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[00:00:00] ANNOUNCER: Welcome to The Real Estate Syndication Show. Whether you are a seasoned investor or building a new real estate business, this is the show for you. Whitney Sewell talks to top experts in the business. Our goal is to help you master real estate syndication.
And now your host, Whitney Sewell.
[0:00:24.1] WS: This is your daily Real Estate Syndication show. I’m your host Whitney Sewell. Today, our guest is Ryan Gibson, thanks for being on the show again Ryan.
[0:00:32.6] RG: Thanks Whitney, appreciate you having me.
[0:00:35.0] WS: I’m honored to have you back, this is going to be a good show because you could go back and listen to show, WS32 and you can hear Ryan then, it’s been right over a year ago and you’ll be able to hear some great growth in Sig or Spartan Investment Group and from then to today and we’re going to talk some about how they’ve gotten where they’re at and some specific things that they’ve done to get there.
A little about Ryan, in case you didn’t hear the other show. He is a chief investment officer and co-founder of Spartan Investment Group. He’s responsible for investor relations and capital raises for projects. Today, Ryan has raised 14 million dollars for six projects. Spartan focuses on acquiring and developing self-storage facilities. Ryan has experience ranging from ground up development of luxury condos to the acquisition of cash flowing self-storage facilities.
Ryan graduated with a Bachelor’s degree in Business with concentrations in marketing, management and advertising. Ryan is also an airline pilot and enjoys spending time with his wife and daughter in Seattle Washington. Ryan, thank you again. Give us a little update and let’s dive in about this massive growth that SIG has have.
[0:01:44.1] RG: Yeah, it’s been great, we started off as you know, with Scott Lewis and I and we’ve scaled to 21 employees and we have a corporate office now in Golden, Colorado, which is just outside of Denver and we focus on doing everything ourselves in-house so we do everything from the acquisition with Ben and his team Ben Lapidas, and we raise the capital all in house. We’ve property managed and asset manage in house. We do all the direct property management and we’ve even seen some deals go all the way through to the sale.
We have a great team and as part of growing that team, we’ve had to hire a lot of people and bring in a lot of staff and really lay the groundwork for a good corporate culture and it’s been an exciting couple of years for sure.
[0:02:29.2] WS: How many employees did you all have approximately at show 32 or say, a year ago.
[0:02:33.8] RG: I think it was between six to eight to include the property level so it’s been quite a lot of growth since then.
[0:02:39.6] WS: Okay, now, you have how many?
[0:02:42.2] RG: 21
[0:02:42.4] WS: 21 employees. You know, you’re not able to grow a business that quickly and withstand, ‘growing pains’ is what some people would say. You know, without some structure, right? Or some things in place that they’re going to help you to get there. You know, I’d love for us to talk about some of that and just, you know, maybe where you all’s focus was in being able to grow a business like this.
[0:03:03.2] RG: Yeah, I think, instead of looking at it and just going out and doing every deal we can or focus on growing our portfolio, we really kind of looked at growing an internal mechanism, you know, the financial book keeping, record keeping, looking at how are we going to bring on, you know, 150 investors into active projects? How we’re going to communicate with them at scale. Pretty much everything we’ve done, we’ve asked ourselves, how is this going to scale? You know, Ryan, if you’re the one that primarily deals with the investors, how are you going to keep up with a 150 people in conversations, text messages, emails you know, things like that?
Really, it just kind of boiled down to how can we lay the ground work for scale? Which made our growth slow in the beginning, frankly, coming up with better – you know, putting the focus on the business instead of working in the business really slowed us down in the beginning but now that it’s picking up steam and we have the infrastructure in place, we’re able to take on a lot more projects and we’re able to do them successfully and continue to have businesses that we acquire and operate officially.
[0:04:07.0] WS: I like that because you’re looking at like every process in the business that you know that has to happen and you’re really asking yourself or that team member, how’s this going to grow? What happens when it doubles, can you still withstand this or how are you going to withstand it, is that right?
[0:04:21.2] RG: Absolutely and you know, I think, one of the things that we focused on was you know, as a team of five or even a team of two, you know, we could really provide a lot of quality to people, a lot of quality communication, a lot of quality marketing and when you add a lot of people to your organization, the first thing that usually goes is the quality.
We really – by hiring our own direct people it really helped us vet folks and put the right people in place to take down the projects.
[0:04:47.3] WS: What are some tips for keeping the quality when expanding like that?
[0:04:51.9] RG: Yeah, sure. Hire slow, fire fast. We have a really long hiring process, super frustrating sometimes to have many months of lots of applicants and going through multiple people to get to the right person but at the end of the day, we look for who is the best cultural fit. You know, somebody that has the passion and determination. Maybe they don’t have the skillsets, that’s okay, but they’re eager to learn.
We’re able to bring them on and kind of align them with the company long term. That’s kind of what’s really helped us I think is getting the right people onboard for sure.
[0:05:24.6] WS: Best cultural fit. What are some things you’re going to look for there or maybe questions or you know, some way that we can help for our own business?
[0:05:31.8] RG: Yeah, you know, this business, you get a lot of people with a lot of experience and then you get people with minimal experience. One thing that we look for is that they are going to be able to work with our team members and have the grit to go in there, roll up their sleeves and get the job done.
You know, they have to be thoughtful in what they do but we’re looking for somebody who is just going to just get in there, roll up their sleeves and execute and I think that’s more important than necessarily having a ton of experience but lacking grit and determination to get things done. We actually put our core values up on the wall at Spartan and you know, we really kind of go over those core values with our team so that we have the opportunity to bring on the right people at the right time.
That’s really been important for us to have everybody in our company interview the candidate. We have everybody all of our directors, all of our – Scott and myself as the executives, we interview everybody and we do personality testing to make sure that they are a good fit for the role as well.
[0:06:35.4] WS: Okay, well, I haven’t heard that one before, so every director or every high level person at SIG is going to interview this person. Are those going to be individual interviews or you’re like sitting around like a horseshoe table. I was a police officer, you know, many years ago and I had many interviews where it’s like six or eight people sitting around this horseshoe table.
Of course, they’re trying to intimidate you and make you nervous, right? I mean, that said, they want to see how you’re going to respond. I just wonder how you all handled that.
[0:07:01.8] RG: Yeah, what we do is we put out the job application and like Workable, LinkedIn, Indeed, and so we get the candidate that comes in and then Kerry our office manager, she actually pre-screens the candidate and she actually talks to the hiring manager to make sure that she understands what the hiring manager is really looking for and she’s got a really good hang of it now. Once the person comes in, we look into Workable or our – the job application screening site and we can thumb up or thumb down who we want to have a call and Kerry initiates a call. Kind of a 30-minute screen to make sure that they’re a good fit.
After that, they come in, Kerry advances them to the next stage, they come in for a director interview so that three directors, Lindsey, Scott.
[0:07:43.7] WS: In person?
[0:07:44.8] RG: In person, correct. We’ll give them like a 10 minute call just to make sure, “Okay, Kerry, check the box, we’re good,” and we do a three person interview panel with the directors and then if the directors all give an ‘A’ or higher score, then [inaudable 0:07:59] they sit down with both me and Scott who are the executives and we only have veto power at that point, so we can’t recommend, we just can say, “Not quite a fit for the culture.”
That’s what we do, we just think that fit is so important because if they don’t have a good fit, it can bring down everybody, right? It’s somebody on the team that’s not jumping in and you know, deploying teamwork or perseverance and people can kind of see how that person’s reacting or how they’re performing on a job and that might flare off on the other individual. Super important.
[0:08:30.1] WS: Wow, no, that’s – I appreciate that and you know, I’ll never forget in one of those interviews, there was at least six to eight people sitting around the table and one lady stood up and slapped the table with both hands and yelled at me real loud.
[0:08:44.3] RG: Well, we’re definitely not doing that. We’re trying to get, you know – just the opposite, you know, we’re not trying to intimidate anybody, we’re trying to – it’s difficult, right? When you go in for an interview and they say, “We just want you to relax and be yourself,” you know? That’s like the last thing going through your mind, you know? We try to get people relaxed as much as possible. Some of the questions that I ask, they’re more about, “Hey, we want to make sure that you like this job and that you’re a good fit for our business and that you’re going to enjoy yourself.”
Because that’s really the most important thing is making sure that they’re actually going to like the role and be passionate about it. Because if they’re not, then they’re not going to really do the best job that they could. We like hearing their concerns about the position so we can kind of vet those and talk about it.
[0:09:26.5] WS: Yeah, how did you all start with this system or did you have something you followed at first? I know you even said like, “At this point, you know, you only have veto rights.” It’s like, how did you all develop this and where did that start from?
[0:09:40.2] RG: Scott really laid out a good framework. Again, everything that you do to scale your business has to have a process, right? It has to be vetted and published to the team. We have a flow chart that we created so everybody knows what the process is for bringing on an employee. That’s already been put in our operating manual.
We knew, “Hey, when we got to hire somebody, we have a process for that.” We built that in Visio just kind of a flow chart and you also have a – when the person actually gets hired and we have a Trello board onboarding checklist where it’s a two week, two month and I think, one year process where you can go on and make sure they have all their i9s and W2 forms filled out, payroll, we’re doing you know, 90 day reviews with the employee and getting all the tools that they need because nothing’s more frustrating than getting hired by an organization and then you can’t even open your computer or turn on your email or something like that, right?
We try to take all the things that we’ve worked in previous employers that drive us crazy and make sure that our employees are getting them and that’s kind of where I think our roles are sort of being – I mean, we’re still very hands on in the business but now we’re just trying to provide for our employees, it’s really kind of – where a lot of our focus has shifted.
[0:10:49.5] WS: You mentioned Trello, is that — I’m a little bit familiar with it but could you elaborate on what that is?
[0:10:54.4] RG: Yeah, it’s a project management tool. Basically, it’s a board you can put up a lot of the different functions that you do, task, time-based. I think it’s probably the best task tracker out there. Gives a nice visibility, you know. We put up word up, use like red, yellow, green for top priority task to low priority task and then when we want it done, you can kind of move your boards around if you reprioritize or de-prioritize a certain task. It’s a good project management task management function.
[0:11:23.5] WS: Are all employees local?
[0:11:25.8] RG: Yeah, we require everybody to be at the office. So I’m out in Seattle so that kind of is an exception but anybody that we hire – we do have two big projects that are upcoming here in the Seattle metro area and you know, we do have quite a few investors that live in Washington. It kind of makes sense, you know. We’re actually going to probably open up a satellite office here at some point. Maybe in the next year or so.
But we require everyone to be there, you know? We’ve had deep discussions about remote working and you know, we do have a flexible work space, we have a flexible work office culture where we primarily are just there Tuesday through Thursday and then work from home Friday and Monday, which provides flexibility to our employees.
But you know, we love the face to face. There’s just nothing better than just getting people face to face and having regular meetings. I think it’s helping us grow a lot faster, having the office and having the face to face interaction versus being spread out all over the country or something.
[0:12:18.1] WS: Nope, I agree, it’s awesome to be face to face, as long as you are planning for them to be full time I guess. Is everybody full time?
[0:12:24.6] RG: Everybody’s full time, yup.
[0:12:26.4] WS: I guess taking a slight turn here. It’s great to see how you all have put all these systems in place and been very strategic about it because it’s easy to get caught up in just the transactions, right?
[0:12:36.1] RG: Yup, that’s right.
[0:12:37.1] WS: You know, can you talk a little about that, how did you all stay away from just say, “Okay, you know, we’re just folks doing the next deal, we’re focusing on raising capital. But wait a minute, you know, there’s a business over here that we have to build at the same time. If not, just before all this over here happens.”
[0:12:50.3] RG: Yeah, you know, that comes with Scott’s leadership. We have a strategic plan and he made sure that every month that we sit down and have a monthly – first of all, you create a strategic plan. You have your strategic goals and objectives and then you have a performance target and then tasks that break down and all of that, right? So you have this high level goal, like maybe your goal is to acquire a 150 million in real estate. Okay, well that’s great but how do you transact day-to-day to get that goal, right? And what are your performance targets that, “Okay by June of this year I want to have this. Or by March of next year I want to have that.”
And all the goals lead to tasks, and every month we review the tracker and we have that up on Smartsheet and we see if we are red, yellow, green on our tasks and we hold each other accountable. So, yeah, you’ve got your deals going on. Yeah, you got your underwriting to do. Yeah you got your capital raising to focus on but you have to be accountable for the tasks, goals and objectives that you set out for the year. And our strategic plans, which last three years.
The other thing too is before we decided to go into self-storage, we paused any deal finding efforts. We weren’t going out trying to find deals when we were learning about storage. We did nothing but for 90 days but learn as much as we could about the asset classes. This is back in 2016. Before we started running around trying to find a deal we wanted to learn about the asset class itself.
So it does take time, as you know, learning about multifamily or something, you want to learn as much as you can about it before you just go start chasing deals otherwise it is not sustainable.
[0:14:25.3] WS: You know I like how you said you paused looking for deals because that seems totally opposite of what you should be doing in this business, right? It seems like you’d be so pulled to do the other thing, which is what everybody is doing but now that you’ve got these systems in place — I like the strategic plans. I like that.
[0:14:41.4] RG: And especially when you are using other people’s money, right? I mean if you take massive action and go do a deal that is really bad with other people’s money and see how that goes, right? So you want to make sure that you have a good understanding of the asset before you just jump in and use other people’s money to buy it, right? And that is what we do and that’s what we want to make sure that we prevent is we have responsibilities to our investors to ensure that we have the right planning and strategy in place.
[0:15:10.7] WS: Are there other tools that you all use to help build these strategic plans or systems or how you all keep all of this organized?
[0:15:17.8] RG: Yes, so we use – we are big users of Podio. We have been for a long time and that is how we do some of our investor management. We kind of built it in house.
[0:15:25.6] WS: Now Podio you kind of have to build it yourself, right?
[0:15:27.8] RG: Yeah and Lindsay actually did that. So we have a platform that allows us to move an investor through the entire onboard process all through Podio with the back end of Globiflow. I am doing a lot of “if then” statements. We’ve also connect RightSignature to it and a bunch of other things that helps the automation through – some deals we have as many as 65 investors, right? So we have to make sure that the deal is going through and their compliance is wired tight.
So that is one thing we do for investor management but you know company wide, we use Smartsheet, Trello, we use Expensify for business expense reporting. We use QuickBooks online for all of that multiple LLC’s that we are managing. We use a variety of different things and I think the most important thing if you are going to scale is think about which programs have API so that they connect. For example we can do bill pay through QuickBooks and it will connect to our Chase accounts.
And Podio will back end the RightSignature and Citrix, right? So you want to make sure all of these things can talk to each other before you decide to go with a certain vendor. You know some of our self-storage management system connects with our bookkeeping. So it is all kind of integrated, which really helps us scale. So it is one of the things that you want to ask a provider before you decide to go with a certain software.
[0:16:48.8] WS: And could you just quickly say what is API? I know you briefly mentioned that it helps it connect but just in case somebody doesn’t know what that means.
[0:16:56.8] RG: Yeah so it is like a code that you put into a software. I don’t know what API stands for but it is a code that you put into a software that will allow the script to talk to each other. So for example, my American Express business card will connect to QuickBooks online and they can talk to each other. So when a transaction comes through and I swipe my card it will go into QuickBooks and it will be on QuickBooks and I can categorize it, reading QuickBooks instead of having to go in and connect it and all that stuff.
The other thing is like Expensify will API into QuickBooks. So you can have an expense report that mirrors what the inputs on QuickBooks online will be if that makes sense.
[0:17:40.8] WS: It does and what is Smartsheet?
[0:17:42.4] RG: Smartsheet is another collaboration tool. It is an online spreadsheet with a superpower in it. It is very collaborative. You can assign tasks to people, you can make attachments, you can do different lights for on target, it automatically calculates percentage complete and it just has a lot of functions. You can email people, you can email people rows from the spreadsheet. They have actually added a lot of different features to it and we were an early adopter of it.
It is kind of like Microsoft Project online but way easier to use. So for a project management tool it is very good because you can put the gantt chart in there. So your critical path key milestones and really kind of visualize where you are in a certain project without a lot of effort setting it up.
[0:18:26.2] WS: So now on like a monthly, weekly, daily basis, how is that laid out? Where do you see all of these things out okay so you can track it and say, “Okay, I know every day we’ve got to be working on these things,” kind of like you mentioned but when you all get to that meeting every month, how do you know that these things have been done?
[0:18:44.9] RG: Yeah, sure. So the Smartsheet tracker is really important. When we do a raise process, you know we will do the same thing. We track our strategic plan in there so we can see where we’re at. We also for a raise standup, we have one meeting and we have a checklist and we have all the processes mapped out to do a capital raise and everybody has their tasks that are assigned to them and everybody has got their red light, green light, yellow light. So we know exactly how they are doing and everybody can log in and collaborate on that piece.
[0:19:12.8] WS: Okay so in Smartsheet, you can see where everybody else is at on those things.
[0:19:16.9] RG: Yeah.
[0:19:17.2] WS: Nice. Okay so that acts as a manager that you can track everybody and know if we are moving forward or not.
[0:19:23.9] RG: And then everybody has their own Trello board. So, you know, we have one office manager and one marketing person. It gets a little complicated, right? Because we have the property level marketing that we are trying to track customers to, we have the investor relations that we are trying to attract investors to and then we have sellers that we are trying to market to. So each employee has their own Trello board.
So before you go on to assign something you’d only need to talk to that person’s manager and then you can put it on their Trello board as a low, medium or high priority task and with a deadline and that is really important to see the workload of everybody. So you kind of see what everybody is working on and manage, “Hey, can I put one more thing on this person’s lap or do they just not have the time or will my project not get done in the time that I needed to get it done with?” So super important.
[0:20:09.1] WS: All right, so a few questions before we have to be done but you know, Ryan what has been the hardest part of this syndication process for you?
[0:20:16.0] RG: The hardest part is probably been the deal finding has been difficult. You know deal flow, having a lot of investors, having a lot of capital on the sidelines and placing that capital responsibly is super important for us. We have a very conservative approach to our business model. So that has been a challenge in syndicating.
[0:20:35.9] WS: Is there a unique way that you all have overcome that challenge or at least started overcoming?
[0:20:40.4] RG: Yeah, I mean I just build deep relationships in the market with brokers. You know we have a list of about a 120 brokers on our list. We send them a monthly newsletter, let them know what we are up to, let them know what we’re looking at, what we’ve gone under contract, what we closed on, events that we are speaking at, different engagements. That has been kind of a helpful thing. We’ve also been just a big advocate of data and using data systems to more quickly vet deals as they come up.
So when we do get a deal we want to be able to get through that deal and either turn it down or move to the next step as fast as possible and the only way that you are going to do that is by understanding the market, feasibility and you know getting that data in there to do that.
[0:21:19.8] WS: So how is SIG prepared for this potential downturn that everybody is talking about?
[0:21:24.3] RG: Yeah, so the risk mitigation that we have is pretty extensive. So in one of our properties, we can go down to 20% occupancy and still break even. You know one of our self-storage facilities breaks even at 45% and everything in between. So we basically have made sure and that is what’s really slowed down our acquisitions as of late is the fact that we are trying to underwrite a margin on the end and then risk downside in the middle.
And I think just getting creative in financing, making sure that you are buying the right project that can withstand a downturn and that is why we went with the self-storage in the first place is because if you look back over 20 years, the two top performing asset classes in recessions have been medical office and self-storage, which is why we focus on self-storage an asset class because we want to be in something that is a little bit more recession-resistant than your typical asset class.
[0:22:17.8] WS: So what is a way that you all have improved your business recently that we haven’t talked about that we could all apply to our business as well?
[0:22:24.8] RG: You know I would probably say getting the office has been a big improvement in the business. Getting the office has helped us scale. It has helped us get efficiencies and talking to each other and collaborating and I think that has really helped us move to the next level.
[0:22:39.8] WS: That’s awesome, yeah to have that office with everybody local. You’re seeing each other, you can talk about things immediately if you need to, can’t you?
[0:22:45.9] RG: Absolutely.
[0:22:47.4] WS: So what has been the number one thing that has contributed to your success?
[0:22:50.1] RG: I think just having a good strategic plan has been the thing that’s really helped us grow.
[0:22:54.7] WS: And how do you like to give back?
[0:22:56.4] RG: I like to give back by helping others in the real estate space. You know, we have done a good job of providing value. I do a monthly webinar on real estate investing. You know I have been passively invested with myself in other people’s deals and they haven’t gone very well frankly, and I have been very passionate about giving back to the community on how to do due diligence on an operator, how to do your due diligence on an investment.
And really making sure that people have really considered hard the things they should be looking for in a deal before actually going out and doing it. So we do a monthly webinar and I always have a nice guest on it and we go deep into due diligence and all the things that surround doing an investment.
[0:23:39.6] WS: Yeah, I would encourage listeners to look at the webinar as well so they can Ryan, tell the listeners how they can get in touch with you and learn more about SIG?
[0:23:46.2] RG: Yeah sure, we’re at our website is spartan-investors.com or my email is just firstname.lastname@example.org.
[0:23:57.7] WS: Don’t go yet, thank you for listening to today’s episode. I would love it if you would go to iTunes right now and leave a rating and written review. I want to hear your feedback. It makes a big difference in getting the podcast out there. You can also go to the Real Estate Syndication Show on Facebook so you can connect with me and we can also receive feedback and your questions there that you want me to answer on the show.
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[END OF INTERVIEW]
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