Dave Codrea has over 20 years of experience in real estate investing, beginning with acquiring rental homes in Pennsylvania and continuing through a career in financial consulting.
Dave co-founded Greenleaf Capital in 2008, an Atlanta-based real estate investment firm. Since then, Dave has led over 125 buy-side transactions and nearly 55 exits. Greenleaf has acquired over 4,000 multi-family units and 2 million sq ft of medical, industrial, and net lease assets across GA, TN, NC, and SC.
Charles:
Welcome to another episode of the Global Investors Podcast; I’m your host, Charles Carillo. Today, we have Dave Codrea. He has over 20 years of experience in real estate investing, beginning with acquiring rental homes in Pennsylvania and continuing through a career in financial consulting. Dave co-founded Greenleaf Capital in 2008, an Atlanta-based real estate investment firm. Since then, Dave has led over 125 buy-side transactions and nearly 55 exits. Greenleaf has acquired over 4,000 multi-family units and 2 million sq ft of medical, industrial, and net lease assets across GA, TN, NC, and SC. Thank you so much for being on the show!
Dave:
Hey, excited to be here. Thanks for having me. So you
Charles:
Have many decades of experience in real estate investing, and then you were also you know, doing financial consulting. Can you tell us a little bit about yourself, both personally and professionally prior to launching Greenleaf in 2008?
Dave:
Yeah, 20, I mean, 20 years kind of goes quickly, which is crazy
Dave:
<Laugh>. But 2008 was really kind of the middle of the, I guess probably the start of the great recession kind of mentality. And the south real estate prices were, were pretty cheap all over the south, and I was living in the northeast and I was like, man, I can buy a lot more if I just go to the southeast and the weather’s a little bit nicer. So moved down to Atlanta, I was like, I’ll just start, you know, there, there wasn’t like a, a massive macro strategy applied other than, you know, it’s a little bit warmer and stuff was cheaper so I could get in and be active and like actually get started at a meaningful level. You know, I lived in Washington DC for a while and prices were 20 x what they were in, you know, Georgia. So it was, you know the reality of like, Hey, I can come to Atlanta. I can get some stuff going right now. I can get some deals, I can get in the market and start working. And the south has always been, you know, very population growth oriented and easy to do business in. So it was a, it was a natural like, Hey, you wanna start a business? This is a great place to do it.
Charles:
I think when Peel throw around 2008, I became investing in multifamily in 2006. I’m originally from Connecticut, and it was something that 2008, I don’t think people understand if they weren’t in it, of what happened. And I bought my second property October 1st, 2008. And it was literally like a few weeks after Lehman went down, and it was literally like a month and a half before Bernie Madoff thing. It was like literally if you had the, if you weren’t worried about your blood pressure and you had like CNBC on or whatever, and you’re watching this thing, it was literally every half hour something was blowing up, you know, they stop. You know what it’s like I can’t remember. It’s like the mortgage company stops lending in these towns or in this, and like, somebody shut off like all of lending in this part and then Wachovia and this, like the whole thing, Washington Mutual, I mean the all, everything just like changed.
Charles:
It was, it was it was a bloodbath, you know what I mean? And people I was buying properties from are over the last couple years and, you know, agents completely outta the business by the time this happened. I mean, it was just such a, I mean, so for you starting a real estate investment firm, I didn’t know any better. I was just a few years outta college. But the thing though was that for people that were like, I mean, they, my people must have thought you, you know, people were crazy if they knew anything, what was happening? Yeah,
Dave:
Well, you know, this stuff was not like a, a sexy, exciting thing to be doing from like 2008 to 2013. A lot of the stuff was just pure train wrecks of deals that you were, you were looking at and being like, well, like, why would anyone ever even buy that thing? It’s like, well, you know, when things aren’t going well is a lot of the time when you should be getting in and trying to figure out what can I do here? So I really liked that, that view of it, you know, when I started, I, I like the physical building, like, what can we do to improve it? I could see that progress was being made, you know, it, a lot of these things are however you choose to, you know, lead your career and what you plan to get into me. I, I wanna be able to see like, what are the results? And for me, it was easy to see in real estate when it would get a basically burnt out, crappy building and fix it up and be like, wow, you know, this is someone’s home now. It’s nice. That was exciting. I, you know, felt good doing that. So that’s a lot of the reason why I got into it and why I wanted to be doing it. Did
Charles:
You have any kind of mentors or anything else that kind of assisted you with the whole process of buying properties? Or was it kind of just you just did it and see what happened? I mean,
Dave:
A lot of it was just kinda like, do it and see what happens, but along the way it’s kinda like you gotta sucker in some people to go try this experiment with you if you’re just getting started. So I was lucky enough, I had two friends that that started with, and they were willing to get their hands dirty and help figure stuff out and do a ton of the maintenance, rent collections, fixing laundry machines, doing all that stuff from day one. You know, we, we did everything. It was just us. So it was a fun way of doing it. But I was lucky enough, I had two other buddies that that said, Hey, we’ll, we’ll go, we’ll, we’ll do this with you. This sounds like fun <laugh>.
Charles:
Interesting. So can you give us kind of an overview of what you’re doing now? So like, what is your current investment criteria and strategy at Green Life Management and what are the asset classes? Because it’s pretty wide ranging. You’re not just on one asset class. I think there’s like three different asset classes and markets you guys focus on. Correct.
Dave:
Yeah. We, we have a, we have a good number of what I would call tenant types at this point. We have, you know, we can look at ’em as different asset classes, but a lot of times we’re buying a very similar building. For the most part, we invest solely in the southeast from a criteria. We are typically buying more suburban type assets. They’re almost always garden style with lots of parking, whether that’s an office building or an apartment, it’s gonna have a lot of parking. It’s gonna be one or two stories at the most, is really what we look at doing. We don’t wanna have a lot of common area that applies to office, that applies to retail, that applies to apartments. We don’t really do common area in like big amenity packages. We want to have like the most direct, affordable asset that we can buy.
Dave:
That’s really where we focus. A lot of what we’ve been doing lately is buying a really vacant single story office and converting it into, not necessarily like a specific asset type, but something that’s usable, right? We’ll take a 40,000 square foot essentially vacant office building that has a lot of parking, it has great access, has a lot of room. It’s one story. So it’s not anything crazy where to go deal with. And we’ll divide that into, call it eight suites. And sometimes those get built out into office. Sometimes they have a roll-up door where there’s more flex tenant in it, but we also have medical users that have it. We just built out a an afterschool center that’s in one of them. So it’s a bunch of different users, but the core of it is still really the same. We’re investing in the same geography because it’s, it’s really population growth oriented. We want a single story building, we want lots of parking, easy to get into, you know, those kind of core factors are all the same. And then over the years, we’ve just adjusted our leasing and build out teams to who can we find that can best occupy this space. So that’s really where we’re at now. And the bulk of the bulk of acquisitions we’re doing right now are more that more that four to 5,000 square foot tenant that that is operating the business out of it. Yeah,
Charles:
That’s a lot of great information. The other thing too, I found when you were explaining that is that you’re avoiding kind of that functional obsolescence, right? Because you can’t add most instances, you can’t add more parking. I mean, there’s a lot of, you know, they’ve already tried that over the years. If you have a property that’s built 30, 40, 50 years ago, you know what I mean? They’ve maxed that parking out, and that’s something you just can’t add easily. You know what I mean? And then or if all, and like you said the common area is easy access, stuff like that. Again, another thing that’s extremely expensive to change, to edit, to renovate, you know what I mean? And could really kill your numbers if you don’t have that. So you, it seems like you’ve really got it honed in of exactly what works for you guys.
Dave:
Yeah. And when you come up to a building for us, most time was like, Hey, there’s like 10 spots right here. You park in any one of those and just walk right in the door. Most of our stuff, we, a lot of stuff, if we’re buying old, one of them is really like old call centers. They have great parking ratios to total square foot numbers, right? So you’ve got four, five parking spots per thousand square feet. It is, the south people are driving everywhere here and yeah, there’s plenty of parking. So it makes it, it just removes one of those barriers. It’s like, Hey, I don’t wanna have to go into a, a parking garage and find a parking spot, then take an elevator over to this other, like, we don’t, we’re not doing any of that stuff. That’s like a different, that to me, that’s like a different world of operating on those assets.
Charles:
So when you’re buying these assets, you said a couple things that, you know, kinda turn a red light for me was that first of all they’re vacant, number one. Where are you buying ’em from? You’re buying ’em directly from a bank or, I mean, I imagine they’re from a bank or a previous REIT or something like this.
Dave:
Yeah, most of the time you know, most of the time we’re buying it from a pri prior real estate owner, but it could be, Hey, there was a tenant here for 20 years and then they left, or it was a business that owned the building and they’ve shifted gears, they’re doing something else, they’re moving to a bigger or different space. And then and then this space becomes available that we buy. Most of the deals that I target are, are really less than $20 million. So these are not big institutional products. The buildings are called 30 to 50,000 square feet. So a lot of times you have someone that was in there running one or two businesses and they’ve either sold that and, and moved or shifted gears of that business and this space becomes available. Yeah. And we don’t try and Dr. Buy like directly from people. We’re not like out cold calling, trying to drum that up. It’s just been much more effective for us if we, if we have a broker involved and, and everyone talks about broker commissions and the costs and all that stuff. Yes. But, but it enables us to actually move a little bit quicker when we know we have someone that wants to transact so we can buy something. So
Charles:
Once you, you’re buying a property, one of the things, or before you buy it, this is one thing that I, I, you know, because with, with multifamily, it’s pretty easy to sense the demand. Okay. You know what I mean? You can, you can go on a lot of different websites, you can figure out exactly what that demand is for the vintage, for the rent amounts that I need to hit, what other things are renting for everything like that. How are you how are you sensing demand before you monitoring these properties? And are you, when you are going and finding a tenant, is at that point that they’re telling you, I need 8,000 square feet, or are you already subdividing that and then finding tenants for whether it’s in office or whether it’s like a flex office industrial type situation?
Dave:
Yeah, so that, that demand forecasting when we have so many different types of tenants is, is definitely a challenge. We look at it first on the supply side. It, you just pull up any like, LoopNet and you’re like, okay, how many spaces are available for lease between two and 7,000 square feet in this little pocket? And a lot of times the answer is none. So it’s not like we need a, a huge demand of tenants. Like sometimes the supply is literally none, so we can add three or four and then there’s that amount of de you know, that’s a easy demand curve to, to figure out there. But we also go then on the, on the tenant rep side and, and reach out to tenant rep brokers that we, we are constantly speaking with. And a lot of times tenants have multiple locations.
Dave:
If you have like a lab corp or some training facilities or even afterschool care or autism centers, like these places all have multiple locations that they know they want to be in these rough areas. So a lot of those are direct conversations to make sure like, Hey, is there demand in this area for a, call it, you know, three to 7,000 square foot suite. And when we do, when we divide ’em up, we are trying to divide up based on like what walls and, and what support structures are in place. So we’re not really doing like a custom division. So that for us is most cost effective. That’s a big a, a big factor for us is being cost efficient upfront, where it’s like, these are the most efficient ways we can divide this building up. And then you may have a tenant that needs 4,500 square feet, but you got a 5,000 square foot space, you’re like, well ultimately we want, we wanna, we wanna make a deal and, and get things occupied. So we’ll, we’ll, we’ll just work to do that. They’ll have the 5,000 square foot space
Charles:
When you’re working with people and they want to expand into an area and you’re speaking directly to those business operators, those owners. Does is also work with like franchises, obviously you, you mentioned like, you know, medical chains, stuff like that, which that might be doing like I would think like a Quest diagnostics type thing, right?
Dave:
Oh, exactly. Quest or Lab Corp. Like those are, we have a lot of those locations and, and I mean, they’re really geographically specific of where they are and what the facility is that they need to be able to operate out of. One, you have to have a lot of parking just to get in and out. You know, they, they have drop offs. If you can help them have a secure drop off, that’s a, that’s a big benefit for them. Just makes their business easier. Roll up doors, help and, and how you outfit that. So there’s a lot that goes into, yeah, working with those types of tenants, but there’s a lot of franchise, I mean, personal fitness, pest control, these are all franchise mostly franchise models that are out there and rapidly growing. So
Charles:
When we’re talking about vacant office space, there’s been, I think buzz over the last couple years in regards to transforming office space into multifamily, which sounds great when I say it, but however, when you look at it or if anybody’s recently been in an office building, they’ll realize that it’s nowhere near the shell that’s required for multifamily, you know what I mean? Where you have no windows <laugh>, most of it, and you can’t just like, divide up and every time you’ve been in a place, I was in a, a hotel that was transformed from an old office a couple weeks back, it was very nicely done. However, you can definitely tell it’s, it’s nowhere near the same, you know what I mean? And it’s great that you’re transforming these spaces, but also I feel it’s a little bit unrealistic. Right. So can you tell us a little bit about the possibility of these properties ever being rezoned, the residential? Is that actually a feasible model or is it, if it had happened, are they just like all coming down to the ground and then being rebuilt?
Dave:
Yeah, it was, you know, couple points on that. Like the re the rezoning of stuff is hard. Like trying to say that you’re gonna take a, a piece of property in a city or an area and you’re gonna just rezone this one little piece of it. You know, if, if, if I’m a mayor or I’m running a city like that doesn’t make a lot of sense. Like, we already had a plan of what we wanted to see our city look like, and you’re gonna come in and try and just change that like, for just one part of it. Now, if you go in with like a whole master plan and work with the city on doing something like that, sure, I can see that, you know, I could see that happening, but it’s hard to just say like, Hey, I’m just gonna rezone this one thing and it’s not gonna be cohesive with what the, what the city structure is.
Dave:
That sounds like you’re fighting an uphill battle. And we don’t really, we’re not doing that at any of our assets. We’re keeping our most time keeping our zoning nets in place that allows for flexible use and doing something with it. But in the, in real estate in general, if we look at like, the bigger, the bigger issues going on in real estate where you have like very large office complexes that could be converted to something, or even vacant malls that could be converted to something, or old factories that are gonna be converted to something. Some of those are really neat projects. Those are just at a different, a different dollar scale than anything. You know, we’re working on a green leaf where you have, you know, just major redevelopment stuff that’s happened. Even like New York, like the Chelsea Pier stuff, or in Atlanta we have Pond City market, which is just a phenomenally cool project that they did that added, you know, hundreds of thousands square feet of retail apartments office all in one space. Very cool project. I like seeing that stuff. I dunno if I’d necessarily wanna sign on for a like a 15 year redevelopment play. So, but you know, we’re, yeah, we’re, we’re not looking to rezone any of our stuff. We like the zoning we have, we like the use it has, and that enables us to work with like a Lab Corp or a Quest diagnostics or training or pest control companies to get them in there. Yeah.
Charles:
And the other thing too is it’s not just office going to multifamily. I think that there’s issues, I think when people, I hear people talking about very cavalier talking about you know, motels or hotels going into multifamily and you’re like, hold on here. I mean, there is completely different, like plumbing, electrical, you know what I mean? Like, it is a, every time I speak to people and when I’ve spoken to contractors that’ve actually done it, they’re like the amount of like in, you know, infrastructure where like mechanicals, just the mechanicals that have to go into that, I mean, makes it very cost prohibitive. So when I hear that, I’m always a little hesitant about, you know, signing onto that project in the sense of like understanding what they’re doing, because I feel that a lot of it just doesn’t make sense.
Dave:
Yeah, I would agree with that. I, I, the only way I really see it making sense is if the building you’re talking about has some kind of historical significance or, or something about it that like, it’s in an amazing location or, or it’s just like an irreplaceable facade. Those kind of things where it’s like this, this is an iconic location, an asset, and it’s always going to have a use. There’s that, but the random office building that’s in like suburban somewhere, converting that to apartments, that’s not gonna happen. Or at least that would be my prediction. That’s not gonna happen. But the very cool stuff yeah, there’ll always be the thing I mentioned here in Atlanta, PON City market. I mean, it was an old Sears factory. It was just, but just a, at one point, I think it was the largest brick building in the country. It’s an amazing looking building. There’s always gonna be a use for something like that, that people will be creative and and execute on. Yeah,
Charles:
I think my, my first office I was in in Connecticut I had from a company was like, it was in an old factory that they had changed into offices and part of it was still like flex space and part of it was, I mean, this thing was massive. It had like 28 acres of like factory floor. But they had done little by little, they’re doing it over. And it was just a very unique thing, you know what I mean? Like, I mean, it was like 25 foot ceilings. It was a, it was a very cool, unique project, but they weren’t going into residential. You know what I mean? It’s a much easier thing when you’re like, oh, we’re going from industrial to, you know, still keeping some of the industrial flex space kind of stuff. And then we’re doing some of this into office.
Charles:
And that’s much different. I think, because the other thing too is like, the rezoning part of it is that, you know, we’re talking about like the dynamic of the town, but also, you know, you have to think that some of the most expensive cost for a town is really education and then like your fire and police, right? And when you start putting in residential, you know what I mean, you’re just adding to that education piece. ’cause There’s, you know, people that are going in, they have to go to school and stuff like that. And it just, it really offsets, I guess the trajectory of that area of what it initially was set for. So there’s so many different, like, things outside of just what we’re talking about as like running mechanicals, you know what I mean? Yep.
Dave:
It’s very much like an in an institutional level play to be doing stuff like that. And even then there’s, you know, some of these things, like there’s not really a track record of doing it at scale effectively. Economically, none of those things are really there. So it would just take a, you know, that’s a, that’s a big bet to take and go try and like build all those skill sets out for an asset that even then, even if you do a good job, you can still tell that it’s, you know, it’s probably nicer to just build it from the ground up residential and be in there. Yeah.
Charles:
Especially with all the amenities and stuff you can add in there, you’ll get a probably a better return on investment. You talked about investing in coal centers and kind of how you like ’em, which sounds like they’re usually one floor, maybe two floors, plenty of parking, because usually people are like in like cubby spaces making these calls, I would imagine. Yeah. Or were, so tell us kind of like when you’re, when you’re switching for these properties you’re, you’re going in there, you’re putting in your idea of, hey, this is gonna be, we’re gonna split this up depending on what we feel the demand’s gonna be, and then we bring that to the market, whether it’s directly to companies that we know that are expanding, or do we, are you also finding tenants? I mean, I know you handle a lot of the property manager yourself. You’re doing all the leasing yourself in, in house as well. Yeah, when
Dave:
We have a full property management team, you know, want to, kinda like the, the caveats of real estate investing is as soon as you buy something, you then, you know, then it’s yours. You’ve gotta go figure out like what’s gonna happen on a daily basis. So we operate everything our ourselves we have a full leasing team, but we’re also working with tenant reps and even brokers on our side all the time with all of our deals. So that’s a mix of it. I I really like the, the call center component when I say that it’s, it’s an easy way to be like, look, the specs of a building that a call center was in when they were the tenant are really good for what we want to do. Typically, it is a one story building. Typically they have really high parking ratios. Typically it has great power supply and typically it’s in a more suburban location.
Dave:
So that’s a lot of like, to sum up like, hey, if you’re gonna look for stuff, if it’s an old call center, that’s really like, that kind of summarizes all the main points we wanna look for in a deal. ’cause Those are the, that’s what we’re looking for when we say, you know, we want an off, we, we, we want a building. It’s more, hey, have, have you noticed any like old call centers that are vacant people’re, like, oh, I, I know where there’s one like that. Perfect. That’s, that’s kind of like our, like now let’s go check that out, see what we can do there. So
Charles:
I one time was in talks to buy a call center like in 2009. I didn’t know anything about it. I did know that when I went down to the basement, they had asbestos all over the place and that kind of scared me. I didn’t know what to do with any of that. So tell me about when you’re buying a property, because this is what it is. I mean, we’re buying properties that are property built in the sixties, right? Seventies, something like this. Different building materials, let’s just say were utilized, which can be extremely dangerous, hazardous expensive to deal with, whatever you wanna call ’em. How are you guys dealing with them during your, I mean, during any inspection and how, how this is working with what you’re doing? Yeah,
Dave:
And for the, on the, on the office type assets that we’re converting in, if they have any of that stuff that’s, that’s really a deal breaker for us because the remediation effort and the, the time and the logistics, it just takes too long for us to get from acquisition to stabilization. So if it has some big remediation effort, that’s not something that that we’re gonna do. So we would, we, we wouldn’t go through on that on that transaction. A lot of our stuff that we’re, we’re buying on that front is more like early nineties to 2010 range. When you, when you look at stuff, and for the most part, they’re all brick, lots of glass windows on the outside. But not basements, no asbestos issues, no like all good power, all good mechanicals that are already in place that just making sure we have, that helps us get to our conversion and get to market that much faster.
Charles:
I think when you kind of block out anything pre 1985 or 1990, you really minimize all of those different building items and materials that were utilized. And that can include like lead pipes, that include aluminum wire, all this different stuff that really was utilized I think in the seventies and eighties, stab lock, electrical, all that stuff. That kind of, we don’t, you don’t have to really deal with with newer properties. So that’s, that’s one way of dealing with it is <laugh> kind of like barking out of your buy box. So that’s easier. <Laugh>.
Dave:
Yeah, we, we learned that from apartments. I mean apartments we bought a lot over the years and our typical buy in apartments was like 1970s, two story brick walk up, no common hallways. But in that you’re gonna get, I like the, the classic HVAC units that have been there for 45 years or aluminum wiring, right? And then you’ve got plumbing of all sorts of varieties. And we’ve bought buildings before that had terracotta sewer drains. So it’s like, that’s from like the forties and fifties. I, you know, there’s all sorts of older stuff and like, if you’re comfortable with buying it, ’cause you know what your remediation plan is for it, then sure, you can go ahead, you can, you know, you can tackle that and put that in your CapEx plan and do it. But if it’s a brand new one or it’s one that’s like outta your league, just, you just gotta know like, look, that’s not my skillset. I can’t do that. If we have like a full asbestos remediation, I was like, we’re not gonna do that one.
Charles:
I, I think for new investors, one of the, one of the mistakes I made was on my first deal was doing it was getting into something that was over my head. It didn’t have anything like this like, you know, asbestos and stuff, but it was one of those things that it was like you, if you don’t have the team, you don’t have the knowhow for it, you really put yourself at a huge disadvantage. And it’s something like, unless you have a partner that’s done it for many, many times over and over and then bringing them on with you, that’s a different situation. However, I mean, these are very expensive and very time time and sensitive as well. It,
Dave:
It’s one thing if you wanna risk your own money, you’re gonna do it. You’re gonna try it as soon as you, you’re gonna take on investor money and you’re gonna risk it and it’s your first time, it’s like, you know, you’re just amping up the risk factor there a little bit. So better always. I was a big fan of like, better go try it on your own first and learn as much you can with your own money and then, and then go from there. Yeah.
Charles:
I always say it to people and people don’t like that. They like to get in and with other people’s money, which I feel is completely dangerous. That’s, that’s where we are living today. I turn down more coaching students that way. I think they turn down themselves if I speak to them. I don’t really do that much coaching, but when I do, it’s one of the first things I’ll talk to people and you’ll, you’ll mention me like, nope, this isn’t gonna work. You know what I mean? You’re just think in the back of your head, you’re like, this isn’t like this person is already trying to raise money ’cause they don’t have any money and Yeah. That’s not, that’s not how you, I feel you, you invest into real estate.
Dave:
Yeah, and a lot of it, six, I mean, I had a job for a long time too that I trying to live as efficiently as possible and save as much money as I could so we could, you know, buy stuff and get started. It’s not the glamorous route of doing it, but the route that I thought was most appropriate.
Charles:
Yeah, I think a lot of people that are successful have gone that route as well. So let’s talk about money and how to, how you’re doing it. Because our thing you said too is when you’re explaining your criteria a few minutes back, you’re talking about buying vacant properties, which obviously it takes a unique financing and debt strategy. So can you tell us a little bit about how your deals are usually structured and then maybe also how that’s changed over the last few years? Obviously we know about the increase in interest rates, which probably make it a little harder for some of your deals to pencil. Yeah,
Dave:
Yeah, it’s definitely, it’s definitely been a wild a wild couple years here on, on how the whole deal structure plays out. But for the most part, our structure from a, like how do we get compensated and work with LP investors on something, we basically al we always have a preferred return. We split the, and we split the upside. It’s all cash based. We don’t do waterfalls, we don’t do IRR stuff. We, we just try and keep it simple. We do a single asset at a time. We don’t do funds more, more time that I look at, like what we do is, is more like, oh, well here’s all the stuff we actually don’t do. And that leads into, you know, what we do do, but we do one deal at a time and it’s just cash return based. So, but when we’re looking at that one deal, we’re we, I mean we are applying leverage.
Dave:
We are mostly working with local and community banks or credit unions on a deal that’s in their area so they can, you know, they’re going to all this stuff, they’re seeing it. We’re typically lower leverage. We’re in like the 50% range of going into stuff. So that’s, that’s nowhere near as as juicy as it was when it was like, Hey, you’re gonna get an 80% plus loan at 2%. Like that certainly doesn’t exist in any capacity of any kind. You know, it’s in the 6% range, 50%. There’s definitely gonna be some personal recourse in there right now if you’re, if you’re working with a, with a bank, maybe you could use some debt funds where you’re gonna be paying in the, in the low to mid-teens and, and they might not have personal recourse on it, but to get a deal done right now, like it’s, it’s pricey on the debt side.
Dave:
And banks are, banks are very stringent to work with, I would say, on what they’re willing to do right now. Especially when you’re like, Hey, I’ve got this great vacant building and want you to get excited about this thing and we’re gonna occupy it. Thanks. Like, ah, it doesn’t sound so great right now sometimes. But that’s been our, our business plan for 20 years has been buy something that’s underutilized or not taken care of or, you know, has not maybe a physical issue or maybe an operational issue that we can improve and stabilize it. So that’s, that’s always been our go-to investment strategist. Just different finding, finding different assets we can do it with. So we, we’ve built some long very, you know, longer term bank relationships that we’ve been using over the years to facilitate that.
Charles:
Yeah, I love that idea of working with you know, utilizing local banks and credit unions. I’ve had a lot of success working with those type of institutions in the past and mainly working out unique deals and financing structures that typically wouldn’t be available for certain deals. And I find that you know, when you’re working with one of these local institutions, they, they, they know the area they’re want to invest back into the area, you know what I mean? They’ve probably driven by your property before. And the other thing too is that it’s very small credit committees making decisions that are local. Everyone’s local, you know what I mean? And that’s what I have found that it’s great for investors. The other thing too is if you’re going direct to ’em, and it’s not that difficult, I was refinancing property years back and you know, you reach out to a bunch of ’em and it’s so hyper-local when you’re working with local banks and credit unions.
Charles:
I would speak to someone, I remember one time that was like 45 minute drive away from the property and they were a little like offput about why are you contacting us? And you’re like, okay, now I know that this is like, everything’s super local. So now like when I’m making who I’m calling to get property finance, I’m like, I’m calling like 15 minute drive, you know what I mean? Like, gimme that radius and you’re gonna call. But tell me about like how you, what kind of benefits you’ve had for buying. I mean, these are unique properties you’re buying and they don’t have cashflow from the beginning. So I mean, this is gonna be something where there’s a, a runway before they are profitable, even though you’ve done this before. I mean, there’s always, you know, a little bit more risk versus, hey, we’re buying a property and it’s 92% occupied and stuff like this. Right. What, what, what, what have you found kind of like of some of the main benefits other than working with these institutions that are local versus kind of going through a broker or going through maybe a regional banks or stuff like that? If, if they would even lend on this, right?
Dave:
Yeah. And just because you’ve done it in the past doesn’t necessarily mean it’s gonna work this time. It’s, there’s no, like, you know, there’s no guarantees in any of these, any of these deals. So, but we do have a local a local relationship, you know, we’re able to be like, Hey, come out to the property, let’s walk this together. Let me bounce out like, this is what we’re thinking we’re doing here. What, you know, what do you think? What’s your experience showing? What are you, what are your other customers telling you? And how the, you know, how the real estate market’s working. And a lot of times we get good feedback on that. I mean, a lot of times we’ll have those meetings and, and go through that walk and then not do the deal, right. And it’s like we learn more as we go through that process and work with them. So I, I think if you’re going into this stuff, there’s always, you always gotta be open to what can I learn from each one of these interactions that I have? What can I learn every time I go walk a property and brainstorm how we’re gonna do something here That’s really hard to do if it’s just a, an email exchange and the person’s in Portland, Oregon, and I, you know, that’s gonna be a lot harder to to, to convey what’s actually gonna happen on a deal.
Charles:
What do you think when you are you know, you said before you don’t really, you’re, you’re, you’re pretty much building out the prop, building out the, the, the, the, the units and the space, depending just how the buildings, how the building is versus kind of like on a tenant improvement type, what the requirements are. Is that correct?
Dave:
Correct. Yeah.
Charles:
So how does that affect when you’re having conversations with kind of any kind of brokers or anything like that, is that just kind of like, this is what it is and then anything else where like tenant improvements that’s kind of like something we’re not doing or that’s something that you’re bringing yourself, but like this is the shell we’re giving you? Yeah,
Dave:
Well, I mean, what we definitely do a lot of tenant improvements. So that’s kind of like, you know, step two, step one is how do we get the, the size of the suite built and, you know, there’s different support beams going through the buildings. We’re not gonna move that stuff. But when we, when we meet with the code enforcement and we’re putting up fire rated walls, like we’re trying to do those as efficiently as possible and like within the, within the boundaries of what can be done at a building. We’re not trying to like reinvent the wheel with these spaces and like totally morph how the building works. So if you imagine a, a, a building, you know, you already have the support columns that are in there, that’s where the wall’s gonna go. And sometimes that means it’s 7,000 square feet, sometimes it means 4,000 square feet, that suite that goes in there.
Dave:
But we’re gonna start with that just because that’s the most, most efficient way to get the space to a, what we call a white box situation, where then when we talk with a potential tenant, there is definitely gonna be some build out, some of the larger national tenants, like they have their plan, they know what they’re doing, and they might be, they’re many times just bringing their own contractors as well, and we’re pitching in for the ti. Other times if it’s a, you know, smaller operator, even like less than a hundred unit franchise operator, they’ll look to us to supply the manpower and, and do that build out which a lot of times then we’re splitting that cost and in some form as we negotiate that lease. But that’s step two, doing all the ti is definitely, definitely a part of it. How
Charles:
Are the leases for something like this five, 10 years?
Dave:
Typically like five to seven years, we’re not really seeing a lot of 10 year leases. It’s more five to seven is our standard lease. I mean, there’s built in normally renewal options and language that goes into that. But five would be like our bread and butter from a, from a time standpoint to do something. Yeah,
Charles:
That’s nice because you do all this upfront and now you know that you have a pretty, a pretty solid payment coming in there over the next five or seven years, whatever it is. And I mean, that’s kinda like, it’s everything kind of pays off at that point, which is different from residential where you’re having these conversations literally every 10 months with tenants about trying to keep ’em to stay, you know what I mean? So pros and cons of, you know, different asset classes.
Dave:
Yeah, I mean, multifamily, you’re constantly, you’re, you’re constantly cycling. But then other standpoint, you know, most of the time if you have a hundred, 200 unit property, if someone does leave, it’s, it’s not a big hit. If you have a 50,000 square foot building and 5,000 square foot leaves, all of a sudden you’re down to 90% occupancy or 80% occupancy. Right. You know, you, you, you can take a hit quicker on that one, but you got a, you got a five year period.
Charles:
Yeah, no, that’s, that makes perfect sense. So Dave, as kind of a wrapping up here, one thing I like asking is I mean, what are some common mistakes you see let’s say office real estate investors make or real estate investors in general make over your years of being active in the space?
Dave:
Most of the time it’s like when you get into something you’re just not comfortable with, that’s, you know, when we look at like, the deals we’ll buy, even on the, on the multifamily side, we, we know down to like, this is what we do and this is what we don’t do. On the office side, it’s like, look, we really want single story four plus parking spots per thousand square feet. We want strong power, you know, we prefer a rectangle size building. Like we know what we’re looking for. If we deviate too far from that one, you get into some things you, you may not have as much experience with, but also you’re operating this stuff in most cases where someone’s operating it. We believe in the, in the model where, you know, we do the, we operate and our team has to know what they’re doing. So if we, if we hand them a brand new fresh problem that we don’t have any insight on, it’s gonna make it really hard. And we’re all for learning and experience new things and, and if you’re in real estate and you’re operating stuff, there’s always gonna be a new challenge every month. You’re like, wow, learning something this month that that’s, that’s definitely gonna happen, but you just want, you don’t wanna try and learn a bunch of things every month. Yeah,
Charles:
<Laugh>, that’s a good way of putting it. Yeah. It’s
Dave:
Like, it’s fine learning, but let’s try and not like learn all sorts of new stuff every month. Yeah,
Charles:
I like that. Over the years I’ve realized the more serious real estate investors, when you ask them, it’s very simple to kind of suss out the real, real estate investors is when you ask them kind of what they’re buying or what they like seeing, it is very detailed. It’s like in a box that works for them versus someone that’s like, oh, we’re just buying in like this area or something like this, or like, you know, we buy one to a hundred unit buildings, you know what I mean? Whatever it is. When you have people that are like, they get it down to like, it’s 10 to 22 units and it’s this and it’s that and 50 th or whatever it is, when it’s like so synced and detailed, then you’re like, oh wow, that’s like a real serious buy box that they have. You know what I mean? That they’ve obviously had a lot of experience with that’s worked for them.
Dave:
Yeah. And even in, in the buy boxes that we have right now, in the first quarter of 2025, you know, there were only like three deals that came up that fit any of our buy box criteria, not from a price standpoint, just from like what the physical asset is, right? So price irrelevant, like what’s coming up that fits in our very specific buy boxes. There weren’t that many things, so we looked at all the deals that came up, which was three. We didn’t buy any of them, but, you know, we’ll, we’ll keep looking and growing and trying to find like, is there a new buy box we want to add to it? But that takes some, we’re, we’re not just jumping in anything on that, on that side of it.
Charles:
Yeah, that makes sense. Well, Dave, thank you so much for coming on today. How can our listeners learn more about you and Greenleaf management? Yeah,
Dave:
Best way is really LinkedIn, you know, we post our newsletter every quarter on LinkedIn and, and our con my contact information up there as well. And always love talking about what’s going on in real estate and what the trends are looking like. So happy to chat with anyone new too. Well,
Charles:
Thank you so much, Dave. Looking forward to connecting with you here in the near future, and we’ll put all those links down the show notes for all of our listeners. Great.
Dave:
Thank you. Enjoyed it.
Charles:
Thank you.
Dave is the co-founder and partner at Greenleaf Capital Partners, leading the integration and growth of its investment and operational aspects. Greenleaf, a full-service real estate firm, is dedicated to long-term, cash-flow-driven investing.
With over 20 years in real estate, Dave’s journey began with acquiring rental homes in PA and continued through a career in financial consulting at Deloitte. He holds a master’s in Real Estate and Urban Development from George Washington. In 2008, he launched Greenleaf in Atlanta, GA, and has since led over 125 buy-side transactions and nearly 55 exits. Greenleaf has acquired over 4,000 multi-family units and 2 million sq ft of medical, industrial, and net lease assets across GA, TN, NC, and SC.
Dave is also passionate about adventure trips and leadership. He believes in taking groups out of their comfort zones to teach leadership skills through real-life challenges. These experiences reflect his belief that entrepreneurs must embrace discomfort to drive success.
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