Interview: Jayson Lemberg of Pioneer Acquisitions: Part 2
In this podcast, EisnerAmper’s Dave Plaskow and Jayson Lemberg, Principal at Pioneer Acquisitions, discuss what amenities and social opportunities renters in the real estate market find desirable as well as ways that real estate developers and property managers can integrate technology, aesthetics and a sense of social connection between tenants, as they develop their properties. Dave and Jayson also discuss some of the challenges that affect the real estate industry, both in the national political arena and on a state and city level, and give tips on what to look for in selecting trusted professional advisors.
Dave Plaskow: Welcome to part 2 of my interview with Jayson Lemberg of Pioneer Acquisitions.
You touched on it earlier, and we talked little bit about generational issues. How important is an aesthetic to clients? Is it that important? Is it functionality? Is there a design aesthetic that people are looking for? What do you look for in terms of that?
Jayson Lemberg: I think it’s a combination of both. Aesthetics are very important. By way of background, the types of building that we acquire is vintage, generally 1920’s and 1950’s era buildings, so there’s a certain character that’s inherent in those properties and we like to retain that character. But we also want to meet the tastes of today’s renters, so, in terms of our upgrades, kitchens, bathrooms. Primarily kitchens for example we’ll put in stone surfaces, stainless steel appliances, we’ll add dishwashers and microwaves to these vintage apartments, new flooring, paint colors that are more attractive to today’s renters. So that’s very important, but we’re also focused on some of the intangibles, like connectivity is important, community is important – so we are focused on creating community events for all of our tenants, whether it be a night out, a happy hour at a local bar, or a movie night outside in the courtyard during the summer months, that’s important. We’re working on the launch of high-speed internet throughout our buildings, which is a big deal for a vintage building that was never built with any of that in mind. And in the way we manage our properties. We’ve spent quite a bit of money on our property management software systems and accounting systems. We have the ability to allow our tenants to pay rent online, to enter work orders online, so I think that we’d like to be in a spot where our renters don’t have to come to our office because I don’t think they want to have to come to a property management office. They want to do everything on their smart phones or on their computers.
DP: It’s that common issue of form and function.
DP: So if I was able to wave a magic wand and make you king of the universe for a day, what initiatives would you take to enhance doing business in the real estate sector?
JL: Hmm. That is a tough one… The answer really needs to be looked at on a national level and on a local level.
I think on a national level – or federal level, if you want to call it that – I’d hope there would be minimal changes. I think that’s the way I look at it. I think our business, I’m used to how it operates right now and I’m used to the political environment, the regulatory environments. I think what makes me more nervous now is the uncertainty in the regulatory environment federally, end-to-end. And tax climate as well. We’re in a very strange political environment now. I think that when our President took the oath I was expecting there to be few changes in our industry simply because of his background, but I have no idea if that’s going to be the case. Every day I read new things, how 1031 exchanges may be the next thing to go, as a form of compromise. I don’t know if that will happen, and I think if it does happen that’ll be a significant change to the way we operate, and our strategy for sales and purchases. So hopefully nothing will happen on that front, and we’ve taken advantage of tax deferred exchanges quite a bit. So that would be a big change.
I think if I could wave the magic wand I would create certainty in the environment, and that’s just what we don’t have.
Locally, I would wave the wand and create pension reform in the state if Illinois. I think that’s the biggest problem with Illinois, and I’m sure you’re read about the budget woes, the biggest hurdle is on the pension front. I don’t know if anything will happen. It’s really like that third rail…
DP: It’s a monster…
JL: It’s a monster and the state has not been willing to do anything about it. It’s sort of written into the constitution. I don’t know if anything will happen on that front and, unfortunately, what it leads to is property tax increases – something we’ve seen quite a bit in Chicago. Unfortunately we will be bearing more of the brunt of the impact to get around the budget woes. Unfortunately, the impact will then pass through to the renters, so it clearly will have an impact on us as an operator, but a lot of operators are going to push that through to the renter, so I think the renters are going to see a lot of pain as well.
DP: Every good business has a good team of advisors that work with them. What do you look for in a financial business advisor?
JL: Well first and foremost we want an advisor who understands our industry and also understands what our objectives are. We are a small but rapidly growing operation and we certainly need an advisor that has some patience for that. We have gone through a lot of growing pains. We’ve gone from three employees really a matter of a few years ago, to over 50 now. And building out an operation in-house with property management, marketing, leasing and obviously accounting. We went from myself and my partner handling our accounting on QuickBooks years ago, to having a team of five accountants including a controller. We need an advisor who understands where we’re trying to go and is able to steer us in the right direction and help us get through the difficulties we’re bound to face.
DP: Can you share one or two ways that EisnerAmper was able to help you add value to your business?
JL: Sure. EisnerAmper’s gone above and beyond what I think your average tax accountant would do for a growing operation. They helped us structure our accounting group, and that was not an easy task, in terms of helping us hire personnel as well, and pointing us in the right direction. You know, how many people they think we need based on the amount of work we have and really how we want to structure that group. That was invaluable to us. Not to mention through the growing pains we had some fits and starts in terms of personnel. We’ve had some bookkeepers that unfortunately weren’t up to the task and really created some issues for us and our books, and our recordkeeping. EisnerAmper helped us find a consultant that would steer us in the right direction and actually go through all our previous books and get them up to speed to where we need to be. So that was a huge ordeal for us and we owe a lot of thanks to EisnerAmper for that.
DP: Well I owe you thanks for sharing your insights with us, Jayson. We really appreciate it.
JL: Absolutely! My pleasure.
DP: And thank you for listening to the EisnerAmper Podcast Series. Visit EisnerAmper.com for more information on this and a host of other topics, and join us for our next EisnerAmper podcast when we get down to business.
In this EisnerAmper podcast, Jayson Lemberg, Principal at Pioneer Acquisitions, gives Dave Plaskow insight on the real estate private equity industry in the New York City and Chicago markets.