Is it possible to start a partnership and to ink a $1.4 billion development deal just a month and a half later?
Neil Bertrand and his partner prove that it is.
Neil is the Executive Vice President of RGX Invest, overseeing the sourcing of new acquisitions, including sourcing and evaluating investment opportunities, asset due diligence, business plan development, financing, and closing. In this episode, he talks about their large-scale development project in Austin, Texas and breaks down what goes on behind the scenes.
He also shares his insights about opportunities in the development space, the current state of the market, and the importance of inspiring people to lead an impactful life.
[00:01] – [05:17] The Big Business in Development
- Neil talks about starting in real estate, starting a partnership, and getting the billion-dollar deal
- Why it makes sense more to build now
[05:18] – [11:17] Building the Ultimate Live-Work-Play Environment
- Neil gives us the details about Leander Springs
- Learn how they raised funds for this project
- Getting the best talent on board
- The risks they are keeping an eye on
[11:18] – [16:07] Inspire to Impact
- This is what they are doing to help educate aspiring investors
- Neil’s thoughts on the business side of mentoring
- Why you should figure out your “why”
[16:08] – [17:24] Closing Segment
- Reach out to Neil!
- Links Below
- Final Words
Tweetable Quotes
“If something is worth it, you make the time.” – Neil Bertrand
“Learn how to do things the correct way.” – Neil Bertrand
“The best thing about real estate? Anybody can do it. The worst thing about real estate? Anybody can do it.” – Neil Bertrand
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Connect with Neil Bertrand! Shoot him a message at neil@reitgroupx.com if you want to know more about Leander Springs and other exciting projects they are working on.
Connect with me:
I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.
Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on. Thank you for tuning in!
Email me → sam@brickeninvestmentgroup.com
Want to read the full show notes of the episode? Check it out below:
Neil Bertrand [00:00]
We want to bring in like-minded people, a very select group, and just kind of put them through a six-month program, where they’re analyzing deals and we’re explaining to them why things work, why things don’t work, you know, in terms of time, if something was worth it, you make the time, right. And that’s what we want from the people that we will bring in as these codes GP, I hate to use the word trainee because it just doesn’t sound right. You know, come stand shoulder to shoulder with us and learn how to do things that I hate. I’m going to use this phrase and I don’t care who gets offended, learn how to do things the correct way.
Intro [00:35]
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 [00:47]
Neil Bertrand is a 25-year multifamily veteran with experience across all asset classes and types. Neil, welcome to the show.
Neil Bertrand [00:55]
Hey, thanks for having me.
Sam Wilson [00:57]
Pleasure is mine. Same question I asked every guest who comes on the show, in 90 seconds or less, can you tell me where did you start? Where are you now? And how did you get there?
Neil Bertrand [00:55]
I started in the mid 90s. My wife got me in the business. And I had… I gravitated toward the financial side, started with the property management side, was naturally numbers-oriented. And it served me well.
Sam Wilson [01:17]
And where are you now?
Neil Bertrand [01:19]
So I’m with RGX invest, Executive Vice President and Partner in our assets. Ravi Katta is our CEO. We’re an Austin-based institutional-style, vertically integrated investment firm.
Sam Wilson [01:30]
And then how did you get there?
Neil Bertrand [01:32]
Ravi and I actually met two and a half years ago, and we were both asked to participate in something called the Texas Multifamily Executive Forum. I joke that it’s a group of owners, investors, C-suite guys, you know, a couple of private equity guys, and we meet every other Friday by Zoom. Half of the call is us griping about how everything is overpriced, and we can’t find good deals. And the other half of the call is, you know, where do we go to find good deals. So during the course of those calls about the first year or so of it, Ravi and I realized that we had a lot of the same ideology, same mentality, both long term, very ambitious guys with kind of desire to help other people, learn what we do, impact their lives and grow. February of last year, we made it official, teamed up. And within 45 days, we had $1.4 billion of new development under contract. Man, you know, the rest, as they say, is history.
Sam Wilson [02:27]
That’s, you know, nobody just wakes up one day, you know, says hey, we’re gonna form a partnership and then a month and a half later, you know, inks a $1.4 billion new development deal north of Austin, Texas. There’s a lot of things that have gone into that I’m sure that you’re downplaying. But let’s talk about that project. I guess out of the, you know, break down that project for us. Why do you guys see the opportunity to be developing now versus where you see we are in the market? I think we were talking about, you know, here before we kicked off the episode that you kind of see it as a party that you know, people think never gonna end.
Neil Bertrand [03:06]
Right, right. The analogy I use was a bunch of 18-year-old rockstar wannabes playing the clubs every weekend, thinking that the party is never going to end, right.
Sam Wilson [03:07]
Right, right.
Neil Bertrand [03:08]
When you look at the cities we’re developing in, Leander Cedar Park and Lago Vista. Lago Vista: 76% plus population growth since the year 2000. Median income for the entire cities pushes $90,000,. Cedar Park: 205% population growth since the year 2000. Again, six digit, you know, median incomes in the sub market. Leander Springs: fastest growing city in America, 761% population growth since the year 2000. City-wide median income is six digits. The opportunity was great, we were able to purchase the land for all these deals pretty much off market. The Leander Springs project was actually a development that was already in play and we purchased out the guys that had put it together. But you know when you look at what we can build these deals for in cities that have five and eight year projected growth, I mean, 2019-2020, 4% population growth alone for Leander, okay. And when you look at where a lot of the growth is situated in Texas, you know, Dallas and Austin are really getting, reaping the benefits of that, and Houston and San Antonio are doing very well. But to kind of answer your original question, why develop now instead of buy? We’re developing for much, much less than I can purchase a 2015 asset for in this market. And I’m talking in comparable locations, right? Half million dollar homes, six figure incomes. It just makes more sense right now to build. By the time, you know, you’re looking at a 2015 asset, relatively brand-new construction right. But guess what? Your appliances and are nearing the end of their life expectancy for an apartment community. Depending on where you’ve built, you’re probably starting to see some of those nice foundation issues that certain areas of Texas are known for. Your deferred maintenance is starting to creep in, right.?
Sam Wilson [05:10]
Right.
Neil Bertrand [05:11]
Do I buy for, you know, 330 a door? 2015 asset? Or do I build for 225 to 30 a door? It’s a no brainer.
Sam Wilson [05:18]
Sure. Yeah. I mean, just from a mathematical equation, it’s a no brainer. What about time to bring product to market? I mean, a $1.4 billion project isn’t a six month project.
Neil Bertrand [05:29]
No, no. So we, Leander Springs will be a six year project and kind of what this project is. It’s 78 acres, it’s going to consist of three apartment communities totaling 1600 units, over 1 million square foot of office and retail, a 250 room hotel with a 20,000 square foot conference center. And all of that will be centered by a four acre crystal lagoon. And this will be the only publicly accessible four acre crystal lagoon in Central Texas. So we’re basically building the ultimate live-work-play environment, right. And that’s going to be built in probably four phases. Phase one is going to be the lagoon, the first apartment community with the retail, get the utilities stretched out there, take about 18 to 24 months from the first shovel in the ground to full lease-up, right? With the way that the markets are growing, and the population growth, and the fact that we’re building such a unique product, you know, we’re anticipating a very easy lease-up. If you take a look at the national average right now, similar class lease-ups are hitting about 50 to 70 units a month in high demand areas. So I’m always cautiously optimistic. But on this one, I’m just optimistic.
Sam Wilson [06:42]
I like that. How are you guys funding this? I know you have a big background in the institutional space. So maybe this was just a hey, tee up the right partners, and then off you go. And we all get together and do it. But talk to us about that.
Neil Bertrand [06:56]
So a year ago, Ravi and I started a fund. And it was basically a friends and family fund, but only for accredited investors, $30 million fund. And we basically have used that money to purchase the land for these acquisitions. So we’re stable there. And yes, as we build project by project, we are engaging private equity groups and family offices, you know, from around the country and a few international groups as well.
Sam Wilson [07:23]
Right. And so you’ve already kind of got this pipeline warmed up. This is the project, this is what we’re doing. This is the expected capital. You know, it’s not committed capital, hard capital yet, but it’s people that have kind of given the preliminary nod that says, when it’s time, yes, we want to participate.
Neil Bertrand [07:37]
Right. And I’ll be honest with you, this is the only project and I became a VP of acquisitions summer, sometime around 2015-2016. This is the only project where I have the private equity groups contacting me or contacting Ravi, like, hey, you guys, you guys ready? You guys gotta pay the numbers? Because, you know, the city of Leander is offering us a, you know, incredible tax incentive. Obviously, they see the benefit to this type of project. You’ve got tech companies moving in, hey, you have your office, you’re living, you’re shopping everything right here. You know, what else do you need?
Sam Wilson [08:10]
Right. Yeah, absolutely. When you have investors calling you saying, hey, you ready? You ready for my capital? Yet? That’s a great place to be. Let’s talk about the market for a second, if there’s a shift in the market, or if there’s a shift in as you said, you know, when the 18-year-old rock band grew, you know, when the music stops, is there any fear that not committed capital won’t be there when it’s time?
Neil Bertrand [08:33]
No, because the new development space right now is probably one of the safer areas to invest in because the returns are simply better, right? You’re not going to get 20-25% IRR on an 80s value-add deal, right? You may get 18 at best, you’re certainly not going to get it on anything built between 2015-2020, right? Again, you’ll probably get 18 at best, unless you can come across a unicorn where the developer didn’t care about the expenses. He just wanted to build the thing and sell it as soon as it was stabilized, and you can trim a lot of fat. So it’s still going to be the safest bet. For a lot of that capital.
Sam Wilson [09:12]
Yeah, no, I think that’s really smart. And especially, you know, everybody always says that real estate is local, right? There’s no such thing as the national real estate market. And we saw that even in 2008, that while, yes, maybe there was a lot of pain across the country. There were still markets that did really well. Some of those, I think, were actually in Texas. So you know, like you mentioned before, just following the population growth, I mean, that’s astounding population growth. So not seeing that kind of wane as well, I think is really intriguing, and also not “motivating,” what’s the word I’m looking for here, but further reason to keep doing what you’re doing. Tell me about the buildout side of things. I mean, that’s a lot of projects and a lot of moving parts and people to manage. How have you guys built a team around you? I know it was just the two of you, I guess, not too terribly long ago. You need a lot of support staff to make this thing go round.
Neil Bertrand [10:00]
Right. So if you’re familiar with The Domain project in Austin, once again, very large, nationally-recognized live-work-play development, we’ve engaged the big players who are involved in that project: architects, project managers, developers, engineers, I mean, literally the same, just probably about 80-70, 80% of that Domain team, we’ve engaged for this project, because when you’re doing something like this, you want the best of the best, you don’t want the guys who started an engineering firm last year, right? Or who read an engineering book and think they can do it, you know. We want the big names, the big guns.
Sam Wilson [10:35]
Yeah, that makes a lot of sense, you know, to go out and find talent that’s already done it. What are some risks that you feel like in this development project or in development as a whole, that you guys kind of see, you say, hey, these are some risks that either we can or cannot compensate for?
Neil Bertrand [10:51]
I think right now, it’s going to be supply chain, and pricing, right? Obviously, we’re keeping an eye on that, lumber kind of fluctuating up and down, up and down, labor shortages. Those are the type of things that can impact our numbers. But again, when you’re working with these large groups that have a huge network and can command great pricing, you have a buffer, right? You don’t have 100% guarantee, but you have a very good buffer.
Sam Wilson [11:18]
Yeah, I would imagine that’s absolutely true. One of things we talked about was that one of the things you’d love to do is to inspire others to grow and lead an impactful life. What does that mean?
Neil Bertrand [11:31]
So there are a lot of people who, Ravi, of course, being Indian, I think, you know, the Indian community, lots of tech entrepreneurs, medical community, and then just even outside of the Indian community, a lot of people, great entrepreneurs, I mean, I was talking to a guy who was the VP of cybersecurity, all in, you know, pulling down 600,000 a year, but this much time to learn about real estate, right? The same thing with tech entrepreneurs, IT guys, doctors, no time to really, really learn. And when you take a look at what is out there, and I’m not disparaging any of the groups, but let’s just be perfectly honest. The business of a mentor group is attracting and retaining students. That’s first and foremost. Okay. Second is teaching you about real estate. So that’s their primary concern. How do I attract and retain students? We’re not gurus, we’re not mentors, we don’t want to be. You know, I make the comment, if I’m the smartest guy in the room that I need to find a new room. And even after 25 years, I still think that. I don’t want to be the smartest guy in the room. So we want to help people to come alongside us, give them an opportunity, you know, they’re aspiring GPs give them an opportunity to invest with us. You don’t pay us, you invest with us. And you work side by side. You shadow us, you learn everything, you learn how to underwrite on a model that has been sent to Blackstone, and AllianceBernstein, and Prudential, and Northwestern Mutual Life, okay? It’s not on a four tab underwriting model that is going to spit out the most erroneous returns you can imagine. And if I say that with a bit of sarcasm and loathing, it’s there, because that hurts people. Right? What you don’t know will hurt you.
Sam Wilson [13:14]
That is awesome. I love that. What does that mean practically? I mean, because there’s only so many hours in your day. And there has to be some sort of return on investment for you guys, when you bring on these, I’m gonna call it mentees, even though it’s not right… You don’t do a mentor program.
Neil Bertrand [13:31]
Yeah. So for us, one is being very selective, right? You’re not paying us to be coaches. So we’re not doing this for everybody. We want people who, you know, first we want to understand your why and your why needs to be two things. My why is simple, I have to be somewhere after this call. If I don’t make it there, my family is taken care of, okay? The second thing is, what do you want to do outside of yourself? Okay, it’s great to have, you know, 10-15, $20 million net worth and pull down big money, but what are you doing to help other people, right? And so we want to bring in like-minded people, a very select group, and just kind of put them through a six month program, where they’re analyzing deals, and we’re explaining to them why things work, why things don’t work, you know. In terms of time, if something was worth that you make the time, right, and that’s what we want from the people that we will bring in as these Co-GP. I hate to use the word trainee, because it just doesn’t sound right. You know, come stand shoulder to shoulder with us, I learn how to do things, and I hate… I’m going to use this phrase and I don’t care who gets offended, learn how to do things the correct way.
Sam Wilson [14:37]
I love it. And that’s so absolutely necessary. And I think that’s very valuable what you are doing because, and I say this in the show all the time, unapologetically, that if you are going to hire a mentor, then… And I know you’re not a mentor in the traditional sense, but if you are gonna go that route, you’ve got to find somebody that is active in the space, that is buying and is doing it. Run from the guru, what I call the “guru but no do” person. It’s like the real estate industry is fraught with that, it is I’m with you. It just kind of soured my stomach like, oh my god.
Neil Bertrand [15:10]
I make sure I say this on every interview or podcast, you know. I say this, before you give your money to somebody, I want you to think about something. Before you give your money to a guru, or a syndicator, or a deal sponsor, heck, before you give your money to an institutional investor, in the state of Texas, there was more education, licensing and recertification required to cut hair than there is to raise money for $20 million asset.
Sam Wilson [15:36]
I know it.
Neil Bertrand [15:36]
And that is a sad, sad fact, right? You know, the best thing about real estate, anybody can do it. The worst thing about real estate is, anybody can do it. And you know, when you have enough people stomping around and puffing their chest like they’re experts, and they have great marketing prowess, people buy, you know, they drink the Kool Aid.
Sam Wilson [15:55]
Yeah. And people get hurt as well. I mean, that’s in the end, there’s a lot of activity and very little forward momentum. And I think that’s one of the things maybe you’re trying to solve there, is actually putting people in a position to make meaningful progress.
Neil Bertrand [16:08]
Yeah.
Sam Wilson [16:08]
I think that’s absolutely cool. And I love the idea there of growing and leading an impactful life. So thanks for taking the time to break that down. Neil, appreciate having you come on the show. This has been great. I love the projects you guys are taking down. That’s, what do they call that, massive action in a very short period of time? So I look forward to seeing this project. What’s the name of the project you guys are developing there again?
Neil Bertrand [16:29]
The large project is Leander Springs.
Sam Wilson [16:31]
Leander Springs, okay, I have to keep my eye on that as it progresses over the next few years. But absolutely love how quickly and how precisely you guys are going after stuff like that. So yeah, look forward to following that. If our listeners want to get in touch with you or learn more about you what is the best way to do that?
Neil Bertrand [16:48]
Sure. You can send me an email neil, N-E-I-L, @ reitgroupx.com. R-E-I-T groupx.com.
Sam Wilson [16:55]
Neil, thanks for your time. Appreciate it.
Neil Bertrand [16:57]
Thank you.
Sam Wilson [16:58]
Hey, thanks for listening to the How to Scale Commercial Real Estate Podcast. 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.
