This is your daily real estate syndication show. I'm your host, Whitney Sewell. Today, we've packed a number of shows together to give you some highlights. I know you're going to enjoy the show. Thank you for being with us.
Deana Berg : Nic DeAngelo , welcome to the show. So glad you're here with us today.
Nic DeAngelo: Deana, thank you. I'm really excited and looking forward to it.
Deana Berg : Well, good. Let's jump in. Give us a brief overview of your background and let's jump into what you're passionate about right now.
Nic DeAngelo: Sure. So I'm on one hand a lifelong entrepreneur, but I'm also celebrating my 20th year in real estate this year. So I started very young. Um, I was, uh, able to tap in very early on with some friends and family that were huge mentors to me that were in real estate. I saw their ability to be very successful in the space, you know, parents, uncles, things that were, Great. And so I started my career with some family offices and got to be classically trained on the acquisition side. We then expanded into asset management, all of this with the backdrop of the global financial crisis. So we developed some really advanced acquisitions models that we still use today. We had developed some really amazing asset management models that we still use today And what we found was our investors were looking for something more consistent. And so we had been buying debt in the background for many years as well. So today we have found ourselves in an environment where fixed income was the number one request for our investors. So we've been fixing, we've been filling that need with our investors by buying over 500 mortgages throughout the U S and are working, uh, more on a fixed income model for real estate. So it's been a really exciting times with how wild the market's been. And, uh, yeah, that's, that's one year summed up into about 90 seconds, but, um, It's been great. We just crossed over $206 million in asset center management, 26 syndications, 500 plus loans, and a lot of happy investors.
Deana Berg : So it's been a fun run. That's great. And where are you based?
Nic DeAngelo: We are in Southern California. So we do have a virtual component to our staff, which is the majority. So they're throughout the country. But our HQ is in Newport Beach, Southern California.
Deana Berg : Gotcha. I have a couple questions. I want to know what classically trained means in my it's something my kids all go to classical school, but we actually throw that term around in Jess in our house a lot but. But I think I know what you're talking about, because I feel like people who come over from either institutional capital or family offices, they're kind of. inject themselves into the syndication space, it feels like the Wild West to them. So I'd love to hear what you mean by you are classically trained in family offices and acquisitions.
Nic DeAngelo: Oh my gosh. So it's twofold. It was a really interesting time in the market where things had such a big run-up before the global financial crisis that a lot of people that shouldn't have been, I don't know how to phrase this perfectly, a lot of people were making too much money and they weren't sticking to the fundamentals. So at that time, I wanted to be involved with winners and around that, but the sky was falling for a lot of operators. So I basically had to beg my way in, negotiate my way into work for free. with a local family office. It was a third generation real estate company. So they had these amazing strategies that were generationally developed. The biggest issue was that they needed some uptake and some updates to the current market conditions. They hadn't kept in with some newer technologies, et cetera. So that was my inroads, was to offer that. And hey, I know I'm too young. Hey, I know I'm too inexperienced. Hey, et cetera, et cetera. But between that side and some family members that I was really trying to help on the acquisition side, we went really all in on distress. And again, at that market time, it was perfect timing for that. but there were weeks where we were buying up to $10 million a week in acquisitions from banks, from foreclosures, almost exclusively in the commercial space. So I learned what really high-end acquisitions looks like. I learned what really high-end due diligence looks like. I learned what really high volume of purchasing looks like with big zeros behind it. And so what that did was, When you're when that level of stress and you're, you know, I was very young at the time in that high level of expectation all collide at one time, you have to figure out the systems on it. So now we're volumes a little bit lower we are more snipers than we are machine gun, you know approaches. it's like we can process deals really well. We do extremely well when the sky is falling, right? So when all kinds of bad things are happening in the market, it kind of feels like home, right? So we've had decade long relationships with CEOs of banks and trade desks at banks. And so when it came to come full circle, purchasing different assets and at discounts, they know we're good buyers. They know we got cash in hand. So it was on one side, classically trained on the acquisition side, where we knew the high expectations. We knew the things that these partners needed to see to transact and the high volume. So we had to put those together with really efficient systems. And then the relationship side, family offices, high net worth families. They have decade long relationships. So I got to learn and soak in these things from people that I really cared about, that I was close to. Some were family, some I had to negotiate my way into work for them. And so that's what I mean by classically trained, is people that just, I stand on the shoulders of today and I'm so thankful for the things that they taught me at that period of time.
Deana Berg : I love that. What I like about your story is that you were both classically trained, but there's like a scrappy nature to that story. You're like, I will work for free. I want to get my foot in the door. I want to learn from you. You didn't give up, you know, the squeaky wheel kind of syndrome, and it clearly paid off for you. So I love also thinking about our listeners thinking, man, how could I ever even get into this? It's a long road. You said it yourself, you've been doing this for 20 years in some form or another. But I like the intersection between classically trained and scrappy perseverance. So great job on that.
Nic DeAngelo: Yeah, it was a wild time. Again, the global financial, like 2008 to 2011 is, I don't know if we'll ever see anything like that. We'll see other problems. But that was a really wild time where a lot of things happened.
Deana Berg : Yeah. So you said in distress, you feel at home. Do you feel at home yet?
Nic DeAngelo: Oh, man. Well, certainly things are tighter than they used to be. I'll say that is, um, I really, the comparisons to 2008 that we're seeing today, on one hand, it feels dark right now, right? If you look at investor sentiment, consumer sentiment, that it is very low. Okay. It's low from judging what our government's doing, you know, congressionally, there's just low ratings across the board. But when I see direct comparisons to 2008, I'm like, I mean, you know, like markets are doing a pullback, but 2008, there was no floor, right? Like it was, things were falling from the sky. We were buying assets, just to give you an idea, we were buying assets for below replacement costs in probably 15 plus markets, right? And we were like, man, if we only had more money, we'd be buying in every market, right? Today, it's just not the same level of distress. Back then was mostly a residential falling from the sky. You had an average loan to value at that time in 2008-ish of 97%. So there was no equity. So borrowers were walking away because they had no reason not to walk away. Today, the average equity is around 40% in single family. you, the average rate is three to 4% today. Whereas the average purchase rate today is in the sevens, eight. I mean, there's crazy numbers being thrown around. So I don't see that distress in residential, but Dina, you, me, us, we all work in many of your listeners. We work in commercial. So there, there's some significant distress in parts of commercial today where, um, I think there's good deals. I do see, I do have friends that are transacting at some pretty ridiculous discounts in certain markets. So I think it's just, it's not systemic right now. Like people are assuming, but you can definitely target and find really amazing opportunities right now.
Deana Berg : Yes. And I'd love to hear one of the things that you are passionate about that we talked about pre-show was some important demographic shifts that we're starting to see right now that could have a massive impact on investment, on the economy. Talk to us a little bit about that.
Nic DeAngelo: Yeah, the economic side to me has been, for our business, we were amazing acquirers, amazing purchasers, but we purchased deals at such good targeted prices, below market prices, we ended up with some deals where we sat there being like, we're working really hard for a deal that already has a 20-30% below market discount. What is going on? And we've never lost money on a deal, thank God, trying to keep that trend up. Even our returns on average of our last seven exits were, I think, 30. Here's what it is. Our last seven exits averaged a 35.5% IRR. So we've had successful exits, but We saw that the economic tides in some of these markets were so much more drastically affecting of the deal than we gave credit for in the past. So we have focused for the last, let's say, five years or so, and especially during COVID, our research economically in office has been exponentially growing. So we drill down in every market that we touch in everything that we do to such a high level. So what we found, and what I'm passionate about what we're talking about, is that there's different market drivers in each situation. Right now, inflation is a huge discussion. We have the Federal Reserve, going all the way from the COVID era where we reached a 9% of inflation all the way down to today where it's decreased significantly. And it was really easy for everyone to just write that off. Oh, it's just COVID. It was this anomaly, right? It was this crazy thing that happened. But the reality is, COVID in a lot of ways was just the beginning of a lot of these trends. It accelerated many of these trends. It was a one piece of a larger puzzle that we're seeing ongoing. If you look at the big names, the Howard Marks, the Bill Ackmans, many of the biggest names are betting on 10 to 20 years of inflationary pressures ahead. So we are looking at the same numbers. We are seeing the same. Again, don't think the sky is falling, but adjusting expectations and strategies is what we're doing with the data that we're seeing.
Deana Berg : in alignment with some of what we're seeing with the baby boomers. Let's talk about the impact of, I mean, some of this is, you know, the timing, you can't make this stuff up. People are growing older. There's trends among generations. How will the behavior of baby boomers affect where we go for the next, let's say 10 years?
Nic DeAngelo: Yeah. So we were, as we sit today in the U S we have many benefits that the rest of the world does not have demographically. One of them is that after World War II, we have this baby boomer emergence, this baby boomer generation, which is the largest and the most wealthy, the most successful generation that the US has ever had by a long shot. So baby boomers coming up, coming of age, getting into the workforce, that was actually a deflationary pressure in many ways. Because if there's a huge workforce, and if labor inflation is a major driver of US inflation, that having a massive workforce actually drives down the cost of labor in a big way. Not only that, the US in a major way during that period of time emerged as a major winner. in a lot of economic categories, where many parts of the world were literally rebuilding from scratch their major cities, their major metros. The US kind of came out unscathed for the most part. We had some debt issues, et cetera. But as the baby boomers have developed, they really stepped into the center stage of the world, and the US has thrived. But that has changed, right? What we've seen in the last 10 to 15 years is the largest bull run in market history in the United States. So that's an interesting note on its own, right? We've seen the stock market booming. We've set more records than ever. We've seen companies killing it, but we've also seen at the same time, if you line these two graphs up of the largest bull run in history, we've seen the cheapest cost of capital that we've seen at that same time. So those are two interesting charts to overlay. But now things have shifted a little bit. Because during that last 10 to 15 years, the baby boomers, that huge generation, was entering into their highest earning age period in their lifetime. Not just because they're at the top of their game, they're killing it in the workforce, right? They have decades of experience. They're in those big seats and the big C-suites and the big executives. They're hitting the higher levels of different companies, but cost of capital is cheap. And the baby boomers of that period of time also had something amazing happen. Their expenses lowered exponentially because their freaking kids left the house. So They have this highest income they'll ever see in their entire life during that decade. They also have their expenses lowered significantly with their kids leaving the house. And all this in the backdrop of cheap money in a timeframe where the market's in a huge bull run. But COVID did something interesting. Not only were we sitting in a position where baby boomers right around this time, or especially during COVID, were starting to tilt towards retiring more, right? also taking their money with them when they retire, right? But COVID sped that up. They said, look, well, I was going to retire in two years. Why am I not retiring now? Right? Why am I dealing with this now or layoffs or et cetera, or I need to take my money into more safe assets because the entire world is being upended by this virus and the government responses. So All of that has reached a point where today, as it stands today, it's not just that the baby boomers are leaving, it's that under them is Gen X, the next generation, kind of a smaller generation, right? Kind of had to deal with a huge baby boomer generation in their way for a lot of their working years, but now they're coming of age and stepping into the highest level roles, but they're just a smaller demographic. Below Gen X are millennials. Millennials are a big generation, but they're not running the show like Gen X is right now or like the boomers are passing along. Below millennials is Gen Z, tiny generation. And Gen Z is replacing the boomers in the workforce. So you have a huge part of the workforce leaving and behind them a tiny generation replacing them in Gen Z. Wait, why is Gen Z replacing them and skipping over the other generations in between? Oh, I'm sorry. So the boomers are aging out, right? They're saying, hey, we're moving into retirement, whereas Gen Z is coming of age. Hey, we're adults.
Deana Berg : Oh, I see. It's on the bottom of the stack. OK, gotcha.
Nic DeAngelo: Yes.
Deana Berg : So it's just that shifting generation falling off of the edge, coming up under understood.
Nic DeAngelo: OK, exactly right. And so Gen Z has a lot of different thoughts on what work looks like. They have a lower labor participation rate, which happens in every generation. It keeps ticking down. So it's not just Gen Z. But interestingly, Gen Z is so much smaller by just nature of numbers that we have a discrepancy annually of nearly half a million jobs, 500,000 jobs net lost by boomers leaving and Gen Z being a smaller generation. Fascinating. So go ahead. Yeah, sorry.
Nic DeAngelo: I can keep going on forever, but what questions do you have?
Deana Berg : Do you think that that's affecting the labor numbers that we're seeing right now as well? Is it because of the smaller pool of workers?
Nic DeAngelo: Absolutely. It's labor's tighter, or excuse me, hiring is tighter. It's a more difficult time for employers that the pendulum is swinging in favor of the labor workforce, which is a good thing in many ways. Maybe it needed to readjust in a lot of ways, but that also drives up the cost of labor, which is extremely inflationary. So that's what we're seeing a lot as the demographics, as the generations pass the torch, and you see other generations, Gen Z come of age, and there's that half a million per year discrepancy of workforce, we're seeing labor prices go way up for US labor. So that's one thing that's been a huge driver of inflation that no one's really talking about right now.
Deana Berg : So I have an interesting twist on this kind of a question. You mentioned baby boomers are the most wealthy generation the world has ever known. They're aging out of the workforce. That means there is going to be, correct me if I'm wrong, the greatest passage of wealth that we've ever seen at some point in the next, let's call it, I don't know, 10 years, 15 years. 20 years, one of my favorite discussions about investment is market analysis. So I would love for you to talk. I have the multifamily background on market selection, but like we talked about, it goes hand in hand with other industries. So tell us how you look at market analysis. What are some of the non-negotiables? What are some of the red flags? How do you decide where you're going to invest and what timeframe do you consider when looking at markets?
Nic DeAngelo: Fantastic question. Some of my favorite questions as a matter of fact. So let's jump in. So industrial, like you said, I'm positive you guys have layers and layers and layers of drivers that you look into for multifamily. Here are some of the big ones for industrial. Industrial is an asset class where primarily you're looking at very large buildings with very large floor plans with mostly single or very few tenants. So when you're purchasing a building in industrial, the risk is extremely high if you don't have the literal best tenant available sitting in that space. So whereas if you have 200 tenants in a building, there's a degree of balancing, hey, we got a bad tenant, whoopsie. Risk mitigation, sure. That's not industrial. So the way you diversify an industrial is with a portfolio. So that's how you put that together. At Saint, we have dozens of industrial deals that we've done successfully. We've never lost money, thank God. But we have to be very careful with our selection and how and why. The drivers that we're looking for are twofold. One is we look at warehouse distribution. That's one model that we look at. You're looking at huge open floor plans, lots of roll up doors, lots of docks for 18 wheelers, kind of that model where things are shipped in from out of country or from other parts of the country to a warehouse and they're distributed out of that warehouse. So the drivers of that primarily, you're going to be looking at international trade. So what we're looking for, it goes all the way down to what the local docks and what the ports are doing. So we look at drivers from like the ports of Long Beach, the ports of Los Angeles. which represents any given year, about 30 to 40% of international trade through the US. So we're buying a lot in the Southwest, primarily Southern California for a lot of those drivers, as well as the Texas triangle. We really like the imports through the Texas infrastructure there and for those metros, because not just that, it also lets us kind of tap into the second half, which is manufacturing. That's the other side. One is imports. It's distribution. You're using warehousing to kind of navigate a lot of the goods and therefore the services. The other half is manufacturing. So we dove in a little bit about China in our previous discussion. If manufacturing in China is on the downswing, then that means it's either going to go to other low-cost labor countries or Maybe the calculus now is that it needs to be a lot closer, that maybe the U.S. can't budget, U.S. companies can't budget for 60 days of waiting for goods and services to get from overseas, and maybe it needs to be closer, and maybe the efficiency of U.S. labor or Mexican labor, because the Mexican manufacturing industry is booming right now, Between those two things, we've seen a consistent trend of efficiencies that actually place production in many U.S. markets and Mexican markets cheaper than it is in China today.
Deana Berg : Wow. Say that again. That's crazy.
Nic DeAngelo: Many industries in manufacturing today, it's cheaper for them all in right now as we sit today, not in the future, today. It's cheaper for them to produce in the U.S. and Mexico today than it is to produce in China and bring over.
Deana Berg : Why?
Nic DeAngelo: One, it's not the labor cost. We'll start there. Because China still has cheaper labor than the US, although there's been a 15x increase in labor costs since the year 2000, plus or minus. But China's efficiency with their manufacturing has only increased 3x during that same period of time. So there's a mismatch where the cost of labor has increased so much more than the efficiency with what they're doing.
Deana Berg : And do you, when you're talking about efficiency, are you talking about mechanization? Are you talking about AI? Are you talking about systems and technology? What creates efficiencies to that level?
Nic DeAngelo: So it's a little bit of all the above that's those technologies and those huge advancements that you just added. And, and, you know, rightfully so with a lot of that being in the news, frankly, the bet by most people on that side with robotics and AI is that the U S is light years ahead of China. And so not only that, Mexico as our closest trade partner, our neighbor, we share a border and they have cheaper labor than the U.S. So if you take U.S. efficiency and you take U.S. high-end manufacturing and you add that with a Mexican labor force and you take that just below the border, you have a pretty powerful combination where we are already more efficient than China with how we manufacture. then it's cheaper and it's next day, you can throw the goods and services on trucks instead of boats. So all in, we're seeing a huge shift away from China to the U.S. for manufacturing, which on our side, we are betting and leaning into with southern manufacturing markets on the coasts.
Deana Berg : Okay, this is a little bit of a departure about assets and investment. But I have to ask because I know you thought about it because you do your homework. What impact do you think that will have on immigration?
Nic DeAngelo: Well, I'll say this. I have been I'm politically like right in the middle. So this is not a political, this is a critique of both sides. You know, frankly, I think Both sides have missed the mark on immigration so ridiculously that nobody's having the real conversation where we are trying to achieve in the U.S., if we're smart, we are trying to take the best and the brightest from other countries. You know who else does this? It's the Socialist Republic of Canada, right? So I say that half-jokingly. I love Canadians. I have many dear Canadian friends and they have a huge economy. But what Canada does with immigration is they say, look, if you can demonstrate a high level of schooling, of achievement, of whatever, you get fast-tracked for the immigration status, fast-tracked through the immigration process. In the US, we have such a mess of red tape and political nonsense. We are completely missing the boat on this. As a matter of fact, we talked demographics last time. Here's a demographic shift for you. If we took out the immigration from the US, what we'd end up with is a actual loss of population. That's not good. With immigration, we're slightly at or above a net zero, where we're actually growing as a population. So not only do we need it demographically, But we also, if we structure this properly, we can attract the top talent in the world, which we already do accidentally, despite ourselves, right? If we put a good immigration in place and both sides can get together and say, this is for the benefit of the country, then we can end up with a situation where we have the best manufacturing industry that we've ever had. We have the best partnerships with North American fellow countries that we've ever had. And we steal the best talent from all the other nations to bring them here and educate them and get them here, adding their value. That's what I see as the perfect storm.
Deana Berg : Except that the last two things do seem like they're at odds. If we're going to have great international relationships, yet we're draining all their talent, I think that could complicated things, you know, if other countries are trying to grow and to grow their economies, then there could be some, there could be a rift there. I don't know. What do you think?
Nic DeAngelo: So I would say that if we Maybe that sounded malicious, like we are targeting, like we want to steal their best people. I mean it in a way of attracting them, saying, hey, we are such, you know, oh, de-dollarization, the U.S. is crumbling. These are ridiculous headlines if you look at any of the drivers of versus the U.S. versus any other country in the world. So if we can, we already attract the top talent that wants to be here in many ways. If we can give the top talent globally a place to thrive and really be able to reinvigorate the American dream and give them a shot at being able to achieve things here, that's really what I'm talking about. Like opening it up for the best and the brightest to have an opportunity where they can fast track and be in here adding value in a really big way. So I'm super pro-immigration. just to be clear, and not because it's a political thing. Again, I think both sides are wrong on this issue. I think it's just economically and strategically and demographically the right thing for the US to figure this out in a good way.
Deana Berg : Yeah. An example is that I was reading an article recently about a year ago in the summer, Congress passed a very significant bill called the CHIPS Act, bringing all production and development of semiconductors on US soil. Ironically, there's a lot of thought around that it will be foreign workers that are going to fuel these trained, skilled foreign workers that are going to be fueling these different fabs around the US, which is translated into our business as a demand for housing and not purchasing, but for apartments. So it's interesting to look at the trends and to look at the different asset classes and how they can come up under the supporting industries that will demand or I guess be an invitation for the skilled trained worker that are international.
Nic DeAngelo: So you guys are looking at the same drivers. And to really understand, I think most people miss what you're talking about right now when they're going to the investment side. And they don't realize that there's big drivers that are decade plus investment opportunities for guys like you and multifamily to take advantage and offer that to your investors and create value for the residents as well.
Deana Berg : Well, how can people find you, Nick?
Nic DeAngelo: The best way that we can add value to the audience and give them more information on economics and strategy, et cetera, is at saintinvestment.com slash resources. We have a ton of webinars that we do regularly where we break down step-by-step investment strategies and a ton of economic analysis that they'll find interesting.
Deana Berg : Fantastic. I'm going to find my way to your website and benefit those myself. Thank you so much for joining us on the show today. Really grateful to learn from you. You've added a ton of value.
Nic DeAngelo: Dina, thank you so much. I had a ton of fun and I'm excited to maybe beyond in the future, we can pick the conversation back up.
Thank you for being with us again today. I hope that you have learned a lot from the show. Don't forget to like and subscribe. I hope you're telling your friends about the Real Estate Syndication Show and how they can also build wealth in real estate. You can also go to lifebridgecapital.com and start investing today.
