The Chris Voss Show - The Chris Voss Show Podcast – JT Capital Group: Investing in Multifamily Real Estate for Passive Investors

Episode Date: December 14, 2023

JT Capital Group: Investing in Multifamily Real Estate for Passive Investors Jtcapitalgroup.com Show Notes About The Guest(s): ​ Denver Lobo is the Managing Principal at JT Capital Group, a boutique real estate private equity group specializing in industrial and multifamily properties in Texas and Florida. He has over 10 years of experience in global finance, FinTech, and real estate. ​ Deepa Akula is also a Managing Principal at JT Capital Group and leads their investor relations group. She has over 14 years of experience in engineering and commercial real estate. ​ Summary: ​ Denver Lobo and Deepa Akula from JT Capital Group join Chris Voss on The Chris Voss Show to discuss their company and their focus on acquiring and managing institutional-grade multifamily assets in Texas and Florida. They explain how they partner with busy professionals who want to invest in real estate but lack the time and resources to do so. They also introduce their newly launched JT Capital Strategic Income Fund, which aims to provide investors with current income and equity upside. The fund offers two share classes with different preferred returns. Denver and Deepa emphasize their commitment to capital preservation and risk mitigation in the real estate market. ​ Key Takeaways: ​ - JT Capital Group specializes in acquiring and managing institutional-grade multifamily assets in Texas and Florida. - They partner with busy professionals who want to invest in real estate but lack the time and resources to do so. - The newly launched JT Capital Strategic Income Fund aims to provide investors with current income and equity upside. - The fund offers two share classes with different preferred returns: 12% and 10%. - JT Capital Group focuses on capital preservation and risk mitigation in the real estate market. ​ Quotes: ​ - "We partner with busy professionals who want to be invested in real estate but don't have the time or resources." - Deepa Akula - "We are really passionate about delivering double-digit returns." - Deepa Akula - "We can be extremely selective in what we choose to do." - Denver Lobo

You wanted the best. You've got the best podcast. The hottest podcast in the world. The Chris Voss Show. The preeminent podcast with guests so smart you may experience serious brain bleed. The CEOs, authors, thought leaders, visionaries, and motivators. Get ready. Get ready. Strap yourself in. Keep your hands, arms, and legs inside the vehicle at all times because you're about to go on a monster education roller coaster with your brain. Now, here's your host, Chris Voss. Hi, folks. It's Voss here from thechrisvossshow.com. There you go, ladies and gentlemen. The Iron Lady sings it. That's when you know it's official. Welcome to the big show, my family and friends.

We certainly appreciate you guys being here. As always, for 15 going on 16 years now, we bring you the most smartest people, the most brilliant minds to deliver to our audience the massive amount of intelligence, data, inspiration, everything that you need to fill your day other than a nice warm cup of joe or tea, I guess, if that's your thing. We have the most amazing people on the show,

the CEOs, the billionaires, White House presidential advisors, governors, Congress members, U.S. ambassadors, astronauts, Pulitzer Prize winners, just an elite crowd of folks who come share everything you could ever know in life because stories are the owner's management of life, as Chris Voss says. If I can talk in the mad third person of one of my personalities, thereby giving you the Chris Voss show glow, as we like to call it. We have two fine people on the show today talking to us about what they're up to and their company, JT Capital Group.

We have Denver Lobo. He's the managing principal at JT Capital. And we have Deepa Akula, who's also a managing principal at JT Capital. And we'll be talking about her company and his company, which is a boutique real estate private equity group specializing in industrial, or I was going to say industrial grade. It's late in the day, folks. Institutional grade multifamily properties in vibrant submarkets of Texas and Florida. Denver spearheads the Capital Markets Group and focuses on multifamily properties. He's an energetic and forward-thinking leader with over 10 plus years of global finance,

fintech, and real estate experience at both multinational organizations and startups. His journey began at Credit Suisse, where he spent eight years in investment banking, raising over $4 billion in debt capital for companies across Latin America and Asia from institutional asset managers across the U.S. She is a highly accomplished leader, real estate investor with over 14 years of experience in engineering and commercial real estate. She currently serves with JT Capital, and she leads their investor relations group. Welcome to the show, both of you. How are you? Good. Really good. Now that we are here. There you go. Welcome to the show, both of you. How are you? Good. Really good. Now that we're here.

There you go. Welcome to the show. Yeah. Thank you so much for having us on the show. So give us your.com so we can find you guys on the interwebs. Go ahead, Denver. Yeah. So you can find us at jtcapitalgroup.com. And then you can find me on LinkedIn, just Denver logo would be perfect yeah same website and on linkedin the pirate diacula there you go and so give us a 30 000 overview of what you folks do over there at jt capital in your guest words yeah so thank you for asking ch Chris. So at JD Capital, we are a private investment group,

and we specialize in acquiring and managing multifamily assets. And they're institutional grade in core markets of Florida and Texas. And so far, as a group, we have transacted $1.5 billion worth of property. So, yeah, we… Basically, it's two homes, right right is that the way real estate's going it's hundreds of units my mom's old single family resident home is like worth a billion i think right now it's it's crazy market yeah it's 50 million per month in your monthly payment for your mortgage nice yeah it's it's it's. She called me and she goes,

the next door neighbor is selling their house. I'm like, for how much? And it's an extraordinary sick amount for a 30-year-old home. I did our first refinance like 20 years ago or something. Anyway, with my mortgage company. So tell us, who are your guys' clients? Who do you guys help and how do you do it? Yeah yeah so we partner with busy professionals who want to be invested in real estate and but they don't have the time or resources to go after acquire these assets and run them and they are our capital partners they're passive investors and we find acquire do due diligence and run the assets and share the profits with them. So we are really passionate about delivering double-digit returns.

Focus on returns, but our priority is on capital preservation and risk mitigation. In this market, that's huge. Like not capital preservation is huge. So, yeah. It's always good to preserve that capital because, you know, and don't loan money to friends. Anyway, I don't know what that means.

Institutional... I had somebody, a friend, post something on Facebook today. Institutional grade assets, active asset management, and strategic risk management. And there's a lot of investors out there that may be doctors.

You know, we have many people on the show like yourselves, you know, doctors, dentists, retired folks. You know, they want to get into real estate. They know it's usually a safe harbor for a lot of things. You know, it's very different than buying crypto. And so they want to get into it, but they don't want to, you know, they want to have to learn how to, I don't know, go in and change a water heater, right? Right, right. We offer an amazing solution for folks that have the capital

and don't have the time. You know, you think about getting invested in real estate, and if you go buy a property, just managing it, renting it, and dealing with the tenants is a lot of work. And we don't deal with single family. It's all multifamily, just big assets, over 200 doors on one lot in one spot. So we have economies of scale. We also have groups that service the residents.

And it's just much easier for professionals who want to be invested part of their portfolio to be in real estate and don't have the time. They can partner up with us and we do all the work. There you go. And then you guys have a fund that this works under? Yes, Denver. Yeah, so we just launched the JT Capital Strategic Income Fund. And the investment objective there is to provide investors with a portion of current income, so through quarterly distributions, and then equity

upside when, you know, we sell some of the investments inside the fund. And the fund also, to Deepa's point, looks to reduce risk by investing in high quality assets, very experienced sponsors as well. And then it kind of offers investors diversification for multiple assets in one fund so that its correlation to, you know, the traditional stocks and bonds out there is low. And so it allows investors to not put all their eggs in one basket and kind of get a diversified source of income. Ah, there you go. How do you feel that this is maybe better than being in the stock market or other competitive markets out there or investment things out there? How do you guys feel this is better than that? Yeah, so it's macro versus micro.

That's the best way I'd put it. Macro is impacted by so many things, right? A war somewhere, interest rates on a very macro level. When you invest money in the stock market, you have very little say as to what you can do within, you know, if you invest in the S&P 500, the 500 top companies in the US aren't going to listen to what you have to say about their business model. Versus on the micro level for real estate, a very small team within our group manages, you know, 250 plus units in a very efficient way. And we have a lot of say over the business plan, the operational procedure

that we do things. And at the end of the day, at every single step of the way, we're working with people from we're working with great tenants to, you know, having staff on site, to working with property management companies as well. And then ultimately, our team that, you know, we're conversing and making sure that everyone's aligned, everyone's incentives are aligned and just making sure we're working with good people. There you go. And so people can do the investment there. Of course, real estate, I mean, there's a real estate inventory glut right now. I mean, and so, I mean, real estate's going to stay strong, regardless of where interest rates have gone.

Because, I mean, we're, I think we're about 7 million inventory lower than what we really need for demand in single family. And multifamily is building out a lot right now. I'm trying to fill that because a lot of people can't afford a single family residence. So they're moving to multifamily. So there's a huge demand for it. You guys, and you guys are in the two states of Texas and Florida. Is there a reason you guys don't like North Dakota? We want to be in the family states.

I'm not sure there's a multifamily place in North Dakota. It might be like, I don't know, there's five people. There's apartments everywhere, Chris. And, you know, we've always,, there's five people. There's apartments everywhere, Chris. And you know, we've always, that's where we started. That's where the company started. And some of our team members

live in Texas and we have a good base in Florida. And we really want to play in markets where we feel comfortable and know the data down to the zip code level.

And you talked about the supply coming online. We use, we are very data-driven and we use tools like RealPage Analytics and CoStar to know how many properties are being built, how many permits are being pulled, and how many units will be delivered. And all this data helps us tailor our lease terms for our apartments to keep occupancy high. Because as inventory hits the market, we have to adjust. And I know, Chris, go ahead. Here's where we have an unfair advantage,

right? Because we've owned and operated multiple assets in each sub market. Therefore, we know what rent should be, what occupancy is, what vacancy, what, you know, delinquencies look like. And through all of that data, we can kind of overlay the data that's out there. Because, you know, just from doing that part, we've reduced our competition by 80%. However, there are much larger companies than us, you know, your Black Rocks, Blackstone, Oak Trees of the world that also have all the data. However, because of our competitive moat in these sub markets, and it goes back to the micro level point here, we are able to compete with them because we can overlay that data with our own to make better and informed investment decisions. There you go. You know, and I imagine

these two markets are really great to be in. I know that post-COVID or during COVID and post-COVID, California is removing largely to Texas. There was, you know, Elon Musk, I think, moves those companies there. A couple of Silicon Valley companies, I think, moved over there. And then I guess people from New York were flooding to Florida as well. And I don't know, maybe some of the thing is if you move to warmer climates, they tend to survive COVID better because they had warm air helps. I don't know. Yeah, Jeff Bezos as well just recently announced that he's moving to Florida

and portions of Amazon are also going to move there. Oh, wow. You know, the weather is amazing. That's probably why we picked Texas. Oh, yeah. You know, the tax structure is also great, right? You don't have a state income tax, which is super helpful for families, especially trying to pay for a house and whatnot. It's a little bit more affordable. And so you see a lot of young families moving to Texas and Florida. They have great schools, employment incomes on the rise.

That's what we look for, not only on the state level, not only on a city by city level, we look at it down to the street level. That's how granular you have to get with the data to make it impactful plus between austin and the rest of texas it has the best some of the best barbecue ever i might alienate some people saying that i think but we were actually just at salt lake yesterday oh really is definitely one of my favorite barbecue places and they have a very mean beef rib. And I could eat that every day. Yeah.

Then there's, is it Franklin's? It's in Austin that has the giant line. And I think he did a master class. Franklin's, there's always around a two to three hour line. Gary Black's is another one that's fantastic food. Yeah, Texas definitely has their barbecue down. That's the only reason I haven't moved to Texas is because I live there, I weigh 500 pounds.

We go there for, when we go through for Austin because we do a lot of shows and interviews with CEOs at South by, I literally eat, I come home just sweating like meat juice because I've eaten so much barbecue when I'm there. There's no way I could survive if I went down there. So when does this fund launch?

Does it launch now or does it launch soon? Yeah. So the fund launched on Monday last week, actually. So relatively soon. And we are accepting investors into the fund. The great thing is we're offering an early bird special as well for investors that join. They get a higher equity upside in the returns yep tentatively say hey we're ready to go with this and we you know we're seeing almost two and a half billion dollars worth of opportunity and our

fund is going to go towards one to three percent of satisfying that demand. So it's just such a lopsided kind of opportunity that we just feel like we can pick and choose the best investments, reduce risk for investors and put this together as a, you know, investment offering, not only for this fund, but hopefully for follow on funds as well. There you go. What's the minimum net worth or amount of investment? What are some of the qualifications people need to have? I think you have to have $200,000 as an individual in the past two years

and reasonable expectation of having the same income in the future and $300,000 as a family, I believe. Oh, there you go. Or $1 million in net worth without equity in the primary home. Yeah. We guys take checks. No, I'm kidding.

That's a joke we always use. We always do. No. We guys take a check. There you go. So this is a great way they can get into it. Now, let me ask you this. Are you guys buying the properties

or are you guys building them? Are you guys buying them already built and you guys building them are you guys buying more already built and then investing in from there looking for deals or are you are you building the multi-families so in the past we have already we have just acquired the whole asset like 23 acres and like how many were units 300 units just bought it but denver and our CEO, Supin, they both thought about it. And there's this big opportunity where there's amazing assets without buying the whole asset. We can actually deploy a small slice of capital. I say small, maybe three to seven million dollars and have access to the asset instead of spending like 90 million dollars and buying the whole thing and running it.

So the fund will actually be investing in in-play assets. Okay, there you go. So you don't have to wait for stuff to be built and start bringing in income. I know that there's certain rules on investments and quoting, and I don't know how it works, especially with the stock market where you have to get a prospectus and all that stuff. Do you guys have an anticipated percentage of annual return you can quote at all? Or is that something that you got to have a prospectus for?

No, this is actually on our website too. Because it's a 506C fund, it only allows accredited investors on there. So we can market the fund as well. And so we offer two share classes, one that has a 12% preferred return, and then one that has a 10% preferred return with equity upside. So it depends on you and what you're looking to add in your investment portfolio. If you're looking for something more stable and say, you know, I don't want to keep this in my bank account that's earning me 0.5% per year. And when I sort of market in a more higher yielding investment with,

you know, de-risked assets, the other side is saying, I know the opportunity set and I know what you're investing in. I would like to see equity upside in some of the investments that you're making, because ultimately we are investing this money so that this operator can bring the asset to sale maybe one to two years down the line. And when they sell, hopefully they're selling at a higher price than when we get in. And so we can kind of share that back with our investors. And our fund is a pass-through, right? Like when we make money, we pass it through to our investors. And so trying is a pass-through, right? Like when we make money,

we pass it through to our investors. And so trying to be as open and transparent with that. There you go. So it looks like on the A option, which is, here, let me hop back to this. You need a 50,000 for the class A shares, limited partner, 50,000 minimum investment, and then 100,000 minimum investment for the class B. You're right. Yes. There you go. Will you take a check? No, I'm just kidding. It's a good callback, Joe. So there you go. Minimum investment and all that good stuff. What about reinvesting dividends, distributions, all that stuff? Yeah. So you as an investor, if you're getting

12% per year, for example, you can choose to reinvest that and we will kind of redeploy that over and over again until the end of the life of the fund, which is five years. And so not only do you get a return on your original capital, but you're now compounding this capital into more capital, which is the whole idea of compounding interest and real estate as well, right? You really want to have time do its thing. On the flip side, people have schools to pay for and food to eat. And, you know, some people want a, actually some investors that are potentially not working anymore, just want a consistent stream of income. And that's a perfect way to just get a monthly income and park some money in an investment like this. There you go. There you go. What's the liability as an investor? Just like crypto where it can go from $40,000 to zero overnight?

I'll answer that in two parts. The liability is zero because we structure these as limited liability companies. And so whatever you put in into this fund is your max loss and not lose. We cannot come after you for your house or your car because of loss anymore. But the second thing is, and the beauty of real estate is that you have collateral, right? You have a multifamily asset there that's a beautiful kind of structure with a gym and a pool. And those are the types of assets that we're investing in. They're not going anywhere over a five-year period. And in fact, there's more and more people even looking for opportunities like that just because the cost of buying a house is so expensive. There you go. And how often do you guys pay distributions?

So distributions are done quarterly. So all our reporting distributions are done quarterly. And the benefit of that is an investor receives an open book of saying, these are the investments we made. These are the returns. Here are our financials. And here is your return for the quarter. There you go. So what do you guys see as the future of what's going on with maybe multifamily,

the real estate market? I think I was seeing someone from Goldman Sachs or one of the big firms, Merrill Lynch, maybe. I don't know who it was, but they were actually predicting that within maybe the first quarter, the Fed might start lowering rates again. What do you guys think? You know, the fundamentals are strong, Chris. But talking about the interest rates, for the past few months, actually for the past few weeks, maybe three or four weeks in a row, right now, the interest rates have dropped. So it's going to help out all the assets out there that have variable interest loan.

And yeah, we don't know. It's hard to predict if the Fed's going to cut the rates or not. But it's good for you guys. Right now, yeah, they're coming down. Yeah. I mean, it gives you guys more funds to do whatever. Definitely. Invest.

I mean, I don't know how we're ever going to catch up on this glut we have in housing i mean we're like seven million units behind from in single family there's some very unique stuff going on there's modular there's 3d printing you know and stuff that today the cost is the same but the time is actually much faster so you actually gain money because of time i'm still using cardboard but i live under the viaduct so that's yeah and there's really cool structures that you can build a beautiful home in you know around two weeks and with modular if you walk in one of these places you wouldn't even be able to tell. And that's the beauty of it. Multifamily, a little bit different, takes a little bit longer. They're just much bigger structures.

You have to gut the entire, you know, the pipelines and stuff underneath and make sure it kind of works with such a big structure. And there's so many laws and permits that you have to actually get. And so single family versus multifamily is just a very, very different space. There you go. I'm so jealous of my Florida friends right now because I'm visiting Utah. Normally in Las Vegas, but I'm visiting Utah and it's freezing cold here for the holidays and there's snow.

There's this thing called snow. My friends are sending me nasty pictures in Florida on the beach. It's 80 degrees and there's the ocean and they're out frolicking and i'm just like was that i'm like is that is that from the summer that you posted that no that's now i'm like i hate you people i'll text you later chris this is how it is i'm in i'm in seattle it's raining oh yeah you guys i i've heard you guys

have when the sun comes out that's a holiday for you guys oh yeah yeah you have a sunday i think they call it and everybody takes the day off of work you know i think the same is true of london they're like look the sun we should see it well it's here yes i i went to nerding uh for college and south Bend, Indiana is the same way. We have winter for nine months and six months of that is, you know, three feet of snow. And I actually, I was born in India, lived in Kuwait all my life. So I'm used to 120 degree weather. Going from 120 to, you know, minus 20 on some days was pretty painful. I'll do it.

You need to move to Arizona so you'll feel comfortable. Yeah. I mean, Texas is up there in the summer. That's true. Yeah. Texas gets up there. And then you have the humidity in the thing. So it sounds pretty good.

What's the, is there a vision of future that, you know, your company's working on? Do you want to get to a certain point of assets under management? Do you see yourself developing in other states? What's kind of the vision of future whenever you guys are thinking about over the next five to 10 years? It is so far, Chris, like we learned how to run these amazing multifamily assets, all institutional and luxury apartment communities like decks and pools and resort style pools and awesome assets. So we know how to run them. And the goal now, and we've always been very, not very high quality quantity, but just high quality,

a low volume shop so far. And we've learned, we've built a foundation. And the future is we're going to start with this fund, which is $50 to $75 million, and just build bigger and bigger funds and deploy more and more capital. There you go. Sounds like you guys are on your way. Go ahead. Yeah. And Chris, again, you know, the other thing that's unique about JT is that we have a very targeted team that has a lot of ownership over their kind of silo. And what that allows us to do is, ultimately, we don't have 20 to 30,000 people and mouths to feed, right? The bigger guys have a huge organization and have to churn a certain amount of deals in order to just keep the lights on. For us, we can be extremely selective in what we choose to do. And the part of what we're trying

to build is a hundred year brand. Like we're not in this to be in multifamily for five years and then get out of it and then be in it. The partners here have been doing this for 15 years. And we plan to have this be a generational kind of wealth builder, not only for us, but our investors as well. And, you know, the second thing is just of what we plan to do, especially within this fund. The opportunity set is just so large right now that we don't even need to stretch into other strategies or other, you know, investment classes. Like for example, two of the ultimate uses of the funds that we're deploying this fund into are a funding gap and rate cap expiry. And so for a funding gap is when a multifamily property goes to refinance their property, they're actually not taking money out.

They actually have to put money in. So CBRE, which is a very large lender in this space, estimates that there will be around $21 billion worth of cash in. So a funding gap next year, and that's going to expand to around $40 billion by 2026. Now, if you think about the size of our fund versus that opportunity set, it's 1% to 3%, which just means that we can be very selective. The second thing, again, rate caps that are expiring next year, a lot of the multifamily space is focused on what happens if a rate cap expires and a multifamily owner has to now pay a much higher interest rate. And that's estimated to be around four to five billion dollars per quarter in 2024.

So, again, we're just seeing so much opportunity in this space. We don't think it'll last forever. And that's why we're kind of moving now. And that's the ability of our small team to, you know, do all the institutional diligence, but move as fast as a startup, which is kind of something that we like. Nice and small and agile. So thanks guys for coming on the show. Give us your final pitch out and tell people how to onboard, reach out to you guys, interact with you guys and see if they're a fit. Yeah, please reach out to me on LinkedIn or to Denver on LinkedIn.

And if you're a busy professional and have some capital and want to diversify into real estate, please reach out to us at www.jdcapitalitalgroup.com. And you can look at our fund details up there. And you can always email us at invest at jtcapitalgroup.com. And we can take you from there. There you go. Yeah. Also, if this is your first time as well, looking at a real estate investment, we'd love to speak to you because whether it's this fund or our 10th fund, we want you to kind of learn about this asset class because it's an amazing diversifier of your investment portfolio. I'm not saying don't have stocks and bonds. I'm saying have that, but also diversify it into these other much higher yielding and potentially lucrative investments for yourself. There you go. Thank you very much,

guys, for coming to the show. We really appreciate it. Thank you for having us on, Chris. Yeah. Thank you so much. Thank you. And thanks, Ron, for tuning in. Go to goodreads.com, 4chesschrisfoss, linkedin.com, 4chesschrisfoss. Subscribe to the big LinkedIn newsletter, the 138,000 LinkedIn group over there. Let's see. There's chrisfoss1 on TikTok and chrisfossedIn.com, 4Chess, Chris Foss. Subscribe to the big LinkedIn newsletter, the 138,000 LinkedIn group over there. Let's see. There's Chris Foss1 on TikTok and ChrisFossFacebook.com. Be good to each other. Stay safe, and we'll see you guys next time.