, Trim Doors, appliances, you know. So it’s a matter of supply, a matter of what materials. So it’s been a challenge of being able to pre order have stuff in time, but also like being able to move budgets around, as well as repicking materials to whatever is available…

00:18:06 – 00:20:59

…and be able to stay consistent, or as consistent as possible, with the end product. That’s been our main challenge for the past twelve to sixteen months. Clearly, you know, we do have a very strong market for sale on one end, but then you have to figure it out on the other end to be able to have something out there for the market right. So I think that’s where our experience, our background or track record kind of like shines and and you know, if you’re able to put all those pieces together, you’ll be fine. If if not, then you’ll be in trouble. Yeah, that makes sense. Could you put a percentage to the amount of a project that you have to swap out? You had item a in the budget, but you have to go. You can’t get out of a for six months. Is it five percent of the project? Is Twenty percent of the project? How much of an average project? As being a fact, absolutely so. The more in depth answer to your question is there’s some materials it’s you can’t trop right. Example, lumber. You can’t choose to do your framing with something else correct. So with lumber it’s a matter of you buy what what’s available and you buy it whatever prize they have. So that’s about twenty five percent of our single family budgets. And so in twenty five our percent of our budgets we’ve had from a hundred and a hundred two hundred and twenty percent in price increases that there’s nothing you can do, just pay, keep going, close your eyes and go. And then in about twenty percent to twenty five percent of the rest of the budget right which is appliance, is windows, trims, stuff that you can switch and move around. We’ve had to do it. So and I would think the most, the worst has been applying since by far and it’s been just a matter of this brand’s not available, this model number is not that weiable. Oh No, wait, I only have one piece of the package. But then you know, you can’t move people in or you can sell the property without appliance. Is kind of thing, and that’s where it’s been most challenging. So it’s more stuff that’s in the consumer good space, where you have you know, you have all time high savings rates and we could, we could go down the rabbit hole of the why behind that and the massive stimulus that enriched to the world. But yeah, so it’s the consumer goods that are the harder ones to get the you know, you roll up to a costco and you can get appliances and you’re competing against consumers on those things, whereas I’m not going and buying a truckload a lumber because I’m not doing any real estate projects and I’ve no need for a trucolodle long right. So I think this is a perfect point that we can break, and I excitedly say break, because this is the first two part kind of series I’m having going on on this podcast. Right. We’re going to do one more episode after this. So,…

00:21:00 – 00:22:48

Daniel Angel, Apex Development Group, thank you so much for joining and everyone who’s listening, don’t go too far. Next week we’re going to have Daniel on for another episode. We’re going to dive deep into a little more about his business, talk through the transition from single family to multi family and do a deep dive into one of my favorite markets in this country, Atlanta, Georgia. Daniel, thank you so much for joining don’t. Thank you so much for having us and happy to have this one and our next episode with you guys. Thanks very much, I love it. Thanks everyone for listening and catch US next week for episode number two with Daniel Angel. Take care. Thank you. Are you a real estate investor looking for the right lender that can finance all your deals and help you scale? Lima one capital has the best suite of loan products in the industry, Barnet. Whether that’s fix and flips, fix and holds, building new construction or buying rental properties, they have incredible financing solutions for it all. A reliable, common since lender is one of the most important parts of your investment team, and that’s exactly what you get with Lima one. Let Lima one capital show you how they’ve helped thousands of real estate investor scale and increase their wealth. Check out Lima onecom or call eight hundred two five, nine, zero five n ninety five to speak with the consultant and preparation for your next project. Thank you for joining us today on the real estate of things podcast. Subscribe and tune in weekly for new content from the industry’s best. While we continue to unpack the nuances of this dynamic market. Follow US across social media for additional insights and analysis on the topics covered in each episode, and remember to rate, review and share the show.

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