#258 - Fort Capital’s 2022 Year in Review | The FORT #258

Speaker 1

00:00

 We're not doing it to impress somebody so that they believe in us more. We're doing it because it works, and we're doing it because it makes.

Speaker 2

00:05

 Our job easier, and we get smarter more efficient better and it propels our flywheel of all the other things we're doing, welcome to the for podcast, I am Chris Powers. And on the show, I talked to some of the most fascinating Minds in business and discuss important topics in the worlds of real estate entrepreneurship. Investing and more to learn more. Visit the fort pod.com. That's the fort pod.com. This episode is brought to you by Fork capital for capital is a real estate investment firm based in Fort Worth Texas, with a track record of transacting, more than 1.6 billion in assets throughout Texas, Tennessee and Florida. The team over at Ford is currently looking to acquire Class, B, industrial deals between 15 and a hundred million dollars throughout Texas, Florida.

Speaker 1

00:54

 Tennessee.

Speaker 2

00:55

 And now North Carolina and South Carolina to learn more about Fork, Capital visit You. Fort Capital LP.com. This is the fifth year that we have done a year-end recap and when we first started these, I think we were just trying to, you know, fill an episode at the end of the year and these have actually become really important. They are important for how we have looked at the last year. It makes us think deeply about how we think about Fort and our company. And really, it's just really cool to see how things have evolved over the years. I mean, I was listening to 2018 like a week ago. So it's just it's hilarious. So if you're listening to this and you have never been able to listen to our past years after listening to this, I think it would be cool of you to go, listen to Prior episodes, and you can kind of see how our thought has evolved how we think about the company and what we're executing on pinches me. So.

Speaker 1

01:54

 At Fort our mission is to.

Speaker 2

01:56

 Become the best real estate operator in the world. We think about this business, in terms of how do we operate better? So the more real estate we can buy our credibility get stronger. We can Promote our track record to investors, this helps us attract talent, and top tier candidates to come work with us as they join. We operate our assets, even more efficiently, which drives more profit profitability and higher returns for investors, which we hope would strengthen our reputation and our Partnerships in the market, that helps us gain economies of scale, and then we're back to the top of the flywheel, which helps us acquire more real estate and continue to scale today. I think you will hear you a lot about how we have continued to scale over the last couple years, but really how we have improved operations. So without further Ado, we're going to start with some of the highlights of 2022, and then we will go from there. So Jason, let us kind of start with some of the things that caught your attention this year of big wins for the company.

Speaker 1

02:58

 Yeah, much like last year you don't often step back and as you're going through the entire year and really think about all the progress you're making because it's In real time and then you get to these moments in time especially at the end of the year and you start looking backwards and you start adding up and actually documenting all the big things that happened and every year we think, how did we do that? How did we get that done? How could we have accomplished that? And last year Listening to We both talked about listening to last year's update before we came into this one, which we try to do every year just to refresh ourselves on where our mindset was and Last year we had broke so many records internally for our company and what we had set out to do and destroyed it. And, and talking about it last year, you could just hear it that we had were amazed at how much we were able to accomplish. But also we had done, all the work needed to accomplish it, and then we start this year and there was one thing that I said at the end of last year or when we were talking you had to ask me a question and like where my mind was and I have said You know, we had such an amazing year. We had done five hundred plus million dollars in transactions, the prior year and which was far more than two and a half three times. What we had expected to do or what our original goal was. And we said I said, you know, I hope we can accomplish that again, I think we're capable of it but that might have been an outlier. I hope it wasn't right because we had just done so much in such a short amount of time and it was such a leap forward. And we talked about why that was The Leap Forward because of the foundation we had built, and then we had this year, right? And we went into this year, and we talked about it at last year's discussion that we were going into this year with more of a pipeline established and Deals were working on. I think to the tune of 80 or 90 million dollars. We were starting the year with. So we had a good start but no one knows what the years going to hold. And we knew that the economy might start to get shaky, but that being said we ended up accomplishing, Even more than we did the year before. And so, I am excited to go through it with people today and hope that everybody can take something from it. I know we have, and we joke about it, but this is really as much as it is for us to be able to share this with the audience is for you and I to document it and be able to talk about it and flush these thoughts out of our mind so that we can go back and continue to push forward by listening to it. And so, I would say, the biggest thing is that the goals that we set the.

Speaker 2

05:33

 For that, we crushed.

Speaker 1

05:35

 We set as aggressive goals this year coming in, and we Crush those goals as well. So last year, we are the year before we did 550 or 520 million in total transactions, about half of that was sales about half that was Acquisitions this year. We did over 500 million dollars in just Acquisitions. We didn't sell, we sold a little bit. We sold about 35 million. That's nothing to sneeze at. We're talking in different scales now, but we sold about 35 million. So in total Volume this year we actually did more than we did the year before which, you know, we're extremely grateful for. But what I am most impressed with is our ability to do 500 million dollars worth of transactions more efficiently than we even could have possibly imagined when we were doing 70 80 million dollars in transactions. We did it with essentially the same team, the same amount of people much improved team, obviously because we have been doing it a lot longer now, but Where we really have to add resources when you grow at this pace is through property management and some accounting. But in terms of the core team, we didn't really have to add, we didn't have to add more people in order to accomplish the same thing. And if you listen to the last year's episode, when we talk about this, we talk about the whole purpose of us establishing flywheels working on our company operations was to remove as much entropy from the company and gain as much energy and do as much as possible with Less right? So maximize what you have and see how much you can accomplish and I would say this year was a testament to that. And the most amazing thing is we could have done a lot more. We shut down, not shut down, but we slow down much like the economy. Did around August. September in starting to be more conservative as interest rates change and starting to slow down the pipeline a little bit just to make, you know, really smart decisions as things were changing. And so most of what we Happen by really August into the first of September. And so the fact that we did all that within an eight or nine month period, and of course there was some stress and strain at times when you're doing that many deals but I would say the team would even vouch for those that it was way less painful than anyone would have imagined, and we definitely could have done more, so I think we're just primed to do so much more but that the amount we did with the team that we have and how Gently and somewhat painless, they would probably they're going to get mad at me for saying it was painless because it wasn't painless. But in the grand scheme of things, what we were able to accomplish was phenomenal and that, that number is just.

Speaker 2

08:17

 Amazing. Yeah, I think you nailed that. I mean 2021 money was flowing freely. I mean, well, look back at 2021 is just the, I mean, it should have never happened. I mean, it was, it was a crazy year. We took advantage of it and a lot of ways and so to have just 20 22 and a different act. And you know, atmosphere not saying we, you know, give ourselves extra Pat's on the back, but it we did double what we did in 2021, with a lot more uncertainty in the market Banks, starting to not Lind. Equity starting to pull back, and we stayed really committed and focused to what we're doing. The team has gotten, as you said, just unbelievable, continues to Excel and maybe we can just of start, there is at a high level. How is the team progressed this year from your?

Speaker 1

09:08

 Perspective, every year, it just continues to compound in terms of alignment. And I think what, obviously every year when you have a the same team and people are continuing to push themselves and grow, and we have ways that we're doing that, which I am sure we will talk about the alignment continues to get stronger as these people are growing. There's something that you don't It's hard to even put a metric to it or to really say exactly what it is, but it is that shared Consciousness that continues to build to where the alignment is, is a natural thing that happens within the company. Everybody speaking the same language, everybody's moving in the same direction and everybody's trying to accomplish the same goal and every year that gets better and better, and this year there, it was just at an all-time high and I know it's not that doesn't mean we're At the top. It's but it's better than it's ever been. And the team continues to take advantage of the things that were put in place two years ago in terms of foundation and only make it better. So I would say the thing that really stands out in terms of the Improvement of the team as our ability to solve problems, we have always been a company that's always solving a problem getting better, solve a problem, get better. So fast.

Speaker 2

10:32

 You know learned Rosie.

Speaker 1

10:33

 Drover Pete. We do that really well but the way we do it now is like nothing I have ever seen. It's hard to even imagine how well a company can identify a problem know the solution. And I don't just mean like oh I know how to solve that and say it I am saying to implement it into a company in to process into a system, automate it and never have to worry about it. Again, that happens. So often in our company that it is now just a part of how we communicate. As soon as we identify something that is pain or loss of time or entropy something that is causing friction in the company. It's sniffed out and solved in a matter of days or weeks, sometimes they take longer but once we identify, there is no doubt in my mind, that is going to get better and that Process. Typically, in the past those things get put on the back burner, because you're busy, you're doing work and so you want to solve those things, but they linger or you don't, you put a bandaid on it or you just give it to somebody and try to solve it. Our system of solving these problems and putting them into our processes and systems and the team actually now takes the initiative to do that because they don't want to deal with that pain again. And the way that we set up, our ability to solve those problems, the team can actually do it. We don't there's not one person that needs to go. So Of the problem were to implement it. It's a team effort, and so I would say that is going to be a tool kit that we have. That is going to take us so far in terms of what were able to accomplish from an operating standpoint because the company improves at a rate that I have just never seen and you know, from my background working with a much bigger company and seeing how as it grows you naturally, get these in efficiencies because of processes or Bureaucracies or one person does something one way or one person. Does another way our company is just built to not have that happen and everybody actually appreciates it, and so they're incentivized to not go outside of that process because it doesn't actually solve the problem. They actually know that this is the best path and so that alignment and that ability to solve those problems is just.

Speaker 2

12:52

 Phenomenal. And we will talk a little bit more about how we do some of that. Let us start with some of our big company wins. Okay. I am going through So our year-end meeting that you and I recently had, and we will go through, we had 12 of them will probably go through eight or nine of them. Sure, we will start with quarterly and best reporting revamp process. Updated design rolled out in Q3, why is that important? That was a huge win. So every year in terms of continuous Improvement and even what I just mentioned, solving a problem, we have a that process in place on how we solve it. So once we identify a place that we need to improve the company.

Speaker 1

13:31

 We're also using that as an opportunity to now raise the bar across the whole company. So when we go to tackle, something like quarterly invest reporting. We had a good investor quarterly. Investor reporting process. In general, we got it done. Basically is what I am saying we ever. We had a way that every quarter we like clockwork, it went out on time, consistent, accurate, good information for the investor no complaints on their side. We didn't get very many complaints at all. So We from the outside world. They would say, well, you had a good process. What we saw internally was an opportunity to streamline the process because we were spending a lot of time to get to that point. Every quarter also we thought the output the actual report itself. There was a huge opportunity to improve how the information was presented. How it looked and how we could make that automated so that look and feel. And that information that the investor was getting Was the most accurate real-time without as much work on the backend, to try to get to those metrics and make it look and feel in this in a way that the investor could ingest that information as easily as possible and get the most out of it. And once we start said on that path and said we can do this, the team used the same method. I just mentioned how we solve that problem to systematically create a proposal which we do in our weekly executive meeting. That outlines the steps that need to be taken in order to achieve that the team involved the cost involved, and we set a timeline on it and though every person that's involved in that then moves full steam ahead to get it done. And then the output of that. Now that we see if anybody listening is seeing the new investor report is a totally different invest report than we had just three months prior. But what they don't see is behind the scenes, the amount of effort one that was taken to do that. That's one thing, but the amount of Effort that has been eliminated from the company in order to achieve that, that is the biggest impact. So we're able to do the same actually better Quality Reporting and more real-time with live, reef forecasted assets, the day of the reporter or shortly. Therefore, there. Before in a way that takes days when in the past, it took weeks. So in the past we took roughly three weeks of different teams and whether it's accounting Finance. Me marketing vetting, our investor reporting in different functions to make sure that it's all accurate. Looks good, no errors, no edits, that sort of thing, and many rounds of that each quarter. So we had a process where over a three or even four week period, it was just the round around the.

Speaker 2

16:18

 Horn, right round-robin.

Speaker 1

16:19

 Just keep passing it around until it gets done. Well, when you look at the amount of energy and work and people and time and how much cost the company like ours is spending just to generate that report in terms of human man-hours, it's way too much, but we have to part of our goal. If you look at the flywheel obviously returns to the investor is incredibly important. So if you can't tell them, then that's a huge flaw. So we know it's top priority for us. And by eliminating all that extra work internally. Now we can do that at a higher level to the investor while at the same time, having more time to provide more value on operations of the actual assets and finding new deals. So when you think about the that Improvement, how much impact it has on the company, it's hard to put a number on, all right? It's almost immeasurable, but that's an example of, by identifying something that appears to be just to make it look better. She and feel better, right? From an outside view point, because it's roughly the same information just way easier to understand and read. But the impact long-term not only for the investor but for us as a company and the investor on our ability to execute at a higher level, just went up probably 20 or 30 percent across the company because we save three to four weeks in quarter. Not doing quarterly invest reporting on how its automated. We're going to touch on corn a bit but that's.

Speaker 2

17:51

 That's overhead management right there that's a hat it's at its best. Yeah.

Speaker 1

17:55

 It's a trickle down effect.

Speaker 2

17:56

 It's hard to measure. I am going to sound bias here. I think we have the best and best reporting in the real estate world. I have not seen anybody that does it better than we do.

Speaker 1

18:04

 It's good. We're always looking for opportunity to improve mostly on how we can get the most accurate real-time data. With afford look to show that we are making good decisions in the.

Speaker 2

18:18

 Future. I so what we're really.

Speaker 1

18:19

 Looking to do is Continue to think through that process of how we can provide the best information so that the investor knows what we're thinking and how we're thinking. And that's what we think is critical in those reports. But what it also did and I will just piggyback on that from raising the bar that quarterly investor report. Now, became the new Benchmark at least for now on how every bit of content or information that we send out as a company should be right? Not just how it looks. That's very important. So we do want that to be the bar for whether it's our oems are offering memorandums which were in the process of updating to match that or our distribution letters which we have updated as well to match that. Everything should raise the bar in terms of how it looks but also how those things are generated. Right. So now that we have a roadmap of how we automated how this information flows into this quarterly, investor report we have automated how the design is done, there's not peopled having to do this. A lot of this stuff is confirmation that lives somewhere in our system. And now he's being aggregated into a design that is very hard to create even if you're manually doing it, right? So, we have figured that out how to automate how these documents are created that so that they can go out quickly and now we can use that same tool kit to do our distribution letters, we can use the same tool kit to do are offering them randoms and so now we're able to raise the bar. Across the whole company. Well, if we save that much time on quarterly and best reporting, imagine how much time we're going to save on offering them randoms, when we get a new deal. Now, we have a pretty efficient process in that. We have got that narrowed down to just a few days. Three, four, five days. We can usually get those to a point where they're pretty good until we lock in our underwriting. But there's a lot of room for improvement in this gives us the pathway. The knowledge that we already know how to do it. So now, it's rinse and.

Speaker 2

20:18

 Repeat. This was a cool one. Underwriting importer tool. Yeah I love this one explain what that is and why that was such a big breakthrough this year. I think anybody listen to this that's dealt and Excel is going to have their mind blown here.

Speaker 1

20:34

 Yeah. And not honestly, I have no clue if other people have figured this out and maybe they have maybe they haven't. I know we fought this battle for a long time, but everybody in the investment world most people in investment world, use Excel models on a regular basis and Those that over time, especially if you're underwriting deals, you end up underwriting, 5, 6, 10 15. We have deals that we underwrite. We're on Model 17. 18 19 before we close, right? You're always tweaking it because of whatever is changing or you got updated rent, roll or your loan terms change or your Equity changes, whatever it is, you're always tuning the model. And what ends up happening is, you're just saving new versions of that as you go. And that information lives in files usually saved on servers in some people do that really well, and they organized it well and some people don't which we feel like we have always organized it really well. But the worst part about that is that all that information lives in a silo that no one ever goes back to or no one ever checks, or you don't get any value out of it, right? Even the final model and what we always struggle This was had a, we get that information because of how we have built our fos system in our database, all of our other information, all of our other data lives in our database except for previously. Except for the information that was in our financial models are modeling our performance and over two years ago, myself and the director of Technology sat down, and we tried to solve this, and we had a pretty good idea of how to we're trying to code the model to map into our database. But it was very hard because sometimes models change, right? And sometimes you one model has this type of financing and sometimes they don't. And so you we couldn't. It was really difficult to write one code to map all models into our database and make it consistent and make it make sense. And so we kind of.

Speaker 2

22:40

 Quick to go ahead. Why does coating out of excel into the database? What, why who even cares about doing that? Why is it important that we do?

Speaker 1

22:48

 That? Because we're trying to get the Data to get into one place, so that we can now compare that data and utilize a native than pull that data up, got it and to then use it for other things like forecasting, like to compare against budgets, like to create reporting, right? Like to even, just run your own company financials to look at how you're doing. Right. But also too, if you just said, I want to compare all the deals. I have looked at this year, right? Either you have an analyst creating a model that's tracking every deal and layering in any Each time or you find a solution where you're under write, it the way you're going to write anyway but that information automatically goes into a database. So fortunately as we continue to grow the company and scale how we do things, not necessarily just growing people but scale how we perfect our operations, we brought on additional staff on our technology team and that I have freed up the resources for us to actually tackle, some of these problems. And this year, we were able to identify I solution where we created a, we created our own proprietary plug-in into Excel. So if you open any Excel model in for Capital, there's a for Capital plugin, and like I said, other people may have figured this out. I am just saying it's amazing for me for us because we did it on our own and that plug-in allows us to push the information from our models, all the data. So we select, we don't push it all because we don't need it all. But two selected fields in the model. Is that we underwrite in? We simply push the Importer tool and that tool allows us to push the data from our Excel model just by pushing that one button directly into our database but also into yardi into our accounting system. So that we can now live update our forecasting. So we can use the tool to push and pull information, which is pretty phenomenal. So now our models are directly integrated into everything we do. So, now if I want to Let us look at the last 10 deals, we did. Let us look at the average, rents, we underwrote. Let us look at the average everything, right? Let us look at our final model of everything. What was the PV of cash flow? What was the projected? Exit cap rate, right? We can look at post applecross our whole portfolio, in an instant and over time, that alone even becomes powerful because now, you can start to see trends when the market starts to change or as a company, you start underwriting slightly differently to adapt to the market. And there's, you could go on and on, but having that data live in the same database as opposed to in an Excel model, in a file in a folder that rarely anybody ever goes back to have changed everything we do. And so, including how we do our, it's a part of how we do. Our quarterly investor reporting, how we re forecast. There's so many things that happen now because of that tool that literally take our analysts no time when in the past they would take them weekdays and week. So that is actually an Of the cooling vest reporting. How it's got so much quicker was twofold. So we solve that problem, during that process of the cording best reporting. So.

Speaker 2

26:00

 We're extremely excited about that. I love it. Yeah. Company an asset for casting.

Speaker 1

26:06

 The company and asset forecasting Falls in line, very similar, in terms of that importer tool in underwriting. We have always forecasted our assets but it's been, you know, a much more lengthy process to go through every aspect. Asset re forecast based on what's been done, projecting the future based on new, rents, new cash flow, all those things. Right. And it's not that it's hard to do it on one asset. It's the fact that we have 40 plus and so it's always a little bit of a lift that process has gotten way easier. So what we did is we looked at that as an opportunity that we had solved that using things like the Importer to land in our quarterly best reporting how we automate those things. So that data is all flowing together and there's not double work happening to mirror that with how we Forecast, for our company. And so.

Speaker 2

26:53

 All of that was.

Speaker 1

26:55

 Redeveloped and reorganized in a way to mirror or to match what we do on an annual basis, which is our annual budgets, and our annual operating plans are aop at the end of each year. And so those two things aligned now, so that we they basically work in tandem so that we can project what is going to happen on the assets, right? What we think going to happen on the assets, It is projected to happen on the assets. What new assets are going to come because that directly impacts what we're planning to do as a company and what our budgets need to be. And so you can't have one happening. One way in one happening, the other. And so those two things overlap each other. Now, so before we can start doing our complete budgets at the end of a year, right? Even by department. So if you think a property management how is Property Management supposed to budget for next year? If there's not a clear insight into every single assets performance capex, rent rolls in tenant mix, you know, new tenant coming in going to do capex, Property Management, scan have to do it, there's a fee associated with that. We're gonna have to charge that fee, but that's going to be Revenue. How do we plan for that Revenue, right? We have to know exactly when that is planned to happen. Now, that there's there can be some fluctuation but you have to have a plan. You have to start the year saying we're going to have this rent. Collection or were not. Right. So you even look at the revenue of the asset. Every asset. We know based on the plan for the year and how many tenants are going to be there. When their rent rolls when we, when the rent goes up, what we expect the revenue to be, so then we can within a narrow margin, we should be able to predict how much revenue is how much property management fee is going to be collected from that asset. So you do that first, in terms of understanding that you have completely, Stood the assets and then you completely tie that to each Department's, ability to go, make a really dialed in budget based on that performance. And the whole point of that is any company should be doing that. But what I am really getting at is that we have tied, those two things together. Meaning they're into the same process and so one flows right into the next? And now, as we're making our annual budgets in our annual operating plan, we can't complete this annual operating plan until that is done. So it makes it very, it gives you Of confidence that you're not missing anything. You're not creating this budget over here and then hoping that you're going to hit it. All right, right. It's all tied together and close together. So that was a huge win and I would say this year our budgeting and our annual operating.

Speaker 2

29:29

 Plan and I know you and I talked about it at the year-end.

Speaker 1

29:32

 In terms of just how dialed in it is. And I would say, each year, we get a little bit better at that and I think because of the new.

Speaker 2

29:41

 Process we have really outlined in identified connecting those this year.

Speaker 1

29:45

 The next few years are just going to be completely different and our ability to get that done, quickly. Same thing, we were spending the last month and a half of the year, or really from November to mid-December doing budgets and aop every year. I think, next year that will be dialed into just a couple weeks. Deal sourcing.

Speaker 2

30:04

 Tool to Kepler. This is an interesting one. Yeah. And so take a deep breath, here we go.

Speaker 1

30:13

 No, I am not going to go into all the Nuance in this because it goes deep. But We have talked about our deal sourcing on several of these. Even starting back, two years ago that we were moving away from the Acquisitions model. The traditional. Last year, we talked in depth about not having internal Acquisitions people, and we talked about that, we create these lists and this is the extension of that is always been the plan. It's always been in the original thought process of how we're going to get to this ultimate vision of being able to track deals across the country. And Have real-time data all the time about the deals that we know we want to buy in any market. And this extension of, that is the mapping portion of that, which I have always been a huge believer that we need a visual to be able to really see the world. What's going on, because in a pipeline meeting, what you do is we might have a list of deals that we like, and that we're tracking, and we have a database and in our fos system, we have our structure set up where we can track all these deals, and we pull the our fos pipeline report up every week, and we go through deals. We're tracking. King we have received materials on, we're sending a million submitting allies on ordeals. We might be under contract on. We're looking at those every week and that's on a list and that is great. But then what you end up doing is if you wanted then dig into any of those or re talk about them, or maybe just do some more, even if you get into investment committee and you want to dive in and actually, what you do is you pull up Google Earth and you look around and you think that's great, you know, is there anything else in this market? And yeah, you might know some things but you're really just looking at a building on a map and you're looking at the street view and obviously it by that point we have usually gone there, somebody's been there, but we're using different tools to just try to make a decision. And what we're on this side sitting here looking at is that we have all this data. And we have these lists of properties that we have already identified that match our criteria that we're actively pursuing. And this is in the, the neighborhood of hundreds per Market at a time. And so those could be at any given stage. Like I said, they could be a we have reached out to him, we haven't we're tracking them or trying to get in touch with them. We have already been negotiating with them, we have submitted an ally, but there are all these different stages were system is tracking where they are in that process. So our vision was, if we could get that into a mapping software that we could control, we could see all these deals where they stood in terms of how we're tracking them today and where they are in our process and where they are on the map. To each other. While at the same time, looking at all the deals, we haven't even pursued, yet that do match, our criteria, and be able to turn those filters on and off. So, you basically, you get a, your own customized world view of Class, B, industrial, and any Market that we like that. We can now start to learn that market in a different way than we believe. Anybody else is learning it at that time, right? So we're seeing the world through our Limbs, and We started working on this, like I said, two years ago, and we found the solution Greg on our team, I challenged him with this idea, and he very quickly, came back with a solution which was a tool called Kepler which is the same open source mapping software that nuber used to start boober. So this is open source mapping, you can build it to your own needs. And so we started using it about two years ago and dumping in the data, and we found like we could really utilize this tool. Well, Again, another one of those projects that, you know, we had a lot of work to do, so we focused on other areas of our Acquisitions Pipeline, and we put this on the back burner and then earlier this year, we made it a huge priority and same team that was helping solve. Some of these other problems, put more focus and attention on that Greg in the team, put more focus and attention on that, and we ended up finding a way to incorporate, not only all the data, but Greg figured out a way to also add in some really key features that allows us to run everything we do in Acquisitions in our deal pipeline through Kepler through our mapping. So once we realize that was a real possibility, we set a goal earlier in the year that we would completely get off our ability to use Google or need to use Google and any deal pipeline meaning, any investment committee meeting, and we have successfully done that for the last three months. And so now, when we walk into a deal pipeline, meaning we don't use Google Earth. Anything we have our own mapping software and when we look at the buildings that show up on our mapping software and this is as good as Google Earth view, street view, all these.

Speaker 2

34:57

 Things are there and you have a live street view of every property in the right hand.

Speaker 1

35:01

 Corner. That's live at all times, which is amazing. I love, I love for people to see it because it's amazing. But not only, do you just have a view of the world through our lens in. The assets were looking at every one of those assets has all the data that's in our system over 700 data points is in Inside that property in that map. So, when you hover over that map the field, the Box pops up that has all the we put the like the top 12 to 15 critical data points. Like who's the the registered owner? Who's the true owner? That stuff's important because most people wouldn't think about what that is, but who's registered as the owner isn't always the true owner, right? They use entities, they use other things. So we have a way to decipher that, and we're getting better at that, but we're Trying to do is have as much relevant information about that asset that when we hover over it, we get an instant view, right? We have a predictive of how much it probably is worth. We know. Everything that's in normal databases that's out there for the world to get we have. So this isn't necessarily all proprietary information but the way we gather together in the way we view it is proprietary to us. So we feel like we have a much better view to be able to search around a market and now everything about the buildings were looking for, and we only get smarter. So every time we do more investigation or more negotiating or more research on a property that goes into That properties data in our system, which then automatically updates, what we see on that map view and if something gets moved forward, so we received the material and now we're sending them a Loi. Well we did, they did that in our system, it updates on the map and everything is color-coded, so we can see a real-time view of what we're working on. Where but where I think the most value of the whole thing is, as you can see systematically how you have worked through a market and now you can start to segment markets and identify where the best. The best real estate opportunities are not just because you think they're the best assets but where are the best sub markets? When that within every Market that you're working in and our have, you worked through all the potential Assets in the best sub Market where you're looking and you just don't miss anything, right? So instead of trying to wait for that needle in the haystack, we're just shooting fish in a barrel, right? So we created the barrel. All the fish are in there and now we just shoot them as we need them. And when you say, work through a.

Speaker 2

37:25

 Market just quickly, what is working through a market.

Speaker 1

37:28

 Mean. Yeah. So if you just imagine In a normal city, as a circle, like any DFW Fort Worth Houston, they all have loops, right? And then, there're nodes. So out of the center of.

Speaker 2

37:38

 Every city, there're nodes where they go out and you can just imagine create spies and some way, right? Well.

Speaker 1

37:45

 If you start to look at the data within that, and I am talking about the Deep data hundreds, if not thousands of data points. And you start to layer that in, I am talking about traffic patterns distribution, patterns truck patterns. This is all data that. You can go pull to see like where is the activity and then you start layering in where are the people moving? Where are people living? Where our home prices going up, where were their most transactions last year from an industrial aspect? Where did cap rates go down? Where did cap rates go up? You can see all this what we do is we're not trying to go try to pick into every single one of those things. We know all those data points, add a lot of value. So we let the machines show us by highlighting and shading the map to tell us where these hot spots are, right? And we tell it, you know if the cap rates going up, this is show us what the cap rates. Looks like in across the market, where Cap rates gone up and down, show us where there's been the most trading volume show us where there's the most distribution truck traffic, and we can see we can look at each one of these criteria on the map and see, Obviously where the top, and we try to break it down like this where the top three submarkets of any City are and now that might be different from Dallas to Houston, right? Because Houston sub markets, are way different from they are, here the Zone. There's no zoning. So DFW, industrial sub markets are very identified. Every city is different. So instead of looking at it by true sub markets, like in DFW, we're looking at basically segments of a city, right? So we're breaking it up into quadrants Different sizes per City, but we're basically creating wedges in the city or blocks within the city and saying, any City and saying, this is a very attractive spot for these reasons, right? Population growth, demand, trading volume, cap rate, compression rate, grows, all those things, right occupancy. All the things that we know Drive value to real estate. Once we identified that is a hotspot, we No it. Then we say what, I, what opportunities are within that hotspot and do we know all of them have we looked for all of them and if, so, what's a real opportunity, those are what we're seeing on our map. So once we have identified those now, we're just going after them, and they may not sell which we have talked about over the last couple years we're not trying to get them to sell next year. But what we're hoping for is that if we have identified them over the next year, two year, three years. We're on top of the potential that if they do sell, we're ready Right? So that's the key. So.

Speaker 2

40:30

 If somebody is listening this going Well, obviously, like anybody knows where the best spots in town.

Speaker 1

40:37

 Are they think they do?

Speaker 2

40:38

 Can you expand on that? What would, what, what? Separates us from the average?

Speaker 1

40:43

 Yeah, so I mean, the way the market typically works is that it's everybody thinks what everybody else thinks.

Speaker 2

40:51

 So hours Following fall.

Speaker 1

40:52

 Right? So people talk about something always hold this building in GSW. Everybody knows certain areas of a city or busy because of where they're located, right? And they know No, that buildings are valuable there because the occupant, that's a known thing. What we're looking for is what are we missing, right? So when we can see all this data together, what you see is where there might be a similar aspect to a known location like an if I am using DFW for those that don't know, gsws a very hot Industrial submarket in the center of the city. There might be a similar aspect or a similar like kind area in another Market that has way undervalued buildings compared to a GSW that has the same type of rent growth, the same type of roof tops around at the same type of occupancy building Quality Distribution traffic, right? There's a lot of things that you see when you look at the data to go, wait the GSW the hottest submarkets. Was this one. That's right over here that there's been very little transaction volume but look rent growth is going up as well or sometimes. We're looking for where rent growth hasn't gone up that all the other Dynamics exist. So why is nobody pushing rent there? Where there's no ah cute. There's No Vacancy. And so you just start to see these opportunities. So it's not a one. It's there's not one answer, right? What you're doing is you have all the data and now you can ask the right question, right? Is that the best opportunity? So what we have a ranking system of how we're getting better at this? Every day, pretty much. But the way we look at these sub markets for ranking them for different reasons, but we try to identify where we think the three best opportunities in any Market are. And so that's where we're at right now. So that part is somewhat proprietary in the sense of those are how we think, right? I am not saying we're right or somebody else would do it differently but when we rank those markets, we think that those are our three best opportunities to have outsized returns risk-adjusted returns for investors. That other people might not see and that's what we're going.

Speaker 2

43:02

 For. My favorite part is in a live meeting, showing people the mapping software and just watching because I think a lot of people today like to talk about their business. As, you know, we're Tech forward where ya at company, and we tell people on the phone all the time, like we're going to preface this by saying we're a tech company like everybody else says, but when you come in our office, you will actually understand what we mean. We're not just like, connecting slack to y'all ready to, you know, all these other people's too. Tools. We have built internal tools that like you said, they work for how we think about the world and that's one of the things I love most about our company is we keep not blinders on, but we keep in our own lane, and we believe in ourselves and how we want to look at the world and believe that we're seeing it a different way. And that there's value that.

Speaker 1

43:50

 Way, I think there's two and through our most recent discussions with capital Partners. I think it's more clarified it in my own mind on why. It's Important. But there's two different types of real estate companies out there today that in terms of when you talk about tech, right? There's real estate companies that are being Tech forward because that is the path. That's what people believe is the future, right? Which it is to be more Tech forward in their focus on the tech because of the tech right there, trying to be Tech forward as opposed to where real estate, operator, Who We Believe makes as best investment decisions. As we possibly can, with every bit of data that we can get and all of the things about our fly World, our first, if you look at our flywheel, the fly will in there doesn't say anything about technology. But around the border of the flywheel, we added an arrow that says technology and knowledge and that is just to show you that propels the flywheel faster, right? It is not one of the critical buckets of where you focus your attention, it's on the periphery. And so, the way we think about Technology is been using it as a tool to continue to push our company forward, but it is not the selling point. I am not trying to sell anyone on the technology. That's why we're a great company or that's what someone else is investing in their investing in people that are smart enough to make great investment decisions operate at a high level and are smart enough to utilize the world's technology that exists today to only make it better, right? But we're not focused on building the technology because we think people are going to like believe in a small Or right? They should when they come and see it, it's inevitable. Right? It's inevitable that if people come see what we're doing that, they're blown away that all these things work, but that's not why we're doing it. We're not doing it to impress somebody so that they believe in an s'more. We're doing it because it works, and we're doing it because it makes our job easier, and we get smarter more efficient better and it.

Speaker 2

45:49

 Propels our flywheel of all the other things we're doing. Yep. And ultimately our investors do better.

Speaker 1

45:54

 100%. If you're like me, you like to.

Speaker 2

45:57

 Wake up and get your daily dose of reading for me, a lot of that has to do with commercial real estate because of the industry that we're in it for Capital and the news is important. But if you're a busy real estate, professional like me, you don't have time to skim through the dozens of dry and add filled media, Outlets each day. That's why I read cre daily. A free email newsletter that cuts through the Clutter and delivers concise, witty commentary on the latest trends and transactions and Commercial Real Estate. I discovered cre daily a few months ago and it's an email I actually look forward to getting each morning. If you're a real estate professional, you owe it to yourself to try it out and stay on top of what's happening in the industry. In only five minutes to give their free daily newsletter to try. Visit cre daily.com that's cre daily.com. All right. We will pick two more. Okay, I think this is an important ones and it's something that I think separates us again as we're observing where we want to put dollars to work process for evaluating new markets. Doesn't everybody have a process for evaluating new?

Speaker 1

47:04

 Markets? Maybe not, maybe not I have no idea. Fire just comes in and they just say.

Speaker 2

47:11

 Great we're entering a new market broker sent flyer.

Speaker 1

47:14

 Yeah I mean, I think it goes back to what we just said on submarkets I In people here, Nashville's hot. Let us by Nashville. Yeah, I mean it's that easy everybody money's flowing in Nashville, then ask Nashville, must be good, right? But do you know why? But we really think about winter New Market, and this was a learning process for us this year because he listened at the end of last year. We talked about growing throughout Texas, which we have always been doing but also looking at Key markets across the Sun Belt, right? And so this year, we enter to New Markets, which we had not done last year, which was a huge Accomplishment for us. But when we start to go down that process, we you realize, if you have all these tools in place for your own company today, about how you operate and all the things you do and you start to go into a new market, you immediately have all these questions as to. Well, how's it going to work? If we like simple things, how do you get your permit for your t.i., right? You can't assume it's the same way, but we have a process for that here. What was that process going to work? There, we don't know. So we ask the question. So we started doing that as we were talking about buying the first asset in a new market. And we realized real quickly that we needed a different set of criteria. A different set of questions to ask ourselves for every single Market. We were entering same process. Meaning you have to go through the process of learning, the market understanding the market and what's going to be needed in that market. But every Market is going to have a different list of questions. And so, There's got to be flexibility in there. So what we did is we created a master process, right? And then we can modify that and when I say process, these are automated tools within our fos system, that are digitized, they have things called triggers in them. That automatically tell people what to do when and now we can adjust that by market. So, when we go into a market, we can basically hand select what that market might need. And now our process for that market immediately adjust in our system without us having to do any work. Work. Which is priceless right? Because we're not, we're not doing double work, we're not missing things, we're not recreating stuff. We basically have covered all the bases. When you go into a new market, what do you need to identify? I mean, I could go down a list of our long but who's the broker what are the city requirements? Are there different tax when we close? Are they going to charge a different tax for this and different texture? That you know what is title has title work in that City what are their legal or their laws that we don't understand about Means acting real estate. There's a million things that you have to go through. And what we do is, before we go into that market, we go through that list, and we make sure that anything we need to know before we pull the trigger on the asset, we know. And so sometimes that happens simultaneously where you're looking in the market, you identify deal, you start negotiating that you realize real quickly. If this is going to become real, we have got to get all this stuff identified. Well, we streamline that so that we can do it instantly, so we identify Fi what we need to know when we need to know it the timeline. And so that we know that, all those boxes have been checked before our money goes hard. And now we have done it twice. And so we said okay, since we have done it twice into new markets, let us go back. Check ourselves in the other markets that we moved in through Texas, that we just thought we already knew because we're in Texas, right? And so, we back, check ourselves in Houston, we backtrack ourselves in San Antonio. Make sure that we have checked all those boxes, you end up finding that Nuances in every city that you kind of need to adjust how you look at that market. And so we have now got a really good framework in a really good foundation. Of when we go into a new market, we know all the questions asked but then there's another layer that we add into that, where we do this deep market analysis. So we get anywhere from 12 to 15 page deep market. Analysis report that we do internally. This is an internal thing. We have we can talk about some of the people that we have brought on but one of those being economically, Um, extract adjusts that we brought on this year, who's phenomenal, who works with the technology team? And the operations team, so he sits right in the middle, and he knows exactly what we're needing to accomplish from operations. Budget plan, execution, Acquisitions side, and he also understands the technology side and all the information needed in order to get the right data to flow into those processes of going into a new market. And so what I was mentioning before truck court orders and traffic patterns and all that stuff, population growth, rooftops, We Gather all that information. So we get a clear understanding of the market from a data standpoint. And then we have this list of criteria that we need to know and understand about the market before we move into it. Those two things to get together. Give us a great confidence in, when we go into a new market, we have at least done our homework and this is, this is totally separate from Looking at assets driving markets, understanding, if the building quality is right, if the tenant mix is there, that's totally separate. That's a deal vetting process. That goes back to what I was saying with Kepler. Right? This is just entering the market. And so we believe that again going back to the very beginning of our ability to solve problems. This is another one of those problems that we figured our how to solve and the fact that we're a company this size, moving this quickly, and we can utilize tools like this and identify how to Into a new market quickly. Identify the opportunities with them in that market quickly act on them quickly, track them efficiently and then operate at a high level. I think it just gives us a huge advantage on being able to look across the Sunbelt and not just have to be an expert in Texas, and that's proven to be the case. I mean, we have had, we have a nice portfolio in Florida, in Orlando, and we have a nice portfolio in Memphis.

Speaker 2

53:14

  and we're looking to expand in both of those. Markets and.

Speaker 1

53:18

 More to come on that early next.

Speaker 2

53:20

 Year. We sent over three hundred million dollars of l0 eyes last week. That's maybe those are in Texas, maybe they're.

Speaker 1

53:27

 Not. I would say they're not. Well.

Speaker 2

53:30

 Part of the part of them, are ya. All right, let us kind.

Speaker 1

53:33

 Of I think these last two are important.

Speaker 2

53:37

 Let us talk about dashboard utilization and accuracy. If you're a small business or not a small business, what you can probably know is that there's a lot of businesses that create dashboards, and they don't really work, they don't really give you the data. You need their kind of afterthought but a great dashboard can be a lifesaver. So maybe we start there. And then I want to finish on monthly Financial reviews, kind of how we kind of stay on top of things. But sure, data pipelines rebuilt to reach high level of stability across all reporting. What does that mean?

Speaker 1

54:11

 Yeah, so this is right in line with what I mentioned on all this data collection, through properties. The Importer tool, this really goes back to technology. So we have got a lot of processes in place where when we go into meetings that information is flowing through to give us a view somewhere, right? We use dashboard. So we have a tool that we built that we can display any metrics across our data pipelines. And when I say data pipelines, not asset pipelines, but the actual data flowing through our system, we can see that in a myriad of ways across different departments combined, the data. Look at anything, we want to see. So, where you run into that problem, like you said, a lot of companies will create dashboards and I will tell you need technology team would tell you. They get requests for Words all the time. And they hate it. Because our God, great. Another dashboard. No one's going to look at, right? Because you think in a moment, I would love to see that. But you look at it once the you never go back to it. Well, we have done is identified along with our weekly executive meeting, what are the most important criteria or data points that we need to be looking at on a certain Cadence. So that might be weekly monthly quarterly or annually and then by Department, right? So every Department, The operating team at the very top has a set of dashboards that we look at Financial operating and then each department has those as well. So over the years, we have continued to improve those in this year because of all that Improvement in technology. We have really dialed in one. What is displayed on those to get us the best data to make the best decision at all times? But the real time accuracy of it is Improved tenfold. So in the past there was still a lot of manual things that had to happen behind the scenes from accounting to technology to a department level to an approval, to get information into a system, but then had to be pushed to a dashboard. So there was a lot of like work to get a dashboard to look correctly. Right. Just so you could go into a meeting and go. Yep the numbers correct? Right well that creates a lot of pain because someone down the chain already knows that number right in the department they're like I am having to do all this work to get this number Over into this dashboard to so you can see it when I can just pull it right from the accounting software and disco tell me what number you want to see. I will just tell you right? So that defeats the purpose. Because what you're trying to do is have a shared location where multiple people multiple departments, multiple teams can see the information clearly and concisely much like the investor reporting right to create that shared Consciousness. And so what has happened now is that we those data pipelines this year? We rewrote literally The technology team rewrote our entire data pipeline. So imagine we have millions of lines of data millions, and it all lives in a Big Data Warehouse that we built. So, it's our proprietary data system. It's not some off-site thing where we pay somebody to have a storage deal. We have a data warehouse that we built that has data pipelines to flow in and out of it of all these different locations that was completely Rewritten into a new location, and we made the transition from the old to the new with zero error and zero conflict. It just happened so smoothly. But what that did is it ensured that every one of those connections and every one of those ins and outs of data, from one Department, from one accounting system, from fos, from our importer tool from our underwriting, all of that was happening seamlessly on top of that and I think they actually just put out a LinkedIn post this week, that shows how they track to see if there's an error. We can be highlighted. So in doing that they were also able to create a view so that they knew if there was ever a breakdown in data flow, right data being pushed from one place to another or it was supposed to get somewhere in. It didn't what that has done is given us alternate confidence and assurance that when we walk into a meeting the data that is being displayed in a dashboard is real-time and accurate and live. So when we're looking at Cash, balances revenue for an asset anything Across the entire company. We know that it's live in accurate. So when you have that at your fingertips, right that everybody's just doing their normal job, accountings doing, cash, Rex, everyday collecting rent paying bills? That's happening every day. Now, when we walk into a meeting that same information that is happening already in some other location, we can see Consolidated down to a number that matters to a lot of people instantly live accurate. And that becomes invaluable when you're having meetings. So when you go into meetings now there's really good content and neat to have on the screen as a starting point for everybody to be on the same page, it doesn't mean you sit there and talk about the dashboard the whole meeting. What you do is everybody is in agreement that this is where we're at. These are the numbers that matter were ahead or behind. We have work to do here.

Speaker 2

59:25

 Whatever it is. It's right there, right? And so.

Speaker 1

59:29

 You know, the famous saying is, if you know is you didn't measure it, it didn't happen. Measure, you have to measure everything, measure what matters, you know, and that's what we think we have done is going back to even where we got the things like, okay, ours and flywheels. That's those are from people that did things like John doerr, the measure what matters, right? That's who wrote that, right? Yeah. And so that's what we think we have done with this. And it's only gotten a thousand times better over the.

Speaker 2

59:58

 Last year and so our ability.

Speaker 1

01:00:00

 To utilize and have accuracy in. Those dashboards are Has.

Speaker 2

01:00:04

 Become critical in. You pretty much, put some meat behind this last one, but monthly Financial reviews.

Speaker 1

01:00:09

 Yeah, same thing, you know, as a company, you just want to have clear, understanding of how the company is operating financially at all times. And you shouldn't have to if your company like ours. It's not like there's a bunch of ups and downs every day. So, on a monthly basis, you should have a very good picture of what's going on. Because these are big events that happen right there, either big Acquisitions transactions. Sales, those are the big events. And then in that you're operating normally paying bills collecting rent, collecting fees, whatever it is that we're doing on a daily basis. That is very predictable. So there's not a lot of ups and downs in that. So when you get to the end of a month, There shouldn't be a lot of surprises. So what you're looking for is the nuance and where you can improve and where things might be getting off in the future. Well, you got to have really clear metrics to measure to be able to spot those things, right? So you're looking for the Nuance in the ups and downs, so we measure some really micro things so that we can start to see way before we might start to feel pain like the rent growth. Is a great one, right? Because rent growth is a huge measurement of potential. Noi for the asset, which affects investor return for one, but it also infects Property Management fees or the ability for anything to happen at the asset. Right? How much t.i. Your be able to spend how much capex you're going to have? So we track that way early, on across the whole portfolio and at the ACT asset level, To a very minutely level so that we can see, are we continually getting slightly higher rents than we projected or white Harbor instantly projected. But we can see the trend across the whole. So rents might still be up across the whole portfolio in at any given situation. I mean, any given time line, but if you're starting to see that growth slow, then it's something to watch doesn't mean it's bad. But, you know, you might have hit your top in terms of rent growth, even for just an asset, right? Like, we were trailing up, we got to 950 triple Mets but now everything's right at 950 trip amounts. Can we push? Or is that the market? That's the market, right? So you start to learn what not to do in the future. So then you don't go by the next deal and say, well we're already at 950, let us go to 11 on the next one, right? That's for people, go wrong, and we have never done that, but it's, it's obvious to see if you're not tracking these things. How you can convince yourself? That it's always going to go up into the right. And so what we do is, is a company try to be very diligent to know what's going on at all times and that's what that monthly financial review does.

Speaker 2

01:02:49

 If you take it until like forecasting cash, anybody listening to this knows that we're heading into potentially a period where things are going to be slower. And you're just sitting here going, Investor calls and says like, how are you going to manage cash through all this? Are you going to stop distributions or you know, all the things that could happen? You have always had a really good answer for how we will know to start conserving cash. How much will conserve when will start conserving, it when will stop conserving it? So, when you think about cash management for 2023 and you tie it back to, you know, everything we have talked about how does this meeting kind of help you. You understand where our cache levels need to.

Speaker 1

01:03:34

 Be. Yeah, this ties into our monthly distribution meeting where that really comes into play. And so, we're constantly looking forward 12 months in the asset. And so first off that, that re forecasting process that we do monthly allows us to say, this is what we thought was going to happen. This is what happened. That means this is now what the future holds, right? And so you can start with a pro forma, right? And that's what a lot of people do, a lot of people. And we know a lot of these people that are Investors right that buy real estate just like we do they write it, they do it pro forma. They put that pro forma side. They start operating the asset and whatever happens because that's reality and to some degree. That's true. I mean and that's, that's what they should do because they're just, if they're working as hard as they can but what we prefer to do is start with that pro forma. And then month one, this is what happened. That's our new metric to measure on. We never lose sight of what we originally said, but we should always be doing. Doing better than that, right? And so or trying to do better than that. So we're always looking at different metrics. We're looking at original underwriting re forecasting, right? And then our actuals, so we have original actual re forecast at all times. And when you're doing that and you look forward and you're doing multiple things, you're looking at the asset performance, which are also looking at.

Speaker 2

01:04:56

 The.

Speaker 1

01:04:57

 Longevity of your loan right in your financing. And you're looking at all these things together. Other and you're forecasting out and saying this is what right now based on the performance of the asset is going to happen from the day-to-day operations. Then at some point in the future we're going to switch from IO to amortization. That has this impact. At the end of three years, we either have to refinance or extend the loan or whatever. The situation is for any individual loan that is built into our forecast. So we're always looking far enough out to where if we're at a moment in time and there's an event coming that we can start adjusting. What happens at the asset level today from cash, flow spending cost all those things right to ensure that we're managing that cash leading up to that event. Not getting to that event and saying oh man, what did we do? We distributed all the cash, right? And I think any smart company should be doing that but if you We have a plan in place, it can creep up on you because what happens is especially in a market like we just went through, right? We're crushing it on a lot of rents in a lot of pain, a lot of assets. And so what can happen is your cash flow starts to build from an investor standpoint. It is great. It's great for us. We get to distribute more money if you get too aggressive in that and don't plan for what could still be coming and you distribute too much money, right? And at this point, I am talking about being way ahead of pro forma. So if an Investor's expecting A five thousand dollar distribution, right? And we're invested were Distributing commonly 8 Grand to an investor. That's great, right? That's great. Except if you didn't plan for that and you get to the end of 18 months and say, oh actually, I need 25 of that back. Yeah, well that would be a bad mistake because you should have just never over distributed in the first place for the investor, we were still out performing, right? So that's just managing the asset. So the whole point of that is that's all common sense in my mind. But We have a process in a way that we do that. That makes it impossible for us to let that creep up on us and get over or out of balance with what the assets going to need, versus what we're able to distribute. And so, our goal is always to maximize distributions while protecting the asset and that's a fine balance. But if you're doing both, then you have to be looking at both sides. So if we're saying, we want to distribute as much as possible except for is the Asset protected and any investor would want you to do that. There's no investor out there that said would say distribute me all the money and just hope for the best over here. Right. Right. So we're just balancing. Those two the point of this is we have a process to do.

Speaker 2

01:07:44

 It, all right. That was, it was awesome. Just to go through some of the operational highlights of the Year. Obviously, there's been many across the team. Those were some of, the, the few highlights. But it really, for anybody listening, I hope it gave a nice flavor for how we are thinking about business. I think real estate tends to get put into this box and there's only a few things to care about. You do deals, you asset manage them, you property, manage them construction manage them. But I think there's a lot more to it and I think again, it's what makes for it. So special is the depth at which we think about things and what we often say is the foundation to scale this business is has been set. We're getting a lot more done with a lot less effort that problem-solving culture of just you asleep find things that are causing us entropy anybody to know. Entropy is that's energy leaking out of your company and continuing to make it stronger. And a lot of this is stuff, we have come up with and a lot of this just following the best practices of the best companies that have ever existed. I think if there's one thing that's not lacking at this table, it's a little bit of confidence, and we tend to set the bar. Very high.

Speaker 1

01:08:57

 Yeah. And you know, real estate companies in general, like you said, They tend to focus on just the real estate itself, right? Which is super important but if you look at our results what it would say is and you hear his talk about, all this very little was talked about in terms of the actual like, buying the deal, right? Those are processes that we have dialed in, so we can ingest. So many deals so quickly, we have a process of how we do it, but we believe better than anybody but her as good as anybody. But what you're seeing in terms of, Of the numbers of buying 500 million is the output. That's the result of all the other things we focus on right. And so it allows you to do it where people Miss, they think, if they focus on just those deals that somehow they will just find a way to do more. Well, it works for a very short period of time but you realize very quickly in the life cycle of a real estate company. If you grow it any, any scale at all that? You have to focus on these things if you want to continue to get bigger. Right? Or not, just get bigger, but get better, right? Which then allows you to take on more. And, so I look at all this is this 100% happened because of the other stuff, if we weren't focused on these other things, there's just no chance. We would have been able to do this amount of work in one year. There's just no.

Speaker 2

01:10:20

 Way. What's the quote, your process is perfectly designed for the results that it gets? That is so true. All right, let us just run through some numbers, and then we are going to focus. The last few minutes on just some things that we are working on going into 2023, that are just kind of new and things that were very excited about, so I will rattle through a few of these. If you want to add into any of them, copilot, feel free. We did 16 deals in 2022, over half a billion, 500 million, five hundred fifty-five thousand and one hundred and forty dollars to be exact, we disposed of two deals, total of 35 million. We're raised about 166 million of new Equity. Thank you to all of our investors that help make that happen. We are the largest acquisition was 105 million 104 million in Houston. We acquired 4.1 million.

Speaker 1

01:11:18

 Square feet.

Speaker 2

01:11:19

 We entered to New Markets, Memphis Tennessee, in Orlando Florida. We're looking for 2023 to have several more added to that list TBD.

Speaker 1

01:11:31

 We hired 16 people. We open two new offices.

Speaker 2

01:11:35

 So we now have an office in Fort Worth which is our corporate headquarters. We have a full-time office in Dallas, and we have a full-time office.

Speaker 1

01:11:44

 In.

Speaker 2

01:11:45

 Houston and will soon to have a small office in San Antonio. We ran 150,000 property records through our properties pipeline. We just want to touch on that one for a second. That's not a normal number. That most people hear about.

Speaker 1

01:12:01

 Know, that just goes back to the Kepler map. Thing in our search for the best opportunities that match our criteria. So these are property records that we have vetted across all the markets that were looking at and then filter those down into those best opportunities. So that number is our ability to First search out Class B, industrial within a market that somewhat matches what we're looking for. And there was a hundred and fifty thousand of those. There was actually more we narrowed that down to land at about 150 but that just shows you how He deals are out there. Now, this is across six markets, right? But you narrow that down, there's a ton of opportunity to the tune of thousands. I think there's 2,500 buildings across six markets, that we believe are real opportunities at some point in the future. And when you think about that, if you're talking billions and billions of dollars of real estate now, are we going to buy all of that? No, we don't need to buy all of it. We just need to buy some of it.

Speaker 2

01:13:01

 Every year, right? And that's the.

Speaker 1

01:13:03

 Key and that's That this is what that tells us is that opportunities.

Speaker 2

01:13:06

 There. And one of my favorite things I laugh at is when people say there's just no deals out there. I think they keep thinking we I do too and I think they are the process by which they sniff out. What could be opportunities is really their problem, but I don't know it and maybe they don't have the scale to know it or the they care to know it. But there is a deal out there.

Speaker 1

01:13:31

 always a deal out there and it actually doesn't Matter what's happening in interest rates. We talk about this all the time. Interest rates any of that, right? The market has to sometimes adjust, but if interest rates, go up prices to come down. But there's always a marriage there of a happy medium that if those things align in your ability to achieve a certain return can be met and you believe in the replacement cost of that asset. Then there's no reason why you shouldn't buy it, and we.

Speaker 2

01:14:01

 Think that there's a ton of opportunity out there at all times.

Speaker 1

01:14:03

 Times specifically in this asset class because of the location. And because of the replacement cost.

Speaker 2

01:14:09

 There is a rally cry this year called operation paperless. Yeah. And we now have 96 Steve Bailey if you're listening to this thank you for running operation paperless and to all of our phenomenal property managers who have helped execute on it. Yep. We now 96% of tenants paying online. Yeah, why is that.

Speaker 1

01:14:29

 Important? Yeah, it's huge and this goes back to Opera being the best real estate, operating the world, but it's also one of the biggest opportunities within this asset class because of the nature of it, the prior ownership of it, the dispersed ownership of it. It just hasn't been managed to very efficiently and so commonly many of the tenants when we buy an asset still pay like you can possibly probably imagine with check or even trying to pay cash, and they still are used to hand delivering those to a Dropbox somewhere or mailing them. And over time, that is super And efficient for a lot of reasons. But the amount of energy spent from a property manager, to try to gather all that up every month, it can take weeks to just collect rent and when you think about what a property manager could really be doing to generate value to the asset that is important, obviously. But if you can make it efficient, then they can spend way more time, making sure the property is looks great. Everything's maintained. Well, that the new spaces are ready to go for New tenants. If somebody's moving out, that Gets turned quickly. All the things that really matter. Rent should be the last of our concerns. If people signed the lease, they should pay the rent, and we should give them an easy way to do it. And so, we brought this to the modern error, which is not that groundbreaking, but it's shocking that most people haven't done it. And so we have an online portal. Like most good real estate companies do we're tenants have to log in create an account set up payment, and they have to pay online. And so we sort of made it a negotiable. Steve Bailey, took the initiative ran with it. We tested it in Houston. Thanks to, I believe Debbie and are on our team in Houston. We tested it on one portfolio that we had Acquired and said let us just see if every tenant would be okay if we just force them to get on the and now say for slightly we required them and said you know we need everyone to be on the portal. It's a good thing, and we actually got very little to no pushback and it took some work, but we got it done. And that just opened the door to say If we can do it once, there's no reason we can't do it across the whole portfolio. Now, this Ebbs and flows every time we bring on a new asset, this number drops because however, 60% or more of those tenants when we bring on a new asset are not going to be on the portal, right? So we have to do that process every time, but now that's built into what we do. So step one is getting them on the portal so that they have it placed to pay their rent, automatically.

Speaker 2

01:16:57

 Online on a.

Speaker 1

01:16:59

 Specific date each month, that's also where they get their.

Speaker 2

01:17:02

 Reminders. The follow up, all those.

Speaker 1

01:17:04

 Things. The next step is to try to incentivize the tenants to do auto-pay and the more you can get that the more that is happening automatically, that's less work for accounting. It's less work for the property manager, it's more efficient for the investor, we.

Speaker 2

01:17:18

 Have more.

Speaker 1

01:17:19

 Consistent. Revenue comes in how quickly we can complete accounting each month because all the rinse collected quicker efficiencies just speed up. So when you talk about scale, and we get to, I think we have 1400 tenants or close to 1400. We will after the first year. To become 3000 before we know it and that it's a lot of rent collection and so the more efficiency we can create around that it will trickle through the whole company. Just like some of the other things we talked about.

Speaker 2

01:17:46

 All right, let us just talk a little bit, some forward-looking things, okay? If you want more information on our asset performance for our investor report performance, either a join us as an investor but look at listening at reading our annual letter That will be coming out with have more detail figures on. You know, how we see the market, our portfolio excetera, I wanted to cover a couple things. This one I am really excited about and I think it is a testament to just the evolution of where we are as a company, where our people are as a team, their desire to elevate in and keep improving for Capital University. Yep. This has been something that you and our leadership. Team are select members of our leadership team have been working on diligently for a lot of 2022 will be working on it at the very beginning of 2023, and then we will kind of be releasing it. Can you just speak to kind of what it is and what we're hoping to accomplish with it? And why it will become kind of core tenet of how for capitals culture, evolves to the next level? Yep.

Speaker 1

01:19:00

 It's inevitable that you have to do these type of things. If you want to keep growing, Accompany the way that we're growing it, if you're doing more every year, taking on more responsibility, increasing your ability to do things and you're also hiring more. People write your, you have to create a path on how that's going to be sustainable for the long term and sustainability only matters in one area the most. And that is the people. If you don't have a sustainable path for how people are going to get all this done, Then you have nothing because it will fall apart with the next higher that you have. Right? So if you just take an example, you have one great person that is helped build a lot of these things and let us just say something happens, unfortunate, or, or they leave or some their life changes or whatever. Right? You don't know, then your company has to then solve that and if you don't have a way that you solve that or if you don't have it built into your culture and how you do things then, The system breaks down and it's like starting over and what a lot of people do is they don't have these paths designed for people to understand. If we're going to grow, the people have to grow. And what we realized is in order to sustain the growth that we have, we have to take the initiative, and I am fortunate myself and a few of the other people on the team have gotten the benefit of going through this type of thing and other companies. And seeing the That can be created if you do it, right? But not just creating a growth path from a job perspective, but creating a growth plan and then providing the tools that person's going to need in order to become the person that is required to do the things we're going to do and often what happens in a small company, and we see it happening, even with people we know is it's not a, I am not knocking anything that anybody has to do in order to grow their company. But oftentimes you reach each Breaking points in a company where you're growing in. The first instinct is to go try to hire somebody from the outside world and bring them in because they're, they have more expertise. And you think they're going to be the thing that changes, your ability to change your ability to do more or to elevate your company. Often times, no matter how great that person is they were not a part of that building. They were not a part of that culture building. They were not a part of all those things and so oftentimes there's friction and there's a lot of risk. Are how they do things why they do things their culture, their?

Speaker 2

01:21:37

 Background, all those things, and so.

Speaker 1

01:21:40

 You can do it that way. And now it's inevitable that you do that at some point in the growth of a company. If you have been in business, a long enough, but the best way to do it that I believe, and we believe is to provide the tools and the resources for your people. Internally that have been here that are in it day to day that are already producing all the results. To give them the tools and the resources to continue to grow and become the people, right? So you're basically just growing your leadership from within, and we're not the only lots of companies do this. I just believe it's the best way. If you give those people the opportunity, they're more body than the more dedicated. They have more incentive there, more aligned and if they're the right people, and they take advantage of the Trent, the tools and the training and the things that we can provide them to become better leaders and managers.

Speaker 2

01:22:30

 Through what you're talking about with for.

Speaker 1

01:22:32

 University. Then we have something that is invaluable, you can't replace that, you certainly can't hire it from outside and so that's what we're aiming to do. We're aiming to create a university which we're calling it University somewhat lightly. But this is a required Class A Series of classes that we have put together that our leadership team and certain select people that are in our executive meeting every week. Will be required to go through to their benefit to give them the tools and resources, so they can continue to grow as a leader. And a manager separate from how well, they execute their job. This is about how to they now Foster and grow, the next level, next layer of people in the company, right? That's how you build a sustainable organization, long-term, you provide the tools and resources to your leadership and management. So that they continue to be better leaders and managers. And then they pass that on it also gives us a comment Language to speak about how we manage and how we lead. So that this shared alignment and Consciousness that we talked about in this meet, this discussion every year that we have formed through our executive meeting, that starts to permeate the whole company in a more impactful way, how we talk about the company, how our leadership and management talks about the company to their people is more consistent, even though it's fairly consistent now, we basically are all working from a similar tool kit on what it means to be a leader in a Enter within this company. And when you do that, you create a lot of alignment. And you also show the next generation of people that might come to the company that there is a path to becoming a leader in a manager, within this organization. And there is a way to grow through this company, and we have identified, we have taken the painstaking effort to create growth past for every position in the company and different types of growth paths, whether it's an individual contributor, or a team leader. And so we have these things in place. So in addition to that, you have to give the people at the top of those paths that are there today the tools to keep growing themselves because you can't be providing opportunity for people to grow that. Then look at you as a roadblock, you have to be growing yourself as a leader. And so what we're doing is giving the tools to the people that are the current leaders and managers in the company to keep growing themselves beyond their job, we're all.

Speaker 2

01:24:58

 Executing at a high level. We're talking about.

Speaker 1

01:25:00

 What else we're talking about, who we are as individuals and what Going to give back to this team so that we can create future great leaders and managers and if you don't have those tools today there's just no way to do it and even people that have it naturally, even people that went and learned themselves or have read great books, that's great. But if you have different managers leading and managing and different ways over time, it always breaks down because eventually the people that they're leading and manage if they're good. Are going to keep growing in the company? Now you have more people that are misaligned with how they lead in. Managed and that only gets worse over time, right? And so you have got to create consistency across an organization in terms of how you lead and manage. And so that all this hard work we have done with creating shared Consciousness and alignment on operations process. How we do things that only gets stronger because of the culture of leadership and management not break down because of leadership and management. And so we have done a lot of work. We're fortunate, like, I mentioned, we're fortunate that we have a lot of tools that we have learned in the past that we can take. That knowledge adapted to who we are adapted to what works. And this isn't, this isn't anything new, a lot of this stuff is stuff that has been around in companies for decades on what makes great companies and so that's what we look to do in 2023. We plan the first class to start at the end of q1 and 2023. It will be a series of four classes across take roughly a quarter to go through, and we plan to add onto that as we grow in the future. I am so excited. Cited.

Speaker 2

01:26:35

 About for University. I think it's a testament to what it takes to really become the best operator and the world. And you hear us talk about it. And, as I said earlier, we truly believe that we can become that our team is our most valuable asset. They are. The people that are showing up, they are the front lines. They are the ones making decisions every day to drive value, to this company, to drive value to our assets, to drive value, for our investors and the ability to I will implement this. It's like a dream of every small business that you can start offering that leadership and management training. So I think this is a great place to end our 2020 to recap and where we're going operationally. We have had a wonderful year that's showed up in the results and getting to kick off 2023 with something that's going to help grow our people. And obviously, all this Foundation of process and operational skill that we have built starting 2023. Yeah, I am excited about what's possible. Yeah, anything's possible. Thank you for wrapping up 2022. Appreciate it. Thanks, Chris. I hope you have enjoyed this episode of the for podcasts. Be sure to follow us on your favorite podcast platform or hop on over to YouTube to watch, full video episodes. If that's what you'd prefer for more information. You can check out the for pod.com. Chris Powers is the founder and chairman of for Capital LP, all opinions from Chris and guests of the fort podcast are solely their own, and do not reflect the opinions of for Capital LP. This podcast is for informational purposes only and should not be relied upon for Real Estate or investment decisions.