Recently I had the pleasure to interview Danny Fishman, The CEO and Co-Founder of GAIA Real Estate.
Founded in 2009, GAIA has owned $3 billion of real estate in the multifamily, condominium, and office sectors. GAIA acquires properties that can be enhanced by hands-on management with rigorous execution of a comprehensive business plan. GAIA also invests in real estate technology ventures aimed at revolutionizing the real estate industry.
I hope you enjoy this interview (and transcript below)!
Podcast Transcript
Brad Thomas:
Hi, everyone. This is Brad Thomas with The Ground Up, and we’re back again for another CEO interview. Today, we’re going to take it from the public side of the world to the private side of the world. I’m joined here today with Danny Fishman. Danny is the co-founder and CEO of GAIA Capital, and GAIA Real Estate and Venture Capital. And I believe Danny was just telling me, GAIA stands for a Greek goddess. So can you tell us a little more about that name? I’m really intrigued, Danny.
Danny Fishman:
Yes. Hi, everyone. So when we started the company, it was 2009 and we know where the world was upside down there. Then… So GAIA is the Greek Goddess of the land, and she’s also responsible for dividing back the land to people after a chaos. So we thought that, that’s a great name for the company in 2009.
Brad Thomas:
Great, well, Danny you’re of course located in Televiv, which I’ve never been there, but one of our main products, Seeking Alpha products, is based there in Televiv. So I’ve got a lot of friends in Televiv, so I’ll make sure they’re watching. But your company is based in New York city. So I want to touch on New York city today. I haven’t been to New York in at least over a year, actually has probably been maybe 13 months now that I was at… In New York. So how do you see the business there in New York? Obviously, it doesn’t look very attractive from a real estate perspective, at least that’s how, from a market perspective, we see companies that have really been beaten down these public REITs that only their office or multi-family, but how do you see the state of New York city today?
Danny Fishman:
So as you said, we are basically based in Manhattan and then we follow the market and we’re big investors in the city. So I think that it’s actually on the private side. It’s one of the biggest opportunities I saw maybe even bigger than 2008, 2009. It’s true, many people left and also COVID-19 was basically the end of the story. Because, if already…If You follow the market, it’s sliding down from 2017, basically mixed a few things over supply of condos and rentals. Also all kinds of frame without getting into politics, extreme left laws that basically draw real estate and all the other segments down and drove some people out of the city.
So I think the mix of everything basically came together and the market basically is down a lot. So rental today is on the good areas are like 20, 25% below corona prices and condos it’s a mix. So you can get a 10, 15% discount, but in the new development where there’s over supply, you can get 25 to 40% discount on the prices. So we are very bullish. We think that it’s a huge opportunity, especially that this cycled down, and for me it’s like the four cycle down. What’s unique in this cycle that there is liquidity and there is the lending and there is banks. So you have what I think is a great opportunity of declining prices and reduced prices, but availability of lending and the banks and so forth.
Brad Thomas:
So what about employers, Danny? I mean, again, I see… We got an office down in West Palm and we see a number of hedge funds that have relocated from New York to Florida, South Florida. And we see a lot of people that are, at least the media reports, a lot of people moving, leaving New York city. However, some of the reporting we see, especially on the publicly listed REITs site is that there are many technology companies that are doubling down on New York city right now. So what… Who’s winning that battle right now? Are people coming, or are people leaving?
Danny Fishman:
So I think that the city is doing a shift, which I think is a positive shift because if it was… It’s still like the capital markets center of the world, but I think that with the prices and that a lot of financial companies, banks, investment banks, and so forth are becoming more tech oriented. So I think that what they’re doing, if you look really carefully, most of the things that are moving to Florida or other places are more like back office. And what’s moving into the city is technology.
So even if you look at two names, let’s say that they will move something outside of the city like Goldman Sachs and JP Morgan, but they hire more people to run technology versus people that are coming from business school. So I think that the shift is very positive. Now, if you look at another shift, that interesting is the startup scene? I think New York is becoming significantly number two to Silicon Valley. So just from the start of Corona last March to today, a year, you have 1200 startups that got financing from VCs and tens and tens of billions of dollars are moving into the city and all these companies are growing. So the growth today all over the world is in this segment.
Brad Thomas:
Yeah.
Danny Fishman:
So I think yes, New York is losing some of the back office and other things, but I think mainly the shift is a positive thing.
Brad Thomas:
Yeah. So I wanted us to pivot over to multifamily. I know that’s big, significant part of your business. Can you talk a little bit about some of those markets? I did see you’ve invest… You’ve got some investments on your website in the South East. What do you think are the most favorable multi-family markets today?
Danny Fishman:
So I think that if you look on basically the places that are more affordable from cost of living because of no state tax, no city tax and more easy to do business. There are the growing and the population moving there like Texas, Florida, we have a lot in Nashville and it’s doing very well.
So all these places are growing fast and people are moving there. And also, I think one of the… I think positive for South Florida is that if it’s always most people move there for a vacation or for second home. So, I think up to, I don’t know this year, it was mainly a place to go for to the beach. And I think the change now is that people are actually moving there to live. And if that will continue to happen, it means that they need also workplace. They will need, culture, infrastructure, and other things that are lagging behind. So I think this is the markets that are enjoying it, but that’s from demographic and growth. I don’t think that from the investment. It’s so interesting because I think that the low interest rate pushed cap rates so down in this area, that I personally don’t think it’s attractive anymore.
Brad Thomas:
Yeah. How about on the development side? I know I’ve got several friends who were looking to develop new multi-family product. I mean, if given that low interest rate and have you typically been more of a buyer of a completed product or what do you think about the development business today and multi-family?
Danny Fishman:
So I think at this time, I think there is… I would say like this on the coastal area, especially in New York, there’s no point building any more today.
Brad Thomas:
Mm-hmm (affirmative).
Danny Fishman:
You can easily buy today ready product below construction or below replacement cost. So for sure in New York, I don’t see any point doing anything until the inventory will clear.
Brad Thomas:
Right.
Danny Fishman:
And the other end, I think that’s places like the Sunbelt and areas like these, they’re are growing in places like South Florida has a lot of demand. Nashville has a lot of demand. Dallas has a lot of demand, and I still see growing and continue to grow. And I think it will be… But I think that the profitability will be much less because it’s cost of construction is higher, and then… On all fronts.
Brad Thomas:
Yeah.
Danny Fishman:
I think that it’s still good business, but I think it’s less pro… Will be less profitable.
Brad Thomas:
Yeah. Have you… I’m just curious we cover all the property sectors. I’m just curious on the retail specifically mall sector. Have you looked at any of the potential mixed used products and obviously there’s a lot of that product coming to market, a lot of malls aren’t going to make it. What do you think about that industry from the private side in terms of redeveloping some worn out malls.
Danny Fishman:
So I think we’re not so much in the retail. We had retail mainly in New York. You know when you have a building and you have down on the ground floor, we have retail, we have one like center in New Jersey.
Brad Thomas:
Mm-hmm (affirmative).
Danny Fishman:
And I think that the reason that we went out, and that’s why it’s interesting, I think again, is because when we decided to sell everything on retail and to get out it was 2015, it was because when we interviewed the end users, they say, look, the rent doesn’t make any sense anymore, especially in the city. So, you interview… We interview their long… Big coffee store chain. And they say, no we can’t sell coffee 24/7, we cannot even pay the rent. And the same Italian restaurants so forth. So we said, we don’t want to be a landlord if the users cannot basically afford it.
And I think that leaving aside malls, I think in the city today, it’s the… It’s again interesting because they think that if the rents will go down, you’ll still use more… A lot of use back the retail. On the mall side, I think the place should be mainly residential because I think in office, there is over supply. I don’t personally, I don’t believe on work from home. I think it will be, I don’t know, 5%, 10%, I think everyone will be back home. And you know, if it was an interview on camera, I could tell you now I’m in Tel Aviv, until… In Israel got vaccine already like 55, 60% level. And I can show me from my window, it’s evening here, all the office hours I see for my window or full of lights. That wasn’t the case three months ago.
Brad Thomas:
Yeah.
Danny Fishman:
So I-
Brad Thomas:
Yeah, no, I think, travel getting is really underway. I think that’s certainly what we’re seeing and we’re focused really a lot right now on that segment of travels, TSA of course is getting ready to hire additional people. They’re getting ready for more flow coming into this country, traveling around this country. So I think there’s some really good opportunities and that’s really what we’re trying to dissect. And one of the reasons I wanted to get you on the call is just as an expert, is to see what are those pockets. And I do believe we share that same belief that New York city will be back. And we’ve got a long positions in both multi-family as well as office because we believe that eventually New York will get back. Hopefully I can get up there really soon.
One of my children, one of my daughters actually lives in New York. And I really think that’s the case. So I guess the last question Danny is, how do you see this kind of unfolding, in New York city, if you just had to look at your crystal ball, a year from now or say the end of this year, do you think we’ll be kind of back to more normal? I mean, given what you know and what we’ve seen with the vaccines and so forth, what do you think the… What do you think it’s going to look like say in December of this year in New York city?
Danny Fishman:
I think it will be back to normal by the end of the year by year end. I think that with the vac… Between the vaccine and the herd immunity and the… Some degree after the elections already and everything, I think that we’re going to be opening. They will… Everything will be open. And again, if I’m looking at Israel, because Israel today is basically the model that all the world’s follow because we are like the experiment of Pfizer. If you follow this, everything is opening up now, I was the last week in meetings, which are… None of them are my mentor, my investors, which are pension funds and insurance companies and all the meetings were in the office.
Brad Thomas:
Yeah.
Danny Fishman:
So I think that if we will follow this, I think New York will be open back by year end. And then, I think people would start to come back to the office. And also there are two other things in New York. New York is one… Over one million students in the Metro. So I think students will be back to the campus, so they will be back renting apartments. And tourist will start to come back, so I think we’re going to start to see that is coming back to normal.
Brad Thomas:
Great. Well, Danny, I really appreciate it. I look forward to seeing you in person when we both get to New York here really soon. And I want to thank you for your time today and we’ll see you again soon.
Danny Fishman:
Great. Thank you very much.
Brad Thomas:
Thank you.
Happy Investing
Brad Thomas is Senior Research Analyst at iREIT and CEO of Wide Moat Research LLC. With over 30 years of real estate experience, he is also long-time Editor of Forbes Real Estate Investor, a monthly subscription-based newsletter that dives deep into the vast world of profitable properties, and since 2021, he has served as an adjunct professor at New York University.
Thomas has also been featured on or in Forbes magazine, Kiplinger's, U.S. News and World Report, Money, NPR, Institutional Investor, GlobeStreet, CNN, Newsmax, and Fox. And he was the #1 contributing analyst on Seeking Alpha in 2014, 2015, 2016, 2017, 2018, 2019, 2020 and 2021 based on both page views and number of followers.
Thomas is the recently-published author of The Intelligent REIT Investor Guide (2021), co-author of The Intelligent REIT Investor (2016), and he wrote The Trump Factor: Unlocking The Secrets Behind The Trump Empire (2016) - all available on Amazon.
Thomas received a bachelor of science in business/economics from Presbyterian College and is married with five wonderful kids.
