DJE Texas (00:02.414)
Welcome to the DJ podcast where you will learn about real estate investing from real life examples. Here's your host, Devon Elder.

DJE Texas (00:16.622)
welcome to the show. My g Thomas. He's a co founder of Catalyst e Real Estate investment fir a lot of multifamily dea 2016. And so we dive into uh the business, right? How he g from a C. P. A. And manag to meeting his business par

passively and then as an active investor, how they're going out and buying deals in the Houston and Dallas markets, how they're putting the capital stack together. They started their own construction companies. We spent a lot of time talking about that, how they're seeing the current market, how they're putting together deals right now. So really just kind of the whole business model, the team and everything, just a good shop talk session with Shane, really bright guy, sharp operator and enjoy getting to know him. I think you can enjoy.

podcast as well. So we'll get right into that. This episode is brought to you by DJE Texas Management Group, a San Antonio, Texas based real estate investment firm with a track record of transacting on several hundred million dollars of multifamily land and industrial deals throughout Texas. EJ has been in business for over a decade and is approaching 100 team members in San Antonio.

learn more about DJE visit dje texas .com or the link in the show notes of this episode. This episode is also brought to you by apartment educators .com a complete ecosystem for professionals to learn how to find finance and operate large multifamily properties for profit. You can get started with a free mini course and learn more at apartment educators .com or visit the link in the notes. Shane, welcome to the show. It's good to see you. How are you, sir?

Hey, Devin. I'm excited to be here. Thanks for having me. Yeah. Yeah. I look forward to diving in and, and talk and shop on, on Texas multifamily among other things. But, uh, before we get into all that, how about, uh, for, for those folks listening that might not have connected with you or your, your company, um, how about some background? How did, how did you get into this, uh, this crazy game? Sure. Yeah. Um,

DJE Texas (02:37.421)
Well, based in Houston, Texas, our company was formed about seven to eight years ago, 2016. We primarily focus multifamily value add. We've done pretty much everything along the food chain. We've got some 1960s properties and we've got as new as 2015. So kind of happy to share kind of what kind of drove us to kind of go off the chain and whatnot. We also have a...

a construction company, so we do third party renovation work, we do all of our in -house work, mostly multifamily, but we do some other asset classes. I'm an LP in multifamily in some hotel deals. But yeah, our bread and butter is multifamily. How I started was, so I'm from Toronto, Canada originally, born and raised, and then I'm a CPA, chartered accountant, worked at a...

Big four consulting firm for 10 years, PricewaterhouseCoopers, moved to Chicago, basically at the depths of the US recession in 2010, got a job and I was in consulting at the time and pretty much head down for about five years. Prior to moving to Chicago, I did start in single family. So I've just bought a few, buy and hold, renovate, rent out and hold in Toronto.

And then basically in 2015, I decided to, you know, kind of, I wanted to get back into the real estate game in the U .S. And so, you know, long story short, kind of, you know, wanted to go back into residential real estate, you know, with my finance background, really kind of, you know, the light bulb turned on when I thought about NOI and buying more kind of commercial based property. And so I looked for my own deal for about a eight to...

you know, 12 months to try to buy a 20 unit, 25 unit in Chicago. Um, you know, and honestly, it was kind of a blessing in disguise. I would say kind of nothing worked out, but it led me down the road, um, to, you know, passively investing in multifamily, right? So then I started passively investing in 2015. And then in 2016, um, met my now business partner and bought our first deal. And, you know, we were kind of off to the races since then.

DJE Texas (04:58.958)
Yeah, I love it. Did you guys form the company? You see a lot of partnerships happening in multifamily where maybe you've got a couple, two, three general partners come together for a deal and then that's kind of deal specific, but then the principles are off doing, doing different deals. Did you guys kind of set out to form a company to go acquire multiple or did you just grow into that? Yeah, that's a great question. And, and, um, you know, I think what helped us is that, uh,

Basically me and my business partner, we met just through networking, just like a lot of folks, right? And then what we did, I was living in Chicago at the time and he was in Dallas and we just kind of had similar values and whatnot. We were more, I kind of liken us to kind of gym buddies, you know, like we would kind of talk every week. You he was, you know, he had his own path getting into multifamily real estate, you know, and he was investing passively and we would just trade notes, you know, like, Hey, what do you think of this deal? And we would start underwriting deals.

So we developed a relationship for honestly, I think six to nine months. And then I had moved to Houston for business slash personal reasons. And then we started touring deals together. And again, no intent to partner, but we formed a relationship because I think, you know, a lot of stuff that I've seen, and I'm sure you've seen is that people kind of get into partnerships, you know, kind of without even dating, you know, and then those partnerships, you know, um, become challenging. And so we, we, we, we basically formed a relationship. We did one deal.

we brought in one other guy to help us on that deal who had more of the experience. And then we said, okay, this deal went well, then we did another deal. And so we were like, okay, after the second deal, you spend a lot of time with folks. And then we said, hey, I think we've got a lot of synergies here, same goals, same values. And then from that point on, I think it was after the second deal, we said, okay, let's form a company and really scale this so we're not just Shane and Prashant doing random deals. And then we formed Catalyst and

You know, to date since then, you know, we've done all of our deals together. We've got a small company, eight employees. Um, you know, we know where we add value to, you know, our co -GPs and our LPs, right? And so we're not really just, uh, you know, jumping around and just, you know, we, we have co -GPs, you know, to grow in this business, you know, we, everyone kind of works together. But as a core, we've kind of formed like the catalyst value proposition. This is why.

DJE Texas (07:23.374)
people, you know, uh, co -GPs, you know, invest in us and trust in us, et cetera. So it's been great. It's been seven, like I said, 78 years running. Um, and it's, it's been a good partnership. Yeah, that's fantastic. There's so many ways to partner up and put these deals together. Um, I want to take a step back, talk about your background. You know, when I hear CPA, uh, management consulting, I think those are incredible skill sets and, and, uh, foundation.

to build your own business upon, but how did those experiences shape what you're doing now? Yeah, yeah, no, that's a great question. And I think definitely it's a great foundation. I think being kind of understand, and that's honestly why I went into accounting, right? I wanted to have good understanding of the backbones of business. And so I went into accounting. I think it helps me be very,

understanding of kind of how the finances work, how to integrate operations with the results and whatnot. And so I think from that perspective, it really helped me add value to folks in the beginning when I could jump in, run models and et cetera, understand the tax implications. So I think in a lot of ways, it really, really helped. And my consulting background really helped with.

At the end of the day, we're coming up with a business plan, we're coming up with a story. We need to be able to articulate that story to investors in a summarized way. And consulting really give you those type of skills to really distill complex problems into kind of very simplified ways of communicating. So I think all those things were great. I think the one thing that I do, or I guess one challenge was when you're coming from that back,

where every cent matters and whatnot. You have to retrain yourself to some extent to become thinking more like an entrepreneur where, hey, 80 % is good enough. You're never gonna have 100 % of the answer. Whereas in the consulting world, if our PowerPoints weren't perfect, there was no 80%. And so...

DJE Texas (09:39.886)
I think that took a lot of retraining and surrounding myself with a lot of entrepreneurs. But yeah, that was my biggest challenge where in the first couple of years, it was like, everything had to be quote unquote perfect. And now I've learned to be like, hey, we've got 80 % of the answers and we've got to make a decision. And so that's been honestly a fun challenge for me. Sure. Yeah, it's a huge distinction of entrepreneurship. You've got to act on.

with imperfect information. And there's a concept that Dan Sullivan talks about among others, but you know, any project or initiative, get it to 80%, ship it, and then the last 20 % you're going to fine tune and get new information and finish out. But it is, it's a mindset shift. I remember talking about PowerPoint decks, working with some McKinsey consultants in my corporate, and I was just like, I've never seen such artistry in a -

75 page PowerPoint. Like you guys, I've Harvard was just like crushing these things. But yeah, you got to get more scrappy in the entrepreneurial world for sure. Something that stood out kind of the way you structured it, your business is doing the construction. I feel like I see that a lot less. You see people creating management companies. We ended up doing that a number of years ago for obvious reasons and control.

don't see it as much on the construction side. So how did that come about for you guys and how was that working for you today? Yeah, that's a great question. So our early deals were heavy lifts, you know, and so they were relatively, again, look, obviously everyone knows pricing has changed a lot from 2016 to 21 to now, but...

you know, we were buying smaller deals, I would say, deal capitalization wise. And, you know, we were still put in seven to 9 ,000 a unit in these deals. And at the time, me and my partner were really, you know, we were hiring the GC and then managing the GC, but we were having a lot of input into kind of the transformations that we wanted on these properties, right? And so we did that a few times. And then we realized that in order to scale, right, it would be,

DJE Texas (11:56.942)
it'd just be better to control it in how similarly why people start management companies, right? And so in 2019 and 2020, when we started buying a couple deals kind of in parallel, where we had to do, and then some of these deals were heavy value ads where you had to do eight, 10 units a month just on interior renovations, right? Whereas, quite frankly, our first dealer or so, it was an agency loan, 95 % occupied, turned like, then once you get into the big heavy value ad deals, time is everything.

Right. And so basically what we did is we basically brought a construction manager in house and then we said we needed a project manager and we said, okay, we need to do this the right way and control this. Right. And we have great relationships with our GCs, but they're working on multiple projects. Right. And so that's what we did. And we basically spent about 18 months or so, you know, ironing out the kinks internally on our own deals, right. Coming up with the process.

You know, obviously, you know, the, the draw process and cash management is very important in a capital cycle. And a lot of people, you know, getting into this business don't realize that you need the money upfront to get it back, you know, and there's a big cycle time to get that money back. Challenging things. Yeah. Of this business. Yeah. It's very, it's very challenging. Yeah. And so, so, so anyway, so we did that for about 18 months and then we started having some folks ask us like, Hey, who did you do?

you know, because, you know, we have a lot of investors in our deals. They see the transformations we do. And we had folks start asking us about, you know, just, Hey, who do you use for this? And then we said, Hey, well, you know, it's our own house. So, and we just started doing it. And then slowly our management company, we have, you use a few different management companies. They started using us as a vendor, you know? And so it's just kind of blown from there. Honestly, we haven't marketed it very much at all. And so.

We think, I mean, look, the capital projects are very important on these deals, right? Most of these deals that people are buying their value add and it's, I mean, look, there's, some people will say lipstick on a pig, but what we do is we really try to harden our deals. We really try to make the improvements long lasting and that are gonna add true value. Like on one deal right now, we're actually converting Chiller system to individual HVAC. Oh wow. We believe it's gonna.

DJE Texas (14:14.018)
you know, that's gonna really be a huge ROI on our exit and for operating value sake. And so, anyway, so that's what we did. And yeah, I mean, I think it's, you know, something that we could control. And then now for third parties, based on one of our learnings, going back to the draws and we're also owners and whatnot, right? So we can really relate to, you know, our clients to say, hey, we understand you've got 3 million escrowed with the lender.

this is how we think it should be done in these phases, et cetera. So yeah, so I mean, it's been about a year and a half since we've started doing it for third parties. And so kind of, obviously the market last year transactions were slow, but we've got a good pipe this year and I'm pretty excited to see kind of where that goes. And then last point, I know you had discussed property management. And so that's been kind of the million dollar question for us. I mean, we...

You know, we've looked at it several times. We've done a lot of analysis, talked to a lot of folks. I mean, we're, you know, we're at that stage right now where we can probably, we can do it, but we're split between Houston and Dallas. And so we don't have like a huge critical mass. And then what our decision, at least at this stage, Devin, is that we said, we're just gonna hire as many people as it takes to manage these well, right? So we've got an asset manager, you know,

and whatnot and we're like, we're gonna asset manage these really, really strong league have processes and KPIs and then, you know, likely wait until we're at four or 5 ,000 units before, you know, fully committing to that, you know, and, you know, I don't know if there's a right answer. I've talked to a lot of folks like yourself. I've talked to folks that been in the business for 10, 15 years that have 10 ,000 units and some of the most of them are like, Hey,

looking back, I wouldn't do it, you know, unless you really have to, but it's really a control thing. So, so that's kind of our rationale on property management. Yeah, it makes perfect sense. I think there's no, there's no clear cut answer or we'd all do that. It's a low margin business, difficult business, but you know, clearly some of us, some of us make it work and it's worth.

DJE Texas (16:29.646)
It's worth it all back to control. I really like having the construction component. It is something we do not have currently. And it's just like, Hey, we know maybe there's margin and control to be had there. But for us, you know, third party, a bench of GCs is working. So, you know, that's just kind of where we are. But I think that'd be an amazing level of just control and execution that you get out of having that. Yeah. So yeah, that makes a lot of sense.

And it is tricky. I think we started a management company around 800 doors, which is too small, but it was kind of a situation where I had to. We're at 2300 doors. It makes sense. It's profitable, not in a big way. And I don't think it'll ever will be. But yeah, you get to that four or 5 ,000 units under management. I think you really start to see some economies of scale on the management company. If you opt to do it, and there's operators that never do, and that's fine too. So.

Yeah. Yeah. I mean, we're, we're basically like, we're going to evaluate it every year, you know, and just kind of see. Um, so that, that's, that's where we're at. Yeah. Makes perfect sense. I want to talk about kind of your approach to these deals since you started. I mean, there's so much that's happened since 2016. And then obviously since 2020 has been another era. Um, the last two years have kind of been another era. So how, how is your approach to.

finding and specifically financing these projects evolves over a pretty, pretty dynamic market since you guys have been in it. Yeah. Yeah. I know it's, it's, it's definitely evolved. You know, I think when I first started in the business, 2015, 2016 as a passive, I mean, I still remember at that time people were saying, Oh, things are overpriced and you know, the market's really heating up, you know, and.

my first deal, we bought it like 40 ,000 a unit, you know. And so where was that? Or Houston? It was in Houston, Houston, eight and a half cap, you know, wild. And yeah, second deal was in Dallas a cap, you know, and so, you know, I think, you know, time gives you perspective. You know, what what I would say is that, you know, there look right now floating rate and bridge loan is almost like a bad word, right? Yeah. But

DJE Texas (18:49.262)
I really think people have just maybe taken it out of context, because there's been floating rate loans for years, decades. It's a product for a reason. And a bridge loan is to find a bridge is to take you from A to B. I think what's happened is that a lot of these bridge loans were got into for non -bridge executions. They were just got into because they...

better leverage. And weren't protecting their downside risk with any hedging or proper hedging. And so I think it's just got a bad rap for wrong reasons. And a lot of LPs just don't understand the nuances. And so the way that I kind of explained this is that when I bought my second deal, we still own it today, it was a $12 million loan.

fixed rate deal, 12 year term, 5 .3 interest rate. And it sounds great, hey, we got fixed rate, and we had a five to six year business plan at that time. And so to kind of give you perspective that bought in 2017, tried to sell it in 21 when obviously cap rates plummeted, the market was hot. But on a $12 million loan, I had a $4 million prepayment penalty. And so like,

you know, a lot of people, you know, don't appreciate the flexibility that you need, you know, on these loans if you want to act on something, right? And so, and then, you know, when, when obviously when interest rates go back up, the prepayment comes down, but then you can't sell, right? And so I think, I think, you know, look at the end of the day, I, I tell everyone that really you got to just match your debt to your business plan, right? Right. And so, you know, and so to anybody to answer your question, I mean, I think the market,

You know, we were buying class C deals first couple of years. And at that time, you know, we were newer and you know, we were, I think compensated for the risks we were taking. Like I said, my first deals were above eight caps and we were, you know, getting dead at five, five and a half, you know? And so you had enough, you know, arbitrage there. And then what we did is post COVID once, you know, we saw cap rates drop across the board, you know, I think they dropped.

DJE Texas (21:11.214)
a lot faster on the class C space. So then we started just buying newer stuff. Cause we were just like, Hey, why buy a four and a half cap C deal when I could buy a four and a half cap 80 with less risks. And so that's how we kind of got some newer deals. So we bought some 20, 2000, bought some 80s deals and we bought some 2004 deals and our one deal was 2015.

And you know what I'm seeing now and obviously, you know folks that are following you and your podcast know that the last, you know, 18 to 24 months, you know, the markets really been challenging for multifamily, right? And I think what we're seeing is kind of a reversion back to the mean, right? Because, and what I mean by that is when I started, A deal was maybe four and a half to five, a B deal was six to seven and a C deal was eight plus, right?

And now, and then cap rates just plummeted to four for all deals where no one was pricing in risk at all, right? And now what we're starting to see is like, you know, we're still active in the market. We haven't bought anything in a while, but we're making offers every month. And what we're seeing is like, you know, A deals seem to have kind of, I'm not gonna say peaked, but feels like there's some stickiness where, you know, I'm not seeing a whole lot of A deals go above five and a half to 6%.

B deals are kind of six, six and a half percent. And quite frankly, if you want to sell a C deal, you got to be at 7 % in major Texas market. I mean, look, they're not gonna, no one wants to sell them, but if you need them to clear the market, they need to be high six, seven to clear in today's market. And I think people are pricing in risk now. And so, the market has definitely evolved. And what I've also noticed is that,

investors that started with us in the beginning, like 2016, 2017, 2018, I mean, they've kind of seen this, you know, and so they kind of understand. And I think some of the newer investors, you know, maybe got in in 22. It's harder for them to understand because, you know, you know, this is like our first major downturn COVID was like a little blip, you know, but in the last 14 years, I mean, you know, distributions right now are, you know, pretty much stopped across the board. And

DJE Texas (23:28.398)
You know, some folks are getting capital calls and you know, and stuff like that. And so I think, you know, I think newer investors may be just a little, you know, just, I guess scarred, you know? But I think if you look at, you know, just the long run right now, you know, we were talking about it before we started recording. I think right now, you know, is a great time to buy. I mean, it's, it's, I've seen pricing that I haven't seen since 2017. It's pricing we've all been wanting and waiting for, right? You just not going to get the right to go with it. Right.

Right, right, exactly. So I think it's a good time to buy, I mean, if you can figure out your equity and most importantly, your debt. And like, there's a saying, what do they say in the single family space, right? Like, date your rate and marry your house or something like that, you know? So it's kind of like that, you know, you gotta figure it out, but the basis on some of these deals feels really incredible. So yeah, I mean, we're making offers.

Yeah, I like it. I think that's the right approach and the basis is kind of the permanent piece of it. But I couldn't agree more on the exit cost of some of these loans. I typically the exit costs, you know, at a minimum, maybe you have zero exit costs, but maybe a point of the loan balance. But some of the really attractive fixed rate debt, it has some egregious exit costs and you're never going to get all your

your term points to check out. And that's kind of what you give up with some of this really attractive fixed rate debt is a exit cost is untenable some of the time. And it's purely a finance cost, it has nothing to do with the performance of the property. And it can keep you in a deal that you'd otherwise exit. So, you know, it's just for anybody listening that's looking at doing deals, try to figure out a step down prepay or something where you can get out of it if possible.

And I agree with you that the bridge stuff now getting into it is less risky than it was a couple of years ago. I mean, I don't expect 11 more rate hikes after what we went through the last two years. Anything can happen. But yeah, I think there's a place for it, certainly with a big focus on that exit cost, right? You know, you're in a position to get out in 25 months instead of that five -year hold. Yeah, I think investors just need to understand like,

DJE Texas (25:55.854)
just what's the business plan of the particular deal they're looking at and does the debt enable them to execute that plan? Yeah, exactly. Really biggest driver of are these deals working or not is how are you gonna put together the capital stack? Are you guys doing a pretty straightforward kind of first lien senior debt and one class equity on top or do you guys get a little fancier with that or how do you structure it?

Yeah, no, no, no, good, good question. I mean, so we're, we're generally have just been senior plus equity, right? And the way, yeah, nice and simple. I mean, the way I've always looked at it, we've never taken on any preff, you know, and, you know, we're, you know, generally kind of plus or minus 70 % of cost is kind of where our leverage is 75%, you know? And so, you know, I wouldn't say that's low leverage, but I wouldn't say that's super high leverage either. Sure.

Um, and so, you know, yeah, we've just tried to keep it simple. I mean, we've had one or two deals where, you know, we've introduced like, Hey, if you invest a bigger amount, you get a higher preff, you know, um, and a split, um, on one deal we did like, uh, you know, basically like a fixed rate return, no upside. Um, but we've never added like preff or mezz. And, you know, I quite frankly just like to keep it simple, you know, like generally, you know, seven preff 70 30 is, is, you know, kind of.

how we like to do. I mean, we're creative to a certain extent, but I think what happens is like, you don't wanna basically financially engineer these deals. I mean, they gotta work on the basis of the business plan, the basis of the deal, and a lot of stuff that's happened in the last three years or so, a lot of it has been financial engineering, and that can obviously go the wrong way too. So, no, we try to just keep it simple.

Yeah. And there's some that goes a long way towards explaining this to investors, to LPs, to the accounting processes. I mean, anytime you can, anybody can make something more complex, right? They say the real elegance and beauty is in making something big like this as simple as possible. And I'm a fan of that as well. What does the team look like for you guys? You said you've got eight folks on the team. Is this?

DJE Texas (28:17.07)
principles, asset managers, what does the team look like for you guys? Yeah, so I mean, we've got myself and Prashant, two principles. We've got a asset manager, we've got a acquisitions, we've got a marketing person, we've got our admin, we've got a few VAs that help us, right? With the preliminary analysis, we've got our construction manager, project manager, and then we're looking to hire a few more folks to kind of round out the team.

Yep. You know, investor relations is something that's very important to us. And, you know, we kind of, you know, right now we share that duty, but we may, we may bring that on board. We're looking at, you know, potentially, you know, getting a little bit more operational help just to really manage the managers, you know? And so we've got a few open positions, but yeah, I mean, we've, we've tried to, you know, you know, take the...

you know, the pay that you brought up Dan Sullivan. So I'm I've been in strategic coach for about five years. Excellent. And so yeah, we just try to hire eight players, you know. And so, you know, I think in the beginning, we started hiring folks that may not have had the expertise, you know, and I think in the long run that hurt us. Right. So we hire hire folks that have the expertise that could hit the ground running. And and yeah, you know, I mean, we like to, you know, I think without.

having property management on board. I mean, we may have to add like an additional, you know, acquisitions person or additional asset manager as we scale. But I think for the most part, we can remain lean, you know, and that's the one thing I do. I do like without having property management. Oh, that's a beautiful thing to run it like that. I mean, think about it. I'm a prop an entire property management company taking three, 4 % of revenue to run that whole machine. It's not much money. Yeah. And so to have that.

Uh, just pay that fee as an expense rather than have to deal with the entirety of, of that entire, uh, completely different business model. I mean, we, the way we have a bunch of companies, but we basically have private equity company and property management company and sit down with our accountant and read the financials every, every month and look at KPIs like revenue per employee and profitability and margin and stuff. And they're just, they couldn't be more.

DJE Texas (30:35.534)
different companies, right? And so you're like, yeah, I think the private equity company is where, you know, where we want to focus and grow. And, you know, it's just, it's just different. So I think that makes a lot of sense to bring in some people on kind of the private equity side to help assist and oversee and fine tune and execute better, but not to have to have the property management side lets you run really efficiently. Right.

which is good. So you're in Houston, your partners in Dallas. I mean, is there like a friendly rivalry there? How do you guys decide what the next deal is? Do you care what market the next acquisition's in? Are you looking at other markets or is it just those two? You know, we're on the same page. I mean, we look in both markets. We really, honestly, I'll give you kind of the quick story. We bought our first deal in Houston.

And then we started buying deals in Dallas for kind of similar cap rates in Houston. And then we said, okay, well, you know what? You know, there's a little bit less risk, headline risk and stuff like that in Dallas versus Houston, right? And especially at that time. And then post 2020, what we saw was cap rates in Dallas really plummeted. And then we saw Houston kind of hold, you know? And so we felt like the discount between Dallas and Houston, you know, was strong enough for us to go back to Houston.

And so that's why we started buying. So honestly, we kind of bought like four deals in a row, their last four deals in Houston. Now we're kind of, we're still looking at Houston, but we're kind of pivoting back to Dallas because cap rates have, so we're not like, hey, we're just gonna, we were looking at both markets, but like we kind of did it with some intention, and like we focused heavily 2017 to 2020 in Dallas, then we last couple of years in Houston, and now we're going back to that, we'll still buy deals in Houston.

And so we kind of look at the data and we always look at relative pricing to each other. And we're like, yeah, we're like, hey, you know what, Dallas, we, you know, in a perfect world, Houston should be a 10 % discount to Dallas, right? But if I see a 30 % discount, I'm gonna go buy it, right? I'm just using example numbers, but like, that's how we kind of think. And so now we're kind of pivoting back to Dallas, but to answer your question, we are looking outside of Texas. A from...

DJE Texas (32:58.67)
just a diversification standpoint. We spent a lot of time Q4 last year, putting a bunch of cities on the wall and just figuring out, okay, pros and cons and whatnot. And went to NMHC, met with a bunch of brokers on our short list of cities. So I think we're kind of looking at the Midwest, Columbus, Indianapolis, et cetera. We don't want to spread ourselves too thin. We'd rather go into one, maybe two markets and buy two, three, four deals there, you know? And you know, it's a...

just from a diversification standpoint, B, I'm sure you've talked about this on other podcasts, insurance and taxes in Texas. It's getting really tough. And so, yeah, looking at one kind of, to build one core market outside of Texas. And so anyway, so we're narrowing it down to the Midwest. Yeah, I think that makes sense. You get three or four deals and it can support maybe a dedicated regional manager out there overseeing that stuff and you're getting some of those advantages.

that you mentioned. So yeah, I think that makes, makes a lot of sense. Um, how's, how's investor appetite been for these deals over call it, you know, the last year or so what's the, what's the sentiment out there? I know what we're, what we're hearing, but curious to see how you guys are. Yeah. You know, I mean, we, we haven't officially raised money in about, I want to say 12, 14 months, something like that. Um, but we did, uh, we had a couple of investor events events last year and we did a survey last year. So,

I would say at least based on our survey results, we got about 70 % of our existing investors are wanting to deploy. Nice. Right. And so, you know, that was honestly higher than I expected. That said, the survey was maybe three, four months ago. So I'm not sure how that would change today, but what's 70%. And so, you know, I mean, how we've looked at it is we've just said, Hey, we've raised X.

previously and we're probably looking at deals that are a little bit smaller or are gonna have to partner with some other folks. I think what's happened is, I mean, a lot of folks are getting capital calls and whatnot and they're just like, look, it's not your deal, Shane, or anything like that. It's just, I've got to put in more money on these deals. And so, I think everyone's just cautious, but I'm confident if we have the right, and one thing that,

DJE Texas (35:23.598)
We've done, Devin, since day one, we've scaled up to 2 ,000 units, but it's been over seven, eight years. It's not like we went from zero to 2001, two years. And we've kind of just taken the slow and steady approach and we've communicated, over communicated, whether it's good news or bad news. And I think investors respect us for that. And at the end of the day, we're all, our job is to be a fiduciary and make the right.

decisions for the deal, you know, and, you know, I still remember like, you know, we had a few deals where, you know, in the beginning we would like reserve for future, like even though like we generated 10 % cash on cash, just to give you an example. You know, I would only just distribute seven or 8 % because I'm like, hey, I just don't know what's going to happen, but like there's like a few kind of cloudy clouds forming. And so those decisions have actually helped us because,

in the last year or so, those reserving of that money has helped us give us runway. Whereas a lot of folks were just distributing money just to make somebody happy, which is not investment philosophy. It's like, hey, you got to just distribute what you earn, right? And so that's given us runway. Whereas if we had not done that, we would have lost runway, you know, maybe six, 12 months ago, you know? And so, yeah, so, you know, I mean, investor relations, communication, very important to us. And...

Yeah, I mean, I've talked to several folks in the industry. I think, you know, I mean, a lot of folks are saying like they could raise 25 to 30 % of what they used to be able to raise, you know? So I think it all depends on the sponsor, the deal and, you know, really your track record of doing things. Look, at the end of the day, we all had the wind at our back, right? For a long time. And so I think, you know, how you...

people are performing in tough times really kind of shows their true character, you know? And it's not fun or easy or pretty right now, but we'll get through this, you know? And yeah, I mean, we're just, you know, conveying that to our investors and doing everything we can from our end. Yeah, I mean, it was a really, really long run since 2010. And to your point, people were saying we were overdue when you guys got started in the business, 2015, 2016, and we even had a run.

DJE Texas (37:46.414)
Beyond that, but yeah, I agree. It's very dependent on, on the sponsor. And I think the thesis we have in multifamily is that these things are going to happen. They last two, three years and you just need to be in a position to not lose your property. Really? I mean, you know, distribution pause. Okay. Maybe a press still accruing. If you're able to just continue to operate, hang on, see it to the other side. Um, I think that thesis still holds up and we're hopefully closer to the end now than the beginning of this.

this dip or whatever, whatever you want to call this season. So, um, and if you're setting up a five, six year hold expectation, and there's a few years in there where you're just kind of playing a little more defense, which is not as fun, but it's, uh, it's still, still preserving capital. And, um, you know, I think we come out on the other side of it for the most part in a, in good position and even, you know, still hitting IRR projections, I think here in a couple of years on some of these, some of these assets. So, yeah.

I agree with you. Well, it's good. Well, hopefully, you know, we're talking mid 2024 here. So hopefully we've got, you know, clear skies ahead and everybody's sort of had the opportunity to get in the gym and lift some heavy weights for a couple of years. You know, some forward to coming out on the other side here. If somebody listening, Shane wants to connect with you, get in touch with you guys, see what you're up to later on this year. What, where do we send them?

Sure. Yeah. You could visit our website. It's a cat equity, C a T equity .com. Email me at Shane at cat equity .com. And I'm pretty active on LinkedIn. So you could find me Shane Thomas on LinkedIn. So yeah, happy to chat with the and talk shop with anyone. Awesome. We'll put that in the show notes. If you're listening, you can scroll through the description there and connect with Shane and the team. Appreciate you jumping on it. It was great. Great to connect. If you're in San Antonio, let's, uh,

Let's hook up and wish you guys success in the year ahead here. Yeah, thanks, David. Appreciate the opportunity. Enjoyed it. All righty. We'll see you.

DJE Texas (39:51.31)
Thank you for listening to the DJE Podcast. For more information, please go to djetexas .com.