Insider Secrets Podcast Season 2, Episode 22

 Guest: Joel Friedland

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Guest Bio:

Joel Friedland

Joel has a 42-year track record in industrial real estate. He co-founded Epic/Savage Realty Partners in 1991, overseeing hiring and mentoring 60 industrial real estate professionals, many of whom became his partners. His group sold the firm to an international real estate company in 2014 and Joel started Brit Properties.
As an industrial real estate broker and owner, Joel has secured over 2,000 industrial property leases and sales, totaling over $2 billion in brokerage volume and $250 million in acquisitions. His greatest accomplishment is maintaining valued relationships with brokers, tenants, and investors spanning five decades.

He does fully syndicated deals, often with 0% debt, an unheard-of approach in real estate that caters to his wealthy investor base primarily concerned with the conservation of principal. His experiences during the Great Recession in 2008 have informed his investment approach to be hyper-conservative while still allowing an ~8% cash return, plus upside, for his investors.
Joel attended the University of Michigan. He enjoys playing golf and spending time with his family, particularly his 3 young grandchildren.

SHOWNOTES

Key Takeaways

Industrial is the backbone of our country, really of the world. Everything is made in an industrial building.

Companies are coming back. It’s called onshoring or reshoring where what they used to do overseas; they now need to do locally.

Real estate is a leveraged business for the most part.

You’ve got to have your back office. In my case, I’ve got two guys in my back accounting office that have been with me for 20 years.

Standout Quotes

“It’s not what you know, it’s who you know. And it’s also how well you know each other. Those are the two elements to me of a relationship.” – Joel Friedland

“Industrial is riskier than multifamily because you’re putting more money in with one tenant. Sometimes there’s a multi-tenant building, but it’s not the same thing as having units that might be worth $200,000 each.” – Joel Friedland

“One of the things that I believe is really beneficial to anyone who watches [podcasts] is to talk about something that no one’s ever heard before or that very few people have heard before.” – Joel Friedland

“My investor group, I’ve got 200 investors, and they’re mostly wealthy people. Doctors, lawyers, business owners, retired people who sold their business.” – Joel Friedland

“That industrial piece is a piece that keeps that job growth happening and the income happening.” – Mike Morawski

Timeline

[02:24] Intro to episode guest

[03:41] One word that describes Joel personally and professionally.

[06:220] Provide a brief overview of your background, detailing your journey over the years, from your initial steps to your current role at Brit Properties.

[15:50] Do you just own your buildings and take care of all the maintenance and issues or are your tenants triple net tenants?

[20:04] So we have said that real estate’s a leveraged business. Isn’t your IRR or your return to your investors higher with debt on the property than it is when you’re all cash?

[30:35] Let’s discuss the real estate market briefly. Given that 2023 hasn’t been an ideal year for real estate purchases, what has been your experience, and what are your insights on where the markets are headed in the next 12 to 24 months?

Contact

Email: joel@britproperties.com

TRANSCRIPT

Kristen: [00:00:00] Welcome to this edition of Insider Secrets, the weekly podcast that turns real estate investing goals into reality. Each show we interview guests who are seasoned real estate professionals, actively closing and managing real estate deals. Mike is the founder of My Core Intentions and would like to help you make your real estate investing dreams a reality.

Mike coaches you to buy investment real estate, creating short term cash flow and long term wealth. Your host and real estate coach, Mike Morawski has more than 30 years of real estate investing and property management experience. Here’s your host, Mike.

Mike Morawski: Hey, what’s up everybody? I hope that you are having a great holiday season because I know that you are here in this sometime at the end of December and that you are in the midst of Christmas and Hanukkah and whatever else you celebrate.

And I just want to wish you happy holidays. Hope you and [00:01:00] your family are enjoying the season. Hope your year ended up well. If you’re starting to look at the new year, what are you looking for? What are you looking to accomplish? I revised my goal setting and planning guide. So if you are looking to start setting some goals and thinking about next year, go ahead follow the link in the show notes and download that guide for yourself. It’ll be great to walk you through a little bit about some mindset, some shifts, maybe that you need to think about for next year.

This past year might’ve been a little bit slower for you, might not have got done what you wanted to with the market continuing to change and look like we’re going to go into an upswing, you might want to start thinking about doing things a little bit differently. And if I can help you with any of that, don’t hesitate to reach out.

Hey, if you’re new to the show, welcome. Glad that you’re here this morning. This morning, I got a twist for you, which will be very interesting. So, buckle up. You’re gonna enjoy this one for sure.

[00:02:00] But if you are on social media, follow us, like us. Love us. We’re always trying to bring you some information, some golden nuggets that are gonna help you scale your business, grow your business. If you’re on YouTube watching us this morning, subscribe. Because we are always, again, bringing out good content. So whatever I can do for you to help you scale to the next level, don’t hesitate to let me know.

Hey, my guest this morning, Joel Friedland with Britt properties in Chicago. He’s in the industrial side of CRE. So we’re going to have a little twist about things this morning. Let me bring Joel in for you. Hey, good morning.

Joel Friedland: Mike Morawski. It is so nice to see you.

Mike Morawski: How are you? Good to meet finally.

Joel Friedland: Yeah. Ditto.

Mike Morawski: Hey, we were talking a little bit before the show, but I’m in Southern California where the sun is shining and the weather is beautiful and you don’t miss too many days of 72 degrees. What’s it like in Chicago today?

Joel Friedland: It’s [00:03:00] sunny, but 42, which is not acceptable. I like double that. I like 84.

Mike Morawski: Yeah. Do you ever get out of Chicago in the winter?

Joel Friedland: I’m leaving tomorrow for Florida for a month.

Mike Morawski: Oh, nice. Good for you. Where do you go in Florida?

Joel Friedland: We’re heading to Sarasota, a place called Longboat Key, right off of the Gulf.

Mike Morawski: Okay. Okay. I’m not going to impose on you to drive by my properties down there and take a look at them for me. I promise I won’t ask.

Joel Friedland: Oh, it’s alright. I’m happy to do it.

Mike Morawski: Hey, so I always kick the show off. I ask one question of all my guests and then we wind up in some rabbit hole, but I always want to know in one word, Joel, what best describes you personally and professionally?

Joel Friedland: Relationships.

Mike Morawski: God, what a great segue into today, I think. Why relationships?

Joel Friedland: So I have learned that it’s not what you know, it’s who you know. And it’s also how well you know each other. Those are the two elements to me of a relationship is knowing [00:04:00] people that share your values. Really important.

And also the depth of the relationships, how much you care about each other and are curious about each other. So just to give you a quick little background, I’ve been in industrial real estate, owning manufacturing type buildings, small ones for about 42 years. And I’ve got 200 investors and I’ve got 24 tenants and I know everybody personally.

And one of my habits, Mike, is to make sure that I talk to at least three to five of my people every single day. Whether in person or by phone.

Mike Morawski: Yeah. Interesting. I think it’s really important to build relationships with people. And, I do a little coaching and training for multifamily investors, and that’s the first thing I always teach people is you’ve got to build solid relationships, whether it’s with brokers, whether it’s with your tenant, whether it’s with investors, but that’s how you build your business. So I think that’s great though. Awesome.

[00:05:00] Hey, I’m honored to have you on this morning. I’ve been in the business 30 years. I’ve seen your name around, heard your name around. We’ve run in a lot of the same circles and really haven’t had an opportunity to meet. So I’m looking forward to building a relationship.

Joel Friedland: I’ve been on, I don’t have my own podcast, but I love watching podcasts and I really enjoy yours. And I also have been on a number of other podcasts. And what’s great about them is when somebody who’s a host asks questions, it forces me to think through what I really care about. And so I know these things go in a direction that the host wants them to go.

But as a guest, one of the things that I believe is really beneficial to anyone who watches it. And to me personally, I can’t speak for you is to talk about something that no one’s ever heard before. And or that very few people have heard before. Start relationships with people who want to know more. So that’s what’s fun to me.

Mike Morawski: Yeah. [00:06:00] Awesome. And we’re going to talk about some stuff that I don’t normally talk about. We’re going to take a little twist this morning and talk about a couple of things that will be new to people. So, buckle up.

Hey, do this, talk a little bit about your background. Over the years, what you’ve done. How you got into what you’re doing today and what Brit properties is all about.

Joel Friedland: I went to the university of Michigan, which is why I love your logo because it’s got two Ms and they’re maize and blue. So you’ve got the perfect logo. That’s number one. After graduating from Michigan, I went to work for a family, a very wealthy family in Chicago that owned 80 industrial buildings. I found them through a friend, and they hired me to be a property manager and a leasing agent. And I was mentored there by these two amazing older guys. One was five years older than I am, and the other one was 10 years older.

And then the father of the one that was 10 years older, was also a mentor to me. Their last name was [00:07:00] Podolski. And the most wonderful people. Huh?

Mike Morawski: Good Polish name. Just like me.

Joel Friedland: Yeah. They’re without a doubt, the most incredible teachers. And they brought me in and took me under their wing like I was a family member. And they taught me the business. Let me give you a funny story about multifamily versus industrial. Milt Podolski, the father who was about 60 something, like I am now. I met him and he said, Joel, I have an investor that owned a multifamily property in the Chicago area, sold it.

And then came to me and said, what do I do with the money? It was about $20 million. And he said, I do industrial. And how many tenants did you have in your multifamily property? And she said, I don’t know, 400, whatever it was at the time. He said, how about this? I’m going to have you invest with me in a deal where there’s one tenant, same amount of money instead of 400 tenants, [00:08:00] one tenant.

And the woman said, that would be great. So they bought a building at 131st street in ALSO. Since you’re from Chicago, you know that’s the west outside over by the Calumet river. And guess what? It was 1981. Business sucked. Interest rates were very close to 20%. And they had built this building on a speculative basis.

And the woman came in and invested all of her money. And it sat vacant for three and a half years, which means instead of getting, at the time there was a 10 cap on a deal like that. So instead of getting 2 million a year, she lost the opportunity cost of 2 million a year and had to pay the taxes, insurance, maintenance, and utilities.

So Milt owned a small percentage of it. And this other investor owned the majority of it. And then they had a few other syndicated investors that had pieces. And the Podolsky said to me, we’re losing 3 million a year on this thing. You go [00:09:00] find us a tenant. And I was 22 years old. So I went out door to door canvassing and to try to find tenants for their building.

What I learned from this is that industrial is riskier than multifamily because you’re putting more money in with one tenant, sometimes there’s a multi tenant building. There might be two or three or 10 tenants, but it’s not the same thing as having units that might be worth $200, 000 each. It’s a $20 million building.

And these people were just so miserable. They were losing money every day. And I got lucky. I found a tenant. I found Uniroyal Tires.

Mike Morawski: No kidding.

Joel Friedland: At the time, I don’t even think they’re around anymore. They wanted to put a big tire warehouse in 330, 000 square feet. And they did. We had to give them a year of free rent in order to entice them to come in.

And then the rent was low. 330, 000 square feet at the time should have been $3 a foot triple net. And instead we got $1. 95. [00:10:00] Times were tough. So industrial is a riskier business when times are bad, then what you do. But at the same time, the cap rates are higher, so the yield’s higher. And it’s a lot less of a hassle in terms of management.

Mike Morawski: That’s kind of the same story I tell people about single family versus multifamily. I own 200 single family homes. I had 200 roofs, 200 furnaces, 200 hot water heaters, but I can’t own a 200 unit building and have Four or five roofs, four or five hot water heaters, boilers. So I get that. I understand that. I hope people really dig into that and find the economies of scale that work best for you.

Joel Friedland: Yeah, I love the industrial business primarily because it’s all I know. People are funny. They say, I love what I do. What else have you done? Oh, nothing. So I’ve been doing this, the same thing. The Chicago market has 16, 000 industrial buildings, 1. [00:11:00] 5 billion square feet. And I just focus on this market because it’s so vast that there’s not really any reason to go any place else.

I can be busy every minute of every day and have 15 employees busy every day, just working on industrial in Chicago. The thing that I love about it though is it’s a little obscure. A lot of people don’t know about it. Industrial building are hidden behind other buildings. You don’t see them. But the kinds of tenants that are out there are so fascinating. Do you know for example, that the knives used by most restaurants in their kitchens are rented?

Mike Morawski: No.

Joel Friedland: I didn’t know that either. So there’s an industrial building in Des Plaines, Illinois, right near O’Hare airport, where they have 60 guys working sharpening knives. So if you go to Chipotle anywhere in the country. The knives in their kitchen are re used [00:12:00] over and over again after being sharpened every two weeks.

So there’s a company called Cozini and they’re all over there in most cities and most large cities in the country. And so if you go to a Morton steakhouse, their kitchen has Cozini rented knives. And so every two weeks, these guys have routes, they have a little van and they pick up the dull knives. And they deliver identically suited the same knives, except sharp.

They bring back the dull ones to the warehouse where these guys sit there sharpening these knives. And you can only sharpen knives, I believe, nine or ten times before they get so thin that you have to throw them away. And then they melt them down and they make something out of them so that it’s more environment friendly.

Think about that. There’s a business that sharpens knives and rents to restaurants. How about this one? There’s a company that makes protein bars and they make them for Dannon Yogurt. Dannon [00:13:00] doesn’t make their own bars. They contract it out with a company called element bars. It’s near where you used to live on the west side of Chicago at Western and Roosevelt, actually.

Mike Morawski: Okay.

Joel Friedland: Not too far. And so in that same building, we have a company that makes walk in bathtubs that competes with Kohler and American Standard. So if you’re one of these people who has to walk into the tub and you can’t step over the side of the tub because of maybe some sort of a disability.

This guy came over here from Latvia, when he was a young child and not speaking any English, he learned the language and he started this business. And it’s fantastic. You should see these. These are the most beautiful tubs. They have gorgeous lights and they have the sprayers. What do you call those things? That they’re built in?

Mike Morawski: The body sprayers.

Joel Friedland: Yeah. Inside. Like propulsion so that it hits wherever you want it to hit. If you’ve got a sore muscles or whatever. So those are the kinds of tenants that occupy the kinds of [00:14:00] buildings we buy.

Mike Morawski: I have to say I love that. And here’s what’s interesting, the other night we were out, it was out a little networking event. We’re out on a boat in Newport Harbor not to make you jealous or anything. But I always wonder, what does that guy do? And you see these big houses or these big boats and you go, what do they do for a living? I’ve always been curious about other businesses and what people do.

And somebody said, Oh, that guy owns Duraflame. Here’s a business where a guy made billions of dollars off a fireplace log and nobody’s ever competed against him.

Joel Friedland: Yeah.

Mike Morawski: Which just fascinates me.

Joel Friedland: We have companies here that make and distribute medical products. There’s a company called Medline. There’s a company that distributes packaging products. It’s called Uline. All you need to do is have what you do or how your name is spelled and add the word line. And then you become a billionaire.

Mike Morawski: Yeah.

Joel Friedland: That’s how it works.

Mike Morawski: What happened to fried line?

Joel Friedland: Oh yeah, that would be a great [00:15:00] idea. Yeah. That’s what these guys do. There are all different businesses and one guy made jewelry and became a large supplier to target. So if you went to the jewelry counter at Target, and you bought the jewelry there instead of at a fancy jewelry store. He went diving somewhere on a vacation and we was down there.

He found some really cool stones that could be made into jewelry. And he brought them back and he had an idea, give it to a jewelry designer, and he had these things made and he went selling them and they actually sold out. So he went back and got a lot more stones and eventually created a multimillion dollar business called Sunstone.

And then he sold the business a number of years later. He was in a building in Morton Grove, a hundred thousand square feet. And he had about 120 employees working at assembly tables.

Mike Morawski: Interesting. So do you just own your buildings and take care of all the maintenance and issues or are your tenants triple net tenants?

Joel Friedland: They’re triple net. And[00:16:00] as you know from our previous conversations, I do deals all cash primarily with no debt.

Mike Morawski: Yeah, which is an interesting, so explain that model to people because that might have gone over some people’s heads.

Joel Friedland: Yeah, so real estate is a leveraged business for the most part. It’s where you buy a house, let’s say, and you spend a half a million on a house and you borrow 400, 000 and you have 100, 000 down payment. So your equity is 100, 000 and your mortgage is 400, 000. If we compare that to what I do, our buildings cost more. Our average building is about 3 million. So in the case I mentioned with the house, that would be an 80% loan to value.

So on a $3 million deal, it would be 2.4 million of debt and 600,000 of equity. That would be the down payment. And what I’ve been doing the last few years is primarily buying buildings with no mortgage. Where if it’s a $3 million building, we actually pay [00:17:00] the 3 million in cash. And we don’t get a mortgage.

A lot of people think like that I’m an idiot because they say, wait a minute, real estate’s a leverage business. But at my age and at my stage with a lot of experience for 40 years, my investor group, I’ve got 200 investors, and they’re mostly wealthy people. Doctors, lawyers, business owners, retired people who sold their business.

They’re into preservation of capital. And my idea was there’s nobody else doing all cash deals with no debt. Maybe there’s a market for it. Beyond that, I emotionally can’t take the risk of owning a building. Remember I told you about Milt Podolski with the 330, 000 foot building vacant for three and a half years.

They had a mortgage on it and it nearly took them down. So I stay away from mortgages to the best of my ability. We did a $13 million acquisition about a monthago. We bought three buildings where they make Fruit Juice Concentrate, a company [00:18:00] called Tampico. It’s actually very popular in southern California. They are all over the World. They are in 50 countries.

Mike Morawski: Yep.

Joel Friedland: And they make this goop. It’s goop. If you were to pick it up, it’s like this and they put it in containers and then they send it around the world where it’s mixed with water and bottles. And it was a $13 million deal, three buildings on the Chicago river at Belmont and Western.

Mike Morawski: Oh, sure?

Joel Friedland: Yeah. Great area.

Mike Morawski: Where Riverview used to be?

Joel Friedland: Directly across the street from where Riverview used to be. Where Lane Tech High School is.

Mike Morawski: We’re old enough to remember that.

Joel Friedland: Yes. I went there as a kid once.

Mike Morawski: Me too.

Joel Friedland: Scared the crap out of me. That thing that falls down really fast. I forgot what it was called. The bobs or the shoots or something. My dad took me there. I was traumatized by the roller coasters. I was six.

Mike Morawski: And they were wooden back then. Remember that?

Joel Friedland: They were wooden.

Mike Morawski: That really dates us.

Joel Friedland: So that is right across the street where that was [00:19:00] located, which is now high schools and a public park on the river. We are just across Belmont from that on the river with 1200 feet of frontage, which I believe one day our industrial buildings will be turned into condos. Someone will tear them down and develop condos for multifamily play. But not for me. I’m gonna call you. I’m not gonna do it. I’m just gonna sell it one day.

But 13 million was a lot to raise. I only raised 9 million. Because if you are raising an average of a hundred thousand dollars per investor, 9 million is 90 investors. That’s hard. And to get a 130 investors to do it all cash is really hard. I can easily raise money from my group for a 4 million or 3 million or a 2 million building, but I’ve never done a 13 million.

So I borrowed 4 million. If you look at 4 million as to 13 million of value, it’s 30 percent loan to value. And that is the [00:20:00] most that I will ever do in my future and now.

Mike Morawski: Interesting. So we have said that real estate’s a leveraged business. Isn’t your IRR or your return to your investors higher with debt on the property than it is when you’re all cash?

Joel Friedland: Significantly higher. The difference between the way that most people operate in real estate and the way that we do is there is a magnifying effect of having the leverage. So if you buy a property for a million dollars and you sell it for 2 million and it’s all cash, your profit is just a million.

And to get that, we usually have to keep it for seven years or whatever. Because we look at our average annual returns have been around 14%. But think about this. Because our average cash flow is around 10 percent over a 10 year period on an all cash deal. So in seven years, we’ve made 70 [00:21:00] percent roughly, or maybe 60 percent on our money in cash flow distributions, and then the profit might be 30 or 40 percent on top of that.

That’s how you double the money in a period of time that’s, let’s say, 10 years. If you go out and you borrow 70%, then the profit which is the 30 or 40% is magnified, and instead of 30 or 40 on your equity, it’s maybe 120%. So the IRR or the average annual return with leverage is likely in a successful deal to bring you to an 18 to 20% return as opposed to the 14 that we shoot for.

But my audience or my group is really focused on preservation of capital first, and they’re really comfortable taking some risk, like with leverage deals. But not all of their money goes into highly leveraged. They look at my [00:22:00] stuff as being like a safe harbor for some of their money so that their portfolio is diversified. Because we have single tenant buildings, our risk is higher.

So having no debt is extremely important to us if the building goes vacant. Whereas if you have a hundred houses just to pick a round number and you lose four or five tenants, you don’t get slammed with, Oh, I’m not going to be able to survive this. Because 95 percent of your homes are occupied and performing. We’re either 100 percent occupied or 100 percent vacant with single tenant buildings.

Mike Morawski: Right. Exactly. I have another kind of a follow up question, just unpacking some of what you said. That story you told between multifamily and industrial when you went to work for Milt, with knowing that pressure on a single tenant building, knowing that pressure in the industrial space, why did you stay in that space? [00:23:00] Obviously there’s some passion or some love that you have for it that caused you to stay in that space.

Joel Friedland: Yeah. So first of all, I was a broker when I worked for Milt, and I mainly worked for his son, Steve, who’s also just the most incredible real estate guy, wonderful person, loved working for them. So part of it was, I really liked working for Steve Podolsky.

That was maybe the main thing. And Milt was entertaining. Steve was the serious, make good decisions guy. And his dad was let’s go. So it was entertaining having Milt, it was educational having Steve. But working for them. It was the relationship. I loved working for them. And the deeper I got into it, the more entrenched I got with industrial brokers and industrial owners.

And as an industrial broker today, if you started out as an industrial broker. You’d make probably 50, 000 your first year, 100, 000 your second year in commissions, take home. And by the third year, if you’re really good, you’re 300 or 400 or $500, 000. And the guys that I’ve trained [00:24:00] who worked for me, over the years, whether at Podolski or at a later company that I started, I’ve got about 20 guys out there that I’ve trained who all make seven figures.

And they can’t do that in residential. Because in industrial deal, if you sign a 400, 000 square foot lease as a tenant, the rent today is 4 million a year. So a 10 year lease is a $40 million lease. So if I’m a broker and I bring a tenant to a landlord for an industrial building, that’s that size, it’s 40 million.

And the commission is about a million six or a million eight. So that’s one deal. Industrial is unbelievable because it’s big,. Once you’re entrenched in the relationships, it’s a system. It’s a group. There’s a group called the society of industrial and office realtors. There’s several thousand members around the world, and it’s hard to get the designation.

You have to do a certain amount of volume of business, but I went to the conference. It was in Chicago this year in October. And I’d say there were a thousand [00:25:00] people there and nobody makes less than a half a million a year. Nobody. So there’s a thousand people making a half a million on average, the young guys, maybe $250,000 and the older experienced guys, probably two to three, 4 million a year.

So it’s a great business. And I found a little niche of buying stuff. Like you buy homes. I buy little industrial buildings. They’re only 20, 000 feet. So they’re only worth two or 3 million. It’s as opposed to a 400, 000 square foot building. Which is probably somewhere in the neighborhood of 50 million to own it. That’s way over my head.

Mike Morawski: Yeah. Right.

Joel Friedland: I let the pension funds do that.

Mike Morawski: Let me share a story with you that’s kind of in this space. And this might be something you want to think about cause maybe it helps you and your investors maybe make a little bit more money. So our mutual friend, Carl Moose, who everybody may remember him from, him and I started this show together three years ago. But he’s in the solar business. And Carl came to me [00:26:00] about six months ago and said, Hey, I have an idea. He said, why don’t we go buy a warehouse or an industrial building?

Let’s put solar on it. Triple net lease back to the tenant. And we become now the power company and we sell that electric or power back to the tenant and it increases the return that the investor is going to see on that property. And so we actually started to walk down. We’ve started to walk down this road and look for deals.

We actually had an offering on a deal in a building out in Woodstock, and we couldn’t come to terms on the lease. We could come to terms on today’s lease, but the tenant didn’t want to future increases in lease terms and length of terms. Have you looked at doing any of that at all or thought about it?

Joel Friedland: Yeah, we started with, I have relationships and that’s what I do. I [00:27:00] have an investor who’s a seven figure investor with me, who’s been with me for a long time. And he and his partner are in the solar business. So I am locked and loaded with those guys. If there’s anything that I do with this, we own so much real estate together and we’re so close.

We have lunch every couple months together. We talk maybe once a week. I know when his kids are sick, he knows when I have a grandson who’s born, the relationship is that solid and it’s exactly what he does. His name is Ira Holtzman. And they’re in the lighting business also, it’s called Crown Commercial Lighting and he’s got a partner and his partner is also an investor of mine.

It’s sort of like, I’ll scratch your back if you scratch mine. I do everything with them. So I love that you guys are doing that, but I am solid on that commitment to those guys for that business. But you’re right. It’s a fabulous thing to be able to do. Industrial is the greatest.

Chicago’s not as good as some [00:28:00] other places. Cause we don’t have as many sunny days. You guys have more out there in California and Colorado’s better and Utah’s better because it works here. But it’s not like people are clamoring to do it here.

Mike Morawski: Here’s where some of the biggest impact is it’s in the credits, right?

Joel Friedland: Yes.

Mike Morawski: You get credit back from com edge. You get state credit, federal credits, that there’s where you don’t get those credits here in California or you don’t get them in where I own real estate in Tulsa, Oklahoma. You get themin illinois. I think it’s Illinois, Maryland, and one other state that really have those high credit returns.

Joel Friedland: Yeah, I think it’s great. And when I have a new tenant, I remember it was funny. We have a building in a place called, it’s right next to Rosemont. And we were meeting with a potential tenant who hadn’t moved in the building. We bought it vacant and filled it up. And he comes to the meeting as, a Coal landlord because we’re investors together.

And he says to the [00:29:00] tenant is a guy, owns I think 14 restaurants called the Rosebud Restaurants. I dunno. His name is Mr. Dana. So says to him, Hey, listen, if you’re gonna be the tenant and we’re the owner, we should do the solar on the roof. And Alex Dana says, maybe.

Yeah, it’s a hard sell because they’re not thinking about that. They’re really thinking about how do I build my business, stay in business, make a profit, not lose my employees, not lose my customers. So you really need somebody who takes charge of that project and does it for you, but then you’ve got to get as an owner or a landlord to agree to do it.

And one of the big problems is that when you put it on the roof, because roofing systems here need so much maintenance. That there’s the question of, does it interfere with your ability to repair, and eventually replace the roof? It’s like when you have so many HVAC units on the roof, cause most of them are rooftop, it becomes a [00:30:00] more complicated roof.

So there’s a lot of issues, but it’s great. I’m not saying it’s not great. But I’m so committed to IRA and his partner, Billy, that if they’re watching this, Hey, guys.

Mike Morawski: I’m sure they either have or can run the numbers for you. And, I look at it. I think it’s a great opportunity, especially alternative to what I’m doing. And I’m like you, focused on multifamily. I like market rate multifamily. And, I look at it as maybe a little side hustle.

Joel Friedland: I love it. I think it’s great.

Mike Morawski: Yeah. So it’s interesting. Hey, so let’s talk markets for a little bit. We all know2023 hasn’t been the greatest market to buy real estate in, what’s your experience been? And where do you see the markets going over the next 12, 24 months?

Joel Friedland: So industrial has remained really good through this year. There’s been no downturn in industrial. There has been an office because people don’t have to go to work anymore. [00:31:00] But industrial you have to come to work because the stuff in the back of the warehouse, it’s not just an office, it’s a warehouse or a manufacturing building, which requires people. Forklift truck drivers, assembly people, packaging people. And two things have made industrial really strong.

One, the internet, every time a store goes out of business, an internet company gets a warehouse. Because now you’re ordering from those companies online as opposed to getting in your car and driving to Bed Bath Beyond. So, as Bed Bath Beyond went out, a bunch of companies that sell the products that used to be in that store, you can go directly to that company and order online and not leave your house.

So that’s been great for industrial and over COVID it got even better. The second thing that’s been great for industrial is there’s a really difficult problem going on with China and the United States from a geopolitical standpoint. We’re at odds with them right now.

They talk about Shi, the [00:32:00] president, Shi and Biden and it’s a cold relationship. Stuff used to be made overseas ’cause they could make it for one third or one half the price because labor’s cheaper and everything’s cheaper in China. So they would do the manufacturing there. And then ship it here and it would save companies a fortune and their margins will better.

Now, companies are coming back. It’s called on shoring or reshoring where what they used to do overseas, they now need to do locally because remember the supply chain, you couldn’t get toilet paper, other products. You couldn’t get anything. They need to make it here so that they’re not at the mercy of some company in some country that’s thousands and thousands of miles away.

So they’re occupying more industrial buildings with manufacturing and distribution. So our rents have gone up in the past four years by somewhere between 60 and a hundred percent. That’s 15 to 20% rental rate growth. So it’s really been [00:33:00] too good.

Mike Morawski: Yeah, that’s interesting. Because when you look at companies like Amazon and I told you before we got started this morning, I was working on a project in Tulsa and Amazon in Tulsa just built their third distribution warehouse. I understand that and just from an economic standpoint of looking at markets, that industrial piece is a piece that keeps that job growth happening and the income happening.

Joel Friedland: Industrial is the backbone of our country, really of the world. Everything is made in an industrial building. I can point out to you, your headset. Who makes it?

Mike Morawski: I don’t offhand.

Joel Friedland: So let’s say like a microphone, a SHURE microphone. It has about 70 components in it. And so SHURE has a place where they put them all together, but they order every single piece from some industrial building somewhere where they make the individual parts. Same thing with your clothing, same thing with your [00:34:00] furniture, same thing with everything we eat.

Refrigerators. The cups. The glasses, the Warby Parker, everything that the TV remote, everything’s industrial, it’s all made in industrial buildings and that’s not going to stop. So industrial has just been booming. I am worried that it’s been overbuilt. Remember the story of Milt and the lady? So these huge big box. Big box is defined these days as over 200, 000 square feet. They’re building too many of them. Too many people started all at the same time with pension fund money. And now there’s going to be 10 million square feet built in the next 12 months here.

I don’t know if it’ll all fill up, but it doesn’t bother us financially very much because our buildings are little and they’re closer to O’Hare and they’re in the city. And those you cannot replace because to tear one down and build a new one makes no sense.

So these class B and class C, older, smaller buildings. There’s a niche for them [00:35:00] and companies looking for them to buy can’t find them because the Vacancy rate in some markets is zero.

Mike Morawski: Yeah, it’s interesting. What are you working on these days?

Joel Friedland: So have you ever seen one of those posts at a university or a parking garage or a hospital? It’s like an emergency phone on a post. It’s got like a blue light? So, if some bad actor is chasing after a college student on campus, there’s this Phone, it’s an emergency phone and the company is called Talk a Phone that makes most of those. And they’re in a 27, 000 foot building in Niles, Illinois.

And believe it or not, I used to own the building with a group of investors and sold it to Talk a Phone in 2007 and the owner recently died and his family wants to sell the building and we’re going to probably buy it back. So I’m looking to buy that $2. 7 million building with Talk a Phone as a tenant.

It’s going to give us an 8 percent return for four years and then a 9 percent return after that. And it’s a really nice company. It’s owned by a [00:36:00] private equity group. So I’ve got to syndicate that I’m going to do it in increments of 50, 000 each and hopefully, close that by maybe late January.

Mike Morawski: Okay. Interesting. Good for you. So people are interested in this type of a passive investment, they could reach out to you about that.

Joel Friedland: Sure. Yeah, we are very careful as to who we bring in. Because again, it’s all relationships. We want to know each other before they come in. I do 506 C offerings. Which means we can advertise them. We can talk about them on a podcast, but everybody has to be an accredited investor, or they can’t come into the deal. And they have to be people that we get along with who trust me and I trust them. And otherwise it’s a mess.

Mike Morawski: Yeah, you’re absolutely right. It’s funny you say that this week alone, I told two people that I don’t think you’re a fit for us. And I don’t do that because you know when you connect with somebody or not. And as soon as investors want you to start changing documents or [00:37:00] doing something different, you’re not a connection with that person.

Joel Friedland: Yeah. This is my draft of my new document. I’ve got a lawyer in Philadelphia. He’s my securities lawyer. His name is Mark Roderick. And we have to be careful how we write these documents so that they’re easy to read so that the investors can understand what they’re getting. Mark doesn’t believe in legalese. Instead of receive, he says, get. If you can say it in three letters, you’d rather do that than a word that’s nine letters.

Mike Morawski: I love that.

Joel Friedland: Isn’t that great?

Mike Morawski: Yeah. But for a simple Southside Chicago guy like me.

Joel Friedland: Exactly. Yeah. So we have the book we put out and we send it to people. We email it over. And I like when they have a lot of tough questions. That’s always the best. I like a discriminating investor who’s careful.

And the biggest question that they ask me that’s the most important is about succession planning. Because you and I are, I’m a little older than you, I’m assuming. When I get hit by a truck or I get [00:38:00] cancer or whatever, they want to know that somebody’s standing in line on the bench next to the bench, ready to take over.

And so people say, well, what happens if something happens to you? I know you. So I’ve got Eric Schneider, who’s 20 years younger, and then my son, Sam, was 20 years younger than that. So there’s a succession line of people who know the business and can be in charge of it. If something happens to me. That’s the question that’s the number one stumper for most people.

Mike Morawski: That’s interesting. I don’t necessarily know. I think because I have a team, a pretty strong team, I don’t get that. That question doesn’t come up as much. I have a great partner, who handles all of the stuff that I don’t have the brain power to handle. I’m a visionary and big picture guy. And when you give me a set of documents like that. I fall asleep by page three.

Joel Friedland: You’re like a Milt Podolsky. Milt Podolsky didn’t have any patience for any of that stuff. And Steve Podolsky had patience for all of that stuff. [00:39:00] So they were a great team. And they had another, he had another brother, Randy, who also was great on details.

You’ve got to have your back office. In my case, I’ve got two guys in my back accounting office have been with me for 20 years. And without having the back office really in good shape, everything can get out of control pretty quickly.

Mike Morawski: Absolutely. Yeah.

Joel Friedland: So it’s good that you have that somebody who handles that for you.

Mike Morawski: Yeah. Listen, thanks for being here this morning. I appreciate it. This has been very insightful. What do you want to leave investors with and please tell them how they, get in touch with you.

Joel Friedland: Sure. I’m joel@britproperties.com. That’s my email. And the biggest thing that I think is important to say is that I’ve been through battles and there are future battles. Nothing is easy. It’s not simple. I’ve heard you say it. It’s complicated. There’s work to do and our work is never done. And [00:40:00] someone who says, yeah, it’s easy. Invest. We always make money. They’re full of it. So you and I both agree that we have to work hard. And that’s the message. It’s hard work.

Mike Morawski: Yeah, absolutely. Hey, best book you ever read?

Joel Friedland: The Four Agreements by Ruiz. Fabulous.

Mike Morawski: Yeah . Love that book. That’s awesome. Hey, I appreciate you being here this morning. And, I would encourage people if they’re looking for something different, if they’re looking for some diversification in their portfolio, whether they’re in the stock market or whether they’re in multifamily. I’ve had a couple multifamily investors lately say, Hey, I need to diversify into something else a little bit. This might be a great vehicle for them.

Joel Friedland: Yeah. And vice versa. My people who watch this, might be interested in what you’re doing.

Mike Morawski: Yeah. So you and I should probably continue to build a little bit of a relationship.

Joel Friedland: I would love that.

Mike Morawski: Yeah, me too. Me too. Thanks for being here. I appreciate it.

And everybody remember we are here to bring you some twists, somebody who’s [00:41:00] going to share with you something you don’t know and it’s going to help give you that golden nugget to help build your business. If Joel can do anything for you, don’t hesitate to reach out to him. If I can help, don’t hesitate to reach out to me.

Joel, have a great new year. Good luck in 2024. I look forward to talking with you soon.

Joel Friedland: Thank you.

Kristen: Thank you Mike, and thank you for joining us for another great episode of Insider Secrets. As always, Insider Secrets is brought to you by My Core Intentions. Wherever you hang out on social media, you will find Mike and My Core Intentions. Please like and follow us to get the most up to date real estate investing trends.

Visit mycoreintentions.com where you can get expert coaching on all things real estate investing and property management. If you’re looking to become an expert, Mike’s coaching will help you scale your real estate investment business. We’re looking forward to having you back again next week for more Insider Secrets.