WS1899 Utilize Data and Analytics in Commercial Real Estate | Stash Gelezinski

In today's episode  we continue our conversation with Stash Gelezinski, a partner at Nedl, and a seasoned expert in the commercial real estate industry. Stash brought to the table over 15 years of experience and shared insights on how AI and machine learning are revolutionizing the way we approach real estate investments.

Key Points from the Episode:
Nedl's Innovative Platform: Nedl a data analytics firm, is revolutionizing the commercial real estate industry with its innovative platform. They have meticulously cataloged every multifamily property in the United States with 50 units or more, providing clients with updated leads on a monthly basis. This platform allows brokers and operators to optimize their portfolios and maximize their returns by leveraging data-driven insights.

The Power of Specificity in Prospecting: Stash emphasizes the importance of specificity when prospecting property owners. Instead of asking if they want to sell any property, it is more effective to target a specific property of interest. This approach leads to more meaningful conversations and increases the likelihood of potential deals.

Challenges and Market Predictions: Stash discusses the challenges faced in 2023, specifically the gap between buyer and seller expectations. He predicts that the real estate market will improve as the Federal Reserve indicates potential interest rate decreases. This could help narrow the expectation gap and create more favorable conditions for transactions.

Advice for Passive Investors: Stash advises passive investors to thoroughly understand the sponsor they are investing with and the metrics of the deal. It is crucial to assess the sponsor's track record and evaluate the feasibility of their projections. By conducting due diligence, passive investors can make informed decisions and mitigate risks.

Listeners interested in Nedl's  AI platform can visit nedl.us for more information or to request a demo. For brokerage inquiries, Stash can be reached at capstone-companies.com, or via email at stash@needle.us.

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Transcript

Stash Gelezinski: so we've cataloged every single property in the united states 50 units and greater every single multifamily I know multifamily so it's like well let's start with what you know and we're looking at rental rates and maturities and the occupancy and changes in occupancy changes in rental rates how the subject property is doing against its it's sub-market competitors, and then ownership behavior patterns. And we're taking all these things into account and creating a list. We update the leads every month.

Whitney Sewell: This is your daily real estate syndication show. I'm your host, Whitney Sewell. Today, our guest is Stash Gelezinski. He's a partner at Needle, a data analytics firm focused on bringing AI and machine learning to the commercial real estate industry. helps clients optimize their portfolios and maximize their returns. He's got 15 plus years of experience in this. He's part of Capstone Apartment Partners, and he's a managing director there. But he uses that brokerage experience to build this platform called Needle. that's going to help a lot of us in the industry, especially brokers, but I think operators as well, especially eventually to use that AI platform to narrow down that targeted list of properties that you're interested in. He's going to dive into actually a superpower today as a broker that could help all of us in this industry that you need to be good at, right? And there's some specific skills that are going to help you to do that. He's going to dive into that today. I wanted to back up just a little bit. And, you know, we were first talking about the list. I didn't ask you really how you get that list, you know, and how do you, how do you know, you know, like, I guess where's a good place to start. Right. I mean, we could buy lists and have thousands, tens of thousands of numbers and people, but man, that's, you know, if we can narrow that down, our time is going to be a much, are used much better. Right. How do you do that?

Stash Gelezinski: Yeah. I mean, I think it starts with, um, defining your, your category or, you know, who you're prospecting on for me, it's, um, you know, Ohio, Kentucky and Indiana property owners, and you can even get more specific than that and having, um, uh, specific multifamily owners, and then even more specific than that, given vintages or just affordable or, or what have you. Um, but. On that subject, my partners and I, so I've got, aside from brokerage, which is my primary at the moment, I've been working for maybe two years or so on a software platform. It's called Needle. And it came out of me using different CRMs and what I would find is that if you are prospecting through a call list and you get an owner and they've got 20 different properties and you say, hey, Mr. Owner, do you want to sell anything? They're going to say no. But if you say, hey, Mr. Owner, I'm calling about capital square apartments. I have a buyer for that or whatever your pitch is, are you interested in selling that? They're much more apt to have a specific conversation with you about that. And so out of that, You know, I had the occasion more than I liked, more than I like to admit, where I would be calling, doing my prospecting and talk with somebody and, you know, no, we're just, we're not doing anything right now. It's like, okay, great. You know, you just being honest, doing, doing what you can. And then all of a sudden you see a deal, a listing pop up with a competitor or a, a sale transaction come through on, you know, the, the different websites that track those. And it's like, I just talked to that guy. Like, what am I missing? So the question was talking about CRMs, um, you know, there's a lot of data out there. And what, so what if you could use that data, uh, applying analytics to it, to predict transactions before they occur, you know, being a broker, we underwrite a couple hundred deals a year. And, you know, there are, uh, telltale signs, you might say, of when somebody is prepping a property for sale. The typical life cycle of a deal is somebody who's popping in and out of deals pretty quickly. So they're going to buy it, the occupancy is going to drop a little bit, but then revenue and occupancy are going to start climbing. And then you know they're gonna spend a lot of money on capex and then two years to three years five years later they're gonna wanna turn around and sell it. And so you know there's a number of different data providers out there i was like what if we could use that what if. you know, that in conjunction with loan maturities, you know, cause that's a telltale sign of somebody who's got to do something. And then even just ownership behavior patterns, like there are certain owners that just buy and hold forever. Uh, and there are certain owners that are in and out of deals every two to, you know, five years. And so I had a friend come to me, and he happens to be a senior vice president for data and analytics at a local bank here in town. And he said, hey, my partners and I have a background in software, and we want to buy value-add real estate. I was like, that's a great idea. You and everybody else, what if we did this? And I pitched him on the idea. He came back a week later with our third partner and said, yeah, this thing has legs. And so we started slowly chipping away at it. And, um, you know, we're in our, uh, pilot program phase right now. So we've got probably 15 different users, user groups, um, on the platform, maybe. I want to say 50 or 60 individual seat licenses. And, you know, we're actively testing it with anticipation of being able to go to market. Probably sometime late in Q1 is what we're targeting.

Whitney Sewell: Interesting. Well, I want to dive into Needle and what it does, right? And it's brand new, obviously, to the listeners. And maybe you mentioned there a little bit these things that are needed, right, to help narrow that list down and the things that help You just see what's going to happen almost right for a property but before the sale takes place you mentioned you just talk to that person and all of a sudden you see something you know something happened and man that you hate that feeling right and I missed it or what happened what you know why did I not see that was going to happen and if you could have. some AI or analytics right combined in a way that could help you see that ahead of time that would be so helpful right. So yeah let's jump into some of that but maybe let's take it back before even needle you know you could dive into and what was some of the analytics that it's important to use stash when you're when you're looking for deals right that are potentially going to sell you mentioned them a little bit let's dive in there a little bit and let's talk about how needle helps with that.

Stash Gelezinski: Yeah. So, um, you know, the things that we, this past year, 2023, we spent a lot of time prospecting on deals that had, uh, adjustable rate mortgages or floating rate debt with the thought that the increase in rates would cause some distress, um, and cause owners to say, you know what, let's, let's hit a single instead of hold out for a home run. And, you know, we, we spend a lot of time on that and we just didn't find a lot of those opportunities, even though I could see what the rates were doing. Like some of these groups were signing up deals, you know, buying deals with rate caps at, I don't know, call it three and a half percent. And then with the interest rate increases, they'd be up around eight or 9% and the cap would burn off and they still were holding. And you know, you can't call somebody and be like, Hey, I know that you're, having to dig into your pocket, like that's, that's a great way to get somebody to hang up on you. So, you know, we just didn't see it, but the market anticipated a lot of those distress sales and they just never really came. So, you know, things like loan maturities, those are the best indicators of a potential sale because somebody has to do something right. Like, There are three outcomes, they can pay off the debt, they can refinance it, or they can sell it. Those are the only three things that can happen. Or they could give the keys back. So maybe that's four. We've looked at deals on the watch list, um, upcoming maturities.

Whitney Sewell: Yeah. Maybe even part of that, you know, as you're building that list to find deals, right. If you're cold calling a ton, they're giving, I mean, often sellers are almost going back to the cold calling conversation a little bit. You know, they're giving you information that you're tracking as well. Right. Oh yeah. This is going to happen in September. Well, you're probably making a note to call him back. A hundred percent couple of months before that, right?

Stash Gelezinski: Yeah, definitely. Um, yeah, we've got lots of, uh, follow-up notes and even calendar events of call this guy. Cause he said to call me, you know, around that date. So I've got a couple of those coming up next week.

Whitney Sewell: So, yeah. Well, speak to how, uh, what needle does then, you know, as far as those things are, are concerned and how it helps you to find those deals.

Stash Gelezinski: Like I mentioned, we've cataloged every single property in the United States, 50 units and greater, every single multifamily. I know multifamily, so it's like, well, let's start with what you know. And we're looking at rental rates and maturities and the occupancy and changes in occupancy, changes in rental rates, how the subject property is doing against its its sub-market competitors, and then ownership behavior patterns. And we're taking all these things into account and creating a list. We update the leads every month. And what we found is that in backtesting the formula, in 2021, we were about 44% accurate. And in 2022, in backtesting the formula, we were about 47% accurate. So we're calling a little less than half of the transactions that are occurring. But it's like, OK, well, if they're popping up on the radar, you at least know where to go and spend your time as A young broker as a mid career or is a you know established broker and it's just then all depends on how you approach the conversation and what your level of relationship was is with the owners but then what we've also done. is say you do get somebody, and we had a guy with Capstone in our Charlotte office who is relatively newer to the investment sale business, and he was able to pull seven different opportunities out of it within the first two weeks of using it just by focusing on the leads that we were delivering. So that was a great endorsement of what we're doing.

Whitney Sewell: Speak to maybe who needle is for as well. Is it just brokerage firms or is it? Okay.

Stash Gelezinski: So it's, um, designed with the broker primarily in mind. Cause I am a broker. Um, but you know, acquisitions people as well.

Whitney Sewell: Um, you know, an investment firm like ours could are, you know, could our, uh, you know, acquisitions guy, you know, use needle as well. A hundred percent.

Stash Gelezinski: Yeah. And then what we're, what we're trying to do is also create a hot list of prospective buyers from the brokerage seat of, Hey, here's the groups based on what they already own, uh, either in the current sub market or similar assets, maybe in different markets that are similar, um, that might be interested in buying the property. Then we, what we want to do is take that a step further and allow you from your seat, your pilot seat, so to speak. to say okay here's my portfolio i'm interested in in selling or refinancing at these levels at these prices that we've will art we will articulate and then further here's a set of here's a hot list for you of properties that we think you might be interested in and you can click yes I'm interested or no I'm not and provide whatever feedback that you want and you can use the tool to go and directly prospect and go out and find those deals before anybody else or when that owner of the property that you said hey I am interested in selling says you know what the property that you've identified that you're interested in buying when that owner says I'm interested in selling you're going to pop up as like a verified lead or verified buyer, somebody that's said already, I'm interested in buying this property at this given price or in this given range. So that'll be beneficial for you because you can go direct to the owner or it'll be beneficial for the owner because they can see, okay, there's one or five or 30 different groups that are verified that have said that they are interested in acquiring my asset at this price. So that's a little bit further down on the roadmap, but that was one of the things that we were working on this morning on our call.

Whitney Sewell: No, that's interesting. Anytime we can narrow our focus, we're much more likely to have more success. I think about even a 50% accuracy rate, that's more than, say, the numbers I could just pull out of most lists or thin air trying to just find property owners myself. and calling, and so that would, I mean, it's a big leg up. You know, how does the, I guess, how does the system maybe speak to, you know, how the AI works a little bit to pull that information, you know, where it comes from, some of that?

Stash Gelezinski: Yeah, so we have subscribed to our primary data source, it's called Cherry. And we've spent a lot of time, you know, smoothening that data out, so to speak. And they've got a number of different APIs that we're taking advantage of. There's some other, you know, publicly available free APIs out there. And candidly, I don't, I don't know. I don't know exactly how the, uh, the sausage is made, which is probably good. Um, but cause I speak broker, I don't speak, um, data scientist. I'm figuring it out a little bit, but that's why I have my partners for this. Um, but anyway, you know, we're taking all these different pieces of data in each property has a, has a formula that's being run on it. that you might think of that's ranking it. And so each property we're ranking as hot, warm or cold, mostly, or we're ranking a data set of hot, warm and cold leads. And what I've found, especially early on when we were testing it, um, is they would just give me, you know, an Excel spreadsheet of, of 20 deals, um, in my market. And what was so interesting is that like seven of them would be either listed. We were underwriting, they were under contract, they're listed by somebody else or listed by us. Like they were actively in play. And I was like, this is awesome. Um, and then the other ones just weren't there, but it's like, okay, great. Um, so that was kind of proof of concept that were, that were, we were onto something. Um, but you know, to tie into the cold calling, you know, what we're aiming to do with needle is not only be a value add, you know, cause like when I was first getting back in my day, um, I, I literally didn't have, I didn't have any of the data subscriptions. So I just had the auditor site, um, And I had to look everybody up online. And you would have to make 100, sometimes 200 calls a day to hit your conversation goals. Because back to cold calling, I still try and hit 50 solid conversations a week, which is 10 a day. during a typical work week. So it's like, if you can do that, you're going to be all right. Um, but what we're trying to do with needle is identify the opportunities to go out and be in front of so that hopefully you don't have to have 200 calls. Hopefully you can have 50 calls, uh, or maybe 20 calls to get the deal flow that you're, that you're seeking. So that's what we're trying to do.

Whitney Sewell: Yeah.

Stash Gelezinski: What's the, so what's the biggest challenge with, you know, either a needle or how you all are finding deals or, you know, right now, this past year in particular, 2023, we found that the average spread between buyer and seller expectations. And I'll quantify the buyer expectations as our optimistic pricing. So when we value a deal, we're coming up with a conservative, mid-range, and optimistic. And the optimistic is usually like the high end of reasonable. So our average spread between that was about 20%, between the optimistic, which is what we thought was high, and then the seller's expectations. So they were 20% above us. So just bridging that gap and have having that spread of interest rates was a challenge. We were finding a bunch of opportunities. It's just that we are too far apart. And I'm hopeful that with the change in interest rates, that we'll be able to narrow that spread a little bit and be able to pop off some more deals. So that's been the biggest challenge is not necessarily finding opportunities. Cause it's like, You know, we're out there, people know who we are. They know that we're credible. Um, they know that we're not going to pull their leg, so they'll talk with us. But the problem is, is that their expectations are so much higher than where the market is. That's like, what are you going to do? You know? Like for instance, we had one deal that we were at like 25, 26, and he's like, I'm at 30. I'm a seller at 30. And I know that's higher than where the market is, but that just is where I have to be. And I don't have to sell it right now. It's like, all right, well. Fair enough. Thank you. Thank you for playing.

Whitney Sewell: Well, you know, with that being said, it's interesting. So, I mean, I hear that as well, you know, as we make offers or whatnot, right? Why do I have to sell? This is where it has to be divide and whatnot. Well, often that, that doesn't work for us, you know, to make that happen. And so, you know, with that being said, you know, sash, what predictions do you have for the, just the real estate economy and market, you know, over the next six, 12, 18 months thoughts?

Stash Gelezinski: Yeah, well, I think that the economy and the larger real estate market will probably improve. And what I mean by that is that prices and buyer and seller expectation is going to narrow because the Fed is indicating that they are going to lower interest rates up to three times. And if I was speculating, I would, which I am right now, you're really speculating. I think that they'll probably do quarter point decreases at the tail end of the first, second and third quarter. Because that will drop us down a little bit by the time the election comes. I'm not trying to get political, but it is an election year. So it's like those things tend to be tied. And so I think that that's what's going to happen. I think that maybe the front end of 2024 will still be a little challenging, but you know, we have seen the 10 year come down pretty significantly. Just, I didn't check it today, but so that's a positive thing, you know, in anticipation. So I think that that is how the general real estate market is going to, happen. And then as it relates to technology and, uh, things like needle, um, I do think that other tools like this, um, be it the one that we're creating or, uh, maybe ones that competitors are creating, I think they're going to, you might say, augment the brokers or the deal makers process and hopefully make them more efficient and what they're trying to do. That's what we're aiming to do.

Whitney Sewell: On the flip side of that, what's a way you all have improved, uh, you know, recently approved your business and it can be on brokerage or at needle, but some way that could apply to, you know, the listeners.

Stash Gelezinski: That's a good question. Cause it's like a loaded question. Cause there's, there's a lot of ways, you know, the, the guy was when I first got started is very different from the guy I am now. I think being. you know, thoughtful and making sure that you, you do your best to understand the drivers of, of a deal. For instance, if we're talking about brokerage and why, somebody may or may not be interested in selling, you know, trying to understand those motivating, uh, factors. Um, that's good. A book that we read as a firm, uh, at Capstone was called emotional intelligence. And that was a great one. I don't know if you've had a chance to read it or listen to it, but it's, it was for me, it was, um, Oh, that makes sense. I had a couple of those moments. I was like, Oh, So, you know, just identifying some of those triggers or other things in your life that it puts a name to it.

Whitney Sewell: I was looking it up. Cause I was saying, I know, I knew I'd heard of it and I thought I, that I had read it, but I have not.

Stash Gelezinski: So that's a good one. That's, I think that's helped me improve. It's on my list. I listened to books, so it's on my list to listen to again. I just haven't yet.

Whitney Sewell: That's awesome. I'll definitely put it on mine as well. What's your best advice for passive investors right now?

Stash Gelezinski: Make sure you really understand the sponsor that you're getting into bed with. Um, and make sure you understand the deal and the metrics, um, by which that deal is going to be governed. And what I mean by that is, well, let's talk about first sponsor, because it seems like everybody and their brother, uh, got into, the real estate syndication practice over the past couple of years, call it five or 10 years even. And you know, for a while there, it was really tough to screw a deal up, but you know, with the changing of interest rates it has become more challenging and you really have to understand the operations of things. So I think make sure you understand the sub market, make sure you understand the, and the rents and the levels and where you're, you know, your sponsor is projecting those rents to be. And you know, the question is, does it have to make sense to you? Not necessarily because rents have continued to go up, but can you see a path? Right. Like it's not necessarily for you to live there as an apartment investor. But can you see a path to get like if your average rents are at seven hundred and they're saying we're going to give them to twelve hundred. Well, how are you going to do that? You know, are you actually going to put twelve thousand a unit into it? Because if you are, well, then that probably makes sense. But if you're just going to do, you know, a coat of paint and maybe change the flooring, I don't know that that's tough. You know, I've heard of a number of, uh, sponsors who are, you know, well publicized having to pause distributions. Um, and that's not a good look, neither a capital calls. So just make sure you understand what their track record is as a passive investor.

Whitney Sewell: Yeah, no, that's a good advice, especially understanding their track record. Yeah, many are pausing distributions. I'm a lot more comfortable with that than I am capital costs. Depending on the reason, right? But Sash, what would you say is the most important metrics you track? It could be personally or professionally.

Stash Gelezinski: So the metrics, personally, I like to get a workout in every day. And so that's like, it's not necessarily a metric, but it kind of is. Because it's like, five, six days a week, I'm getting a good workout in. And that for me is really important, really helps my mental health, my just well-being overall. And then I guess you could get into things with family. You know, you want to make sure that you're going, like if you have kids, you want to make sure that you're going to, you don't necessarily have to go to all of their games, but you should make an effort to go to most of them. Uh, and so I, I try and do that. And the ones that I miss, I'm like, I'm sorry, I wasn't able to be there. It was at three 30 in the afternoon. Like I can't do that. Come on. Um, but you know, so things like that, and then, you know, being a good husband, um, telling your wife that you love her. That's, that's a good metric. And then professionally, you know, it's, have I brought in my quota of opportunities this week or month or year, right? Or quarter. So those are the, and then, you know, am I doing a good job to prepare for those opportunities as they've come in? Like, am I spending time to practice the pitch? Do I really understand the pitch? Do I really understand the client's motivations? Um, and what they're trying to accomplish. Do I feel like I have the best story? Uh, if not, can I, what can I do to improve that? And that's working with the team. Like I've got, I've got, uh, two other senior brokers that have been with for about 10 years. It'll be 10 years in 2024, actually. Uh, and then we've got a couple of, uh, junior brokers that are with us and we have an analyst. So we have a whole team here and it's really making sure that you work well together as a team. and having everybody row the boat in the same direction, first of all, but, you know, from the seat at which they are best positioned, if that makes sense.

Whitney Sewell: Yeah. You know, I love that the, uh, the first thing, first couple of things you mentioned were around the kids and being a good husband, the wife, even the metric of telling your, your wife, your lover. I thought that it was, I love that when us busy, uh, businessmen, entrepreneurs, whatever it may be, right? We're so focused on that success in the workplace that we forget that we're trying to be successful at home. The reason we say we're doing all those things, right? And so I appreciate you mentioning that because it's not often what's said when I ask that question. So I appreciate that very much. Stash, how do you like to give back?

Stash Gelezinski: Honestly, my favorite way of giving back was, was coaching. Um, I coached lacrosse for probably six years and that was so rewarding to see those kids selfishly. It was my son's team. So like I was doing it to spend time with him, but you also got to see all the other kids on the team and see them improve, uh, improve as a skillset and as, uh, team members and team players, um, you know, from picking up ground balls and catching and throwing to running complex plays. And, um, so that, that was, that's the best way that I like to give back. And then, you know, I'm involved with, um, the, the church, uh, that we go to, um, and then there's a number of charities that we support as well. So.

Whitney Sewell: Awesome. Well, Sash, I'm thankful for how you've given back to us and diving into at least one of your superpowers, which, again, I think is very important in our industry and almost in any business as well. But then dialing in to finding deals and some of the things that are important and how the software you all are creating can help with that. Because, man, you need to be able to call at the right time, right? And if we don't have the proper information, it may not be the right time or maybe, unfortunately, like you talked about, too late. And so, you know, just raising our awareness around needle in the information that, you know, software, piece of software like that can help us with specifically that one that you all are working hard to create and improve. You know, so tell the listeners how they can get in touch with you, learn more about you and how they can learn more about needle.

Stash Gelezinski: Yeah, so Needle's website is nedl.us, and if you want to see a demo, you just scroll to the bottom, and there's a contact us form that comes to me. My email for Needle is stash at needle.us, n-e-d-l dot u-s. Um, and then if you wanted to talk to me about brokerage deals, um, capstone dash companies is our website and my email is stash at capstone dash companies.com. And it's S T A S H in all of those instances. Um, so that's the best way to get in touch with me. And then once we establish email contact, I'll give you my cell phone and every other way to get in touch with me. So.

Whitney Sewell: 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.