WS1883 Maximizing Returns in Multifamily Investing | Highlights Cameron Pimm

In today's highlight episode, we're diving deep into the ever-evolving world of real estate with our guest, Cameron Pimm. We're unpacking the critical insights for investors in this tumultuous market.

Cameron, with his robust background in asset management and multifamily sponsoring, brings to the table a wealth of knowledge on navigating the current real estate cycle. We're discussing the importance of conservative underwriting and why communication with investors isn't just important – it's essential in times of uncertainty. Learn about the significance of monthly financial reporting, engaging investors through questions, and why showing progress through actual images can build trust and satisfaction.

As deals are slowing down, we explore the strategy of finding diamonds in the rough – those discounted deals in desirable neighborhoods that promise long-term value. Hear Cameron's take on why the market is showing signs of needing a pricing reset and how his company has mastered the art of under promising and over delivering to its investors.

For those ready to raise their game, we delve into the importance of continuous education through podcasts, books, and online conferences. And with a market that might be reaching or already at its bottom, Cameron shares why the next twelve months could be rife with opportunities for the savvy investor.

Join us for this compelling episode where execution meets opportunity, and discover how maintaining investor relationships and being ready to pounce on the right deal could set the stage for your next big win in real estate syndication. Don't forget to hit like and subscribe for more insider insights, and head over to lifebridgecapital.com to begin your journey into real estate investing.

Click the links now to tune in to the full episodes.  Whether you're an experienced investor or new to the game, this episode is packed with valuable information to help you navigate the current market.


https://lifebridgecapital.com/2023/09/20/finding-opportunities-in-the-current-real-estate-market-cameron-pimm/

https://lifebridgecapital.com/2023/09/21/multifamily-investing-trends-technology-risk-mitigation-ca

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Transcript

Whitney Sewell [00:00:02]:

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 today. Cameron, welcome to the show. Honored to dive into some of your experience, and I know we're going to appreciate just your outlook on some of that because having that experience helping you so much in your business today, or actually your focus, and I want to dive into that amongst some other skill sets that I know that you have that are going to help the listeners before we do, man, give us some of that background. Who's Cameron and how did you become a multifamily sponsor?

Cameron Pimm [00:00:41]:

Sure. Well, thank you for having me on, Whitney. It's a pleasure to be here. Yes, my background, I came up on an asset management side of things with some local investors and developers and really learned how the assets function post acquisition, all the way to disposition, managing management teams, vendors on any value add rollout. So the execution piece is so important in any investment. So I think that's really helped me in how we underwrite for our acquisitions and what we look for from investment opportunities and then how we roll out our whole business plan all the way through execution.

Whitney Sewell [00:01:34]:

Yeah, I think it's interesting when someone has that experience, the operations piece, right. Because like you said, it actually execution is so important. Right. Things that happen on the asset management side or the execution side. Right. Of the deal that unless you've been pretty involved, you don't know, I feel like. Right. Speak personally.

Whitney Sewell [00:02:03]:

I feel like I still like it, maybe always will like what you feel like. The knowledge I want to have of the operations piece. But we've brought that expertise in house or more experience the best we can. But speak to maybe how that's helping you now, your focus now in urban and how that's helping you.

Cameron Pimm [00:02:28]:

Yeah, there's only so many inputs you can influence, but those inputs in an investment are so sensitive. Right. And you start with getting in at the right acquisition price. But not only that, you have to have realistic rent expectations. Rent growth expectations. Where are your renovated rents going to land amongst its competitive set? Do you have a realistic competitive set? What are your renovation expenses going to be? What's the timeline to roll that out? And then also what are your opex expenses? As we know, the exit terminal value is driven by the exit. Right. Or by Noi.

Cameron Pimm [00:03:12]:

And so having realistic expectations and a thoughtful, thorough step by step plan to achieve that is critical in any deal that you do?

Whitney Sewell [00:03:23]:

Yeah, no doubt about what's your focus now at urban? What would you say you do every day?

Cameron Pimm [00:03:32]:

I'm focused more so on the acquisition and investor relations side of things now, although I can't help myself. And I do join on our weekly operation calls with site teams. So we have a weekly overall ops call to discuss what we're seeing in the market, what challenges we may have on what are some of the opportunities to improve our overall value proposition to our residents and prospects. And then we also have a pricing call that immediately follows that using our pricing tools and the pricing expert within the management company's team. But right now, outside of that, I'm focused on sourcing deals. Kind of picture investment thesis. When do we think it's the right time to pull a trigger? Or have we found where are the deals right now? And as many will tell you, they are few and far between. We're in kind of a weird lull and for somebody who loves the acquisition side of things, it's kind of a boring time, not a lot of deal sense, but I think all of that is to change with all this debt maturity and the aggressive acquisitions that were made over the past year or two.

Whitney Sewell [00:04:57]:

Yeah, let's talk about some of that because I know that's perk the listeners ears for sure because they're all feeling it. I feel whether they're active or passive, they're thinking, man, where's the deal flow, right? I mean, both sides of that coin there. So on that, where do you see just market right now? Right. As far as from maybe an acquisition.

Cameron Pimm [00:05:16]:

Standpoint, the cracks are starting to show. We're starting to see deals where sponsors and their lenders realize that this isn't working and that either the sponsor is going to have to sell at a discount or worst case scenarios, lender may have to sell at a discount to the loan that they put out there. And we're seeing that now. We're starting to see. We've been tracking a number of deals that we were trying to work out before they went to the courthouse steps, and I'm not sure that the lender is going to get the price they want on those courthouse steps. So we're continuing to watch those deals and see when and where somebody's ready to make a deal. That's really our focus for the next 24 months for our acquisitions is there's a pricing reset that's already started to happen. If you look in some of these tools, rising cap rates, but just how far will these prices fall and what are those discounts remains to be seen.

Cameron Pimm [00:06:22]:

What I think is clear is that we are going to see the best discount that we've seen since the great financial crisis. And I don't know that they'll be as deep as that, but it seems like a really great time to be buying assets when that happens.

Whitney Sewell [00:06:37]:

Yeah, no doubt about it. It seems that way. It should be a good time to buy at that point. How do you know when you're at that point? Or how are you all going to make that decision or assessment and say, you know what, this is the time to start buying. I mean, that's kind of the decision that has to be made, right. For all of us. How are you all thinking through that as we move forward into potentially opportunities like you're talking about?

Cameron Pimm [00:07:02]:

Sure. I think you've just got to underwrite in a realistic manner. What are you getting in comparison to your comps from a price per unit standpoint, what are your acquisition per unit standpoint, what are your ending rents going to be? I don't think you can underwrite really aggressive rents with the uncertainty in the economy, has the existing sponsor done some renovations and proven that they can achieve certain rents? And we're underwriting to the rents achieved. Usually we're underwriting without any rent growth in the first year and probably a discount, maybe one and a half percent year two maybe in some markets where we think, or submarkets where we think there are supply constraint and job growth, maybe it's 3%. But I think you just have to be increasingly conservative in your underwriting assumptions as to what rents you can achieve. What are your opex going to be? Expenses have blown out from a payroll standpoint, cost of goods, taxes and insurance. And then you're also underwriting to an expanded cap rate. I think they take all those factors and if those still hit your return parameters, then I think you've got yourself a deal that makes sense.

Cameron Pimm [00:08:29]:

If you can add a distress story in there, can tell you there are a lot of footy groups and family offices that are looking for that story and will be eager to participate in your investment.

Whitney Sewell [00:08:43]:

Yeah, well, let's talk about that a little bit because I feel like many investors are, there's tons of cash waiting, right?

Cameron Pimm [00:08:50]:

Yes, there is.

Whitney Sewell [00:08:52]:

We talk about it often. But it's like you mentioned the story. I mean, it's so crucial, right, that that story is represented or presented to them. How are you all doing that? So investors are ready to invest in your deals, right? In a time where I think many are still scared right to jump in?

Cameron Pimm [00:09:13]:

Sure. We built our company on a deal by deal basis, so we tend to under promise and over deliver. We've never lost investors money, and I think we've built trust with our existing investor base through that. And we've been very communicative on existing deals and what's coming for the future. We're raising a fund to take advantage of these opportunities. We just say, look, we're going to be very patient. We think that this is a great opportunity for wealth creation for investors, but we're going to make sure that we anchor our fund with the right deals and the right opportunities invested with us long enough. Trust us.

Cameron Pimm [00:10:02]:

They know that we're very attuned to the markets that we're in and that.

Whitney Sewell [00:10:09]:

We.

Cameron Pimm [00:10:12]:

Understand potential for what's coming. And so they've been patient with us. A lot of people are eager to put money to work, myself included, as an acquisition guy. But you don't want to be stuck in a bad deal. And that's really how we've been underwriting and making sure that we're not stuck in any bad deals and that we are taking advantage of this great opportunity presented to us.

Whitney Sewell [00:10:38]:

Is there a way that maybe you all are keeping those investors, the leads, warm, right. And ready for when you find that opportunity that does have that story at the moment?

Cameron Pimm [00:10:50]:

Yeah, absolutely. We're constantly reaching out to them, talking to them, whether that's just personal phone calls or via email as well. A lot of them are existing deals that are still performing well. And we're giving commentary as to what we're seeing in the market and where we think we are with those deals. Unfortunately, we bought well and didn't overstretch in the acquisition side of things. And we underwrote conservatively enough that we're still hitting our modeled returns.

Whitney Sewell [00:11:29]:

What about, I was just thinking through funding these kinds of opportunities, there's delicate balance there, right. We've talked about it. Of course. I think everybody is but an operator who's in trouble. Right. They don't want to raise the white flag right. Before. They just absolutely have to.

Whitney Sewell [00:11:50]:

And maybe there's probably times there, though, that man, then it's too late, right. To get help or for the best scenario. Right. It's a horrible scenario for that owner or seller or whatever at the time. But how would you say we're going to find these opportunities so we can make that connection and buy them?

Cameron Pimm [00:12:15]:

Yeah. It's a relationship very much like many things. It's who you know and who are your contacts there my partners and I have been in this space for quite some time and built a large Rolodex. So whether that's through brokers, lenders, their special servicers, other sponsors that we know in the market that we've stayed in contact with and have done deals with in the past. So it's a mixture of all of that and it's really just being very active and reaching out to those. You can use some online resources to kind of see how a deal is going and tabs on them. And we've been doing a lot of that and we have a systematic approach to that as well as to how we are going to reach out to perhaps new relationships and new opportunities that we see having some issues.

Whitney Sewell [00:13:12]:

Yeah. And so much is a relationship business to say the least. And it is going to be through those relationships where somebody might share.

Cameron Pimm [00:13:21]:

Right.

Whitney Sewell [00:13:21]:

We got a property that's not doing great. Right. And then you can start the conversation and maybe you all can be a help to them. Right. That's right before the bank would have to take it or whatnot. But it's a tricky time there.

Cameron Pimm [00:13:40]:

Right?

Whitney Sewell [00:13:41]:

Yeah. Provide a service, but also getting a project at a good deal. Right. At the same time, have you all go ahead.

Cameron Pimm [00:13:50]:

There's a delicate balance. I mean, when you look at the other side of the table, there are sponsors with their investors that have the potential to lose a lot of money. And I think any way that you can help them and preserve their equity and dignity is welcomed. At this point, I would caution those that feel like they might be on the wrong path sooner rather than later, because time is not going to be their friend in these instances, waiting longer with the potential of another fed rate hike, uncertainty in the economic environment. I think the sooner you're having these conversations, it allows the creative solutions to be presented and maybe find your best deal to be rescued. And in some instances, people will have to take a haircut, others may wait too long and unfortunately that equity is going to be wiped out for them. And if they add investors in the deal, they're investors as well.

Whitney Sewell [00:14:56]:

Yeah, no, completely agree. Earlier the better, I think oftentimes too, if they're forecasting and it almost goes back to the first part of a conversation. Right. Understand the execution piece, having good books, really understanding what's happening at the property level and your expenses and assumptions and those things you should be able to see six months out. We're not going to be able to survive. Right. At a project, but oftentimes it's so hard and it would be for me as well. I mean, I'm not acting like I'm above that, right? But I can see how operators, man, they're going to wait, right? Maybe something's going to happen.

Whitney Sewell [00:15:36]:

We're going to keep buying time. And like you said, oftentimes, man, you need that time to bring in somebody to just minimize the damage as much as possible, to say the least, right? You'll see any kind of. I was just thinking through the investment criteria, right, that you all have. Maybe you could highlight that a little bit and we'll talk about that even in this part of the cycle.

Cameron Pimm [00:16:03]:

Sure. We specialize in working class achievable. So what we focus on is buying, first off, in growing Sunbelt melon West markets where job and population growth are both strong. They're also markets that we're familiar with. So we've operated in them before, we've lived there, we've worked there, played there, et cetera. So we feel like we have deep market knowledge and we built relationships there too from there. What we're looking to do is your kind of classic rents are at least at a 20% discount to what your stabilized, renovated rents would be. We are also underwriting to a discount to area mortgages, at least 20% discount of that average monthly cost.

Cameron Pimm [00:16:57]:

And then we're also, you've kind of heard the financial planners talking about you shouldn't spend more than 30% of your monthly take home pay on housing. So we always want our ending rents should be at a discount to that as well. In a lot of instances, our product type is renter by more, so necessity, so there's a stickiness to it. But with that, our renters are backbones of the communities. There are educators, healthcare providers, service workers. And so they deserve a place where they feel safe and proud of where they live. So we tend to do a very nice renovation scope, similar to an a class high rise, just in an older vintage. And many times we're in the same neighborhood, right? We're several doors down.

Cameron Pimm [00:17:49]:

The building was built in 1980 or 1960, but when you're on the inside of it, it looks very similar, the finishes are similar, and our teams are executing in a similar manner. It doesn't feel like it's just a cheap we have to live here product. This place that people are happy about, it's highly amenitized and so there's kind of a stickiness and a happiness to be a resident there. And that serves well. Even in kind of these tumultuous times, we're still seeing significant demand for our product type, and we've got great renewal retention as well.

Whitney Sewell [00:18:35]:

Yeah. Any other metrics you all use when establishing that criteria or even return metrics for your investors or anything like that, it's like, well, we got to be able to project this to even pursue the deal.

Cameron Pimm [00:18:47]:

Yeah. I think for any investor to get excited, they typically want a mid to high teens lp return and some sort prep return. Maybe that's 8% or so. And we underwrite with some cushion in there. So if I'm showing you a 17% return, there's a few points of cushion where I think we can actually beat this. And that's through being conservative in rents, opex capital improvements, expanded cap rates. Some of these things you can control, some of them you can't. Right? And you never know.

Cameron Pimm [00:19:31]:

As great as you could be at writing a business plan, you never know which of those metrics is going to get a little bit out of whack. But if you have enough cushion in all of those metrics, in theory, you should have a very solid investment regardless, because not everything is going to go right.

Whitney Sewell [00:19:50]:

Yeah. Are you sure? Not everything? Yeah, no doubt about it. And I tell you something, even recently, I'm just putting some of this together as we have obviously conversations with investors all the time. We talk about things are not going to go right and what looks right to you as the operator may not look as right to the investor. Just the different perspectives.

Cameron Pimm [00:20:17]:

Right.

Whitney Sewell [00:20:18]:

The operations and way things are done and a maybe speak to this and we're going to continue the conversation so the listener knows in another segment we're going to get to keep diving in on a few things with Cameron and his expertise. But how do you all do investor updates? What does that look like? Even in a time where investors are, they're concerned right now. Right. Has any of that changed and what does that look like for you all? No.

Cameron Pimm [00:20:47]:

We do a monthly investor financial reporting and just overall narrative on how the project is coming, photographs if we're made, value add program, showing the progress, saying where we are to budget, et cetera, and then we do a more robust quarterly report as well. From there. I actually handle the investor relations currently and I've always, at the end of every email, always encourage people to reach out with any questions. I leave my email and my cell phone number, and anytime people do take me up on that, I welcome it. Right. I love to talk shop and I think having educated investors are your best investors. So if they have a question as to why you want to do something and they want to dig a little bit further and understand the process and how we arrived at that decision. I think that makes for them to feel better about their investment, a little more comfortable in how you arrived at that decision and what the other avenues were.

Cameron Pimm [00:21:54]:

And the other thing is we have investors from a lot of other industries, and I think getting unique perspectives from somebody else, from another industry can actually lead to great ideas. How do we look at something differently than we have from our institutional background, where it's always done like this?

Whitney Sewell [00:22:16]:

Right.

Cameron Pimm [00:22:16]:

Well, maybe somebody has a point here. So I think the open line of communication is really important with investors at any time, but especially in times of uncertainty. So we welcome it.

Whitney Sewell [00:22:34]:

Yeah, I heard a quote. This is actually just this morning I heard a quote, and this is actually in a different industry, but I thought this applied to say like the CEO seed or whatnot of our businesses. Right. Or the acquisitions, either one. And the quote was, seeing it once is better than hearing it a thousand times. That was a great reminder to me. I still need to be talking to investors. Right.

Whitney Sewell [00:23:05]:

I still need to be asking them questions and them being able to give me feedback or ask me questions. It's interesting, over the years, I've obviously been more and more removed from that. But even what you were just talking about, I try to be available, but I'm not pursuing that enough, I think.

Cameron Pimm [00:23:24]:

Right.

Whitney Sewell [00:23:24]:

And I think you hit the nail on the head there. Right. You're available, you're having those conversations. Because often their questions make me better. Right. In one way or the other, they make us better as a company. I think that's very valuable. Is there anything else in the, you said like the third month is there's more detail, anything special you all add there for investors or any kind of, I don't know, details that you found that investors, man, they love knowing this thing or anything specific.

Cameron Pimm [00:23:55]:

I think they want to track against your performance. When are we going to hit these major milestones? I think that's a great opportunity. Educate your investors as to where you are in the business plan in the process. So I think that resonates really well. And I think they love to see photos progress and we do before and after and to show the difference in the two. I mean, it tells a really great story about what we're doing and the value that we're adding. So picture is worth a thousand words. Right.

Cameron Pimm [00:24:31]:

And I think that gives people comfort as well.

Whitney Sewell [00:24:36]:

Cameron, you were mentioning something when we weren't recording, just about the continuing of learning. Right. You want to elaborate on that a little bit, we'll dive into some of the market cycle stuff.

Cameron Pimm [00:24:46]:

Yeah, we were touching on communication investors and how important it is to educate them on where we are in the process. But there's also value there from they have unique perspectives, being leaders in their own industries, and they may look at a problem differently and it gives you some ideas of oh, well, maybe why don't we look at this differently? And you and I were talking about some other opportunities. There's so many resources such as this podcast, other podcasts, online conferences, books. I find myself a constant student of our craft. And every time I'm driving I'm listening to one of these podcasts and I'm listening to your insight and your guests insight. And I like to hear how other sponsors are looking at this and what they're seeing in their market. Same thing at conferences. It's just a great way to stay attuned to what's going on and to continue to grow as a professional.

Cameron Pimm [00:25:47]:

So I love these sorts of resources, sharing information and learning from them as well. And I think investors and sponsors alike can and should do the same.

Whitney Sewell [00:25:59]:

No doubt. I do think you have to be a constant student. Things are changing constantly, right? And so you have to continually continue to learn. And that goes right into let's talk about just where you feel like we are in this multifamily, say, market cycle a little bit and how that's affecting. We talked about a little bit yesterday as far as what you all are doing, but let's dive into that a little bit.

Cameron Pimm [00:26:24]:

Sure. So I think we experienced a very long cycle and that cycle ended probably last year, 2022 Q. One, as the Fed started to raise interest rates. And so what I tell our investors now is that the wave has crashed and now is the opportunity to ride the next wave. And that's really our strategy, is finding the deals that are at discounts, that are in good, desirable neighborhoods, that fit our criteria, and buying them at a great price where we feel there's great long term value in them. So there's been a bit of a cause in the deal activity, I think that will thaw out over the next twelve months, hopefully sooner rather than later, for all of us people that all of us deal junkies that are ready to get back into it and get back in the hunt. But I think there's a lot of that coming. Like you mentioned, the cracks are starting to show and people are realizing that the deal doesn't work at the price they bought it anymore or at the assumptions that they have.

Cameron Pimm [00:27:44]:

And a reset in pricing is what's needed in order for that asset to work.

Whitney Sewell [00:27:50]:

Yeah, it is unfortunate for many. And it's going to happen, though, whether almost no matter what they do at this point. Right. And so it does create an opportunity for others, you would say, let's say over the next, maybe the next twelve months we're going to see opportunities. But as far as in our market cycle, that we are hopefully on the way back up, say, within the next six to twelve months. You're hoping as far as deal flow, even just the values of multifamily?

Cameron Pimm [00:28:22]:

Yeah, we're either approaching the bottom or at the bottom right now, I think. So we're somewhere in there. It's tough to tell exactly, but yeah, I think there's going to be some great opportunity.

Whitney Sewell [00:28:38]:

So grateful again for your time. Tell the listeners how they can get in touch with you and learn more about you.

Cameron Pimm [00:28:44]:

Sure. You can find me on LinkedIn, Cameron Pym, Stonemark landings. You can also email us insettle@stonemarklandings.com thank.

Whitney Sewell [00:28:52]:

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.