GI170: Developing $800 Million Worth of Commercial Real Estate with Meg Epstein

GI170: Developing $800 Million Worth of Commercial Real Estate with Meg Epstein

Based in Nashville, Tennessee, Meg Epstein is a real estate developer with over a decade of experience and has been involved in the development and construction of over 1 million square feet of residential and commercial real estate, representing over $780 million to date.

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Announcer:
Welcome to the Global Investors Podcast, a show that focuses on helping foreign investors enter the lucrative US real estate market. Host, Charles Carillo, combined decades of real estate investing experience with a professional background in international banking to interview experts in all areas of US real estate investing. Now here’s your host, Charles Carillo.

Charles:
Do you have money sitting in the stock market? And you’re worried about it or worse. You have money sitting at the bank, not keeping up with inflation. My name is Charles Carillo, founder and managing partner of Harborside Partners. And since 2006, I’ve been investing my money and my family’s money into income producing properties. These are real assets, real properties with real addresses that produce real cash flow. At Harborside Partners, we provide passive investors who love real estate with a turnkey investing solution. If you want to put your money to work in real estate, but can’t find deals, don’t have the time to get funding in. The last thing that productive people want to do is manage real estate. We find the deals. We fund the deals and we manage the tenants, the termites and the properties. Partner with us at investwithharborside.com. That’s investwithharborside.com. Go to investwithharborside.com. If you love real estate, you like the idea of passive income and believe that income producing properties will appreciate over time. Go to investwithharborside.com. That’s investwithharborside.com.

New Speaker:
Welcome to another episode of the Global Investors Podcast; I’m your host Charles Carillo. Today we have Meg Epstein. Based in Nashville, Tennessee, she is a real estate developer with over a decade of experience and has been involved in the development and construction of over 1 million square feet of residential and commercial real estate, representing over $780 million to date. So thank you so much for being on the show, Meg.

Meg:
Yes. Thank you for having me.

Charles:
So give us a little background of yourself, both personally and professionally prior to getting involved in real estate investing and development,

Meg:
I’ve pretty much been in real estate. Since I graduated from college I wanted to be a developer, but I graduated in oh eight. And so it wasn’t the best career path to take. So I got a job in construction actually. So I was on job sites for the first couple years of my career and really learned construction and project management that way and building. So it was definitely very different from what I do now, but obviously related.

Charles:
Nice. Okay. And so why, when you chose, I guess you moved from California, why did you pick Nashville as I mean, it’s a growing, it’s a growing city within Tennessee, which is a growing state. Why did you choose that as the place for you to move, to start your construction business? There?

Meg:
I, it was actually more of a spontaneous thing. My husband, when I met him, he was from San Francisco and he had moved to Nashville, just kind of on a whim cuz he came for a weekend and he liked it so much. So yeah, that was basically I met him and I came, came and visited one time and then just moved here. So it was kind of very fast, but I, I liked the city when I came, it was like 2013 and 14 like very different city, but I still could, you know, I knew I would like it here.

Charles:
Nice. Awesome. So your firm CA self development, what types of construction projects does your company currently focus on? At this time

Meg:
We are primarily focused on mixed use urban info projects. So apartments with retail below, you know, more in denser areas of Nashville. And then we also do industrial and our industrial projects are meant for more middle market tenants, not like big box, you know, like Amazon type tenants, more middle market tenants. And we basically chose those asset classes based on the data that we saw in Nashville and the Southeast in terms of what was being really under supply.

Charles:
Yeah. residential and industrial are pretty much hot everywhere. I’m being in Florida in the whole Southeast. It’s something that is lacking especially industrial. And what are, when you’re doing these industrial projects and you’re doing any type of improvements to ’em for tenants like what, what type of businesses are going into them? You said not big box re like industrial, like companies that might need it, not big box stores.

Meg:
Yeah. It’s actually upper hand land now, sellers market, but to a lot of sellers in Nashville, you, you know, construction related businesses or just kind of even industrial businesses and they, but they’re sitting on land that’s worth so much. And having the industrial platform has been able to allow us that to, you know, help them in the process of finding them new locations. And and so we, we, that was kind of how the idea came about. We saw that trend of, you know, strong, strong rent payers, but just, you know, 20, they need 20,000 square feet. H you know, like an H V a C company, for example, or a lot of construction related businesses, or even just retail e-commerce like, as retail goes away and people need smaller, you know, they’re not some big yeah, they don’t need, you know, 500,000 square feet. They need 50,000 or 20,000 square feet. So those are kind of those middle market businesses we target with that product.

Charles:
Oh, that’s, that’s, that’s great. That’s awesome. So for different funds that you’re running now, which I found very interesting, cause you have a qualified opportunity fund. And can you tell us more about what you’re targeting with that?

Meg:
Our opportunity zone funds. So we’ve set up, I guess, almost five single asset op zone funds now. So we’ve gotten, we’ve been pretty much on the, the forefront of that since the legislation came out in 2018. And like I said, I think we have six, five or six ops zone projects. So we kind of understood the nuances of that. And we have a great legal team that deals deals with that, but we basically just target opportunity zones projects, and it’s all ground up. Not all of it. My actually our new headquarters is in an opportunity zone and you have to, as part of the legislation, you have to double your basis, but it’s basically just these geographic areas that are designated as opportunity zones that give the investors the tax advantages of holding for long term. So usually those projects are in urban locations where the city wants, you know, development and, and building to be sparked. So in some cases it’s, they’re not really in like, you know, with the idea originally was for it to be in neighborhoods that really need a lot of gentrification or, you know, more investment, but in Nashville they’re placed pretty competitively in really prime neighborhoods. So it just depends, you know, we kind of tailor the product type depending on the neighborhood.

Charles:
Yeah. It’s very interestingly you said that cause I was doing some research. So just since talking to some other qualified opportunity fund developers, and there’s like over 8,000 of these qualified opportunity fund zones in the United States. And they finding that a lot that they’re finding these zones that are not where you’d think they are, but where they’ve been zoned and it’s actually right where you’d really where there’s a wave of gentrification. So you’re finding that as well in Nashville.

Meg:
Yeah. And different cities are, are really, you know, varies wildly. I mean, Nashville’s very close to the urban core. I think chat and you guys, another market we were looking at, which is obviously pretty close to Nashville, but I think they’re entire downtown as an opportunity zone. And then you have other markets like LA and Austin where it’s, you know, way far out of the urban core and you’re not gonna get them unless you go hours outside of downtown. So just, I think it just depends on I mean, I’m assuming it highly political when they need those when they need those tracks. But

Charles:
Yeah. Interesting. So as over this last 10 years, plus that you’ve been doing real estate and development, I mean, real estate is a very capital intensive business. How’d you start off raising capital for your deals and now you’ve grown into raising capital for funds for these developments.

Meg:
Yeah. I first started I took the C C IM courses, which are like a broker designation course, which is like kinda like a mini most masters in real estate or something. And it was very beneficial for me cause it’s a very practical application of investment, you know, investment underwriting for, for real estate. And I found that that was, you know, my first foray into actual investment and a lot of people have a lot more, I mean, I have people on the team that are so sophisticated in terms of how they underwrite Excel and, you know, investment banking, backgrounds and things like that. But I didn’t have that. So I I took those CLA those courses and I got my first deal together. I just really went online and like Googled where to get real estate capital. And, you know, I mean, I just did a lot of cold calling, just kind of took whoever I could talk to about how to invest in real estate.

Meg:
And I knew I didn’t want to indicate one because I just didn’t know a lot of people that had money. You know, typically when people start out, they get their first apartment deal and then they go a friends and family and Hobb together a couple million bucks. And I just, I just didn’t know the people that had a lot of money and I didn’t wanna do that. And so I looked for more of like one, you know, private equity fund that would invest now I didn’t have a track record or anything, but the first one I found was off of the C cm directory. I think I did a posting of the deal. And I was like, this is in Nashville. And this is like in 2016. And so in Nashville was gaining popularity, but it wasn’t like what, what it is now in terms of like the darling investment market.

Meg:
So he flew down to Nashville. I mean, he took me, I called him, you know, a lot of times, but he never said no. So I just kept following up. And then he came down to Nashville, looked at the deal. It was like, okay, I’ll do this deal. And he structured it in a way. It was really lucky for me cause he took a chance on me. I mean, I called hundreds of people though. So I dunno, you can call that luck or you can call it, you know, just five. But he came down and we, he structured the deal in a way to where it would be extremely hard for him to lose money. Cause I didn’t have any money to put in the deal. And so he provided all the capital and provided the deal we worked together. And anyways it ended up being extremely successful for both of us. So he invested in more deals. And then I attracted, you know, as, as we grew and our deal sizes grew to being, you know, typically over 50 million or so a deal, then we started, you know, working with more institutional investors and that’s who we work with explicitly now.

Charles:
Yeah. I imagine that’s a much easier to put those deals together with just having a handful of investors compared to having a number of different limited partners that you’re raising funds through.

Meg:
Yeah. And that’s, I think we touched on this earlier just in terms of it’s it is easier to do larger projects and I think a lot of people spend a good portion of the beginning of their career syndicating and, and yeah, it’s just never been, I’ve never seen that to be, I don’t find that very scalable. So I, I avoided that

Charles:
When you’re saying larger projects are easier, is it saying not just raising capital, but is it also with managing the whole project, finding places to put pro? I mean, like everything goes together. I would imagine it’s much easier to find your contractors and vendors cause they want bigger deals. We find that multifamily all the time. I’m going for some way to price out some sort of work for a property. When you tell me you have a hundred units, it’s a much different story than if you’re looking for five or 10 units. And are, is, are you finding that throughout the whole project? It’s just me much easier to do these larger projects.

Meg:
Yeah. I mean, there’s just to be fair as like a precursor, there’s nothing easy about ground development at all. Right. I mean, I it’s, I started and I built a con a ground up condo building and a ground up office condo building, which are like with no track record or, I mean that <laugh>, I wouldn’t recommend that to anyone cuz it is extremely difficult to do ground up development, let alone in an asset class like condo that isn’t, you know, it’s not like building a multifamily building and so that’s a lot less financable and so there’s no, I don’t, you know, it was extremely difficult getting through all of the heartache of learning, you know, the ins and outs of development. But now that I’m there, I would say, yes, it’s easier. I mean, it’s, there’s, it’s definitely more competitive as you get into the larger deals.

Meg:
Because you have a lot more institutional shops with a lot of capital behind them looking at them, but especially in more markets that I spend time in and built relationships like Nashville to when you, if you have the deal if you can find the deal then yes, doing larger deals, you know, you get one equity check from, from an investor, you get a lot more, I mean, in this market trying to find general contractors that can execute and show up to your job sites is a whole challenge in itself. And so when you, you know, if you’re building, they have an 80 million contract, they’re definitely, you’re gonna get some very professional groups. And it just kind of goes that way throughout the entire deal stack in terms of, you know, architecture and, and financing and everything. So yeah.

Charles:
So over 10 years, plus of doing all these types of developments how important have you found it to do property due diligence on people that you’re working with or partnering with on deals?

Meg:
Oh yeah. I mean, it’s extremely important. We do, you know, on the team, we, we have a pretty extensive on my team. We have a pretty extensive background check process and just interview process and not just for ourselves, but also for the, you know, the people that join the team cause we wanna make sure that it’s the right fit for them as well. And it is very you know, we’re very hard charging and a lot of people on the team, I mean everyone’s extremely smart and talented and to work in that environment, it takes a certain type of person that has similar goals. Some people don’t want to, you know, be horribly aggressive and grow very quickly and build massive buildings. And that’s fine. It’s just, that’s what it takes to work here. Right. Mm-hmm <affirmative> so so we go through a pretty extensive process for that.

Meg:
You know, I have people interviewed by my board members and they come meet the team and testing and background checks in a whole extensive thing just because they think it’s where we are small. I mean, we’re, we’ve grown very quickly, but we’re still relatively small. And so working so closely, people have to be, you know, comfortable with each other and then on the partners side yeah, I mean, mainly we’re taking capital from institutional partners, so there’s not like a lot of background checks to do, but you do, you always spend time with your investors and go to dinner and kind of get to know unless it was during the pandemic. We, I never met any of them and we did some deals just over zoom. But beyond that, it’s like there’s a lot of places to get capital from. And at the end of the day, like I don’t wanna be working with someone that’s not aligned with one, like I care a lot about the architecture of the projects and I care a lot about how the end product ends up and how people live in it.

Meg:
And I’m not just building a stamp and repeat, you know, 300 unit department building that looks like everything else. And so one of my investors is a public re and the reason I started working, one of the reasons I started working with them is cuz a lot of those, a lot of res just tend to be really utilitarian in the design. And it’s just like, it’s just about like almost a commoditized product. And this one I’m working with really cares about that dialogue of creating, you know, creating healthy spaces and kind of shaping the urban landscape in a way that’s different and really spending time on the floor plans so that they supply what’s undersupplied in that market. Like in Nashville, there’s an undersupply of three bedrooms, for example. So we really look at those things we look at, oh, how is the pandemic shaped?

Meg:
How people live and work from home. Do they mean, you know, we need to have areas or rooms where people can have separate zoom calls that the husband and wife are working at, you know, in the same apartment, things like that. So they spend a lot more time, so you can get Mon I can get money from a lot of places now, but I don’t, I don’t one, I wanna work with people that are positive and you know, I’ve had my shared experiences from like <laugh> just, you know, people from like more like a New York attitude, like to kind of a holes and I just don’t need it. Right. So I can, I wanna get, I wanna have people, you know, we create more partnerships and that goes down with any type of work that your listeners are doing or any people that are partnering it’s like in any sort of venture, even if you’re flipping a house, it’s like you’re spending, it’s gonna be consuming of a lot of your life. And you wanna spend that with people that you know, are aligned and are positive.

Charles:
Yeah. And knows actually what you mean. Cause there’s definitely people I’ve met and you walk away and you’re like, I would never take a dollar from this person. You know what I mean? Yeah. It’s just like, just if this is how it is and we haven’t even done anything, then it’s just <laugh>, it’s gonna be quite a painful five, seven years plus that our relationship will be for this deal. So yeah. And

Meg:
I think it’s the same way that I work with my employees. I don’t treat people like, you know, they’re so like I, with my investors it’s I know what I’m giving them is very unique and our track record extremely strong. And those there’s a lot of liquidity in the market right now. And there’s so they’re not, it has to work for both sides. Like I don’t, you know, I can get capital somewhere else.

Charles:
Yeah. So what kind of mistakes do you see real estate investors make throughout your decades of experience?

Meg:
Oh man. Like <laugh> what kinda real estate investors like,

Charles:
Just like anything that you’ve seen. I imagine you turned down a ton of deals people partner with you, people want like just in general it could be an any kind asset class over anything that you’ve done in your career. Like what’s something you might see that comes up and comes up. You know, a couple points. It could be anything specifically.

Meg:
Yeah. I mean I made a lot of those mistakes in the very beginning when I just didn’t know what I was doing. I mean, I think you know, I kind of learned the school of hard knocks, but I think like underlying people do tend to get excited about real estate and projects and neighborhoods and things. And I think that it’s really, you really like to be a steadfast investor and make strong returns over a long period of time and not just get lucky by compressing cap rates or Nashville being a super hot market the last five years that you have to be really diligent in looking at data. And we always talk about being data driven, but I tend to be really unemotional in terms of the approach I take with looking at the information and trying to, you know, I mean you can spend a lot of time on a deal and you have to be able to walk away if the numbers just don’t work, you know, and that’s something we’ve become pretty utilitarian about.

Meg:
And I think I’ve seen people you know, I just get pitch things and I’m just like, this just doesn’t make sense. And it just amazes me how far people get down the line or you know, how much people are willing to pay for land and I’m going okay, you’re paying that all that’s happened since, you know, you’re looking at a deal. All that’s happened in the last six months or years is that construction costs have increased by 15 to 20%, but now the sellers want 20% more for your land. And you have to look at that and really go, okay, can this market, it’s not like renters are just gonna be like, okay, I’ll just pay 20% more now. Yeah. Cause we have so much less jobs with pandemic. It just doesn’t make sense. You have to like really look at the numbers. And so when we do a deal, we’re looking at a lot of the demographics that are surrounding it and not just doing what we’ve done because we’ve done it, you know?

Meg:
And so I think being not being data driven enough is a common mistake. I think. I mean, I think it goes towards different if you’re looking at it from the investor side or you’re looking at it from the sponsor side, but I think yeah, partnering with the wrong people. Don’t don’t partner with friends <laugh> so that’s fine. I think, gosh, there’s been, there’s been a few, but I think just doing the wrong deal, getting in at the wrong basis is always just a, a basic and one thing I see younger sponsors or younger developers make the mistake of is, is, and I’ve made this mistake too, is getting paying too much for debt. And you know, there’s a lot of these, especially if you’re just starting out and you’re trying to like flip a home or something like that, it’s like, you know, it’s easy to get into those situations where you’re, you know, it’s like, it’s what do they call those lender? Like shark, you know, like shark lending or something like that. Like I see a lot of people kind of get into loans and then once you’re in it you’re really screwed until you can get out of it. So that’s a big, you know, watching carry costs and not project managing to manage. That is a big problem.

Charles:
Yeah. Walking away is one thing you said earlier is much more difficult than it sounds because after the more time you involve in a deal, it’s just one of those things emotionally that you have to, but you have to be able to have that discipline to, you know, to cut and walk and go to your next deal. So, but yeah,

Meg:
My, my solution for that is I just, we have a very strong pipeline and we do usually around 10 deals at once. And so, you know, if you have a, I think that’s where people make the mistake is they get, they only do one deal at a time. They get fixated on that. And then, then it’s. So that’s how we kind of mitigate. We have a lot going on at once.

Charles:
So as as we’re finishing up here, Mike, what do you think are the main factors that have contributed to your success over the years?

Meg:
I get asked this and I think it changes, but I think generally I, I’ve always done a lot of outreach and I cold called I still cold call people for, you know, I’m raising a fund, my second fund now. And I think that skill set is gone like wasted a lot in the next generation. And you talk and, you know, I listen to a great podcast called how I built this with guy,

Charles:
Guy, Ross,

Meg:
All the, all those entrepreneurs, all of them like cold, like cold call or like reached a lot of people that are, are very successful, have done like door to door sales or some, you know, something that requires a lot of outreach. And a lot of, you know, it’s scary, but you kind of get over that hurdle of getting out there and putting yourself out there. So I think that’s definitely been, I do a lot of, I’ve done a lot of outreach and gone to conferences and things like that. So that’s always, I think key to being successful in whatever you’re doing is just being willing to, you know, constantly network and put yourself out there. And and then I think perseverance is a big one. I mean, I’ve had, I always tell a story of one of my very first deals to my team when anyone, you know, we do our, our retreats and when a new one starts, but this deal was totally screwed and it was my first deal.

Meg:
And I learned all those bad lessons on that deal. And we literally just sold it for, I think it was like a 45% IRR and a great equity, multiple total home run. We sold it for way more than anyone thought. So that took, you know, five years of just perseverance. And you, you, you can walk away if it’s a bad deal, but I was already in, I already had my money in, so I had to figure it out. So I think persevering is something that is a common theme of what I say, which is, seems generic, but it just whatever you’re doing, you know, really having the gut to push through and, and really get something done. And then I’m just very, I’m very active. I do a lot in one day. I think a lot of people underutilize themselves in terms of what you can accomplish in a day.

Meg:
And you know, I wake up very early. I set a lot of goals for myself. At the beginning of the year, I set all my goals and I fill my day with productive activity that works towards those, whether it’s, you know, my work or my husband or my philanthropic efforts or whatever you care about. I think, I don’t know. I don’t watch television. I read a lot. I don’t, I don’t spend a lot of time being unproductive. And I think that makes me really happy and it’s definitely contributed to the success of the company.

Charles:
Awesome. Awesome. So how can our listeners learn more about you and your business Meg?

Meg:
So we keep we try to keep everyone pretty updated on LinkedIn in, in hand Instagram. So CA developments that Instagram handle, but it also goes through the CA south LinkedIn, and also my page, me Epstein. So we try to, you know, keep people pretty abreast of what we’re doing that way.

Charles:
Okay. Well, thank you so much for coming on. I’ll put those links into our show notes and looking forward to connecting with you in the near future.

Meg:
Thank you very much,

Charles:
Bye bye.

Charles:
Hi guys! It’s Charles from the Global Investors Podcast. I hope you enjoyed the show. If you’re interested in get involved with real estate, but you don’t know where to begin, set up a free 30 minute strategy call with me at schedulecharles.com. That’s schedulecharles.com. Thank you.

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About Meg Epstein

Born in California, but today calls Nashville, Tennessee home, real estate developer Meg Epstein has over a decade of experience creating efficient, modern lifestyles for people where it matters most: their homes and neighborhoods. Developing and establishing spaces that support whole living and simplify home and work life for individuals is a personal passion of hers.

To that end, Meg founded CA South in 2016 with the idea of bringing to Nashville her sense of design and style of building honed from her days constructing in California. Meg quickly recognized the unique undersupply of residential condos in this market and began by being focused on this asset class. As CA South raised its first dedicated fund in early 2019, the firm expanded beyond residential condos to include multifamily mixed-use, industrial and office projects, as well as opportunity zone funds. Meg offers unparalleled expertise and resources to real estate investors, developers, and strategic partners. Over the course of her career, she’s been involved in the development and construction of over 1 million square feet of residential and commercial real estate, representing over $780 million to date. Meg is a licensed Commercial Contractor, licensed Residential Contractor, CCIM candidate, and licensed real estate agent; she also keeps a private pilot’s license and bareboat charter sailing certification.

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