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Marshall Boyd

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70
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2023-02-06
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2023-02-06
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  1. “One unit over from that MBA grad, that's the opportunity to be in these infill markets. Maybe another way to frame it is where we're not. So we're not in the inland empire. We are not in Sacramento. We're not investing in areas where you can build a ton of new product. And we like these markets where nothing new gets built. And the only way to provide better housing for normal folks making a normal wage is to improve the existing stock. And so absent of the new supply, we have a huge advantage because we just have less variables. Love to have less variables. We just have to really focus on those markets and that gives us an opportunity to create all the value, not from macro calls on which town is going to be better in the future. It's about where can we create a living environment where people will pay us more to live there.”

    2023-02-06 · Capital Allocators · Marshall Boyd – Meat and Potatoes Multi-Family Real Estate at IEC (Capital Allocators, EP.295) · IDENTIFIED FROM THE TRANSCRIPT · source

  2. “As important what we don't do as what we do do. And so we're very careful about where we spend time. There's a lot of ways to do well in investing, but what we believe makes the most sense for us on a risk-adjusted basis is to invest in apartments in areas where the schools are fantastic, the jobs are outrageously good, homes are very, very expensive. So folks who want to be in that market in order to have their kids attend these schools and work at Silicon Valley companies or these powerhouse employers, they will be renting for it the time being. And those renters a lot of times, maybe they're making a fantastic salary and they're sending their money back home or they're paying off business school or they're trying to make the next leap so that they can buy a home. There's a huge opportunity to provide housing for those individuals. This could be somebody, a fresh MBA, but it could also be somebody who's a groundskeeper at the local golf course and there's significant other works at a restaurant and they could also be living in our building.”

    2023-02-06 · Capital Allocators · Marshall Boyd – Meat and Potatoes Multi-Family Real Estate at IEC (Capital Allocators, EP.295) · IDENTIFIED FROM THE TRANSCRIPT · source

  3. “If we do well here, that's what will result. So let's treat it like a fund. So every deal we brought to that endowment, we want to make sure it would pass IC. We weren't throwing things at the wall. We were beefing up our operations. We were investing ahead of our asset management fees into Team. So we took that as a very serious opportunity. And gosh, it couldn't happen at a better time coming in 2010 to make 16 investments in that period, grow our team and capability through that as a huge break for us.”

    2023-02-06 · Capital Allocators · Marshall Boyd – Meat and Potatoes Multi-Family Real Estate at IEC (Capital Allocators, EP.295) · IDENTIFIED FROM THE TRANSCRIPT · source

  4. “Took a trip to New York and was literally asking friends if they knew people that I could talk to that might consider investing in a small real estate fund and had a friend introduce me to someone who worked at Park Hill, which was at the time Blackstone's placement agent, walked in there and talked to them and showed them the record, showed them the process that we were working on, who we were talking to. And they said, you know what, we can make some introductions for you. I think they might have been a little bored at the moment because it was late 2008. Michael Stark, who runs the group there, were great friends still. And he said, I'll make a couple introductions for you. And so he made a handful of introductions. I hit the road. I was pretty good at making PowerPoint presentations because that would have been my job for several years. We were able to find an endowment that said, we'll back you to be our west coast exposure to apartments. And so we work together with that endowment from 2010 till 2014 exclusively. And really, we looked at that as this is our entree into a fund opportunity.”

    2023-02-06 · Capital Allocators · Marshall Boyd – Meat and Potatoes Multi-Family Real Estate at IEC (Capital Allocators, EP.295) · IDENTIFIED FROM THE TRANSCRIPT · source

  5. “I think people appreciated the situation that we were in. We were very transparent about the things that had gone well for us and the things we were struggling with. I think folks understood that we had a worker's mentality. I mean, we were showing the operational execution on the ground rather than track record. We would lead with that. This is the value we create through our construction teams, through expense management versus the fortunate call of selling some deals in 2007. So I think folks appreciated that. That asset management first approach. Julia leads asset management and it's not normal for a co-CEO to run asset management in a real estate business. It's usually the investment folks and secondary is asset management. We believe that's wrong. So I think that was a differentiator for certain. I think our process orientation for being this scrappy, tiny group we were sitting around writing memos and passing them back and forth to each other and emulating some of the things that she'd seen at Accenture, I'd seen it at TA and some of the investors would smirk a little bit at the length of our memos.”

    2023-02-06 · Capital Allocators · Marshall Boyd – Meat and Potatoes Multi-Family Real Estate at IEC (Capital Allocators, EP.295) · IDENTIFIED FROM THE TRANSCRIPT · source

  6. “We were humbling. We always say at some point in your career you have to burn the lifeboats. There's no going back. My friends at TA that had accepted my resignation and they had invested with us. So there was no going back. And I had this fancy private equity job and now I had no salary. So we need to figure things out. And so we took out somewhat of the TA playbook and we started calling investors. We started getting in front of people. And we'd have little lights in the tunnel along the way. And I'd be sitting and talking to a partner at Sequoia who was looking from behind it worst standpoint and investing with us. Gosh, if this partner thinks this is interesting, there must be other institutional folks globally who have interest in this that have a bigger capacity to invest. We were taking meetings. We must have done 150 meetings, cold calling, looking through the newspaper at names and who we should get in touch with. We had never done a fundraising meeting in our lives and at TAI. I had no exposure to that. Maybe another way to put it is pressure creates diamonds. And there was pressure. We did not want to shut this business down on our watch.”

    2023-02-06 · Capital Allocators · Marshall Boyd – Meat and Potatoes Multi-Family Real Estate at IEC (Capital Allocators, EP.295) · IDENTIFIED FROM THE TRANSCRIPT · source

  7. “How did you go about that process? You're talking post financial crisis, even at the investment opportunities are good. It's notoriously the hardest time to raise capital. What were those two years like?”

    2023-02-06 · Capital Allocators · Marshall Boyd – Meat and Potatoes Multi-Family Real Estate at IEC (Capital Allocators, EP.295) · IDENTIFIED FROM THE TRANSCRIPT · source

  8. “My house. We gave pay cuts to the existing team members. There was no pay for us. And we said, we're going to make this work. Our track record is intact. We can find people who will back us. And fortunately, in 2010, we arranged our first separate account, which was just in time. So it was a very fortunate break for us.”

    2023-02-06 · Capital Allocators · Marshall Boyd – Meat and Potatoes Multi-Family Real Estate at IEC (Capital Allocators, EP.295) · IDENTIFIED FROM THE TRANSCRIPT · source

  9. “Said, well, we need to figure out how we're going to capitalize this business. We need to find people to get behind us. And you're 27 years old and doing steak dinners with wealthy individuals. They look at you and they're a bit quizzical about how you're going to outperform the industry. We made a fortunate call in 2007 and we sold most of our portfolio the year that we joined. We looked at the portfolio and said, well, if the thesis is to fix buildings and then sell them once you fix them, what are we waiting for? It seems like time introduces risk. We made a sale, which was very opportunistic and fortunate. And then we were left with a small section of those buildings, a small bit of promote to feed the company. And we had to figure out how to reinvent the business going forward. And so at that point, we had nearly no capital under management. We had a small amount of promote, which we were feeding salaries with and then went out to figure out how to raise this fund that we had planned to work on. And so we floated the business for nearly two years. I had a line of credit against.”

    2023-02-06 · Capital Allocators · Marshall Boyd – Meat and Potatoes Multi-Family Real Estate at IEC (Capital Allocators, EP.295) · IDENTIFIED FROM THE TRANSCRIPT · source

  10. “Apartments, 85% of the asset class are owned by families. And families have other things going on in their life, especially if they inherited an apartment project. What we find is residents are living in these buildings and they're not being well cared for. There's a playbook for taking better care of people's living environment. And it turns out most Americans, 65%, depending on the town, they live in an apartment building, not a house. The playbook is just to create better places to live by renovating apartments, by upgrading habitability standards, by fixing broken things in their apartments, really operating a high-end property management company. There's a huge differentiator there because institutionally, REITs maybe own 8% of the product and funds might own another 10%. The balance are family owned. And so that was the thesis, but we came in and we were learning the property management business. We were learning how to take care of residents. We were learning how to institute process and software. And then we looked up.”

    2023-02-06 · Capital Allocators · Marshall Boyd – Meat and Potatoes Multi-Family Real Estate at IEC (Capital Allocators, EP.295) · IDENTIFIED FROM THE TRANSCRIPT · source

  11. “So I remember showing up to work the first day week after my father's funeral. I didn't have a key to the front door. I was sitting on a outside the front door waiting for somebody to show up. We had five or six people in corporate that really cared a lot about taking care of our high net worth investors. We had 10 small properties that we owned and we had no one on the investment team. There were a couple people in property management and a couple people in accounting and somebody that ran the office and then Julia and myself. So we're very fortunate to have a playbook to work on, but it was bare bones at that point. And it was unclear where it was going to go because James Boyd, my father, he was a force. And so the business without him was not going to exist any longer unless somebody came in and reinvented it. So there's a little bit of a turnaround element to it.”

    2023-02-06 · Capital Allocators · Marshall Boyd – Meat and Potatoes Multi-Family Real Estate at IEC (Capital Allocators, EP.295) · IDENTIFIED FROM THE TRANSCRIPT · source

  12. “You mentioned, okay, your parents had bought a couple of rundown apartment buildings, got some of their friends' money. This had been going on for 25 years. So what was interstate equities when your sister and you stepped into it?”

    2023-02-06 · Capital Allocators · Marshall Boyd – Meat and Potatoes Multi-Family Real Estate at IEC (Capital Allocators, EP.295) · IDENTIFIED FROM THE TRANSCRIPT · source

  13. “Fund of these vintage apartment buildings. Not everybody had even really considered it at the time. So there were a lot of short meetings.”

    2023-02-06 · Capital Allocators · Marshall Boyd – Meat and Potatoes Multi-Family Real Estate at IEC (Capital Allocators, EP.295) · IDENTIFIED FROM THE TRANSCRIPT · source

  14. “I looked at the replicability of the thesis and the lack of losses. And I think back to risk appetite, that really appealed to me. In private equity, there are complete losses. And in venture capital, there certainly are complete losses as there were in the tech investment banking group. That stability of returns really appealed to me. I love the idea of that meat and potatoes investing, this idea of, hey, we're going to hit singles and doubles. If you want triples, go do something else. But if you want to not lose your money, this is interesting with a high process orientation. you can increase the chances of more doubles than singles and create a really nice risk adjusted profile. And that seemed to make sense, although as we first started speaking to investors about it, they said, gosh, these are old buildings. What if the roofs give in? How many are you going to have to buy to put into a fund? Does that make sense? And so it was a real uphill battle back in 2007, 2008 timeframe to think about putting together a combing.”

    2023-02-06 · Capital Allocators · Marshall Boyd – Meat and Potatoes Multi-Family Real Estate at IEC (Capital Allocators, EP.295) · IDENTIFIED FROM THE TRANSCRIPT · source

  15. “Young and ignorant, but what was interesting at TA is we would approach companies that we didn't even know that industry existed until we got a hold of that company and started studying it. And so that was where when I came into real estate, I thought, if we can underwrite a shampoo business at TA associates or a mattress company, why can't I and other smart people understand this real estate thing? That was really the thing that gave me the confidence to think this is attainable”

    2023-02-06 · Capital Allocators · Marshall Boyd – Meat and Potatoes Multi-Family Real Estate at IEC (Capital Allocators, EP.295) · IDENTIFIED FROM THE TRANSCRIPT · source

  16. “A fancy upbringing, and I just thought this could be a private equity firm. These returns are on par or in some cases better than what TA was doing, and they're very good at what they do. So I thought, gosh, rather than business school, I'll join my sister who had gone there a year prior after Stanford Business School. Let's make a run at trying to make this into a fund business. That was the path. But during your late 20s, you've never done a day of real estate. You're really good at spreadsheets. We had a lot to learn.”

    2023-02-06 · Capital Allocators · Marshall Boyd – Meat and Potatoes Multi-Family Real Estate at IEC (Capital Allocators, EP.295) · IDENTIFIED FROM THE TRANSCRIPT · source

  17. “Moments just really canvassing an area to make a call that felt like this is my place. I really enjoyed my time at TA. Then I'm in my mid-20s thinking about business school. And my father passed away from cancer and we were very saddened. And I started looking at the business that he and my mother had founded, which was interstate equities in the 80s. They would buy rundown apartment buildings and fix them up, pool capital with their friends, and make them some more money and go do it again. We didn't have a second home and I didn't have to pay for college.”

    2023-02-06 · Capital Allocators · Marshall Boyd – Meat and Potatoes Multi-Family Real Estate at IEC (Capital Allocators, EP.295) · IDENTIFIED FROM THE TRANSCRIPT · source

  18. “There was a lot of tech investment banking going on. And so found one Middlebury grad who was in that office and worked my way into an internship and then being a financial analyst at the CSFB tech group for Frank Quatron's group. Remains one of the more famous investment bankers. So it was really fun to watch him as a practitioner, but then also be there through the upswing and then the downswing of the tech environment. And honestly, that really colors the way I think about investing and maybe push me into real estate, which is the lower volatility world that I really appreciate. It fits my mentality and I think my mentality was formed by being in a high-flying tech environment after my investment banking time moved on to TA associates, the private equity firm, not the real estate firm, working for Jeff Chambers, who opened the Menlo Park office and working with people like Brian Conway. That was where I really felt this is where I belong, the idea of writing memos, really thinking about risk, having quiet.”

    2023-02-06 · Capital Allocators · Marshall Boyd – Meat and Potatoes Multi-Family Real Estate at IEC (Capital Allocators, EP.295) · IDENTIFIED FROM THE TRANSCRIPT · source

  19. “Please enjoy my conversation with Marshall Boyd. Marshall Grid, too. Thanks for having me, Ted. Well, why don't we go back to your initial background and start of your career? I run interstate equities. We're probably a little different than Starwood or fancy guests that come on this show. We have about a billion dollars under management. We're real estate private equity firm. We buy and operate apartment buildings on the west coast of California and in the state of Washington. That's the flavor of what we do. I grew up in Palo Alto. I was a public high school kid. I worked at a sneaker shop. My father was a professor of economics. He didn't look kindly on being asked for cash after high school went to Middlebury College, wanted to do something really different, and ran cross-country and tracked there. So got to see the East Coast and then learned along the way what investment banking was. A lot of folks at Middlebury who grew up in New York, just a big industry there. And as I learned about it and thought this sounds really interesting and something I could go into, it turns out in Palo Alto in two.”

    2023-02-06 · Capital Allocators · Marshall Boyd – Meat and Potatoes Multi-Family Real Estate at IEC (Capital Allocators, EP.295) · IDENTIFIED FROM THE TRANSCRIPT · source

  20. “My guest on today's show is Marshall Boyd, the co-president and chief investment officer at Interstate Equities Corporation. A real estate investment firm that manages a billion dollars focusing exclusively on multi-family apartments on the California coast. IEC is one of those little-known gems for those in the know. It's an endowment darling with just a dozen or so of the most elite LPs in the business. Our conversation covers Marshall's path to IEC and steps to turn a family boutique into an institutional business, including the firm's investment thesis, deal sourcing, value-added operations, and exits. We then discuss attracting high-end institutional capital, IEC's team, the macroeconomic environment, a partnership mindset, and Marshall's lessons learned along the way.”

    2023-02-06 · Capital Allocators · Marshall Boyd – Meat and Potatoes Multi-Family Real Estate at IEC (Capital Allocators, EP.295) · IDENTIFIED FROM THE TRANSCRIPT · source