Dr. Alex Cartwright

we've got a record number of people in the United States, not just number, but also percentage of people, that are both rent-burdened and severely rent-burdened. It's just going way up, the unaffordability. And if you look at who is in that rent-burdened category, more than half of the people that are rent-burdened make between 45 and $75,000 a year. These are not people that are on government assistance or are, on the edge of poverty. These are folks that we would consider more or less middle income or at the edge of being middle income that are rent-burdened.

Ed Mathews

If you're within three feet of me, we're probably talking about real estate, much to my family's chagrin. But here's the thing, most people see 7% rates and freeze. I see opportunity. They're waiting for the perfect deal, and well, I've analyzed thousands of them, and perfect just doesn't exist. So I talk to operators across every asset class, flippers, multifamily syndicators, note investors, and whatever else is working. No sales pitches allowed, just real lessons from people actually doing it. I'm Ed Mathews, and this is Real Estate Underground. Greetings and salutations, Real Estate Undergrounders. It is Ed Mathews. We are on location up at my house in Rhode Island. I had to run up here to run some errands. So the background you normally see if you're watching us on YouTube is down in Connecticut. Here we are. And we are fortunate to have... We're talking hotels today, hotel conversions in particular. And with us today is Alex Cartwright of Hotel Shift Capital, and based in Providence, but I believe, Alex, you are in the Dallas-Fort Worth area. That's right. So welcome to the show, and thank you for your time today.

Dr. Alex Cartwright

Thanks, Ed. Pleasure to be here with you, and thanks for the great introduction.

Ed Mathews

My pleasure! For those folks who haven't discovered you online, on LinkedIn or wherever why don't you tell us a little bit about you and your company, and then we'll go from there.

Dr. Alex Cartwright

Sure. So my company's called Hotel Shift. We're not in the business of owning and operating hotels. I know a lot about the hotel industry, and I think hotels are great investments, but our expertise really is multifamily. And we get to multifamily by buying distressed, or I would say end of life hotels. And we're doing it that way because there's an economic advantage which we can talk about. But in short, what our company specializes in is finding hotels that are end of life. So sometimes they're old, they're not worth remodeling as a hotel. Sometimes they're newer hotels, but they're just in a crowded market. There's other hotels, and they're the less desirable one, or they've got too much debt. Whatever the story is, we look for opportunities where you've got a hotel, and the highest and best use is to become multifamily. And so there's usually an arbitrage between the multifamily price being a lot higher than the hotel price. So when you do the conversion, you unlock a lot of value, and our company focuses on looking for just those opportunities. So fundamentally, we're in the apartment business, but we're buying hotels to convert to apartments.

Ed Mathews

Yeah. It's interesting. It's a business that has really started to grow here in the Northeast as well. That and office conversion, 'cause office here in the Northeast has been absolutely decimated. But- so I'm curious about your buy box, right? Let's talk geography first. Sure where do you tend to focus, or are you all over the place?

Dr. Alex Cartwright

We are not completely agnostic geographically- Okay but but definitely willing to go to a new city. What drives where we're willing where we are willing to go is really three things, and the number one thing counts for a lot, and number one is just the rent level. So the higher the rents, the better. And I know that might sound a little obvious, but let me explain more. In a place with higher rents, it is worth spending more on construction to convert the hotel into multifamily. And in a place with higher rents we can be more flexible in terms of the hotels that we can look at 'cause we can afford to pay more. And in a place with higher rents, those rents are usually high because there's a supply constraint, and it's difficult to build. So the, the converting a hotel is of a bigger service. And then we're looking for places where it they're somewhat dense, urban. People are accustomed to having a little bit smaller unit, and they'll be forgiving if our unit is a little bit smaller than the traditional purpose-based, purpose-built multifamily. Smaller unit, but of course they get a better price, so they're willing to make that trade-off. It's so unaffordable, there's gonna be demand for a hotel converted unit, and the, even though the place might be a little bit smaller, it'll be sufficiently cheaper that people are cool with it, to use a layman's term. Yeah. So those are the two drivers, and then the third one is really the regulatory environment. So a city that is not open to a rezone or that is gonna be very difficult in terms of what they'll require on the conversion side, these are places where we don't wanna play. So l- landlord friendly, yet relatively expensive places.

Ed Mathews

Okay. And so talk me through the types of properties that you're looking at. 'Cause, when you say smaller like the, the, the few hotel conversions that I'm aware of and by aware of, a friend of mine did them, right? Are these efficiencies? Are they one bedrooms? Are you completely changing the, the floor plans? Obviously the advantage of buying a hotel is there's a whole lot of infrastructure already in there in terms of plumbing- You

Dr. Alex Cartwright

got it

Ed Mathews

and

Dr. Alex Cartwright

whatnot. Bunch of individual bathrooms, individual HVAC, individual windows and front doors, parking spaces. You've got soundproofing between the walls because it's designed for a bunch of people to be together in close proximity at night. Yeah. So y- you're right. The, the core advantage is the infrastructure. Yeah. In terms of the floor plan We have not done one where we completely gutted every room and put together a new floor plan. We're using the placement of the existing bathrooms and front doors almost always. But what we're typically doing is walking through how many rooms should be combined to not just have studio units, but have one and sometimes some two-bedroom units in addition to studios. And it boils down to two things. Of course, the architecture of the hotel, how big are the rooms. Smaller rooms, we need to combine them. Some hotels are all suite hotels or extended stay. Some larger downtown hotels just have bigger rooms. So we're looking at the size of the rooms. That dictates what we'll combine, and then of course the demand in the market. So the... Certain markets, there's not a big demand for studios. Certain markets there's not a... There's gonna be more demand for one bedrooms. On a pure dollars and cents perspective, it is always worth it to go all studios because you're never gonna take two rooms, put them together, and 2X the rent of two studios, right? The, the rent per square foot, if you will, of the studio is the highest, and so the projected NOI is the highest. But that doesn't mean it's the best strategy if it's gonna take forever to lease up a bunch of studios. You might hold onto the vacancy too long, and you do want to have a diverse unit mix so that you can pull from different types of demand segments in the market to keep your place full, not just to fill up faster. So it's... And then you've got to balance that with the construction costs and the architectural constraints. So it's actually not a straightforward answer. How many one bedroom? How many studio? How many two bedroom? We have to really sit down and study that hard during the due diligence period. And so I... Not to give you a, "Sorry I'm not giving you a straightforward answer," but I- No, it is

Ed Mathews

what it is, right? I guess I would,

Dr. Alex Cartwright

I would summarize and say it, it just depends on the hotel and the market as to how many rooms we combine.

Ed Mathews

Yeah. No, that makes sense. It is what it is, right? Here in, in our markets here in, in Connecticut, a single a studio or a one bedroom the population, the residents that live in those buildings, I'll use my own buildings for example those tend to go vacant every year, right? And so the churn on those is really, it can be a challenge. The, the good news is that a whole lot of people are looking for them you're not talking, you're not even talking weeks to fill them. You're talking days usually, especially if you have it priced right, priced to market right. But- Our,

Dr. Alex Cartwright

Our experience has been kind of the opposite, where-

Ed Mathews

Okay

Dr. Alex Cartwright

yeah, you get the certainly I see what you're saying. You get the, higher bedroom count units. You get the families. Length of stay is absolutely longer. And cutting down on that vacancy is a huge savings. But when you're the best priced unit in the market by A good 15%, you've got some sticky tenants. Yeah. And when you're the best price in the market overall, the folks that are maybe on fixed income or They're people that are don't have a lot of upward trajectory in their career, their earnings potential. They are... They're with you. So not to say that we don't have churn, we absolutely do, but our pricing keeps people sticky.

Ed Mathews

A- and the fact that it's a, a new building or newer building, right? So the amenities are new and the- And it's, y- so let's talk about, one of the things that, that we do that is really important to our business model is retention, which is why I was asking about it. A- and so y- you, do you vertically manage as well, or do you outsource that? How does that work for you guys? We've done both. Okay. We're doing

Dr. Alex Cartwright

both on

Ed Mathews

properties.

Dr. Alex Cartwright

I don't know that we have a real comparative advantage in management, meaning I don't know that our management is the best out there, right? I think that we're pretty good, but what we are the best at doing is finding, analyzing, and converting hotels to multifamily. So I wanna spend our time and attention on that. So our goal is to have more and more third-party management- Okay. Makes sense as we do more projects. Hey, stick to your knitting, right? And that's great. So when you're buying these properties, are you buying them to hold long-term?

Ed Mathews

What's the overall project look like?

Dr. Alex Cartwright

Sure. So we are, we're typically buying for five to seven years. Okay. We are very interested in opportunity zone projects, which I can, I'm glad to talk about. Sure. Opportunity zone and hotel conversion really marry up well. And so those are minimum 10-year holds. But on a typical project, we're looking to purchase the hotel, complete renovations, and then lease up in the first 24 to 36 months. And so 24 to 36 months goes by, we're renovated, we're leased up to 90%, and then we're doing a refinance, returning around 100% of capital at that time, and then we're holding. And at some point in time we've got to exit just 'cause the return on equity falls, and folks want their liquidity at some point in time.

Ed Mathews

Sure. Yeah. It's everybody wants their money back, right? And then they want their gains back. So okay. So when you're looking at a project, you mentioned 24 to 30, 36 months. That is... So walk me through the timeline of a, a project you're doing right now, for instance. Yeah. I'm curious about how you're buying it. I'm also curious about the engineering effort and, and-

Dr. Alex Cartwright

also

Ed Mathews

the renovation. Like, how does that work for

Dr. Alex Cartwright

you? Yeah. So our, a, a long... I could say a lot of things on just that, but I guess I'll say the big difference, and then we'll get into some specifics. Big difference in, in, in buying a hotel to convert versus multifamily is we're doing an extraordinary amount of due diligence, and d- the due diligence period is very long, like several months of homework that we're doing. I know that may sound strange. In the multifamily world, you're not getting that kind of time to make a decision, but that is normal when you don't have a line of buyers to buy these old hotels, right? I'm We're typically the strongest bidder, and so the seller's willing to give us some time to get this in- these investigations done and the conversations with the cities done. So right now, we are doing a project right on the edge of downtown Denver, 310-room hotel. That hotel was a Holiday Inn, and there was nothing wrong with with the management or really the infrastructure of that hotel, but 310 rooms is a big hotel. Yes. I know maybe that's a m- medium-sized multifamily, but that's a big hotel. Hotels getting developed today, you think about a, a Hampton Inn or a Marriott Courtyard, they call them select service hotels. You don't really see those up over 120, 150 rooms unless it's a downtown core, 'cause that's when the economics of hotel operations start to break down. They'll build a hotel, 120 rooms, and then just build another one right next door because it's so hard to make money once you get a room count that's much higher than 200. Yeah. So a 310-room hotel that we bought was right next to an airport in Denver, Stapleton Airport. And folks that know Denver know that Stapleton Airport closed because they built a new airport further outside the city. So you have a hotel where the main demand driver, the airport, closed and moved, hence the hotel was not making the money that it used to. But it's a great area. They redeveloped where the airport used to be. There's a lot of new multifamily there. A lot of people need to live there. We like the economic trends in Denver, and so we purchased that hotel a little under $30,000 a door, where you've got multifamily down the street selling in the mid to upper 200s a door, right? So that's the kind of basis that you can get because you're buying it as a hotel. Now, that took due diligence-wise, maybe six months to put the plan together. Denver's got a lot of energy codes we needed to make sure that our development and our remodel would comply with. And the best thing that you can do is just get engaged with an architect, and we use an architecture firm that's the nation's... I would say they're the expert in doing what's called adaptive reuse. Hotel to multifamily, office to hotel, office to multifamily, historic buildings changing uses, all of that falls under the umbrella of adaptive reuse. So you find an architecture firm that can help with navigate what is required there, and they help us during the due diligence period, make sure that all the boxes are checked.

Ed Mathews

Okay. So I'm doing quick math here. 200 a door, you're buying a 30 a door. What does the construction project look like from a budget perspective?

Dr. Alex Cartwright

Yeah. The, so the more vertical the building, the more expensive the construction as a general rule. Like

Ed Mathews

physically vertical.

Dr. Alex Cartwright

Physically vertical, yes. Yeah. So a, think about a, a two or three story hotel that is what we call exterior corridor, meaning the doors open to the outside. Some people call that a motel. The construction on that is a lot simpler and cheaper than it is if it's interior corridor and it's very vertical. So this property that I'm describing in Denver is 11 stories tall. It's got an 11 story atrium in the lobby, right? It's a big building. You walk in and look up and it's cool. It's very striking. And b- and every room has got a balcony, even 11 stories tall. So that's very expensive to replicate. They're not building 11 story multifamily in this neighborhood. They're all the three, four story garden style. So- We thought that architecture's very compelling 'cause in Denver you get those beautiful views.

Ed Mathews

Gorgeous.

Dr. Alex Cartwright

And in terms of renovation there, spending around $40,000 a unit, 40 to $45,000 a unit, and we're not redoing the bathrooms in that hotel. The bathrooms were gutted and redone a couple years ago, and so that is, we're spending on the common areas to upgrade and in, and introduce some cool new amenities. We're putting kitchens in every room. You've got to run electricity, a dedicated circuit for every appliance, and we've got to run some drain lines, and there's got to be some core drilling through the entire property to get the supply and drain lines for the kitchen in there. And in this property we're doing kind of a B to B+ finish just because of where the rents are, the neighborhood, and the size of the rooms are generous in this hotel. And that, that construction we budgeted 18 months. We think it'll be more like 12 to 16. You know how const- construction, there's just always surprises, so we try and leave plenty of cushion. And but yeah, 40, 40, 45 a door. That's, that is on the upper end of what it can take. If you buy an extended stay hotel, think about Marriott Residence Inn. Hilton has a brand called Homewood Studios. Or there's a IHG brand called Candlewood Suites. Yep. There's a lower tier brands called Hawthorne Suites or Studio 6, which is Motel Studio 6 is extended stay, or Mainstay Suites. These are all Red Roof has a brand called Hometown Studios. Those are all economy extended stay. An extended stay hotel with bigger rooms usually, and it's got a full kitchen or a kitchenette in every room. That is a product that's only been around 20, 25 years, and those work pretty well as hotels in most cases. So we don't always get so lucky as to buy those, but if I'm buying that kind of a hotel, then maybe I'm only spending 10 to 15 grand per room doing cosmetic upgrades, installing a sprinkler system, working on the common areas, right? But the more vertical stuff could be 40, 45 a door.

Ed Mathews

So going in, let's use your original example. So going in you're at about 125-ish per door. No, we're way less than that. We're at about 90 all in with- no, I'm talking equity

Dr. Alex Cartwright

Oh, equity. I'm sorry.

Ed Mathews

Yeah,

Dr. Alex Cartwright

more than that even- 410 'cause the, the... it's, you could say, the, the apartment building across the street has got bigger units and a different unit mix than us. And if they're selling two, 250 or more per unit, does that make our units worth 200? I think so. NOI is NOI. We usually just- Yeah, I'm doing underwrite to a- 100,000 square foot. We underwrite to a to a higher cap rate because there aren't as many sales as hotel converted properties. So just to be conservative, we always put a solid 100 basis points on the terminal cap rate. Smart. But... And I don't know what that works out to per door on that building, but let's call it 200, low 200s. Yeah.

Ed Mathews

Still it's a really good deal. And it's a good deal for the residents because they're getting a, a, as you said, a B plus finish for super reasonable rents in a, in an area- And,

Dr. Alex Cartwright

and to inter- and to interrupt you for a second, really A class amenities because think about what a downtown hotel has. It has a hot tub, has an indoor-outdoor pool. This hotel has got three underground racquetball courts, two of which we're making a pickleball court. It's got a big, beautiful fitness center. It's got underground parking, and it's got banquet space that we are converting into some co-working, some resident storage, a golf simulator. There's a, a restaurant in the lobby that will just become a coffee shop. We're leasing the kitchen out to a third party. That'll be totally separate. So there are really high quality amenities relative to the rent level.

Ed Mathews

Huge. So it's a huge win for the residents. Yeah. That's awesome.

Dr. Alex Cartwright

And and so I'm just curious, how are you finding these projects? It's not hard. There are more than I can buy becau- So think of it this way. In multifamily, whether it's built in I understand that the CapEx, meaning the, the upkeep is higher as the vintage is older, completely understood. But it's always worth remodeling your multifamily, even if you have a '60s, '70s construction multifamily. If you're a mediocre operator, mediocre landlord, over enough time rents go up and to the right, and the NOI kind of floats higher, inflation is in your favor, and you capture some appreciation. In the hotel world, appreciation is far from guaranteed. Everybody wants to stay at the new hotel. They're always looking to try and build the new hotel. Marriott, Hilton, IHG the big flags, if you will, they are coming out with new brands to introduce into these markets. There used to be a Homewood Suites was, is a really nice brand, but now Hilton's got an extended stay brand called Home2 Suites, and Marriott just came out with a new brand called Studio Res. And they've got a new brand called City Express, and AC Marriott's not that old of a brand. So there's always a new brand that the developers are chasing with the new style and the new amenities. So if you're the older hotel, every five to seven years you need to remodel. Marriott or Hilton is gonna mandate that you do that. And at some point in time, your architecture just doesn't look like the new hotel. It's not worth remodeling. Now, if you're downtown New York City, you're downtown Atlanta, you're downtown Pick at Boston, it's always gonna be worth remodeling the building- Sure into the latest and greatest Marriott and Hilton standard. Yeah, 'cause your,

Ed Mathews

your traffic is enormous, right?

Dr. Alex Cartwright

Enormous. But the more... But little bit let's call it the B location for a hotel, or the more suburban location, at some point it's just not worth remodeling. And so it doesn't, it... There aren't as many hotel buyers, there aren't as many hotel lenders, and hence it's not the case that we have to look really hard to find a compelling deal. We're able to pick the real winners, the cherries on top right now, and we work with folks that are hotel brokers to identify those.

Ed Mathews

Okay.

Dr. Alex Cartwright

And you

Ed Mathews

mentioned financing. So walk me through how do commercial lenders or agencies or, straight banks, portfolio lenders, how do they think about these types of projects? When I

Dr. Alex Cartwright

first started looking into this and doing this a few years ago, it was a much different world than it is now- Okay because not as many of them had been done. Really pre-COVID you had a much different dynamic. Post-COVID, business travel's not come back, inflation really squeezes the labor costs on these economy hotels. Rents have gone up, construction costs have gone up, so the big difference in pricing between hotel and multifamily has become apparent. I would say pre-COVID people did hotel conversion, but it was a lot more of a one-off. The op- the market wasn't so big that you could specialize and do it exclusively. But... And because the market is now bigger, there is a network of lenders that understand this project, they understand the upside, and they... And what they do is, much like when you're flipping a house, they say, "What's the after repair value? What's the stabilized value? Can we get an appraisal showing what this'll be worth once the renovation's complete?" And that's exactly what we get, and lender looks at that and they say, "Wow, based on the stabilized value, your leverage is actually pretty low." And I say, "That's right. We're getting a good deal on it because I'm rezoning it before closing." So in the lender's eyes, it's a multifamily that just needs a lot of work.

Ed Mathews

A- and so th- and is that what takes... you mentioned the, the due diligence process is extremely long relative to other parts of the multifamily market. So- is that what's taking the time? Is that rezoning process?

Dr. Alex Cartwright

Yes. Yes. That's exactly right. And it depends on the city. Do cities understand it? There's a wide variation of city responses, okay? So a lot of s- some cities will, no matter what they say publicly, they're scared of creating affordable housing because they're worried that they'll bring in lower income folks who will- call the police a lot sell drugs or do other unsavory things at their apartment, and they're worried that the constituents will be upset. So we're very clear that we're not doing capital A affordable subsidized development, right? Our base case is more of a B-minus product targeted at a young professional. Sometimes, depending on where the hotel is and the location, it's targeted toward more of a blue-collar tenant. But-

Ed Mathews

Good, hardworking people, right?

Dr. Alex Cartwright

Exactly. Exactly. But of course, there are, there's operating standards, there's management standards, there's people that are on site 24/7, and that this is governed like a, and managed professionally like a professional multifamily community. Now, cities are concerned about what the hotel will turn into if it's rezoned because, and you may not know this unless you spend a lot of time in crappy hotels like me, but you may not know that pretty much everybody that's at a low-end hotel or extended stay hotel, these 40, 50, $60 a night hotels, they live there, right? These are folks that they've been evicted. They need to go somewhere where there's no background check, pay in cash or if it's not in cash, they pay every week. It includes all the utilities, no questions asked. Maybe they're alcoholics or have some other kind of problem, or they just need their li- They're at a point in life where they need it to be very simple for their living situation. They just need a place to land. Yeah. They need a place to land. They pay every Friday, and that's it. So what the city doesn't want to have happen is they don't wanna rezone the property and make that element permanent. So we need to convince them that is not what's happening. We're gonna provide housing that's at a competitive price point, but it doesn't mean that we're allowing residents to run wild or that we're letting anybody live there without

Ed Mathews

rules.

Dr. Alex Cartwright

Yeah, you have to qualify to be there, right? And, you know- You gotta qualify to be there and follow the rules. So when we can sit and have that conversation, most times the city's open to it, especially when the city understands this hotel doesn't have a future, right? No one's coming back to make this thing into a Marriott. So I understand that you guys want a new Marriott, and you, and they want a new Chick-fil-A, et cetera, et cetera. But- Me too your choice is crappy old hotel or- That gets worse or we... Exactly. It gets worse, or you work something out with me. Yeah. And we can almost always work something out.

Ed Mathews

Yeah, so you're solving a problem here, and they've got to realize that, A, they have the problem, and B, you are a, a high potential solution to that problem.

Dr. Alex Cartwright

Exactly.

Ed Mathews

Exactly. Okay. All right. All right, so let's get into the final five. We've been we w- I'm fascinated by your business model, so we went a little long, and I apologize for that. How are you on time? You good? I'm good. Okay. Excellent. One of the things that I'm always interested in when I meet executives like yourself is what gets you out of bed on Monday morning? Obviously you've built a tremendous business. As I said before we hit the record button, pretty sure your car payment's handled, right? So you're coming to work for something else. It- there's a purpose here, and I'd like to understand that. What is that purpose in your mind?

Dr. Alex Cartwright

I'll do my best to articulate it. There are a lot of purposes, sure. I'll do my best to articulate the professional purpose as succinctly as I can. So I spent 10 years as an economics professor. Loved my job, loved teaching economics to students, loved teaching them about why we're the most prosperous economy in the history of human existence here in the United States, and what role things like free markets, limited government, prices, right? What role that those, those things play in creating wealth. And teaching students about the importance of entrepreneurship, virtues of business. Oops. Sorry about that And and it, I came to understand that let's say you're a student that graduated from business school where I taught from undergrad. You go and get your first job, and you're like a B-minus student. You make 40, 50, 60 grand a year start now, and you're not going out and buying a BMW, but you don't want to have roommates anymore, want to have your one-bedroom apartment. And you're sitting there and you say, "Wow, after taxes, a third to a fourth of my income is gone to rent." There's this not saying, but a term in the multifamily world whether or not a tenant is rent-burdened. So you're rent-burdened if you spend more than 30% of your gross income on rent, and you're severely rent-burdened if you're spending over 30% of- Yeah your gross income on rent, like 40, 50%.

Ed Mathews

Yeah, and we won't take if... that's a huge criteria for- It's a- for our company.

Dr. Alex Cartwright

Sure. Sure. Sure. Do you know, we've got a record number of people in the United States, not just number, but also percentage of people, that are both rent-burdened and severely rent-burdened. It's just going way up, the unaffordability. And if you look at who is in that rent-burdened category, more than half of the people that are rent-burdened make between 45 and $75,000 a year. These are not people that are on government assistance or are, on the edge of poverty. These are folks that we would consider more or less middle income or at the edge of being middle income that are rent-burdened. And so the... I am talking to some students about that, and it dawns on me this is why folks like the most recent mayor of New York get elected, because maybe socialism doesn't look so bad when you'd work hard, and go to school, and all of a sudden you give half your income away in rent. And there are a lot of reasons, I think mostly political, of why housing is unaffordable, and we, I like to think that we're a solution to that, and we're a sustainable solution to that. I don't have to have a bunch of- Sorry, I don't know what that noise is. I don't have to have a bunch of money from the government to make a project profitable, right? And we're- we don't... In other words, we don't have to take taxpayer money to create more housing that's attainable for young people so that they can save money, have a safe place to live, and and get to the next rung of the economic ladder. So I think that what we're doing is has a big impact on people's lives. One, one just tangible example of that, when you go to these hotels and people paying $400 or $500 a week, think about what they're paying per month. They're paying maybe 1,600 to $2,000 per month for the unit that we are gonna renovate and then lease to them for around $1,000 a month. So we might cut their rent payment by 35, 40% and give them a brand-new unit, and we don't need anybody's taxpayer dollars to do that. Think about what it would take for somebody of a lower education and income level to move their disposable income up by 30 or

Ed Mathews

40%. Oh, it's

Dr. Alex Cartwright

like hitting the lottery. They might... That... they probably can't go back to school for a couple years and move their income up that much, and we can do it immediately. So I like to think that has a huge benefit to the stress level that people have and to the autonomy that they have in their lives, and I hope that, that leads them to get to whatever goals that they wanna get to.

Ed Mathews

Nice. Nice. So I'm also curious about the mentors you've had in your life. What is the best advice you ever got, and

Dr. Alex Cartwright

who gave it to you? You told me you're gonna ask this question, and so I've been reflecting on it a little bit when we're going through this this interview. And I'm realizing that folks that were my mentors have changed over time, right? And and you've got different mentors for different stages of life and for different things that you're trying to accomplish at different stages in life. And I could give you different moments of specific advice that I've gotten from different people. But as I'm reflecting on this, I'm thinking about how a mentor of mine right now mindset coach that I speak with every week has taught me maybe it's time to move on from that mentor. Maybe it's time to look for a new mentor. And so I think right now I would offer that advice, which is that if you're growing, like in some sense, you're always looking for the next mentor. And so yeah that's what I would offer. I would, I would- Yeah make sure that you're on a trajectory to outgrow the person. I shouldn't say outgrow. It's not a competition. But to, but that you're progressing such that you need yet another mentor to teach you more things.

Ed Mathews

There are absolutely levels, right? I, so I come from the technology space, and I remember one of my mentors had said, Rob Bernstein had said, the skill set to start a business, be a founder, and grow it to a, an investable product, right? So a million, $5 million in annual revenue. The skill set to then take that business and grow it to 10, 20, $50 million is an entirely different skill set. And then additionally, to grow it from 50 to 100 million or more is, and again, an entirely different skill set. It's a different human being. And then in order to bring that business to the public markets, whether to sell it or to go public, is a- is once again, an entirely different skill set, right? And usually a different human being. I know of only a couple people that were capable of being a founder and taking it all the way public. And those, I can count them on probably two hands. And I'm 56, so I've been around for a while watching this, right? I'm not one of them, pro- you know, so I'd love to be that, but I'm not. I'm really good at starting them. I'm really good at growing them a little bit, but I'm not the guy to take them public at all. Bureaucracy makes me crazy. But, But the but y- and I think mentors are a similar thing, right? Depending on where you are in your journey- Dictates the type of mentor you need, right?

Dr. Alex Cartwright

Exactly.

Ed Mathews

Yeah.

Dr. Alex Cartwright

Exactly right.

Ed Mathews

Yeah. I, I used to... I had this gentleman when I was first starting out. His name was Mike Gonom. He was a CFO of a company that that I had worked with back in the late '90s. And, I started it was a, a dot com company, and we ran into a brick wall because all the venture capital dried up when the bubble burst, and so that company died. And I started my own company, and every month Mike agreed to let me buy him breakfast, and I would spend the first 15 minutes over scrambled eggs explaining to him how we were gonna conquer the world. I was 30, 32 maybe. And then he would spend the next 45 minutes explaining the 19 ways I was screwing up and the the ways I could fix the ones that w- the mistakes that were fixable. And invaluable, right? And then fast-forward, the different mentors I've had along the way as my own career has progressed. Still friends with Mike, but and he is now well into his 80s. But we talk about Red Sox. We don't necessarily talk about business anymore. The... so it's a, it's an interesting, it's an interesting perspective that different points in your journey require different mentors, and I wholeheartedly agree. So let me ask you about a decision, looking back on your career. You've been doing this for a while now. What's the decision that you would love to have back knowing what you know today? 'Cause I, I think we learn more from our mistakes than we do from our successes. No doubt. No doubt.

Dr. Alex Cartwright

I would Look, a lot of them. I would w- would have, I should have just left the stable job even earlier and just had the confidence to believe in myself and chase exactly what I wanna chase.

Ed Mathews

Yeah.

Dr. Alex Cartwright

That is maybe easy to say once you've done it. I don't know that's a mistake. Maybe that's more so advice. And then the other thing is I would, I'd fire people quickly. On one project, contractor was missing deadlines and missing deadlines, and I finally fired him, but probably should have fired him months earlier.

Ed Mathews

Yeah.

Dr. Alex Cartwright

And I was in a career where you don't really have to be angry, tough, mean to people, and- Now you've got to. And so- Bottom line business. The- and so that's a skill set where, sometimes there's parts of this business that are tough, and it's it's not It is not personal even though it's difficult sometimes. Sometimes you gotta cut people loose that are that are not a good fit. And so those are- Agreed I would say those are the

Ed Mathews

big ones. Should've fired somebody faster. Yeah. A- and, I always found that I- that was a skill I needed to learn as well. I'm, I'm a I like to say I'm a nice guy, and sometimes- I'm too nice, right? And but learning that skill of recognizing this isn't working and being able to, disengage from someone either at their ba- at their decision point or mine- is, it was a difficult lesson to learn. And half the time I found they were relieved because they re- I think

Dr. Alex Cartwright

that's a great insight. That's a great insight. I think that I've experienced the same thing because they sense there's... It's not a good fit. There's not alignment, right? Somebody's not happy. So even though it can be uncomfortable for a mo- for a few moments, most of the discomfort is probably just in your head anyway. It's some fake fear that you've created. And and if they're not immediately relieved, they will be. But I think you're right. They are relieved a lot of

Ed Mathews

times to get fired. Yeah. All right. So I'm also curious about, since we're staring at a lar- for those of you folks that are watching on YouTube, or not watching on YouTube- Behind Alex is a very large shelf of a whole lot of books, and I'm-

Dr. Alex Cartwright

Yeah

Ed Mathews

given his academic background, pretty sure he's read all of them at least once.

Dr. Alex Cartwright

Yeah. Not, maybe not all of

Ed Mathews

them. Oh, come on. But, Come on, take it. Take that credit.

Dr. Alex Cartwright

Oh.

Ed Mathews

Okay. But, but I'm curious about the book you're reading right now. Who are you paying attention to and what what are you reading these days?

Dr. Alex Cartwright

Yeah, that's a great question. Right now I'm really enjoying biographies. There's a- there's a book, How Elon Musk Thinks, or... And it's, a lot of it's in his own words that I am really enjoying as a, as somebody that's... He's writing about- Taking a lot of risks, taking punches, need- needing to adjust the strategy in order to grow. So I'm, I get a lot of get a lot of encouragement from that. I read a lot on LinkedIn. I find that I get a lot out of reading longer form posts from other professionals in real estate, whether those are people in capital markets writing about debt, or other people just writing about different transactions that they're working on. And and I also, I spend a lot of time, I like to read Wall Street Journal and The Economist, but I love to listen to podcasts. There's just so much great stuff out there. I listen to a lot of the All In podcast, maybe you've heard of. I have. Those guys are probably 80 to 90% right in terms of their economic analysis, but it's just nice to listen to smart people put arguments together or synthesize what they believe, explain how they get to their conclusions. You can learn a lot from listening to folks like that. Agreed. And and then there's a great economics blog called Marginal Revolution. I think that's the most popular economics blog. And if folks have at all an interest in economics, I'd recommend checking that out. I get a lot of value from looking at that.

Ed Mathews

Excellent. Thank you. So the reason I ask that question is I'm always looking to increase my own reading list, so I'm gonna check out those things. But I am a listener of All In, and that's that's a great show. How do you define success in your life?

Dr. Alex Cartwright

Great question. I'm gonna try and give you a brief answer. Okay. Suc- I- look, fundamentally, success is not an outcome for me. It's doing things in a certain way, and I would say that if you're doing things to where you're living out the values that are important to you, then that's success, right? If you can provide for yourself and your family while living out the things that are important to you, then that's success. So what's important to me is to help other people, which I think that our business does. What's what's important to me is to take risks, challenge myself, do basically the hardest thing that I can think about doing. That's important to me. So when we're doing that, I feel successful. But I think a lot about a great poem called The Man in the Glass, and it's a short poem. Are you familiar with it? I'm not. No. Okay. You should Google this poem called The Man in the Glass, and basically that poem says, when you look at yourself in the mirror, if that person is your friend, then you're successful, right? Meaning if you're proud of yourself- You're successful. So that's, if that's, if I can pass the test in that poem, then I'm successful.

Ed Mathews

I

Dr. Alex Cartwright

look forward to reading it. So Alex, when you're not talking about real estate, what do you like to do? What I aspire to do, I do like to read. I do like to, I do like to research. I love cars. Love to watch different car YouTube channels. People that like cars, they probably know Tyler Hoover, Doug DeMuro on YouTube. Love watching those guys. I love going to Cars and Coffee. But I aspire to... See this set of books up here that are all brown? Yeah. So that's a collection called the Harvard Classics, and basically in the '20s or in the, a little before 1920, the president of Harvard asked all the faculty, "Pick out what you think are the most important books not written in the last 100 years, and then pick out what you think are the most important chapters of the most important books. The best parts of the great works that are timeless." And and they put those all together. So there's a little bit of literature, there's science, there's philosophy, right? There's all kinds of there's biography in there. There's some economics. There's history. All different subjects are in this. And then they sold those. That's a 50 volume set of here's the most important chapters, the most important books. Read this and you'll have a real education in in the classics. And so I like to read that kind of thing. And think about how it's relevant to being an entrepreneur or a business owner today. And I worry that a lot of academics teach that kind of thing, and it's just this pie in the sky- Theory yeah, ideas that are disconnected from the real world, and doesn't hold students' attention. So I'm doing a lot of thinking about how we could do a podcast that goes through that work, but makes it relevant for modern entrepreneurs, and talks to other entrepreneurs about how they've been inspired by great works of literature. So I, I do a lot of thinking about that lately.

Ed Mathews

You should do that.

Dr. Alex Cartwright

Yeah. Thank you. You should do that podcast. It take a... It's gonna take a lot of... We will do it. It's gonna take a lot of time and effort, which, look, maybe I'm saying that 'cause maybe I shouldn't even say that. But we will get that done. I'm excited to do it at some point.

Ed Mathews

Good. Count me in. I'd be fascinated by that. So- Yeah. Thanks, man Alex, how can people learn more about your, you or your business?

Dr. Alex Cartwright

Yeah.

Ed Mathews

How can they get in touch?

Dr. Alex Cartwright

Best way to get in touch, hotelshift.capital. It's our website. Sign up for our mailing list. I write every single thing that we send out. I'm proud that almost everyone on our mailing list opens up our emails, and they can learn and see more about Hotel Conversion and what we're doing. And when we've got a investment opportunity or we're doing something new, we announce it on there. And if that's interesting to you, you can be informed.

Ed Mathews

Excellent. Dr. Alex Cartwright, thank you so much for joining us today. It was truly a pleasure to, to- Thanks get to know you. And and I'm-

Dr. Alex Cartwright

Thank you

Ed Mathews

again, I'm really interested in your business and I'm excited for you. Congratulations on building a tremendous business. Thank you. Thank you. Thanks for the kind

Dr. Alex Cartwright

words.

Ed Mathews

All right, my man. That was great

Dr. Alex Cartwright

End it there

Ed Mathews

I kept you a couple of minutes ear- late. I hope I didn't mess up your

Dr. Alex Cartwright

schedule. No, not at all. Not at all. Okay. I do need to get on a call, but, Okay. Well- But I texted them and told them I'd be late

Ed Mathews

Okay. I will let you go. All right. And we're probably about six, seven weeks out. But my- All right me and my team will let you know, and we'll send you a whole chair kit to-

Dr. Alex Cartwright

Good job having a backlog

Ed Mathews

All right. Yeah. Thank you. All right. All right. Be well