EPISODES
Episode 21.
Darion Dunn, Managing Partner at Atlantica Properties
Plenty of people cout and noble purpose in the real estate world, but my guest, dairy and done of Atlantica Properties, actually lives it. Dairyen and I talked about his civil engineering background, plus his pathway from Sfar to multi family and the ever elusive a and D world. Really, most importantly, in my mind, we walked through his focus on providing affordable housing opportunities in the Atlanta market. 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. I’m joined today by dairy and done, dairy, and thank you so much for joining. Thank you for having me, Dalton. So you’re based in in Liliana and I want to go ahead and hit you with the first question right away. You and I had very different college graduation days. I’m actually I’m repping the team brand right there as we sit. Go Firm and University Erman. Okay, that’s yeah, but you we had very different college graduation days, right. I was doing the normal college graduation day thing. You were involved in real estate transaction around your college graduation, right. That that is that is correct. It real estate was something I knew I wanted to get into when I was in college. When people ask you when did you start real estate, many people are referring to when did you do your first transaction? I really consider when someone starts real estate is when they start engaging and immersing themselves in it, and I was doing that in college, my Sophomore Year of college, so by the time I was graduating, the day I was graduating, I was ready to do my first transaction. I went to go to work the Monday after I graduated and I also was doing my first deal. So I was ready to start my civil engineering career, since I was a Georgia tech engineer, and I also was ready to jump into my first real estate fix and flip do. I’m glad you brought up the civil engineer background because that has to have played, I would imagine, a pretty significant role in your real estate world, the way you view things like. How has that hyper technical degree played into your real estate trajectory? Yeah, it’s been really beneficial. Most folks that get into the real estate field are usually from the finance background and I’m one of those guys that got into real estate and I’m from the kind of the construction, technical engineering background and even though the finance guys there’s a lot more of them, there’s a level of knowledge. When you have the technical background that really helps you along the way, especially when you’re young, and real estate contractors can’t talk over your head. Engineers and architects really can’t talk over your head because you have that same technical experience. I find myself many times actually giving advice and giving notes to my actual architects and engineers because I’ve done that type of work for many years. I worked as a staff civil engineer, so I was doing grating plans, I was doing, you know, waterline sewer line plans. So it’s something that I went into civil engineering at Georgia Tech because I knew I wanted to have a professional real estate career and that was the best way to have that background. And also my father ran a civil engineering firm in here in Atlanta, so it was just a natural progression. Yeah, now that makes complete sense and you definitely had a massive lag up getting into the real estate world. Like you said, most people approach it from the finance side and you having that ultra technical background without having to go through the experiential learning right of like these issues with this contractor or this architects like you are able to really understand it. A D back into Mike standpoint, everything that’s going on right out of the game. That’s the the Finan side of it’s easy. It’s just itelfs and stuff. So as long as…
…long as all that pencils out, it’s you go. So the the harder part is the actual execution on the property side of the fence. So I think that flows into Atlantic of properties. So tell me a little bit about your group. When what y’all are doing, what’s your focus is? Yeah, so Atlantic a property is a company that my brother and I started in two thousand and ten. So about twelve years ago, when I graduated college, I was doing fix and flip deals on my own and my brother, who’s one year younger than me and also a Georgia techa lum, he was doing real estate on his own. So from about two thousand, two thousand and one until two thousand and ten, we were actually working individually. He was working at his job, I was working at my job and we were doing real estate separately as well. And then during the downturn in two thousand and eight and nine, we saw an opportunity to come together to start doing real estate together. So when all the houses across America, including Atlanta, were really cheap after the downturn, we used our money and our savings from our jobs to start buying real estate, and that’s really where Atlantica Properties was born. We started buying homes, doing some flip deals, and then we started buying to keep, you know, buying to hold, and we still own today, still many of those homes that we bought. It got fifteen, thou twentyzero dollars. That are worth, you know, much more than that today. We still own a lot of those homes. And then we grew the company to start buying multi family and then today we have now graduated to doing development, doing new construction development. Through some partnerships and jv deals, we have started to get to that highest level of real estate where you’re actually building from the ground up. Yeah, it’s a whole whole different world on the land and a and e side of the fins to so how many years is from the first SFAR deal you did to call it today? Yeah, I would say it is twenty years, because I would consider my first transaction probably in two thousand when I graduated college and then today, you know, being twenty years later, you know, and during that time it’s just been this steady ind you know, this steady increase of the type of deals were doing, the volume we’re doing, the sophistication of the capital, where Leban one capital has played a major role, and I know we’ll get into that. It’s really just been the volume and the sophistication of the deals and even some of the partnership. So it’s been a twenty year journey from me, from graduating till today, and it’s been just a learning lesson in the one of the biggest lessons I tell folks is that you just truly have to embrace the process, and that sounds cliche but it’s so, so true. It’s not about the transactions, because transactions will come, transactors will go, but it’s really about the process and learning. So some of the deals, and if you talk to any real estate guys, some of the deals that you learn the most on or deals it didn’t go that well that you ended up getting under contract but it fell through. You learned so much on deals, not just because you close them and you took ownership of them or you flip them or you built that thing. It’s just the process. We’ve really had a great twenty year process and there’s been a lot of transactions along the way, but it’s really about up the Tweeny, your journey we’ve been on. I love that viewpoint, that kind of philosophy, and we promise I won’t take us down a philosophical rabbit hole. But the idea that the from an experiential learning standpoint, like everything that happens in life, you have you can, you can and I feel like some people can make the decision to be a victim or look at things neatly, but you have to look at everything as a lesson, right, you just have to think and pull pole experiences, pull lessons out of experience. It’s right. No Change Your viewpoint. Then you just look at all of this as, like you said, kind of like one building block. It’s on the next one and it’s going to you know, it’s all for the better benefit. And I don’t mind going now philosophical rabbit holes because that’s that’s where I live. You know,…
…even though we do this technical work, bricks and sticks and real estate and finance and deals, me and my partner, my brother. We truly do try to make sure that we understand what’s important and we always try to be at thirtyzero feet to understand like, why are we doing this, whether it be this deal in terms of a financial standpoint, in terms of who are we helping? What neighborhood are we helping? How are we growing the company? Why are we doing this? Versus that alternatives analysis. You know, if you’re doing something, that means you’re not doing something else. You know. So it’s not even about what you’re doing, it’s all the other opportunities you know, and they that you’re not taking advantage of. So we are always very, very conscious about out what we’re doing. So it’s not always about just the technical transaction or the real estate deal. It’s about why are you doing those things that you’re doing right now? So we actually focus on that a lot of the higher minded things in real estate and life in general. Yeah, you teat US up for this conversation about digging into your why, right. You. You and Atlantic big believer in buying and holding really providing opportunities in Atlanta and true opportunities for people and helping tamp down rent growth and stabilization is a focus for you, even though you are a for profit firm. So these you you make a couple of pieces a real focus of your mission that are kind of counterintuitive to, I feel like the mainstream real estate investing. Pull every single penny you can get out of every single project. You know, not not naysaying any particular school of thought, but you have really positive, holistic view and talking me through a little bit how you made the decision and some of the examples that you and I have chatted about previously. Walk me through that. Well, I think in life in general you have to be principle based and you have to have that why and then that will lead your decision. So I feel, again being philosophical, I feel that all decisions are already made if you’re filtering it through your principle. So you have your principle pulls with you at all times. So when a decision comes to you, technically the decision is already made. Is just you don’t know it yet. You know. So a circumstance comes up, I’ll have a decisions to make later today tomorrow. Technically those decisions are already made. I just don’t know it because I haven’t seen the circumstance. So we built our company on that principle of let’s put our principles in place so then when things come and opportunities come, they will natch. We will naturally know the answer. Will naturally know the route we need to take, go left or go right. So the principles that we have our affordability and stabilization. That’s what we take into our real estate deals, whether they be single family deals are multifamily deals. We want to make sure that families can stay in place and not have to suffer from transiency and be moving every two to three years because the rent is going up or they can’t afford their home. So that’s one of our principles that we have built the company on. So we have the buy and hold approach so we can actually accomplish that. So, because that’s our principle, we want to keep rents low and to have the neighborhood stabilization. We need to have a long term approached our real estate deals. We can’t necessarily get in and out of every deal in two to three years because that cost basis is going to keep going up for the future owners of that property, which means those tenants, if it’s a rental deal, are going to have to keep paying more to keep up with that rising cost basis. So many of our deals in our portfolio we have owned probably for ten plus years and neighboring property is, whether they be single family homes or multi family properties, have to charge much higher rints than us and actually probably are making a smaller margin. They were charging higher rents but acting making less money just because they bought it at a higher basis. So there’s nothing against there’s nothing inherently wrong with buying and selling frequently. There’s nothing inherently wrong with that, but you have to have some landlords like myself that are staying in…
…for the long term so you can keep rents down and keep families in place for the long term as well. Yeah, what do you think? I mean that that has a big community impact and you a Lanka are you know, you’re not dealing in small numbers in terms of units, kind of like we’ve talked about, kind of seventy two home portfolio that I know only one capital side. We finance with you all, and just what’s I guess I’ll lie and I’ll take us down the philosophical rabbit home. But what’s what’s the what’s the end goal? They’re like. What’s the core piece of that mission? It’s to really Garner those partnerships and we consider our tenants or if we’re selling something, the folks that buy are buying from moust true partners and not in a sense of just to say the right thing and have a corporate tagline. We could not do what we do without those partners. So if you’re a partner of mine, why would I want a deal that only benefits me, that only has me profit or prosper from that? We have to take the approach of we can make money and do well while we’re doing good. So when we purchased in two thousand and Nineteen, seventy two single family homes, rental properties from a housing authority here in Metro Atlanta, we went in with principles. We were actually bidding on this with other, even bigger investment groups. But when I pitch to this housing authority, I want to convert all of these seventy two rental properties into stabilized owner occupied properties. With that pitch they sold us to deal and that deal had built in profit in it because we were buying it from a housing authority which wasn’t trying to sell it at the top value. With that principle we won that deal. So we almost had our profit built in. So we made money. Myself and investors made a lot of money, but we had the approach of I want to create wealth for seventy two new families. So when we took that, that principled approach to that deal, we were able to accomplish a partnership type approach to the deal where we could make money. But then the folks on the other side of the transaction, the folks buying these homes, can, in essence, have stabilized housing for the next thirty years for the next generation. They can hand it off to their kids or their grandkids. And we finished selling those homes off in two thousand and twenty one. It was a two year initiative of buying these homes selling them off to homeowners. We gave first right to refusal to the tenant in place and many of those tenants bought the home they had been living in and been paying rent. And many of those folks, because interest rates have been really low the last couple of years, their mortgage was cheaper than the rent they were paying us. They literally were paying less than what they were paying in their mortgage just because rates have been so historically low. So it’s one of those things where I made a profit off of that deal that that family has a lower housing cause and they’re going to benefit from the appreciation down the line on that home. So it’s something that if you take that partnership approach instead of the antagonistic approach to real estate, it really does benefit a community and that’s what we’re about. And if you have that principle to approach, you separate yourself as well. We don’t want to be another just transaction or real estate company, because there’s tons of them out there. When we approach a situation we say how can we make a bigger impact, and when you do that, folks actually choose you and actually want to work with you. So we also see it as it’s just a strategic advantage. More companies want to partner with us or work with us or do deals with us because we’re not just about making money. So it’s something that is not just, you know, to give ourselves a pat on the back that we’re doing well. It actually has such a strategic advantage for us. Yeah, money is not the most important thing in business. Trust is the most important thing in business. That’s as you you have to really do somebody before you even have a discussion about money. All right, like and I feel like oftentimes we some you know, oftentimes one can get fixated on dollar signs and you have to look at the relational part of it.
And thanks for bringing that full circle. The philosophy makes sense to me now completely. That the the view point of WHO’s on the other side of the table and that partnership approach. That’s really the glue that bonds it together. So that’s really that’s great. Yeah, let’s see the short, medium along curve benefit all in it’s so I will not I’m terrible about switching gears going all over the place. Yeah, in ball brain. So talk to me about a and D. All right, when did you? When did you make the jump into a and D? It is, you know, on the Lema one side, we just partnered last year with this group land, a d group, Satanta, that a Charlotte, and that was our way of tackling the ad problem, because we would have folks come to us and it’s just not in our wheelhouse? Yeah, like we we would do ground up construction on SFRS, but land a d is just a whole different beasts for us and something that you know boat. Could we have dedicated resources to it? Yes, but we wanted to focus on could of our bread and butter in this partnership came up at the right time. But for years and years and years, all right, like Courtney Newman’s who’s good friend of mine and colleague and he’s kind of ahead of sales for us at Leama one. I would always reach out to him when I was running the broker program of like Hey, do you know anybody, because corny knows everybody. Do you know anybody who can help on the AD side of the fans? And it was always like it’s just it’s it’s a tough world. So it’s a bit of world. So talk to me about kind of your entry into that world. What the pain points been or has it just been a seamless kind of angelic choir? Everything is going great and while it’s definitely acquisition and development, is definitely a different world and we can kind of talk about the reasons why. One, because there’s more risk involved, because you’re truly envisioning something. You know, it’s like when you were buying a home or you’re buying an apartment or office building or Strip mall. It’s there, it’s performing and even if it’s not performing, it was performing at some point. So you literally have a history. Acquisition in development is something where everyone, the developer, the financiers, everybody, is taking a big risk because you can’t to look to something that has happened. You can maybe look around an area, but that piece of property nothing has happened. So it’s so different in the type of capital and the type of investment and the type of time that it takes to do those types of deals. We knew we wanted to get into it simply because the inventory in Atlanta is just so scarce for single family and multifamily. So if we knew that that is the only thing we were chasing, a single family multifamily acquisitions, you know, we wouldn’t have the pipeline that we needed. So we knew we wanted to graduate into doing development. So that’s one of the reasons we went into it. We knew it was going to be hard because I come from that world of civil engineering where I was working with many clients I was. I was doing there, you know, engineering plans for developments, so I knew the toughness of that world and it’s something it’s just really that risk reward. There’s so much upside to doing development and in acquiring land, developing land, putting in the infrastructure. There’s so much upside simply because there’s so much risk involved. So I would definitely say it’s not meant to be for the new investor, but it’s something that if you have the right, you know, skill set and you have the right partnerships, you can get into that world and it’s something that we always talk about the power of partnerships. We’re doing it with strategic partnerships, you know, folks that have done new construction, multifamily and folks that have done subdivisions. So we’ve linked up with them to kind of cogp deals, to be CO general partners on deals, so we can bring our knowledge of real estate or that market and financiers they can bring the knowledge of that construction and the development side. So it’s something that it’s been pretty smooth for us, but…
…that doesn’t mean that it’s been without its regular, you know, kind of bumps. In the road, because that’s the world that you’re in. You’re literally creating something that didn’t exist. So you don’t know what’s around any corner just because it’s it’s literally raw, it’s undeveloped. Yeah, it is. It’s a clearly different beast and I want to talk a little bit about kind of the development side and your world on some town home and multi family projects, really the Grove Park neighborhood, which which is home to really a big Microsoft projects that’s going on, and talk to me about what you’re doing in that area, why that area is significant, you know, and and really bring it back to your commitment. You know, you’re developing town homes there and you have some of those set aside for more affordable housing, and it just goes back to many investors may look at that and say you are leaving money on the table. Are you doing and yeah, I think you’re responsibly. Yes, we are, and we’re doing it purposefully and thoughtful. So talk to me about that whole project and the area. Yeah, so there is a development project that we’re doing in the Grove Park neighborhood of Atlanta. It’s on the west side of Atlanta. It’s an underserved area that’s kind of a, you know, the last you know, kind of oasis of Atlanta that is still has some cheap real estate. It’s inside of the city of Atlanta proper. Microsoft got word of this neighborhood and they recently, a couple of years ago, bought large parcel of land and they’re putting their new headquarters there. So we about a year ago put a five Acre piece of land under contract. We had to go through the entire rezoning process. Approximately one month ago we finalize that year rezoning process. On December six of two thousand and twenty one. We got the rezoning. We got the city of Atlanta Council to prove the rezoning of this residential parcel to be a multifamily parcel so we can put more density on there, to put town homes on there. So we’re going to put forty three town homes on their thirty three of them are going to be market rate and ten of those are going to be set aside for families making eighty percent area median income or less. The reason we did that is because we knew we couldn’t get the density that we were asking for without coming to that neighborhood and actually saying we want some homes in this new development that actually can be afforded by the legacy residents of this community. When you’re coming into a neighborhood being a developer and you’re building homes that those people in those neighborhoods could not afford, you know that’s how you get the big bad developer. You know, you know title and it’s and in Atlanta, the city of Atlanta, and it’s like this in many jurisdictions, you have to get the approval of neighborhoods. In Atlanta they’re called neighborhood planning units. Inpus you have to go before the Neighborhood Planning Unit and get their approval of recommendation and then you go before the City Council, the Z owning review boards. So you don’t want that neighborhood to say we don’t want this development. So we went into this deal self imposing these set aside of units where ten of these are going to be sold to families making a maximum of this amount of income, or the rest of them can be old and market rate. They will be probably sold for very high luxury prices, but we’re going to make sure that that community has homes that the legacy tenants and homeowners could afford. So again it’s that approach of to get the density that we wanted and to get the rezoning that we want it, which would benefit me, I have to give something to my partner and my partner in this case is the literal neighborhood. This neighborhood needs to approve this rezoning. So here’s where I’m offering team. So it’s that same principled approach to let’s create a partnership. Yeah, it feels like there’s a strong case that could be made, and not that not to mix of business and benevolence too much, but a strong case there could be made where your business philosophy and the partnership approach has…
…generated more revenue than if you would have taken just kind of an off the shelf vanilla approach and been stilely dollar in Oroi Focus that it has afforded you opportunities. It really sounds like that. That’s kind of a big competitive advantage. I would tag it as like what we’re on the Lema one side of the fans. We’re always looking at, you know, as this commodity becomes excusing. This industry becomes more and more commodity YEP, like we set ourselves apart above and beyond rate, fee, leverage and basic things. Those are all table steaks that take its to the game. Everybody has one. So it’s how are you different? And and and then that’s how you really level up as having a real different, positive competitive advantage and kind of the mission on Atlantica. That’s so true. Seems to be seems to be just that. That is that is really true. You said it best. We take the approach that your expertise in whatever industry you’re in, and in our case is real estate, that’s par for the course. You know, if you’re doing this on any high level, you know that’s what’s expected from you. To No real estate, to know the market, to know deals, to know you know whatever it is you’re doing. But how do you differentiate yourself? And we knew we did not want to grow in the real estate industry. You know, swimming in the same water as everybody’s swimming and going the same paths. We go those paths that are less traveled, on purpose because they might be a little harder, but there’s a lot less congestion. So we have gotten a reputation in the Metro Atlanta area of being that thoughtful landlord, that thoughtful developer where we want to have affordability. We’re self imposing these things because it does a greater good and that has given us so many opportunities over the past few years. It’s almost every opportunity we’ve gotten. It’s because somebody sees our mission and saying we want to link up with you, we want to actually help you grow. You know, developers have come to us and saying, Hey, you want to get into new construction apartments, I’ve seen what you’re doing. You know the acquisition side. Hey, let’s team up. That has literally happened to us. You know big you know developers, major market developers, want to work with us because they see and they’re seeing what we’re doing and want to link up with that brand. So it’s branding yourself, not just to get exposure, because I’m not on social media. I’m’s not about exposure for that sake, but exposing the mission and not necessarily just yourself, just exposing that mission. If you expose that mission to make that the face of your organization instead of necessarily your own face. It can get you so much farther along and we’ve really benefited from that. Yeah, I thank you for real for being a positive lift in the industry. Are you mentioned kind of the big bad wolf developer and some of the mystereotypes that are around our real estate space. What you’re doing is really has a driven by noble purpose and that’s meaningful and it’s something that just is symbiotic relationship for you and everyone who was involved with you and your projects is really thank you for being one of the good guys. Super happy to have you on this podcast. Tell everybody they want to go see what Atlantica Properties is doing. where? Where can they go? Where can they what’s the website? How can they take peek? Yeah, if you guys want to contact us, you can go to Atlantic propertiescom. That’s the best way to get in touch with us. We have a contact US page. That email goes directly to my personal inbox. If there’s anything that you want to talk about, have questions or have any opportunities for partnership, you can get in contact this with with us on our website. Utiful Darian, thank you so much for carving out some time to chat with me off fer end. No problem. Thanks so much, at Alton. Thanks to everyone for listening. Take care. 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…
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