Interview with Brian Adams, Founder & President, Excelsior Capital

Andres Sandate: 00:01

Hey everybody welcome to another edition of ATLalts. This is Andres Sandate, the host of ATLalts. I am delighted to be joined today by Brian Adams, the CEO and Founder of Excelsior Capital in Nashville, Tennessee. I recently was introduced to Brian and he's got a really interesting and fast growing platform that I'm looking forward to hearing more about. So with that, I'd like to welcome and introduce Brian from Excelsior Capital to ATLalts.

Brian Adams: 00:32

Hey, thanks so much for having me.

Andres Sandate: 00:34

Brian, it's good to see you again. And thanks for joining me on the show. You know, when when we got connected recently, I immediately knew that I wanted to invite you on the show because I think we share a common belief and set of interests around, you know, education of investors and educating the vast millions of accredited investors around the country, about the opportunities in alternatives and opportunities in private markets and private assets, which is a big interest and passion of mine. So I'd love to learn more about Excelsior. But before that, I'd love to learn more about you. And I love to ask my guests, you know, some of the things that they've done early in their career, where they grew up, and kind of what the inspiration is. The tagline of ATLalts is The Story Behind the Numbers. And so while there's lots of interesting things to unpack about your business, and learn about real estate from you, I think there's equally a lot of inspiration that can be gained from, you know, how you got to this point. So with that, tell me if you would a little bit about your background.

Brian Adams: 01:43

Yeah, happy to and thank you so much for having me on. It's always fun to connect through mutual friends, have a conversation, realize that we're both in the podcasting space, to come on a show like this - it's a lot of fun. And one of the best things that I think has happened since COVID, for me is embracing these types of opportunities, great way to meet new people. So my background...I'm from upstate New York, originally, kind of middle of nowhere. My father is an attorney, my mother is a child psychologist, which might explain some of my psychological issues. Cobblers, children. I went to an all boys military school in Albany, New York, and then went to a small liberal arts college in Connecticut. That's where I met my wife who is from Nashville. So we met in college. We did the Northeast thing for a little bit after school. We both went to graduate school in Boston, where I went to law school. I moved to Nashville 15 years ago, because if you start seriously dating a Nashville girl, you will end up living in Middle Tennessee.

Andres Sandate: 02:55

Yes. Yes.

Brian Adams: 02:57

Son in law capital of the world. And, you know, it's interesting, the journey to where I got here. I practiced law for a couple years in Nashville, I was actually a prosecutor. So I worked at the DAs office. I did not work in commercial real estate or finance or even a big law firm. But when I...so the way my wife's family works is they have a family office, which we can get into that world if you want. And it kind of started with negotiating the prenup. Because in the prenuptial agreement, they have to disclose the assets right? So I, unprompted get this email from the law firm representing my wife's family, with the disclosure documents. And I knew my wife was affluent. Obviously, I'm not unobservant. But I've never even I don't even know what the hell the family office was. As you open up disclosure documents, you see these the holdings, but then you also see these entity names. And you're like, what are these entities? And how does this work? And so that all led to joining the family board as an ex-officio member, right? I'm a non-lineal descendant. So I'm considered an outlaw, where my wife is the primary beneficiary. But I had observation rights. And so I started joining the quarterly board meetings, but also the weekly staff meetings are what we call them. And I started learning about private equity. I don't even really know what private equity was. I didn't really even know what public equities were. But, but through my father on our CIO and the investments we had made over the last 20-30 years, start learning about venture capital, private equity, commercial real estate. I got to meet some of the sponsors and GPs that we were working with - mostly in Nashville. It just opened up my eyes to this whole world I had no idea existed. And it's funny, the precipitating event that I started the company was I attended this, this class that a Vanderbilt business school professor put on for a men's development organization I was a member of. And it was an abridged version of his class that he taught called launching the venture. Which is all about, you know how to take an idea from your garage, and then take it IPO - kind of big picture. And he said, you know, before we get started, let's kind of do a thought experiment here. If you, let's pull up the Forbes 100. So he pulls it up on the big screen. And he says, if you remove everybody on this list, who either inherited the money or married the money, you're left with three buckets. People who had an idea in their garage, and then built this huge company around it. So think Amazon, Microsoft, Google. People who worked in a corporate gig, and then had all these stock options that over time they build up that equity in the company. So think, you know, the Tim Cook at Apple, etc. And then you've got people who had exposure to real assets, be they real estate, commodities, oil and gas, timber, etc. That's pretty much it. So what bucket are you going to play in?

Brian Adams: 06:36

And I thought, man, that's like the smartest thing I've ever heard in my life - that's incredible. And I realized really quickly, I did not, I did not want a salary job. I did not want that kind of gig. So at the time, I was trying to move from the DAs office to a corporate law gig. I stopped that full press. And I started the real estate company probably 30 days later.

Andres Sandate: 06:57

Wow. That's what I call moving quickly. So let me go back. You're in this, you're in this class, and you hear this aha. And did you. I mean, I grew up, God bless my parents, my mom and dad, they still live back in little town of Newton, Kansas, in the middle of the country. And they gave us a fantastic childhood. And they taught us everything, they gave us every opportunity. But you know, it's one of those things where it's like it, you know, you don't know what you don't know. Right. So to you, like your comments about like private equity and venture capital and all these things that, you know, multigenerational, let's say, wealth, have exposure to I think you and I hit it off, because, you know, you said some things about, you know, the fact that it's like thirteen and a half million, I think you said the number was thirteen and a half million Americans have, like, they're defined as accredited investors, meaning you know, they've got a certain net worth, they make a certain amount of money, etc. And they probably have a minuscule if any allocation to real assets, real estate, commodities, oil and gas, things like that. Yeah, you just articulated that's how a lot of people ended up in the Forbes, you know, 100 list. So why is there this big disconnect? And like, what, like did you just go home immediately and start writing a business plan and saying, like, to all the people that you grew up with, like, what are we doing? I mean, as you put it into motion, because it's one thing to have that like spark? And it's another thing to like, go and actually do something?

Brian Adams: 08:45

So this could be a fun 45 minutes. Yeah, get right into it. And these are the right questions to ask. Right? So first off, I'll say, I'll admit to my privilege of having great background for my family, having great educational opportunities. Looking at what I do, which is like a white male, and then marrying into this very affluent family, I could get any meaning I wanted. And I think most the time when I walk out the door, the presumption is I know what I'm talking about, or people want to help because they assume that is good for them at some point as well. So let's just get that out there.

Andres Sandate: 09:24

Yep.

Brian Adams: 09:26

But to your question. The really interesting part about what you said the first part is people, people don't realize that even if they have stock exposure, mutual funds, index funds, like an S&P 500 vanilla, like they already have real asset and private equity and oil and gas exposure. They just don't realize it. But because the way the system system is set up right now. They're missing out on the real upside. Right just because you own Goldman and you can experience that stock position, the partners at Goldman, who are getting fees based on the deals they do that have their internal deal fund getting exposure in side cars, on the really exciting IPOs that are really cool. Tech and VC funds that they help form. That's how they're getting to the next level. So I think people are scared because they don't understand it. And there's a lot of Wall Street jargon and terms out there that are meant to scare them. Because Wall Street's built a moat, around, you know, this whole business for the last 100 years. And they've done really well with it. But they've got to realize they already have exposure to these industries. It's just so synthetic, and pulled apart. And the friction costs between their exposure to what's actually happening are so harsh, that they're not experiencing the real upside to it. So what I did was, I started having coffee with anybody in commercial real estate that would be with me, like, it didn't matter if they were broker, lawyer, insurance person, property manager, principal, third party, whatever, and just started learning that way.

Andres Sandate: 11:28

And did you how did you get those meetings? Because I'm all 100%, about empowering people and saying, like, I can't walk you through the door. But I'll be damned if like, given what I've learned in my 42 years, I'm not going to try in the time I have here left to open your eyes to the fact that there are a lot of doors. Now, there's gonna be a lot of ways that those doors get crowded, and you can't get through, but like, go find the next one. So how did you get those meetings? Because like the idea of calling up somebody that's a broker or somebody that's busy in real estate, it's hard to get people's attention. It's hard to just say, like, Hey, will you sit down and help? You know, me learn this business? So did you have the family office? You know, as like, sort of that was the business card? Or did you have Hey, I'm a lawyer on transitioning into commercial real estate, you know, what, what was the angle, because I think that's a big insight. Because you've got to learn, you've got to build a network, and you've got to have relationships.

Brian Adams: 12:35

My father loved it, something that was at the time really frustrating. Short term, but long term is probably the best thing he ever did. He made two introductions for me. But which was like he couldn't do a lot more than that. But he said, you can tell everybody in town, what our relationship is, and that I'm an investor with you.

Andres Sandate: 13:01

That helps.

Brian Adams: 13:01

And so when you when you have that opening, as your preamble,

Andres Sandate: 13:08

Yep.

Brian Adams: 13:09

And you're not afraid to pick up the phone or make a couple of blind emails or LinkedIn notes. Yeah, you can start getting some meetings and then to your point, especially in real estate, but but I think it just in general and in the private world...

Andres Sandate: 13:25

Yep.

Brian Adams: 13:26

if you don't have the skill set, to get meetings on the books, do proper follow up and provide value to the people that you meet with, and not just have it be totally unilateral and one sided, you're going to be a failure in this business anyways, like you shouldn't be in this business. Because in real estate, this is what it's all about is being thoughtfully persistent. Making timely introductions and referrals. Being helpful to people and building up that karma over time. And you always end the meeting with, even if this is like, the biggest real estate person ever in the world. Well, how could I help you today?

Andres Sandate: 14:04

Yeah.

Brian Adams: 14:05

What are some things that you're struggling with? Or what are some problems that you're having? You never know, I might be able to help. And if that's the framework, and you get three introductions, or three names from every meeting, you take...I had a, I followed a rule, that an old insurance sales guy told me, that he would not let himself leave the office on Friday until he had three meetings of the books for every day next week.

Andres Sandate: 14:30

Right? Yeah.

Brian Adams: 14:32

So I started doing five meetings a day and 10 phone calls a day. And pretty soon if you do that for six months, you have a decent Rolodex.

Andres Sandate: 14:43

Now I want to talk about when you start thinking about building this real estate business, like it sounds like the light bulb went off, and you get out and you start hustling, having meetings. Did you have an idea Brian about, like, the kind of real estate that you wanted to buy? Or was it, you know, I'm gonna refine this strategy. As I get out, and I start seeing what the opportunities are, and over time, I'm gonna, you know, kind of use what I call the Lean Startup method, right? The Lean Startup method of just talking to customers and using customer feedback to kind of iterate and sort of improve your process. And I'd really like to hear you talk about if what you started with is where you're at today, or if you've iterated, you know, maybe once or twice or more times to get to kind of what is Excelsior.

Brian Adams: 15:40

So, again, this is the, this is the right question to ask. And I do a whole presentation on this. I did a video and a PowerPoint, because the question I get asked the most is, how can I raise capital efficiently?

Andres Sandate: 15:52

Oh okay.

Brian Adams: 15:53

Especially as a first time entrepreneur sponsor. That's why I put together this kind of detailed. But this is how I started is, like most people in this business, especially alpha males, just thought, I am the smartest person ever. I know what I'm doing. I'm gonna find these really cool, bright, shiny objects, and then the money will come. Right. And so that pitch sounds a lot like the ego pitch of...I went to these great schools. I know these really important people, I worked at these prestigious firms, I found this really, really great deal. And you need to do it because of me and the deal. Well, there's a lot of I statements in that whole pitch. And if you ground and pound it, like I did, you can, you can do it, right. And that's what we did. We started raising blind pool commingled funds. Urban infill deals in Nashville. And the deals are really compelling. And they were sexy and cool. But unfortunately, my investor base, my logical investor base, it was not what they want. And so we raised three funds, but it just never was as smooth as it should be. And so about six years ago, I completely pivoted. I took a pause. I went to my investors, my current investors, and then my prospects, who should have invested with me like these people that I know should have done deals. And instead of me just talking about me, I just said, "can I buy you a cup of coffee, get some advice from you." Because I had a mentor tell me, if you want money, ask for advice. And if you want advice, ask for money. So I took it to heart, and I just said, "hey, I just want to, I don't have an agenda. I'm not pitching a deal. I really just want to hear your thoughts here." So I just asked people, "hey, if you invested in commercial, real estate and private deals, what would you want it to look like?" And I started taking notes. Like the structure, the time horizon, duration, the investment return profile, the reporting, the marketing, and I completely changed my business to provide them with a solution set to their problems, as opposed to deals that I thought were compelling. And when I started doing that, the business took off.

Andres Sandate: 18:24

And so when you have this pivot moment, right, that's actually a term in venture. And you realize that I need to get closer to the capital in a much more authentic way, I need to understand their issues, instead of me, bringing them what I think are the solutions to what I think are their problems. And I've been around the industry, and I see a lot of that, you know, alpha male, great schools, on paper, they check all these imaginary boxes. And I, and the term, you know, that gets used as pedigree, you got the pedigree, and it's just like, you know, but then the business side of things, so much more nuanced, or so much more complexity. And at the end of the day, people in the real estate industry, in my experience, are much more relational than almost any other asset class. And they really like touching and feeling and seeing and really being a part of, what is an experience like to invest in a building, or to be a part of a development or to see, you know, see how, you know, to see how an area gets brought to life. And I want to talk about what you see in Nashville, whether it's a market you invest in or not. And then ask you, you know, what, what are investors to think of Nashville? Is it a bubble, or should they be putting their money to work and other markets maybe that aren't so hot? But before we get to that, you talked about this presentation and people coming to you and saying, how do I raise money so what have you found is the formula?

Brian Adams: 20:02

You've got to check your ego at the door and be super empathetic, which is a term that we use a lot now, but truly be empathetic in terms of what and I say logical or natural investor based on by that. I mean, I work with high net worth individuals and families, okay. And then the financial services folks that have those people as clients. Okay. And that's great. It doesn't mean I can go patient endowment, or a pension plan, or large white shoe, Wall Street private equity group. I don't know them. I don't know what their problems are. I haven't structured my firm to work with them. We don't have shared experiences. That's not going to be realistic for me. And so a big part of this is being realistic with who are the 100 people that are going to take your phone call, it might actually exchange their resources, their time and money for your product. Right. And that's what we're talking about here. Yeah. So for me, and the people that I work with folks that I serve, it's super straightforward. Three things, access to direct deals, double digit cash on cash yield, the tax benefits that come from direct real estate ownership. Those are the three things that we do.

Andres Sandate: 21:29

And say to you, yeah, so sorry to interrupt you. But I want to ask, so did you. Did you find that you had to educate people within that circle of influence? And as that circle grew? Did you have to educate them on that? Or did they understand the tax benefits of investing in real estate? Did they understand, you know, when you said things like cash on cash return? Because, you know, look, just because they have a lot of money doesn't mean they're necessarily understanding this jargon. And you use the terms like, Wall Street's great at creating terms like IRR and multiple on capital and cash on cash. And, you know, you talk to the average person that's, you know, an accredited investor. And I don't know, I mean, they might understand what that means. You say, blind pool versus direct investment. There are their head spinning. So how do you simplify it for them? And where did you start?

Brian Adams: 22:27

Yeah, and you're right, there's a huge spectrum of what I would call, you know, sophistication, and that's not a judgment, call these people as people, yeah, if they're a neurosurgeon, and they're really good at what they do. And they came up, you know, bootstrapped it from their background. And they've been heads down on their business. They don't read the Wall Street Journal every day, like I do, or Bloomberg, or the economist, or whatever. And these terms are gonna be foreign to them. So what you have to do is kind of peel back the idea, and realize fundamentally that these three things that I mentioned, they know that that's an issue, right. So they know that investing in reeds, versus their friend who owns a building downtown is a different thing with different return profiles. And they want to own real estate, because they've seen over generations, that real asset ownership creates real wealth. But they don't understand that when I say direct co investment, I'm talking about fractionalized ownership of a real asset, but that they own it directly. So they're part of the ownership group. So you have to teach them that part of it. They can feel that bonds, and fixed income and private credit, whatever their money market account, they can feel that that's not giving them a decent return because they feel inflation. These people, even if the Fed says inflation is transitory, if you've been paying for private health care, private education, or you bought a house over the last 1020 years, you've felt that inflation and they realize, oh, man, these yields that I'm getting elsewhere, besides my salary, I'm not gonna be able to keep my head above water. So they know that cash flow is a problem. And these are typically highest income tax bracket, folks, right? So they know that they're getting 40 to 50% of their take home, off the top. And there's there's they understand that the tax code is complicated, there must be ways that they can. They can decrease their tax liability, but they're just not sure how they can do it. So these are all fundamental things. You just have to kind of tease them out a little bit.

Andres Sandate: 24:46

Right and so that that ultra high net worth individual they may have a financial advisor they may have somebody that they refer to as their their planner. One of the things that's pretty fascinating about Wall Street is the financial innovation. You pick an asset class, and Wall Street has figured out a way to slice it, dice it, fractionalize it, put it in some kind of, you know, vehicle and then go sell it. That's one thing Wall Street's really good at. And then replication, right? Once something's working, everybody moves in that direction. And we have these feast and famine, environments. There's, you know, any great historical book on financial crisis, you can see that. And today, you could look at tech, and you could say, "wow, everybody's piling into technology. You could do that directly, like you said, and you have more of a synthetic exposure to a company like Google, or Netflix, or Apple, you know, people are walking around with the Android or the iPhone. And you can synthetically own the growth in that, that business. But you could also invest in early early stage tech companies that have an app on, you know, the app Store, or in some way are part of that value chain. So let's talk about that in the context of real estate. So in real estate, you can own a REIT, which, you know, help us understand what that is. Or you could, you know, think about partnering up with Excelsior and what you're doing with your team, and own a fractionalized direct ownership in? Is it an office building? Is it an apartment building? Is that, you know, what is it and so help us understand that, that that read versus that direct ownership and some of the some of the benefits, pros and cons of each.

Brian Adams: 26:44

And, again, when I structured the platform to address this problem, the, my avatar or my ideal customer profile investor, the biggest challenge they had was access. Because typically, their financial advisor has already given them a REIT allocation. Right, and REITS, do a good job of giving you, as you put it, synthetic exposure to real assets. And that was the initial, to your point, in Wall Street I had an old investment banker friend of mine tell me that if you're getting pitched a Wall Street product that has an acronym, and its confusing, and you're not sure how it makes money. They're making money off you the retail end user. You're the product.

Andres Sandate: 27:45

Right? You're You're the You're the one at the card table, right? That that's been taken. I mean, we're being we're being a little unfair. But but your point is, if you look back at the last financial crisis, right CLOs, CDOs CDO squared, RMBS, CMBS. Some of these terms still live there. But yes.

Brian Adams: 28:03

SPACS.

Andres Sandate: 28:04

Right, all those kinds of things, right. It's it's a it's it's common for the jargon and terminology to be thrown out. But what what you're saying is with with a REIT, like a publicly traded rate, what you effectively have is like a stock that you can buy and sell on a daily basis, if you will, more or less, that owns an underlying portfolio of commercial real estate, is that correct?

Brian Adams: 28:29

Correct. And for what they are, they do a good job. This is not me..

Andres Sandate: 28:34

Yeah.

Brian Adams: 28:34

...painting with a broad brush, right. Like, REITs have a place in the world, and they do a good job what they're supposed to do. But like a lot of products they don't fulfill every need, right? So the problem with REITS is they are tax inefficient for taxable investors, because they're getting ordinary income off those yields. Yields are really depressed right now in REIT land. And the correlation with the overall stock market is super high. Right. So one of the things that's beautiful about direct real estate ownership, right, if you own your home, or if you own a office building downtown, when there's a correction in the market. Your buildings still there, right. There's no, there's not a daily scoreboard, which is a wonderful thing. And there's there is no liquidity near term, which can be a challenge, but also when things get really hairy. It's a really good thing because I can tell you that if, when when COVID first hit, if I gave my investors the opportunity, a lot of them would have probably gotten out at a 40% discount.

Andres Sandate: 29:38

Yep.

Brian Adams: 29:39

And looking back on it now, that wouldn't have been the wrong call.

Andres Sandate: 29:43

Right. So they have that illiquidity, we call it an industry we have to be careful about not using jargon. But for investors. Essentially the trade off is this and you correct me if I've if I get it wrong. You are willing to lock up or tie up or commit your capital, your your a portion of your wealth. And we're always talking in proportion, right? Diversify, diversify. In exchange for a group like yours going out and taking that capital along with the capital of other direct investors. And then you're looking for a piece of real estate. And you're going to need that capital for a period of time. And because you're going to go have to go buy a building, you're going to do some things to the building. And then at some point in time, you know, the capital could be returned to the investor. But maybe that's not all, maybe you'll do some things in the interim, like pay a distribution or, you know, send people a check. But that that illiquidity is often a trade off. And in the public market, you get that correlation, meaning, hey, there's a really terrible jobs report, stock market sells off 2%, REITS sell off, you know, two or 3%, all of a sudden, your paper wealth is down, and you didn't do anything different. You woke up and went and did brain surgery, all sudden, your 2% poorer, right. So that illiquidity premium is real.

Brian Adams: 31:12

It's real. And that's why when people ask my opinion on, hey, like, where's there a great opportunity in commercial real estate today? This is all and we're gonna use a term here, but it's all about your risk adjusted return expectations. So what that means is, if you are risk adverse, then yeah, you should go buy, whatever the REIT is that owns brand new Class A Amazon distribution warehouse. Totally. Like that's bulletproof. Its going to do well. Its going to stay liquid. You're probably going to get probably a one or 2% return on that thing. And it's not really going to appreciate much because everyone's in on that trade. But if you really want to feel safe at night, that's a great place to go. If you were if you had more risk, if you were amenable to more risk. Maybe you should look at some deep value-add hotel deals. I mean, right now, there's probably some out there. It's not for everyone, right? I mean, you could really risk permanent loss of capital. But your upside could be huge. What I like to say is, we're somewhere in the middle. Right. The illiquidity premium, the fact that you can't just cash out on my deals is a con for sure. But if I can give you 10%, on average, annualized and monthly distributions, and I can push through losses to your K-1, through cost segregation analysis, and accelerated depreciation, so that you can offset gains elsewhere in your portfolio. And then hopefully, I can create some upside. I think that's a good reward for the illiquidity. I think double digits is the right number. And we don't focus on IRR, or any of that stuff, because I don't think people really understand what it even is. And you can't take our our to pay for your mortgage or your kids college. Like it's ephemeral. So we give distributions of hard cash flow so that people can pay for their lifestyle or invest that money elsewhere. That's where we think we're kind of in the middle of a lot of this. And that's how we've kind of created the product.

Andres Sandate: 33:23

Sure. I want to ask you a little bit about, you know, real estate itself. So you had this like, pivotal aha moment and you said, wow, okay, real estate, that's where it's going to be. Real Estate you know, I always find it interesting when when people ask like, what do you do Andres? Say, well, i'm in alternative investments, private markets, like, you know, do a little bit real estate. Oh, you're a real estate person, you must do great. Well, real estate is such a broad term, right? So let's break it down. You're doing commercial real estate at Excelsior. And within commercial real estate, you've got all different types of commercial real estate from like, you mentioned, hotels, you talked about industrial or logistics, distribution centers, people get that. You've also got office buildings. You've got, you know, retail-strip center, retail-mixed use, you know, retail on the bottom, maybe condo on the top. Got all these different food groups, as they call it. Where do you Where do you like to focus? How do you focus? Like, there's a lot of really interesting things going on everywhere. Asset prices have appreciated, and just about everything, it seems like stocks, real estate, art, any kind of alternative asset, it seems like. So how do you how do you decide where to where to spend time as a team?

Brian Adams: 34:50

Yeah. And that's where having these three underlying principles is really helpful, because it It prevents us from what's called the industry style drift. Where just because I can do a deal, I should do a deal type of mindset. And I've fallen into that trap before. I made that mistake. So for us solving for that yield, without taking too much risk or leverage means that we are what's called the industry a cap rate buyer. And cap rate is essentially like EBITDA, or price to earnings ratio. A way that I can compare an office building in Milwaukee, to a retail center in LA. It is the ratio of how much I pay versus how much cash it produces. So for us, we really need to be in a seven to eight cap range. Which means with leverage taking up debt, we can get the 10 to 12% cash-on-cash yield. And it's important for us to maintain that yield over long term. So these are what's called core- core plus, which basically means stable, well occupied buildings. And to your point, asset valuations have gone through the roof since I've been in the business. So for us, we've had to go to smaller deals. Right, there's an adage that it's the same amount of brain damage to do $100 million deal as a $10 million deal in real estate, private equity, whatever. It's true. But the pricing premium is different. And so for us to have that $10 million price range, in what's called secondary or tertiary markets. So places that we've transacted recently would be El Paso, Texas, Chattanooga, Tennessee, West Palm Beach, Florida, Kansas City, Missouri, Dallas, these type of Dallas suburbs. These kind of growing markets in the Sunbelt, Southeast, Midwest areas. So that's how we kind of think about it is how can we solve for those three key components, but do so in a way that we can still experience some upside, based on where we see growth happening. Because, again, what you're seeing play out across the entire spectrum of real estate as well as all kinds of assets, is the Fed has been printing money since 2008. And that money needs to go somewhere. And so it's going to go towards assets, which means that cap rates, those ratios continue to go down. And it's very challenging to find value right now. In I mean, across the spectrum, but real estate as well. So we think about kind of macro, where people moving, where's their growth? Where's their population growth, job growth, wage growth? And then once we find some markets, we like, okay, what are some products or asset types? So for us, that's industrial flex, medical. Think, single story, airport products. That's, that's what we like. They stay full. They're easy to run. And people really like occupying them.

Andres Sandate: 38:07

Yeah.

Brian Adams: 38:08

So that's how we think about kind of high level macro. But then very granular, okay, well, how can we solve these three problems and stay true to the to the principles of the firm.

Andres Sandate: 38:18

Right and avoid, avoid the style drift and avoid, you know, this, I got to gather up hundreds of millions of assets, because that throws off fees, and then that, but that forces a cycle where you're deploying money, you're chasing deals, you know, you're paying, maybe overpaying for things and that discipline and focus, you see that time and time again in, in our industry. Which leads me to a question around, you know, there's a lot of gunslingers in real estate, deal junkies, whatever you want to call them. And I think it's part of the alpha male thing. I think it's part of this, you know, I don't know, you, you, you come up through an up cycle. And so things are working, and you start, and I'm generalizing, but but you start seeing capital being deployed. And it's so I think it's true, I think the data shows this, that, you know, the first five deals are usually the investor's best five deals, you know. If you compare the first five to the, the second five, and the third, five, and the fourth, five, you know, maybe there's a trend line, but I tend to think that when you have skin in the game, you're building your firm, you're you're trying to establish track record, and it is a going concern, you're just going to be more careful. So where are you all in that lifecycle? And what have you learned about building a firm? Right, now this gets to kind of the part of the conversation where I like to ask leaders about recruiting, and team, and culture, because I think in our industry, there's this obsession with returns. And there's a lot of people that, you know, like to profess that returns will solve all the problems. And there's some truth that returns will get attention, but the persistence of the returns can be fleeting. So I want to ask you, from the leader standpoint, like, how do you go from having this insight about real estate, to then thinking about and being humble enough to go ask people for advice, to then coming up with an investment philosophy and a process, and then trying to build, you know, build a franchise? You're not doing this for the next deal clearly. And that's, that's one of the things I'd love to unpack with you is like, how do you recruit? How do you build a culture? How would you characterize your culture?

Brian Adams: 40:46

Your statement makes me I have all these things, I guess, a family office investor, who's participates at some of our offerings, told me once that once your hedge fund manager starts a foundation, like a philanthropic foundation, or buys a plane, redeem out.

Andres Sandate: 41:08

Yeah, I agree.

Brian Adams: 41:09

Alpha is no longer happening.

Andres Sandate: 41:13

Yeah, yeah.

Brian Adams: 41:16

But to answer your question, so this is a trap that I fell into. That is very stereotypical of real estate sponsors or GPS or principals. It is that deal guy gunslinger mentality of, we're gonna go out and get the most AUM and have the most square footage, so that I can talk about it on my country club. And what you realize is, especially in the syndication business, if you're just focused on the deals, and even if the deals work, you will fail. Because what I've realized is, I'm not a real estate investor. I am an alternative access platform that services individuals and families. Right, that's a small business. And until you start thinking like a small business owner, you won't have a scalable, repeatable business model, regardless of what your product is. Right, my product happens to be real estate. But if you don't have the infrastructure, set up, reporting, marketing, investor relations, communications, HR, tax, audit, whatever, that underpins the deals, and if people have a crummy experience, being an LP with you, being an investor with you, nobody really cares how great the deals are. The institutional investors that might work. But for individuals and families, the investor journey and experience is almost just as important as the deals. Because let's be honest, we all hope the deals work. We know what carried interest is we know that happens. They're not all work. And you're going to be defined by the deals that don't work and how you respond. Much more so than the deals that do work.

Andres Sandate: 43:15

Totally 100%. I, you know, I know. A shout out to our mutual friend Brian Cote, at Gramercy Park because he, you know, he introduced us and shared with me that, you know, one of the things that he most respected about you is just how you conducted yourself when, you know, the deals aren't always going according to plan. And that's just the nature of business. That's life. And it's like so true about relationships. You learn more about people, when their backs against the wall than you do when they're knocking it out of the park and rounding the basis. And I, my son's seven, he plays baseball and I kind of laugh at how homerun trots have become so much more you know, elaborate now, you know, it used to be you hit a homer throw the bat and run. Now it's you flip, you point to the dugout, you do some stuff, you round the bases, you do all this thing. And its like, you don't ever see that when they strike out. You know, you don't ever see that when they're in the slump. And I think it's such a good analogy. I remind my son of that all the time. You know, it's like, how do you conduct yourself when you're running out an infield hit, and trying to beat it out to first. You know, that's the mentality I'm trying to instill in them. But I want to ask you about the things you said earlier, you talked about customer journey, customer experience. I think if I said customer journey experience to people in the vast majority of our industry, they'd say you're a marketing person, get get out of here. You know, I want to talk investments. Why, why, when did you arrive on that? Was it from other experiences, you know, no pun intended, or when did you say yourself like the CX customer experience customer journey stuff is real. And it can be a competitive advantage if we get it right.

Brian Adams: 45:07

Because I've totally screwed it up early in my career, where I fell into a trap of being a deal guy. You know, I, I found those three elements that I knew were, were were, were compelling in our marketplace. And so the pitches were working, the capital was flowing. It's what happened six months later, when I just didn't have I didn't have the reporting, the communications, and investor relations and have the right personnel in house. And I couldn't accommodate the investors. And I was I was underperforming on everything else other than the deals. And I got my teeth kicked in for about a year. Going around and trying to figure out okay, what was I doing wrong? What did they want? And it was it was by making those mistakes that ultimately made me a better manager. And I agree with you, in my business, especially, if you just take a portion of what I said, seriously, you're going to be a top decile sponsor.

Andres Sandate: 46:16

Right.

Brian Adams: 46:17

Because most people don't take it, they don't put the resources and the time and the effort into it, that it deserves. And I think what you realize is, as a manager, once you lead with that, and that's your value proposition. The deals kind of take care of themselves, right. But if you want a scalable, repeatable business, if you don't have all of the guts of that business put together correctly, you're gonna spend all your day on the phone. And that's not the highest and best use of your time to yourself, the enterprise or the investor. And so it's because I stepped in those potholes, and really made those mistakes and learned the hard way that I had completely changed my business model. And how we spend our time and resources. Obviously, we care deeply about the deals, we all want them to be great. But again, and this is really a testament to, unfortunately, to how Wall Street has operated in the past. Most the time is let's just close this investor and let's get on to the next deal.

Brian Adams: 47:29

So, I like to, I'd like to wrap with you, Brian, and ask you to kind of look ahead in our business. I think you and I both agree that we're, well, I believe, and I hope you'll agree that we're, we have an opportunity to provide education, to a lot of folks out there who, they should have more of an allocation to private markets, private assets, including real estate, and they don't because of a variety of different structural things. Technology's changing that. You know, podcasts like this, I think are are opening and democratizing as we say in the business, access to information. It's no longer you know, just your financial advisor that has all the answers and financial advisors serve a great purpose. I'm of the view, though, that financial advisors are fast becoming the conduits to great sponsors, if they're doing their job. And so, among the many other things that they do. But I want you to look in your crystal ball and look ahead, and what is your organization look like? You know, if if, if things are going, you know, well, in five or 10 years, you know, what, what do you want your organization to be known for to be? How do you want people to view Excelsior Capital.

Brian Adams: 48:52

It goes back to my, to my ideal customer profile. To identifying the problem. It's, it's access. It's access to opportunities, access to my network, access to educational content. I would just be a portal for them to access it, all of it. And yeah, it might not always be real estate, right? I mean, I've been in the business 11 years, I've been through two cycles. And what was once a great asset class is now hated. And I've seen it go full circle. So, it might change, but fundamentally leading with that content and education, being an industry expert, being a thoughtful leader within the space. I think that will always be something that investors need more and more of. And one of the coolest things that's happening in the industry today are things like this right where 11 years ago, podcasts weren't really doing the thing. Social media was just for photos. But now, an investor can educate themselves about flex medical office buildings and secondary markets. They can learn all they want in a week, if they spend some time on it for no money. YouTube, my web page, podcasts like they can become an industry expert. And that gap between where they are and what they need and me, no longer has such a wide moat around it.

Andres Sandate: 50:29

Right

Brian Adams: 50:29

Which I think is the coolest thing out there right now.

Andres Sandate: 50:32

No, I agree. I agree. Well, I'd love to invite you back on the show. And in, in six months. That's one of the things I'm hoping we'll get, you know, will come from the show is the opportunity to meet, you know, established, up and coming next gen, you know, owners, founders, investors, portfolio managers, and, and really, like, go on the journey with you, in a way, you know. Hear hear about some of the innovations and what you're, what you're disrupting, and what you're breaking, and then check in with you. But I want to wrap with you. I think a big part of this, too, is, you know, the balance, as we say, trying to find ways to recharge, trying to find ways to stay inspired to keep doing, you know, the work you're doing, like how do you do that as we wrap up, because I think there's probably a lot of insights for other aspiring fund managers and other investors out there. And, you know, I like learning from, you know, from other people that are operating at a high level.

Brian Adams: 51:36

Yeah, so, recharging the batteries is really important. And one of the things I was super hesitant about early in my career was always being available to my investors. But now we've set pretty tight boundaries. Like starting five o'clock on Friday, absent an emergency, you just not allowed to call me. Like, I need the weekend to do my life to see my kids to get my rest to be the best principal I can starting on Monday. And still someone's gonna respond to you. But setting those guardrails, I think is really powerful. And as Brene Brown says, clear is kind. Right, just being honest with people upfront, I don't think they'll begrudge you that? And to answer your question so this is probably, I don't know if it's unusual or not. In our industry, like you said, we have a lot of people who work really hard. But my thing is, I've got a eight year old and a five year old, a wife who works, pretty busy during the week. What I realized is that at like starting at 6:30 in the morning, people really care where I am. Like, my wife needs me for something my kids need me for something, like people that I work with need me for something. But before 6:30am nobody really cares where I am. And so that's my self care time. I wake up. I set my alarm for 4:01 and then 4:10. So I wake up at 4:10 I make a cup of coffee. I take my dogs out for their morning walkies. I do a little bit of meditation, thoughtfulness, catch up on, make sure there's nothing crazy going on email, text message. I'm on the road to the gym at 4:40. And so oftentimes, I'll listen to a podcast, but sometimes we just put all the windows down, it takes 13 minutes to get to my gym. I just have like quiet time. I show up at 4:53 get a warm up, then workout for about an hour, I'm back at home at 6:13 check the email again. And it's 630 it's kind of go time.

Andres Sandate: 53:38

And that as we say it's a wrap. You want a formula for success. I love that. I mean, I appreciate you sharing that. I mean, now now, I think, you know, we've done our part in this show today by bringing somebody on that, you know, use the opportunity that you have, you know, and some of the privilege and actually turn it into something. You know, you're employing people, you're creating jobs for people, you're creating wealth for people, and you clearly put a hell of a lot of work into it, you know, into yourself and all that. So not to put you on the spot. But I I love that because most of the successful people, you know, whether they're working at a nonprofit or a foundation, and changing the world in that respect, or, you know, they're lifting people up and giving them access and exposure to the things that you're doing like in real estate. Most of the more successful ones, they work their ass off. And, you know, they they are obviously rewarded as a result. So I just want to tell you, thank you, Brian, for coming on the ATLalts podcast. I want to invite you back in in six months and hear an update on you know what you're doing at Excelsior Capital. You guys have a great website. You've got lots of great content, you yourself have a podcast. So I'd encourage those of you listening to go check out Brian Adams and Excelsior Capital in Nashville. Thank you very much for joining me today on on the show.

Brian Adams: 55:08

It was awesome. You asked great questions. This was a lot of fun. We could go on for another hour probably so happy to come back anytime.

Andres Sandate: 55:16

That's awesome. Thanks so much Brian.

Brian Adams: 55:18

Absolutely.