David Sloan is a multifamily syndicator and specialist and he’s focused on value add multifamily throughout the United States. He’s a seasoned attorney with tremendous hands-on experience in real estate. And he formerly worked with the General Counsel of Sunstone Hotel investments, which is a publicly-traded read. And that role, he managed all legal functions, including securities, manners, and real estate transactions.
David Sloan formerly had a real job and was at a larger company. And in 2014, and 2015, he started to dabble a little bit with one of his current business partners, Jordan Fisher. And they’ve grown their platform to over $200 million now. And assets we’ve taken, Nike deals full circle, that’s purchasing, stabilizing, and selling, we have another seven assets that they currently own. And they have two more under contract, which is their Spanish Oaks deal in Las Vegas.
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Deferred Sales Trust Client shares his experience and his new Multifamily Deal with David Sloan
Brett:
I’m excited about our next guest. He is a multifamily syndicator and specialist and he’s focused on value add multifamily throughout the United States. In fact, he’s a seasoned attorney with tremendous hands-on experience in real estate. And he formerly worked with the General Counsel of Sunstone Hotel investments, which is a publicly-traded read. And that role, he managed all legal functions, including securities, manners, and real estate transactions. And now he’s a principal for next wave investors, and he oversees the firm’s acquisition and investments to ensure accuracy, legality, and efficiency, please welcome to show with me, David Sloan. Hey, David, how are you doing?
David:
Good. Thanks, Brad. That’s quite the introduction.
Brett:
Hello, thank you so much, and for being on the show and absolutely looking forward to diving in a little bit about your story. And can we start right there? Would you give our listeners a little bit more about your story and your current focus?
David:
As Brett indicated, I have formerly had a real job and was at a larger company. And in 2014, and 2015, started to dabble a little bit with one of my current business partner, Jordan Fisher. He had, you know, decade-long or so experience in the multifamily asset class, we both had a mutual interest in continuing his you know, and my investment and multifamily. We’ve been doing this since 20, really, since 20, early or late 2014, early 2015. So this is when your call it six or seven, however you want to look at it. And we’ve grown our platform to over $200 million now. And assets we’ve taken, I believe Nike deals full circle, that’s purchasing, stabilizing, and selling, we have another seven assets that we currently own. And we have two more under contract, including one that we’ll talk about today, which is our Spanish oaks deal in Las Vegas.
Brett:
Beautiful, David, thanks for that overview. And that’s fantastic. And before we dive into that deal, and some of the philosophies on multifamily investing, I want to take a step back and help the audience to get to know you a little bit better, David? And this is the question. The question is this, I think we’ve all been given certain, you know, gifts in this life, some people call them strengths and superpowers, I believe their God-given gifts, but I gave these gifts are given to us to be a blessing and help to others. So I’m curious, David, what’s the gift? Maybe you are the strength that you believe you’ve been given? And how does that help how you help people today?
David:
I would say strength is just the practical aspect of investing here and just take deals. There’s the theoretic and you’re sitting behind a computer, and how can you financial engineer to make a project or to make returns work. And then there’s the practical aspect, which is, I guess applies to a lot of people that invest with us is, they don’t have experience doing this. That’s why they’re investing with us or people like us. And just practically letting them know that. Here’s what we do. There’s really no rocket science to it. What it is, is just understanding where there’s potential value to be unlocked. Going out after you understand what kind of value or potential upside there is, finding investors explaining to them that look, yes, you can go with a bunch of different companies. However, here’s that here are the things that that we focus on. Number one is being transparent, letting people understand, here’s what we’re doing. We are buying, we are renovating, we are stabilizing. We have experience with doing this. We’ve done this before. Matter of fact, and this particular deal we’ll talk about later, we’ve done it right around the corner, many times. And so I think that brings that to the table helps and helps people just get comfortable with this investment. At the end of the day, these are all we’re all making bets. We’re making bets that you know we can make not only the asset stronger, that we will have some sort of an exit within 357 years down the road. So again, I think our strength is explaining this to people and very understandable terms also being accessible and how Having very clear and consistent reporting to investors, which is something that we have that some of, you know, some of those investment companies like ours out there lack, we’ve made a significant investment in our back office, we have, depending on, you know, where we are in our growth stage anywhere from five-plus accountants that are on staff. And that’s something we really focus on again and helps us with transparency.
Brett:
Beautiful love that. Yeah, love, transparency, love the clear communication and reporting. And so let’s dive right into multifamily investing. When did you become fascinated or really excited about helping others achieve wealth through multifamily investing?
David:
At first, selfishly, we were investing with our own money. And then as we realize that our own money can only go so far, you start to bring in friends and family into these deals. And then, as you continue to grow, and you, you know, we are vertically integrated, integrated, we self-managed as well. And the only way really to get to a breakeven point is to grow on the management side. And so as we grew, we were capital constrained, we started to work with friends and family and now that we’ve proven this time after time, that we can, you know, have a rich, adjusted manner, continue to grow our platform, and at the same time continue to really provide outsized returns to our investors. It’s rewarding, I think that you know, anytime we have a new deal, anytime we’re raising money, we’re always very nervous to take any dollar, to be honest, because the worst thing that that I would hate to have somebody that I know or relative, someone in our neighborhood, someone’s you know, so another one of our kids, parents, entrust us with their money and not be able to provide a return on that. So it’s the most rewarding thing to grow together and to make money with your friends and family. But it also puts the pressure on really to perform.
Brett:
Yeah, absolutely. Right. As the tide rises, and you get to do a great job, everybody, everybody wins. And that’s the power of the syndication, right, everyone can put a percentage of their wealth into a deal, sharing the risk, and then also share on the upside. So what are some questions that potential clients ask you, David, and for next wave investors?
Deferred Sales Trust Client shares his experience and his new Multifamily Deal: “The major fortunes in America have been made in land.” – John D. Rockefeller
David:
I would say that there is a lot of focus on it being concerned about stretching the team too far. And so for instance, when we want to jump into a new market as we jumped into the Texas market back in November, we didn’t have a presence in Texas. So prospective investors were really concerned with, do you have the ability to add this to your plate? And so, fortunately, the answer is yes. And it’s been a successful project, albeit we’ve only had it for a little less than eight weeks. But I think that it’s, you know, making sure that the back end of our office is really growing as we grow on the front end, and grow our asset base. And so, but one question is making sure that we’re that, you know, we’re saying, Yeah, it’s no problem we’re going to take over into this new market, and other people are saying, well, let’s, let’s really see if you have that back end office capability to expand. I’d say that’s one thing. The other thing that we get a lot of questions on would just be I said, questions, it’s not really particular to us really deal-specific questions, such as assumptions on debt assumptions on exit cap rates, we get a lot of those questions, which is, you know, you know, who you really sort of investors are that are in tune with the details, but the detailed questions they ask.
Brett:
Excellent. Yeah, that’s good, that’s a good thing. So the ability to expand if you’re going into new markets, but you guys have you said 17 deals full-cycle already, I think is what you said…
David:
About 19.
Brett:
I think 19 years full cycle, over $200 million, and then another seven inch currently have now. And so, but yeah, you have it when you’re expanding to new markets. It could be a new thing. But the good thing is, is Texas seems to be doing very well. And it seems to be a lot of people are fleeing California, by the way, Dave and I both in California, Dave’s in Southern California, and Northern California. And so we’re seeing kind of a flight to these other places. So David, do you want to speak about that and then dive right into Spanish Oaks, which is in Nevada, and how we’re seeing kind of migration for businesses. In fact, I think it was Oracle, I believe HP, and Tesla all announced in the last like 120 days that they’re all relocating to Texas. So you want to speak about that?
David:
Sure. I know that what you’re saying about the flight, I think you see a lot of this on the news and you read about it is the flight out of California and some of these other states that, have higher taxes and more government regulation, we have definitely seen that firsthand. Our other sort of group of assets is in Salt Lake. So we’re really concentrated in Salt Lake, Las Vegas, Phoenix, and Dallas right now. And in all of those markets, we’ve experienced that. And even in Las Vegas, where there’s definitely been a big hit on the tourism spending and the jobs in the tourism industry. We’ve seen a lot of people moving there since March. And a couple of things. I mean, obviously, the weather’s good, except for the four or five months year where it’s over 100 degrees, there has been a lot of job growth and diversity out of the gaming industry in Las Vegas. But more importantly, it’s the cost of living relative to primarily California. And during the pandemic, and you know, we still see this today, occupancy is not an issue. And all the markets, occupancy has remained really high, pretty much at the north of 90%. In every single market, and every asset we’ve had, it’s really Market to Market. When you look at collections, though, Vegas has probably had the biggest hit on collections. What we’ve seen generally at our properties, there is five to 10%. That debt, you know, and most of the time, people in this business are underwriting one to 2%. So it’s an order of magnitude above what we’ve performed. But, you know, if you’re at 100%, full and 5%, or 6%, or 7% are paying, you’re still in the mind is on collections. And so it’s not as bad as what you would think and primary, the primary driver, we see is just relocations, there’s just for every tenant that’s there and maybe lost their job, there’s someone else moving from California that can come in and step in their shoes and pay rent. So stronger than what we thought it would be.
Brett:
Excellent. Well said. And I like that Salt Lake City, Las Vegas, Phoenix, in Texas. And that occupancies have remained pretty healthy given what happened with COVID-19. And I think he picked some good markets and some good deals. That being said, Do you want to dive into Spanish Oaks and talk about that deal that you recently found in the Las Vegas area, what you like about it, how you found it, and what the vision is to and make it make a good investment here?
David:
Spanish Oaks is a 1976 216 unit property. They consist of the unit mix is really pretty simple. one bedroom, one bath, two-bedroom, one bath. About 160 of the 260 units need a full renovation, that that we have underwritten and having our ppm and our other investment materials. But we project here that this is going to be around the 20% or north of 20% IRR based on a three-year-old. We do have a bridge loan as our first mortgage lender, and then we have some, some preferred equity. And then there’s a 4.2 million of common equity, of which the sponsorship group is going to bring in at least half a million dollars. And so the of the $4.2 million, was down to a little less than $500,000 remaining to raise. And we just really liked the deal on again, like we talked about earlier, every what every one of these deals, you’re making a bet no matter what the market, that sounds maybe worse just because it’s in Vegas, but it’s a bet nonetheless. Right. And we believe over the next 24 to 36 months that Vegas Will you know, we’ll see a real strong recovery. Obviously, there’s a lot of good things happening in Vegas over the last you know, call it five years, but certainly, over the last year and the next year you have additional venues that are gonna open up you know, we know that Las Vegas Raiders are obviously in town they’ve played now a full season. Granted, nobody was there at the stadium, but that venue will open up next year, there’s Resorts World that’s on the strip across the street from the when that’ll open up and I think it has somewhere between four and 6000 new employees. So there’s gonna there are employment drivers that are opening up and there is a continuing flow of people and this is a call it C plus b minus asset. And that is always going to fulfill a need and it’s going to be a requirement to fulfill workforce housing.
Brett:
Love that. Yeah, I love the value add opportunity for 160 of the 216 units. So there’s still plenty of meat on the bone, like the 76 kinds of advantage, that CCB kind of combo. And then the ability to get 20% IRR in three years is achievable. That seems like very solid returns. And then as well as you’ve already been there, right, you’ve already done it down. Like he said, down the street, if you caught it early in the interview. You’ve done this before, you just sold on a deal not to actually take the last few months. This leads us to the next question day, which is actually the first deal that we did together with the deferred sales trust. So for our listeners who don’t know, if you haven’t heard by now, we specialize and help people defer capital gains taxes on the sale of businesses or real estate, and also helps work for multifamily syndication. So, David, you want to talk through your experience as it pertains to the deferred sales trust? How did you learn about it? What was the biggest thing to overcome? And what it’s been able to do for you now?
David:
We’ve done now two rounds of deferred sales trust. And let’s see, not both, but the first one that we did was actually a few miles away from this property. It was another property we had in Vegas that we sold in 2020. By the way, this is our 11th deal in Las Vegas, I just had to run through my head and figure that out. But so I let a loving 11th deal in Vegas. But the last year we sold in Vegas was the first deal that we put the money into a deferred sales trust. And then we had another deal in Phoenix that we did the same. And the reason obviously, like anyone, right, you want to defer and delay sort of incurring those taxes on capital gains. But the optionality that it provides, relative to 1031 is what was the most attractive to us, and the ability to take those capital gains. And to reinvest that money in our own deals or other people’s deals or to invest in stocks or bonds, the flexibility was, was the piece that was the most attractive.
Brett:
What was the hardest thing to overcome? Because being in the multifamily industry for a while and maybe doing 1030 ones, or maybe hadn’t done any 1030 ones? In regards to your syndications? What was the hardest thing to overcome, for the deferred sales trust? Because I know for me at Marcus and Millichap, this is like 11 years ago, I first heard about him, like, I was selling multifamily deals, doing 1030 ones to clients. And we’re like, what this seems like too good to be true. Or how does it How is it really going to be worked for me? What was the biggest challenge for you to overcome, David? And then what is it like now that the trust is been closed? And how’s it working out?
David:
So I would say that the biggest thing to overcome is probably not too different for anyone else is, it sounds like a great alternative. But what you know, what’s the catch? Right? And I would say, the catch really is, number one, really understanding how it works and getting comfortable with it. Number two, I would say that the paperwork was pretty easy. We thought you surround yourself with a good group of advisers, Robert, but Kelly, as well as Todd Campbell on the legal side. And so a good team, that that will take the time to sit down and have or have a phone call and Roberts case, we met him for lunch, but, you know, a good key team that really knows what they’re doing. And so that’s, that’s really helpful, I would say, on you know, what are the what would be something that would be I would don’t want to say it’s a negative, but just the learning curve. Right. And that is taking that money and reinvesting it in deals, our own deals, right? It’s a little extra paperwork, yes. However, it’s worth it. Because you can take that money, delay, avoiding taxes, and really be able to use that money, tax-free, obviously until there’s some sort of liquidation event, but grow that money, you know, prior to paying taxes, just like kind of a self-directed IRA, right? It’s really nice to be able to do that and provides us the ability to grow our business.
Brett:
Absolutely. 100%. Right. And that’s, that’s what we pride ourselves on giving you some more access to capital, delaying deferring the tax, right versus 1031. Exchange can be very kind of challenging. The 99% of syndicators. We work with do not 1031, they don’t allow 1031 money in order to do it out because it’s just too complicated. But the deferred sales trust is very, very flexible, and it allows each individual to come and go their separate ways. And then to have their own deferred sales trust to go back into more deals and you can learn more about that a capital gains tax solutions.com it’s capital gains, tax solutions, calm. And let’s see are With that being said, David, are you ready for the lightning round?
David:
Sure.
Brett:
All right, knowing what you know. Now if you go back to your 25-year-old self, David, what’s the one Golden Nugget that you would Make sure that you would do or not.
David:
I would have gone to undergrad and graduate school finance and business.
Brett:
Excellent. What’s the one book you’ve recommended the most in the past year?
David:
Brett:
That sounds like a good book. Let’s see here. What’s, what’s the biggest project? Besides Spanish oaks? We’ll put it this way? What’s the biggest delegating business part project that you’re currently working on? And how do you envision that having an impact on your business?
David:
Delegating delegate, we just hired an analyst. And here over the next 12 to 24 months, we want to see him get out from behind the computer and take over some of the travel and project management.
Brett:
Nice, beautiful. what’s the one thing you’re most curious about right now?
David:
What happens to interest rates over the next 36 months, and the cap rates follow?
Brett:
So fascinating to see those two things happen? I agree with you. Last question. And this will kind of wrap up this interview. You know, based, after all, your success in acquisitions in multifamily management and helping a lot of people create and preserve more wealth, and you’re an attorney right, as well. And everything you’ve accomplished, David, I’m curious, how do you stay centered in your values? And then how do you stay encouraged to reach for new heights?
David:
I think that staying as far as staying centered goes, and I think that investing with your friends and family and neighbors, really helps to hold you accountable. You don’t want to take any stupid risks. And if you’re going to take risks, you better make sure other people are on board and understand those uncertainties. And as far as you know, what continues to drive I think that you know, I heard that you learn in your 30s and earn in your 40s. And you know, only 43 so you got it, you got to make hay while you can.
Brett:
Beautiful, love it. Well, I appreciate your time, David, and appreciate you sharing part of your story, sharing this with the Spanish oaks for those of the those who want to get in touch with you and learn more about that what’s the best place for him to connect with you and find you?
David:
I’ll give you my email address, david@nwimulti.com. You can also find us at nextwaveinvestors.com. Feel free to call email anytime we’re around. We’re always looking for new ideas, new partners, new equity investors, new debt opportunities. So again, love to hear from you.
Brett:
Beautiful. Well thanks, David for being on the show. That’s David Sloan with next wave investors and that’s next wave investors calm and you can reach out and find him there. And I want to thank our listeners for listening to another episode of the Capital gains tax solutions podcast as always, we believe the highest net worth individuals and those who helped them struggle with clarifying their capital gains tax deferral options, not having a clear plan is the enemy and using a deferred sales trust to exit your business real estate or even commercial real estate syndication is the best way for you to defer your tax and grow your wealth. With that please rate review subscribe go to capital gains tax Lucia calm if you want to learn more. We appreciate your listening and if you’re a business coach or if you’re a business professional or commercial real estate professional, go to expertcresecrets.com to learn how that deferred sales trust can help you grow your business. Thanks so much, everyone for listening. We appreciate you, too. Bye.
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About David Sloan
A seasoned attorney with tremendous hands-on experience in real estate, David Sloan is an expert in multifamily real estate transactions, as well as asset and project management.
As Principal for Next Wave, Sloan oversees all of the firm’s acquisitions and investments to ensure accuracy, legality, and efficiency.
Earlier in his career, Sloan served as Senior Vice President – General Counsel of Sunstone Hotel Investors, Inc. (“Sunstone”), a publicly-traded REIT. In that role, he managed all legal functions, including securities matters and real estate transactions.
Prior to joining Sunstone, Sloan was engaged in the private practice of law in San Diego. He holds a B.S. degree from Ball State University and a J.D. degree (cum laude) from Thomas Jefferson School of Law.
