John Coe 00:00:03  So Daniel Klein, welcome to icons of DC area real estate. I overvalued your biography in the introduction. Perhaps share your role at Klein Enterprises and your day to day activities. And then we'll go into your background, including your four generations of the Klein family. Klein real estate family. Thank you. Absolutely.

Daniel Klein 00:00:26  Absolutely. John. first and foremost, thank you very much for having me, on the podcast. You're an old friend, and I've been a fan of your podcast for five years now, listening to a lot of my other friends and peers in the community share their stories. So I'm honored to be here today, and hopefully I can, I can meet the the high standard that you've set for, for your listeners here. I am the president at Klein Enterprises. I've been the president for almost 15 years now. which is, which is, surprising to hear me say that because I'm 43. Spicer stepped in the role at a young age. and, and my role has evolved in that time in terms of, you know, what I focus on and what I do on a day to day basis.

Daniel Klein 00:01:12  I'd say today, my primary role as president of the company is to is to think not just about who we are today, but who we'd like to be tomorrow and what we need to do as an organization to get us there. I focus a lot on, long term strategy, as it relates to both the capital markets, both debt and equity, but also portfolio composition, geography and sort of, you know, you know, what we want to be as a company, you know, 5 or 6 years down the road.

John Coe 00:01:46  So you said you started young, so let's go back even before then, if we can, to your origins and talk about your youth and, your influences of your family, if you would.

Daniel Klein 00:02:01  Sure. So, you know, I probably had, more of a nontraditional childhood than what most people would expect. Looking at us being a multi-generational real estate firm and sort of expectations that people generally have about what my life was like. I experienced a lot of, a lot of, you know, family trauma, through my childhood.

Daniel Klein 00:02:26  My father passed away when I was four and a half. Oh. Okay. And then I lived with my mom, up through eighth grade. But she had some mental health issues that probably weren't as, understandable as they are in the world today as they were then. and so I moved out from my mom's house and moved in with my grandparents. My freshman year in high school. And that that had a big impact in terms of, you know, who influenced me, how I was influenced and sort of how I view the world. And not to get too dreary, but not long after I moved in with my grandparents, my sister dusty passed away in a car accident. So, she was my oldest sister. She would. She was. I was 15, she was 25 years old and had actually worked in the family business, you know, prior to her passing. and I think that more than anything impacted sort of how I viewed the world and sort of, you know what, what's motivated me in terms of how I approach dealing with people and what I wanted to, to do with my life and, and how I wanted to be remembered.

Daniel Klein 00:03:33  Right. so, you know, after she passed, you know, I lived with my grandparents. and her passing clearly impacted them a great deal. my grandparents I lived with were my late father's parents and my grandfather, Phil Klein was the, you know, one who really started, the real estate firm Klein Enterprises, as it's known today. And so I, you know, while there were a lot of unusual, things that took place that led me to live with my grandparents in high school. I think in the long term, it was the greatest thing that could have ever happened to me. you know, I had structure. I had, you know, one of the brightest, men that I could imagine around every single night sitting at the dinner table with me, teaching me about life, teaching me about, you know, not just his successes and failures, but what he saw and other people that made them successful and what caused them to fail. And so, while I absolutely enjoyed my youth a lot more than a lot of other people, I was also always taking a long term approach to thinking about my future and what type of future I wanted to have for myself, and how I wanted to create it in my own life.

John Coe 00:04:52  So I think I met your uncle. I believe Michael. that was the first exposure I had to your company. Talk about, you know, his relationship to your grandfather and to you a little bit and how that, you know, transfer of power for the company went through the assuming he was the next CEO after your grandfather.

Daniel Klein 00:05:16  Yeah. So. So at one point another, you know, my father was one of four was one of four sons. And at one point, another, my father and his three brothers all worked in the family business, at different junctures. I think what happens I think what happens when you have family businesses and you have different personality types is sometimes the, the, you know, the strongest voice in the room is who sort of lasts for longest. and that was my that was my Uncle Michael. you know, John, if you met him and Michael passed away, October 2020. but, if you met him in person, he was a big, gregarious guy.

John Coe 00:05:58  Yes, I.

Daniel Klein 00:05:59  Remember, you know, six foot four north of £350. And he captured your attention when you walked into a room and when you walked in and when you had a meeting. Right. so when I moved back, to Baltimore in 2004 to work with the family, at that point in time, my grandfather was, was 86, and Michael was 50. and they were. They were equal partners in the business. And my grandfather still worked, every day. And, and Michael, you know, would always tell me that if it weren't for me coming back, he probably would have been closer to retirement. But he was going to but he was going to stick around for me. And so I think there were sort of, different generational approaches to, to work. and, you know, what of one of Michael's lines he, he would always use when we talk about it was, my grandfather's generation lived to work while my uncle's generation just worked to live. And I always thought that was interesting, because I don't think you could sum up the entire work ethic of a generation, you know, by looking at it that way.

Daniel Klein 00:07:16  And I think that, you know, I think it's more different. Individuals have different philosophies on what they want their lifestyles to be. And, and, you know, I think based on that, you know, we sort of had a solid family business, you know, Michael and my grandfather worked well together. They had different skills and different strengths. you know, my grandfather was, was, sort of a math wizard. You know, you'd be in a you'd be in a conference room with a dozen people, and 11 people would have their calculators out trying to come up with the answer. My grandfather would have already had the answer and was telling everyone what the result is. Whereas, you know, Michael, you know, was a tough negotiator. He knew what he wanted. he had he had an ability to really sort of cut to the chase on an issue and not beat around the bush. which which, you know, could save a lot of time. On the positive side and could also create some issues, sometimes on the negative side, if people didn't understand who he was.

Daniel Klein 00:08:22  But, but but the two of them, I think, complemented each other nicely. and, you know, when I moved back, you know, we were just sort of. You know, we had, you know, 12 to 15 asset portfolio of mostly grocery anchored shopping centers that in a ring around the Baltimore Beltway, and we were mostly just managing those assets and not necessarily looking to do things, looking to do new things. And I think that worked out well for where both my grandfather and wasn't at that stage of his life, and where Michael was in terms of where he wanted to be that stage of his career.

John Coe 00:09:03  So where'd you go to high school?

Daniel Klein 00:09:05  So I went to a school called Park School, which I actually went to for, for 12 years. And I think, you know, going to park. was also one of the greatest influences on my childhood, because it was a place where I had amazing friends who came from really stable families. And for me to see how, quote unquote, a normal family operated, given some of the things that I went through, also allowed me to create a vision for myself for the future.

Daniel Klein 00:09:41  Park was a, you know, a small liberal private school. that was very fortunate to go to, you know, maybe 75 kids grade, on a beautiful campus in Baltimore County. So everybody, you you knew everybody in the school? You know, when I was in sixth grade, I knew people who were in 10th grade. And when I was in high school, I knew, you know, my friends, siblings who were in second and third grade. And there's a very high level of comfort at the school that allows people to be who they are and who they want to be. you didn't really have, you know, cliques in the same way that you had at other types of, high school environments that I didn't really appreciate until I was out of the school. But, it was a great place for people to discover, you know, who they are? in a very safe and comfortable environment. At least it was for me.

John Coe 00:10:34  Did you play sports there?

Daniel Klein 00:10:36  I did sports. Sports was a big outlet for me.

Daniel Klein 00:10:39  so my, my main sports were basketball and lacrosse. I was, I was captain of both the basketball and lacrosse teams. when I was at park, and, you know, wasn't the most, challenging athletic environment, you know, compared to some other Baltimore area schools, to put it lightly. But, sports were a wonderful outlet for me, as a, you know, as an escape and, and as a place to sort of see, you know, the direct results of, of working hard and seeing the fruits of my labor.

John Coe 00:11:18  Did you compete with the Gilman's of the of the world, or were they in a different league than you guys? They were.

Daniel Klein 00:11:23  They were in lacrosse. We were in the B conference. Got it. Gilman was in the A conference? Yeah. you know, the way I sort of explain it to people is the real difference. At the end of the day between, you know, a good B conference team and the A conference, schools is, you know, a schools like Park.

Daniel Klein 00:11:40  A few of us could have could have played at the a conference schools but the a conference schools had had 20 of us. They were they were a lot deeper and it was a much much bigger focus. But you know our basketball team you know, was it was in the B conference. and, and played some of that, played some of the better schools. And we had a decent basketball team my junior year.

John Coe 00:12:03  That's fun. That's cool. So then you went on to Boston University I understand. Talk about that experience. Why did you, why there. And and what was your experience like.

Daniel Klein 00:12:14  Sure I actually had I actually had an interim step along the way don't you. Which which you know, and you know, it's I sort of joke around in that I have two high school diplomas because I did a post-graduate year at Mercy Academy. Oh, sure. After high school. and I did that. I did that year. Kind of. It was it was two pronged. a really good friend of mine who was who was a year older than me, was an excellent basketball player, a guy named Keith Ganz.

Daniel Klein 00:12:45  Mueller, who, you know, senior year, probably averaged his senior year, probably averaged 33, 34 points a game the same year that Carmelo Anthony was a senior. And you open up the Baltimore Sun newspapers and you sort of see Anthony and Mueller's like the top two scorers, in in the city, of course, playing different levels of competition. And, and Keith ended up going to Loomis Chaffee for a post-graduate year. and Keith was a good friend of mine, and his father was also, the college guidance counselor at Park and my advisor named Paul Ganz and Mueller, who was a really great influence on me in high school as well. And, both Keith and Paul in the first few months of my senior year, would talk to me about how great the experience was for Keith and having this, having this interim year to get ready for college to sort of, you know, prove himself out on the basketball court. and simultaneous, my junior year in high school, about four games into the lacrosse season, I got mononucleosis, and I couldn't play the rest of the season.

Daniel Klein 00:13:51  Oh, and so I didn't know if I wanted to play college lacrosse or not. I had good, good SAT scores. You know, back then it was on the 1600s. You know, it was a 1600 scale. And I, my my SATs were in the 1300s. That's good. But based on a lot of my, you know, my sort of the volatility in my home life, I wasn't very focused on academics where my grades and so my grades really didn't match what they should have been based on my, my test scores. And so I made it was probably the first of a lot of responsible decisions when I was mostly an irresponsible kid, and I decided I would I would do this post-graduate year, to create some structure in my life before I went off to college. and, and I said it would give me some time to decide if I'd like to play college lacrosse. And at the end of the day, when I'm 40 years old, I'm not going to remember that I did this extra year.

Daniel Klein 00:14:49  and so I went to I went to Mercer's burg.

John Coe 00:14:51  And it's a boarding school.

Daniel Klein 00:14:53  It's a boarding school. It's, it's just it's just past Hagerstown. The third exit or the, Pennsylvania line. it's it's, you know, the campus is nicer than most liberal arts college campuses. Wonderful environment. I made podcast.

John Coe 00:15:09  Guests. Two podcast guests of mine have been there.

Daniel Klein 00:15:12  Really?

John Coe 00:15:13  Yes. Fred Cline and Lacy rice. Yeah. I don't know if I know either one. You know, either one of them.

Daniel Klein 00:15:19  I do, and I and I know, I don't know Fred well, but I know that he went there because of the same last name and the Mercer bird connections. Somebody once asked me if he was my dad. Yeah.

John Coe 00:15:30  So you met Fred?

Daniel Klein 00:15:31  It'd be better. I met him a while back in passing, but we don't. We don't really know each other well. but, Mercer Berg was a was a it was a very interesting year for me when you go to boarding school as a post graduate.

Daniel Klein 00:15:44  All of your friends and peers are experiencing the freedoms that come along with being a fresh freshman in college. And and I had more roles put in place, at boarding school in that year than I had had throughout my entire high school experience. And so, you know, I had to adapt and I had to learn, and I had to recognize that, you know, how great my what I call my true high school experience was. And it gave me some real perspective. Interesting. And it also, gave me some perspective. You know, I'm Jewish, and, Park School was probably over 50% Jewish when I was there, and it Mercer burg, I was, you know, one of maybe 3 to 5% of the Jewish population. Population. you know, I experienced some anti-Semitism from people, you know, from friends of mine who had never even met a, never had a Jewish friend before. And it also gave me some perspective on, on being in different environments and, becoming resilient in that way.

Daniel Klein 00:16:44  And it also helped influence where I wanted to go to college. You know, I decided I, you know, being, on a beautiful campus in rural Pennsylvania was was great for the year, but it made me recognize that I wouldn't want that experience for four years of college. You know, I needed more activity. I needed to have more sort of non-academic options and pursuits. And so by being immersive Berg, I decided I wanted to, you know, I wanted to go to school in a more urban environment. And, and that's sort of what led me to, to Boston, which is a school, ironically enough, I got into out of out of, you know, when I finished a park, but I didn't know what I wanted to do then. So. So that year, that year, Immersive Berg ended up being, very valuable for me.

John Coe 00:17:29  Why Boston? I mean, why not New York or Philadelphia?

Daniel Klein 00:17:33  Yeah. So. So, you know, my grades weren't good enough in that one year immersive berg to get into Penn.

Daniel Klein 00:17:38  And so I didn't really have another option that I was familiar with in Philadelphia, but I looked at, Emory in Atlanta. I looked at Tulane in New Orleans. I looked at George Washington University. Sure. Looked at looked at NYU. Looked at, looked at Beau. Yeah. and from the time I was a teenager, I always had the expectation that I would move to New York City after college. And so I decided for college. I'd like to go somewhere else first because the it was a default in my mind that I was going to New York City no matter what. so I thought, you know, Boston, when I visited, seemed like a, you know, be you especially sort of kind of has its own campus in the middle of the city. Not really, but kind of they've done a much better job from an urban planning perspective on improving it in the past 20 years. but what's also close enough, to downtown Boston, where I could get some exposure to sort of, you know, having that urban experience.

Daniel Klein 00:18:38  And the other great thing was there are so many colleges in Boston that, you know, it's you're not just being surrounded by, students from your school. You have exposure to people at, you know, a dozen colleges within 30 minutes of you. And, so, you know, it took a flier, and I said, Boston's where I'm going.

John Coe 00:18:56  That's cool. And what was your experience like there?

Daniel Klein 00:19:01  well, I'll be honest in that my year at boarding school taught me how, taught me that I could I could thrive academically. But when I had the freedoms of being in college again, I didn't do that when I arrived. I think I think I was very focused on, what happened, you know, unserved, maximizing my four years in Boston, to the best of my abilities, you know, across the spectrum, which included, you know, you know, which included socializing, included work included experiencing, you know, making amazing friends and just experiencing, life with with people from all around the world, which is what being going to college in Boston is.

Daniel Klein 00:19:44  I joined a fraternity when I was there and ended up becoming president of the fraternity, when I was a sophomore in college and was president for two years.

John Coe 00:19:54  That's unusual.

Daniel Klein 00:19:56  It was. It was very unusual. And I guess it's, also was sort of representative of, of of other people seeing something in me that maybe I didn't see. And whether it's responsibility or leadership and choosing me for a position. Same way in high school when I was voted captain of basketball and lacrosse teams, I was surprised. you know, you know, whether it was self-doubt at that stage of life or just not being aware of what my skills were compared to other peoples. and if you ever want to talk about a, you know, a very difficult leadership position, it's trying to, get a bunch of, you know, 19, 20, 21 year old, guys organized in and listening to you and fulfilling responsibilities. But but it was worthwhile. and then while I was in Boston, also, I, you know, I had the opportunity to get into real estate, just so you know, through serendipity, not through design or plan.

Daniel Klein 00:20:56  my freshman year, I was looking, you know, looking for an apartment, off campus. towards the end of the year. And, my experience was that most of the residential brokers that I would call or come across seemed like they were being a little bit predatory with college kids. Right? Not taking not taking them serious. you know, maybe not being forthright or honest. And unlike most of my friends, I had to find my apartment myself. I had to do all this on my own. I didn't have parents to help me. And I said this. This just doesn't feel right. You know, everybody. Similar to other urban schools, everybody moves off campus and rents apartments. There has to be a better way. And, we discussed earlier before before the call, you know, the analogy of sort of throwing pebbles and, and, you know, the ripples that result. an older friend of mine from I was talking about it with, with an older friend of mine, in, in our fraternity, a guy named Sam Grossman.

Daniel Klein 00:22:02  As I understand it, these guys don't they don't seem like they're professionals. I don't get it. He goes, well, I have my real estate license. You could get your real estate license. Really? I said it don't. It's not like 100 hours in school and class and all these complicated tests. He said in some states. But he said, in Massachusetts you do a weekend class. You know, it's 9 a.m. to 9 p.m. for two days, and you go take the test. It goes in any of these and any of these brokerages would love to have a college kid because all of your friends are going to rent apartments. So I said, okay, I'll do it. I'll try it out.

John Coe 00:22:36  That's excellent.

Daniel Klein 00:22:38  So I went and I, I got my license still with no intent to really do anything with it. And then, you know, I don't know if it was that summer where the following summer I was looking for a job and at that point in time, my plan was to go to law school after Bu.

Daniel Klein 00:22:58  And not that I wanted to be an attorney, but I just I told myself the story that if I got an advanced degree and I had a basis in law because I had read about some really successful real estate developers and business people who went to law school first, that, you know, I'd be armed with the knowledge to go do whatever I want. I went and interviewed at a law firm that was, I don't know, a 40 to 50 person law firm in downtown Boston that I got connected to through a, through a friend, a bu and the managing partner there was a guy named Cary Cutler, and he sat with me for. Close probably two hours when I went in for this interview. Just for a summer job, and by the end of it, he looked at me and said, I would hire you to work here all summer long and I would be very happy with that decision, he said, but, but I'm not letting you go to law school, and I'm not letting you become an attorney and you're not working here this summer.

Daniel Klein 00:23:57  So. So what are you talking about? I need a job. So you have your real estate license. You've never met me before, and you just came in and talked to me for two hours, and we had a great conversation. I'm calling my friend who owns a real estate brokerage in Brookline, Massachusetts, and I'm going to tell him to give you to give you a seat in his office. He's only going to pay you by commission anyway. But he said, but I promise you're going to make more and learn more working in that office than you would being in, and you would being at this law firm.

John Coe 00:24:26  Isn't that something?

Daniel Klein 00:24:28  So he caught up. He called up a guy named Richard Riko Moka, who had a company called Ringo Realty. And the next day, I went set up shop and, you know, working as a residential broker for a few years in college. gave me a lot of confidence in terms of dealing with people in the real world. Right. Most of my clients were people five, ten, 20 years older than me.

Daniel Klein 00:24:52  I had to lie about my age sometimes because people, you know, I'd be brokering a condo sale at 20 years old and people, you know, the biggest purchasers of someone's life, and they're trusting the kid who's, you know, a sophomore. Junior in college. and, you know, I ended up, being able to sort of marry a lot of my skills in terms of having, you know, a deep network of relationships and the ability to work hard and control my destiny. And I end up having a great brokerage career while I was in college, and I even bought my first investment property my junior year in college. That's cool. And buying a two bedroom condo in Austin, Massachusetts, that I ultimately sold when I finished in Boston. But, you know, having those life experiences, you know, before I, you know, quote unquote, went out into the real world where we're unparalleled.

John Coe 00:25:48  I want to ask you, if you ever went back and sat with that attorney again after you, he gave you that advice and find out why he said what he did, just out of curiosity.

Daniel Klein 00:26:03  Yeah. I've reached out to him here and there over over the years. Probably not in the past five years. But I reached out to him and it's, And you even bring it up is going to provoke me to make a more concerted effort to track him down.

John Coe 00:26:17  Well, it's just, you know, it seems like he has this wisdom about people. Even a young person like you. You are, what, 19, 20 years old? And he said, yeah, I mean, that's that's a pretty incredible talent to be able to look at somebody after a meeting or a couple hours to say, you don't need to be, you know, need to go to law school. You you need to be a real estate broker. He just knew your personality after learning that. That's interesting.

Daniel Klein 00:26:46  Yeah. And then the fact that he took the time to even sit with me, you know, you know how valuable time is today? yeah. He probably sold.

John Coe 00:26:55  At $300 an hour or more, right?

Daniel Klein 00:26:58  Well, yeah.

Daniel Klein 00:26:58  The one, the one good thing for him is, is I used his firm when I bought that condo, so he did get some business.

John Coe 00:27:04  Okay. That's interesting. So you were a real estate broker through your pretty much your entire college time then? Yeah.

Daniel Klein 00:27:14  And I actually, before I finished in Massachusetts, I actually had my actual broker's license. You know, there's the two levels. You have your sales persons and then you go to brokers. And I think after two years there, you were eligible to get your brokers license. So so I got that before I, before I finished, before I finished college.

John Coe 00:27:31  Well, you're all set. So why did you go back to Baltimore then? After that? I mean, you could have said, yeah, I'm going to stay in Boston. I like it here. You know, that's that's.

Daniel Klein 00:27:39  That's a great question. And I'll answer it quickly. But I'll tell you, I made more money in college than I did my first year as a salaried employee for my family.

Daniel Klein 00:27:50  I took a pay cut of probably 40% is my guess. Maybe maybe 50%. and I think, you know, the easy answer is, you know, as I was doing this work and I was actually it was a great way for me to to bond with my grandfather and connect with him. I would I would finish a day. I would have rented three apartments. I'd call him and I'd tell him about it and talk about it. And all the while I was doing this, I didn't think he would hear this and think that it meant I had a future coming back and working with him in Baltimore. I just thought, you know, he was my mentor and my best friend. And we were I was sharing my experiences to have someone to talk to about it. but I guess in his head he was saying, okay, you know, he's he's doing this on his own, you know, that this could be good for him to come back and work with the family. And I guess summer going into my senior year, he sat me down and had a conversation at, you know, and said, you, we need to start thinking about what you're doing, you know, when you finish next May and and what are you thinking? And I and I said, I said, I don't know, I could stay in Boston.

Daniel Klein 00:28:56  I could, I could keep trying to buy some properties here, and I could work. I could keep expanding my brokerage relationships and make this a full time thing. But I said, I don't really want to stay in Boston. I said, I think I would like to go to New York City. And ironically enough, you know, keep talking about these pebbles. One of my friends parents who I helped find an apartment for the, you know, for their child, you know. Was, was best friends with the owner of a very large brokerage firm and an office brokerage firm, in New York City and said, you know, they'd like to offer you a job if you want to come. And so I'm sitting here saying, I haven't even applied for a positions, and I have people telling me they can help me get jobs in New York City. I, you know, I I'll be okay. And my grandfather said, well, why would you do that when, you know, we have a family real estate business? I'd like for you to come back and try and try working with us.

Daniel Klein 00:29:51  and I tell everybody, if he had asked me to go move to Botswana and live in a tent by myself for a year, I would have done that. You know he did. He did everything for me to put me in a position where I could be successful in life. And so it wasn't. It was never anything I thought I would ever do. I really thought once I was out of Baltimore, I would never come back at that point in life. and when he asked me, I said, you know, I said, of course, you know, but we're sort of talked about it conditionally. And, it was not a commitment that I would do it for five years or for ten years. It was, we'll come back and we'll see how it is. And after a year or two years, if it's if it's doesn't feel like it's the right thing for me to be doing, I can I can go do something else. And that was now, you know, we had that conversation probably around this time 21 years ago, and I and I moved back to Baltimore.

Daniel Klein 00:30:53  I started working with the family. May, May or June of 2004.

John Coe 00:30:59  So, as I referred to and you, I sent you my questions in advance. So you know where I'm going with this. But I interviewed Toby Hutto, who you may know, who runs the pesto group now. And he followed his father's footsteps. Tom founded the company back in 1987. I interviewed both of them and Tom told him when he got out of school. He was interested in music at the time, so he. But he pivoted and said he wanted to go into real estate after his music career didn't quite get off the ground. And then he went to Tom and said, I'd like to, you know, join the company. He said, no, no, no, I think you should go get learn Real estate, in another place first and then come over, you know, at some point. And then I'd like you to move into senior management here. So that was his thought process because, you know, the company was pretty large.

John Coe 00:32:02  And for him to come on, it was kind of like, I'm not so sure this is the right time and place for that. So, with that in mind, I'm curious, you know, how you see yourself differently? perhaps maybe the scale of the companies were different in the situation was different. But I just like your take on that, that analogy.

Daniel Klein 00:32:24  You already partially answered it. you know, Toby and I, have been close friends for a long time, and we discuss a lot of things that we probably, you know, couldn't share openly on the podcast like this with each other. and I'd say the two immediate distinct differences that come to mind are number one. time was not on our side. And my grandfather was 86 years old. when I, when I finished in Boston. and I and I think that even if he were 75 I, you know, I personally would have viewed it differently. You know my grandmother passed away spring of 2001. Right. So you know he had this conversation, you know, a little, a little more than two years after my grandmother passed away.

Daniel Klein 00:33:12  So he's kind of by himself to a certain extent. We had a lot of family in Baltimore, but he's living by himself in Baltimore. He's 86 years old. And, you know, at that point in time, I didn't know whether he was going to live for another 15 years or another year. So, I think I think that's the first distinct difference is, is, is his age probably relative to when Tom and Toby had their conversations. And then second, our company in 2004 didn't resemble the current version of Clown enterprises in any way, shape or form. And I think, I think even in 2004, if I would have said to anyone at our company that we are going to be like 0 in 10 years, I would have been laughed out of the office and people would have said, that was crazy. you know, when Toby was like, come in was already an institutional quality firm. Yes. with, with with, you know, with, high quality reputation and name brand, you know, not just in the Mid-Atlantic region, but people beyond the region still knew who they were.

Daniel Klein 00:34:27  Oh, yeah. With a number of partners, institutional, incredible processes in terms of how they ran the business. committees. You know, all the things that our company did not have. and so I think it's really important and I, and I respect, how Tom approached it with Toby. I think it's very important as companies evolve from, to, family business to a business that may have a family name and may be influenced by the family, but is really an institutional quality firm to to act like it's an institutional quality firm. And, you know, nepotism doesn't really have a place in business when you have a lot of fiduciaries and a lot of stakeholders and a lot of shareholders that you're accountable to. And so I think we've all seen too many situations where families didn't adapt or didn't or didn't treat the business like a business, as opposed to just, you know, a place for the family to go. And I think our company, well, it was, you know, a great nucleus of people.

Daniel Klein 00:35:41  there were only six non-aligned family members in the office, but back in 2004. Yeah. Yeah. So there was no size. There was no scale, there was no strategy. There was no thesis. There were there was there was there was no plan other than, you know, we were really just operating what we had. And that takes work. It takes effort. but we were just sort of operating what we had. And the focus that we had at that point in time was more about just, you know, preserving what we had as opposed to trying to figure out how to grow the pie.

John Coe 00:36:15  Okay. That that opens up the door for my next question. So when you came back, what was your thought process? You looked around and said, I think we can make some changes here. So talk about how your thought process evolved.

Daniel Klein 00:36:33  You know, I didn't think that way at first. You know, I'm I'm the type of I'm the type of person who. I have a lot of patience and I have.

Daniel Klein 00:36:46  And one of my strengths is I can generally see the forest through the trees. and whenever I do anything in life, I want to get acclimated and understand what my surroundings are. Okay, before I really push for change. and there were times in my first year or two when I was back in Baltimore when I was saying to myself, what in the world am I doing here? You know, my my. None of my best friends are here. You know, most of my friends were in New York City. I was going up probably two weekends a month, to go see my friends. you know, we, you know, I was, I was doing early on, I was mostly doing leasing, and. I was learning a lot, but I didn't really love leasing, you know. and but I was just sort of stuck in that role. I was trying to get exposed to reading financial statements, to learning to learn how to model. I was kind of doing a little bit of everything while, you know, getting a lay of the land as to sort of what the business climate and the real estate community was like in the Mid-Atlantic region for the first, for the first two years.

Daniel Klein 00:38:02  and at that point in time, I didn't really know yet what the future held. And I and I really, I don't know how confident I was that what we had was sustainable for the long term. But like everything else in life, I sort of told myself, it's early, like you'll figure it out. I think me coming back energized both my uncle and my grandfather, you know, in ways that maybe, like, they hadn't been energized in a while, you know, to to in terms of, you know, educating me on, you know, assets in our portfolio, the background, the stories behind them, who the partners, were in those assets, how we look at deals. and, you know, someone taught me early on that, you know, you can learn as much, from people about what not to do as you can. What to do. Yes. And I and I think there was there was a lot of that. But I think it's also good to remember that where we were in the economy, moving back in 2004, it was a very frothy time.

Daniel Klein 00:39:05  My first years back, and we would look at we would look at an asset and I'd convince us, you know, we'd put a bid in, it would be a shopping center that we knew well. And and, you know, I'd sit with my grandfather, we'd run the numbers and the analysis and he'd he'd explain why we could afford to pay X, we'd put the bid in for, you know, for X. Let's just say, hypothetically, it was $10 million and we'd find out that the property sold for 14. And the real benefit of coming back during that time was because we weren't looking at 100 deals, and because my grandfather had the time, and because my uncle had the time, we would talk about what they were, you know, what the buyers were doing to be able to pay 14 million, whether it was inflated, rent growth, inflated occupancy assumptions, interest only financing, at 75% leverage. Everything that was going on back then that that we fortunately weren't participating in. Right.

Daniel Klein 00:40:08  And so it was difficult, but it was it was a great time to learn through what felt like our failures by not winning bids, but recognizing, especially 4 or 5 years later, the mistakes that others were making, the failures that people were making and winning. and so and I had, you know, to be able to have my grandfather as a resource whenever I had any questions on anything, you know, and he was really. I'd say 100% there mentally, my first three years. And to have those three years, I wouldn't trade for anything in the world.

John Coe 00:40:55  So he taught you the discipline of the business. So at least from his perspective. And he wasn't going to overpay for something. And he probably told you you know there are lots of ways to look at this business. And you know you can you can go out there and take incredible gambles. But here's how I've had success and, you know, building my portfolio. And so, what? You know, what 2 or 3 things would you say were the things that he told you that you should and you still probably have in the back of your mind when you look at a new deal or consider an acquisition just out of curiosity.

Daniel Klein 00:41:35  So I think one of my main takeaways was that real estate can provide cash flow and wealth without a lot of assets and for a very long time if the owners are prudent and responsible and disciplined. And I say that because even, you know, 2004, 2005, 2006, you know, we had assets that my grandfather had developed in the 1960s where, you know, it would be a lease renewal that would come up and he'd be laughing in his office and I'd say, what's going on? And he goes, oh, I can't believe this. I've been telling you for ten years that whenever this gas station lease came up and we'd be able to take the rent from 30,000 to 100,000, guess what? Let's say he goes, it's the rent's going to go to 150,000. So when I built the shopping center, the entire rent roll wasn't 150,000.

John Coe 00:42:32  Yeah.

Daniel Klein 00:42:33  Right. So, you know, we're in a even then, we're in a world where so many people focus on instant gratification. It's worse now.

Daniel Klein 00:42:41  But but even then, people were focused on how quickly they could turn a profit. And I and I had an 86, 87 year old man who I deeply respected, sitting there sharing stories from when he built something 30 years earlier, still providing cash flow today. Right. And so it helped me recognize that, you know, even in my early 20s, that time flies and what might feel like a really long time when you look ahead, when you ultimately get there. It didn't take as long as you thought it would have taken. And so that helps, you know, give me the perspective of patients and taking a long term approach to real estate early in my career.

John Coe 00:43:22  Very smart.

Daniel Klein 00:43:24  and, and I think that was a big positive takeaway, from those years. it's outstanding. I'd say I'd say a negative during those years, you know, before we sort of got to, you know, you know, when everything crashed in 070809 that when I moved back, we got involved in two large projects.

Daniel Klein 00:43:46  one was a land development at the, the Mark train station in Odense, in Maryland. on a land assemblage there that, when we started, was just going to be a small strip center. But then they passed town center zoning, and we did the land development for 232 units with ground floor retail. And that was my first real, you know, entree into development. And I got thrown into the fire on that right out of college. And the second deal was a 50 acre piece up in Bel Air in Harford County, Maryland, that we had under contract that we were going through a rezoning on. And so what also happened during that time, from zero 4 to 0 seven was whenever because we were working on these two big projects, whenever any opportunity I brought to our family that we should look at the response from my uncle. My grandfather was, we don't have the money to do it. We have we already have these two big projects, and we don't know how we're going to finance them.

Daniel Klein 00:44:41  We can't look at anything else. And so it had being constrained from a capital perspective also helped us buy. We just had to say no to things. And then what ultimately happened were these two big deals, which is all I worked on from a New Deal perspective for three years. Four years? one of them we ultimately sold, the project we sold to the Dolman company, who we had been talking about doing a joint venture with, but then they had a 1031 exchange or something along those lines, and they, they said, well, what if we just buy the whole project? And so we got added at May of 2007, June to 2007. and it was ended being a great deal for us from a land development perspective. So it taught me about, the value of, of creating, you know, creating value through entitlements. and it was a great financial outcome, but we sold it and I got a nice check for, you know, 26, 27 years old for, you know, I had a 5% stake in the deal.

Daniel Klein 00:45:44  but then I said we just I just spent all my time on this deal that we said we couldn't do anything else because we were doing it, and now we just sold it. And then we had the second deal in Harford County that we were going through a rezoning on, and our zoning got appealed. We had a Wegman Wade Wegmans teed up. We were going to do a Wegmans out there to a big retail development, and we got ended up, in a zoning battle for years until the the market turned and the seller wouldn't drop the price, so we dropped that as well. So I'm sitting there in 2008, and I, my first four years have had amazing learning experience on these two deals, but they were all of a sudden not in our pipeline. And so I said, I moved back here with the professional and I with the prospect that we'd have these two big projects and that we were going to work on. And I, you know, I, you know, I get the experience and the benefit and get some small pieces of and now neither of them exists.

Daniel Klein 00:46:37  And we have the same portfolio we had in 2004. And I kept thinking, what, you know, what would I have been doing otherwise? Right. And the market and the market was turning. And I kept saying, there's got to be a better way. and some of what was going on also was that anything that wasn't, you know, true grocery anchored retail development or retail development, we would just pass on. And we couldn't compete with the reach or the institutions buying an undeveloped piece of land during that time. And so we really also just we weren't looking at things and I said, okay, we're gonna have to figure something out because my grandfather now is turning 90. My uncle is, you know, four years further into a career where he said he'd stay as long as he'd work, as long as I needed him around. But he wasn't looking. He had done well, and he wasn't looking for the next 20 years of his life. And I said, you know, we need to be prepared to think about, you know, what model works if we're going to have this company and we're going to make it successful, and I'm and I'm going to, you know, get married and raise a family and, you know, and I'm not going to nothing against people who come in and take over family businesses and just sort of maintain the status quo.

Daniel Klein 00:47:59  But I'm not the type of person who ever wanted to just maintain the status quo. So I had to think about, you know, what we would do to to change our model. And fortunately, the downturn hit, and it allowed us to really transform ourselves as an organization and think bigger and do new things.

John Coe 00:48:19  You said fortunately so not unfortunately. So normally people say, unfortunately, the downturn hit. But you said fortunately. So talk about why it was fortunate.

Daniel Klein 00:48:31  Yeah. So the same discipline I referenced, from 2004, 2005, led us to be in a position where we were relatively I'd say we are modestly leveraged across most of the portfolio. and we didn't have a whole slew of problems. And while we lost seven figures on the Harford County deal where we got stuck in the rezoning battle, who, if we had achieved the zoning in early 2007 and had to close on a $25 million piece of land, we would have been carrying that in the middle of a downturn when rents dropped by 40%, and we ended up not having to do that.

Daniel Klein 00:49:13  Right. So the R&D cost. Yeah, the R&D money that was lost, working on that transaction paled in comparison to the damage that could have taken place if we had actually had to close on that land and try to get a project developed, you know, between, you know, oh eight and and 13. Right. Yeah. So and we saw because the, the, the land came back to us, you know, in 2010, 2011 and the alloy numbers that retailers had given us in 2007 that literally dropped in half frequently. Wow. So that was another big lesson of, you know, a small mistake might hurt, but it's a lot less painful than a concentrated large mistake. And that and that formed a lot of my worldview in terms of having a more diversified portfolio with a lot of different sources of income and cash flow, which which we've been able to achieve over time. So, you know, I think, once we got into oh nine and, you know, I've been working for five years and, and I felt like I understood the dynamics of the marketplace.

Daniel Klein 00:50:32  we sort of said internally, this might be the best buying opportunity that, you know, that I will see in the next 20 years. We need to be positioned to take advantage of opportunities, and we need to be more flexible in how we see things. And we need to recognize what our skills are and our strengths are as a company, and it's not as a retail developer. It says a developer with local knowledge and expertise. Right. The same land use attorneys are going to be involved in a rezoning for a multifamily project, as they will for a retail project. The same civil engineers, the same architects, the same land developers, the same brokers. And so, and instead of saying just no to anything that wasn't retail, I said, you know, we just had one of our best transactions in the history of our company on a land development deal in Edmonton, on the multifamily side. How can we say we only do retail when, when, when when? That's financially one of the best returns we've ever had.

Daniel Klein 00:51:35  All right. Let's let's look at where the opportunities are. And let's be prepared to think differently about things. And instead of focusing on what can we capitalize internally? Because in the in the grand scheme of the real estate ecosystem, we had very, very scarce resources, right? We had enough to put deposits down. We might be able to buy a small shopping centre by ourselves, but we couldn't go fund 3 or 4 deals at a time. and, and I said, we need to leverage our intellectual capital and whatever actual, you know, monetary capital we can put into transactions and then use that and go raise capital from people outside of our family. you know, part of it was self-preservation for me also. you know, we got to 2009, right? My grandfather was turning 91. He was frail. He wasn't in the best health. And and I had power of attorney for him. And I never wanted to be in any type of position where, you know, someone could say, oh, well, you did this transaction because you had power of attorney.

Daniel Klein 00:52:45  So I was forced into into a position to say, you know what? That's two deals with no family capital. I'll put in whatever I can put in. Michael could put in whatever he could put in, but we're not going to. We're not going to do deals that are relying on the internal bank. We need to focus on, you know, improving, our external materials, how people view us and perceive us, how we operate as a company. And, you know, if we're going to be sustainable over the long term, we have to we have to bring in external capital as well. So we did that. The first deal we did that on was a grocery anchored shopping center in Glen Burnie, Maryland called Burwood Village Shopping Centre. you talk about the pebbles. we did that in 50, 50 JV with, with cats, properties out of out of New York and the two main principals there, Dan Cocktail and Dan Katz at that time were both, you know, a year older than me and went to, you know, went to the same high school as, as my college roommate and as my, as my now wife.

Daniel Klein 00:53:53  And we had a lot of mutual friends. Dan Katz actually went to college with a good friend of mine from Baltimore. We met in iCSC show, you know, months, you know, six months before we did a deal together. And we and it was one of those conversations of, oh, yeah. yeah, everyone says we should meet like, let's, you know, let's talk. And we ended up buying a shopping center together, 50 over 50 from, from Prudential. you know, they were starting to, you know, to sell because, you know, they were getting into a downturn and they needed to get some liquidity. And that was the first indication deal that, that I ever did. And it wasn't a big it was a very small one. It was you know, I think we bought the shopping center for 13 million, something like that, and we put 4 million of, of equity in, Bill Liberace actually helped source the, help source the debt.

John Coe 00:54:43  Oh. Did he.

Daniel Klein 00:54:44  Okay. Yeah. Or maybe we put 4.5 million of equity in each side. Put 2.25 n. I had a little bit of cash. I didn't have a lot. I put $100,000 in. But I told everyone I went to that we were raising capital from. This is what I can afford to do, and it's a lot of money for me at this stage of life, and raise the money and, end up selling that center two and a half years later for 17 million. And that was the first in a series of syndication deals that we got into where we expanded the capital base and brought in, you know, brought in, really more friends and family investors at that time to allow us to grow as a company and to get involved in the new transactions in a different way.

John Coe 00:55:25  Is that a grocery anchored center?

Daniel Klein 00:55:27  It was a grocery anchored center, food line.

John Coe 00:55:29  Oh, okay.

Daniel Klein 00:55:31  and and we did something there that, that we did a lot of as we grew as a company in that we partnered with great people who shared our worldview and shared our strategy, and what we wanted to achieve that brought different skills, brought different skill sets to the table.

Daniel Klein 00:55:50  And then what we brought, right. We brought the local knowledge, we sourced local financing, and cash at that point in time had already done a half dozen acquisitions, probably in the prior 12 months. So they had the due diligence down, they had the processes down. And, it was a good it was a good merger of skills. and and that was the catalyst for, for going on doing more syndication deals.

John Coe 00:56:13  So how did your product type, you know, growth occur and diversification and then and then going moving that beyond that into geography, going outside the region, that kind of thing.

Daniel Klein 00:56:26  Yeah. So the for really from oh 9 to 12 we probably still focus within the region. But you know, we bought our first flex park in April 2010, in a 5050 JV with caps, also from First Potomac Realty Trust, if you remember them. Oh, sure. yeah. so we bought a business park in Randalstown, Maryland that we would have never looked at if it weren't for a relationship that said, listen, it was a guy that we looked up to, who said, if a REIT is selling in this market, they're selling.

Daniel Klein 00:56:58  So take a look at it, because there aren't a lot of buyers. And if you're local and you might be able to do something with it. So we bought, you know, I don't know, 35% vacant. And we expanded five tenants in the first six months just by returning their phone calls. and we did pretty well with that. And probably the biggest deal we did during that time was, was a joint venture with actually with JBG on a large building for the Social Security Administration. That was a that's in Baltimore. Yeah, yeah, that was in Baltimore. It was an RFP. and, you know, I think this is a good example of of being bold when other people would probably tell you not to, you know, I guess 2009 RFP came out. Maybe I was 28 years old, and a friend in the, office brokerage community in Baltimore said, you know, here's a link to a website, a government website that's that's public and open. and go click on that link and then call me back.

Daniel Klein 00:58:00  And I went on this link, and it was during early analysis of different sites for where SSA was thinking that, doing a north of a 500,000 square foot build to suit. They said he said, okay, now you see that go, there's another link. Go click on this other link. And this other link actually was the second study that had just been, posted that day or something like that and identified the site that they wanted to do the building at, and that there was going to be an RFP coming out. And it was, you know, I don't know, a 10th of a mile from one of our shopping centers in northwest Baltimore City, in our backyard. Sure. So so I started to look at the RFP, and, we were unqualified in every way possible to bid on it. It said it said you had to have built a Class-A office building in the past seven years. We hadn't done that. Said you had to have developed a lead over a greater building in the past seven years.

Daniel Klein 00:59:00  We hadn't done that. Said you had to have, you know, done a 500,000 square foot building in the past seven years. We hadn't done that. But I said, okay, well, if I'm looking at this and it's not in the papers and it's not out there, it means a lot of other companies that are qualified probably aren't looking at. And, we had a relationship with JBG, so I called up, David Jacobs at JBG and I said, you guys do these government buildings. there's an opportunity that is in our is in my backyard. It's not in DC, but, you know, this is a 500,000 square foot build to suit for the SSA with the 20 year lease. I see it seems like this is something you should you should want to pursue. So, you know. So. So he came to Baltimore with a guy named John Simeon who worked at JBG then and was sure that, you know, John's a great guy. sort of the GSA expert at that time, he, and they got approval to pursue a deal in Baltimore, and we pursued it as a joint venture.

Daniel Klein 01:00:06  And, we ultimately ended up winning, you know. you know, probably 15 companies, probably went after it. They narrowed it down to five, another five. We ended up winning it. It was a multi-year process. And, you know, we had no place being in the room other than me making a phone call and saying, you know, let's try to pursue this together. And we ultimately won. And seeing the quality of people from JBG at that point in time, across the board, you know, in terms of, intellectual capacity, determination, work ethic, it didn't matter. It didn't matter who I came across. There were high quality people. Yes. and I developed some phenomenal relationships with people from JBG at that time. Rob Lance was the partner who was sort of tasked with the project. Tony Greenberg, you know.

John Coe 01:01:07  Yeah, I know Tony Jordan. Yeah. Rich Jordan. Yeah.

Daniel Klein 01:01:11  Yeah. So a lot of great people that, that we had had the opportunity to work with and when we ultimately want it, you know, I've arrived in Northern Virginia, you know, every Wednesday for design meetings.

Daniel Klein 01:01:23  I didn't miss a meeting. I felt like being the small, you know, the the minority up in the room. I had to work harder to prove our worth. Right. and there were things that we did that absolutely proved our worth in the partnership. But, you know, my people in the office when I said we were pursuing this thought I was insane. And and it being the largest private deal in Baltimore City history, when, you know, at that time and, you know, a $200 million project and that deal, gave our company a lot of credibility in the broader real estate markets, because when people would say, so, you know, what other deals have you done? I could say, oh, well, we just did a we just we just did a half million square foot build a suit with JBG, you know, in Baltimore City. And so both the size and scale of the job and having, a partner with the institutional quality reputation when a long way even on little deals that we were going to do.

Daniel Klein 01:02:25  Right. So so it was a good lesson also on sort of, you know, you know, reach beyond what, people think you can achieve because you never know what happens in terms of, in terms of how you get there. And, and, and, you know, that was a great example of sort of the evolution of a, a firm, you know, coming out of the downturn where we said, you know, let's just we are a real estate firm. We're not a shopping center developer. We're a real estate firm. And, and that's just one example of a lot of things that we did to evolve ourselves to the point where we could be recognized as a credible firm, not just in Baltimore, but in the region.

John Coe 01:03:10  So while that was going on, you learned a lot, obviously, about institutional real estate and investing and what you're doing. So you looked around the landscape when this was going on and what what was your mindset at that point?

Daniel Klein 01:03:29  so I recognize a few things.

Daniel Klein 01:03:31  One thing, one thing I learned, and I give Rob Lawrence a lot of credit for this, is he would always talk to me about when investing in people at at my company as we're growing Invest in people who have the financial analytical capabilities to do really difficult work, right? Because real estate was only getting more complicated. And and the financials behind real estate transactions were only getting more complicated. And if you, if you if you hire a few extra people that you think you know, you might not need, you never know. You know, you're going to end up needing them. right? Because, you know, as you grow, you grow in, you know, I'd like to hire people ahead of, ahead of needing the roles because you need to have the infrastructure in place. And I also learned that the big companies aren't that much different than the small companies. And a lot of it is how people present themselves, you know, and the confidence that they have in their abilities to get something done.

Daniel Klein 01:04:32  And if you work hard and you have a vision, you know, companies change and evolve all the time, right? And I would hear these stories also about how JBG, they went from X number of employees down to 9 or 10 when they sold their whole portfolio the first time around. And then they grew back, they grew again. And so. this is not accepting the status quo. I think was it was a big was a big takeaway for me. And also recognizing that, as smart as the team was, there were there were times where. Our company solved problems in the partnership that weren't that complicated, just because we had different types of experiences than they had. And, never underestimate, who brings what to the table. especially in a partnership.

John Coe 01:05:28  That's cool. You learned a lot then? Yeah. So then corporately, how did you change your pivot, your strategy once that once you had that SSA deal underway and under, you know what? How did you look at the market differently than you had before? Because before you were building or looking at smaller shopping center deals, maybe 25 million was probably the largest deal you had imagined before that.

John Coe 01:05:55  Roughly, I don't know. So. And so now you're now you're at least your thought process is in a different place. So how did you take it from there? And what what did you know? What did this inspire you to think about, you know, going forward?

Daniel Klein 01:06:11  So I think 2012 was probably the real turning point. And that's the year that we got into multifamily. Yep. And we went from zero units in our pipeline to 750 that year. And we we stepped into three multifamily projects, throughout that calendar year that had been started by other people. And for whatever the reason, whether it was the capital markets issues, concern about financing, whatever it might be. we had the opportunity to step in, and, you know, we did the first two with Donovan, who have been a great longtime partners of ours, drew and Dean Donovan or close friends of mine. And we we've developed probably north of 1000 units together in 50, 50 joint ventures. And they do a lot of third party management for us as well.

Daniel Klein 01:07:03  And we stepped into two deals with them, one of which was, land development deal, where we were selling them land and they thought they were going to get, financed under a HUD. 221 D4 and HUD ended up saying, you know, for one reason or another, there was too much supply in that market. And so the land closing was being deferred. So I said to drew, I said, you know, why don't we just partner with you on it? Same concept. I'd never done multifamily before. I didn't have the money around. I had no idea what I was doing. But we had a relationship and we trust each other and we figured it out. So we did that deal, and we did a deal in Fells Point. And then after we had those two, And I realized that we didn't have the development capabilities in-house. We hired a guy named Matt Allen who had been running Boehler engineering office in Towson, Maryland. And Matt is still with us today is our director of development.

Daniel Klein 01:08:01  And, when that came in, said, all right, Matt, you have no preconceived notions that we do retail or multifamily. We just do real estate. So let's go. Let's go find some more real estate opportunities. And we end up doing a third multifamily deal that year as a pathway to get some diversification in our portfolio. So we weren't as reliant on just retail, knowing that it was a really tough time for retail. And, multifamily always, always had a perception of stability much greater than retail at that point in time. And so, we really pushed in that direction, and we continue to hire really good people as we diversified our portfolio.

John Coe 01:08:42  It was about that time that I brought an opportunity to you as well, the project in Pasadena, Maryland. So talk about that project a little bit.

Daniel Klein 01:08:53  And that was that was probably what, 20 2014.

John Coe 01:08:56  2013, 20 1413?

Daniel Klein 01:08:58  I think we probably closed it 2014. yeah. So that's where that's where we first met, although we may have first met on that opportunity in Beltsville that you that we spoke about but didn't come to.

John Coe 01:09:09  Actually that was after I think that was after that. And actually, I might have met you when you first started, when I had a meeting with Michael. Okay. And your office And we were talking about Edenton at the time. So you might have just started at that point, because I remember talking about that deal with Michael. That's when I was Mike.

Daniel Klein 01:09:30  Was Michael nice to you?

John Coe 01:09:32  I remember him being very sharp, very smart. Yes. He didn't stand up much. He just sat at his desk. I remember we stood. He stood up and introduced himself and we talked. But he was very smart. I can't remember what what. It was a financing. I think it was a financing. He was looking at debt on the project at the time. And we, you know, I presented my wares to him. Yeah, I may have been in partnership with Bill Alberti on that deal. Possibly. Okay. Time, because I know you. That's how you met him? Yeah, probably through Michael, but.

Daniel Klein 01:10:05  Yeah. So. So the Pasadena deal. We did the reserve at Stony Creek. was a good example of the types of deals that, we were getting involved in. one of the things I recognized also in 2012 and beyond was that there was going to be fallout for a long time from the, from the GFC and that, you know, just because things were falling apart in, you know, 0708 didn't meant that at all. You know, Humpty Dumpty got put back together in 2009, 2010.

John Coe 01:10:38  No.

Daniel Klein 01:10:39  And I recognized that we probably had five years of potential opportunities, but we had to be creative in our problem solving and creative and our approach to deals in the same way, when the capital markets were flying high in oh four, oh five, oh six, we couldn't compete with larger institutions. We still couldn't compete with larger institutions and trying to solve problems, you know, from zero nine through 14. So we had to really get creative in terms of approaching this. I think that was a good example.

Daniel Klein 01:11:11  We had to assume a HUD. 221 D4 loan. There were an immense amount of outstanding payables from the original developers. Yep. Wasn't even clear at times who was owed what or who was even in the partnership. And, a lot of I think there were a lot of people who couldn't spend the, the bandwidth or the brainpower to try to figure it out. And and we ultimately did. And it also had a phase two development opportunity that we like there. And we ultimately developed that phase two, through a HUD rehab loan. And it's been a good, solid performing multifamily asset for us since then.

John Coe 01:11:54  It's great. That's a market rate deal. Is that right? Right. Yeah.

Daniel Klein 01:11:58  Yeah. All everything we have, you know, our multifamily portfolio today we're up to 2800 units. And all of those are class A market rate.

John Coe 01:12:08  That's great. So let's, talk about, you know, strategic growth. I mean, it's one thing about product type, but what about, you know, geography and also the type of real estate.

John Coe 01:12:20  So for instance, some of your projects are developments, others are just straight acquisitions. Repositioning is is it a fair to say that everything you're looking at is either value add or opportunistic? Or do you look at core deals at all core core plus deals?

Daniel Klein 01:12:38  I think given our cost of capital as a company, core deals are very difficult for us to look at. Right. And we so we, we, you know, we might be able to dabble in core plus, depending on, on, on what the asset is. But generally value add or opportunistic is where we've had more, more success over time. and geographically, you know, we're now located in five states along the East Coast from new Jersey, south through North Carolina. I'd say probably probably half of our assets are outside of the state of Maryland now. you know, we have we have close to 20 assets in Virginia. you know, so we have more assets in Virginia now than we had total assets when I moved back to Baltimore in 2004.

Daniel Klein 01:13:28  and so we've also, you know, I think in terms of, of how we view our portfolio, you know, given our corporate structure is more of an open ended fund that kind of mimics a private REIT, having more strategic diversification both through asset class and geography. continues to be something that's significant for us and important as we look to the future. And I think we'll continue to expand, you know, along along the eastern seaboard, you know, as we see opportunities that make sense, that that fit in our capital structure.

John Coe 01:14:05  So, you know, what is your lens right now? I mean, is it different for each product type or you know, what do you how are you looking at new deals?

Daniel Klein 01:14:14  So I guess let me let me just give you the general scope of what our portfolio composition is today should help to understand, you know, again what we're going to the future. But to your gross asset value today we're probably approaching 1.5 billion, including cleaning projects that are under construction.

Daniel Klein 01:14:33  And that breakdown by gross asset value is roughly 50% class A multifamily, roughly 40% grocery anchored retail. And the other 10% is a blend of lead, industrial, flex, self-storage, some land holdings, and, you know, very little bit of office. and we have about 6,000,000ft² of, of space in total. and about 3.5 million of that is commercial. As we as we look ahead, like I mentioned, we had about 2800 Class-A units. We're trying to build our portfolio up to about 5000 Class-A units, in five years and get up to about 5,000,000ft², square feet of commercial space. And what we've done in terms of expanding geographically is, you know, as we look at as our portfolio has grown, assets that were once a sizable part of our portfolio become a lot smaller. So we've sold those off and done 1031 exchanges. And that's a lot of how we've gone into new geographies through through that strategy. okay. but we haven't said we're going into this geography to do multifamily but not retail.

Daniel Klein 01:15:46  We find that the uses can be complementary in areas that we're looking in, and it's helped us in terms of finding opportunities by being more flexible on the asset class as we're looking.

John Coe 01:15:58  So listening to what your portfolio mix is, you have different disciplines you need on the asset management side. So apartment assets are different than retail assets and managing and operating and strategic thinking, on a day to day basis and a long term basis. Yeah. So you do you have separate asset management teams for each asset type.

Daniel Klein 01:16:24  we don't so what what happens is on the commercial portfolio, on the, on the retail and flex portfolio, we generally properly manage that ourselves. Yep. On the self-storage and multifamily portfolios, we outsource that property management. So our asset management is all blended. I think when we get to a certain size, it probably makes sense to have a dedicated asset manager just for multifamily, dedicated, you know? No, you know, we have a we have a head of asset management now, a guy named Devin Gerhart, who actually, you know, once upon a time worked at JBG and got introduced to me through a mutual friend.

Daniel Klein 01:17:03  Right. Probably been with us for ten years now. and, you know, he does a great job of doing asset management across the entire portfolio. I think given that we have such high quality property managers on the multifamily side that we have close relationships with the asset management component. Hasn't been. Hasn't seemed to be as essential to have someone that's dedicated there. I think when we get to the size and scale, if we have 20 communities, we probably need someone who's dedicated.

John Coe 01:17:38  Interesting. Well, it also depends on the quality and the assets issues too, and also the capital markets, the way you've structured your debt and equity on each project and and whether you're going to hold or sell what your strategy is from holding standpoint. I'm gathering that you're in the accumulation stage and you're not in the merchant building type structure where you're selling properties frequently. But maybe you are, I don't know.

Daniel Klein 01:18:05  So, so, so our portfolio has close to 60 assets today, so we probably sell anywhere from 5 to 10% of the portfolio annually.

Daniel Klein 01:18:16  So that's selling more than you would think. But we want to have net growth on an annual basis. Or if we're selling a $10 million asset, we the the net transaction that's new that we're doing is probably a 25 to $50 million transaction. So so we still have, overall portfolio growth even when we're exiting out.

John Coe 01:18:40  So why sell anything?

Daniel Klein 01:18:44  That's the age old question, right? we still have, you know, from an asset management perspective, assets that are of a certain value or less than a certain value. Take up more resources than they do. Offer up benefits for us to own. under our holding company structure. you know, and our holding company equity is north of 400 million today. You know, if we have a $5 million asset, you know, the cash draw on that asset annually, you know, if if the if it's 50% leveraged and we have 2.5 million of equity. Yeah. Even if we're getting 8% cash on cash on that, you know, $200,000 of cash flow a year.

Daniel Klein 01:19:29  I think Klein Enterprises in 2004, that's a that's a number that's meaningful and significant. The way we're structured in 2024, I don't it doesn't necessarily move the needle enough. Right. So we have to think differently in terms of how we operate the portfolio today, again, tied into thinking about not just who we are in 2024, but who we'd like to be in 2029.

John Coe 01:19:54  Interesting. So let's pivot to some of your projects, if we can. Sure. I have a few listed here. the marketplace, it Fells Point. Talk about that one.

Daniel Klein 01:20:05  Yeah. every that one always receives a lot of attention because it's in the core of Fell's Point. The third block off the water. it's actually one that we finished now 9 or 10 years ago. I think back maybe early 2015. it's 160 apartments, over 30,000ft² of ground level retail. it's a, a ground.

John Coe 01:20:30  Up development.

Daniel Klein 01:20:31  It was. It was actually sort of a distressed deal that we came in with Doberman in in 20 summer of 2012.

Daniel Klein 01:20:39  we bought the we bought the note from a Baltimore bank. prior developer had assembled, you know, something like 48 individual properties from 30 property owners, and got stuck in the, in the GFC and we bought the debt and did a deed in lieu of foreclosure and bought the final remaining pieces and did a really cool redevelopment where we preserved the facades of these historic row homes in Baltimore City like a movie set, and built all new structure behind and did, low grade parking and did and did you know class A 21st century multifamily housing? that project could never, could not be built today. They actually made the entire district. they, Historic Preservation District, even in a different way, where I think we're four stories high and you can't go higher than three stories now. So we have some great, rooftop views. And I actually lived in that project for two years with my family early on. Yeah.

John Coe 01:21:42  Did you do you get historic tax credits on that one?

Daniel Klein 01:21:45  We had brownfields tax credits, historic tax credits.

Daniel Klein 01:21:49  There it.

John Coe 01:21:49  Is. Okay, so that was a creative deal.

Daniel Klein 01:21:53  That was a creative deal. Yep.

John Coe 01:21:56  Great. And it's operating well now.

Daniel Klein 01:21:58  yeah. Listen, we, the apartments are always, fully stabilized. The retail ebbs and flows just, you know, it's gone up and down with some, you know, urban retail and Covid had some problems. Yeah. And then, you know, crime in Baltimore City has posed some issues, periodically. But, you know, I think we're approaching 90% least on the retail side with a lot of interest. And, you know, and it's it was definitely a very memorable project to work on that. That gets a lot of attention.

John Coe 01:22:32  Next one on my list is Aura Apartments. Talk about that project.

Daniel Klein 01:22:36  Yeah, that's a that's a great project. That's the, that's a project in Largo, Maryland. that we actually bought from, from Peter Schwartz. almost shovel ready when we, when we bought it. a late in, late in 22.

Daniel Klein 01:22:54  and that is, you know, $125 million projects right at the Largo Metro station that we deliver. the first units actually later this year, a ton of activities going on there right now, 379 units. And we should be fully finished, next year. we had some Tiff financing with Prince George's County. you know, another another good example. I think of us being flexible in terms of working with the landowner. That's maybe a non-traditional seller. and there needs to be a comfort level on our ability to perform. Also respecting the vision that the seller has in terms of what they want to see get done on the project.

John Coe 01:23:36  Was this always zoned for apartments this site or was it different zoning?

Daniel Klein 01:23:41  no. No, I think I mean, he he secured the zoning for the apartments. when I say almost shovel ready, I mean, it really was, you know, probably 90% of the way along to being shovel ready, and we just had to come in and, and tie up some loose ends.

John Coe 01:23:56  How was the market there? I mean, it seems to me there are not a large amount of absorption of apartments in that neck of the woods. Or am I wrong?

Daniel Klein 01:24:06  I think I think it depends where you are. Over there. Okay. you know, I think, as there are a lot of opportunities we've had in Prince George's County to do, ground up development that we passed on, I think in this little, nucleus. You're right next to the brand new hospital that got developed. you know, the University of Maryland Capital Region Hospital. You're right near sort of the county seat, and you're right near the, the metro stop. and without a lot of other vacant land parcels in that core that can be developed. And there are a lot of comps that supported our development there that makes us makes us comfortable.

John Coe 01:24:43  That's great. So you'll be in lease up next year?

Daniel Klein 01:24:47  we'll start to be leased up later this year.

John Coe 01:24:49  This year? Yeah. Good.

Daniel Klein 01:24:51  Well, we'll finish the project 100% next year.

John Coe 01:24:53  Do you? And is that with Dobbin again? I just had a partnership with them. Or is that on your own?

Daniel Klein 01:24:58  yeah. We brought Dobbin in for a for a slug there on the venture.

John Coe 01:25:03  And are they managing it? Leasing it for you?

Daniel Klein 01:25:05  They will. They will be. Yep.

John Coe 01:25:07  Okay. And then next one I have is extra space storage.

Daniel Klein 01:25:12  So what's interesting is, is you know we got into self storage a few years ago mostly through a strategic venture with Morningstar out of North Carolina. And, okay. the president and Morningstar, Dave Benson is a close friend of mine, actually, really through a business organization. Ypo. Sure. And, and they've been wanting to come in the Mid-Atlantic region for a while, and we're having trouble sourcing deals. We like the the opportunity to go and do an additional asset class. So we we've done four self-storage deals with them under the Morningstar flag. We've done one deal under extra space because that's a joint venture we did with Greenberg Gibbons, where they knew we had some self storage in our portfolio and they had an opportunity and they, hadn't done any self storage before.

Daniel Klein 01:26:01  We came in on a 5050 venture with them on one deal in Reisterstown, Maryland, and that's, self-storage on the whole, has been a good asset class for us. I don't know how deep we're going into it, because we sort of went into the Morningstar venture knowing that their fund has a shelf life, and whenever they exit the fund, we'll exit our portfolio with them. But it's been a good way to diversify our portfolio with some with an additional asset class.

John Coe 01:26:25  Have those deals been, ground up or they've been part of, let's just say retrofitting other uses.

Daniel Klein 01:26:33  We we did three GroundUp facilities, and we bought and we bought one for ground up and we bought one.

John Coe 01:26:39  Interesting. Because I've seen often conversions from retail into self-storage. I've seen office conversions into self-storage. Yeah. And even industrial. So all three of those product types seem to tap in there.

Daniel Klein 01:26:54  And we and we've looked at we've looked at some of those. Yeah. John can I get a break for just one minute? Sure.

Daniel Klein 01:27:00  Okay. Thank you.

John Coe 01:27:06  So the other project I was curious about is the Waldorf townhouse house deal. Talk about that one also. That's a little. That's a new product type for you, isn't it?

Daniel Klein 01:27:15  Yeah, it's a it's a new product type. And it's I think it's a good example of us being willing to sort of dip our toes into an asset class without fully committing. And so it's a 74 unit, build to rent community in Waldorf, where we bought the the lots from Dream Finders homes. And they actually then constructed the homes for us. And, we own them and operate them and rent them out. you know, when we went into it, a summer of 22, a lot more exposure was coming on, build to rent. And so we, we sort of wanted to see if it was something that we, we could expand our, our rental housing portfolio through. We haven't done any other transactions since, you know, in the Mid-Atlantic region. I think it's hard to make the numbers work because the land costs are so high in the housing costs are so high.

Daniel Klein 01:28:04  and. You know, we're we're up and running. They're we're released up. We're stabilized. But I don't think we'll get the numbers there that we thought we would get just based on the shifting capital markets. And so, I think we're happy we didn't dive in completely because we had some opportunities to. But we felt like we wanted to sort of talk about exercising some patience earlier, sort of see how the first one performed. Before we went into deep into the asset class.

John Coe 01:28:35  Well, since it's a townhouse, I assume I'm assuming you have a condo regime there to some extent, so you could convert if you wanted to, if the market was appropriate for that, right?

Daniel Klein 01:28:47  Yeah. We could, you know, Dream Finders is still building and selling houses there. So we don't want to be competing with we don't want to be competing with them. But at some point down the road, that could be an option. And the housing values there are very strong. But, you know, there's absolutely a market for institutional buyers to to buy this, to buy this portfolio, this, this project.

Daniel Klein 01:29:08  You know, once we've been up and running and operating for a while.

John Coe 01:29:14  You've been active in acquiring retail, industrial and storage properties, both one off and in portfolios. The Cedar Realty acquisition in retail is an example of a portfolio. Is there a theme for your acquisition strategy, or are you looking at one deal at a time and whether it achieves certain yields and quality metrics?

Daniel Klein 01:29:38  And this almost mimics a conversation we had on our weekly management call this morning.

John Coe 01:29:44  There here we go. You know.

Daniel Klein 01:29:47  It would be amazing if acquiring portfolios, was more capital efficient because you're getting transactions by buying in bulk, but we tend to see the opposite takes place. you know, the cap rates seem to be more compressed on portfolio sales than they are on the one off transactions. And so when we look at the portfolios we underwrite, we try to stay competitive, but we don't have the lowest cost of capital of all the institutional investors in the world. And frequently, you know, the cap rates that we're seeing the portfolios potentially trade at are, you know, lower than we carry retail or multifamily or whatever the asset class is on our own books.

Daniel Klein 01:30:39  So it's hard for us to justify the portfolio purchases even when we love to write. And so I think it has to be situational from an energy perspective, to be able to pick up a number of assets at one time, I think would be preferred. But the reality is, you know, we have a great deal team that works really hard to source opportunities for us, you know, internally. And, you know, we we can find the assets on an individual basis that have better stories that allow us to take advantage of the opportunities better than the portfolios. And the portfolios tend to be institutionally owned. well-managed. Well-run. There might be some opportunities here and there to add some, add some value, but not as great as the one off transactions that we see.

John Coe 01:31:29  How did you win the Cedar deal then?

Daniel Klein 01:31:31  So that that again ties into relationships. you know, our friends tied up the, the entire portfolio and for various reasons, you know, it was a very large transaction. I think there's a comfort level.

Daniel Klein 01:31:47  If they could, parcel off a portion of it to reduce capital outlays, maybe, there may have been some, properties where there are some radius restrictions based on other assets they owned and individual circumstances. And, you know, I guess, we got this, that that call time flies now, but I guess probably summer 20. number 22 is when we closed it. So, our friends knew that we had a lot of dry powder from the Almanac transaction and that we could, handle the sensitivity of the transaction. Well, and an off market sort of way. And, we had the ability to source both debt financing and have the equity to put into a transaction like that. And, you know, it was $135 million transaction 130. And so there are that many groups that can that can move quickly at that size. And fortunately, we were one of them. So we got the phone call.

John Coe 01:32:44  So back up now and explain the deal and how it came to you in the first place. Okay.

Daniel Klein 01:32:50  On on Cedar.

John Coe 01:32:51  Yes.

Daniel Klein 01:32:53  Yeah. So, DRA and and caper centers. you know, I was working on a deal to privatize, Cedar and they.

John Coe 01:33:05  And who is Cedar again?

Daniel Klein 01:33:07  Cedar is a cedar was a my apologies. I just assume everyone that listens is so well versed and know what goes on.

John Coe 01:33:14  Back up. Back up a little bit, please.

Daniel Klein 01:33:16  So my apologies. So, Cedar was a, was a public REIT that focused on owning grocery anchored shopping centers along the East Coast of the United States. and, you know, they had been on the market for some period of time, and some friends of ours, you know, were awarded the, the deal to privatize Cedar in a very large transaction, you know, and, I think in order for them to manage their own capital in terms of closing on a portfolio that was significantly larger than the piece that we took down, they parse it off some portions of the portfolio. and, we acquired nine centers from Pennsylvania, south through Virginia that were really in our backyard geographically in areas that we understood very well.

Daniel Klein 01:34:12  and, we closed those centers simultaneous to the, their closing on the broader on the broader portfolio, for Cedar to be privatized. And that was a complicated transaction because actually, the, the public shell and number of assets went to Wheeler, which is, another, which is an existing public REIT that's headquartered in Virginia Beach. Right.

John Coe 01:34:37  So you have nine centers that you keep all nine, or did you spend any of those off during that process?

Daniel Klein 01:34:44  Nope. we kept all nine. and we wrap them into our broader. It was about 770,000ft² that we acquired, all all in one day, and we just wrap that into what is our now 2.5 million square feet, grocery anchored retail portfolio.

John Coe 01:35:04  So did you have to beef up your staff to manage that or did you.

Daniel Klein 01:35:09  Yeah. Yeah. We've we've you know, we, we since that acquisition, we've hired net new positions in leasing, property management and accounting. And for for context, John, I sort of mentioned when I joined the company in 2004, maybe there were, you know, 5 or 6 nonaligned family members, in the company.

Daniel Klein 01:35:37  today we're approaching 30 people between our offices, in new Jersey and in Baltimore. And, you know, we have. Consistent, steady sort of year over year growth. we're pretty strategic about about hiring where we where we need spots filled. But we've had, you know, we've had we we've generally had net new growth every year in the past, the past ten years.

John Coe 01:36:04  So do you have a property management office in Virginia since you said most of your assets or a lot of your assets are down there?

Daniel Klein 01:36:10  No, no, we haven't done that yet. We've we've discussed it. We've discussed having someone who's dedicated and down there. But for now, we've just, been deliberate with our property management and leasing staff about about when they're making trips there. And we have vendors that are in Virginia that can that can respond on short notice for things that pop up. But we've been, you know, people have just putting them, then putting the miles on.

John Coe 01:36:33  So, you have a large portfolio. Is there any, any other projects before I get into your financing structure? talk any other projects that you want to talk about that are of interest? You think the listers would like to hear learn about?

Daniel Klein 01:36:48  Yeah.

Daniel Klein 01:36:49  So we just had the. We just had a big groundbreaking on a, you know, 100 plus million dollar project on the multifamily side in, in new Jersey, in Middlesex County. 272 unit project. we just closed financing on that project last month with, Northwestern Mutual. and it was our second loan with them. They also financed our, aura deal. Largo.

John Coe 01:37:13  So construction? Permanent deal?

Daniel Klein 01:37:15  Yep. Construction firm. Deal. they've been they've been they've been a great partner. on the on these two projects with us. That's great. And this mitigation project, which the project is called the Kempson I think is a good example of, you know, we keep making these references to pebbles and the ripples that take place. But this is the deal that came to us through a shareholder and, in client enterprises, who owned a piece of land and was having trouble. it was an old industrial piece of land that had environmental contamination and was struggling figuring out what to do with it. And as a favor, we just said, yeah, you know, we'll take a look at it.

Daniel Klein 01:37:56  Not thinking it would be a development opportunity for us, really just to help out a friend, just help give them some ideas. We drove past and said, you know this, this would be a great multifamily site. So we worked, collaboratively with the town of Metuchen on getting approvals for a multifamily project that they didn't want to approve in the first place, but they got comfortable with us based on our track record and reputation and other projects that they saw that we did and speaking to other municipalities. And this ended up being we had to secure a pilot, we had to get a redevelopment agreement done. We had to there was probably $10 million of environmental remediation. Ooh. we're helping to construct a 30 plus acre park for the entire. For the county on the parcel next door. So, you know, people frequently see developments once they're finished, and they look beautiful, and they're all said and done. But there's a lot of work and a lot of collaboration that goes on between a wide variety of stakeholders.

Daniel Klein 01:38:54  And this is one that, when we look back on it, once we deliver it, you know, late next year or early 2026 that, there are a lot of war stories that went on in order to take it from the vision to getting a project to come to fruition and executing on it.

John Coe 01:39:11  Was this a groundwater issue as far as brownfield or what was the issue there?

Daniel Klein 01:39:16  There were all types of issues. It was really it was no, it was a 1960s industrial, industrial. Site.

John Coe 01:39:23  Okay. All right. So this is an industrial area of new Jersey then? Pretty much.

Daniel Klein 01:39:29  No, no, it's a Metaxas is a great town. There's there's an old, there's a greenway trail adjacent to a site where half mile away from, beautiful Whole Foods and, a path train, Long Island, a new Jersey Path train that goes, that goes into Manhattan City. Yeah, yeah. So it's a it's a it's a it's a great town, without a lot of, developable land and, and the town that really values what goes on there.

Daniel Klein 01:39:53  So it really was a collaborative effort with. That's great. Yeah.

John Coe 01:39:58  You got a pilot too, which is interesting.

Daniel Klein 01:40:01  Yeah. I think in new Jersey, for the most part, it's very difficult to get multifamily projects up and running. based on the tax, the taxes up here without getting a pilot done.

John Coe 01:40:13  Interesting. Always away. Yep. So now I'm going to pivot to, what's probably turbocharge your growth, I'm guessing, but I'm just going to let you tell the story about Almanac Realty investors. yeah. and as we said, I think before I turned on the mic, I had experience. when I was in Lake Mason back in the late in the 1990s into the early 2000, when they, invested and they were known as Rothschild, real estate at that point. And they had a fund called Five Arrows, which was a fund that invested in companies, at the entity level, that invested capital, and basically became part of the board of directors and really restructured companies in a way that made them look like an institutional, owned company, institutionally owned company, operating company, or like a like an RA.

John Coe 01:41:19  It would be structured if they were public and so more like a private REIT structure. And so I'm going to guess that there are $200 million investment in your firm that they were looking for a little bit more organizational structure than you had at that time. So talk about how you got to the deal and then how that changed your company and then your thought process from there. Sure.

Daniel Klein 01:41:44  so just a quick background. a pivotal a pivotal event in our company transformation that set the stage for this was, January is we did a roll up across all of our single purpose entities throughout 2017 into a consolidated holding company, which was effective as of January 1st, 2018.

John Coe 01:42:08  Why did you do that?

Daniel Klein 01:42:10  And we did that because, as you know, we grew from a dozen assets to 35 assets. the fragmentation of the of the partnerships, the, differing objectives of individual partners and deals, the the lack of ability to sort of think holistically about our portfolio was this, it was almost like wearing handcuffs on a daily basis.

Daniel Klein 01:42:36  Right? I would we will leverage our relationships to refinance five assets at one time. And let's say market rates were 4%, but we would get 3.75% because of the efficiencies and because of the trust and belief that the lender had in client enterprises as a sponsor. And invariably, someone in one of the five partnerships would, would, would, you know, think something nefarious was going on and say, well, you know, you're only refinancing because you're doing these other properties too? I would say, no, it's this is we're getting below market terms. We're helping out the partnership. And we had a lot of situations like that of when people aren't aligned across the whole portfolio and everyone's looking at their own individual interests. it's almost like they, people could have bifocals on and they're not thinking about the big picture. So we formed this holding company. And, you know, at inception, we had about $150 million of equity value based on partnership interests that were contributed in. the goal had been 100.

Daniel Klein 01:43:39  And we had a lot of partners who contributed interest in because of their trust and belief in us, which was very rewarding. And, it was great to have this cohesive vehicle. But one of the problems we had for the first few years of operation was we had this holding company. We had a lot of equity value, but we didn't have cash, right? We distribute out dividends quarterly and we do a new transaction, and the holding company could put in some capital, but not all of it, and we'd still have to go raise the rest of the capital on a sidecar. We kept saying, and at this point in time, we had an entirely new management team, which I should also mention because it sort of ties into everything. my late Uncle Michael retired at the end of 2016. I bought him out of our operating company, but he still kept his ownership in the real estate partnerships, and once I did that, I was able to really build up an institutional quality management team along alongside of me that could help take us to the next level.

Daniel Klein 01:44:47  and brought in our chief investment officer, Sean Garland, late, late in 2016. you know, he had been the, the head trader at a $2 billion hedge fund in Baltimore. we had actually met, ironically enough. You know, I was on a flight with my wife and kids and met his mother in law sitting in the rope with us, and she said, oh, my. My daughter and son in law moved to Baltimore. And I said, oh, you know, again, these ripples in the pond, right. I said, well, if they ever need anything, here's my number. I'm happy to help. you know, I, you know, I have a real estate company. I'm not a hedge fund space, but, you know, if you ever need anything, you know, we're here, we, you know, and next thing you know, the, the hedge fund decided to shut down to become a family office, and he called me and said, do you want to get together and talk? I'm trying to figure out what I'm doing next.

Daniel Klein 01:45:39  And so a fortuitous get together ended up him coming in as our CIO and been a great partner for eight years now. not long after that, we brought in our CFO, Erin Leavenworth, who had been the CFO at the hedge fund as well. his kids and my kids went to the same school together. So I, you know, so we had some familiarity with each other. And he sort of came in on a temporary consulting, gig for six months while we were going through this roll up. And he's now been our CFO since 2017 and a great partner as well. And we also brought in, probably early 17 or late 16, Neil Schecter as our general counsel. And you probably crossed paths with Neil at some point over the years. So, you know, as we evolved and we transitioned from being a family business, we were able to really become more of an institutional quality business, with high quality people who could share the vision that I had for our long term success. And I give that background in terms of, you know, this were the team that was sort of thinking about what to do, you know, as the holding company evolved.

Daniel Klein 01:46:47  and, you know, as luck would have it, we kicked off a small equity raising to the holding company late 2019, with initial close, with the initial closing to take place March 30th, 2020. Right. And so, Covid hit, you know, right around March 12th as we after we kick off this equity raise. Yeah, we're raising we're raising capital into an existing portfolio of assets. And immediately we had a team said we have to cancel this capital raise because everything's valued as of 1231 19 and we have no idea what the world is going to look like in a month or two months or three months. So we, we we pause the capital raise. We even sent money back to some people who had who had, who had invested and said, look, we have to get through Covid and like, you know, if you remember March of 2020, like, you know, no one was paying rent, we had no idea what was going on. We said, we need to at least understand what's going on in the world before we're comfortable taking capital.

Daniel Klein 01:47:54  you know, from our from our network. So we paused it. We talked about maybe raising an opportunity fund, you know, to take advantage of opportunities where the whole Co would be the general partner and contribute some capital. And I'm sitting there in my house with, you know, you know, with my three kids working from home every day saying, we raise $100 million fund, I'm going to have to be on the road 200 days next year. Yeah. And is that what we want to do? And does that make sense? And, you know, what's the process we're going to have to go through. And we had been in touch with Almanack a few times after we formed the Holding Company, because they had heard about us, and it just wasn't the right time. And, we sort of checked in with them summer of 2020. And, you know, they have they always had a great reputation. And, I know a lot of people who have partnered with them over the years, and we checked in more just to see what their worldview was, you know, 4 or 5 months into Covid, knowing they just raised a big fund, saying, you know, how are you guys thinking about investing in companies today? And they said some more long term investors and we're partnering with the companies, you know.

Daniel Klein 01:49:07  You know, we've we've been through everything else. We're going to get through Covid. You know it takes nine months to get a deal done anyway. Covid could be gone by the time we get a deal done with the company. And it was the first institutional group we spoke to that took a much more pragmatic, collaborative, friendly approach to to making investment as opposed to some other firms that we spoke to that it just seemed like they wanted to opportunistically discount the value of what we've created in our portfolio. And we didn't need money, we weren't in distress. And so we could pick the right partner. And the more we engage with Almanac, the more comfortable we became. And we ultimately closed. what was a what was then a $200 million commitment into client enterprises? As of, we closed that May 1st, 2021. And I'm happy to say that it's been such a successful relationship, John, that we actually just we just closed an additional $50 million commitment, Monday of last week.

John Coe 01:50:09  Congratulations.

Daniel Klein 01:50:11  Thank you.

Daniel Klein 01:50:11  And so I think it speaks to sort of the relationship that we collectively have, that, number one, that they would want to continue to support us. Number two, that that we be comfortable, you know, having an even greater commitment from them as a partner. And it's been a wonderful relationship. you know, they trust us.

John Coe 01:50:34  Would you mind talking about the deal structure there a little bit? And also curious during your due diligence process with them? Did you talk to Scott Dorsey over at Merritt?

Daniel Klein 01:50:45  I will say, I spoke to a probably a half dozen different firms that were either current portfolio companies or prior portfolio companies, and that diligence that I, that that I did, is what gave me the greatest level of comfort as to what types of partners that they would be. and, you know, I think they approached their investments with firms as they want to invest in high quality teams that can just continue to execute on the strategy they were already executing on, but with more infrastructure and capital support.

Daniel Klein 01:51:19  So it's a win win for everybody. I don't think I can get into the nuances of the deal structure. I think there's probably some limitations on that out of respect for how they, you know, maybe approach their deals with other portfolio companies and things like that. But I'll say, you know, as you know, it's a hybrid of debt and equity, you know, hybrid of debt and preferred equity. and I think every company, it's a different structure based on what that company needs or desires. but I'll say frequently, what they do when they come into companies is get the companies to form a consolidated holding company like we already had. So we were able to save a lot of time and effort because we already had the framework in place. Right. And then it was just getting into the details of, of of the investment and. Their investment is like a typical private equity investment in, in a non-real estate asset class in which they are, they own a part of our business. And everything that we do that, that we still have to explain to partners sometimes or lenders or sellers that, you know, if Clint Enterprises makes a $20 million commitment to a project no one's ever going to see.

Daniel Klein 01:52:36  Almanac. Because Almanac is an investor. Inclined enterprises, right? Right. The same way you have private equity transactions in software businesses or other asset classes. Well, in.

John Coe 01:52:46  Common stock, I guess I'm trying to figure out the corporate structure. Is it a common stock investment? Is it a, a preferred equity structures?

Daniel Klein 01:52:55  There's a there's a component that's preferred equity. And there's a component. The debt component has warrants that converts the common stock warrants.

John Coe 01:53:02  Okay. Yep. All right. And I'm not a a wizard in finance, but I'm just trying to explain the capital structure a little bit, that's all.

Daniel Klein 01:53:12  And and what happened was we still operate as an LLC. you know, we have, you know, we have some structuring rules that we abide by from a tax perspective and that we follow, that we are already equipped to handle. I mean, we had to beef up our accounting staff for reporting and things like that, but I don't I wouldn't say seismic change because we were already doing institutional quality reporting.

Daniel Klein 01:53:34  and we adopted, you know, a synthetic share structure, which I think has been really good for our company From a checks and balances perspective, because, you know, before we just did year end valuations and now we do them quarterly. So we have an Nav so we can track our our stock price on a quarterly basis. And we. Yep. And our entire team, you know, we don't have individual promotes on individual partnerships. We have a stock price for the entire company that is the benchmark of which.

John Coe 01:54:11  So it's like a private private REIT structure basically. Yeah.

Daniel Klein 01:54:14  It mimics I like to say it mimics a private. Right. We're not we don't really operate like a private REIT, but it's the easiest way to explain it is it mimics a private REIT and and our team gets compensated based on the stock performance. And so everyone's incentivized as a team and as a company to make sure all 57 assets are performing to the best of their ability. Right. And a big thing for me as a leader is having alignment of interests with our team and having people that who are working together, who aren't competing with each other, but instead are trying to lift each other up.

Daniel Klein 01:54:58  And I think that I've seen companies where everyone's competing with each other and it's unhealthy. And it's not how I live and how I operate, and it's not environment I want to see. but seeing people work together as a team, knowing that everyone has, you know, the same end goal and the same objective. I think, gives me a lot of peace and comfort and should give our external shareholders beyond almanac, of which we have over 150. peace and comfort as well.

John Coe 01:55:29  So. The relationship with Almanack is a partnership, but it's also, almost as if they're just kind of a capital provider to you, when you need it to help with situations that, you know, traditional debt equity just can't provide.

Daniel Klein 01:55:51  Well, no, they are the equity. Right. So there's a commitment to our company. Right. And so we take the capital that's committed to our company, and we use a portion of that capital as the equity on new transactions.

John Coe 01:56:03  Got it. Yeah. So that's you're they're part of your sponsorship.

Daniel Klein 01:56:07  Yeah. Yeah.

John Coe 01:56:08  Correct, correct. Got it. So you will find large deals. You might do a joint venture with an institutional investor potentially. And but they're just part of the spark. They're just part of your GP interest in the deal.

Daniel Klein 01:56:20  In essence yeah they're a part of everything. Right. It's you know GP NLP because we haven't really been doing the GP LP deals. We've just been investing capital from our holding company. Yeah, I'm just saying.

John Coe 01:56:34  Yeah, yeah. Outside equity. Yeah. They're in your position with just side by side. That's what I'm trying to make sure that people understand. Yes. Okay. And so when that happened, what did that do for you? Yeah. With regard to looking at deals and and, you know, you were able to take on much larger deals. I mean, what what did that do? What what lens did that open up for you to to have that money there?

Daniel Klein 01:57:02  So so there's always the fear of the unknown. And I think there was a lot of fear of the unknown of us bringing in a private equity partner into the company.

Daniel Klein 01:57:11  I can say emphatically that the association with Almanac and their, public commitment to our firm gave a level of confirmatory diligence to property sellers, to lenders, to people across the ecosystem that has enabled us to vastly accelerate our pace and rate of growth. and in a way that we couldn't have measured when we were evaluating doing it. some examples. You know, we had a, we had a sizable line of credit already for the holding company. We had a $30 million line of credit. The day we close the Almanac transaction, we expanded that to $50 million with the same institution. Right. Because they knew there was the almanac commitment there. we, were able to do some larger refinancings, with some, you know, but some what now retrospect, were some very good long term fixed rate, rates, you know, in our portfolio, tied in with just having conversations about what we were doing with the Almanac capital. Right. And just, you know, having some conversations that wouldn't have come up otherwise.

Daniel Klein 01:58:29  The Cedar transaction is a great example. you know, you know, the people who reached out to us there knew that we had $50 million of dry powder and could close in 30 days if necessary. Right. So, so much of real estate, given how capital intensive the business is, is providing credibility and reliability and surety of performance and close. Absolutely. And. 15 years ago, ten years ago, I'd have to grind my way through it, through perseverance and determination. Whereas now the people that we deal with just know, right. And there's a comfort level that if we're saying that we have the ability to execute on a transaction. People know that we will write, and there doesn't have to be that doubt. so it's been it's been an amazing partnership. You know, my my only wish. And I say that to I say this Dominique also is is I wish that their capital was long real true long term capital as opposed to having a finite, having a finite lifespan. You know, they're not short term investors, but as you know, real estate, long term and real estate could be 20 years, not 7 to 10.

Daniel Klein 01:59:51  Right. So we're we're already, you know, before we, you know, we're fully deployed on the first 200 that the additional 50 will be deployed within the next 12 months. And then at some point in the next 3 to 5 years, we have to figure out, you know, what? What a recapitalisation, of Almanack looks like. And fortunately, we have time. And it's a great relationship. We don't have to worry about it, but it's something that we have to focus on and think about for the future.

John Coe 02:00:20  So talk about the management. You mentioned some team, your team members. I assume that Almanack, based on what I've understood about them, they put somebody on a board of directors, typically of an investment that they're in. Do you now have a board of directors structure like a like a public company does?

Daniel Klein 02:00:39  Yeah, we have we have a, we have a board of governors that has has five of us on it. It's three of us from Clint Enterprises, myself, Sean Garland, who I mentioned before, our chief investment officer, and Aaron Levin, our chief financial officer.

Daniel Klein 02:00:55  And then Almanack has two, has two seats on the board. I'd say it's equal voting even though the numbers are skewed. and, I think, you know, we love we love the governance structure. you know, we're audited, annually now. some firms don't want to be audited. I like being audited. You know, again, it's another it's another verification of how we operate our business that, you know, that we're audited annually. no. Our accounting team probably doesn't love the whole process. But, you know, again, it's part of that, confirmatory diligence as to what type of firm we aspire to be and having checks and balances in place. By and large or good. And there's a reason they exist. you know, we have, you know, quarterly board meetings. We have quarterly asset management meetings. We have a pipeline call with Almanac, every other week to go over the deals in our pipeline and what we're looking at. But, you know, we have an investment committee, so we put memos together when we're doing transactions, we have investment committee votes.

Daniel Klein 02:02:02  All of these things, by and large, I think are good. And I think they're necessary as firms evolve from, you know, small entrepreneurial family businesses to more institutional quality firms. And there's a reason, you know, these processes exist, even if, you know, some of them might be hard for me to accept or adapt to. But I think in life, when you know something, there's a reason for doing something. It's beneficial. At the end.

John Coe 02:02:34  This is pike alloy in one of the two board members that's on your.

Daniel Klein 02:02:37  Yep. Pike. Pike is on our board. And then, woman named Madeline Wick and and, and having Pike on a board on the board is phenomenal. He's, sort of the elder statesman at Almanac. he's he's, you know, he he was probably the most tenured partner at Almanac and and his wisdom and experience in terms of seeing a wide variety of things across a wide variety of cycles has been invaluable. And, Madeleine is, more of a contemporary of, of myself.

Daniel Klein 02:03:09  And, and she's a phenomenal board member and partner as well. you know, it's just it's a very caring, thoughtful relationship. and a lot of people say, well, why Almanack over this other private equity firm? I think the reality is, it's not one or the other. It's we would have only partnered with a firm that sort of, ideologically, like, matched up with who we are and who we'd like to be, knowing how, closely you, you know, we would we work together, and we will work together for a long time. Having really good people on the other side of the table that will ultimately be on our side of the table is very important for us as part of the process.

John Coe 02:03:56  Well, please, say hello to Pike for me and share this episode with him, too, if you would. I definitely, probably enjoy this. So, Sustainability. sustainability. Sustainability appears to be a little bit of a focus of your firm, I assume. Talk about your commitment to it and other aspects of ESG in your firm.

John Coe 02:04:19  Sure.

Daniel Klein 02:04:21  It's funny, I had this conversation with somebody the other day. We've probably done brownfields remediation at least north of ten projects by now I can think of. and, you know, that's part and parcel of maybe the, the geography in which we develop or we look for opportunities when you're along the East Coast and it's, you know, mature market. There's not a lot of, of like, you know, land that hasn't been touched before. But it also, I think, is a testament to our ability to realize that you can solve problems and clean things up and, and create a brighter future. you know, we, you know, we have some involvement. I'm on the board of a solar installer, you know, as well. And so, you know, we, you know, we've been we're very focused on alternative forms of energy and way, you know, on how to get solar on our properties. and I think that anyone who's developing the world today, first off, if you're developing, you're already going to be focused on sustainability in some way, shape or form, because fortunately, the standards from a political perspective have have become more stringent.

Daniel Klein 02:05:34  And, you know, even just anything that you're doing is going to be better from a net new perspective than it was ten years ago or 20 years ago or 30 years ago. That's that's the that's the first off. But second is it's not that hard to push a little bit to hit certain levels of, of sustainability and projects, while still also making economic sense. Right. I think just a lot of people don't take the time to look into it, but I think any intelligent developer should take the time to look at ways that you can be more sustainable in terms of your projects.

John Coe 02:06:12  And what about ESG and other aspects other than just sustainability? Yeah.

Daniel Klein 02:06:19  And what what components of ESG?

John Coe 02:06:22  Let's talk about, you know, the social and the governance side governance. You. We talked a little about about governance already. So maybe on the social side. Yeah.

Daniel Klein 02:06:32  So on on the social side, I think this one's always a little bit tricky when you're not, a very large company. Right.

Daniel Klein 02:06:42  You know, I found, if you're a 100 person company and you're hiring ten people in a year, I think there's certain aspects of the of the social side that that are a lot easier to achieve than when you're 27 or 28 people and you're hiring two people, right. and I've had these conversations, you know, that usually conferences and things like that. you know, we are very open minded in terms of, you know, who we, who we hire and, and, you know, we push for diversity in candidates, but, you know, across the spectrum, at the end of the day, we hire the best people that come in and and apply for jobs with our firm and hope that they're best for the culture and help lift us up, help lift us up as we grow going forward.

John Coe 02:07:37  That's great. So since this podcast is aimed at young real estate professionals, please offer your thoughts on where you'd be focused today if you renewed the business in both investment and the development businesses.

John Coe 02:07:50  What product types, geographies or niches would you be looking at today? If you're new in the business?

Daniel Klein 02:08:00  You know this one's a hard one to answer. because I think that anyone who, specializes or focuses focuses on being the best at whatever they do can be successful. I'd say my biggest thing I ask anyone who's coming into business today is to really think about AI, and I'm amazed that this is the first time the AI has come up in an hour and a half discussion or longer now. but think about, number one, how you're training yourself to utilize AI in your business. And, you know, but also what about your role could be replaced by AI? Ten years down the road, right? Not tomorrow, but down the road. And what skills are you developing or working on to make sure that you can be a you can be a contributor, you know, wherever you end up and that your skill set doesn't become obsolete. Right. And I also tell people not to worry so much.

Daniel Klein 02:08:58  I think this next generation, this is how I know I'm getting older and you know, I'm only 43, but I've I noticed things a lot more now in terms of I'm not I was always the youngest person in the room and I'm absolutely not anymore. the next generation seems a lot more impatient about, about achieving success by and large, and has in a lot of conversations I have with people who were in college or just coming out of college. It seems like there's just, you know, because it's so easy to see other people's successes in the world today. And success can be glamorized, you know, through social media and things like that, that people seem less willing to rent it out in the early part of their career to try to get to that pinnacle of achievement later on down the road. and I tell everyone, don't focus on your salary or your title or anything for the first five years of your career. Go somewhere where you can get as much exposure as you can to interesting things in business, with interesting people that can help set the framework for what your future career will be.

John Coe 02:10:09  Well, to me, the what? The big word is learn, learn, learn learn.

Daniel Klein 02:10:17  Absolutely.

John Coe 02:10:18  Watch as you can, as you know, as broadly and as diversely as you can. But that's you know, that's what I would advise at least. Yeah. So what what are your biggest wins, losses and surprises in your career, Daniel?

Daniel Klein 02:10:37  Biggest wins?

John Coe 02:10:39  Yeah.

Daniel Klein 02:10:41  I'd say us winning that Social Security project.

John Coe 02:10:44  Yeah.

Daniel Klein 02:10:44  I'll bet I'd say, forming or holding company. Sure. And then then ultimately actually closing that Almanac investment.

John Coe 02:10:57  That's great.

Daniel Klein 02:10:58  Biggest losses? Oh. Fortunately, I can only really think of one bad deal that we ever did was a, apartment building in Baltimore City called the Lenoir that we bought. We were the third owner, and we recapped a friend who had recapped the original building converter. And you know, my general philosophy at that point in time was we got into a building at $18 million under preferred equity transaction that had been converted for 25 and things, and it was after Freddie Gray in Baltimore.

Daniel Klein 02:11:38  And there's really only one way to go. And then, you know, Covid hit and it was in the CBD and when rents dropped and yeah, we ultimately got out and got our money out. But it was a it was a painful process. It was a good lesson on, you know, if you're catching a falling knife, it doesn't mean you want to be catching it. No. and so, you know, but other than that, we haven't had a lot of losses, fortunately. Great. and the surprises are, you know, I think we have surprises every day. And, you know, and and I'm honestly, I'm surprised that I'm 20 years into, a career. with what was our family business. you know, because there were big stretches of time where I didn't know if I would stay. I don't talk about it a lot, but but there was a there was a point in time in summer 2016 where my late uncle and I, had such different worldviews that I was ready to leave the company and.

Daniel Klein 02:12:48  Yeah. Yeah, and I had spoken to my wife about it. You know, I'm married with four kids, married for 15 years now. And we had a, a meeting that I knew I was walking into. Well, one of two things were going to happen. I was either going to stay and continue, or I was going to leave. And and fortunately, you know. The meeting worked out in a better way than it could have. And I'm still here today. But, you know, a lot of things can happen. And I think, you know, you have to have a lot of luck in your career. Yes. you know, hard work. Absolutely. But a lot of things, are based on luck. And I'm a big believer in karma and how you treat people. And that's great that if you do good things, good things will come in return.

John Coe 02:13:36  You're an active member of Ypo Young Presidents Organization. iCSC and Uli perhaps discuss what you've learned from those affiliations.

Daniel Klein 02:13:46  Sure. I'd say I'll stay on the real estate specific ones first. And iCSC newly. I learned about the value of, the value of industry relationships and learning from other people. you know, I can think too many conferences and events and, you know, both like regional and national, where I developed really strong relationships with people that I was able to, you know, learn from and share experiences with and gave me some different views on what real estate could be right for myself and for our family. on the ypo side, I can say that it's definitely been the most transformational organization that I've been involved with. I've been a member since, since 2013. Actually got referred in through another, close real estate friend, James Shapiro. And, you know, I was 32 when I joined. And every major life decision that I've made, since 2013 has, as I've done, consulting with somebody in some way, shape or form through IPO. it also gives me some great opportunities on the real estate side specifically.

Daniel Klein 02:15:01  I'm on the board of the there's a real estate network. I chair a program at Harvard Business School exclusively for Ypo members from around the world that are real estate professionals. That's great. and so, you know, it's a one week program every year in May. You know, ten years ago, I would have never guessed I'd be chairing a program at Harvard Business School. but it's been it's been a very fulfilling organization that I've been able to develop some real, meaningful relationships through and give me some good perspective on life.

John Coe 02:15:31  One of my earlier podcast guests, Bob young and Bob, is very active member of the IPO. Yeah. E Holmes yeah that's right. So what advice would you give you you've talked about in general for people? What about yourself for 25 years old? What would what advice would you give yourself? 25 years old today?

Daniel Klein 02:15:55  just, you know. Things might seem like they're taking a long time now, but, time will move more quickly than you ever could ever imagine.

John Coe 02:16:06  That's great.

John Coe 02:16:08  Okay, my final question. If you could post a statement on a billboard on the Baltimore Beltway for millions to see, what would it say?

Daniel Klein 02:16:17  Life is short. Do good and be kind.

John Coe 02:16:22  That's great. Well, Daniel, thank you very much for your time and candid remarks today. I really appreciate it.

Daniel Klein 02:16:31  Thank you.