Transcript

Aaron Strauss 

You’re listening to The Dealmakers’ Edge with A.Y. Strauss, diving deep into stories behind commercial real estate’s leaders.

Adam, thank you so much for joining. It’s great to see you; great to speak with you, as always. We’ve been friends for a long time; we go back a while. I’ve watched your career; you’ve had a lot of success. Could you give us just a broad sketch of where you grew up, a little background, and how you just got started?

Adam Altman 

So, I grew up in Teaneck, New Jersey. I was born in the Midwest, actually, but I grew up in Teaneck, New Jersey. I did not grow up in a real estate family; I grew up in a family of psychologists. So, I was always kind of looking around and seeing those families that owned real estate and people who owned real estate. It was always really exciting and interesting to me: the idea that you can own something tangible, and you can go visit it.

As I got older, I graduated NYU and went to work in the corporate world, and then realized I didn’t really like sitting at a desk. The idea of going out, looking at buildings, walking on roofs, walking into boiler rooms, actually was something that I really enjoyed. That was actually the best part of the job for me, not the worst part.

You know, if you like what you do, I think that’s really important. Being able to find success; I found something I really liked doing and I started doing a lot of it. And luckily for me, I’ve had tremendous, tremendous mentors over the course of my career, who really enabled me to learn, make mistakes, recover from those mistakes, and ultimately, excel. I think I owe a lot of that to just kind of understanding what I like to do, but also finding people in my life who were willing to be supportive and, you know, acknowledge both my innate abilities and talents, and also my shortcomings and to try to focus on the better things

Aaron Strauss 

Well said. I think the fact that you grew up in a family of psychologists has not hurt your career, given all the psychology that goes into the heavy negotiations that you do on a daily basis.

From there, you started to be more active on the acquisition side. And then I guess, maybe start with the KABR foundation, you know, that seems to really be when things took off to the next level for you, right. And then remember back in 2008, or 2009, on that, first, that building from AIG, that was a real sort of watershed moment for your career, but maybe take us back to that time period.

Adam Altman 

Absolutely. So, the concept for The KABR Group really came out of my partner, mentor, Ken Pasternak, the “K” in KABR. He had led a very successful Wall Street career, and I had collaborated with him previously at his family office. It was probably 2007, and he said, you know, the wheels are really going to come off the bus here, referring to what ultimately became the Great, or is known as, the Great Recession.

He wanted to be in a position to buy real estate and assets, and he thought that the, you know, there was going to be a real tide going out period. He called me up. And, at the time, I was working for CareOne, in the Straus family office – different Straus – and I spoke to the head of that company. It was a fellow by the name of Daniel, and he was unbelievably supportive of me and my career, which is something that I always appreciated. And we really, we wrote a business plan to how we were going to go and buy these assets when the tide went out. And that ultimately became The KABR Group.

We purchased our first asset in December of ’08, and, early into 2009, we purchased what you referred to – a foreclosed REO asset-owned by AIG, which was a 240,000 square foot building in Ridgefield Park that was empty. We bought it, we bought it at a terrific basis. And we ultimately populated the building with Samsung and their North American headquarters. And that became a watershed moment for The KABR Group and my career.

KABR is a fund; we are a registered investment advisor. We are an SEC registered fund. At the time, we weren’t yet because we were just starting. But Kenny committed a tremendous amount of his personal capital, and we had some other early investors who believed in Kenny and my guess is (because I was 31 at the time) to a lesser extent myself. And we went forward and we continued to buy assets.

And you know, here we sit almost 15 years later, you know, and having purchased well over 100 assets, having sold over 55 assets, still owning and operating 45 assets, having purchased thousands of apartment units, millions of square feet of office, probably approaching a billion dollars of construction.

And every day you wake up and you feel like you’re at a baby startup company, and you have something to prove and I think that feeling that I had on, you know, the first day is still the same feeling that I wake up with today.

Aaron Strauss 

I like the way you understated that acquisition in 2009 when you bought that AIG building, because even today to buy a vacant office building is gutsy. But at that period of time, after Lehman just went down, it was a nuclear winter. I mean, nobody bought existing multifamily at that time, you know, cash flowing assets, and to go buy a vacant office building in that climate, in that market, in that time, and to put Samsung in there really was quite awesome. And there were certainly many other deals which are interesting, but that just from a time perspective was fascinating. I remember it clearly.

And then obviously, KABR has had a lot of success – Jersey City has had a ton of development, you’ve really been a pioneer there. Every time I think of Jersey City, I think of the work you’ve done.

Adam Altman 

Even when I was younger, I remember my family trips down to Miami from the time I was probably eight or nine years old. I remember walking around emerging neighborhoods and really enjoying it. As I got older and went to NYU, I remember being in emerging neighborhoods, and enjoying it, meaning enjoying what I was seeing. I don’t think I was mature enough to understand what I was seeing. But I liked the idea of having artisanal kind of boutique shops opening up to merchants who’d been in the area for decades and decades.

When I was at NYU, I saw that, you know, on the Lower East Side, for instance, where you’d have guys who sold socks next to you know, a new cool bar that opened up. I enjoyed exploring those streets and actually even talking to the merchants, both the old and the new. And, you know, the coming of neighborhoods became like a really important concept in terms of, where do I want to focus? And where do I want to buy? And where do we want to focus capital? And where are we going to get return for that capital? Where are we going to get rewarded?

We started looking at different markets, you know, Jersey City was one of them. Kenny had started a company in Jersey City that he ultimately took public, so he was a very early pioneer. He was at one point, probably, I think the largest employer in Jersey City. So he knew that market very well and encouraged me to kind of walk the streets and focus on that market. And we also knew that Williamsburg was having its moment, right? And kind of asked what was going to be our Williamsburg, right? You know, Walentas family had made Williamsburg theirs, as well as some other well-known developers; what was going to be ours?

And we set out to purchase opportunistically assets and development land where we could be very basis driven, value-oriented consumers of real estate, right? We really wanted to feel like if we make an error, we were falling out a first-floor window, not a 15th-floor window. And so, we tended to be very driven by value, often saying that if we make errors, they’re going to be errors of omission, not commission. We ultimately ended up purchasing, several million developable square feet in Jersey City, a good portion of which we still own.

Aaron Strauss 

Terrific. I’m familiar with a bunch of those projects. Now, we’ve talked about the omissions, and we’ve talked about errors. Your career has been remarkable and continues to be remarkable, but everyone has had challenges and some setbacks and some war stories. Any stories that you’d be open to sharing as far as adversity? Because I think there’s a tendency to look at successful people and to say, it’s all roses, but everyone in business knows that there were constant setbacks.

Adam Altman 

Yeah, I think the setbacks happen in some ways, unfortunately, every day. I find most of the days are focused on putting out fires and dealing with those setbacks because the successes tend to take care of themselves. You don’t spend a lot of time really celebrating the successes because they’re successful. So, you kind of put them on a shelf to the side, and then most of the day gets spent really dealing with those things that are most problematic, most troublesome, most complex.

Specifically, I would say it’s more about solving problems on assets. So, we bought a lot of smaller assets at one point in time through our fund’s lifecycle, and while they ended up having okay returns, the amount of effort and energy that we had to spend on them, in order to kind of get them right, really taught us that it’s usually better to focus on mid-size or larger assets because they take a similar amount of effort and energy. That was something that took us quite a bit of time to work through, you know, development, which we’ve done and we’re doing.

So, there’s one success and that’s when you get it approved, and before you get it approved there are a hundred setbacks, you know, if not more. So, you have to be willing to deal with every one of those setbacks continuously. And you can’t have any ego about it. You’re dealing with many municipalities and with engineers and professionals whose view of the world, needless to say, we don’t always agree with. Sometimes they’re right. Sometimes they’re not. But it’s a series of setbacks until you ultimately, hopefully, achieve success.

And there have been times where we haven’t. And we’ve just determined, hey, you know what, life’s too short. Let’s sell this property and let someone else climb that mountain and have that success. You know, I recall buying an office building in Connecticut, a partially-occupied office building, buying it from a special servicer, beautiful building, well-located, decent tenant roster, about 50% occupied. You know, that was a lesson that, you know, sometimes there’s just not a velocity and depth to a market that makes something worth owning. So, ultimately, we sold the asset, we made a little bit of money, but the amount of effort and energy we spent on it, you know, as we say, you know, the juice wasn’t worth the squeeze at the end of the day on that one. And there have been a bunch like that.

Aaron Strauss 

Absolutely. And on top of that, even after you get your approvals on development, you have the ever-changing cycle of economics. The economy keeps moving up and down; your investor profile may want something more or less risky at that time; your lender may want something different. So, you’re juggling, obviously, so many balls in the air and the ultimate respect to people who pull off successful developments.

We talked a little bit about the background, we talked a little bit about some of the setbacks. But what are you telling that young professional today who wants to get into development? What are some of those words of advice you’d offer?

Adam Altman 

Well, I think if they’re passionate about it, any individual who’s passionate about it, you know, should explore it. The best way to get into real estate is to figure out a way to buy an asset, whether it’s a two-family home or a 200,000 square foot office building. If you own something, you’re in real estate, and there’s no substitution for the experience of figuring out how to put together that capital stack, how to do that analysis on that asset. And not everyone has to do the same thing, right? Some guys make a tremendous career out of buying smaller assets and really focusing on them. Other people have made a tremendous career, you know, focusing on multifamily or office or development. I think you have to find what your skillsets lines up with and what you enjoy doing. That’s where your attention should be set.

Aaron Strauss 

Well said. We talked about multifamily, and I know you’ve been more active in the southeast, but you want to talk about a little bit more in the past year or two, some of your more current focuses?

Adam Altman 

We recognized, quite a while ago, that there were some pretty interesting demographic shifts taking place in the country. And we targeted southeast markets where we believed that we could take advantage of those demographic shifts, and also acknowledge our own size and ability.

So, through some intensive research, we chose Jacksonville. There are other markets we had been looking at that we could have chosen. We probably would have been right to choose those markets as well, but ultimately went to Jacksonville. It was because it was a top 20 MSA in terms of population; it had tremendous potential growth, job drivers, geographic migration trends, but it wasn’t Orlando and Tampa which had a lot more attention and focus.

We had the opportunity, at that time, to, amongst other things, be, you know, a bigger fish, and I’d say a more mid-sized pond. And that was helpful to us in terms of finding properties to buy and being able to perform quickly. You know, those were a lot of the factors that were part of our consideration.

Aaron Strauss 

Well said. And, with respect to factors, obviously demographics and the population growth and job growth and rent growth, but any other fundamentals that you think if you’re an investor today, you absolutely need to be paying attention to? Something that you always have, immediately, top of mind when you’re looking at an asset in the first 10-15 minutes?

Adam Altman 

Certainly! You know, understanding the local political climate is important. If you’re doing development and go to a place that you just know, they’re going to be obstreperous and, and really work to stop you from doing what you do,  you have to take that into account. And maybe it’s not worth it. Life’s too short.

I remember getting a great piece of advice from one of the guys I look up to in real estate who said, buy real estate in places you like visiting – whether it’s New York City, Brooklyn, Jersey City, parts of Florida, Carolina, wherever. Wherever you like going and seeing that real estate, go buy stuff there. There’s enough real estate, you know, to buy it in places you like, you know, don’t go buy it in places you don’t want to go because then you’re not going to be motivated to be really present in the process. I thought that was a really good piece of advice.

Aaron Strauss 

That’s awesome. And speaking of advice, it’s a tough game you’re playing. It’s super competitive. There’s a lot of capital, a lot of deals which are tight; you’re managing a team, you’re managing investors’ money, you’re dealing with all your lenders, your partners, your vendors, I mean, you’ve got a lot of responsibility on your shoulders. What do you do day to day?

Obviously, you have a personal life, as everyone does. But you know, how do you get that mental aspect of your career, always in the right frame of mind to do what you do day to day? Obviously, you love what you’re doing and your passions carry you, but what are the types of things you’re telling yourself when you’re going through those tough developments, or you’re having a terrible day and what’s sort of driving you?

Adam Altman 

On the really tough days, and they certainly happen, I look back at my family story. My father was born in a displaced persons camp in Germany after World War II; my grandparents survived the camps. So, I tried to, on a relative level, understand what they went through and say, you know, kind of whatever I’m dealing with right now is not nearly as bad. And, you know, put on your grownup pants and deal with it. I also really try to root myself in: if you do what is right and honest, it doesn’t necessarily mean you’re going to win each and every day, but you can go to sleep at night knowing and feeling comfortable with how you conducted yourself. Those are probably the things I try to tell myself on the toughest days, in terms of balance.

And in some ways, COVID has been good for forcing a better work-life balance, even though in some ways works bleeds into every inch of your life. But at the same time, I think it’s become more acceptable that I can come home for dinner much more frequently. Now, that doesn’t mean I don’t work after dinner, but I’m home for dinner more often. So just kind of finding more time to be present and be around. Exercise, meditation, whatever works for the individual, that’s important to weave into your day-to-day.

Aaron Strauss 

Well said. I think we’ve had a great conversation. I really want to thank you very much for being on.

Adam Altman 

It’s a pleasure to be a part of your podcast and thanks for the thoughtful questions.

Aaron Strauss 

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