JF1224: How To Raise Over $1 BILLION For Real Estate Projects with Jared Rogers
Jared has done a little bit of everything in his lengthy real estate career. His forte is raising money for investors and developers, but he also has a ton of experience in construction. Having knowledge in both those area allows Jared to work very efficiently, and take some risks that others may not take. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
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Jared Rogers Real Estate Background:
– For the first half of his real estate career, Jared raised over $1 billion for investors and developers
– Has leased, managed and sold properties from 700 square foot homes to 900,000 square foot industrial parks.
– Over 20 years of commercial and residential real estate investing experience
– Based in Winston Salem, North Carolina
– Say hi to him at jrogers AT webuyhouses.com
– Best Ever Book: Design Your Life
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Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluff.
With us today, Jared Rogers. How are you doing, Jared?
Jared Rogers: Good. Thanks for having me, Joe.
Joe Fairless: My pleasure. Boy, looking forward to diving in with you because, well, Jared’s got over 20 years of commercial and residential real estate investing experience… And in fact, for the first half of his real estate career, he raised over one billion dollars for investors and developers, and he’s also leased, managed and sold properties, from 700 square foot homes to 900,000 square foot industrial parks. Based in Winston-Salem, North Carolina.
Is that all accurate, Jared? That’s incredibly impressive.
Jared Rogers: That’s all accurate. That was my first two lives; I’d say I’m probably on life three now.
Joe Fairless: [laughs] Well, let’s talk about the beginning, and then I’d love to talk about where you’re at now. One billion dollars raising money for developers and from investors… Tell us about that.
Jared Rogers: Well, I started off out of school in a small boutique investment bank; we were basically placing debt for people who had shopping centers, apartment buildings, that kind of thing; everything from mobile home parks, some esoteric properties to the [unintelligible [00:03:27].14]
That company got acquired, we turned into being a direct lender. It grew real fast, I got to grow real fast… I kind of wanted to get into more of the creative side of financing, so I left to join a boutique firm called Industry Partners, which is still somewhat in operation today on a smaller scale.
Then me and a partner, we basically had our own rolodex of clients and we would raise three million dollars for a simple acquisition, to the largest deals I did, around 150-180 million dollars, kind of entire redevelopment plays. Mostly on the West Coast… We’d follow our clients sometimes East as they went East, but basically West Coast-focused.
Joe Fairless: I wanna make sure I’m understanding… Let’s just pick one of the projects, let’s say the redevelopment. You were raising money, and were you on the general partnership side, or was your role different?
Jared Rogers: No, so we were retained by lots of developers and investors to raise money for their projects.
Joe Fairless: Okay… You were a broker-dealer?
Jared Rogers: No, we were a finance broker. They’d contact us, we’d underwrite, understand the deal, present them the different capital sources, and then we might raise equity, we might raise debt, we might raise both… Sometimes we’re raising five different capital stacks if the deal is large enough; we’d get money from Germany, and kind of all over the place. So it really just depended on the deal. We were basically — for middle-sized developers, we were their in-house CFO in terms of raising money for their projects.
Joe Fairless: How did you and your colleagues come in contact with the individuals who were writing hundred-million dollar checks?
Jared Rogers: Different organizations… A lot of it started with, like everyone else, [unintelligible [00:05:10].06] the Lehman Brothers… We did a lot of stuff with New York, like everybody did, and then you just kind of grow from there as you build up your reputation. We started doing stuff with investors out of Asia, I did stuff with Sharia investors, I did stuff with European investors, high net worth family offices, you name it. There’s a lot of money out there that’s chasing yield, and that was one way that we could get yield, was to loan to developers, ground-up, kind of creative stuff.
Joe Fairless: Was it through an EB-5 program, or something different?
Jared Rogers: They were all institutional or large investors, so we would just basically create similar to an offer memorandum and say, “This is what we’re requesting. Here’s the sponsor, what can you do?”
Joe Fairless: What’s a typical structure look like?
Jared Rogers: One of my sponsors, one of the largest developers in the world, they really were only looking for good debt for large projects. I had other investors who literally said, “Look, this product is 50 million bucks. We can put in half a million, and we need you to find the other 49,5 million.” And we would raise — sometimes that might be an A piece, a senior debt, we might raise a B piece, we might even raise a C piece just to layer it all in.
Joe Fairless: For someone who’s not familiar with different types of ways to structure that, could you elaborate on the senior debt, the B piece, the C piece, just to bring us all to your level in case we’re not as versed in this?
Jared Rogers: I apologize. The senior-level is just the debt; that’s whether it’s a construction lender, or what everybody has on their house. That would be senior financing. The HELOC that people have on their house would be a B loan; it’s secured behind the A loan, so that would be more of an equity position. Sometimes products are so large enough we would raise a piece between it that we call the B piece or the mezzanine, and that would be the piece between the equity and between the senior debt. It gets paid a higher return, because it’s riskier than the senior level (A piece) but it is as risky as the equity piece, because it is debt… So it would charge somewhere in between.
Joe Fairless: Does the B piece have to agree to have it be jumped ahead?
Jared Rogers: [unintelligible [00:07:13].03] That’s why they get paid more. All the home loans that people do today that all get pooled together, they get sold off in one million tranches. So someone’s buying the A piece, someone’s buying the B piece, and then all the way down the line, depending on where that investor wants his return. If he wants essentially a rate better than a CD, he’s buying the A piece, and that’s basically all he’s getting. But then there’s somebody on the back-side who will take all that risk, because they want a 20% return, if that kind of makes sense…
Joe Fairless: Yeah, it does make sense. So that was part one of your career… What was part two?
Jared Rogers: Part two was when I left that partnership in California and decided to chase the quality of life; I came out to North Carolina and I wanted to get on the ownership side of real estate, the true bricks and mortar side of real estate, so partnered with a former client of mine, and we were buying business parks, industrial parks and that kind of stuff, in and around North Carolina. That’s when I hired a construction manager, a leasing person, property managers, all those things. They ran kind of the day-to-day, and I was more of the regional director overseeing the operations, seeking out new opportunities, making big decisions, interacting with money partners… All those kind of senior level duties.
If anything went sideways, I’m the person that’s gonna go in and try to straighten that out. I’m the person that other people on the ground can call in when issues arise.
Joe Fairless: Tell us a story about one.
Jared Rogers: I’ve dealt with everything from the smallest tenant with 400 square feet and the largest tenant with 220,000 feet, and that was Ralph Lauren. So we had all kinds of different problems. Although it was much more of a critical operational thing, the business shut down, and they were really frustrated.
Small businesses, we had everything from delinquencies like you would on a single-family home, because [unintelligible [00:08:57].23] I’ve had tractor trailers back up into gas lines, whole properties evacuated… You name it. I’ve seen a lot happen on a commercial property.
Joe Fairless: So walk us through one specific example if you would, and then your approach for how you had a solution and the process for it.
Jared Rogers: Well, one of the properties we bought down in Charlotte had some awkward buildings. People kind of add stuff on, as they go through the years, to try and chase more income, so… [unintelligible [00:09:24].19] solution on that was I contacted the city, I contacted the investor and partner, I went to him and said, “Hey, honestly guys, this building is 14,000 feet but it really should be 10k. Let’s cut off 4,000 feet.” I know it sounds crazy, but at 14,000 feet it’s gonna lease for, let’s just say $1/foot/month, and if I get it down to ten and I can lease it for $1,50 a month, we’re gonna make more money and we’re gonna have less downtime, because it’s a more functional building.
So I still do a lot of that every day, addition by subtraction, but that’s something that a lot of people won’t even look at.
Joe Fairless: How do you show that in numbers to the business partners, to get them comfortable to actually remove square footage from their property?
Jared Rogers: I’m a big fan of keeping it simple, stupid (KISS), so I do do a lot of simple [unintelligible [00:10:13].26] presentations, walking them through, showing them why it’s more functional and showing them at the same time that they’re not losing equity because of this. So it’ll be a simplified map analysis, but I might show him a floor plan, I’ll have different brokers in the market provide their input, and we’ll have contractor input to show them “Hey, this is what it’s gonna cost, we’re not gonna get destroyed on it, and we can make that money back in three years of lease, just on that space.”
Joe Fairless: Now you’re investing in your own deals and you’re focused on that, right?
Jared Rogers: Yeah… Basically, life has gotten in the way and I had to take more time off, so I just started doing single-family deals, and now I’m doing single-family and commercial deals. [unintelligible [00:10:56].01] slower just because it’s just less partners. I get a bigger share of the upside and less partners to answer to.
Joe Fairless: What’s a specific example of a commercial deal that you’re doing?
Jared Rogers: I’ve just bought three recently. I’ve bought one which could be considered not the prettiest thing in the world, but I bought one about 5,500 square feet; I’m subdividing it for kind of nine small business spaces. [unintelligible [00:11:20].28] We were able to get the municipality here to allow us to move it into a RUCA, which is kind of a revitalization area, where the city has two programs – one, they should give me a grant for 50% of my construction costs, and another, they give me a loan for the other 50% of my construction costs. So on that building, I bought it 25% below list price, I got the seller to give me 80% debt for five years at 3,75%, and I’m negotiating with the city to basically give me my renovation money.
Joe Fairless: [laughs] I was writing down notes… What were your out-of-pocket costs to acquire it?
Jared Rogers: My partner and I put 30k down to buy it. We actually have a really bad tenant in there now, but he still pays for our overhead and pays for our mortgage from our seller while we go through and do the whole design, rebuild and approval process.
It worked without the potential city funding, but obviously it turns into a complete homerun if our equity goes down from 200k to 50k overall.
Joe Fairless: What type of property is it?
Jared Rogers: Oddly enough, it was a former restaurant/catering space, but we made some reconstruction; it’s got shallow depth, so it’s very functional to carve up. It’s got a very good traffic count… It basically sits just off a corner. So I looked at it more like a small flex building; we’ve had a ton of those where most people saw very old, dirty catering buildings.
Joe Fairless: What type of tenant, once you sub-divide it out, would be renting?
Jared Rogers: It’d be everything from the small tax guy, the small business that deals with government money where they need to have a physical location… You name the small business; it’d be quasi-retail, it might even have a barbershop it, just because of the traffic count. So any small retail, small office, or anything in between.
The great thing about those products is they rent like apartments. If someone comes in and says “What’s the rent per foot?”, they say “What’s the monthly number?”, so I can rent 350 square feet for $550/month, which is in that area probably a crazy number per foot, but that’s not what it’s about. It’s about what can they afford per month, just like an apartment.
Joe Fairless: Compared to industrial parks or retail, that might rent per square foot…?
Jared Rogers: Any space over space over 2,000 feet is gonna rent per foot, just because of options. On a small-sized range, it really comes down to what they can afford per month. I did a survey on our area when we went under contract to buy the building, there was literally one space under 700 square feet available, and that doesn’t count the small office suite that’s on the third floor, because that’s not my competition. My competition is you can drive right up and you have a quasi-retail location.
Joe Fairless: How much did you acquire it for, how much are you looking to put into it, and what is the value that you’d like it to be at, in what period of time?
Jared Rogers: I’d like to do per-foot numbers – so we bought it for like $35/foot, and we’re gonna put anywhere probably additional $20-$30/foot, depending on how far we take it. If I get the municipality partnership, I’ll go on the higher end, because I’ll make the building more bulletproof, so I’m keeping my maintenance costs lower ongoing, and then it should be worth $90-$100/foot after that.
Joe Fairless: Over what period of time?
Jared Rogers: It will take, I’d say, a year to renovate and three months to lease up, and a year of [unintelligible [00:14:45].14] so around three years.
Joe Fairless: And what do you plan on doing at that point with it?
Jared Rogers: Getting a conventional loan, taking out any equity and hopefully recapturing some profits, and paying off my seller financing, and holding it for as long as I can.
Joe Fairless: What’s your role in the management?
Jared Rogers: The property management, or are you talking like asset management, construction management and all that stuff?
Joe Fairless: All the above.
Jared Rogers: I guess you’d say I’m involved in all of it… Some level of involvement. In some of the property management I’ll be involved, in some of the construction management given my background – I’ve probably done one thousand or so TI jobs. And then on the leasing side, given the traffic counts, we won’t even hire a leasing broker, we’ll just put a sign in front and say “Space available, under $500/month”, and then just hopefully start taking orders. I don’t need a hundred of them, I just need nine of them on that building.
Joe Fairless: Based on your experience, what is your best real estate investing advice ever?
Jared Rogers: I would say don’t throw good money after bad. I’ve made lots of mistakes, like anyone else, but don’t compound it by trying to hang on to the money you’ve already invested in it. It’s better just to cut and move on.
Joe Fairless: Can you tell us a story about that?
Jared Rogers: Yeah, I’ve had several ones since I was working on a deal even recently with the city of Charleston, and I had a deposit down on some row houses that we were gonna renovate, and they were gonna send me a public/private partnership and that kind of stuff. I’ve met with the division, it was great, everything went well, I [unintelligible [00:16:15].17] presentations… I didn’t like the feedback I got; it wasn’t negative, but it gave me pauses in terms of the questions they were asking. So I have $3,500 at risk, and I said, “You know what? I’d rather fight for that $3,500 on that escrow than double down and hope these guys will be there for me like they said they would be.” It turned out to be the right decision; the municipality wasn’t as aggressive as they said they were gonna be, and I would have lost a lot more money if I had decided to go forward.
Joe Fairless: You said the questions on the surface weren’t positive or negative, but it gave you pause… What questions were they asking that gave you pause?
Jared Rogers: When I first discussed the project with them, they were talking more like “Hey, we really wanna see this happening. We’re gonna help you do it, we’re gonna have to do all these things…” Then when we sent them information, they started (I’d say) kind of wearing the wrong hat. So they started asking questions about our potential constructions costs and that kind of stuff, and I said, “Whoa, that’s not your role, guys. Your guys’ role is to trust us as the developers to what we said we were gonna do, and then be there for us when we need you.” So when they started (I’d say) poking around, responding maybe a little slower than I would like to based on our initial feedback, I just said they’re not where they wanna be.
They said they wanted to be there, but they weren’t there. It’s better for me to cut the fishing line and try again. I’m still trying to get that deposit back, I haven’t given up on it, but I’m much more comfortable knowing that that’s my downside if I lose that. And I wouldn’t like to lose $3,500, don’t get me wrong, it really hurts, but the potential losses and the time invested on those losses far outweighs that.
Joe Fairless: If you would have proceeded and then something happened, what would have been the potential losses, besides time, monetary-wise?
Jared Rogers: Monetary-wise, I would say after a couple years it was three projects which we were trying to grow into five… I might have had to come out of pocket like 50k to refinance them at the end of the day, or leave a lot more equity in there than I wanted to. So they would go into probably a low-yielding deal.
Joe Fairless: That is definitely a story of experience coming into play, because on the surface if they were not saying no, then inexperienced investors might not read between the lines.
Jared Rogers: Right. And that probably goes back to my experience in my first life, when I was having to make those calls for those developers to help them raise money where they might have $100,000, $200,000, $300,000 non-refundable money… You get to the point where you’re pretty good [unintelligible [00:18:52].15] and making sure that the people are gonna be there for them when it comes times to close.
Joe Fairless: Are you ready for the Best Ever Lightning Round?
Jared Rogers: Sure.
Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.
Joe Fairless: What’s the best ever book you’ve read?
Jared Rogers: I’d say I’m kind of reading it right now, it’s a book called Design Your Life. I really like it, because I think we all have made the shiny bubble thing where you chase whatever seems like everybody’s doing well at, but I’m kind of passionate about a lot of things, so I like to try a lot of things. I’ll try private partnerships, I’ll try tax credits, I’ll try anything and everything to figure out if I am truly passionate about it… So I like what those guys are teaching, which is try it, learn from it, and figure out the stuff you wanna do ongoing.
I don’t wanna be pigeon-holed or narrow-focused and not be open to new opportunities, where I think some investors are told “Don’t go chase the shiny new object”, I think we can learn a lot from chasing the shiny objects, as long as you put that into practice and move on.
Joe Fairless: Best ever deal you’ve done that you haven’t talked about already?
Jared Rogers: On the residential side I’ve done some very simple assignments and made 25k pretty easily. On the commercial side, the large industrial deal in Greensboro, with my old partnership, a 79% return on investment. It’s still the largest return I’ve ever had. That’s a pretty high number for buying existing property and turning it around. So that was probably the best deal I’ve ever done.
Joe Fairless: Is that 79% annual return?
Jared Rogers: Yeah.
Joe Fairless: Over how many years?
Jared Rogers: Four years.
Joe Fairless: Wow. So 79% return a year for four years is what they made – wow, that’s great. Well, it’s phenomenal actually, not great.
Jared Rogers: What’s a mistake you’ve made on a transaction that you haven’t talked about.
Joe Fairless: I would say a mistake that I’ll never make again or haven’t made again was I didn’t pull permits on one of my earlier renovations. I let a contractor tell me I didn’t need them, and then when everything hit the fan, that contractor was gone and I was left trying to solve all the problems.
Joe Fairless: What was the result?
Jared Rogers: The result was $8,000 in repairs, and a slap on the wrist from that municipality for doing unpermitted work.
Joe Fairless: Plus probably a delay in selling, which time value of money comes into play too there.
Jared Rogers: Actually I had sold it.
Joe Fairless: Oh, you already sold it… You had to go back into it?
Jared Rogers: [unintelligible [00:22:03].07] North Carolina is a buyer-beware state, but at the end of the day you’ve gotta do what’s right.
Joe Fairless: Best place the Best Ever listeners can get in touch with you?
Jared Rogers: My e-mail, JRogers@webuyhouses.com is probably the one I use the most. I’m on Facebook, I’ve got several Facebook pages. The one I’m doing the most on right now or trying to build up is WeBuySmallCommercialProperties.com, because that is one of my focuses, trying to continue to buy more small, well-located commercial properties.
Joe Fairless: And just to double-check, your e-mail is JRogers@webuyhouses.com, correct?
Jared Rogers: Correct.
Joe Fairless: Alright, great. Well, thank you for sharing your insight, your experience over 20 years of investing and being involved in real estate, the “Don’t throw good money after bad” example with the row houses in Charleston, and on the flipside, the 5,500 square foot commercial property, subdividing that out, and how you were able to structure that deal and maybe even get a grant to pay for 50% of the renovations and a loan for the other 50%, and then where you see that going – $35/foot, put in $20, all in about $50-$60, and then make it worth $90-$100 in about three years time.
Thanks for being on the show. I hope you have a best ever day, and we’ll talk to you soon.
Jared Rogers: Thank you, Joe. Have a good day!