Zack Streit
The Opportunity Zone Expo Podcast
LA Native Finds His Calling Driving Entrepreneurial Mid-Market Deals
Transcription
Jack: Welcome back everyone to the OZExpo Podcast. I'm your host Jack Heald and joining me today is Zachary Streit is a senior vice president with George Smith Partners. Zach, welcome to the OZExpo Podcast.
Zach: Thanks so much for having me.
Jack: It's good to have you. So, we want to find out about our guests, who you are and where you came from. So, tell me: who are you, who is Zach Streit? Where'd you come from? How'd you end up where you are?
Zach: Wow. So, I'm a Los Angeles native. I grew up in L.A., but I spent about 10 years in New York where I went to college and law school and business school. And then I came back to L.A. Again in 2011 and kind of been living here and working in real estate here kind of ever since.
Jack: Why did you go to New York for law school and B school? And then once there, why did you come back?
Zach: Great question. I think I went out there because I sort of thought I would make a career out there. There was no lord of being in New York City, kind of the people and the energy and I really enjoyed living there. I'm in my twenties. I think it's a great place to go to school and there's so many other schools close by. And I worked in real estate for four years, for a big European insurance company called Aviva Investors in their real estate fund-to-funds group. And I actually started working there in 2008, at the height of the recession. So, I was really lucky to have a job when most people didn't.
Jack: Oh fun.
Zach: You know, I got to see some amazing things. There was a big struggle then and you got to see how…
Jack: I guess so.
Zach:…some of the best guys in the biggest general partners in real estate dealt with that, and it’s kind of colored my view on real estate. After about three-and-a-half, four years there, I decided to move back to Los Angeles, kind of where my roots were. I just spent about 10 years in New York. And so, I was ready for sort of a different pace of life, a different quality of life. And I met my wife shortly after moving home, we just had our first kid and so, and I haven't looked back.
Jack: You, are you are now a senior VP at George Smith Partners? Those who don't know, tell us about George Smith Partners in general and your work there in particular.
Zach: Yeah, absolutely. So, I’ve been at George Smith Partners about two-and-a-half years now. We are a debt and equity finance brokerage. So, what we do is we help owners and developers of commercial real estate capitalize their projects. Our focus has kind of always been on helping middle market entrepreneurial sponsors get their deals done, both deals that are institutional in size, and some deals that are sub-institutional in size.
So, we'll work on deals on the smaller end that might be in the $5- to $10 million range. And we're actually working on a $600 million deal, which happens to be in an Opportunity Zone up in Portland. So definitely a wide range, in our capacity and what we can do. Most of our geographic focuses are Denver and west. And since we're based in southern California, I would say maybe half of our business is in California and the other half is in major, western U.S. markets. I'd say we're probably the largest sort of independent duty, for what we do. I'm on the West Coast. Our firm probably does, I would say $2.5- to $3 billion a year in production. So we're a big, small shop.
Jack: Well I have to say as somebody who got to the west side of the Rockies as soon as I could, I don't really see any point in dealing with anybody east of Denver. It was just a reason to do it.
Zach: I agree with you. Real estate has kind of become a larger national game. And you know, there's many lenders and equity providers that will lend nationally. We found that there's still a localness to it, and that for sponsors, for developers that are doing deals in any of the major western U.S. markets, they want to work with a capital advisor that's done a lot of deals in their market. That is a quick flight away. And then, you know, tons of the capital decisions that underlie these deals are often made out of L.A. or San Francisco. So I think being in that seat on the West Coast helps a lot.
And we're on planes a ton. I mean, we were at ULI in Nashville a couple of weeks ago and then earlier this week we were up in Portland for the day working on that deal that I mentioned. We're going out to Portland again next week and then we're going to be, of course, at the Opportunity Zone Expo later next week in Vegas. So, you know, we tend to hit the local markets pretty frequently and nothing replaces actually getting on the ground and meeting with guys there and sort of seeing the project.
Jack: Well, you just gave a lot of terrific business, practical, rational reasons for doing business west of the Rockies. Mine are just entirely just sheer personal preference. Okay. So, why did you end up in this kind of business? The equity and debt mid-market financing, that's kind of a…
Zach: Yeah.
Jack: How'd you, how'd you find yourself there?
Zach: Great, great question. So, admittedly my career's taken a pretty circuitous route. I went to law school and I still keep my law license, but I never practice and I kind of learned in law school that my heart was more in real estate, on the finance side. And so, you know, after that I enrolled in the NYU Master of Real Estate program full-time and I actually found my job.
Jack: You did the law before you did the Masters.
Zach: Okay. Yes, I did the law before I did my Master's. While I was getting my Masters, I got my job in my first semester. I did my Master's part time around work was actually really full-time and I just essentially went to school at night so I was sort of a glutton for punishment because it was a lot of school and then I had to balance work also…
Jack: Wait, wait, I just got to stop you here. You’re in your twenties, you’re in New York.
Zach: Yeah.
Jack: When you should be partying your brains out. You've got a full-time job and you're a full-time student. Is that right?
Zach: Yeah, I was a glutton for punishment, but I still managed to find some time to drink. I actually needed it a lot back then.
Jack: Yeah, I bet. Okay. Carry on.
Zach: I would say that I spent probably the first 8 to 10 years of my career on the principal side of the business not as a broker, as an advisor. I came to that later in my career. And that's sort of the opposite trajectory of what most people take. I think most people start off in the brokerage business and then become principals.
And I gotta tell you when I was on the principal side, on the kind of equity side at a real estate fund to funds, I spent about five years as a lender, both in the hard money space and the bridge and CMBS spaces. So I covered a lot of bases. I never thought that I would flip over to advisors, but during those years, I liked that I was doing, but I never really felt like I had found my calling.
I always wanted to be doing something different. And then, after about five years as a lender, I started looking around and saying, “Who am I and what do I really want to do?” And my heart lay in doing what I would call mid-market, entrepreneurial, but really commercial deals.
And then I thought, “Okay, well, where and how can I add the most value?” And I had known of George Smith Partners, probably since 2011 or 2012 when I first moved back to L.A. And I was pretty friendly with a few of the principals here, including Malcolm Davies whose team I work on now and we originate business together. And as I was looking for a job, I think in '16, trying figure out what was gonna be my next step after I was a lender, they said: “Why don't you try it here? We think you think you could make it as an advisor.” And it's been an amazing run ever since. We closed a ton of transactions. Our team did $750 million in production last year, which is about a quarter of the firm's production. And, hopefully this year we will outpace that. So it's truly been a remarkable experience. I liked being in the middle on transactions. We see a ton of deal flow. You build great sponsor relationships, you build great lender relationships and you can really help both sides get the deal done that they want to do. So, it's pretty unique.
Jack: As I did my research, I wasn't aware of George Smith, but that's because that's just not a field that I play in. I got a really cool vibe about the company culture. So that's something, is that something worth talking about a little bit?
Zach: Yeah. It is a very cool place. So, being an advisory business, I would say it's a very entrepreneurial place. The culture of the company really, I think, parallels, in a way the culture of most of our clients. We tend to be pretty entrepreneurial guys, and I think that's why we sort of get along so well. We're kind of all cut from the same cloth. It's a really great company. It's a very, very flat company. It has no outside shareholders; it has no corporate debt. And so the unique thing about is it pays, candidly, some of the best splits in the industry. And so, we can kind of afford to have great talent at the company which you really need on middle market deals because they're often complicated and they tend to have an angle to them.
The other thing I would say that's very unique about our company is that we're kind of split into teams. We're not a producer-analyst model. Our team I think has eight individuals, you know, Malcolm and, and I guess myself originating business. Then we have six individuals who are awesome and really integral parts of our team, that are very focused on the execution. And so, clients know that when we're out originating other business that there's still a team of six that's working on pushing your deals into the market and helping get them done.
And obviously Malcolm and I are very devoted to our clients. We're always available and we're always pushing to help get their deals done too. But you know, we found that that combination of having a team structure when you're all doing large complicated development deals, is just a really effective way to kind of get them done. And, I would say a it’s big differentiator for George Smith Partners because, most of the other kind of debt and equity finance shops out there aren't structured that way.
Jack: Right. Well, let's talk about the Opportunity Zone stuff then.
Zach: Yeah.
Jack: We know about you. We know about the company. Let's focus now on what this, this podcast is all about, which is the Opportunity Zone. I know you guys are doing work in it. What kind of deals are you seeing? What are the particular challenges that you're running into? You know, we're all familiar with the basic outline of the Opportunity Zone program and the, the caveats for getting in and staying in and getting out. Tell us some stories about some of the more interesting things you're dealing with.
Zach: Yeah. So, great question. Look, Opportunity Zones are the topic du jour and now they're almost isn't a day that goes by, or hasn't in the last six months I would say, when they sort of really kind of come around, where we aren't focused on, you know, working on deals in Opportunity Zones, fielding inquiries from clients or lenders about Opportunity Zones.
So, no question that this is the hot topic within real estate. For us, I would say we're probably working on four or five deals simultaneously in Opportunity Zones. They're all of course development deals because you really need that to qualify for the tax benefit. And they are mostly in the multifamily and hotel asset classes and then also mixed use.
Geographically we're working on a really large one up in Portland, which I'm happy to talk about. Actually we're working on two up in Portland. I should say a really large one. One that's more kind of medium size. Oh, and we're working on one in Salt Lake City. We are working on one down in Phoenix. There's also one down in L.A. In each of these deals. We are helping advise on the Opportunity Zone equity as well, which is interesting.
And I think that's probably a very big value add to developers out there because one of the first questions that we get, when meeting with either an existing client or a new client that’s the developer of property and that wants to do a deal on an Opportunity Zone, all of them want to know who are the Opportunity Zone Funds that are out there that can provide limited partner equity into my ideals.
You know, which ones are real, which ones are not real, which are best suited for any given transaction. And our participation in the marketplace and just sort of working on deals day in, day out gives us a pretty unique sort of insight into who's out there, what's out there. And we can often help try and find the best sort of capital source, or a given deal that we're doing. I would say, you know, as I mentioned, the deals range pretty widely that we're doing a $600 million deal, which is going to be the first Ritz Carlton.
And Brandon residences and also an office up in Portland. I'm smack in the middle of downtown Portland, so it’s a very high-profile deal and probably one of the largest Opp Zone deals, if not the largest in the country. So that's pretty interesting. We are pretty close to closing a ground up construction deal of 127 units in Vancouver, Washington just outside of Portland, which is a really cool. We're working on a Hilton Curio hotel in a Scottsdale Opportunity Zone, that's interesting. We’re working on what will probably be a Marriott Autograph on the Salt Lake City. So certainly, across markets, and just fluent in the ins-and-outs of kind of how you actually get these deals done.
Jack: Because this is part of the business that I have very little experience in. Talk about getting this deal done. I'm here in the Phoenix area, so just take me through conceptually the process. I'm a developer, I've got a deal I want to do, and I need money.
Zach: Yeah.
Jack: So, they come to you and then?
Zach: And then the magic happens. So, what is that magic? Well, to be clear and here's kind of a threshold Opportunity Zone item. You're a developer. You have a deal. First question probably is, “Is that deal entitled?” Because it needs to be if you're going to attract Opportunity Zones Funds capital to it, but assuming it is, we'll take a hard look at the deal, what’s the geography, what's the business plan, how does the deal pencil from a kind of comparable perspective, rent comp, sales comps, you know. If it's a hotel deal, ADR comes, it’s really the same analysis that we would do for any deal.
Given the deals and opportunities, we want to make sure that there's a 10-year business plan in place. Because the equity needs 10 years to qualify for the tax benefits of Opportunity Zone. But if it's a business plan, we can get comfortable with it, and if it's not in Los Angeles, if it's say somewhere in Scottsdale or Salt Lake or Portland, we'll fly out or want to meet with a sponsor and see the deal, which is commonplace for us on every deal that we do. But if we decide that it's a deal that we like and something that we think we can work on, we'll go through it, and we'll make recommendations about how best to structure it.
And also, who we think the Opportunity Zone funds out there that might make sense to sort of see the deal and to make a connection with the sponsor and we'll essentially help market the dea to those funds that are out there and to see if it's something that they want to take a run at. And if they do, then I think the magic happens.
And once it does on the equity side, we would then go ahead and help capitalize the project from the debt side, and follow much the same process. So, big picture, if you have a deal, we would love to meet you, we would love to look at it.
And if we think it makes sense and it's something that we can wrap our heads around, we would want to help the sponsors market that deal to the Opportunity Zone Funds that are out there and see if we can help them get the deal done. For us, big picture the underwriting and metrics on an Opportunity Zone Fund, are a little bit different than your traditional real estate deal. The traditional real estate deal is probably a three to five-year deal and the Opportunity Zone fund deals have to be ten-year deals.
So, there are some nuances associated with that you can help guys work through. But at the end of the day, we want the real estate to make sense, and I think that's the most important thing. We’ve learned through our experience, what is still a growing and emerging sort of sector in the market. But at the end of the day, if the real estate makes sense, if the business plan makes sense, if the geography makes sense, if the sponsor makes sense, I would say the deal has a very high probability of attracting Opportunity Zone fund equity to it. It's when deals don't make sense, the business plans don't make sense, when sponsors have maybe never done anything remotely close to this before that I think you run into issues and it's going to be a lot harder to get your deal off the ground. So, in a way I think the Opportunity Zone incentives, are sort of icing on the cake, and the cake has to be there. But if it's there, we will find a way to get your deal done.
Jack: Do you all have formal relationships with the equity side, with fund managers? Or is this strictly on a deal-by-deal basis that you help find the funding?
Zach: We work deal by deal. But through that sort of deal-by-deal experience of just being in the market of constantly marketing deals to capital sources, constantly attending conferences, like the Op Zone Expo next week, which we're all pretty excited about. We build a ton of relationships with capital sources both on the equity and the debt side. I would say there's probably 50 Opportunity Zone funds in our database right now that we're tracking, and that number has been growing pretty significantly over the last few months. And I think it will continue to grow as the space matures and as more guys get active in it. I wouldn't say that we have formal relationships with them, as much as we just are doing business with a lot of them.
A big way we add value to our clients is making sure that we are current on who is in the market, Opportunity Zone fund or not. You know, kind of, what their appetite is and trying to make sure that we can with the market as much as we can. And really helping our sponsors, helping our developer clients find new and unique sources of capital to help them get their deals done. And no question today, that's the Opportunity Zone Funds.
Jack: I like to find out a little bit more. So outside, outside of work, outside of the finance business, what kind of things do you enjoy doing? You know, you've got nothing to do on a weekend. What do you find yourself doing?
Zach: If I have nothing to do on a weekend, which is great these days with the baby, but definitely I love to work out. I'm a big tennis player when I can, maybe in my mind I'm a bigger tennis player than I actually am, but I aspire to be a big tennis player, let's say. And I also like to run.
I think that, I always try and make sure that my weekend is in involved, some sort of physical activity is big for me. I also am pretty involved in Big Brothers Little Brothers of America charity. And so actually this Sunday I'm going to spend the afternoon with my little brother through the program. And you know, that that's always a ton of fun, a great way to sort of separate from the rigors of the workplace a little bit.
Jack: Absolutely. How did you get involved in that?
Zach: You know, that's a good question. I had a lot of friends that were doing it, and actually my wife was doing it for a while before we had our child. And I always admired the friends and my wife for doing it. And I feel like, as I looked back on my life, I had never really spent programmed time dedicated to anything charitable. Like I certainly supported a lot of causes financially, attended events and things like that. But I, I just felt like something was missing. I felt like, you know what, I'm not, not actually giving of my time in any meaningful and regular way, so what can I do to sort of fill that void and add a little bit of meaning to my life and hopefully help somebody else out. And I didn't have to look very far, because there were already people around me that were doing that and I said, “This is important.” So, we try and get together, I would say every three to four weeks.
We've been doing it for a couple of years now and it's a big-time commitment, especially now having a child. But I wouldn't trade it for anything. It's incredibly meaningful. We have a lot of fun together and I've learned a lot just through the experience and through hanging out with my little. It's something I would recommend highly to people that might be interested.
Jack: How old is your little?
Zach: He's 15, so he's not that little.
Jack: So, old enough that you can actually have some good conversations with him?
Zach: Yeah. No, it, always interesting to see how he views the world. It kind of takes me back to when I was at age. But definitely can have interesting conversations and, and it all was a lot of fun.
Jack: All right, well I'm going to ask you that my favorite question.
Zach: Okay.
Jack: You're going to love this one. You're going to imagine now that for one day you are king of the world. You're really the king.
Zach: Alright.
Jack: Butit's only one day. And during that one day you get to solve one problem. Whatever you say goes for that one day, what's the problem you're going to solve?
Zach: Wow. I think poverty would be the problem that I'd solve. I think there’s so much in the world. I I think it's really easy to go blind to how bad it is in some parts of the world, living in the States and living in a big city like L.A. We have our challenges with homelessness. I, we travel to Portland frequently, as I mentioned, that cit cit has its challenges of that too.
Easy to lose sight of not only that, but also, I think how people really struggle in third-world countries that we might not visit, maybe only read about from time-to-time. So, if I were king of the world for a day and I could solve one problem, I think I would try and solve poverty. I have no idea how I would solve it, but I think that'd be the one I'd focused on.
Jack: Just sit there on the throne and say, make it so.
Zach: Make is so.
Jack: Well that's good. Was that good conversation? I've enjoyed getting to know you. Any last words for us before we sign off for today?
Zach: Well, you know, thank you for having me. Thank you to the guys who are putting the Opportunity Zone Fund Expo together. We're really excited about that. You know, if you happen to be a sponsor or developer of commercial real estate and you're doing a project in an Opportunity Zone, contact me and the guys here, George Smith Partners are definitely here for you. We'd love to meet you to learn about what you're doing, and you know, to see if we can be a resource.
Jack: Well, so tell us, how do folks get ahold of you and George Smith Partners? What's the best way to do that?
Zach: Yeah. You know, the best way to reach me and we didn't even call my cell phone. I tend to pick it up pretty manically. So, 310-709-5320. You can also go on to George Smith Partners’ website georgesmithpartners.com and click on my profile and you can get my cell phone, my email, my LinkedIn, everything you want. LinkedIn is another easy way to reach me. And you know, I tend to be pretty responsive in our line of work, we pride ourselves on that. If nothing comes of it, we always want to know who's out there and what's out there, because life has an interesting way of, you know, the more seeds you plant, the more bread that you cast on the water, somehow it comes back to you.
Jack: Good reference there. And I do want to remind our listeners that all this contact information will be available on the podcast website. Well Zach, thank you. On behalf of Zach Streit with George Smith Partners, I am Jack Heald for the OZExpo Podcast. Thanks for joining us today. Go ahead and subscribe and we will talk to you next time.
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Zach: Thanks so much for having me.
Jack: It's good to have you. So, we want to find out about our guests, who you are and where you came from. So, tell me: who are you, who is Zach Streit? Where'd you come from? How'd you end up where you are?
Zach: Wow. So, I'm a Los Angeles native. I grew up in L.A., but I spent about 10 years in New York where I went to college and law school and business school. And then I came back to L.A. Again in 2011 and kind of been living here and working in real estate here kind of ever since.
Jack: Why did you go to New York for law school and B school? And then once there, why did you come back?
Zach: Great question. I think I went out there because I sort of thought I would make a career out there. There was no lord of being in New York City, kind of the people and the energy and I really enjoyed living there. I'm in my twenties. I think it's a great place to go to school and there's so many other schools close by. And I worked in real estate for four years, for a big European insurance company called Aviva Investors in their real estate fund-to-funds group. And I actually started working there in 2008, at the height of the recession. So, I was really lucky to have a job when most people didn't.
Jack: Oh fun.
Zach: You know, I got to see some amazing things. There was a big struggle then and you got to see how…
Jack: I guess so.
Zach:…some of the best guys in the biggest general partners in real estate dealt with that, and it’s kind of colored my view on real estate. After about three-and-a-half, four years there, I decided to move back to Los Angeles, kind of where my roots were. I just spent about 10 years in New York. And so, I was ready for sort of a different pace of life, a different quality of life. And I met my wife shortly after moving home, we just had our first kid and so, and I haven't looked back.
Jack: You, are you are now a senior VP at George Smith Partners? Those who don't know, tell us about George Smith Partners in general and your work there in particular.
Zach: Yeah, absolutely. So, I’ve been at George Smith Partners about two-and-a-half years now. We are a debt and equity finance brokerage. So, what we do is we help owners and developers of commercial real estate capitalize their projects. Our focus has kind of always been on helping middle market entrepreneurial sponsors get their deals done, both deals that are institutional in size, and some deals that are sub-institutional in size.
So, we'll work on deals on the smaller end that might be in the $5- to $10 million range. And we're actually working on a $600 million deal, which happens to be in an Opportunity Zone up in Portland. So definitely a wide range, in our capacity and what we can do. Most of our geographic focuses are Denver and west. And since we're based in southern California, I would say maybe half of our business is in California and the other half is in major, western U.S. markets. I'd say we're probably the largest sort of independent duty, for what we do. I'm on the West Coast. Our firm probably does, I would say $2.5- to $3 billion a year in production. So we're a big, small shop.
Jack: Well I have to say as somebody who got to the west side of the Rockies as soon as I could, I don't really see any point in dealing with anybody east of Denver. It was just a reason to do it.
Zach: I agree with you. Real estate has kind of become a larger national game. And you know, there's many lenders and equity providers that will lend nationally. We found that there's still a localness to it, and that for sponsors, for developers that are doing deals in any of the major western U.S. markets, they want to work with a capital advisor that's done a lot of deals in their market. That is a quick flight away. And then, you know, tons of the capital decisions that underlie these deals are often made out of L.A. or San Francisco. So I think being in that seat on the West Coast helps a lot.
And we're on planes a ton. I mean, we were at ULI in Nashville a couple of weeks ago and then earlier this week we were up in Portland for the day working on that deal that I mentioned. We're going out to Portland again next week and then we're going to be, of course, at the Opportunity Zone Expo later next week in Vegas. So, you know, we tend to hit the local markets pretty frequently and nothing replaces actually getting on the ground and meeting with guys there and sort of seeing the project.
Jack: Well, you just gave a lot of terrific business, practical, rational reasons for doing business west of the Rockies. Mine are just entirely just sheer personal preference. Okay. So, why did you end up in this kind of business? The equity and debt mid-market financing, that's kind of a…
Zach: Yeah.
Jack: How'd you, how'd you find yourself there?
Zach: Great, great question. So, admittedly my career's taken a pretty circuitous route. I went to law school and I still keep my law license, but I never practice and I kind of learned in law school that my heart was more in real estate, on the finance side. And so, you know, after that I enrolled in the NYU Master of Real Estate program full-time and I actually found my job.
Jack: You did the law before you did the Masters.
Zach: Okay. Yes, I did the law before I did my Master's. While I was getting my Masters, I got my job in my first semester. I did my Master's part time around work was actually really full-time and I just essentially went to school at night so I was sort of a glutton for punishment because it was a lot of school and then I had to balance work also…
Jack: Wait, wait, I just got to stop you here. You’re in your twenties, you’re in New York.
Zach: Yeah.
Jack: When you should be partying your brains out. You've got a full-time job and you're a full-time student. Is that right?
Zach: Yeah, I was a glutton for punishment, but I still managed to find some time to drink. I actually needed it a lot back then.
Jack: Yeah, I bet. Okay. Carry on.
Zach: I would say that I spent probably the first 8 to 10 years of my career on the principal side of the business not as a broker, as an advisor. I came to that later in my career. And that's sort of the opposite trajectory of what most people take. I think most people start off in the brokerage business and then become principals.
And I gotta tell you when I was on the principal side, on the kind of equity side at a real estate fund to funds, I spent about five years as a lender, both in the hard money space and the bridge and CMBS spaces. So I covered a lot of bases. I never thought that I would flip over to advisors, but during those years, I liked that I was doing, but I never really felt like I had found my calling.
I always wanted to be doing something different. And then, after about five years as a lender, I started looking around and saying, “Who am I and what do I really want to do?” And my heart lay in doing what I would call mid-market, entrepreneurial, but really commercial deals.
And then I thought, “Okay, well, where and how can I add the most value?” And I had known of George Smith Partners, probably since 2011 or 2012 when I first moved back to L.A. And I was pretty friendly with a few of the principals here, including Malcolm Davies whose team I work on now and we originate business together. And as I was looking for a job, I think in '16, trying figure out what was gonna be my next step after I was a lender, they said: “Why don't you try it here? We think you think you could make it as an advisor.” And it's been an amazing run ever since. We closed a ton of transactions. Our team did $750 million in production last year, which is about a quarter of the firm's production. And, hopefully this year we will outpace that. So it's truly been a remarkable experience. I liked being in the middle on transactions. We see a ton of deal flow. You build great sponsor relationships, you build great lender relationships and you can really help both sides get the deal done that they want to do. So, it's pretty unique.
Jack: As I did my research, I wasn't aware of George Smith, but that's because that's just not a field that I play in. I got a really cool vibe about the company culture. So that's something, is that something worth talking about a little bit?
Zach: Yeah. It is a very cool place. So, being an advisory business, I would say it's a very entrepreneurial place. The culture of the company really, I think, parallels, in a way the culture of most of our clients. We tend to be pretty entrepreneurial guys, and I think that's why we sort of get along so well. We're kind of all cut from the same cloth. It's a really great company. It's a very, very flat company. It has no outside shareholders; it has no corporate debt. And so the unique thing about is it pays, candidly, some of the best splits in the industry. And so, we can kind of afford to have great talent at the company which you really need on middle market deals because they're often complicated and they tend to have an angle to them.
The other thing I would say that's very unique about our company is that we're kind of split into teams. We're not a producer-analyst model. Our team I think has eight individuals, you know, Malcolm and, and I guess myself originating business. Then we have six individuals who are awesome and really integral parts of our team, that are very focused on the execution. And so, clients know that when we're out originating other business that there's still a team of six that's working on pushing your deals into the market and helping get them done.
And obviously Malcolm and I are very devoted to our clients. We're always available and we're always pushing to help get their deals done too. But you know, we found that that combination of having a team structure when you're all doing large complicated development deals, is just a really effective way to kind of get them done. And, I would say a it’s big differentiator for George Smith Partners because, most of the other kind of debt and equity finance shops out there aren't structured that way.
Jack: Right. Well, let's talk about the Opportunity Zone stuff then.
Zach: Yeah.
Jack: We know about you. We know about the company. Let's focus now on what this, this podcast is all about, which is the Opportunity Zone. I know you guys are doing work in it. What kind of deals are you seeing? What are the particular challenges that you're running into? You know, we're all familiar with the basic outline of the Opportunity Zone program and the, the caveats for getting in and staying in and getting out. Tell us some stories about some of the more interesting things you're dealing with.
Zach: Yeah. So, great question. Look, Opportunity Zones are the topic du jour and now they're almost isn't a day that goes by, or hasn't in the last six months I would say, when they sort of really kind of come around, where we aren't focused on, you know, working on deals in Opportunity Zones, fielding inquiries from clients or lenders about Opportunity Zones.
So, no question that this is the hot topic within real estate. For us, I would say we're probably working on four or five deals simultaneously in Opportunity Zones. They're all of course development deals because you really need that to qualify for the tax benefit. And they are mostly in the multifamily and hotel asset classes and then also mixed use.
Geographically we're working on a really large one up in Portland, which I'm happy to talk about. Actually we're working on two up in Portland. I should say a really large one. One that's more kind of medium size. Oh, and we're working on one in Salt Lake City. We are working on one down in Phoenix. There's also one down in L.A. In each of these deals. We are helping advise on the Opportunity Zone equity as well, which is interesting.
And I think that's probably a very big value add to developers out there because one of the first questions that we get, when meeting with either an existing client or a new client that’s the developer of property and that wants to do a deal on an Opportunity Zone, all of them want to know who are the Opportunity Zone Funds that are out there that can provide limited partner equity into my ideals.
You know, which ones are real, which ones are not real, which are best suited for any given transaction. And our participation in the marketplace and just sort of working on deals day in, day out gives us a pretty unique sort of insight into who's out there, what's out there. And we can often help try and find the best sort of capital source, or a given deal that we're doing. I would say, you know, as I mentioned, the deals range pretty widely that we're doing a $600 million deal, which is going to be the first Ritz Carlton.
And Brandon residences and also an office up in Portland. I'm smack in the middle of downtown Portland, so it’s a very high-profile deal and probably one of the largest Opp Zone deals, if not the largest in the country. So that's pretty interesting. We are pretty close to closing a ground up construction deal of 127 units in Vancouver, Washington just outside of Portland, which is a really cool. We're working on a Hilton Curio hotel in a Scottsdale Opportunity Zone, that's interesting. We’re working on what will probably be a Marriott Autograph on the Salt Lake City. So certainly, across markets, and just fluent in the ins-and-outs of kind of how you actually get these deals done.
Jack: Because this is part of the business that I have very little experience in. Talk about getting this deal done. I'm here in the Phoenix area, so just take me through conceptually the process. I'm a developer, I've got a deal I want to do, and I need money.
Zach: Yeah.
Jack: So, they come to you and then?
Zach: And then the magic happens. So, what is that magic? Well, to be clear and here's kind of a threshold Opportunity Zone item. You're a developer. You have a deal. First question probably is, “Is that deal entitled?” Because it needs to be if you're going to attract Opportunity Zones Funds capital to it, but assuming it is, we'll take a hard look at the deal, what’s the geography, what's the business plan, how does the deal pencil from a kind of comparable perspective, rent comp, sales comps, you know. If it's a hotel deal, ADR comes, it’s really the same analysis that we would do for any deal.
Given the deals and opportunities, we want to make sure that there's a 10-year business plan in place. Because the equity needs 10 years to qualify for the tax benefits of Opportunity Zone. But if it's a business plan, we can get comfortable with it, and if it's not in Los Angeles, if it's say somewhere in Scottsdale or Salt Lake or Portland, we'll fly out or want to meet with a sponsor and see the deal, which is commonplace for us on every deal that we do. But if we decide that it's a deal that we like and something that we think we can work on, we'll go through it, and we'll make recommendations about how best to structure it.
And also, who we think the Opportunity Zone funds out there that might make sense to sort of see the deal and to make a connection with the sponsor and we'll essentially help market the dea to those funds that are out there and to see if it's something that they want to take a run at. And if they do, then I think the magic happens.
And once it does on the equity side, we would then go ahead and help capitalize the project from the debt side, and follow much the same process. So, big picture, if you have a deal, we would love to meet you, we would love to look at it.
And if we think it makes sense and it's something that we can wrap our heads around, we would want to help the sponsors market that deal to the Opportunity Zone Funds that are out there and see if we can help them get the deal done. For us, big picture the underwriting and metrics on an Opportunity Zone Fund, are a little bit different than your traditional real estate deal. The traditional real estate deal is probably a three to five-year deal and the Opportunity Zone fund deals have to be ten-year deals.
So, there are some nuances associated with that you can help guys work through. But at the end of the day, we want the real estate to make sense, and I think that's the most important thing. We’ve learned through our experience, what is still a growing and emerging sort of sector in the market. But at the end of the day, if the real estate makes sense, if the business plan makes sense, if the geography makes sense, if the sponsor makes sense, I would say the deal has a very high probability of attracting Opportunity Zone fund equity to it. It's when deals don't make sense, the business plans don't make sense, when sponsors have maybe never done anything remotely close to this before that I think you run into issues and it's going to be a lot harder to get your deal off the ground. So, in a way I think the Opportunity Zone incentives, are sort of icing on the cake, and the cake has to be there. But if it's there, we will find a way to get your deal done.
Jack: Do you all have formal relationships with the equity side, with fund managers? Or is this strictly on a deal-by-deal basis that you help find the funding?
Zach: We work deal by deal. But through that sort of deal-by-deal experience of just being in the market of constantly marketing deals to capital sources, constantly attending conferences, like the Op Zone Expo next week, which we're all pretty excited about. We build a ton of relationships with capital sources both on the equity and the debt side. I would say there's probably 50 Opportunity Zone funds in our database right now that we're tracking, and that number has been growing pretty significantly over the last few months. And I think it will continue to grow as the space matures and as more guys get active in it. I wouldn't say that we have formal relationships with them, as much as we just are doing business with a lot of them.
A big way we add value to our clients is making sure that we are current on who is in the market, Opportunity Zone fund or not. You know, kind of, what their appetite is and trying to make sure that we can with the market as much as we can. And really helping our sponsors, helping our developer clients find new and unique sources of capital to help them get their deals done. And no question today, that's the Opportunity Zone Funds.
Jack: I like to find out a little bit more. So outside, outside of work, outside of the finance business, what kind of things do you enjoy doing? You know, you've got nothing to do on a weekend. What do you find yourself doing?
Zach: If I have nothing to do on a weekend, which is great these days with the baby, but definitely I love to work out. I'm a big tennis player when I can, maybe in my mind I'm a bigger tennis player than I actually am, but I aspire to be a big tennis player, let's say. And I also like to run.
I think that, I always try and make sure that my weekend is in involved, some sort of physical activity is big for me. I also am pretty involved in Big Brothers Little Brothers of America charity. And so actually this Sunday I'm going to spend the afternoon with my little brother through the program. And you know, that that's always a ton of fun, a great way to sort of separate from the rigors of the workplace a little bit.
Jack: Absolutely. How did you get involved in that?
Zach: You know, that's a good question. I had a lot of friends that were doing it, and actually my wife was doing it for a while before we had our child. And I always admired the friends and my wife for doing it. And I feel like, as I looked back on my life, I had never really spent programmed time dedicated to anything charitable. Like I certainly supported a lot of causes financially, attended events and things like that. But I, I just felt like something was missing. I felt like, you know what, I'm not, not actually giving of my time in any meaningful and regular way, so what can I do to sort of fill that void and add a little bit of meaning to my life and hopefully help somebody else out. And I didn't have to look very far, because there were already people around me that were doing that and I said, “This is important.” So, we try and get together, I would say every three to four weeks.
We've been doing it for a couple of years now and it's a big-time commitment, especially now having a child. But I wouldn't trade it for anything. It's incredibly meaningful. We have a lot of fun together and I've learned a lot just through the experience and through hanging out with my little. It's something I would recommend highly to people that might be interested.
Jack: How old is your little?
Zach: He's 15, so he's not that little.
Jack: So, old enough that you can actually have some good conversations with him?
Zach: Yeah. No, it, always interesting to see how he views the world. It kind of takes me back to when I was at age. But definitely can have interesting conversations and, and it all was a lot of fun.
Jack: All right, well I'm going to ask you that my favorite question.
Zach: Okay.
Jack: You're going to love this one. You're going to imagine now that for one day you are king of the world. You're really the king.
Zach: Alright.
Jack: Butit's only one day. And during that one day you get to solve one problem. Whatever you say goes for that one day, what's the problem you're going to solve?
Zach: Wow. I think poverty would be the problem that I'd solve. I think there’s so much in the world. I I think it's really easy to go blind to how bad it is in some parts of the world, living in the States and living in a big city like L.A. We have our challenges with homelessness. I, we travel to Portland frequently, as I mentioned, that cit cit has its challenges of that too.
Easy to lose sight of not only that, but also, I think how people really struggle in third-world countries that we might not visit, maybe only read about from time-to-time. So, if I were king of the world for a day and I could solve one problem, I think I would try and solve poverty. I have no idea how I would solve it, but I think that'd be the one I'd focused on.
Jack: Just sit there on the throne and say, make it so.
Zach: Make is so.
Jack: Well that's good. Was that good conversation? I've enjoyed getting to know you. Any last words for us before we sign off for today?
Zach: Well, you know, thank you for having me. Thank you to the guys who are putting the Opportunity Zone Fund Expo together. We're really excited about that. You know, if you happen to be a sponsor or developer of commercial real estate and you're doing a project in an Opportunity Zone, contact me and the guys here, George Smith Partners are definitely here for you. We'd love to meet you to learn about what you're doing, and you know, to see if we can be a resource.
Jack: Well, so tell us, how do folks get ahold of you and George Smith Partners? What's the best way to do that?
Zach: Yeah. You know, the best way to reach me and we didn't even call my cell phone. I tend to pick it up pretty manically. So, 310-709-5320. You can also go on to George Smith Partners’ website georgesmithpartners.com and click on my profile and you can get my cell phone, my email, my LinkedIn, everything you want. LinkedIn is another easy way to reach me. And you know, I tend to be pretty responsive in our line of work, we pride ourselves on that. If nothing comes of it, we always want to know who's out there and what's out there, because life has an interesting way of, you know, the more seeds you plant, the more bread that you cast on the water, somehow it comes back to you.
Jack: Good reference there. And I do want to remind our listeners that all this contact information will be available on the podcast website. Well Zach, thank you. On behalf of Zach Streit with George Smith Partners, I am Jack Heald for the OZExpo Podcast. Thanks for joining us today. Go ahead and subscribe and we will talk to you next time.
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