Real Estate Underground

Exploring Unconventional Investments with Kevin Bupp

• Ed Mathews

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Ed Mathews:

Greetings and salutations. Real Estate Undergrounders. It is Ed Mathews with the Real Estate Underground. Thank you so much for listening to us. It's amazing the feedback we get from the folks out there. I'm unbelievably grateful for your comments, your feedback, as well as your questions, and we're happy to answer them as we can. We do read every comment and one of the things that if you get value from our show that I would very much appreciate is based, depending on the platform you follow this podcast on. If you could click that subscribe or follow button, it does help us grow and beyond that, I'm just grateful for you listening.

Ed Mathews:

I'm proud to say it's not just my daughters, my wife and my mom out there listening, which is nice. So with us today is somebody that I have grown to admire over the years. He's very much an unconventional thinker in terms of A some of his approaches to the business and, B some of the asset classes that he invests in, which I'm very, very much looking forward to talking about today, particularly the second one. And Kevin Bupp. Welcome to the show. Kevin is the CEO and founder of Sunrise Capital Investors and I'm very excited to have you on the show, so welcome.

Kevin Bupp:

Yeah, thanks for having me excited to be here.

Ed Mathews:

Yeah, it's good to see you. So for those folks who haven't discovered you or haven't read your book, the Cashflow Investor, which I'm actually halfway through myself right now, I want you to tell everybody who you are and what you do for a living.

Kevin Bupp:

Sure, sure. So I'm Kevin Bupp, the CEO of Sunrise Capital Investors. We're a boutique equity firm that focuses on, as you mentioned, two select asset classes, mobile home parks being one and parking facilities. So I think parking lots, parking garages that is the second. That's all we do day in and day out. We've been buying mobile home parks now for about 14 years and parking for about five, but those are the only areas we spend our time, energy and focus on.

Kevin Bupp:

Outside of that, Ed, I've been a full-time investor my entire adult life. I bought my first property when I was 20 years old. It was a single-family home, kind of started there, built up a portfolio of single-family properties that morphed into some multifamily properties that morphed into different types of commercial real estate a little bit of everything Office back in the day, when it was sexy and still an attractive asset class, some retail, some industrial again just trying to figure out the better way to kind of skin the cat. And shortly after that period, OA happened, lost everything, rebuilt it again, but rebuilt it with mobile home parks. I mean, that's really.

Kevin Bupp:

There was about a three-year lull, from 08 to 2011, where all I managed was damage control of my existing portfolio, trying to just get myself from that grave. And so the second phase of my journey was to rebuild, and I luckily stumbled across mobile home parks, because it was an asset class I'd never considered. And I just happened to meet a fella that owned a few mobile home parks, talked to me about all the major benefits and intrigued me enough to where I left that lunch meeting and went and bought one. And here we are now again, 13, 14 years later, and we've now owned parks in 18 different states. We've got about 3,500 lots in our current portfolio and having a lot of fun doing it. So it's been a great asset class, great ride, and I look forward to the next 20, 30, 40 years of it.

Ed Mathews:

Yeah, so I have a very close friend of mine who's just kind of graduated from class C, value added multifamily, and he has been buying a multi or, excuse me, mobile home parks as fast as he can find them over the last two, three years. So I'm curious his name is Oz Pariser by the way, I'm curious about your viewpoint on that class. We're going to get to parking lots in a bit, but what drew you to mobile home parks as opposed to multifamily, for instance?

Kevin Bupp:

Yeah, yeah, so well, I will say that the plan, the rebuild plan, starting in 2011, kind of like what does version two look like for me and how do I rebuild back? Pretty much, I lost everything. I lost my primary, lost all my investment, lost everything had my bank accounts garnered. So I was kind of starting from zero with bad credit and so I had a good bit of time to reflect back on what worked and what didn't work and just how could I do things better the second time around, and what I identified. A lot of my single family properties were spread out amongst five different counties.

Kevin Bupp:

This is back before technology really played a major role in sales and leasing. There weren't digital showings and digital lock boxes and all that kind of stuff, and what a headache it was. I had 122 single family properties and what a headache it was to manage the leasing, the sales, the maintenance and all that stuff. It wasn't me, but I had a team and it was just so inefficient. And I also looked at the apartment complexes that we own a couple smaller ones. We had like 12 units, 36 units, the biggest one was 72 units, so all kind of like small or medium sized, and a lot of those headaches didn't really exist, a couple of larger ones. We had like part-time sales and leasing agents on staff. We had a maintenance guy that would oversee about 130 of those multifamily units that were all within a five mile radius of one another. It just seemed to be the better way to rebuild and so, going into this rebuild stage 2011, I was dead set on multifamily and so I went on this exploratory mission.

Kevin Bupp:

The world had changed in 2011 than what it would look like in 2007. Financing was so different. Real estate was still in major distress all across the country. There was lots of excess housing still that was still working its way being absorbed. There was a very different world and landscape. And when I say that those three years were just damage control for me, from 08 to 11, I really didn't pay any attention outside of my own little sphere, because everyone I knew in real estate also was losing everything, and so I just I kind of stuck to kind of manage my chaos and didn't really pay attention to what else was going on in the world around me. And so 2011 was kind of like I'm just getting started in this thing again. Right, new world, what do I know, what don't I know and I was introduced by a mutual friend to a gentleman by the name of Randy.

Kevin Bupp:

Again, I was kind of trying to expand my network, talk to everyone, and Randy had been a commercial banker for 30 years. That's why a close friend of mine introduced me to Randy. He said, hey, randy was a commercial banker for 30 years. He just retired. But the guy knows everybody in Tampa Bay, he's well-connected. I would probably go have a conversation with him. I met Randy for lunch. I had a two-hour lunch and found out that Randy had retired from banking the last 10 years of his commercial banking career. He was doing a lot of loans here in Florida for clients that had mobile home and RV parks and after a couple of years of doing those loans he realized that he was on the wrong side of that P&L and basically committed to buying a couple of mobile home parks for his retirement, which he did. When I met him he had three mobile home parks and so he went on to just speak of all the benefits and why mobile home parks are so much better than multifamily.

Kevin Bupp:

Some of the really big ones that stuck out to me. One of the biggest ones was the tenant base, the resident base. They own their own home and they're very sticky, very akin to that of living in a subdivision. To them it is a subdivision, it's their home, it's their neighborhood, and so he's like you know, he's like I've got tenants that have lived in my communities for 20, 30 years and he's like here's the thing is, when the homes go up for sale, they continue paying me the lot rent because we own the lots, they own the home, they continue paying the lot rent. So there's never a down period like you have with a multifamily, like a traditional rental, right. There's not a period where you don't have income coming in, you don't have a necessarily a make ready cost that you would with a normal rental unit. So that was like the big one. I was like that sounds amazing, right. And then add the element of just being a sticky resident base, like you don't have a lot of turnover. These folks live there for a very long time. So today we actually have a number of communities where we've got folks that have lived there for 50 plus years, and then they've also got family members that live in the neighborhood, right, like they've got sons and daughters and granddaughters that live in the neighborhood. So that was a big one for me.

Kevin Bupp:

Another really big one that stuck out was truly the management intensity of it, and I'm speaking more to not having to own the actual units. So when there's an HVAC issue, there's a roofing issue, a plumbing issue, our manager's not getting called about that we don't have to have full staff maintenance crew to go manage all these various elements. The homeowner does that's their response Just like we own our own home. If our plumbing breaks, I call a plumber, and so it just. That was just. It seemed to be a new world. Those are the two things that really just piqued my interest. Enough, there's many others, but those are the two big ones.

Kevin Bupp:

I said, man, there's something with this, because I am burnt out from what I was doing. And don't get me wrong, when I first started building my original portfolio of single families, I literally managed it myself up until like I was spread so thin like 40 units. I mean, I was like running around like a chicken with its head cut off. I, you know, I had like a part-time assistant and I had a maintenance guy that I kind of relied upon to do a lot of things. But outside of that, the normal sales, leasing, answering calls, doing showings. I was doing most of that and it was crazy, it was hectic and even once we actually started outsourcing management on once we continued to grow. Even then, just the inefficiencies that were associated, as I'd mentioned, just the sales and leasing and the maintenance of all these properties spread out, it's just, it was a lot and there wasn't. You know, I did the basic math. I can make the same amount, if not more, with this mobile home park type structure and have way less management intensity and responsibility associated with it. And so it's just, it was a no brainer to me and for that reason I was very excited because I knew what the other side looked like. I knew that the grass actually really wasn't green on the other side and that this was, could be, a special place. So I mean, that was it.

Kevin Bupp:

I left that lunch meeting. I literally I was like I'm going to go try to buy a park. There wasn't much information out there. It wasn't a well-known asset, classic it is today. Randy was the only guy I knew that owned the park at that point. I'd never met anyone else. There was no books really out there on the topic. There wasn't much. And so I just started calling brokers that had listings and started looking at properties, started trying to understand the dynamics of the asset and got cold feet a bunch of times, had a couple of deals under contract, got cold feet later, regretting that. I know who bought a number of those properties and I know how well they did. Anyway, I finally did buy one. It took me about a year. I bought that first property and that was it man that kicked it all off. That was in 2012. And I turned that one around, bought the next one, bought the next one, bought the next one. So now I think we've owned more than 50 communities. We've gone full cycle on. I believe it's 17 or 18 of them at present time and of them at present time and we've owned in 18 states. I think present we're in 14 or 15 different states, and so it's been a fun ride, great learning experience.

Kevin Bupp:

The asset class today is much more well-known than what it was back then. Back then, a lot of people owned them, but banks didn't understand that. It wasn't a lot of lending opportunities in the space. It was really difficult to get financing, which there's pros and cons to that, but in any event, it's a very different world today. Everyone knows about mobile home parks, people like me out there speaking about it. Which again pros and cons of that now more competition, but also, if we do exit properties, we tend to get a higher premium on the sale than what we might have gotten, you know, maybe 10, 12 years ago. So, in any event, I'll stop there.

Ed Mathews:

Between you and your two podcasts and Brandon Turner and there's a handful of other. You know very well-known folks out there that are talking about and you know what's happening in mobile home parks is very similar to what I've seen happening in the self-storage space, for instance, right when people have discovered fewer moving parts. And you know you can affect the, the positive, the NOI, positively, just doing a handful of very specific things. You know in terms of growing the business and you know making the making the business more efficient.

Kevin Bupp:

Absolutely, and so using it, using that as a comparison, that's actually. It's a. It's a great comparison. The consolidation of self-storage started happening probably about 10 years prior to that of mobile home parks. But, with that being said, I actually own self-storage and I have owned it years past If you compare the two, and they're both great asset classes. But one of the other key things that Randy kind of pointed out and he wasn't comparing it to self-storage, he was really comparing it to multifamily but the barrier to entry of new development. He's like they're not building them anymore.

Kevin Bupp:

So if you find a great asset in a great market, you don't necessarily have to worry about competition opening up right down the road, and there's a litany of reasons for that. But any other asset class you pretty much have to worry about competition. Self-storage is the big one. If you're in a major market with all the big boys, guess what? It's a risk. It's a significant risk, right? They're going to keep building. They've got more dollars and cents to put towards advertising. They can do maybe more creative or aggressive pricing structures that might price you out of the market. I mean, we don't have to necessarily worry about that in the mobile home park space. So it's a beautiful thing.

Ed Mathews:

Yeah, so you mentioned going full cycle, so it sounds like this is very similar to a syndication in the multifamily world. So talk to me about your capital stack and your agri-strategy strategies.

Kevin Bupp:

Yeah, what I mean. Going full cycle. That means that we bought something, we've maximized the value and we've exited out of it, whether we had limited LP capital in a formal syndication or prior to that I mean back when I started buying parks. I bought them with either my own capital or more of a private debt structure than an actual formal equity syndication. I didn't know what syndication was until 2013. I wasn't familiar with the structure prior to that. My days were really finding private lenders that were high net worth individuals but that would write an independent mortgage note tied to one property. That was it. That was the complexity of my structure. That worked really well. I bought a lot of deals doing that. I love debt. I wish we could do the deals we're doing today and getting private debt and not necessarily have to bring equity into the equation. But in any event, going full cycle just means that we bought, fixed up and then sold and ultimately did really well with the different parks that we've had.

Kevin Bupp:

But our capital stack today. I mean we launched our very first fund back in 2014. We're now on our fourth fund with which we launched we launched this one back in, I think, October of last year the current fund that we're in. It's a $100 million fund. We're just about we'll max it out, probably by end of Q1 next year, and then we'll open up the fifth fund and so capital stack is, I mean, it's pretty straightforward. We keep it. I like to keep it really simple. We don't add a lot of different classes in there. We basically have an 8, 9, or 10 pref based on the capital contribution of the investor. It's only accredited investors, that's Reg D 506C and that's a 70-30 split after investors get all their original capital back and after we make up any accrued breath. That's remaining.

Kevin Bupp:

But our plan I'd say that our plan has evolved quite a bit over the past probably really five years, where one of the biggest regrets I have a number of those properties that we sold. There was definitely six or seven I regret. I regret selling. I mean they're phenomenal markets and I know they're not making them anymore. And don't get me wrong, we did incredibly well. I mean, just knocked it out of the park, grand slam, but it continually gets harder and harder. And an asset class like this where they're not making more every time we sell something, we got to go find something else to buy and you're selling something that you know more than anyone else. You've got all the skeletons worked out. You got all the kinks worked out of it. Right, you could simply just do a continually do a cash out refinance to tap into the equity there.

Kevin Bupp:

But ultimately we chose to sell a number of properties and we've since morphed the structure into a more of a long-term whole, because, again, I know that they're not making more of these, and every time I find one in a great location it's going to be even more difficult to ever replace that. Going down the road, five years, 10 years, 20 years on the road, as this space gets continually consolidated, what I think is hard today is going to be even harder five years from now. And so now we've really morphed our structure into a long-term hold, and so most of our investors that are with us, we've really kind of honed in on who are we a good fit for? We're not a good fit for the guy that really wants it. He needs the velocity of capital. He's looking to do two to three-year turnarounds, all IRR-driven. That's not for us. We're not a good fit for you. You're not a good fit for us.

Kevin Bupp:

For us, we're the guy we want the investors that have already made a good amount of money. They want wealth preservation, not saying that they don't want to grow their capital, but they don't need to take high risks. They just want consistent cashflow on a quarterly basis and they want it in good asset classes. And they also don't want a tax burden every three, four, five years when we sell something. Your mobile home parks probably have the best depreciation of any asset class, and while that's great on the front end, every time we sell something not only is there a recapture, but now we've also got the capital gains on top of that, and so you create a our investors.

Kevin Bupp:

They're traveling the world, doing their thing, the last thing that they want. They want to get money, they want to return, they like profits. But now you just created a big tax burden for them that they got to figure out and they got to sort out. So we have found that we get more negative feedback when we had sold properties than positive feedback. So surely you can't make everybody happy, but we definitely got more negative feedback of like hey guys, I appreciate what you do, I appreciate the that that thing was a slam dunk, but damn, you got something else I could put this money into Cause. I shit Like I got this max max of tax burden, like you sold me on the depreciation three years ago, but now I got a major consequence on my hands. So what are you going to do? The solution is let's hold this stuff forever. Let's just do continual cash out, refinance. It's 1031s if we do sell something and just keep kicking it down the road.

Ed Mathews:

Yeah, and that's the key, right? One of the things you had mentioned. There is a lot of asset classes have that challenge, right? Is that, if, okay, if I go sell this asset, what am I going to do with it? Right, because multifamily in my world you can go buy something, but you're going to have to overpay for it, and why would you do that? Again, you already know this asset. You've already uncovered all of the curve balls and you've resolved most, if not all, of them, and that's it. It's a cash flowing, it's a cash flowing property. So, if it, if it is, then why?

Kevin Bupp:

you know why mess with happy Right and I and I get in the beginning. So, like I, you know, you gotta, we, we gotta. Look at it from a different couple of points of context. You know, if you're just getting started and you're liminal capital and you need those big hits, right, like you need to be able to take that, those big hits, and then parlay that into something else, right. So it all comes at different stages.

Kevin Bupp:

We're at a point now where we've done really well earlier on and truly have the ability, even the sustainability from a GP perspective. We're comfortable, brian and my partner, brian and myself. We're comfortable in the true delayed gratification of these deals and don't have to sell them. And so our investors are happy because we can give them consistent returns on a regular basis. Brian and I are happy because we can wait five, six, seven years until we're in the promote. We don't need it today. We don't need to sell in three years in order to get that big chunky profit split on the back end.

Kevin Bupp:

So I'm willing to look at it as more of an annuity. It's an annuity today for our investors. They're getting access to that money right away, and then again our icing is on the cake at the end or towards the end of the rainbow as we get them paid back and get them called up. But again, you can't do that in the beginning. That's very difficult to do in the beginning. You can only live so long off. A fee, right Off an acquisition fee or an asset management fee really isn't really much more than just to keep the lights on right and so so just we're at a different stage of our business than what it might have looked like even five, six, seven years ago. So while I regret selling some of that stuff, some of it was critical in order for us to get where we're at today.

Ed Mathews:

So yeah, it gives you that flexibility and the longer view that I think probably most of your investors really appreciate. It sounds like they. So. 10, 15, maybe 20 years ago I used to work in corporate America, flying all over the world selling in software, and I happened to be, for whatever reason I don't remember why, I certainly didn't pay for it first class, and I sit down next to this gentleman and we strike up a conversation. His name's Alan Lazowski, and I come to realize that I'm sitting next to the CEO of Last Parking right. And so now I'm fascinated. I'm a real estate guy.

Ed Mathews:

Back then I was small, multifamily and flipping houses and I started interrogating the poor man on what he found so attractive about parking, and one of the things that he had said to me was very low maintenance in terms of managing the asset. Right, he said you know it's, there are no plumbers. There are no. You know, there are no handymen. You have to call at two o'clock in the morning to go fix a toilet. Well, occasionally maybe, but very rarely. And you know, the fact is is that it's an operating business that you can, you know, grow very easily with some tried and true management techniques. So that's right. I've been fascinated for years. I have yet to act. And then I came across you and thought oh, okay, I'm going to pick this man's brain because this is something so why parking?

Kevin Bupp:

for you, yeah, yeah. So for the reasons that Alan had mentioned. They ring absolutely true. A couple other reasons For us.

Kevin Bupp:

We all know the adage of location, location, location. You can't change a market, right. You can buy a great-looking asset, but if it's in a crappy market or in the wrong side of town, or not in a good school district or not in the path of progress, there's only so much you can do. You can't pull too many levers, right, you can only pull the levers inside the community. But if you can't attract the right people there, then what's the difference? It doesn't matter, right?

Kevin Bupp:

So parking, we kind of look at it in the same vein, like for us, it's first and foremost it's location, location, location. So we look at it today as it's got to be the parking element of it. It truly, in our eyes, has to be the lowest use that it'll ever see, meaning that inevitably, at some point in time, the lot that it sits on is so desirable that, whether it's five, 10, 15, 20 years, it will have a much higher and better use as something else, as a redevelopment play. We're not developers. We don't put any value on that. We don't underwrite that future value. It's got to make sense today as a standalone parking asset with parking revenue. We've got to make the economics work and the business model work from there, but again, knowing that, like, the footprint that it sits on is invaluable and it's irreplaceable and it's in the best part of town, so, like, for us that's huge. And then, lastly, if you have that location, if you've got that phenomenal location, which it's hard to find, we literally have only bought like one a year. We just closed in one last week. We've been buying like one parking asset a year. We want to buy more but it's really hard for it to check all of our boxes because ultimately, if you, if you, if you've got that phenomenal location, what we have found is that parking has an inelastic demand, meaning that if you've got the prime location, no matter if you're let's say you're I'll use an example.

Kevin Bupp:

We've got a parking garage down here on the beach, where I'm at, down in Clearwater Beach, there's a moratorium on new parking. You can't build it, can't build standalone parking. They've removed all the parking minimum requirements from new development. So any new hotels going up, new condominiums, the developers only building as much parking as they need, no more, no less, where historically zoning requirements used to require a certain formula, like one parking space or one and a half parking spaces per every thousand square feet, and what happened is, in a lot of cities across the country we had this excess of parking. Well, that's gone away. Pretty much every major city across the country has eliminated these parking requirements, so no new parking is really being built.

Kevin Bupp:

In fact, it's only going away because a lot of surface lots are being built into other things, and so, using the example of Clearwater Beach, you know we've got half the folks that use a parking garage are in from out of town, like they've actually traveled there. They're parking their car for a long period of time, but the other half are literally transient. They're people that live all in around the Tampa Bay area. They come for the day with their kids, they got their rafts in the car, they got their coolers, they drive. It already takes them an hour to get down there.

Kevin Bupp:

The traffic's horrific down in Clearwater Beach. I try to steer clear of it. I literally go by boat, or I don't go at all, because getting down there via car is a nightmare. It's good, though, for us with parking, and so there's only so much parking, and kids are crying in the car the son's. I got to pee, dad, I got to pee.

Kevin Bupp:

Dad's been driving around trying to find parking. It's $20 here, it's $20 there. Those are full so he can't even park there. Ours is $25. Is he going to continue driving around the block three, four, five, six different times to try to find something that's a 20, that's actually got a spot available, or is he? He going to pay the $25,? Right, so an Arbor location literally is one block from the beach. It's got a direct path to the sand and it's covered. Right, the car stays in the shade. So it's not really a pricing-driven metric. If you've got it in the right location, if you are the most efficient to whatever you're in close proximity to.

Kevin Bupp:

Again, for us it's the beach and that one asset. The garage we just closed on in downtown Charlotte. It is the closest parking garage to the Spectrum Center, where the NBA Hornets play and where they do massive shows. Justin Timberlake was there the other week. Right, we are the closest parking garage to that. It's literally a stone's throw, and so we can very easily charge $3 more, $4 more for the same parking spot than what the neighboring parking lots could put the pension to charge and no one's going to blink an eye, no one's going to drive up and drive back out when they realize that it's $3 more and go find a parking spot somewhere else. So it's got this inelastic demand. That is just phenomenal Again.

Kevin Bupp:

But it's all built around that prime location. It's got to be the best location in the entire marketplace. So a litany of other reasons why we love it. But those are the big ones. It's been a phenomenal asset class. But again, for us there's a lot of boxes that we have to get checked in order for it to fit our buy box and we probably look at a hundred deals to find one that even remotely gets us excited. And even then I'd say it's probably more than that. It's probably more than that. So we've bought one a year now. We've been on a track one a year for the last five years and so hopefully we can keep that up and that's good for us. If that's all it's going to be, that's fine. And if they're the best location in that respective marketplace, I'm good with that. Slow and steady wins that race and we'll just keep buying the ones that are the, you know, the prime locations in in great cities. So anyway, I'll stop, and I know you've got some additional questions.

Ed Mathews:

I know it's akin to the. You know the the Ray Kroc play in McDonald's, right, you know?

Kevin Bupp:

it's a real estate play.

Ed Mathews:

Yep, you know we own the Yep. You know, as long as you understand that that is, you know it's a convenience play right. A family of four with a toddler in the back who really needs to find a restroom isn't going to quibble over three, four or five bucks, and especially if you know you're providing them with the shortest walk to whatever venue they're going to the beach. I remember being in Boston when we were living up there there was this old gas station a block away from Fenway Park and we would always try to get in there and it was, you know, back when I was younger. It was 30, 40 bucks. Now it's probably 80 bucks and I'll gladly pay it if I only have to walk, you know, a block to the stadium. It's fine, right, it's kind of a property I should be ashamed of himself.

Ed Mathews:

But he also goes back, I. I would pretty sure he goes back to a much nicer home than the one I was living in back then. It's off to him. So yeah, so it's, it's fascinating, you know it. And the other thing that's interesting that you said that that I had, because I don't follow the asset class, although I should you're evaluating a hundred deals to find one one a year. So you know that tells me that there are many hundreds of parking lot deals that are occurring in this country on an annualized basis, because you're not the only one out there, and it's. It's fascinating, because it wouldn't even occur to me that parking lots change hands.

Kevin Bupp:

Yeah, well, there's a, there's a nuance to that and it's one of the reasons that only probably one out of a hundred really checked the box for us. And if everyone's parked in a parking garage in a downtown location, pick the city across the country a lot of parking lots that were built are in areas where there's high rises, there's large office towers, and a lot of parking that was built was predominantly built to support not just it's surely could support transient traffic and people that are going to eat and things like that but a lot of it back when it was purposely attached to an office, a lot of the demand driver, the majority of it was office, and I don't know how to fix that problem. I can't fix the market that something's in. I can't fix all the other outside dynamics of a market. I can't fix whether or not people actually go back to the workplace and offices fill back up to pre-pandemic levels, and so a lot of what we look at it's got maybe 70% of the original demand was office and while there still might be an office component there, that occupancy is down significantly and while the other portion is stable, like the transient and if there's government or whatever else, that other parking was being used for that's stable. I don't know how to. I can't grow that because there's only so many people that are there that are coming there. I can't make more people come to the area and I don't know how to fix getting people back into the office workplace. And so for that reason, if it's got a disproportionate amount of the either current demand or historic demand that came from office, then we just move on because I don't know how to solve that riddle. So for that reason there's not a lot that really fit our buy box that have a minimal amount of demand from office and the remainder amount diversified amongst government entertainment venues.

Kevin Bupp:

It can have some office, but it's got to also be a 24-7 city. It's got to be like where they have daytime activities and also nighttime and over the weekends. So it starts eliminating a lot of the potential prospects. So the last deal we bought last year. It's a perfect example because there's a lot of other parking assets in that market. It's in downtown Phoenix. There's a lot of other parking garages, a lot of parking garages in Phoenix. Phoenix is huge, but I'd say probably 80% of them. You know the parkers that are parking there. A lot of it's derived from office and while that office market in Phoenix isn't nearly as bad as maybe what it is in San Francisco or New York or what have you, chicago, I still don't know how to fix it. I can't tell you what the crystal ball looks like and what level is it going to come back to. If you ask me, I would say that how we see it today is about as good as it's going to get right, like as far as, like occupancy, you might see some little tick ups here and there in different markets, but I think the companies that have said they put their foot down, you get back in the office, you go find another job. I feel like that's kind of that's been said, it's kind of played itself out and I think where we're at is where we're going to end up and so I can't fix that.

Kevin Bupp:

So the parking garage that we acquired, it's number one. It's a stone's throw. It's the closest garage to the Maricopa County Courthouse, which is the second largest courthouse in the country. It's right in the heart of downtown. It's actually called Center City Garage. The entire downtown was built around this garage. It's 24-7 seat. There's a whole entertainment venue across the street with, like you know, splitsville Bowling, a whole bunch of bars, restaurants and entertainment, and then right down the way is the Phoenix Sun Stadium. Two blocks away is the Phoenix Sun Stadium and then the Diamondback Stadium is right next to that one. So we've got all these.

Kevin Bupp:

Yeah, literally it's got the stacked up demand. The courthouse kills it. But then the weekends we just went through our financials yesterday and Usher came and had a back-to-back show and we literally exceeded by like 15% our prepaid parking revenue for the month because of the usher show. I mean, just like, it's just not. It's coming from all different directions and it's really hard to find that. It's hard to find the diversity there.

Kevin Bupp:

And if you know what the office piece of it, there's about 20 or about 15 of the demand in that garage that drives from office in the area. Like we just took on rocket mortgages based in downtown phoenix and they don't have a parking in the area. Like we just took on rocket mortgages based in downtown Phoenix and they don't have a parking in the office building that they're in, and so we just did a deal with them where they're taking 150 spaces on a monthly basis. But if that goes, it's great. That's a little kicker, it's awesome. But if it goes away, not the end of the world, right? It's not going to completely crush that garage, whereas most other garages if the office demand goes away what it already did, that garage, whereas most other garages if the office demand goes away what already did. And that's why those garages are. You know they're being sold for paintings on a dollar, but what do you do with it? You know what do you do with it.

Ed Mathews:

So a lot of those. I'm just curious, you know, in terms of those parking lots that don't pencil because of the office problem, right? I mean, I live in Connecticut. There are empty office buildings everywhere around here.

Kevin Bupp:

Yeah, Now, and I think the yeah. So you know I'm curious what is happening to those parking assets? Are they being, you know, bulldozed and other asset classes being built on those lots? Or I mean in cities? I mean in Chicago, probably not. You know, chicago's got some other issues they've got to work through right.

Kevin Bupp:

No-transcript that we just did. We get paid as real estate professionals by solving complex problems. This garage we bought in downtown Charlotte. It came to me because the garage is not in distress. The CMBS loan that's in place is in special servicing. But it's because the garage takes up about a third of a city block. But the other two thirds of that city block and literally not adjoining but basically touching walls to the garage is a large office building, university, occupied like 85% of it. They moved out like 70% of their lease in the past couple of years, so that's sandwiched in the middle and then at the end is a double tree hotel. So three properties all one parcel ID underneath one loan. The garage has always done great, but the office is sucking wind and basically threw that loan into distress.

Kevin Bupp:

And in order to get this deal done, we had to basically submit a revised plat while we were in contract, get approval from the special servicing company, but then, once that happened, try to find buyers, try to line people up that can actually take the stuff we didn't want. I didn't want the office, I didn't want to deal with the risk of it and I didn't want the hotel because I'm not in the hotel business. Hotel was good, but it's not my business and it had no interest. So we found best-in-class guys. They're already doing a project in Charlotte. They came in and bought the office from us, basically at zero cost. I mean, their basis is practically zero in it and they're converting it. They're doing a conversion project right now. They're converting it into 280 market rate apartment units. And then we found the hotel buyer to come in and it was actually a ground lease in the hotel. We sold the ground lease to the owner of the hotel at a very fair price and we got what we wanted out of it. And we got it at a significant discount.

Kevin Bupp:

But it was a complex, convoluted, challenging deal. But it was in distress. To your point, it was in distress because of the office component. What has just happened at Charlotte's actually a thriving downtown market and there's still a shortage of actual housing in the downtown area and there's a demand for that product that wouldn't work a lot of places, that conversion wouldn't work in a lot of places. So I don't know, I don't know the answer to that.

Kevin Bupp:

I think that it's going to take probably a lot of folks way smarter than you and I to figure out that that's a massive mountain of a problem of office buildings that are going to be left vacant, and the thing is is that the majority of them actually don't have the, they don't have the floor plate design to where they would be conducive for a conversion. That's the thing that no one's really talking about. I think I've heard it here and there, but like it's a small percentage I mean it's less than 10% of office buildings in the country that would actually make for a viable conversion to multifamily project. And so what do you do with the other 90% that are empty? They like to put multifamily there, yeah, so they got to be knocked down, but they got to be bought.

Kevin Bupp:

So like it basically has to get to where the basis is so low, whoever the buyer that's coming into it, whoever the banks the bank that's on the deal they got to be willing to basically give it away for practically nothing to where, literally, whoever's coming into it, their basis better be practically zero, with the exception of whatever it's going to cost to actually take that building down to where they can be left with just a footprint and enough opportunity and room for them to build something new. So I don't know if we're there yet, I don't know if it's got that bad, but I think it's going to get that bad. I think that we're at least that asset class. I think it's heading the wrong direction. It has been for a while and it's just a matter of time, you know, and a lot of banks and lenders have been kicking the can, trying to do work out, loan modifications, trying to just, you know, fake it till they make it. But I just don't.

Ed Mathews:

I think that one's going to it's going to come to roost in the next five to maybe 10 has to. Yeah, there's just not enough.

Kevin Bupp:

There's no demand for office space these days but if it's a, if it's a prime location and someone can get a blank slate, level it, there's an opportunity there, right, I mean if it's again. But location, if it's not in a great location, then again different challenge. But if it's in a, in most stuff in downtown areas is a phenomenal location, right, and so it's just who can buy it on a low enough basis and basically wipe the slate clean and do something else?

Ed Mathews:

Hey, you need to find an owner with a balance sheet problem, right? Yep, exactly, they're out there. Good luck, all right, so let's move on. Man, I could, I could talk about this, in fact. I'm. I'm going to you and I are going to keep in touch after this is done.

Kevin Bupp:

Absolutely.

Ed Mathews:

I should ask you about this. I actually may be one of your future investors. You never know. All right, so let's move on to lightning round the final five. So I'm always interested in leaders and folks like yourself who are. You know, we'll get you out of bed on Monday morning, right? Because it's not money at this point, it's you. At this point, you've done well the mortgage is paid off, the kid's college education is taken care of, your retirement is taken care of, and yet you still go to work. So what is your purpose?

Kevin Bupp:

It's a great question. I mean I truly enjoy what I do. I love in our business. I'm very much involved in the acquisition side. I've always been a deal guy my entire life. I mean, whether it's cars, boats, real estate, I just I enjoy the art of the deal. I enjoy negotiations.

Kevin Bupp:

As I told you, I was late to this call because I had a deal. Almost I thought I was listening for 10 minutes, as he told me, as he was trying to wiggle his way out, as I thought out of the deal and had to bring it back alive again. And so I don't necessarily enjoy the feeling going into that, but I enjoy the outcome when it's a win-win for all parties. So I just enjoy the art of the deal. And so waking up on Monday morning and knowing that I get to go do that, and not only than that, that's just me, but I think the team that supports us now we've got an incredible team.

Kevin Bupp:

We've done a really good job of really cultivating just internal culture. Everyone's really rowing in the right direction, doing it for the same reasons, everyone's having fun doing it and it's just, it's exciting knowing that I've got that team support behind us and we're all doing it for the same cause and we're all having fun doing what we're doing. If you're not, you know it's not like literally we'll support you, we'll help you move on to wherever it might be, but like ultimately, just it's a fun environment. Even's really what keeps me going. I mean really as far as like going to work every day, like that's what it is.

Ed Mathews:

Yeah, and it can be that simple, right. It's like I think we were talking about earlier. Don't mess with Appy.

Kevin Bupp:

That's right, no, and it buys time as well. Right, I mean speaking to like how that impacts me and my wife and my kids and our family. It's buying time back right, like having the right team in place and putting the infrastructure that's taken taken so many years to build has allowed me to buy my time back and buy flexibility in my schedule and buy the opportunity to spend as many waking moments as I can with that Mary, as we'd like to, and go, create memories and experiences together and just that by far like that is the end result, like that's what gets fleshed out. Gets fleshed out for me personally as a result of what we do in the business day to day, and, again, I enjoy both sides of it, but I really enjoy the time that it buys me.

Ed Mathews:

I left corporate America in 2000,. End of 2017 into early 18. And my kids were nine and five, I think, when, when they were, you know when I did that and it was the best decision I ever made because I got to. You know I was missing so much good stuff prior to that. You know, traveling all over the country and you know it was just. You know, slinging software and services but, yeah, but you know, having that time freedom to, for instance, today, right, it's in two hours. I've, I've got to jump and go coach my daughter's softball winter league, Love it, and there's nobody to ask, I just go and it's wonderful.

Kevin Bupp:

You can never buy that time back either.

Ed Mathews:

All right. So I'm always curious about mentorship and the folks that have helped you along the way. So I'm curious what's the best advice you've ever gotten and who gave it to you?

Kevin Bupp:

Yeah, that is a great question. I've had a lot of mentors in my life, but there was two pivotal ones. The first one is a guy that got me his name's David, got me into real estate, kind of just literally showed me the basic ropes, showed me his business model. I replicated it and just took it to a larger about 20 years ago and he had a much bigger scale than I had ever envisioned anyone could have as far as like single family homes, and he just really he helped me better understand like not scale for the sake of scale, not scale for just the sake of money, but scale for the, for the ability to build the team underneath it, to support the team underneath it. That again will.

Kevin Bupp:

Again, if your end goal is to you know again, buy time, buy flexibility with your schedule and actually just kind of live it on your own terms, you need a team in order to help you do that and you need a certain scale in order to get there. So, while bigger is not always better, it's better to the extent of you hit a certain pivotal point in time to where you can hire folks in the organization that are way smarter than you. Right, that can put those hats on, that can do the job better than you could ever do it and create yourself a sustainable business. So like that was probably the best piece of advice I've received and really pointed me in a different direction of just thinking of employees and staff as like an asset. I mean like they're an absolute asset, not a liability. A lot of people are like I don't want employees, I don't want employees, I don't want team members, this, that and the other. He completely flipped that switch 108 degrees on me. So big, big moment for me.

Ed Mathews:

I don't know A former boss and mentor, rob Bernstein, said something similar. He said look, every person we hire is an investment right and they've got to be able to do the job as well or better preferably better than the person that they're working Absolutely, and that's how you scale a business. And it was like light. So, yeah, interesting and great advice. So what is?

Kevin Bupp:

I think you touched on it earlier in terms of selling some of these assets, but what is the decision you'd like to have back? What was a period? I lost everything in 08 and then really spent three years just not hitting the sand but just focusing on the challenge that I had, which was important. I had to do that, but I shut myself off completely to any opportunities in real estate and I knew going into that. Everyone knows the old adage of you want to buy when there's blood in the streets. Buy low, sell high, right, I mean you'll buy's a stress and it's very it was very difficult to understand that when it's your own blood in the street and when it's your own distress.

Kevin Bupp:

And so if there was one thing I could look back on and change, I would have. I would have. I would have pulled my boots back up faster and I would have started taking advantage of some of the opportunities that were in the marketplace, and I still I started buying when there still were opportunities, but I think I could have had a year or two jump and that was the best buying time that some of us will probably ever see. I mean as far as like the sheer amount of discounts that exist in the marketplace and we've done well. We bought a lot, but there was a good two critical years that we missed, where we could just scoop things up for literally pennies. On the dollar, so that'd be the one I'd share. Okay, that's fair. So on the dollar, so that'd be the one I'd share.

Ed Mathews:

Okay, that's fair. So I'm always curious about. You know leaders who almost universally tend to be readers, right, and so how do you take in information, and what authors or creators or whatever are you paying attention to these days?

Kevin Bupp:

Yeah, no, that's a great question. I like both physical and audio books. I typically, when I buy a book, I buy both. I buy the physical and the audio version. I find myself much easier getting distracted with the audio version and so I have to reflect back on the physical. And the physical allows me to take notes.

Kevin Bupp:

I'm an old-school guy. I literally have a highlighter and I have a physical book. I never really got into Kindle. I tried, I bought one, didn't really like it all that much. I tried, I bought one, didn't really like it all that much but, and so that's how I learned Literally.

Kevin Bupp:

I do a little bit of both. I do a little bit of both. I go back and forth, and I typically use books as more reference manuals than I do read it from cover to cover. However, I will say that one of the things I've started doing I just I don't have a commute. We're all virtual now. We used to have that for years and I don't necessarily enjoy listening to audio books while I work out.

Kevin Bupp:

It doesn't do it for me. I need music. I've tried, it just doesn't get me jacked up and my comprehension is not as good when I'm out of breath and so Blinkist. There's a number of other apps like it out there where it's like kind of a you know, call it the cliff notes version of a book, and so I'll go through and knock out one of those every day and literally go through and kind of pick out what the next 30 days looks like.

Kevin Bupp:

That's been really good for me. It's not great, it's not the same as reading the entirety of a book, because it's their cliff notes, from their perspective, of what they thought were the key highlights of it, but it's definitely. It's a good in between for me. So, as far as a book that I'm reading right now, at the present time and I read it a couple of times a year but more importantly over the holidays and I give it out to a lot of staff members, I give it out to a lot of friends it's probably the book I've gifted the most, is the Go-Giver and I don't have a copy of my desk and I always forget the author's name but it's a short book.

Ed Mathews:

It's a. You say that it's, so. I'm a huge Blinkist fan myself and and don't move the cliff notes you know there are people out there like myself that they literally got them through high school and probably college.

Kevin Bupp:

Yeah, Um, that's true. I didn't even think of that.

Ed Mathews:

I actually referenced cliff notes, as a lot of people might not know what that is but I'm an alumni of a university, probably because of Clifford, so all right, yeah, that's amazing. So the last one is success. Finish the sentence. For me, success means what does it mean to you?

Kevin Bupp:

Freedom and flexibility to do whatever I choose to do. Love that, I think.

Ed Mathews:

Yeah, there's that for time, freedom for sure. Living on your own terms purposefully is a good thing, all right. So, kevin, when you're not talking about real estate or you're not buying up mobile home parks and parking lots, what do you like to do for fun?

Kevin Bupp:

Yeah, I'm a boating guy. I mean, our whole family revolves around the water. We've got you know we spend a lot of time in the ocean. We've got a lake property. I grew up wakeboarding and doing all that fun stuff on lakes, so we do a lot of that as kids. We go out fishing on the ocean, ski, we snowboard, so lots of outdoor activities and sports and just more. Probably an eight and 11 year old boy and I found it to be very fun to live vicariously through them, kind of rekindle the things I enjoyed as a kid and like and watch them get enjoyment out of it and also me be a kid at the same time. So I truly enjoy that.

Ed Mathews:

And the other thing you'll you'll value as they get a little bit older, as a tired teenager is a very well-behaved that's funny.

Kevin Bupp:

It's funny you say that my wife puts my wife my wife's a big runner and every once in a while she'll she'll literally put them both in a treadmill and like you run two miles, you run, I mean literally, miles in the treadmill. So it's pretty funny.

Ed Mathews:

It's off the YMCA and we go play basketball for six hours and come home and yeah, we have. My brother and I were well, far well, far better behaved when we were exhausted. So, yeah, funny yeah. So I want to learn more about you or Sunrise Capital Investors or anything else. You know what's the best way to get in touch?

Kevin Bupp:

Yeah, investwithsunrise. com is the website that will get you to our company page. We've got a current offering that's open there. You can learn about that. You can learn about past deals that we've done. We've got a lot of information, a lot of resources on that site. My last name is fairly unique, -u-p-p, and so if you just go to LinkedIn I'm pretty active there, pretty active on on Instagram as well as Facebook and just type in my name and you should be able to track me down, I think I am the only Kevin Bupp that's actually in the real estate world. Maybe there's another one, but you should be able to find me.

Ed Mathews:

Find one. I went to do the research for this. Yeah. So, Kevin Bupp, thank you so much for your time. It's a pleasure to meet you and I wish you continued good success.

Kevin Bupp:

Thank you, I appreciate it.

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