Transcript

Aaron:

Anthony, we’re so happy you’re here on the podcast today. I want to welcome Anthony Rinaldi, who’s the Founder and Managing Principal of Saxum Real Estate. He oversees all the aspects of the firm’s strategic initiatives and operations including investment strategy, acquisitions, capital raising, leasing activities, and development. He’s leading a team of over 35 professionals. Saxum is really going through explosive growth to become one of the fastest-growing real estate private equity firms in the country with over 7 million square feet, across 30 assets, and over 2 billion in investment capitalizations.

We’re thrilled you’re on Anthony, and what you’ve done is remarkable, and we want to try and share your story. So maybe we’ll start with a personal background. If you wouldn’t mind sharing a couple minutes of your biographical sketch that would be wonderful.

Anthony:

Awesome. Well, I appreciate you having me, Aaron. It’s good to connect again.

Yeah. Super blessed. It’s been a wild ride, you know, not sure how far back you want me to take it. But I grew up in a middle-class family. My dad had a small contracting business and my mom was an administrative assistant. I grew up in New Jersey in Glen Ridge with my parents and my younger brother. I went to Glen Ridge High School and had a pretty standard childhood. I was very fortunate to have a couple of loving parents.

I ended up going to Penn State originally and was putting myself through college, mostly funded through student loans and side jobs and was having a lot of fun at school. But I realized that I needed to start focusing more on academics and less on social skills. So I ended up transferring to NYU. I was very fortunate to get into their undergrad real estate program at night school.

So I started in that program in the city, and simultaneously—this was right at the crash—[at] GFC I started as a commercial broker. So I got a job working with some good folks at Newmark Knight Frank doing office leasing. The commission-based business was really challenging, obviously as you can imagine to find the owners principal-side roles, you know, in 2009, mind you.

So I figured I’d bet on myself and give it a shot, and jumped into the commercial brokerage industry. So was doing that, working as a bartender and bar-back on the weekends to make ends meet; going to school at night, and working in commercial brokerage. So it was what I liked to call my “pursuit of happiness”. I met my wife, who stuck with me through all that stuff, and my career really took off from there. So ended up getting recruited to go to a boutique shop called Garibaldi Group, another New Jersey-based firm. Wonderful guys. [I] had a chance to work on some great business there. And then from there, [I] wanted to learn the asset side even more. And went to Colliers to work with a team—my former Newmark Knight Frank team—and really there that I started kind of hitting my stride and finding a bit of success relative for my age. You know, I was in my early twenties and at that point started really understanding the real estate side, the ownership side.

Obviously, [for] most people who get in the business, the goal is always to get on the principal side, and eventually one day [I] worked up the courage to go out and kind of launch my own platform. Most people thought I was nuts. I was about to get married, probably had about $140,000 in student loan debt, but I knew I had a dream and I kind of wanted to do it at a young age. I uncovered a unique investment strategy and thought I saw a wrinkle in the market, and really just launched from there. That was eight years ago, over eight years ago, when I started Saxum.

Aaron:

That’s an amazing track record. And for the record, you were crazy. What were you doing? You were about to get married! Come on.

Anthony:

Yeah, I was about to get married, [had] a lot of student debt, [was] living in a crappy apartment. But when you have that desire, and you’ve got that kind of entrepreneurial itch, it’s hard to put that down. It’s just kind of in your bones. So you just got to go chase it.

Aaron:

You’ve done amazing things. And especially in the past few years, the growth has been explosive through all the partnerships and all the capital raising. Maybe you can give our listeners a sense of what the business is like today, maybe versus a few years ago in the earlier stages and what were some of those bumps in the road you overcame.

Anthony:

It’s been crazy. You know, the job of a principal is, is solving problems, right? You’re just making decisions and solving problems that come up and, you know, every day brings a new challenge. As you know, we were the definition of a startup. My first office [was] literally working on boxes with just Christmas lights strung up, and it’s kind of blown up from the one project, one person, one building to now 35 professionals. I think we’re probably up to 40 assets across the country or projects across the country, well over $2 billion [dollars] and a variety of different asset classes really spanning most of the nation. So it’s grown kind of exponentially. And really I’d say the last five years is where it started taking off. And then the last two is where we’ve had that kind of explosive growth.

But I think that’s the nature of an entrepreneurial story. You just start out learning your way through it, kicking your way through it [and] kind of just fighting through all the hurdles because the truth is there’s no playbook for this. You’re only going to learn it if you go out and try it. And you know, that’s essentially what I did. And you just kind of build on every day from what you learned the previous day. And that’s how we’ve seen a lot of growth here. And I would say, you know, surrounding yourself with the right people is what’s most important.

I remember in my first interview, they asked me something along like the lines of, “Do you think you’ll be successful?” And I said, “I know I’ll be successful…provided I surround myself with the right people.” And, you know, that kind of ethos rings true today. We’ve got an amazing team at Saxum; people all rowing in the same direction for a common goal. And that’s what’s really kind of pushed us forward to be the firm that we are today.

Aaron:

It’s amazing. I know you have a motto, “every day, we continue to develop our story, our projects, and our people to do good and push forward.” And I think you nailed it. If you have the people rowing together, you can achieve absolute greatness. If you have disproportionate parts and pieces and different competing interests, then you’ve got a problem. But everybody I would interact with [on] your team, it’s just world-class talent. And together with that ethos of hard work and integrity, it’s hard to find. It’s so wonderful.

Maybe we could talk a little bit about fundamentals. You’ve got your hands in so many development projects. When it comes to [sort of] a niche in cold storage, you’ve really dominated and you [have] built an amazing portfolio where you’ve got so much happening nationally. It’s a weird time in the world, you know, broadly [speaking], and then in real estate with the rates and inflation, all this other stuff–you’re focused on tomorrow and the long-term, so these are obviously blips. Some things will get resolved over time. But on a macro basis, you know, how are you thinking about strategic investments and your current portfolio?

Anthony:

I think you touched on it. It is a very challenging time to be investing. It’s challenging in the sense that no one knows what the future is going to entail. I think every day that goes on the likelihood of a recession does increase. I think we have geopolitical risks, as we all know, that we’ve actually been speaking about for the last 12 months at Saxum before it turned into a war overseas–just understanding that things were kind of boiling up. You have obviously an enormous strain on monetary policy. That’s kind of occurred here in the last 24-to-30 months, I guess, since COVID started. So those things are going to have repercussions. But when it comes to long-term investing, you really need to have enormous amounts of conviction to kind of see through that storm.

So, for example, in COVID it was very challenging on our business. So much uncertainty and you’re scrambling around to just figure it out, you don’t know how it’s going to shake out. But while most organizations at the time were terminating deals and breaking up contracts, we were fortunate enough to have enormous conviction and move forward with pretty much every single one of our investments, and they’ve all obviously panned out to be extraordinary. But it’s having that kind of conviction to move forward. If you’ve got a lot of faith and conviction in what you’re doing, you’re going to ultimately be successful. So in real estate, knowing that it’s a long-term game, we are focusing primarily on two major asset classes at this point.

We’ve touched almost everything from retail office, boutique office, multifamily, student housing, medical office, cold storage, industrial. I think the only thing we really haven’t touched is hospitality because that’s just not our forte. But we’ve had an opportunity to invest in most asset classes and invest in those successfully. But now looking at the kind of landscape of where we see the world and where we see the world going is we’ve continued to focus on two major verticals which are housing and industrial. So in housing, we have our multi-family development and our student housing. So we have over 1,500 apartments, we’re building and at the end of this week, we’ll own about 4,000 student housing beds. And then on industrial, we’ve got a really budding industrial pipeline and cold storage where we’re one of the larger cold storage players in the country. So, in those asset classes, we have enormous amounts of conviction that, regardless of the volatility that we see in the market, regardless of the potential for recession, we know that these areas are going to perform well. E-commerce, as everyone knows, and modernization of supply chains has fundamentally changed the industrial market, which includes cold storage. And there’s a universal housing shortage in the U.S. that’s just not going to slow down due to demographic changes and a variety of other factors. So those are spaces that we feel very strongly about and we’ll continue to make significant investments in all across the nation.

Aaron:

Perfect. So it’s continuing to invest with conviction, double down on your strengths, and don’t get overly distracted or weary when there’s broader blips, as will always come with the rise and fall of different markets and timing.

How about the investor base and your capital partners and your group of partners that you have across different assets and deal flow? Are conversations changing and shifting? Do you hear some people start to say, “Hey, you know, we love industrial, we love multi-, but maybe there’s a contrarian play of some kind.”?

Obviously, you have a strong passion and a view and your conviction, and I think it’s amazing, but it is a sort of odd time. Are you seeing cracks in people’s confidence in those assets? Or are they just saying let’s double down across the board?

Anthony:

I think it’s all case by case. I think there’s going to be a market repricing. Interest rates widening will inherently lead to cap rates widening. It just will happen. I think markets where rental rate growth, part of inflation, outpaces the widening of interest rates. Those markets will not have the same significant widening of cap rates. Meaning values won’t fall as much in areas that are maybe more tertiary where they’re slower growth markets with less kind of fundamentals. They are going to have challenges in terms of value—for the short-term. I think long-term, rates are going to be low. They have to be low. The U.S.’s debt is so substantial. It’s, candidly, unmanageable. So the only way that they can even keep their arms around is by having low long-term rates. And so the idea that rates are going to go to a Volcker era level is really just impossible in my opinion.

So the Fed has to raise rates now to fight inflation. Runaway inflation is arguably much worse than recession, so they’re fighting that. I think once those issues are kind of tampered down, then rates will continue to come down back to lower levels that we’ve seen. And therefore, asset pricing will continue to stabilize.

I think when you see these levels of volatility, there’s sides of the trade you can be on. There are contrarian views that are going to be profitable, and there’s buys that really sharp niche players are going to be able to do really well. And then there’s going to be markets that are going to be inherent losers. And I think that’s just the nature of the game, but if you’re cognizant of that and trying to make decisions swiftly in an ever-changing market, hopefully you can kind of be on the right side of those opportunities.

Aaron:

And you really have your hand nationally. I mean, there’s just so many projects. You’ve really learned so many markets, it’s remarkable. Any particular market you’re really just very passionate about, and you see yourself wanting to pursue further?

Anthony:

We own a lot of multifamily in the Northeast. We continue to believe in those markets. But in terms of growth markets that we’re heavily investing in, I mean the Southeast and the Southwest, like specifically Texas, I mean these markets are extraordinary. The growth story is real, it’s undeniable. People have been migrating to warmer climate areas for 70 years, I think since the dawn of AC, which if you look at it from an economic standpoint, that’s a real thing. When they invented air conditioning, people started moving south. But you know those growth market opportunities like Texas, Florida, Georgia, these are areas that are pro-development, pro-growth, and are great places to do business. So for us moving into Austin was a reason for that, putting a flag in the ground to continue to expand in the Texas triangle very significantly.

So we have projects in DFW, San Antonio, Austin, and soon to be Houston. And those are in a variety of different asset classes. We are definitely long Texas and long, a number of these other Southern growth markets like Florida and Georgia where we continue to do a lot of business. They’re really remarkable places to work. The, you know, if you look at the Texas triangle, a thousand people a day, roughly, moved there every day for the last decade. So this isn’t a COVID thing, [like] people talk about it, it’s been happening for well over a decade, and that type of growth is just not going to slow down.

Aaron:

For sure. It’s funny. I was born in Austin, Texas, and my family moved to New York. Maybe the only person who went the other way…My dad took a job at NYU. He had to take it, but my life would have been a lot different, certainly from real estate perspective. But all kidding aside, we talked about the scope of investing. We’ve talked about your career, which is phenomenal, very exciting.

Maybe we could talk about a little bit about your edge. We’ve talked about the ethos of Saxum, and the caliber of people, and rowing together, but just on a personal basis, you’ve done a lot. You’ve got a lot of pressure and obviously outperformed, but how do you manage that? I mean, some of our listeners, we expect to be young up and coming developers that are going to look to you as a role model, as somebody who’s achieved at a high level. How do you manage the mental aspect of the business, especially in those early years before you had the breakout? I mean, you had to keep going, like you said, it was hard and not many people have that courage. How do you manage those early years? What kind of things did you say to yourself on the toughest days? That that would be really inspiring for people to hear?

Anthony:

Yeah, there’s no secret sauce, but, you know, looking back on those early days, it was extraordinarily trying. Some of the hardest things I’ve ever done in my life was powering through it. But I think in general, if you aren’t an optimist, that’s hard, if you don’t have enormous amount of faith, confidence, and conviction. And I think faith can come in a lot of different ways for people. Confidence, I think is fairly straightforward; out of confidence in yourself, the team, your mission and conviction in what you’re doing. But those are the things that kind of keep the train on the tracks, as they say, you know. You just have to believe that no matter how hard today was, that tomorrow can get better. And if you have that hope and faith that tomorrow will get better—that hope that it can and then the faith that it will—you can power through a lot of adversity.

I think people that maybe are a little pessimistic—and we’re all pessimistic at times—or don’t really have confidence or faith in their mission, are going to have a very challenging time pushing through those moments that become really hard. Because any entrepreneur, anybody really kind of putting themselves out there starting a business is going to face massive amounts of adversity. And you just have to kind of keep pushing through and eventually, you know, hopefully you’ll break out. And my other advice is, you have to train yourself. And this is something that I learned to do, to be able to absorb enormous amounts of information, do your best at retaining it, and then be able to make decisions at record pace. Especially in an investing business like real estate or investing in general, you have to make decisions enormously fast. If you are going to sit back and try to pontificate on every single one of those things, trying to find perfect amounts of information to make that decision, you’re going to have a really difficult time. You’ll have a difficult time scaling. You’ll have a difficult time even getting to the place where you could actually scale the business. So making decisions quickly is really, really critical. And you know, the hope I guess, is at the end of the day that you make more good decisions than bad ones. And if you do, you should probably be in a pretty good spot.

Aaron:

Amazing. I love it. And it’s so apropos for every business owner, not just commercial real estate. I’m going to think about that all day: “hope that it can, faith that it will”. Solid. It’s really solid. Obviously making decisions with the efficiency. Especially in the legal community, where we’re paid to overanalyze, we’re often victims of paralysis by analysis or analysis by paralysis, whichever one it is. But I love it. I love the themes you’re developing.

What else? If somebody is able to sit down with you, squeeze in a cup of coffee in with you, an up and coming developer—and you probably have a lot of these–I know we talked about you oftentimes look to team up on a Co-GP basis with some of these up and coming developers who can use your expertise and your capital relationships and everything else. How are those conversations going? Besides this mental edge we’re encapsulating. They want to break into development, they want to break in real estate investing. You know, what kind of advice and guidance are you giving to them? What do you suggest? [Should] they go through that corporate route or work at some institutional firms? Just career guidance. And I know it’s fact-based specific, but any best practices you could think of for somebody breaking in?

Anthony:

Yeah. I think there’s a lot of different paths you can take. When a lot of people approach me about this, I often start like, “Hey, what is your end goal?” Is it to make your own schedule, have a small company, build a nice nest egg? Is it to scale some mega platform? Is it everything in between? Like, you know, whatever it is, start with what you think a relative end goal is, and then kind of work your way back from there. Know kind of what you’re working for and, you know, as you’re growing a successful business, you’ll find that that goal always moves out. It gets larger, it gets higher, but at least start with something so you’ve got goalposts to head towards. I think that that’s going to help guide you a lot.

I would also say it’s really critical for young people starting in the business to do a couple of things. If you’re really starting a platform of ownership, you have to find a niche. Finding that niche is incredibly important because why would folks invest with you if you’re doing the same thing that others have been doing for 10 or 20 years? So at Saxum, every one of our investment strategies has been well ahead of the curve from institutional radar. So we were the first doing adaptive, reuse creative office in downtowns, in New Jersey. We were the earliest adopters of Opportunity Zones. We’ve been working through student housing well before a number of folks. We broke ground on the second cold storage project in U.S. history and are building that business out and really transforming the landscape across the U.S. because you really got to find that niche and then once you learn it, understand it, and go and capitalize on it.

So I think that early adoption is really critical. And then when you’re really starting out—say you’re 22 years old or whatever age it is. Real estate is a people business. You’ve got to build relationships. You’ve got to be trustworthy. You’ve got to be honest. You’ve got to be a good person and have integrity. And you’ve got to just go build relationships. Like I didn’t grow up in family money. I came from very humble beginnings, but I would say that, you know, even my first investment, whether it was partners, investors, lenders, whatever, those all came from the relationships that I’d built in one way, shape or form, even as a very young man. And luckily in real estate, it’s a social business. People are willing to talk. People are willing to go out for drinks, coffee, lunch, dinners. It’s probably one of the more social businesses out there. So you’ve really got to get out there.

I tell the young guys on my team, specifically like the acquisitions team: “you should be out two, three nights a week meeting people because you never know where those meetings go”. I had a friend tell me early on [that] all meetings are good. And I really believe that, that all meetings are good. You never know what that meeting, that person, or that relationship could lead to. And, you know, I would say a large amount of the success of this firm has been related to relationships and people.

Aaron:

Amazing. And that’s so true. You never know where the opportunities are coming from. Really, really amazing. One more question I have for you actually is, you’re growing so fast, maybe this is a good plug for people who should maybe apply to open positions at Saxum. Is there anything, any talent you’d like to speak to, to apply?

Anthony:

We are looking for smart, hardworking, thoughtful people. So our motto is “get in the boat and row”. No job is too big. No job is ever too small. We mean that in our ethos. If you’ve got that type of mentality, team forward, firm first mentality and want to be a part of something that’s growing and an amazing place to work, we’re looking. We’ve got a blend between a startup culture as well as a pretty substantial firm. And I think that’s really unique. So we always say that hopefully when we have people join this firm, it’s the last job they’ll ever have and hopefully the best one. So we try to live that every day. And fortunately, we’ve been pretty successful at this as we haven’t had a great deal of turnover. So it’s a great place to work. But we’re hiring on a lot of different fronts so there’s opportunities across the board. You can check out on SaxumRE.com.

Aaron:

Amazing. And I will say [that] all the interactions we’ve had with your team have been fabulous. So the culture is really amazing. The quality is amazing. And now I understand where it all comes from as the story all comes together beautifully. So, Anthony, I guess we’re going to wrap here, but again, I really want to thank you for being on. Your story is remarkable. The humility, the drive, the passion, the conviction—I  think it all came out super clearly and hopefully people will look up Saxum for deal flow opportunities and to join a fabulous culture and a growing company. And again, thanks so much for being on today.

Anthony:

Awesome, Aaron. It was great. Thank you for having me. We’ve done a lot of great work together, so I appreciate you and the whole team and yeah, this has been a lot of fun.