GI230: Commercial Real Estate Development with Shane Melanson

GI230: Commercial Real Estate Development with Shane Melanson

Shane Melanson is a commercial real estate developer based in Calgary, Alberta, and has completed over $100M in construction projects across Canada, with a focus on townhouse rentals.

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Transcript:

Announcer:
Welcome to the Global Investor Podcast, a show that focuses on helping foreign investors enter the lucrative US real estate market. Host Charles Carillo combines 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:
Welcome to another episode of the Global Investors Podcast; I’m your host Charles Carillo. Today we have Shane Melanson. He is a commercial real estate developer based in Calgary, Alberta, and has completed over $100M in construction projects across Canada, with a focus on townhouse rentals. So thank you so much for being on the show today, Shane.

Shane:
You bet. Good to be here, Charles.

Charles:
So give us a little background on yourself prior to getting involved with commercial real estate and development.

Shane:
Yeah, I guess just, just kind of how I got into real estate, if you will. I mean, I’m from a smaller town, white Cord Alberta. Both my parents were teachers, and I initially thought I was gonna get into oil and gas. That was kind of the, the path to making money. That was kind of what I was focused on when I was younger. And came to Calgary in 96, went to U of C, university of Calgary, got an economics degree, and with a concentration in applied energy and a, and a minor management. So I was, I was really focused on getting into oil and gas. That was kind of where, where I thought I would end up. But in oh 3, 0 4, there wasn’t much in the way of jobs. So I ended up actually at the City of Calgary and got into assessment that was like appraisals assessment.

Shane:
And that was kind of my introduction into real estate. And what initially happened was I would get tasked with looking at houses that sold the same in the same year twice. And what I was focused on was like, is were, were they fraudulent or what was going on? And really what, what it was was investors buying and flipping. Right. And that was something that was kind of new to me. And so I, I remember going out for lunch with one of the kind of senior assessors, and I just asked them like, what, what was this? Like, what was going on? And he kind of explained it to me and I thought, well, like some of these guys must have making a hundred thousand dollars, right? Because I’d see the, the sale prices anywhere from a hundred to 250,000. I didn’t really understand that you had to put, you know, how much went into it.

Shane:
But that was kind of my introduction into investing. And so I slowly got into it. In 2006, I moved over to commercial finance at Sun Life. And so I was working on larger projects to understand how people bought and sold, you know, five, 10, $20 million commercial properties. And it was the first time that I’d seen a syndication. I still remember there was these two individuals that were, that were essentially buying it was a strip retail, and I think they needed, I think it was like, let’s say it was 10 or $12 million and they were putting in $3 million of equity. And I was thinking like, how did they come up with it? But they had raised about 75% of it from, you know, limited partners. And so they explained, you know, and I just peppered them for like two hours. And and so that was kind of my introduction into syndications.

Shane:
And anyways, we can kind of jump off wherever you want. But that was, that’s, that was kind of how I, I went from res to commercial. And then my father-in-Law, who’s a big developer, they’ve got a publicly traded company. He kind of took me outta his wing and then showed me, you know, how all the pieces fit together. ’cause It’s, it’s one thing to see things kind of piece by piece, but it’s very different when you, when you get behind the curtains and you see how a deal is actually put together. Yeah. So yeah,

Charles:
Especially a development project. There’s so many moving pieces there and between dealing with cities and government and then everybody else that goes with it. Yeah,

Shane:
I mean, development, like, I started off doing kind of value add, which is probably what most investors, you know, focus on, if you will. And then we bought mortgages. I was very op, I was very opportunistic when I started. I wasn’t very strategic. It was just really like, where could we make money? And that was good and bad, but that led me down to 1,150 acre mobile home community that we developed. And then we went into industrial, like light industrial development, retail development, which I still do, but I’m not a, a fan of today. And then over the past three years, I’ve been really focused on built to rent for in townhouses, right. Anywhere from kind of 20 to a hundred and some units. So,

Charles:
So yeah. That’s What about the getting to is that about your current business? So your current investment criteria is really working with those townhouse communities. I mean, what else do you guys focus on other than townhouse communities? Or is that really your primary focus?

Shane:
It’s my focus right now. I like, like I mentioned, I, I have two retail projects that are ground up developments. One with McDonald’s, another with a Wendy’s and a gas bar. And, you know, we’re talking to Tesla and, and like in for a, an electrical station. But I find those deals to be pretty skinny. Construction costs are a lot higher, even if you get the land for, you know, a pretty reasonable price. I, I’m just finding it’s harder and harder for retail tenants to pay the rents and as a developer to, to make the numbers make sense you know, at the end of it. So, used to be when, you know, when I started in kind of 2016 doing these commercial projects retail looked pretty nice today. That’s maybe that’s just in our market or, or my perspective, but it’s, it’s pretty challenging on the townhouse side. It’s, and it’s very different, right? Because you’re in the US And so, like how we get our construction financing is very it’s much different than building or developing in the us. And I’m not gonna pretend to be an expert in the US ’cause I haven’t done developments down there. I have bought and sold, so I understand kind of, you know, the, the nuances of commercial financing in in the us But yeah, it’s, it’s very different. And we can, we can go into it if, if you like.

Charles:
Yeah. Give us a, like, just, yeah. That, that’s one thing. Give us a little breakdown of some of the main differences, let’s say, between financing for example, but commercial property investing as you’ve seen in the US or heard about, but really what, what happens in the United States in, in Canada?

Shane:
Yeah, so one of the biggest things would be in Canada, we are guaranteeing our, our loans, right? Like to get a non recourse loan, you’d probably be 50% loan to value, maybe 55%. Yeah. Every development, I would imagine in the US as well, you’re going to be, you know, guaranteeing just because it’s the highest risk. And so banks really wanna make sure that, that they can hold your feet to the fire. From that perspective, it would be similar. But then on your takeout financing, the banks continually want that, that recourse. And so leverage amounts, I don’t know if it would be that dissimilar. I mean, one thing I will say is CMHC, which is kind of like our government body, which would be maybe like a HUD or a Fannie or Freddie down in the us, they are really encouraging new rental product, right?

Shane:
Because there’s, there’s a real lack. And so depending on the market you’re in, they will entice you by going as high as 95% loan to cost, sorry, not loan to value provided you hit, you know, a debt cover ratio of one one. And, and so they’re CMHC is really encouraging developers to, to build rental product because in markets like Vancouver, Toronto, which are larger and developers can usually build and sell developers are, are, are, they can make a lot more money building to sell condos, for example, than they will for rental product. In my market in Calgary, it makes more sense, at least for me to do rental. And I just don’t have the skillset of building for, for sale. So that’s kind of why I’ve shy away from it.

Charles:
Why do you think commercial real estate might be a better investment strategy versus residential for many investors? Because there’s, you’re dealing a lot with residential, you’re obviously doing development for it, but you, you know, you work a lot as well on commercial. I mean, what, what kind of investor is more, should be more focused on one versus the other in your experience?

Shane:
I mean, that, that’s a good question because I, I, I literally just did this on my podcast last week where I kind of outlined like 10 of the lessons that I learned. And I, I used to have kind of like very narrow focuses on, okay, like commercials the BA light industrial is the best or multi-family value add. And, and the reality is like, it really depends on the, the, where you are in the mark market cycle, what your experience is. And so for me, one of the big things that I focus on is like, where do I have a competitive advantage, right? And so I think the average person, if you’re just like, so I would, I would take a step back and say, are you an active or passive investor? If you’re a passive investor, then you can pick and choose, depending on your risk profile, what you understand who you’re dealing with.

Shane:
I, I would kind of ask those type of questions. But let’s pretend that you are a, an active investor. I would really be asking the question like, why do you have this unique or competitive advantage over everybody else in the market? And so for me right now, because I’m a partner in a construction company and we build 300 plus town homes a year, like I know it pretty well, and I’m going to have an advantage over someone that is just a developer or someone that is just a builder, right? So my partner and I like, by, by bringing those two skillset sets together and me really having you know, the finance and underwriting and, and some development experience, it works to our advantage, if you will. Right? And so I think that that’s key distinction. I mean, there is industrial developers here that have built 3 million square feet, so they know things that I’m not going to know, turning radiuss, you know, bay depths and, and like, you know, cross dock and, you know, all the different things that, because they understand who their tenant is and what that tenant wants. Mm-Hmm. <Affirmative> just like when you build 300 units a year and you start walking in with tenants and you start to understand like, who’s the demographic? What are they looking for? What do they want? You just start to, to get a sensitivity for that. And I think that’s really where, you know, it’s, it’s little things, but they make a big difference. And every project we learn something on.

Charles:
Interesting, interesting. So as a developer, and I mean, how are you, how would you suggest and how do you protect against any type of downturn in the market?

Shane:
I mean, like, one of the biggest things that we try to protect against is like, we run several different sensitivities, right? So o one thing that we’re able to do is really focus on or control our costs, right? I would say that’s probably one of the biggest risks, interest rate, risk. I mean, right now, I think the biggest thing you can do is just have more equity than you think you’re gonna require. One of my contemporaries or whatever you want to call it, he said like, double the length and double the costs, and you’ll like to really stress test it. I, I feel, when I see most proformas and I talk to newer developers, someone that hasn’t gone through a cycle or hasn’t had their head kicked in by a, a project or two, I would say their, their base case, it should be the most optimistic case.

Shane:
And, and they’re, they don’t even run pessimistic. Like they, they’re not projecting like rents dropping by a hundred or 200 a month. They’re not projecting rent, you know, interest rates to go up by one or 2%, or even 3%. I mean, and, and I was guilty of this even on my last retail project. You know, we were building when interest rates were two point a half percent, I put them in at four thinking I was being conservative. Well, now they’re six and a half. Yeah. Right? So that proforma is just hammered. One of the nice things is we’ve got partners with deep pockets and we basically said, look, this is still a good project, unfortunately, what we thought we were gonna get in terms of debt, it, it, it hasn’t panned out. And so, yeah, I think that those are, you know, just, just having more conservative debt levels being a little bit more practical on what your rents are going to be. Those are some of the things that we look at in terms of like how we’re hedging against risk. So

Charles:
With your strategy with building townhouses it sounds like your strategy is obviously building them, but also you’re gonna refinance them and you’re gonna hold them for what is really your term that you would tell investors or that you usually try to tell investors is your business plan for hold after that?

Shane:
So this is kind of evolving for us in the sense that number one, when you do CMHC, you’re really not doing a refi at the end because you’re getting 95% of cost, like the construction terms out, if that makes sense, right? Yeah. It’s, it’s not like your traditional, like when I was building commercial, for example, you go in with your construction financing at, call it 75% loan to cost, and then the value on the backend, you’re almost able to pull your equity out at, you know, once it’s complete in a multifamily or townhouse project, you’re really kind of, you’re going in with skinny equity, and the plan is that you’re not gonna need to in increase that equity. I’ve seen some developers that underestimate and then they get to the end and the bank actually says, you know what? Your rents aren’t where they said they were going to be.

Shane:
Your costs are higher, interest rates are higher, you’ve gotta put a million, $2 million of, of equity into this project. And so those guys get squeezed hard. So that kind of deals with the, the takeout as it relates to what’s our plan or our exit, if you will. It depends on a few things. Right? Now, if I raise money from outside investors, most of my investors actually are looking to turn these properties. So they’re, they’re happy if we build it, stabilize it, and you know, and, and sell it. That’s not really what I want to do, but it’s not entirely my decision, if you will. Right? So if I’ve got five investors in a deal and, and two or three of ’em are saying, Hey, Shane, we, you know, we’re okay if you hold it, but our preference would be to capitalize on where things are at, can, can we sell it?

Shane:
Then we will certainly explore those options. Lately, I’ve been primarily trying to do deals without investors. So if I can do the deal without a limited partner, I will more control less people I have to answer to, and obviously more upside, more profit. And so we are starting to do that, and then I can do whatever I want <laugh>, if that makes sense, <laugh>, not, not, not to, not to be, you know, like just all about shame type of thing. But that’s just the reality, right? I mean, if you have other investors, then you have to take into account what they want. But if it’s your project, then you can do whatever the hell you want. And, and that is kind of a liberating feeling, if you will. Because I’ve, I’ve been, I’ve raised a lot of money over the past, call it since 2008. And only recently have I started to do some projects just on my own. And there’s no perfect or one way to do it. It’s just, you know, having that flexibility to do, to do either or.

Charles:
So, over this say 15 years of raising capital, what are some of the most effective ways that you have utilized for growing your investor base?

Shane:
Well, I think first and foremost is putting our investors first. And I know that that sounds trite and that everybody says that, but I can tell you there have been projects that we could have as the general partnership, like per the, per the GPLP agreement. Like, we were entitled to certain things, but we just did not take them. Yeah. Because we said that the investors would get a certain return, and if we didn’t hit that return, then as a gp, I didn’t feel that I earned it, frankly, just, you know and, and so I’ve, I’ve had other situations where, you know, we worked for free for three years mm-Hmm, <affirmative>, right? To make a project pencil out. And so all of these projects and deals that maybe don’t go the way that, that you want them to, when your investors see that you’ve got their back and that you’re gonna work through it.

Shane:
I mean, you just think of covid, you think of, you know, through oh eight, like there’s been, like, markets are not always like a straight line up into the right. They, they, they’ve got a lot of turbulence. You know, I’ve been in projects where I had to sell my house in order to inject more equity. ’cause I didn’t wanna go back to my investors. So there’s, there’s these circumstances and I don’t go around, you know, telling my investors, this is what I did to, to help you, but they find out and they know that they can trust you. And so that in and of itself, I think really establishes that kind of credibility and trust. And so now when I go out, and then obviously, you know, when you’ve got a track record and you’ve got full terms on, on deals they want to come into your projects.

Shane:
And so I can speak to investors, I understand their concerns. You know, I’ve probably had 500 conversations, maybe, maybe thou I don’t even know how many, right? But the more you have those conversations, you understand, what are they looking for? What’s the question behind the question, right? Because they might ask a question, and I used to think like, okay, so I’ll just answer the question. But the truth is, they really were getting at something else. And so I’m always trying to figure out like, what is it that they really want to know and understand? And, and let’s have a conversation around that so we’re not dancing around for frigging 30 minutes and, and find out that fundamentally you wanna know X, Y, and Z. Like, let’s just get right to that. And and I have no, like, I, I think one of the things I’m focused on is I will tell them the risks, and I’ll tell most people, like, I’ll give you an example.

Shane:
So I’ve got a few individuals that I kind of have an idea of how much liquidity they have. Mm-Hmm. <affirmative>. And they’re asking like, okay, so how much can I put into the deal? Like, what’s your minimum, what’s your maximum? Right? You hear all these kind of questions. And generally what I’ll do is I, I’ll say like, look, most people come in for, let’s just pick a number, two 50 or 500, but I might have two or three deals this year. And so if you put in two 50, and that’s kind of like everything that you’ve got, the next time I have an opportunity, A, you’re not gonna be able to participate. B, someone else might come along with a better deal that you wanna put some money into, and you’re gonna be and you’re gonna wanna pull money outta mine to put into theirs.

Shane:
And so I just, I just try to have like real honest conversations where, where it’s like, this isn’t the only time you’re gonna see a deal from either me or someone else. So don’t, don’t put everything into this for lots of reasons because I don’t want that responsibility and, and there is a risk, right? So I think those just like really transparent conversations. I think it helps them get a sense as to like, I’m not just trying to, you know, put everything in, into my deal and, and I’m doing this for the long term, right? I plan to do this for the next 25 years. So

Charles:
Yeah, I, I totally, my, my first investor, this brings back memories. I had my first pass investor several years back, and he gave me a number they wanted to invest. And then he came back like a week later, a few days later, whatever it was, and doubled that number. And I was walking with my now wife now, and I was like, telling, I’m telling my wife, I was like, you know what? I’m just gonna tell, I’m like, he’s never done this before. I’m gonna tell him I won’t accept that. And we got on a call or it was like by, it was by direct message or something like this. Yeah. And at the same time on it, we both came to the same realization at the same time that he was saying the same thing. ’cause He had reviewed it more. And, and I was, you know, it’s just, you just don’t feel comfortable taking that from, it’s like, listen, you, you don’t really understand exactly how the whole thing works.

Charles:
You know what I mean? So it’s something that’s like, you know, it’s important for you to understand the whole thing of how this whole process works, because one of the things I hate most about Syndicators is that when they advertise deals, they tell you about all this to the cash distributions and everything. It’s like an annuity almost, and it’s not, you know what I mean? It’s a business. And anybody that went through, you know, I guess oh eight or anything with investors, but we went through covid with investors and it was like, you know, what are you supposed to tell ’em? You know what I mean? You’re like, Hey, we have to, we’re pausing this deal here, or we’re cutting this one in half. I’m distributions because you’re like, I have no idea. Nothing’s not performing right now, but we don’t know. Everybody tells me the world’s ending. So it’s like, you know, it’s just one of those things that you’re like, this is what we have to do. So a lot of hard conversations you have to have with investors, but if you, you know, but it also, you wanna sleep at night too.

Shane:
Well, I think that that’s, that, that’s a, that’s a huge part is just knowing that real estate is tough, right? Yeah. And, and there is risk. And, and I feel that oftentimes if you’re new, like, it’s just like sales, right? If, if all you ever talk about is the, you know, the great things that are going to happen and what I call like blue sky thinking, Mm-Hmm, <affirmative>, anybody that’s, that’s been in business or been around for, for any period of time, and that has like, real significant money. Like when I’m raising money from people that might have 50, a hundred, 200 million, like they, they are, they already, they already know the good stuff. They wanna know, like, are you prepared to talk about like the tough times and the things that are going to possibly derail the deal, right? Because they’re more on wealth preservation and risk management.

Shane:
And so they’re like, like, have you even thought through what are the negatives that could, that could kill you in this deal? Right? Like, how, how do you stay alive? And and I think, yeah, to, to your point like, and the fact that you didn’t take, you know, all the investors’ money. Like that’s, that, that’s huge, right? Because nine outta 10 syndicators that, you know, they would think that that’s a win. But two years down the road, they might realize oh, I wish I wouldn’t have taken all that in, in investors’ capital because of Covid or whatever it happens to be. So

Charles:
Yeah, yeah, yeah. No, so, and for future deals, whatever it might be, but really it’s, it’s just, you know, you just have to act on, you know, as a respect as you’re working with a partner that you’re gonna be with for several years. You know what I mean?

Charles:
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Charles:
So one thing you mentioned earlier on, which I wanna drill down now is you mentioned that when you started in real estate, you were kind of scattered, let’s just say. And you really, you know, focusing and getting clear on principles has really helped me become successful in what I do. And how has it helped you and like, propelled your business into where it is now?

Shane:
I think the biggest thing for me is just the clarity and focus. You can really become an expert versus just like, constantly learning. Like you’re, you’re, you’re going to learn. But I’d rather learn like nuances versus big expensive lessons, right? Like, I don’t, I don’t wanna have to continually figure these things out as I’m going. And, and like I tell a lot of clients, like, so on the construction side of our business we’ll get new developers coming through and oftentimes I’ll say, you know, look, this deal, this, the one that you’re looking at right now, it’s mar like marginally. Okay, right? Like, I could probably make it work ’cause I’ve done 10 of them. But I would go into it with the mindset that you’re probably going to break even, or you might even lose a bit of money. So my suggestion would be like, are you planning to do 10 of these or are you just trying to do one?

Shane:
Because if you’re doing one, it it, frankly, it may not be worth it, and that’s not what they want to hear, but it’s the truth because they just don’t know what they don’t know. And then, and it’s really hard to tell someone, okay, well the city could do this and this could happen, and you know, the neighbor down the street could, you know, roadblock you or that power pole in behind might cost, you know, a hundred thousand dollars to bury or whatever it happens to be. Like, there, there’s just so many variables that happen in a development or the inverts when you tie into the city, they said they were at this, but they’re actually much lower now. You need a sump or you need to tie in over here, or, or you need onsite storm and there’s these like unknowns that, that it’s like the way it should be and the way it is, right?

Shane:
<Laugh> the way it should be is the plans are perfect and everybody does exactly what they’re supposed to. And a carpenter shows up when he’s supposed to, and everybody, you know, holds hands and they do things properly. But guess what, that doesn’t always happen, right? People don’t show up, people get, you know, like they quit. They, they do crappy work, whatever it happens to be. And so you have to like, as, as a general contractor, as a developer, you’re just problem solving. And so you just almost have to embrace that and know that, you know, like, do I, do I even want to do this? I’ve come to the realization, I like it. And, and so that’s okay, but I, I also have very clear expectations of what I’m getting into. And so if I was building offices, for example, right now, I wouldn’t know what to expect on the construction side of things and what the tenant wants.

Shane:
And so, to your point, knowing like try to minimize as many of those variables as possible, I think, and, and that that does Charlie Munger say like wisdom is, is like not having to solve problems, but avoiding them on the, on the outset, right? So if you can, if you can avoid as many problems on day one because you, you have a pretty good idea ’cause you’ve done it 10 times, I think that that’s, that that’s really the strategy that I’m focused on right now versus saying, oh, okay, well, you know, just ’cause I have the skillset, maybe I should apply it over here. Maybe I should go over here. And that’s another reason why I even stay as close to home as possible. ’cause As soon as I start going further away from Calgary I just know that I’m competing with someone that’s been in that market for 10 or 15 or 20 years. And so when come someone comes into my market and they don’t know they’re gonna learn some lessons. And, and that’s just the reality. Just like I know if I go into their market, I’m gonna learn some lessons. So if I’m gonna go to that market, I better be kind of thinking, you know, I wanna be here for the next 20 years.

Charles:
Yeah, that’s one of those things that doesn’t really show up in the underwriting, which I’ve seen if I passively invest in a deal or if we’re partnering with an operator on the ground, is seeing exactly how, what kind of, where their base of operations is, where their boots on the ground is, where they focus. And you can’t see it from a spreadsheet. It’s like the story, the narrative of that deal. But the thing that was that it’s super important and people don’t look at that. They’re like, oh, I see rent comps over here. Like, and like, they don’t move like 80 miles from where they are, you know what I mean? Like, this is like they, everybody’s here, you know what I mean? So it’s like this is what they focus on and that’s like, you can’t get that with a lot of different operators and developers. So super important stuff.

Shane:
Yeah. And, and just to touch on that, like when, when we were going into the US into Dallas and Houston to buy class A apartments, the market was like, you could be across the street and it could be a different, you know, like demographic and different market rents and different risk profile and different like one of the things we, we saw in Houston specifically was like, what school district is it in? Meaning what is the, like how good is the football team? What’s the program like? Right? And, and some renters like in affluent communities would like rent just so that they could have an address that their kid could go and play at this high school. And, and it was com you know, it was very foreign to, to me being here in Canada, right? That wasn’t as something that I’d really seen. But yeah, and, and a local would know that. But if you are, you know, flying in four hours and, and you’re starting to figure all this out, you start to realize there’s probably a lot of things I don’t know about this market that I, I gotta get up to speed on.

Charles:
Yeah, that’s a, that’s a great example. Great example. So as we wrap up here, what are some common mistakes you’ve seen, say, new or even experienced commercial real estate investors make, whether it’s US or Canada?

Shane:
I think the, the mistakes that I see are probably from a strategic standpoint I would say that they like, so this would be like just not having clarity or focus, right? Another one is partnering with people that have like non complimentary skills. And, and not having those kind of difficult conversations upfront. Won’t get into the details, but I remember like, I was at a, a stage where I was going to partner up with, with someone, and I sent them kind of like a two page outline of okay, roles and responsibilities who’s making decisions, how are decisions being made? What happens if there’s a stale made, like, all the things that I could think of, because I’d already been at it for 10 years. And what was interesting is the individual didn’t even respond to my email. And, and I had a friend that partnered with this person and is now going through some very difficult times.

Shane:
I’ll just put it that way. Yeah. And, and it’s because I don’t think that they ever addressed like, what happens if, and people don’t wanna think about that. They don’t want to talk about it. They wanna think, and, and I was like this ’cause I, so that’s why I can kind of speak from experience is that I you focus on all the great things that you can do together that everybody is getting along, that we’re friends, that money isn’t gonna get between us, that we can come to a resolution. And the reality is, I, I have found that there’s generally an alpha in every deal. And, and by that I mean like someone that, that has the ultimate hammer to make the decision. And it could be on certain avenues. Like, so my partner now, I know that like, I know the financing and the numbers, he knows the kind of the development and the construction side of things.

Shane:
So I don’t try to like interfere over here. Like I understand what’s going on and we have good conversations, but the end of the day I’m not gonna jump into his swim lane and start making key decisions just like he’s not gonna come over. And, and so there’s that mutual respect, but that is not common and it’s, and it’s pretty hard to find. I think. I think the other challenge that I, or mistake that I see new investors, they just don’t they don’t see enough deals. So, you know, they, I I used to help newer commercial real estate investors get into their first projects. And so they would send me deals that they’re looking at and I, I kind of felt like a broken record where I was kind of, you know, reigning on their parade. But frequently I would just, I would point out all the things that I hated about the, the deal, how small the market is, how small the property is, the, the, you know, like if everything works out well, you’re only going to take this from this value to this value.

Shane:
And like, what’s the risk to getting from point A to point B and does it make sense and why are you doing this deal? And you know, like just really trying to help them think it through. And it would be like, my wife and I are looking at buying a new house. And so it’s, you know, kind of, I haven’t looked at houses in six years. And so like, I had to like reset my brain like, what is one and a half get you today? What does two get you? Like all these, like the numbers and the bandwidth. ’cause I had this paradigm from six years ago, well, what a $2 million house is and it’s very different than what it’s <laugh>, you know, today. And so like I’m like, okay, guess what? Like, let’s spend the next six months and go look at every frigging house because I wanna know like what good value is.

Shane:
And, and I don’t know what that is today, right? If you show me one house and, and you say that that’s the price, I kind of either have to accept it or reject it. But if I go see a hundred, then it’s a very different, you know, story. Just like if someone’s going to buy an apartment building or a retail strip or light industrial, like go look at a hundred, go talk to a bunch of tenants. Go like, immerse yourself in it, because guess what, you know, if you’re gonna put half a million dollars in and it took you three years to save that, why wouldn’t you take six months and do everything you could to understand what you’re getting into versus taking a broker’s pro forma at face value and, and just crossing your fingers that it’s, that it’s true. So I would say that those are probably some of the things that I would think

Charles:
About. Yeah, those are some great ones. I love the one about the tenants, because that’s something that, I only hear that from experienced investors. You never hear like newbies like, oh, I talked to all the tenants and, you know, all this kind of stuff. ’cause Usually there’s a, there’s a problem that they have right when they’re bringing this to you. Oh yeah. But when you talk to tenants, then you’re really getting the scoop on what’s happening, right? There’s no shiny brochures. They’re like, ready to move out for one reason or another, or they just moved in or they’re mad about something and they’ll tell you about it and they’ll, as long as you wanna listen. But a lot of great information there, Shane. So how can our listeners learn more about you, your business and your podcast?

Shane:
Yeah, I think my, my website, so just, my name’s Shane Melanson, M-E-L-A-N-S-O-N shane melanson.com. And I think there’s links to my, my my book and my podcast and all that kind of stuff. And, and you can, you know, I guess learn a little bit more about raising capital or, or real estate developments there, yeah,

Charles:
A lot of great information there. And then also his club syndication book there, how the Wealthy Raise Capital and invest in commercial real estate. So a lot of great information. Thank you so much for coming on today.

Shane:
Thank you Charles.

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 Shane Melanson

Shane Melanson is a partner in the construction company, Kalamoir, and a commercial real estate developer based in Calgary, AB.  He’s completed over $100M in construction projects across Canada, with a focus on townhouse rentals.  Shane is the author of Club Syndication: How the Wealthy Raise Capital and Invest in Commercial Real Estate, he hosts The Game, For Real Estate Developers Podcast, and is an Advisor to clients entering the world of commercial real estate. When he is not running his real estate business, Shane enjoys mountain biking, golfing, Jiu Jitsu, and time with his wife and 3 children.

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