Mass Timber Group Show: Sustainable Building Experts

World's Tallest Mass Timber & Passive House Building w/Nate Helbach of Neutral

• Brady Potts & Nic Wilson

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Mass Timber Group Summit

Are you curious about how innovative developers are leveraging mass timber construction and making sustainable living more accessible? How can alternative financing models democratize real estate investment and drive the future of eco-friendly buildings? Dive into this insightful conversation with Nate Helbach, founder and CEO of Neutral, as he shares groundbreaking strategies in mass timber development, addresses supply chain challenges, and explores the integration of holistic wellness into modern living spaces.

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Timestamps:
0:00 – Introduction: Revolutionizing Mass Timber with Neutral
1:15 – Meet Nate Helbach: Founder and CEO of Neutral
3:04 – Neutral’s Landmark Projects: Baker’s Place and The Edison
5:05 – Overcoming Code Adoption Barriers with 2021 IBC
7:07 – Navigating Supply Chain Challenges in Mass Timber
10:26 – Innovative Approaches to Financing and Capital Raising
14:15 – Sustainability Redefined: Economics and Environmental Balance
18:56 – Enhancing Tenant Well-Being Through Sustainable Design
24:53 – Democratizing Real Estate Investment with Neutral’s Investor Portal
33:28 – Future of Mass Timber: Overcoming Engineering and Structural Hurdles
40:26 – Achieving Certifications: Passive House and Living Building Challenge
48:35 – Expanding Investment Opportunities and Scaling Projects
57:28 – Bridging Communities: Mass Timber as a Unifying Force

Looking for your mass timber community? Attend the 2025 Mass Timber Group Summit in Denver Co - Aug 20-22nd!

Speaker 1:

I mean, it's really our first big catalyst project into this idea of having one main like large hub and then having a lot of smaller buildings in the same market that will be able to utilize the hub for all the amenities. Because one thing I think is just dumb is all these developers that are building 1000, 2000, 5000 units in a market is they're building five thousand units, but for every hundred units they have a three hundred foot a little small fitness center. They have a five hundred square foot little lounge. It's like it's not useful. It's not, it's a waste of space and tenants never actually use it. And so what we're trying to do is create really efficient low rise buildings that have beautifully designed units but really no amenities, and then a large building that has a ton of amenities and has a large focus on health and well-being, to replace your gym membership and have it be even better. And so that's what Edison is for Milwaukee.

Speaker 2:

How do we use mass timber to create beautiful, healthy, resilient spaces and make sure it's still pencils? Well, today's guest, nate Helbach, is going to help us answer that question. Nate is the founder and CEO of Neutral, a development company challenging the status quo of what's possible, profitable and good for the planet. Neutral is bringing to life projects like Baker's Place in Madison, the Edison in Milwaukee, which is set to become North America's tallest mass timber building, and the Marcus Center, a master plan community hub that'll make your jaw hit the floor when you see it.

Speaker 2:

Nate unpacked the financial case for mass timber buildings, what you should think about, beyond the structure, to make these buildings desirable, profitable and sustainable, and how Neutral is democratizing real estate, investing by making world-class investment opportunities, normally out of reach for most people, available to the world. And last, nate shares what he sees in store for the future of the mass timber industry. But before we get into the podcast, if you're looking to level up your mass timber IQ, meet experts and leaders in the industry maybe even Nate himself, and even have a little fun while you're at it. We're hosting the Mass Timber Group Summit this August in Denver. Tickets are live and we expect it to sell out, head over to masstimbergroup, to get registered before early bird pricing expires.

Speaker 1:

So with that, let's get into it. Hey, brady, nice to see you. Thanks for having me on the podcast, excited to be here. Just to give you a little background on who Neutral is and what we do. We're a vertically integrated real estate development company with two offices one in Madison, wisconsin, where I'm located, and then our other one is in the Bay Area with with a primary office in san jose, and we're kind of split between our software development design uh team are all in the bay area, and then our capital markets finance accounting construction teams are all in wisconsin.

Speaker 1:

And, uh, to date, we have four live projects um, one that we've sold, uh, and then three that are either in construction or in early lease up um, one in madison is in early lease up, another, madison, is in construction. And then the big one which I know we're going to talk about later today is, uh, the edison, which we just closed, uh, a large loan, 133 million dollars, uh, which will be the world's tallest mass timber building for a very short period of time. And then, uh, we'll get beaten by the Australians, um, but it's a 31 story mass timber tower right downtown Milwaukee, um, and so, yeah, that's. That's a little bit about us Happy to happy to be here and looking forward to our conversation.

Speaker 2:

Yeah Well, thanks for for joining me and spending the time. I know that you guys are making a lot of headlines with the mass timber projects that you're doing, especially the edison, like you talked about, uh and a couple others, and I believe is it baker's place that's rounding the corner on final construction yep, yeah, we launch uh pre-leasing here in two months, so May 1st is when we open, but we'll start pre-leasing in March 1st.

Speaker 2:

So if we rewind our conversation like two, three years, a lot of people were saying that mass timber and housing was never going to happen, at whatever scale. Why do you think that all of a sudden that coin has flipped?

Speaker 1:

Yeah, yeah, I mean, I founded the company at the end of 2019. So I was like right at the, I'll say, precipice of everyone being slightly naysayers about mass timber and if it could be used. I think there's a lot of different reasons I go into it. Um, I think the biggest one is the code.

Speaker 1:

Adoption is huge, like one big thing for us that allowed us to even build with Mastermber and Madison was being able to be reviewed and approved under 2021 IBC.

Speaker 1:

So I think that was the biggest catalyst for a lot of municipalities to even say, okay, mastermber is safe to use in housing above six stories, and it allowed a lot of developers, including myself, to say, okay, I'm not going to have to go bang my head against the wall and argue with all these municipalities about getting alternative means and methods, requests and all these other additional variances that we might have to get to even build with Mastinburg right, and we all know that ground up development is probably one of the most risky propositions to make when you're in real estate, and so adding another layer of risk is just not very judicious of oneself, and so I think that was the main reason why we're seeing a lot more mass timber.

Speaker 1:

I think there's other ancillary factors as well, just that the market's starting to adopt it because they like mass timber. There's starting to be a few projects out there that have actually been built and are now in lease ups and seeing some increase in rental rates due to the mass timber elements. So I think there's ancillary reasons, but I think the core reason is really the code and fire testing that has taken place the last six or seven years.

Speaker 2:

Got it, and so it's like it's. It's taking one more risk off the table, if you will. So some people talk about the supply chain being a risk, with mass timber or maybe even the industry's capacity. What are your thoughts on that?

Speaker 1:

Yeah, I mean, I don't know. I'm actually seeing it right now, uh, confidentially. We uh have a small project here in madison and we are getting all of our timber from a european manufacturer named binda holtz, um, which I'm sure a lot of your listeners know, and they've done a great job manufacturing um. They contracted with a shipping company to ship it from austria over to baltimore and then truck from baltimore to wisconsin, and we unfortunately had this crazy event happen where they're halfway between, uh the port of bremaheven, germany, and uh scotland, and they unfortunately have a fire on the ship um, and so there's like a few holes. One of the holes uh had a bunch of wood pulp on it and started burning. So they had to stop in aberdeen, uh, scotland, to, of course, port, get all the things that burned off the ship and then try to get back on their way. And they're still there. So I'm hoping they get back on their way this week, but we'll see if it might not even be until next week. Fortunately, due to some of the pre fabrication and more modularity of mass timber, we're going to be getting our third and fourth shipment ahead of time, and so we'll be getting that hopefully towards the end of next week and we're actually able to take our third floor and use it for our first floor, and then we're going to be able to take our roof and use it for a second, and then first will be third and second will be roof, um, and so that is really a great solution that we came up with, um, not something that we necessarily kind of obviously were able to project due to not knowing that a ship would catch on fire.

Speaker 1:

But I really think the biggest risk that we have with the europeans and relying on them so much is that they the shipping is a huge issue, yep, um, especially when someone experiences something like this. Fortunately it's not that big a deal. It's, uh, about a 15 million dollar deal. The mass tumor scope is not not crazy expensive, um, so, but if it were to happen on a large deal like edison over in milwaukee, a huge project with a large, large mass timber scope that would be a massive issue right from a dollar's perspective. So I think where I see us trending long term or I see north american manufacturers should be trending long-term is we should be more competitive with the europeans, and what that means is really bringing costs down, because the only reason we're going to europe is because they're exponentially cheaper than all the north americans.

Speaker 1:

Like we had, uh, another few mastermind manufacturers bid on the same project. One of them is in the Northwest Pacific, which I'm sure you can guess. They already start with an M. And then we also had a few down in the South bid, and no one was even close to KLH, binda Holtz and Store Enzo, but those three were within percentage points, not even half percentage points, of one another. And so the issue, I see, is that we keep relying on the Europeans and we keep running into these shipping risks and it kind of just stalls us out at the progress of mass timber being widely adopted in North America. And I think for us to really go over that hurdle we need very competitive master manufacturers in North America, and I think it's just up to the manufacturers to step up to the plate.

Speaker 2:

Yeah, I think that's a fair assumption, or summation, if you will. So I've read in articles that you've been described as doing things that are new, innovative. They kind of break the mold from quote unquote traditional developers. How would you say that you guys are taking a different approach that allows you to do innovative projects like this?

Speaker 1:

Yeah, I mean I think it's a lot of different elements. We could dive into any of them. I think everything comes back to one of the core tendencies of development, which is you need money, you need capital to build buildings, and typically capital dictates what type of buildings they want you to build, and that's just a reality of the industry we're in. And so if you can find alternative sources of capital that are somewhat more nimble and willing to take innovative risks, that is something that's probably the firm. Of course it was right.

Speaker 1:

Before COVID hit, we went out and tried to get private equity money in these huge institutional capital. Love the idea, love what we were doing, but they were like, sorry, we're a risk off with anything new because, one, we have this huge pandemic hitting and, two, we don't really know the future of real estate, and so that made us kind of go and look at other ways of raising capital. And before I was working on Neutral as the founder, I was working for another development company where we went out and syndicated basically just accredited individuals Someone who has between $2 million to $10 million of net worth and wants to throw 100, 250,000, $500,000 in real estate as one of their kind of alternative investment opportunities, and I was really not wanting to go that route when we started the firm because I was like it just takes so much infrastructure, we need so many people to raise capital and there's a lot of just it's. It's pretty much starting up a whole new business unit. And so I was like, well, if we could get one big a hundred million dollar check to do all this, this would be amazing, right Like the golden goose.

Speaker 1:

And that didn't happen. Um, so we decided, well, let's go back to what we know. Let's go back to the bread and butter of raising capital from accredited investors, and it worked out really nicely. We found two wealth advisors that really like what we're doing. They invest their client capital.

Speaker 1:

We found about 40 investors for our first project to invest, and then we found one larger family office to invest as well in our first project, and since then the family office his name's Matt Frazier has invested, is now one of the co-founders and is continuing to allocate capital to us. And then we've been able to grow the accredited side of just having more and more individuals. So we're up to almost 250 individuals invested in the platform, and we have been able to also grow our partnerships with wealth advisors and are up to about 11 wealth advisors that allocate calling capital into each one of our deals, and we talked about this earlier. But we recently just launched our investor portal to kind of expand the reach out into more than just Wisconsin, illinois, california and you, hopefully, international, but right now we're just doing national with the United States investors. So I think that's really the core tendency of why we're able to do innovative things and new things because we have an innovative way of sourcing capital.

Speaker 2:

Yeah, that makes a lot of sense, and I read online that some of your early funding came from German investors. Is that right?

Speaker 1:

Yeah, yeah, when we started, I went to these two German investors. One was the, and this was one of the reasons why we thought we could get pension money. One was the head of global real estate for Canadian pension board, the CPPIB, and the other was the head of global real estate for union investments, which is a large investment manager in Europe, thomas Hald in Germany. And so we originally thought, well, we have a great CVS, we have a great product, we have good markets, let's try to get pension capital. And so that was with our two German partners. And when Matt came in, he bought their positions out and so he took over their positions.

Speaker 1:

Very amicable, they actually still invest with us. Great guys still advise the company. But we now have myself and Matt as the two primary partners. And then we have one other partner who he'll say he's a recovering architect, but he used to be at Foster and Partners and then was at Neighbor, which was another Silicon Valley startup focused on mass timber, and now he's a partner with Neutral and he leads up our Neutral studio, which is our architectural department.

Speaker 2:

Because Neutral, is so focused on the environmental aspect of what you guys are building your impacts on it. Is that a major part of the conversation with investors? Is it a pull? Is it a drawback? What's that kind of conversation around sustainability focused companies look like?

Speaker 1:

Yeah, I mean, how we really look at the lens of sustainability is through kind of a more economics perspective. I don't know if you're familiar with Robert Solo's work. With Robert Solo's work, he's a kind of environmental economics professor back in the 80s but he has done a bunch of research around like basically this idea of what does sustainability mean through the lens of economics? And I think that's one of the best ways to look at it, because I think a lot of people will sometimes just throw this word around sustainability and not have a good idea of what it means or or what actually you can do to help support this uh notion of sustainability. So how we define it and one of the reasons why we're called neutral is basically consuming goods. Right, because we're all these buildings we're building, we're consuming goods. We're consuming Because we're all these buildings we're building. We're consuming goods. We're consuming wood, we're consuming clays and all these different things that go into making a building an actual building. At the same rate, those goods are produced naturally. So you can measure very easily how quickly a tree grows in the forest right. You can measure all these different environmental aspects and environmental resources. And what we define as sustainability is basically saying, when we hit equilibrium, so when we're taking trees out of the forest at the same rate that that fiber is growing in the forest, that is our idea of sustainability and a state that we call neutral. And so when we look at our projects and when we talk to our investors about sustainability, what we really mean is we want to consume at the same rate that our environment is naturally producing those materials.

Speaker 1:

And I think there's a lot of different scientific ways to look at it. That's the economic way to look at it. Scientifically, how we look at it is through the lens of life cycle assessments and energy models. But really those are just two ways scientifically to say okay, are we actually achieving the underlying thesis here of how we define this state called neutral? And so I think when we talk to investors, that's what we tell them, and we also tell them that people, generally speaking, love to live in sustainable buildings, especially mass timber buildings.

Speaker 1:

But it's like a sustainable building has a lot more benefits for the resident than anyone else, because you have access to better air quality. You have access to better air quality, you have access to better water of our water at least in Wisconsin, has has a lot of PFAS in it and a lot of chlorine and other chemicals, and so our water that we have for drinkable water in the building is all RO water, which is part of the living building challenge, certification, um. But there's other aspects as well, like just the biophilic nature of being living in a timber building versus a concrete, that add to this idea of sustainability, which, for the investor, a lot of investors look at it through the lens of okay, well, what does this mean for my return? Because I'm not the resident, I'm not living here, what does this mean for me?

Speaker 1:

And sometimes people are inherently selfish, I'll say and so what we tell them is if you have two buildings one's a very traditional, down the fairway concrete building and the other one is a neutral building, what one would you rather live in? And we try to walk them through both, tell them about the pros and cons, and it's always inevitable that they say we want to live in a neutral building. And so that is kind of how we sell the vision and how we sell to investors why they should invest in these buildings. Because if we have supply increase which we will we're building more and more buildings and we have demand increase because people love living in our buildings, well, that's great for our investor return. So that's kind of the story that we tell them about why they should invest in a more sustainably focused building.

Speaker 2:

That makes a lot of sense on the investor side. But a key tie into that, like you alluded to, is like the renter side of things, and so we talked about like living in a in a better, better environment holistically, and it goes way beyond mass camera. You guys do a bunch of different things in your buildings to kind of meet that promise if you will, and then perhaps even charge a little bit of a premium for that. Can you kind of walk me through what you're doing outside of mass timber? I know we touched on the water aspect but like, what else are you guys doing?

Speaker 1:

yeah, yeah, I mean, we're really trying to take this idea of like, this equilibrium state into not just the materials we are, uh, buying for the buildings, but also for the residents themselves. And so we're looking at it from the start of like, okay, well, well, we have an empty site, a blank site. What are we going to build? Right, and we're saying, okay, all the elements that we're using to build this building, we want to have this sustainable aspect to it, where they're at a basic equilibrium from a natural resources perspective, perspective. Then we go one step further from the more construction standpoint and look at, well, at the end of the day, we have people living in these buildings, right, and people, especially in the US.

Speaker 1:

We have like an epidemic of disease. We were just talking about our kids having colds, but it's like that's a very micro scale of what's going on. We have like obesity. That's ran rampant. We have heart disease. That's really terrible. Cancer rates have gone up, like all these things are issues that we're seeing exponentially increase, and part of the reason for that is the environments we live in are not suited for, you know, homo sapiens to be at their prime level, to be at their prime level, and so what we are trying to do is basically ensure that the people living in the building actually experience a better life. So what does that mean For us? That means that in every single building that we have, we have this like kind of hub and spoke model. So we have one big building go to market. Then we have a bunch of small buildings the small buildings. We don't have these big amenities because they have access to the big building. So for the big building we have a large fitness center. You can kind of think about a lifetime fitness or equinox fitness style fitness center anywhere between about 8,000 to 10,000 square feet.

Speaker 1:

We have personal trainers on staff that will kind of support your health journey. We have nutritionists on staff and we have a doctor on staff that will kind of support your health journey. We have nutritionists on staff and we have a doctor on staff. So when someone signs a lease with us they don't have to. It's not obligatory, but it's a free option for them as part of their lease rate that they get an initial diagnostic from the doctor, nutritionist and personal trainer, and basically what that looks like is they go through blood testing to see where their blood levels are at.

Speaker 1:

They go through a DEXA scan which shows you your body composition of fat to muscle ratio. They go through an RMR resting metabolic rate test, which shows you this is how many calories you consume, just in latency, on a daily basis, to know, like, okay, this is how much I should be eating. They go through then a VO2 max test which shows you this is my kind of cardiovascular endurance, which is one of the best ways to actually see how your longevity will perform over the next 10 to 50 years. And then they sit down with the personal trainer, the physician and the nutritionist to talk about an ongoing plan. And that is all tied in, then to this idea of having healthier air to breathe, of having better water to drink, of having, hopefully, better sleep, because you're sleeping in a biofuel building, and it all kind of ties into this more holistic view of what sustainability really means, and it's both affecting our environment but also the homo sapiens living in our world.

Speaker 2:

I think that's an incredible idea. I think what you're doing there in addition to hey, these are just the tenant and the tenant building owner relationships and what we're providing you're also kind of creating a little bit of a community of like-minded people that want to be around other like-minded people that want to be in that environment, and I think that community aspect of being around like-minded people also probably will have a certain type of draw and appeal, if you will, to other tenants coming in that are kind of meet. What you're looking for, right?

Speaker 1:

Yeah, I mean that's our goal.

Speaker 1:

One of the things that we see is, if you have a friend or a relationship in the building that you live and you're renting, you'll have a 60% chance greater that you will renew your lease year over year than move to a building down the street.

Speaker 1:

And so ultimately, like looking at it back from the investor lens, if we can build these communities and build people that are all pursuing the same vision, they're going to create relationships, they're going to have community, they're going to have friends, which means that they'll renew year over year. And for us, after we get stabilized, the biggest risk for us is having non renewals, right, because then you're going back to square one of trying to get stabilized. But if you're at 95% occupancy and everyone reviews, well, then maybe next year at 97, which is even better for the returns, and maybe the following year you're at 98. And so for us it's really looking at it through the lens of sustainability, but also, hopefully that leads which this is not something we can really, uh, have any influence over it leads to a community and that's really focused on the people that are there and if they all get along, or or if they don't, and hopefully that we foster spaces that allows them to get along and allows them to have a great community.

Speaker 2:

Well, I think even on, like, if somebody's just reading the, the brochure version of what we're talking about, you're like, hey, health and fitness, quality of buildings, biofuel benefits we haven't talked about it yet, but like, you got on-site compost and partnerships with local, local food providers.

Speaker 2:

I even saw something about some shared teslas. Like on the surface, like before I even learn more, I'm like that's all stuff that I personally would want, and I know that the people that think like me also want that, and I know that I want to be around those types of people, and I think that that community aspect is is is more important than we might realize. For, like you said, like the longevity of leases, the renewals, et cetera, uh, cause I'm thinking like, hey, in in my neighborhood. I don't have any of that. I am ambivalent to the neighborhood that I am in, I love my house, but if I could move to a neighborhood with the same house, with all of those like-minded type people, you bet your butt I'd be picking up and moving, um, and then, if the inverse is true, as ours already there, it would take an awful, awfully sweet offer to get me to move out of that kind of community.

Speaker 1:

Yeah, I mean, the only reason you'd be moving is a family events, like someone dies and you have to move, or you have a life event with work or something else where it's like, hey, sorry, I have to move from Madison, wisconsin, or Milwaukee, wisconsin, to, uh, montana, where you are, um, so that is a really big selling point for investors as well, because that's one big thing they're they're looking at, because all investors all they're trying to do is how can we have the best risk adjusted return and all these things that we're doing they love from the kind of sustainability lens. But they're also looking at okay, what's the risk adjusted return? And some of this stuff is decreasing the risk and keeping return constant. So it's increasing the risk adjusted return.

Speaker 2:

One of the big talking points in the industry, especially around like multifamily type construction, is mass timber in general comes at like a couple points percentage premium compared to other building systems. I think that when you just look at hey, it's call it 2% more expensive to build a mass timber building than another building. I think people, I think part of the conversation that's missed is what you and I just talk about. It's it's not just because it's a mass timber building and that's why it's worth paying 2% more. It's like you can do these wraparound things that help get you that risk adjusted return like you were talking about. So I guess, like one, are you seeing that same type of premium return? And then two, do you think other investors are overlooking kind of the neutral approach?

Speaker 1:

um, yeah, I think from the cost perspective, we definitely see an increasing cost. Um, we're trying to have creative structures. Um, when I say structures, I mean like structural engineering structures. Uh, that would decrease that cost because a lot of the increase is coming from the structure itself. Um, not really from the ancillary stuff, because, as far as in cell goes, uh, it costs about the same for us to install a steel beam or a glulam glulam beam or ghoulam column.

Speaker 1:

So really, we're looking at it through the lens of how do we optimize the structural elements to be as efficient and hopefully as cost effective as steel and concrete, because those are typically our two other counterparts. And what we look at a lot of the times is yes, there's a premium for sure. Like, if anyone tells you there's not a premium, they're just lying to you. And we did a large study actually to prove this with USDA Forest Products Lab On our first project. We got a wood innovation grant and it's on our website, you can look at it. But we basically did almost a full DD design, structural design of what we're building, which is a hybrid steel and CLT and glulam building, a full mass timber building, a full steel building and then a full concrete building.

Speaker 1:

And we looked at all four scenarios and we said, okay, what's the cost? And because this is something I think people often forget what's the schedule impact to building with these different materials? And almost all of them were less expensive than what we were building, except for the full mass timber option that was about 2% higher than what we were building. So we were building about 3% higher than steel and concrete, and if we were going to go all mass timber, it was about 3% higher than steel and concrete, and if we were going to go all mass timber, it was about 5% higher than steel.

Speaker 1:

And so what we found from that study is that, yes, it's more expensive, but if you look at this expense in relation to what we hope to receive as a rent premium, then it's not. It's negligible, because we wouldn't receive that rent premium if it was a steel building. And so I think you have to look at it through the lens of what are you building? What rent are you projecting, instead of hey, this just costs more. Because if you look at it myopically through the lens of this just costs more, you're never going to be able to actually achieve the run premiums that you possibly could to afford the increasing cost.

Speaker 2:

Yeah, and you touched on schedule just a little bit. What were the differences in the schedule? And then as a as a developer, can you unpack like the implications of an accelerated schedule?

Speaker 1:

Yeah, I know a lot of people talk about this and I don't think it's realistic to expect a super accelerated schedule what is real like we're we're.

Speaker 1:

We're going back to our um, our scheduling exercise last week, and I'm just thinking through, like we're looking for our milwaukee tower at uh, basically a full pt core, and then we have CLT from the core. So the cores are all post-entry concrete, the CLT is just a traditional CLT gluam, post and beam structure and what we're finding is that because we're on a five day and five day cycle time it's not that much quicker because we would have to basically, well, we have to literally build the core first, get three or four floors ahead of our CLT, shore that up and then start building our CLT, and so we're basically waiting about a month to get all of our concrete going before we can even start CLT. So clt is already starting with a four uh four week delay and then we can never catch up to the the core because the core has to get shored up and cured before we can bear on it for the clt post and beam solution. So until we figure out which I know there's a lot of studies about this how to do a clt or mass timber core, these schedule savings if anyone tells you otherwise, I think just are not really realistic.

Speaker 1:

You might save a day or two on your cycle time. When I say cycle time, that means how many days you need per floor, um, but I don't think it's realistic to say we're going to save, well, a month or two months or three months on schedule, like I think it's realistic to say we're going to save, well, a month or two months or three months on schedule, like I think it's maybe maybe one or two days per floor, depending on your floor plate, depending on your structural system. But until we figure out how to go with a CLT or some sort of mass timber core that can be assembled concurrently with the rest of the floor plate, we're not going to realize the full savings from a schedule perspective utilizing mass timber.

Speaker 2:

And forgive me because I'm speaking a little bit out of my lane here but is that because they don't have a core system that can participate in the lateral system yet for the types of buildings that you're doing, or is it just like nobody's really explored the core option?

Speaker 1:

No, there's a bunch of research UC San Diego down in la jolla is doing.

Speaker 1:

I don't know if you've seen any of the shake tables that they've been doing for, like earthquakes and understanding lateral loads, um, but right now it's pretty hard to get because it's not prescriptive in the code for us to do it, um, so you would have to get a lot of alternative means and methods. In Milwaukee it's pretty much impossible just because of our wind loads, at least right now. So it's, I think, going to take a lot more engineering from a structural perspective to be able to achieve it on a 31-story tower. On a low-rise project or maybe even a mid-rise project, it might be possible, but on a 31-story tower it's going to take more time.

Speaker 2:

Yeah, that makes sense. So, while we're talking about 31, 32 stories, the Edison, why are you guys building the Edison? Tell me about the story, what's your vision for it?

Speaker 1:

Yeah, I mean it's really our first big catalyst project into this idea of having one main like large hub and then having a lot of smaller buildings in the same market that will be able to utilize the hub for all the amenities. Because one thing I think is just dumb is all these developers that are building 1000, 2000, 5000 units in a market is they're building 5000 units but for every 100 units they have a 300 foot little small fitness center. They have a 500 square foot little lounge. It's like it's not useful. It's not, it's a waste of space and tenants never actually use it. They'll go get a lifetime membership or they'll get an Equinox membership or some other type of fitness membership. And so what we're trying to do is create really efficient low-rise buildings that have beautifully designed units but really no amenities, and then a large building that has a ton of amenities and has a large focus on health and wellbeing to replace your gym membership and have it be even better. And so that's what Edison is for Milwaukee, and so it's our first kind of catalyst into that model.

Speaker 1:

The other thing that's really big on Edison is we are trying a somewhat, I'll say, innovative structural system.

Speaker 1:

It's not that it hasn't been done before.

Speaker 1:

But what we're doing is we're using, I think, the mass timber elements and the fiber of mass timber hyper efficiently and using the concrete elements and the places where we're putting concrete very judiciously, because we're basically having a small donut core in the middle and then we have this great post and beam CLT solution that's been fully optimized for our fiber count to be able to have it be really hyper affordable. I mean, I think this is one area where we're doing a study on right now and we're going to publish the same exact study that we did on our Madison project of looking at, okay, what's the full mass timber solution, what's the steel solution, what's the concrete, and I think we're going to be like 1% off of what concrete would be 1 or 2%. So I think that's a big step forward for the industry because as soon as we get in those like 0.5 to 1% range, it feels like to me like there's going to be a lot more adoption of Mastermind because of all the other benefits that we've been talking about.

Speaker 2:

Yeah, that makes a ton of sense, and I know I read online that the Edison was originally going to be 15 stories. Is that correct?

Speaker 1:

Yeah, yeah, we bought. Just to give some history of the site we bought the site, uh, at the beginning. Well, went into option at the beginning of 2020, uh, purchase the site the beginning of 2021. And of course, we had crazy wood prices, we had cost escalations, and so our original design that we had did not pencil, did not pencil at all, and so we were like at a three percent untrended return on cost, which is practically not financeable uh, definitely not financeable. And we were at almost an a negative imputed value for investors.

Speaker 1:

So we said, okay, let's go back to the drawing board. Let's look at what we have. We had great land, great site right downtown Milwaukee, right across the river from where the Bucks play the NBA team, and right in the core kind of business district that we got for a great kind of pre-covid escalation price. So we went to the city. We said, hey, we really need a variance to be able to go taller here. Could we go to 32 or 31 stories? Uh, and fortunately, after going back and forth with the city, they agreed to that and now that's ultimately what we're building today and and now it pencils really well because we we got the land at a price that the sellers thought we could only build 15. And now we are building double that. So the per unit price for the land value is is a great amount Totally.

Speaker 2:

Uh, are you going to do passive house or living building challenge on the Edison.

Speaker 1:

Yeah, yeah. So Passive House Certification, which we actually have, fiascon, I'll make a plug for CAT in Milwaukee in this year, so it's, I think, october, I want to say 19th, but if any of your audience wants to come, we're going to be touring them through the building, through the building will be under construction, so it'll be a hard hat tour, but Fiascon will be in Milwaukee at the new convention center right downtown, and that will be the tallest Passive House certified building in the world. And then we'll also have Living Building Challenge certification, which is I don't know if you're familiar with that, but it's a really kind of I'll say, one of the best, probably outside of Passive House sustainability certifications that really align with our holistic vision. Like they look at material selection, they look at site location, they look at water quality, they look at health and well-being and it's a really more holistic certification process, unlike, like an Energy Star or LEED not to say those are bad, but just to say that they're not as holistic as we want to be when it comes to sustainability.

Speaker 1:

Um, but it will be the tallest uh, and I think, the first high rise living building challenge certified building uh in the world, because it's a relatively new certification process. Yeah, the interesting thing, though, is, if any of your listeners are thinking about building a Passive House building, they actually could get Living Building Challenge for probably relatively cheap, because Passive House and Living Building Challenge have a lot of the same certification qualities. The only thing that Living Building Challenge adds is a lot of the same certification qualities. The only thing that living building challenge adds is a lot of things for the tenants which aren't super expensive per se. It's more of operating procedures they want to see you implement, so that would be something, if someone's considering a passive house building, to also consider lbc as an additional certification and I know that sustainability is a big focus and that probably plays a pretty big influence into going after those certifications.

Speaker 2:

But again, if you're, if somebody is just looking at the spreadsheet, they say that's a lot of cost to achieve those, or maybe it's not like what, what's your, what's your message to investors. I'm like here's, here's, here's another aspect that we're going. It potentially costs more, but here's why we're doing it.

Speaker 1:

Yeah, I mean one big ping point this is public data is that, uh, ascent, which is currently the tallest mastermind building in the world, just got their refinance and so they refinanced out, uh, their construction loan into this kind of like bridge mini perm scenario. And it's public data. You can kind of extrapolate what they refinanced at on a per unit basis. So how much they got per unit, and we're building for about 4% less than that value. So another bank that came into Milwaukee said it's this amount that we think the value of this building is, and we're building for about 4% less than that. And they don't have Passive House certification and they don't have Living Building Challenge certification. So if you can kind of like extrapolate those numbers, we're right in line with the market.

Speaker 1:

Now the big reason why we think Passive House and Living Building are critical certifications is Milwaukee we would define as a secondary market. So if you think about Chicago, new York, la, houston, those are primary, milwaukee is a secondary. And so for this kind of upper echelon trophy style asset, we felt the need to get these certifications above and beyond, like what we're doing on the sustainability side, like we want to pursue passive house and lbc on every single building. We do, but the one of the big reasons why we were so forward about it on edison is because we feel like whatever buyer is going to come in and buy this building, which what likely will be a big life insurance company, institutional or pension fund company they want the certification because they want to put it in as kind of their trophy sustainability ESG-focused asset in their portfolio and they'll go to a secondary market and spend that dollar amount to do that. And so that was one of the big theses from the investment perspective of why we wanted Passive House and LBC.

Speaker 2:

Very interesting. Yeah, that's something I haven't thought about before because I've never worked on a project of this scale. Obviously, back to like the sustainability aspect, all of this kind of plays into these certifications you're talking about. But you know you guys probably pay a lot of attention to the EPDs of the materials or making sure you're not buying materials on the red list etc. Like can you give it? Can you give me some examples of some materials that just get axed right away that other people might not be as aware of?

Speaker 1:

um, yeah, I mean a lot if you go to uh, which I don't know if you have show notes, but if you have show notes, you should definitely put the Living Building Challenge red list in your show notes, because they've spent, I think, almost 10 years now basically developing this list of materials that are really really toxic and really bad for humans to have in their buildings.

Speaker 1:

For humans to have in their buildings, probably the easiest one to ping to is, like a lot of the installations we use are not good. If you look at like I mean, it might even be in your home, but if you look at a lot of the installations, they're very toxic, have a ton of chemicals and are not good for yourself but also not good for the environment, and so we try to use mineral wool or we use a really high efficient glass with triple pane. So on Edison, it's a big window wall system, so a lot of that system is glass, so it has triple pane, recycled aluminum for that system, but we try to use something that is an alternative to these really high chemical products. Insulation is the one I can think about off the top of my head, but there's a lot more on the red list that we just won't use any of those materials that LBC has developed for us that are considered toxic with heavy metals.

Speaker 2:

Yeah, that makes a lot of sense and I'll definitely link all that down below for everybody that's interested. So, with the rounding of the corner of Baker's Place, we just talked a lot about the Edison. I don't know how much you can talk about the next big project like the Marcus Center that's coming after that. It feels like you are going at like breakneck speed and achieving all these wonderful things like can you tell us a little bit about the marcus center?

Speaker 1:

yeah, um, it's a site right across the street from the edison, so it's a big, somewhat uh demo by neglect type uh parking structure that the city has owned for 40 or 50 years. Um, and they went out for an rfp, uh, october of 2023. Uh, we submitted with michael green, uh, in june of 2024 I want to say may or june of 2024. I had a few competitors, a few local guys, a few national guys and, uh, we were the ones who were ultimately selected by the committee and by the mayor to move forward with the master plan. So what that means is basically over the next several months we're working on agreements with the city that will go into basically our pre-dev and entitlement period and that will start phase one of the first phase of the master plan.

Speaker 1:

But it's more of a legacy project for us, so it'll probably be roughly five to 10 years before we're complete and we're taking it down in phases. One, not to kind of cannibalize Edison for the lease up. But two, the city wants high mixed use and even variability of affordability, especially with workforce, housing and market rate and kind of luxury market rate. So it's a really big project. It's a whole block. It will probably be between 500 and 700 units, a good amount of office, a few hundred thousand square feet of office, a good amount of retail and then some workforce housing component to it. So it'll be a long project, probably take us till about 2034, 2033. But it's one of those projects that's really fun to work on because you get to kind of plan out the whole neighborhood that surrounds us.

Speaker 2:

Yeah, that'll be exciting. Uh, I saw some renderings of a, a very large, tall tower. Uh, is that something that you guys are going to pursue, Like? I think it was like a hundred ish stories or something like that.

Speaker 1:

Yeah, it's 50 stories. Um, yeah, that is something that we're working on as part of the master plan, something that we're working on as part of the master plan.

Speaker 2:

Are you guys leaning towards?

Speaker 1:

mass timber for that too. Yeah, yeah, everything we do right now until we find a better material is mass timber All right.

Speaker 2:

Well, it's going to be exciting stuff. So, like you have all these projects that are rolling, you guys are doing things differently. I think the market's responding well to it. What's next for you guys? Like, is there, is there something that you guys are focused on in your processes on the investment side, on the tenant side? Like, where are you continuing to innovate and grow?

Speaker 1:

Yeah, we just launched our new investor portal, which I would encourage your listeners to go to. But one thing was with our investments. It was really kind of local. We would have lunches and dinners and coffees and stuff like that with people in mostly Madison, Milwaukee area and we wanted to give the opportunity because we feel like we have a unique investment opportunity to the whole nation to invest in our projects. So we built out our own custom software that we just launched a v2 last week and it's basically allows anyone to go on our website, click invest with us and sign up for our portal and then you can see all the due diligence information and then you can go through the full investment process right on our website so you can go through your paperwork, sign your agreements with DocuSign integration and then even fund, with our Plaid integration, the investment there, and our minimum is that you have to be accredited and you have to have a $10,000 minimum investment.

Speaker 1:

So that's where we're innovating right now. We're also doing a lot of innovation on our productize strategy for our low-rise buildings. So we have a project in madison that we broke around on in uh september of this this past year that will be opening this summer and that's really focused on productization. That's the one where we started the episode with the fire, uh, but we have fully prefabricated walls, we have CLT panels as the decks, we have some prefabricated kitchen elements and that's one area that we're looking to really grow in is the kind of prefabricated low rise typology.

Speaker 2:

Yeah, that's all exciting. I read another quote from you online where you talked about right now real estate's kind of a this type of real estate investing can be be very high barrier kind of prestigious investment that's not available to a lot of people. And you you were quoted as like we want to move towards more of a democratization of real estate. Is that? Do you see this new system like really playing into that mission? Is that kind of the core thesis behind that?

Speaker 1:

Yeah, I mean, one of the great things about having a wealthy family office and individual behind the company who's a major investor and partner is that he sees a lot of other family offices and what they invest in. And a lot of the times these family offices and institutions get access to the kind of cream of the crop, the best of the best deals, and a lot of the times the stuff you see on all these syndication platforms like Fundrise and Yieldstreet and Crowdstreet and all these others is, I'll say, not the best investments for real estate, because typically the larger developers would rather go with a big family office or big institution to get their capital because they know that that surety execution is there, whereas with a syndicator they're like well, are they going to raise the funds, are they not? How many investors do we have to deal with? Like there's a lot more complications. And so with us we've had this great kind of new concept that the family office is investing in each project.

Speaker 1:

They're also an owner of the firm. So we're giving this kind of institutional quality asset to the masses and the masses get to invest directly with us, because typically we would be going to those institutions or we would be going to those syndicators or family offices and saying, hey, can you write a $500,000 check or $5 million check or $50 million check, whatever it may be, for whatever project size we need, we'd be going to them directly. Doing is we're kind of taking out that middleman of the syndicator who is just basically getting the funds and allocating it to people like us and instead allowing people to invest directly with us, which reduces the syndication fee and democratizes the process to allow any accredited investor to have access to this institutional quality asset.

Speaker 2:

I think that's really important and for people that aren't necessarily like in the real estate investing world, if you, if you will, what you kind of an act is like, you can get, okay, investments as an accredited investor through these different platforms family, friends, partnerships, et cetera but like the projects that you're talking about, like the Edison, that are like that's where all the big money goes, that's where the big money wants, like generally, you're, you don't have easy access to that, and you're basically breaking that, that barrier down and you're just providing like direct access to these super high quality assets, which for the investor, means potentially better returns, a better experience, more certainty. And then and did I? Did I hear you say that you had a minimum investment size?

Speaker 1:

Yeah, our minimum is 10,000.

Speaker 1:

Our average investment size is 148,.

Speaker 1:

But you're getting, you're getting to a great point, like the syndicator who's giving access to a project like the scale of Edison is then charging the investor fee upon fee upon fee and it's like, ultimately, your return is so kind of liquidated to the point that you should have just probably invested with, like a Vanguard REIT or a Blackstone REIT and gotten a similar return, whereas with us we don't have all those fees.

Speaker 1:

And so you're investing direct with the developer and you're able to avoid a lot of the fees and talk to us directly, know who's building the project, know who's managing it, and it's a lot more of a kind of like smooth process where, hey, I can trust that these guys are going to get this project done, instead of say, oh, I got to trust this syndicator to make sure he's picking the right guys to do the projects and then I got to trust that those right guys are doing the right projects. It's like, no, just invest directly with us into the projects that you like. Maybe you don't like Madison, maybe you really like Milwaukee, maybe you don't like Wisconsin, you really like Arkansas. Maybe you don't like Arkansas and Wisconsin, you want to do California, but it's like you get to pick direct assets, invest directly with the developer.

Speaker 2:

Yeah, that's a great point. And again, for people that may not be in the, in the know-how, like a $10,000 minimum investment size is like really small right, Like I've been approached by syndicators and stuff like that it's like it's 50, a hundred. Those are their minimums. Why did you guys decide to take extra heavy lifting, deal with a larger quantity of investors with generally smaller investments?

Speaker 1:

Yeah, that's something we just started. Because we were at $100,000 minimum for a very long time and because we launched this new software, we were like, well, it's so easy that it actually doesn't take a lot of manpower. We were like, well, it's so easy that it actually doesn't take a lot of manpower, so to speak, to manage the investment, because everything is right on the investment platform. You can see all your documentation. Your tax forms get uploaded automatically. You can go in and even see the live cam. Once you're an investor, you see the live construction camera to know what's going on with the site.

Speaker 1:

And so our thought and thesis was we're spending so much money on building the software. We should really democratize the process even more and expand it to more people that are interested, because they'll a lot more people could write a $10,000 check, even if you're accredited, than a hundred thousand000 check. Right, Like, most people don't have $100,000 just sitting around, even if you're worth 2 million bucks, Like typically, you're deploying that into other investments, but you always have $10,000 sitting around for investment opportunities. And that's kind of like our end with the investor Build trust with them on a first deal. We know they're accredited, so we know they have a good amount of net worth and hopefully we build enough trust where the next deal they'll do 100,000 or 200,000 or 300,000.

Speaker 1:

But it's kind of just that toe in the water step, especially if you don't know us. Like maybe you're in Florida and you want to invest in Wisconsin projects, but you don't know us. Like maybe you're in Florida and you want to invest in Wisconsin projects but you don't really necessarily know us. Maybe you've done a few calls. Well, 10,000 is a lot easier of a bet than a hundred thousand.

Speaker 2:

Totally, and I don't know of any other syndication opportunities, specifically in mass timber. Like people can't just invest in these types of buildings to begin with without a system like yours. But then if you want to go one step further and you want to get like the neutral approach to these buildings mass timber, et cetera, like there you're doing, they buy in, they reinvest, they tell their friends, other people reinvest and it creates more demand for these types of buildings holistically, which I think just betters everybody.

Speaker 1:

Yeah, yeah, there's this analogy from a book that I read by Warren Buffett and he talks about when he first started his company. He was like pushing the snowball up the hill was really, really hard. And you kind of build a small snowball to start and then it gets bigger, and it gets bigger and it gets bigger, but then when you want to roll the snowball down the hill, it exponentially gets larger and larger and larger, exponentially faster, because you're going with gravity and you have a huge snowball already. And I think right now we're kind of rolling the snowball up the hill and hopefully in the next two to five years we'll hit kind of the crest and be able to have it roll back down where it's a little bit easier to raise more capital, do more projects, deploy more and really grow this holistic market of Masterberg. Yeah, that's incredible.

Speaker 2:

Well, I have one more question for you, but before I get to that, if people want to reach out to you and learn more about what you're doing, or investment opportunities, neutral in general where should they go?

Speaker 1:

Yeah, all you have to do is go to neutralus or neutralus and from there you'll be able to kind of direct wherever you want to go. There's a live with us button If you want to live in one of our buildings. There's a invest with us button if you want to invest, and then everything else should be. Hopefully, our team did a good job. Self-explanatory on our website, great, I'll link all that down below too.

Speaker 2:

So last question so MassCampber has, like, such a unique ability to address, like we talked about, the environmental sustainability concerns and the economic side of things. It's low carbon, it's sustainable, but if you're doing it right, it's supporting jobs, has the potential to revitalize communities, it has holistic health benefits, all of those things we talked about. About. But, and what I look at, mass timber, as is often like a bridge between what are traditionally opposing parties. So whether you call them left or right, if you want to put a political label on them whatever they generally hold two different kinds of like opinions. When you talk about environmentalism in the economy, I think mass timber serves as a bridge, if you will, because of the things that we just talked about. Do you think that that's enough to bring those two people together, or do you think there's more work in like communication policy, something else that we need to kind of fix to help accelerate the master bird option?

Speaker 1:

Yeah, no, I actually definitely think there is. We recently I got invited to a USDA roundtable with the secretary of the USDA at the Forest Products Lab in Madison, where we're lucky enough to have the FPL here, and it was something that came up actually quite often was how do we get these rural communities across the nation but this was particularly in the Midwest to be revitalized, because if you look at a lot of these rural communities, especially in like upper Wisconsin Minnesota area, they have seen a huge deficit in new employment and population growth because a lot of the industry has been around paper mills and paper mills, as you know, are not doing very well because of this fancy thing called a computer. And so they were talking to just industry professionals and they brought me in to talk about mass timber, of how could we use a similar product, similar wood, in a different industry? And if you look at the derivative of paper, it's typically soft wood and it's not always apples to apples with mastimber products, but it's relatively close and the people making the paper could definitely make mastimber right. So very similar manufacturing.

Speaker 1:

And so, uh, what we were talking about at this roundtable was like how do we get north america to adopt mass timber and use mass timber more often and also have it be competitive enough where developers like myself and like you are not going to europe to buy their timber but instead they're buying it from their backyard in northern Wisconsin or Montana or Idaho. So I really think when you talk about this bridge like rural communities being thriving and cities building with mass timber probably two different people types right, like typically rural communities a little bit more conservative, cities a little bit more liberal, but the cities building more mass timber could really help the rural communities and vice versa. And so I think it's really understanding how do we get more adoption of wood in, especially mass timber in the US, and then how do we get that wood sourced locally, or semi-locally at least, in North America at a competitive cost? And once we solve that issue, I think we'll kind of build that bridge, so to speak.

Speaker 2:

Yeah, that's a great answer. Well, I appreciate you spending all this time with me, Nate. I learned a lot today. Thanks for coming on and sharing what you're doing.

Speaker 1:

Yeah, thanks for having me, Brady, this was awesome.

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Brady Potts

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Nic Wilson

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