Today’s guest is Chris Okada.

Chris is a prolific dealmaker, entrepreneur, and CEO of Okada & Company, a multifaceted commercial real estate development, management, and brokerage firm based in New York City. Christopher is an avid blogger, speaker, and thought leader relating to entrepreneurship and real estate subjects. Join Sam and Chris in today’s episode.

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[0:00] Intro

[1:17] The 3 Questions 

[3:51] Investment opportunities in other asset classes 

[7:36] Real estate prices, trends, and risks 

[11:03] State of multifamily 

[14:50] Chris’ NYC office space strategy 

[27:30] Closing

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Connect with Chris:

Instagram: https://www.instagram.com/chrisokada/

 

LinkedIn: https://www.linkedin.com/in/christopherokada/

 

Book: https://www.fromfeartofortune.net/

 

Connect with Sam:

I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.  

Facebook: https://www.facebook.com/HowtoscaleCRE/

LinkedIn: https://www.linkedin.com/in/samwilsonhowtoscalecre/

Email me → sam@blog.brickeninvestmentgroup.com

SUBSCRIBE and LEAVE A RATING. Listen to How To Scale Commercial Real Estate Investing with Sam Wilson

Apple Podcasts: https://podcasts.apple.com/us/podcast/how-to-scale-commercial-real-estate/id1539979234

Spotify: https://open.spotify.com/show/4m0NWYzSvznEIjRBFtCgEL?si=e10d8e039b99475f

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Want to read the full show notes of the episode? Check it out below:

[00:00:00]:07 – [00:00:49]:06

Chris Okada

If you’re meeting the market. If rents, for example, were $10,000 a month for for a 1500 square foot just regular office space, and today they’re at 7000 or it’s a 30% drop. You got to you got to be able to meet what the tenant wants with a 30% discount. You got to have it designed the way they want it now because of work from home and because of co-working and all that stuff, when if they’re going to leave their couch, if they’re going to leave their living room, if you’re going to leave your beautiful podcast room. What can I as a landlord offer you that would be equivalent to that? 

 

[00:00:49]:06 – [00:01:12]:14

Intro

Welcome to the How To Scale Commercial Real Estate Show. Whether you are an active or passive investor, we’ll teach you how to scale your real estate investing business into something big. 

 

Sam Wilson

Chris Okada is a prolific dealmaker, entrepreneur and CEO of Okada and Company, a multifaceted commercial real estate development management and brokerage firm based in New York City. Chris, welcome to the show.

 

[00:01:13]:25 – [00:01:17]:12

Chris Okada

Thank you, Sam. I’m super excited. Thank you for having me.

 

[00:01:17]:13 – [00:01:26]:11

Sam Wilson

Absolutely. The pleasure’s mine. Chris, there are three questions I ask every guest who comes on the show in 90 seconds or less. Can you tell me, where did you start? Where are you now and how did you get there?

 

[00:01:27]:23 – [00:02:13]:11

Chris Okada

Great. Starting with my father here in New York City, my family. This is our 54th year in commercial real estate in Manhattan, 1969. So it’s a very different time. My father was very well known, and one of his key highlights was bringing over a Toyota motor company, Honda, Panasonic and Sony, and establishing their on US headquarters here in New York City as a commercial leasing broker representing, you know, the Fortune 500 of the Japanese manufacturers in the in the early stages of globalization in the seventies and eighties before it became what it is today. I started shortly after 911 and 12 and two, and I started as a leasing agent working for my father. And that’s pretty much how it all started, you know, just started from the bottom. Now we’re here.

 

[00:02:31]:27 – [00:02:37]:07

Sam Wilson

I love it. I absolutely love it. What is it that you focus on primarily today?

 

[00:02:37]:25 – [00:03:23]:28

Chris Okada

Great. So I am a very micro focused sandbox territorial person. That means that we focus on office leasing, investment sales and acquisition and development of properties in the Midtown Manhattan sandbox. Really, I would say from Soho to Rockefeller Center, right in the middle, mostly on the west side of Midtown, in midtown, south of Manhattan. So our portfolio of owned and third party at Avon Ivory is around 50 properties with total square footage about 2.6 2.7 million feet. So we eat, sleep, breathe New York City commercial, retail and New York City office. I would say that’s 80%. However, in in markets like this and opportunistic times, we, of course, jump into multifamily and other sort of uses. But all in the sandbox, the midtown, midtown, south.

 

[00:03:51]:13 – [00:04:16]:07

Sam Wilson

I love it. I love it. Yeah. Being micro focused like that certainly allows you, I think probably, as you know, to get to know your investor or your investment profiles really, really well in what you know, what you guys focus on. It sounds like you get to know it intimately, but you do some opportunities that you’re kind of seeing in some other maybe asset classes that haven’t traditionally been what your core focus is. What do you see? 

 

[00:04:16]:07 – [00:04:50]:09

Chris Okada

Yeah. All right. So in a post-pandemic world, we’ve seen so much sort of defaulting on mortgages, we’ve seen price prices come down 30 to 50% on on different asset classes. I have not and I was telling you briefly, I have not seen prices like this since 2009. I created a study called From Fear to Fortune Generational Opportunities in New York City Commercial Real Estate.

 

[00:04:50]:20 – [00:05:19]:12

Chris Okada

And it basically is a longitudinal study from 1993 to 2022 and a little bit, you know, a couple of months of 2023. And it basically outlines every decade New York City over the past 30 years and even further our 54 year history here in New York, prices really do come down every single decade, but you’re only given two years in Manhattan.

 

[00:05:19]:20 – [00:05:50]:24

Chris Okada

On Manhattan Island, you’re given two years where prices come down. And if you’re able to acquire them and it really is timing. And, you know, there’s two philosophies on now over time, the market or timing is everything. Right? So it’s it’s it’s it’s somewhere in there. But over the last 12 months, we’ve seen some real, real up price decline because of the interest rate environment.

 

[00:05:51]:07 – [00:06:30]:28

Chris Okada

And because of that, I think that people that are able to acquire at these 30, 40, 50% discounted price points, they’re going to see some incredible ROI when the market recovers. And New York City, specifically every single decade from the past 100 years, has always rebounded and gotten more expensive than the last cycle. So, you know, the housing and real estate crisis of 2008 was supposed to be the worst crisis since 87 or 89, and if not that, then 1929, right?

 

[00:06:31]:06 – [00:07:08]:28

Chris Okada

So the financial crisis, but we’re seeing pricing equivalent to 2009. And I do think that there is risk involved. I think that it is definitely a scary time for a lot of your listeners. If I were to zoom, you know, what about office? Would you jump into a 50% vacant office building work from home? But there’s a reason it’s priced 30, 40, 50% below 2019 levels, and that’s because of that.

 

[00:07:09]:23 – [00:07:36]:23

Chris Okada

And for the very few that are able to jump in and seek, you know, these distressed assets and find a way to make them fully cash flowing at new risk at levels, I believe they’re going to do extraordinarily, extraordinarily well this this decade towards when we’re in a full recovery mode. So that’s essentially the thesis.

 

[00:07:36]:28 – [00:07:55]:16

Sam Wilson

I love it. I love it. There’s so many questions that come into that. One of one of the first ones, though, is when you say you’ve seen price levels reset for that 2008, 2009 time, is that is that an adjusted number based on inflation and other factors? Or is our straight dollar for dollar.

 

[00:07:55]:28 – [00:08:17]:25

Chris Okada

$3 per per square foot dollar? Wow. You know, so everything that I do in my world is on a price per foot because that’s the only way I can assess a million square foot building in San Fran and a million square foot building in Dallas. And compare it to here in New York City is on a price per foot.

 

[00:08:19]:07 – [00:08:54]:22

Chris Okada

So looking at the price, the the price over the square foot of the property, we’re seeing deals being done at $350 or $400 per square foot. The top was 1000, so or $900 per foot. So really we’re seeing some, again, 50% discount. I mean, as a whole, our study shows that the peak of the market was broke, 900 to $950 per square foot in the last cycle in the 20 tens.

 

[00:08:56]:17 – [00:09:22]:19

Chris Okada

And if you’re picking up a building, even if you got to do put $100 of putting construction and improvements or whatever it may be to improve it and rent it, and maybe another 50 to $100, if you’re all in cost basis, is 40% below the last, you know, the heights of the market. And you have a fully cash flowing, turnkey, fully renovated property.

 

[00:09:22]:19 – [00:09:50]:04

Chris Okada

I believe the bet is that it’s going to be a 2 to 3 x multiple by the end of the decade. Sure. And this is really based on on on just data. If New York recovers to anywhere in the 2013 to 2020 levels for pricing and you’re buying at three, $400 a foot and it recovers back to five, six, $700, you know, you’re doing all right.

 

[00:09:50]:04 – [00:10:25]:11

Chris Okada

If it hits the peaks of eight, $900 a foot and you’re all in at 600 and you’re at 5050, you know, 5050 on your LTV at two X, it breaks records like it does every single decade in history. The sky’s the limit. Of course, it’s scary. You know, you’re borrowing it eight, nine, 10% money, you know. So interest rates are scary.

 

[00:10:25]:11 – [00:10:34]:17

Chris Okada

Vacancy and cash flow is scary. So there are risks in bonds and you have to sort of have a business plan around that.

 

[00:10:35]:19 – [00:11:02]:16

Sam Wilson

What you’re doing, I feel like is is again, it’s a it’s a very local, I think, thing that you are able to see and capture maybe that the rest of us outside of the New York City markets don’t necessarily see. Yes, we’ve seen, I think, you know, price levels in activity in other asset classes slowed down. I think we’re like a 74% year over year decline in multifamily sales was a it was a statistic.

 

[00:11:02]:17 – [00:11:03]:08

Chris Okada

Yeah, we did.

 

[00:11:03]:08 – [00:11:17]:19

Sam Wilson

I had read yesterday we’ve also seen prices, you know, start to decline on the multifamily sale side. But I don’t think we’ve come anywhere near on a national level from seeing them return to that 2829 pricing value.

 

[00:11:17]:21 – [00:11:58]:14

Chris Okada

Actually, I think inflation, I think multi-family is doing very, very well. It’s sort of when you speak to we’ve probably spoken to 50 private equity real estate funds over the last couple of months. What are you asking them? What they’re doing, what they’re up to. Everyone wants multifamily, multifamily or fully leased. Industrial is the crown jewel. But then, you know, you’re paying 5% yield and, you know, maybe even four or maybe maybe you can get to 6% cap on the capitalization rate, but you’re at negative leverage, right?

 

[00:11:58]:17 – [00:12:36]:07

Chris Okada

So we’re a contrarian investors. I do think that interest rates will come down. But for anyone and you and you saw there’s a portfolio on the sun down in Texas, they had to give back the keys to 450 units. And that was I think that news broke yesterday. So it’s not all Sunbelt, all multifamily. Lee is very strong, but for the most part, I do think that if you’re cash flowing today and you don’t have a refinance coming up in the next 12 to 24 months, you’re doing really, really great.

 

[00:12:36]:07 – [00:13:02]:29

Chris Okada

If you if you locked in a ten year like mortgage at three and a half percent, you know, in 21 year you’re the best. And it’s multifamily. I mean, that at that point, you just, you know, clip coupons. And even if you bought a25 cap, you know, you’re 150 basis points above your debt. You know, you can’t go wrong.

 

[00:13:03]:06 – [00:13:48]:01

Chris Okada

It’s really just the short term money that’s causing all this agita, that’s causing all the stress. And I think the best part and the best lesson for all of us in commercial real estate and in investing and people that want to grow regardless of where you are, is that you got to love the biz when it’s good and you got to love the biz when it keeps you up at night and you know, this market, especially with with the interest rate environment, it really just weeds out people that may not, you know, that are in it just for the money and maybe not in it for the long haul, because it’s hard.

 

[00:13:48]:06 – [00:14:19]:27

Chris Okada

It’s tough. It’s tough. And one one anecdote that I tell everyone is that a black swan event and New York City had many 911. I mean, you know, that’s just one, you know, the Hurricane Sandy, that was a huge blow, the financial crisis and now the pandemic. We had a business plan that said if there is a million people outside in Times Square, our properties will never come down in value.

 

[00:14:19]:27 – [00:14:49]:29

Chris Okada

That was literally here. We, you know, three years ago. Exactly. In April of 2020, there was not a soul in sight. And everyone left Manhattan and everyone left the city. So, you know, you always have to try to prepare for the black one as best as possible. And really, that just means having a conservative savings for each one of your properties and having, you know, people say different things.

 

[00:14:50]:00 – [00:15:21]:07

Chris Okada

12 months of mortgage and operating expenses in the bank account for the for the property. Some really conservative people say 24 months, but when times are good and the properties are well behaved, you’re like, no, I’ll keep two months, you know, two months in the end. And then that’s when, you know, you need to be pretty conservative and have a strict cash flow policy and black swan policy of all the properties.

 

[00:15:22]:16 – [00:15:24]:01

Chris Okada

So for sure.

 

[00:15:24]:23 – [00:15:44]:04

Sam Wilson

Here is a question I want to we’ve got about 5 minutes left here on the show, and I really want to hear your kind of strategy that you guys are implementing behind this office space window that you’re finding in New York City right now. How are you taking those down? I know you mentioned nine, 10% debt on them.

 

[00:15:44]:15 – [00:15:49]:14

Sam Wilson

How are you taking them down? How are you making them cash flow and how are you offsetting and or filling that vacancy?

 

[00:15:51]:07 – [00:16:18]:18

Chris Okada

That is the that’s the big question, right? That’s the big question, because the tenancy and the vacancy is the enemy along with it’s a perfect storm. And but that’s why the values are have been beaten up so much. So we are specialists in leasing. We lease we do corporate we’ve been doing corporate leasing and office leasing. We continue to do office leasing.

 

[00:16:18]:18 – [00:16:48]:08

Chris Okada

Our portfolio is 2.7 million feet. You know, when when times are good, there was less money to be made because there was less vacancy to be to be quite frank, year over year, office activity is up 76% as far as commission income and as far as square footage, I think it was I have to double check those numbers, Q1 23 versus Q1 22 and Q1 22.

 

[00:16:48]:08 – [00:17:08]:11

Chris Okada

We are coming out, I think December of 21 and January was all Micron and you know, we were not out of the woods in 21. So in 22 we were just starting. Now we’re full blown. It’s here in New York. It’s 83 degrees. We’re having a heat wave, you know, record highs of heat. You know, spring is in full swing.

 

[00:17:08]:17 – [00:17:36]:23

Chris Okada

And even though it’s extremely challenging, if I turned off the news, I turned off CNBC. I didn’t read Wall Street Journal. Our office leasing business is doing well, but we are super micro. We we, we have a, you know, an online strategy, social media strategy to really do whatever it takes to fill up our, our vacancies for our our own properties and others.

 

[00:17:37]:04 – [00:18:27]:17

Chris Okada

So it does take time if you’re meeting the market. If rents, for example, were $10,000 a month for for a 1500 square foot just regular office space, and today they’re at 7000 or it’s a 30% drop. You got to you got to be able to meet what the tenant wants with a 30% discount. You got to have it designed the way they want it now because of work from home and because of co-working and all that stuff, when if they’re going to leave their couch, if they’re going to leave their living room, if you’re going to leave your beautiful podcast room, what can I as a landlord offer you that would be equivalent to that?

 

[00:18:27]:17 – [00:18:52]:12

Chris Okada

And I have a we have a few ideas that were, number one, fully furnished, number two, fully designed, number three, turnkey. Like literally, I’m bringing your bringing your microphone in your laptop. If if that’s what you’ve you’re bringing a notepad, your phone and a laptop, and your eight employees will be there and the rest, the other ten will work from home.

 

[00:18:53]:15 – [00:19:19]:09

Chris Okada

And so we sort of have that down packed. It’s it’s not these large spaces it’s no longer see is a great cubicles that’s done. Everyone wants to feel comfortable. They they want a lounge sort of comfortable design, an upscale atmosphere. It doesn’t have to be stuffy, but it does have to be thoughtful in design. That’s what people want.

 

[00:19:19]:09 – [00:19:40]:08

Chris Okada

They like artwork. They they want to feel that it’s that there’s warm bodies and then they have to be well located. So they have to be in areas that it’s it’s kind of cool. You know, maybe there’s a park a block away. I should go for a walk in the park. So the properties that are near the parks, they do better.

 

[00:19:40]:23 – [00:20:13]:16

Chris Okada

The properties that are near new, you know hotels we are just ad partners of ours are opening just open the Virgin Hotel with Richard Branson. That was last week and that was super fun and super cool. It was on the same day he opened a hotel. Now that he bankrupted one of his his space or subsidiaries, I’m not sure which one, but I do remember that.

 

[00:20:13]:16 – [00:20:44]:00

Chris Okada

Wow. This guy just read today breaking news that Richard Branson is be all one of his subsidiaries. And here he is laughing and smiling and cutting the ribbon for a $400 million hotel with his name on it. So, you know, I it’s really about having a good plan, meeting the market and being a strong entrepreneur or to be able to take the pressure.

 

[00:20:44]:12 – [00:21:17]:13

Chris Okada

This whole education for me of this downturn, not even 21, was all right, 22 was scary. You know, the whole world was closed up, really. 23 And with the inflated interest rate environment, this is tested. Everything that I’ve been through and I and I believe that if and when you want to grow to the thousand dollar portfolio, ten that whatever ambitions you have as far as the real estate operator and owner, it will be tested.

 

[00:21:17]:22 – [00:21:41]:28

Chris Okada

And that’s why I looked at Branson. I was like, Wow, how do you feel about having your New York? I interviewed him 2 seconds on the red carpet. How does it feel to have your own? And he’s like sort of like giddy about it. But at the same time, he had a multi-hundred million, if not $1,000,000,000 venture, just go bankrupt.

 

[00:21:42]:09 – [00:22:17]:28

Chris Okada

And I and of course, I’m not going to ask him, oh, how did you know how to go with Virgin Galaxy or whatever, you know, whatever subsidiary it was. But that’s it takes grit. It takes a lot of stress, it takes pressure. And being able to understand that pressure. And once you are put in that sort of situation where it’s tough, you’re not you’re now ready for the next level, you will now be ready for the next level.

 

[00:22:17]:28 – [00:22:50]:23

Chris Okada

Whichever level that is. And for me, you know, working on and having, let’s say, five, five properties here in midtown, of which maybe 75% are well-behaved, 25 are not well behaved, and the not well behaved ones are the ones that are keeping me up at night. The thought processes screw it. If, if, if, if a 30 of $30 million project could keep you up at night, why not just go for the gusto?

 

[00:22:51]:11 – [00:23:16]:16

Chris Okada

Go for it. Go for a hundred million? What does what difference does it make? Go for a billion? Because the amount of anxiety you get and if if worst case scenario, it all falls through, you fall flat on your face, you know, and it doesn’t work out. It really just doesn’t work out. And something happens. And now, you know, the Sun Belt is no longer interesting.

 

[00:23:16]:16 – [00:23:40]:20

Chris Okada

And, you know, rents are coming down and, you know, there’s all kinds of, you know, interest rates are up and you’re refinancing. You’re at three and at 7%. Now you got to put up another $30 million. You don’t have $30 million, whatever the story may be. And you come, you come and you and you come up and you survive that you’re ready for the next level.

 

[00:23:40]:27 – [00:24:06]:04

Chris Okada

You’ve been you’ve you’ve been, you’ve walked the fire and now screw it. And I think Grant Cardone, who I’m sure you know, I think he is one guy and his story really that resonates with me is in oh eight, he owed $50 million to the bank. Now $50 million. That’s a lot of pressure, you know, to personally have to cough up.

 

[00:24:06]:04 – [00:24:37]:15

Chris Okada

And if you don’t have 50 mil in the bank, which most operators do not have. But let’s just be clear then you got to liquidate everything. And if you don’t got it past that, then, you know, Chapter 11 or Chapter seven, bankruptcy code. And so if he’s going to go through all of that pain for 50 million bucks, why not just go for 500 million and then why not go for a billion?

 

[00:24:37]:20 – [00:25:03]:18

Chris Okada

And I think that that’s that that resonates with me. But you got to walk that fire and you got to sort of feel that, you know, and all business plans are good. They are good. But you got a black swan event, No. One in 2020 because we are too busy worried about our toilet papers, you know, and, and, and the groceries and just survive in a pandemic.

 

[00:25:04]:15 – [00:25:50]:23

Chris Okada

No one thought about interest rates potentially growing 5% in 12 months. There’s no way to have predicted in 2019 that in 2023 or 24 that the world was going to be the way it was. It’s impossible to predict it. So all you can do is do your best with the information you have. And for us, we’re pretty freaking good at leasing office space and we’re doing whatever we can to buy low and get to cash flow as soon as as fast as humanly possible using all the the tools that we have, which is basically social media, networking, cold calls, you got to do whatever it takes to fill that tenant stack and fill that capital

 

[00:25:50]:23 – [00:26:09]:25

Chris Okada

stack, making. You got to reach out to you got to go on 50 podcasts. All right. You got to you got to go on 50 podcasts and let everyone know, hey, you know, like this is this is an incredible time. Maybe you’re not maybe you’re not there yet. Maybe you’re not feeling it. But this is what we’re doing.

 

[00:26:10]:12 – [00:26:32]:08

Chris Okada

And why don’t you you know, come on our journey and say hello, and how do we make money together? That’s essentially what we what we try to do. But the business plan is still the same. How many calls are you going to make today? How many presentations are you going to make to make this week or plan? How many luncheons do you have to go on?

 

[00:26:32]:08 – [00:27:07]:20

Chris Okada

How many email campaigns are you preparing? How many social media things are you, you know, is your social media calendar up? What is your PR up to? Have you been in the paper the same game in Brick, an investment group as Okada and Company? It’s just the avatar. The target is different and that goes for any business, whether you’re an insurance or an real estate or you’re trying to raise $1,000,000,000 fund, you know.

 

[00:27:08]:13 – [00:27:09]:19

Sam Wilson

Indeed. I love.

 

[00:27:09]:19 – [00:27:10]:07

Chris Okada

It. That’s it.

 

[00:27:10]:16 – [00:27:30]:06

Sam Wilson

I love it. Christopher, this has been a wealth of information. Thank you for taking the time here to come on the show today. I think what you’re doing is really cool. I love the way you guys are taking down assets, how you are contrarian. I think that always speaks to me. Anybody who’s looking look and laugh when everybody else is looking right is somebody that I want to get to know better.

 

[00:27:30]:06 – [00:27:45]:26

Sam Wilson

So thank you for taking the time to come on the show today and really share with us the opportunity that you guys are finding, especially in the office space, one that is, you know, kind of the estate is the dog. Everybody’s kickin right now and you’re going, hey, man, there’s this. This is where you get paid. So I love I love how you’re doing that.

 

[00:27:45]:26 – [00:27:50]:09

Sam Wilson

If our listeners want to get in touch with you and learn more about you, what is the best way to do that?

 

[00:27:51]:17 – [00:28:21]:18

Chris Okada

Oh yeah, for sure. Instagram, Twitter, LinkedIn. I think those are the three most active social media platforms and it’s at Chris Okada, if you want to look at the study, it’s W WW from fair to fortune dot net and that has my investment thesis, it has my belief and it has the raw data and everything that we do is data based.

 

[00:28:22]:03 – [00:28:34]:26

Chris Okada

So, you know, it’s really bets based on historical data and you know, so follow me at Chris Okada and would love to connect with any of you great.

 

[00:28:34]:26 – [00:28:48]:25

Sam Wilson

Or both of those there in the show. Notes from fear to fortune dot net and Chris Okada, for those of you who are listening a c h r i s okay a day. So Chris Okada, Chris, thank you for coming on the show today. I certainly appreciate it.

 

[00:28:49]:22 – [00:28:53]:19

Chris Okada

All right. Bye. Thank you so much for having me. Good luck out there.

 

[00:28:54]:02 – [00:29:15]:16

Sam Wilson

Hey, thanks for listening to the How to Scale Commercial Real Estate Podcast. If you can do me a favor and subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcasts or whatever platform it is you use to listen. If you can do that for us, that would be a fantastic help to the show. It helps us both attract new listeners as well as rank higher on those directories.

 

[00:29:15]:16 – [00:29:18]:23

Sam Wilson

So appreciate you listening. Thanks so much and hope to catch you on the next episode.