Asset Management 101: Spotting Six-Figure Opportunities in Your Portfolio | Ep. 37

Episode Summary

Real estate asset management serves as the vital bridge between finance, operations, acquisitions, and investor relations after a property transaction closes. Sitting at the intersection of CFO and COO functions, effective asset management ensures that operational reality aligns with initial underwriting assumptions and that portfolio strategy adapts as macroeconomic conditions change. Rather than treating properties as static holdings, asset managers continuously evaluate whether an asset still fits the portfolio’s thesis or requires operational pivot—such as adjusting business plans due to shifting regulatory environments or managing capital-intensive infill strategies.

A central mandate of asset management is eliminating operational blind spots to protect and grow net operating income (NOI). By conducting granular, line-item variance analysis—benchmarking properties internally against top-performing portfolio peers rather than generic industry averages—operators can uncover substantial cost savings. For instance, resolving systemic utility inefficiencies can directly add six figures to a property’s bottom line, creating exponential portfolio valuation increases under prevailing cap rates.

Beyond real estate mechanics, modern asset management encompasses the optimization of People, Process, and Technology (PPT). Scaling a real estate enterprise requires creating “mini-owners” within the organization, building lean Standard Operating Procedures (SOPs), and leveraging modern technology and global talent to scale administrative productivity. Passive investors can assess the health of their sponsor’s asset management by evaluating key reporting metrics, including cash-on-cash returns, leverage ratios (DSCR/LTV), and transparent operational updates.

Key Takeaways

• Asset management bridges the gap between financial underwriting and day-to-day operations to ensure long-term business plans reflect real-world execution.
• Granular P&L variance analysis can identify significant operational waste—such as utility leaks—where simple expense reductions directly expand property valuations.
• Internal benchmarking against a portfolio’s highest-performing properties provides a clearer, actionable standard than broad industry average statistics.
• Scaling a real estate portfolio efficiently requires aligning People, Process, and Technology (PPT) by establishing clear SOPs and encouraging an ownership mindset among team members.
• Passive investors should evaluate quarterly operator updates by analyzing leverage metrics, risk-adjusted returns, and progress on property-level business plans.

Key Topics Covered

• Asset management vs. property management
• CFO and COO perspective alignment
• Post-close underwriting variance analysis
• Internal portfolio benchmarking methods
• Operational efficiency and NOI optimization
• Property-level utility cost reduction strategies
• Balancing distribution yield with long-term infill growth
• Scaling organizational processes and staffing
• People, Process, and Technology (PPT) framework
• Key performance indicators (KPIs) for passive LP investor reporting

Episode Chapters

00:00 Intro
Brian Spear introduces Sam Simonian, Chief Asset Manager at Sunrise Capital Investors, to discuss the strategic role of asset management.

01:10 Seeing the Blindspots Most Miss
Sam explains how occupying both CFO and COO roles helps eliminate organizational silos between financial models and on-the-ground property operations.

05:10 Why Sunrise Is Different
Sam shares his background working fractionally with Sunrise and highlights the importance of sponsor alignment and executive trust.

09:47 What Is Asset Management?
Sam breaks down the differences between day-to-day property management and the 30,000-foot strategic view of asset management.

14:05 When the Property Plan Changes
The discussion covers how macro shifts, like changing landlord-tenant regulations, require operators to continuously re-evaluate property business plans.

19:55 A $100K+ NOI Fix
Sam details a real-world case study at the Ridgebrook property where diagnosing water usage inefficiencies led to six-figure NOI improvements.

22:50 Benchmarking Your Own Portfolio
Sam explains why benchmarking properties internally against top portfolio performers is more effective than relying on generic industry averages.

29:12 Which Opportunities Are Worth Buying?
The conversation explores the trade-offs between immediate cash-flowing assets and long-term, capital-intensive value-add infill projects like Hidden Forest.

34:35 What Breaks as Portfolios Grow
Sam and Brian analyze organizational scaling bottlenecks, focusing on staffing capacity, communication channels, and avoiding lean-operational burnout.

42:22 Create “Mini Owners” in Your Portfolio
Sam outlines the People, Process, and Technology (PPT) framework and the value of empowering employees to take ownership and solve operational problems.

52:18 What Passive Investors Should Know
Sam details the core KPIs passive investors should focus on in quarterly sponsor reports, including leverage metrics and risk-adjusted returns.

55:30 Asset Management in 4 Steps
Brian synthesizes the core principles of asset management into four pillars: promise, performance, priority, and portfolio fit.

Full Transcript

[Transcript begins]

Brian Spear: Not every great real estate deal is great fit for all these different investors. Acquisitions, it can tell you what a property should do, but after the deal closes, somebody’s got to really determine whether the original assumptions are actually becoming reality and what needs to change when those assumptions are not. So that’s where asset management comes into place. Today, I’m joined by our chief asset management officer, Sam Simonian. Sam has spent more than 20 years in real estate and has previously served in both CFO and COO roles. And at sunrise, he sits right in the intersection of finance, operations, acquisitions, and investor relations. We’re going to unpack what asset management really means, how small operating problems become meaningful portfolio decisions, and why a potentially attractive investment may still be the wrong fit for investors that it is meant to serve. So Sam, welcome to the Sage Investor Podcast, buddy.

Sam Simonian: Thank you, Ryan. Great to be here.

Brian Spear: Yeah, likewise, man. Looking forward to jumping out in the talking shop. You’re one of those guys that’s like a Batman behind the scenes, Superman, doing all the stuff, doing all the work behind the scenes. So it’s now fun to have you take off the cape for a second, come out here and try to add some value to everybody involved, man. Really, truly looking forward to it. Before you joined the team over here at Sunrise, you had already served in both CFO and COO roles. So how did sitting in those two different seats really shape the way that you think about asset management?

Sam Simonian: Yeah, one thing that caught me by surprise is how often the operations folks can’t talk to the finance folks and the finance folks can’t talk to the operations folks. So, yeah, sitting in the CFO and COCs, you get two different perspectives, the financial and operations side, and how they interrelate, what the competing priorities are. And they’re not always the same, but we need to look at all of our assets holistically because that’s how – the real world works, right? So it’s not silos. And I’m trying to, in this role, reduce the amount of friction between the two departments and creating just one company where everybody’s making decisions based on, you know, optimal portfolio performance and funding performance and not necessarily what’s best for finance or what’s best for operations.

Brian Spear: Yeah, exactly. Sometimes those different departments can have competing perspectives in some way, shape, or form. So maybe a little bit of color here in terms of what you might be able to see because you’ve occupied both roles compared to somebody who’s only sat in that one role, right? What might a CFO miss because they’ve only been in finance? Or what might an operations guy miss if he’s only been in operations? Just maybe an example so we can kind of think through that a little bit.

Sam Simonian: Let’s talk about on finance side. Something can look good on paper, right? And you run your Excel models and everything looks like it should. It’s tracking to underwriting, it’s tracking to budget. But there are a lot of on the ground things that a CFO would probably not necessarily know. Issues as far as… You know, just from it goes from technical stuff, whether or not like one of our properties we’re looking as far as the capacity for wastewater treatment, right? Is that going to be something that we want to finance? Can we take it? Can we let the property run without it for an extended period of time? So the operations folks will look at how to run the community, whereas the finance folks have a gotta have to look at it from the lens of you know okay is this going to make sense as far as dollar and cents goes, right? So it really is two different worlds and a lot of times the you know In practice, it should be where you’re looking at all of it at once, but especially with a growing company, what happens in actuality is that more and more as a company grows, they become siloed and they become two different worlds. And then a lot of times you figure out only in meetings and such, okay, there’s an issue here that we didn’t know about. Something in finance is making this less attractive than it otherwise appeared and vice versa. So having the entire picture, just as if you were running your own mom and pop shop, right? You’re just the sole owner of a mobile home park and you’d know everything that’s going on. Right. So we want to kind of do it like that, but it just becomes more and more difficult as we grow. But we want to maintain that same level of focus and, you know, looking at it holistically as opposed to in silos.

Brian Spear: I agree. It’s beautiful. And again, trying to run the organization as flat as possible, because the more ridiculous and bureaucratic that you get, the more difficult it is along the way. I think Buffett, I believe Buffett, he had this one quote, right? All businesses end up failing for a handful of reasons. He calls it the ABCs of failure. One is arrogance. One is bureaucracy and one is complacency. Right. So the bureaucracy is what we’re talking about. Just getting fat layers and layers and layers. Nobody knows what’s going on in different departments, all that stuff. We try to keep it as flat as possible. It’s not perfect. But again, asset management is a great place to help bridge that gap to ensure that everybody’s on the same page. And ultimately, operations is implementing the model the way that we would have otherwise anticipated. Well, Sam, let’s talk about kind of your beginnings over here at Sunrise. I love to tell this story, right? So we’ve had a lot of success working with folks in kind of a fractional manner, kind of, you know, dating folks before marrying them over time, right? Getting to understand how they tick, and you get to understand us. We get to understand you. We’ve had a lot of success with a lot of guys, multiple C-suite guys in this manner, and you were no exception, right? Yeah. You had initially worked with us in a fractional manner from the outside before ultimately deciding to join the leadership team. We actually had to stroke a check to buy you out of a contract at the other place prior to coming on. So, again, it was beautiful. It was like a free agent signing in baseball. It was beautiful. But what did you observe from your perspective? What did you observe from the outside, from that role, from that position, that ultimately convinced you to think about coming inside of Sunrise full time?

Sam Simonian: We talked about the importance of finance and operations, right? Having all that down. But more importantly for me personally, before I made a choice like this, was how you and Kevin were getting along, right? So that’s me. Even as an investor, it’s almost as important as the underlying fundamentals or the investment thesis of any acquisition or anything, right? It’s just how well you and Kevin get along. And… I’ve worked with other funds. My entire career has been in real estate and I’ve seen, I’ve worked with GPs that haven’t had the same relationship and it’s just like a marriage, right? So a lot of financial reasons, but just friction, right? So this, I saw that it was going to be a long-term thing. I don’t like drama, especially at this stage of my life. And I knew that, you know, after working fractionally with Kevin and Brian, that there was going to be no drama. It was just going to be, let’s just get the work done the best possible way. And there’s no egos and it’s just whatever is best for the company. That’s what’s best period. And I love that. And so that was my… the parking assets and the mobile homes. It was just really how stable the relationship between Kevin and Brian was. And I think I wish all of our investors could really know that because that’s an asset that doesn’t necessarily show on the balance sheet, but it’s as important as anything else, really.

Brian Spear: Wonderful feedback, buddy, and very much appreciate it. I share the sentiment. You know, we’ve talked about it before that business partnership is every bit a marriage. A business marriage is every part of marriage is, you know, your traditional marriage to your spouse. I share the sentiment. Couldn’t agree more. And you’ve got to stay on the same page, right? We always have same page meetings once a month, jump on, talk shop. The good, the bad, the ugly, all the stuff that you try to get out in front of before those little things start festering, as it were. Because, you know, it ain’t perfect, right? It’s not all sunshine and rainbows, but you got to just work through those things as any good marriage would. So thank you for that. That’s wonderful. And again, I think it ties into one of our sage evergreen principles of bet on the jockey. At the end of the day, guys, LPs that have invested across 20, 30, 40 syndications, multiple decades, like a lot of it at the end of the day ultimately comes down to, whose hands are on the wheel, who’s driving the ship at the end of the day. So it’s unbelievably important to understand.

Sam Simonian: And that’s what we want to get to, Brian. So at some point in time, right, instead of us having to say, OK, this is the best new property and you should invest because of this. We just want to say invest in us because Brian and Kevin and we have this track record and they’re actually investing in Brian and Kevin without even knowing what the property is, what the fundamentals are. It’s just like people invest with Buffett, right? They don’t necessarily know exactly the exact moves he’s going to be making, but he has such a, he’s built such a level of trust over the years that it’s like, listen, I’m betting on Buffett and I’m just going to ride with him. However, this goes. So yes, that’s what I think you and Kevin really are on track to having that level of trust. You’ve built it.

Brian Spear: I hope so. I hope so, right? And I think it’s, to your point, it’s not about any individual deal or any individual niche, right? It’s genuinely about how we think, right? Less about what we do, more about how we think, what we’re seeking to achieve on behalf of our families and so much more. And again, very much appreciative of your role and ultimately seeing a lot of that come to fruition because we could draw it up. You know, the coach and the GM could put the team on the field and the coach can draw up the playbook and whatnot. But ultimately at the end of the day, it’s about the folks going on to the field and actually implementing the business model the way that we would have otherwise anticipated. And given your wonderful background, right, CFO, financial, COO, tons of operational boots on the ground experience in the same vein, you’ve got obviously an easier way than most to be able to bridge between those respective departments. So let’s try to dig into this role in and of itself, and this idea of asset management, because asset management, it sometimes can be abstract and be like an amorphous thing until something inside of a property begins drifting away from the original business plan. So once a property closes, comes into the portfolio, where does your responsibility begin? And what are you trying to determine over the course of the first couple of quarters of actual operations?

Sam Simonian: Yes, I think a good starting point would be is what is property management first, because I think most a lot most people will know what property management is. So property management is a day to day operations of what we need to do today, this week, this month to make sure that the property is operating optimally. Right. So that’s property management. Everybody knows that asset management takes a step back and looks at it from the 30,000 foot view and says, okay, well, we start off with the, you mentioned the model we have, the business plan, the underwriting model, right? So this was what we expected property to perform like. And then after a couple of quarters of data coming in, you start seeing, okay, well, yes, it’s tracking or no, it’s not tracking. Okay. And if it’s not tracking, you start to ask questions. Why? Why is it not tracking? Is it because of some one-off event or is it because of something that we missed in underwriting? So no underwriting is ever going to be perfect. There’s just far too many things that we don’t see. Our acquisition team is great, but they’re not going to be able to capture everything. And that’s why it’s called a model. So we just try to have our acquisition the model, our best guess of what things are going to look like. But the reality is things don’t always track according to model. And asset management starts asking that question very early on. And then also once the property has seasoned and saying, OK, so even if it is tracking, our business plan was in place two years ago. This was what our goal is based on changes in the macro environment. Is that still our goal? Is that still the best use of money? Because every day you’re essentially decide to hold onto a property is essentially, technically you’re making, reinvesting in that property because you can sell it, right? So it’s basically you’re saying, I still want this property. And the next day I still want this property. So it’s like almost like a new purchase. So we need to constantly justify the existence of our holdings, right? And if there’s anything that we need to question, we will question. Most of the time it’s like, yes, this is going according to plan and we’re in for the long run because that’s our company goal. But every now and then you’re going to have something that just you see and say, okay, this really is not what we bargained for. Or, there’s an opportunity to right now sell this for more than it’s worth. For what we think, let’s take advantage of that. But that’s why you need to have, I think, before you, there aren’t too many books on asset management, I think because you kind of learn it by experience, right? There’s tons of books on how to be a COO or a CFO, but asset management is just experience. And taking all those tools and say, okay, how can we just optimize the portfolio’s values by using every sort of operational tool, every sort of financial to that we have and that’s really asset management in a nutshell.

Brian Spear: Asset management 101, I couldn’t agree more. So let’s take it to an example. You’re talking about the fact that we’re reviewing the business model periodically, semi-annually, gauging whether or not this is still an asset that we would want to own and continue to operate over the long term. Has anything changed? Have macro environment conditions changed materially? Is the investment thesis broken for whatever reason? Things happen, right? Life changes as Warren Buffett had invested heavily in newspapers and they were basically a monopoly for decades and decades and decades. And then the internet happened. And then it was like, hey, is this business, will the internet change this business model? The answer is absolutely. Okay, so you have to continuously determine whether or not you’re not only generating a good return on investment, but also a return on equity over the longterm, what does that look like? When you’re doing that analysis and you’re looking at the property, right, what would cause you to say that the original thesis is still intact versus we need to revisit that plan and something needs to change?

Sam Simonian: So one example I can give you is Park Estates. Park Estates is performing well as far as whether or not it’s tracks to underwriting. We have full occupancy. We’re about 20% over underwriting. However, we’re feeling that the state is becoming more and more hostile, as a lot of states are, to landlords. And we feel that rent control might not be too far in offing. So what we want to do now is ask the question, does this still make sense based on where things are today, right? So if we just look at it at the micro level, right, yes, it makes sense because this is what we bought and this we expected. But our underwriting model is only as good as the realities in place. And if our rent increases, for instance, are going to be, you know, limited because of these new laws, right, then math is not gonna work out how we thought. And now the question is whether or not we wanna still keep it. So it’s constantly taking a new data and updating our expectations based on what we think and taking the next steps from there.

Brian Spear: Couldn’t agree more, right? For us, it’s all about long-term same-store NOI growth. It’s compound interest. It’s AFFO over the long term. And, you know, for you, the listener, for anybody out there listening to this that’s evaluating a private investment, right, it’s an important distinction that we’re talking about here with asset management. The projected return might get your attention when you’re vetting investments, but the real question is whether anybody in the firm that’s running the deal is responsible for comparing those original projections with what actually happens after your capital is committed to that investment.

Sam Simonian: And that’s why I rely heavily on the entire team, right? So, again, asset management doesn’t live in a silo, so I really need to understand what Todd and operations is doing, what Mike and finance is doing, and then synthesize all that information, and then bring everybody together and say, hey, does this still make sense? And if it doesn’t, what are the next steps? What are the options we should start exploring? And one more thing I want to add is how asset management, Jude asked just previously about what asset management is. I didn’t really explain why I feel that it’s also getting more important. Back five, 10 years ago, deals were easier to find, right? So you could just purchase a property, just hold it. And 10 years later, sell for more than it was worth. Those opportunities have pretty much been exhausted for the most part. The individual mom and pop sellers have either been all bought out or at this point they’re savvy, they know the game, right? So they’re not going to just be able to you’re not just going to be able to, you know, crush that deal and just get, you know, buy something for, you know, two-thirds of its real value, right? So what that means is that, you know, real estate there’s two ways of making money, right? There’s not too many others, right? It’s either income or appreciation. So if the appreciation aspect is gone, basically just due to inflation and just macro pressures, then the only thing now is focusing on what we can do internally. So now to be able to achieve those same returns that we did 10 years ago, we’re going to have to put a lot more blood, sweat, tears into each property. And that’s really what asset management is.

Brian Spear: Undoubtedly. It is about controlling your own destiny. We already talked about betting on the jockey, but it’s about never stopping adding value. Another one of our sage evergreen principles. It’s becoming more vertically integrated. Do you think John D. Rockefeller, when he was building the monopoly, was ever paused to stop thinking about ways in which he could ultimately minimize expenses, remove one of the vendors from his overall value system, He’d operated in a more modest value chain and then over time took more and more of the pieces of the puzzle of the entire value system to become more vertically integrated to continue to drive more top line to the bottom line. It’s about never stopping adding value. And that’s how we try to operate here. It’s 1% incremental improvement every single day. The old Jim Collins flywheel method. And so my contention would be that the long-term macroeconomics still are unbelievably profound in this asset class. Wonderful demand. Negligible, new supply coming online. But it doesn’t change the fact that we have to get better on the margins operationally. And those who operate better over the long term will inevitably win, right?

Sam Simonian: There are no home runs in real estate. Very few, right? Most of them is going to be boring singles, right? Hit by pitch, you get on base, and then you keep on doing it. And that’s what wins the game, right? So it’s doing a whole bunch of boring stuff that doesn’t look like individually, they amount to a lot, but you save a penny here, a penny there, and that’s what’s gonna improve your NOI and your exit cap rate. So it’s a long-term game. There are, again, very few home runs. It’s just, and not very many people are willing to do that, right? So we’re in this exact opposite of Flippery wants it, everything quick and a grand slam. That’s not what this company’s about. This is very much geared for the long run. It’s grinding away every single day. Like you said, to pick up 50 cents here and a dollar there.

Brian Spear: Yes. Why? Because a penny saved is not just a penny earned, as the old adage goes. In our world, a dollar saved is many, many, many, many multiples of a dollar. Because let’s say you’re selling at a five cap. Every dollar that you save in expenses is actually $20 of value. On the property, right? It’s a 20 multiple. Unbelievable. A dollar saved is not a dollar earned. Every time you save a buck, it’s 20 bucks. There’s a difference there. And that’s the mentality that we have to have as you continue to move forward. So let’s put a concrete example to this in terms of asset management, reviewing the numbers, looking at variances on an ongoing basis. We’ll talk about Ridgebrook here as another example, one of the properties that we own, as a concrete example of this. Walk us through the water usage issue that we recently experienced as kind of a first signal that something was wrong, that we ultimately had the operations team go knock out and ultimately help resolve. So let’s just walk through what that looks like and how asset management helped resolve that.

Sam Simonian: Sure. This property, which is the biggest mobile home property we have in our portfolio, when we bought it, it was highly mismanaged from the previous owner. One of the areas we saw right away was 18% of every dollar, right, was going just to pay water expense, right? So the expense ratio just for water alone was 18%. And that just stuck out as one of the first things we saw, right? And I can’t remember the exact number, but it’s somewhere because of the size of the property, it was somewhere in the neighborhood of about $350,000 in absolute dollars, right? Every year, just going to water. And then we also had the sewer component and, you know, correlated, right? So we started digging and digging and digging. We did a lot of tests. We sent our RVPs there and… They, you know, lots of phone calls, lots of, you know, inspectors. But eventually it basically got halved. Last I looked at it, it was just a little bit over 9%. So just that one act, right, $175,000 that flows to the bottom line now as opposed to just going down out the drain, right? And again, that’s just one line item. Right. And what that also allowed us to do now is to consider building back the water, because before it wasn’t really fair to build back the water when we had all these leaks and all these issues, right? Because we don’t want to, you know, saddle the tenant with all these issues that the previous landlord hadn’t taken care of. But now that we know that water is getting within range of what’s normal, we can say, okay, so this is what normal water usage and without hesitation, now we can build back and capture some of that water usage too. So you kind of kill two birds with one stone. But again, that’s an extreme example of how crazy things can get. But every single property has some inefficiency. Most of them will have more than some. There will be multiple, right? And again, it’s the small things that will eventually drive up the individual property values and the portfolio values and ultimately the fund values.

Brian Spear: Absolutely. Small edges compound. Correct. Small edges compound, one foot in front of the other every single day, and you wake up five years, 10 years, 20 years down the road, NOI has shot up tremendously, cash flows increased tremendously, same-store, NOI growth continues to grow. It’s just over and over and over, small edges compound. Let’s talk a little bit about just benchmarking and variance analysis a little bit. You described in the past sometimes the best performing Sunrise properties using those as internal benchmarks rather than automatically accepting an industry average. So why would you say that is a better way to identify what’s possible in a property?

Sam Simonian: For a couple of reasons. One is because every company kind of does their accounting a little bit differently. So, right. So comparing the cost companies, there’s just so many questions. Like, for instance, just going back to operational expense ratio. Right. It highly dependent on whether or not tenants are bearing the costs or the landlord. Right. So if you have a high concentration of tenant owned homes, then you’re going to expect a lower operating expense. Right. Then if you don’t. So those kind of details are very difficult to find. You know, you can just find, you know, OK, on average, operational expenses, a mobile home will be about 40 percent. But without knowing what percentage of the mobile homes are tenant home versus park home, that’s just one example of many I can give. Then you don’t really know what that number really means. Right. Because if a property is primarily tenant owned home and their operational expense ratios at 30% for the company, then that’s not a good performing property because all those expenses should be borne by the tenants. It’s like, what’s going on here? So by benchmarking internally, I can always take the best performing property for each category for, again, for water, for water, for landscaping, for everything, for any line item that you can think of on our chart of account and use that as our own internal benchmark. Right now we have a big enough portfolio, right? 20 plus mobile homes where we can say if all of our properties can perform like our best performing properties on any one we’re more than happy with that, right? And so that’s why we use that. And I can very easily make adjustments based on like what I was just talking about. Is it heavily tenant owned home or park owned home? And it also creates internal competition. We still haven’t really done this, but the next step is to actually feed this information to the community managers. And that’s going to happen in the next probably by the end of this quarter where they actually see how each property is performing. And that creates some internal competition, too. Right. So there’s a lot of aspects why I’ve always chosen to compare that way.

Brian Spear: This is wonderful. And maybe let’s try to paint the picture for the listener in terms of the variance analysis progress that you’re talking about in the process that we go through. These are pretty healthy, in-depth spreadsheets with all of the assets in the portfolio and every line item from the P&L listed on said spreadsheet. Walk through what you do to try to create this variance analysis and what you’re really seeking, what you’re really keying in on so that we can take that information to the operations team and shed some light into what you’re seeing in the numbers and ultimately what we can try to do operationally to implement a plan to improve the numbers.

Sam Simonian: So just think about it. Just visualize the spreadsheet. I won’t go into details, right? But just visualize the spreadsheet. You have all of the properties on the columns listed one by one, side by side, right to each other. And in the rows, you have all of the expense categories, which our chart of accounts probably about 150 rows. So just think about 150 different expenses and all the properties. So they’re right by each other. So basically I can common size them, right? And as a percentage of rental revenue, I can see how each property is performing. So like I said in the previous example, 18% of rental revenue, for Ridgebrook was going to just pay off the water bill every month, right? So what I do is I look at it just like that, and every single line item we look at as a percentage of rental revenue, and very easily you can take one of our smaller properties like a Cedarhurst with 70 units and compare it to its bigger brothers like a Ridgebrook at 700 plus units, right, by looking at percentage. But I also write in the same column to the next of it. I also have the absolute dollar amount because that’s important too. For instance, we have limited resources. We can’t just hire, you know, 500 RVPs. And, you know, so we need to, there’s time resources, money resources, right? So we need to be conservative and just – So what I do is I actually look at also the absolute dollar number associated with each one, right? So even if we said Ridgebrook was at 18%, if Cedarhurst was at 25% of the water, of the rental incomes going to water, well, that’s a much smaller number in absolute terms, right? Let’s say that would be about $25,000 or $30,000 a year as opposed to the 18% at Ridgebrook. So our focus would first still be Ridgebrook, even though… relatively Cedarhurst is performing worse. So by just looking at the relative and the absolute dollar, I can very easily, right now we do 20, 25 properties at once, right, I can, even if we have a hundred properties, very easily on one spreadsheet, without craziness, I can just in a couple of hours time, just very easily spot the issues. And then we update this every quarter and we have an in-depth two hour meeting every quarter where all of this is relayed down to the actual RVPs and they relay it down to the communities. And we’re seeing results. We’re seeing results.

Brian Spear: Yeah, exactly. And for the interest of no man left behind, RVP is an acronym for regional vice president. So we’ll work with them. They typically manage somewhere between eight and 11 properties individually, a handful, a couple thousand lots each, and it allows them maybe a thousand, 1500 lots, allows them the opportunity to then manage all of the community managers and ultimately implement the changes Yes, that asset management needs to ensure that we see a difference in the numbers and doing so quarterly is very reasonable Because there’s a lot of variance from month to month the quarterly Process smooths out some of the accounting nonsense and some of the variables that just occur in accounting over time with missed bills This that the other but quarterly process is very, very prudent for this type of deep work as it were. So we talked about water leaks and finding water leaks. That’s pretty straightforward, right? It’s a relatively straightforward asset management problem, a great example to share. I would say sometimes maybe a harder decision comes when the opportunity that you’re vetting, maybe acquisitions we’re vetting itself is very attractive or could potentially be attractive. But the path to creating value might conflict with what, investors, current investors might expect. So let’s use another property that we have in the portfolio as an example, Hidden Forest. It’s in North Carolina. It might offer very meaningful lift, very meaningful long-term value through infill, but that plan can also consume some cash in the near to medium term and maybe suppress distributions during that period of time for several years. So how do you decide whether that trade-off belongs in the portfolio?

Sam Simonian: Well, it’s definitely not on my own, right? So there’s a lot of discussions with the entire team, right? Because we can feel that a property is an A++ property, but if investors don’t want it, right, then they don’t want it. One example would be a property like… Like a hidden forest, hidden forest has an opportunity to be a home run A++ property. But at the current moment, it’s a cash flowing. It presents a negative cash on cash situation just because it does require a lot of capital improvement infill in the form of infill, right? So for the next several years, it’s going to be sucking in money, right? And the goal is that, of course, like any investments, you take one step back so you can have two steps forward later, right? But yes, currently, that is a drag on the portfolio as far as what we can return to investors as a cash distribution. So it is a balancing act. And, you know, that’s why we got to keep in close contact with the IR team, with finance operations, just really understand what the market is and what our investors are asking for at any given time. You know, some investors, that’d be great. They have a super long-term horizon and they say, fine, I’m just looking for the absolute best play period, right? Not necessarily adjusted for cashflow or anything like that. Just whatever’s going to yield me the most in 15 years from now. Okay, fine. In that case, we might have a whole portfolio of hidden forests, but The reality is investors want to balance. And so that’s always tricky. And those are some of the questions we need to ask, right? For our next acquisition, can we buy another hidden forest or is that going to be too much of a cash drag on the portfolio? And should we pass it? These are questions that, you know, the tough questions that Brian and Kevin need to answer. So I try to do the best with what sphere of competency. But, yeah, there is no there’s a lot of gray. And that’s what makes real life asset management much more difficult than, you know, what you would learn, you know.

Brian Spear: Wonderful stuff, right? I mean, a little bit less black and white, a lot of gray, as you’re referencing. The real world gets a little bit mucky. The pro forma, right, it’s always perfect in a pro forma. But once you get into the real world, it gets a little bit more messy, right? So I share the sentiment, right? What are we trying to do here at Sunrise? We’re trying to help people generate cash flow and build legacy wealth in a tax efficient manner. We obviously much prefer the fund structure. We have a growth and income fund. So we want assets that both throw off cash flow today, make distributions to allow us to live the life that we want to live and have the freedom to do what we want with our families, but also ensure that we’re growing over time and building some legacy wealth for the family and changing the family tree, and ultimately doing so in a tax efficient manner. And every individual portfolio fund, every fund, needs to have a holistic view of what we can tolerate from income versus growth to ensure that we’re kind of meeting the expectations that we’ve set out for our partners along the way. And to your point, when you get into the investment committee, these are the more rich type of conversations that pop up because these can be wonderful assets, but it’s dependent upon the time horizon in which we’re looking at. So from my personal perspective, I am all about long-term cash flow. It is about what is the after-tax AFFO. It is about what is the adjusted funds from operations after tax. How much distributable cash, owner’s earnings, cash in my pocket that we can spend and not send to Uncle Sam. And how can we optimize for that over the very long term? And if we underwrite that dollar amount until judgment day, is the amount of risk that we’re taking in this respective property justified for the amount of cash flow it’s going to throw off literally until judgment day discounted back to a reasonable discount rate to the present value? And should that property… based on the current risk profile, be in this particular fund or not. So again, it’s a very rich discussion. There’s no right or wrong. It’s just what is best for this particular fund at this particular time. So in any event, great, great stuff and good conversation. And for you, the listener, of course, it’s obviously worth applying that thought process to your own portfolio, right? Are you only evaluating how high the projected return might be or whether the timing of, in the liquidity or the character of that return matches the the reason that you’re actually investing what are you seeking what are you seeking? You’ve said previously that a fast-growing company that we are we’re very, very fortunate we just, you know, the number 10th ranked fastest growing company in Tampa Bay we just hit the Inc 5000 list the 21st fastest growing real estate company in the country and you’ve said a fast-growing company can effectively become a new company every one or every two years. So, what tends to break first when the business ultimately outgrows the processes that helped it reach that previous stage? A little color on just fast growth.

Sam Simonian: Yeah, I really do believe that, right? Every couple of years when a company’s growing like this, it’s basically you’re starting from scratch. It’s a startup again, right? And you have all the issues that a regular startup will have, right? Starting with staffing. Do we have enough people to take care of everything? Do we have enough specialists, right, as you get bigger and bigger before, whereas a generalist might be able to handle it and just wear 100 different hats, right? At some point, you realize, okay, now things are getting too complicated and we really need to hire specialists, and specialists are usually more expensive, right? So those are some of the questions, especially… in a private equity situation where, you know, we need to be very mindful of costs because everything eventually gets passed on to the investor. And if we’re not doing it efficiently, the next guy’s going to do it, right? So we got to be very mindful. But the first thing that breaks is really the staffing part, right, where people are doing too much. And that was one of the biggest lessons I learned in my career where you know, I came up through an operations background and lean philosophy and all that, right? And I think I was too lean for too long. And that really did actually affect the company in a negative way. I should have been ahead of the curve, but, you know, I’ve kind of brought over those lessons to Sunrise. And so while I am a penny venture when it comes to staffing, I still, now I do understand that we still need to have a little bit of capacity because once you basically running the day to day, then you have very little time to reflect and criticize and critique your own work and think of how to improve, right? If you’re just fighting fires all day and that’s pretty much, you know, happens when you’re running, uh, you know, mobile home parks, parking lots. I mean, it’s just all the time. There’s a different issue, right? That’s just, uh, That’s why it’s called property management. It really does take hands on management. Real estate has always been thought of passing investment. It’s really not, in my opinion. It’s very much hands on, right, if you want to do it right. But yeah, so those are some of the issues and then I guess One A and one B is the communication. So it has to do with staffing again. So the communication starts breaking down and people start working in silos again. Right. So it’s basically a whole new you need to remap your communications methods and everything. How people delegate work and everything every couple of years when maybe even sooner when you’re growing this quickly.

Brian Spear: Wonderful feedback, and I could not agree more. You know, I feel like Sunrise, we’ve learned along the way. I share the sentiment. We’ve historically operated that crawl, walk, run, sprint philosophy, which is more the lean mentality that you’re referencing. Not getting out in front of our skis along the way, making sure that we had sufficient cash flow to continue to grow prudently, et cetera. But sometimes it has left us behind the curve of hiring. To your point, the same lessons learned along the way. We will never be the old Silicon Valley blitz scaling motto where you have this idea, you raise tens of millions of dollars and hire hundreds and maybe thousands of people. And then you’re trying to grow as fast as possible. And burning cash, literally losing money. And you hope that you can kind of break through and cross the category. You might be able to do that in tech when you have a potential 30-time exit. But in real estate, that doesn’t work, right? In real estate, you’re just trying to 50%, 100%, 200% over long term. But that’s all you get. So you got to be much more mindful about the expenses. So we don’t have that luxury in real estate. So that’s why real estate is simple, but it’s not easy. It’s simple in that everybody understands the business, but to get outsized return and beat your competition, it’s not easy. It’s definitely not easy. Oh, no. I share this sentiment. Simple but not easy. Same thing. So we’ll never do blitzscaling. I think we’ve learned a little bit about being lean, but ultimately being mindful about getting in front of some of the next phase of growth, knowing where we’re at, where we’re going, being able to see around corners a little bit, but growing prudently, allowing to continue to increase productivity per person, bring on the right type of talent, leveraging AI. We’ve used this example before, but ultimately being able to process twice as many outbound payments in AP with the same amount of people, same amount of staff in that department. That’s, again, massive increase in productivity per person, leveraging technology. These are the things that you could do. Ultimately finding teammates internationally that bring exorbitant amounts of value. We’ve got some unbelievably wonderful associates here. And given the concurrency rates, you can benefit tremendously by tapping into wonderful talent, whether it is in Mexico or Colombia or India or the Philippines, et cetera, which we’ve had the luxury of doing along the way for the betterment of everybody involved. And these back office roles can be done anywhere fully remotely. And you can hire unbelievably talented, wonderful A players that are a perfect culture fit, exceedingly talented specialists, to your point, at a wage that is… very, very reasonable and very accretive for the betterment of the entirety of the business. So in any event, it’s been wonderful. And to your point about, I’ll circle back to the philosophy of always needing to shed the skin and continue to grow, right? Every time the business doubles, it becomes a new business every single time. We’ve done this over and over and over again. We’re trying to double in three, double in three, double in three, even Apple, which is, you know, trillions of dollars in value. If you go back to the inception, it has simply just doubled and doubled over and over again. They’ve just had more cycles of doubling than we have along the way. But that’s all you’re doing. It’s slow, steady growth over time of continuing to double. And from my perspective, it’s why I come back to this unbelievably phenomenal quote from Jeff Bezos and this philosophy of day one, day one mentality. Yeah. he always says day one mentality. He writes it in every shareholder letter. It’s day one. It’s day one here. It’s at Amazon. And he wrote that in the late 90s, et cetera. And now it’s at one point was the world’s largest organization. And one of the reporters at one point stuck their hand up sheepishly and said, hey, Jeff, I know you always say it’s day one, but like what does day two look like? What is day two and what does day two look like? And Jeff paused, sat quietly. was thinking about it for a while. And then he responded something to the effect of a day two is slow, slow, slowing down growth, eventually hitting a plateau, then slow, steady downward trajectory leading to the business’s inevitable death. And the point is, if you’re not growing, you’re dying. You’ve always got to keep that startup mentality. You’ve always got to continue to grow. It’s the small edges compound. It’s infused into everyone inside of the organization. And it must be if you’re going to be successful. Because back to the ABCs, the minute that you double the business and you get arrogant, right, or bureaucratic and complacent. If you get arrogant thinking you’re on top of the world because you’re the 21st fastest growing company in real estate in the country. or your top 10 in Tampa, who cares? Congratulations, we enjoy it, we celebrate, but then it’s next day we wake up in the morning, it’s day one. Because if you ever get complacent, that’s when the competitors are going to come eat you for lunch. So we’ll keep on getting better, right? Small edges compound. Let’s bring it back to asset management, okay? Yes. I love the way in which we’ve defined asset management here. So we’ve thus far talked a little bit about kind of traditional definition of asset management thought about in real estate. But let’s open it up a little bit because you’ve talked about PPT. You’ve talked about people, process, and technology as assets and about creating clearer mini-owners, this ownership mentality inside of the organization. So what does true ownership of a process look like in practice? And walk us through a little bit of that PPT.

Sam Simonian: Sure. So like you said, we’ve defined asset a bit more broadly than the traditional definition of asset management and real estate. So we’re including the people, process and technology. And I’m charging that too. It all falls under the broader asset management department umbrella. So, yeah. Yes, the properties line, we require quality property, we hold them for the long term. But if you don’t have the PPT, then you’re really going to fall back quickly. Right. So you need all you need all those. You need the people, the right people in the right seats. You need the processes and then the correct technology. Right. So on the people end, I think we’ve done phenomenally well as far as hiring, right. And we really do believe in the delegate and elevate philosophy. I tell all of my hires, what you want to do from day one is think of a way to fire yourself for career success. I always tell everyone this. Just fire yourself over and over. Just like you were talking about, you have a new company every two years. Reinvent yourself every six months, a year, two years, where you’re firing yourself from your current role. You’re taking on more… more valuable duties for both yourself and your company. And you’re saying, okay, hire my replacement because there’s much more important things that I’m capable of doing and I can do. So that requires constant, you know, education and learning and curiosity. And of course, will, right. But with this model, you have an employee, a employee base that’s constantly improving. Right. And these stars just rise because of out of all their own self-interest. Right. So, just out of their own self-interest. They want to add another bullet point to their resume. They want to make more money, but in doing so, they’re actually helping out the company and our investors get better returns. So everything is aligned. Processes too, right? So if you have the right people, but your processes are inefficient, or if you’re doing things that you shouldn’t even be doing at all, right? Then a lot of that star power is going to waste. So that’s why we spent the last almost year now creating a visual flow of everything we do at Sunrise, right? And our next step is going to be to gradually, and we’re using AI for this too, go back and say, okay, do we need to be doing this first, right? And if not, And if so, how can we do it more efficiently? And once we have that, we create our standard operating procedures so that there’s no variance. Right. So we want the goal is to minimize exceptions processing. And so that the only time a manager steps in is when there is an exception to process. We want everything to blow and take care of it itself. So any time a manager steps in, something got broken, we want to go back and look at it, fix it, update our SOPs and then It just gets better and better with each iteration. And then the technology too, right? So real estate has traditionally been a generation behind every other industry as far as technology. 30 years behind, I’ve worked for real estate companies that are using software that was 20, 25 years ago, and they were still using it just because – Anyway, real estate has not been innovative in the past. That’s changing now slowly, and there’s a lot of new tools. So there’s a couple of new books that came out on Amazon that I just literally purchased last week. One is… asset management, property management in the AI age, and the other is asset management in an AI age. Same author wrote, I haven’t read them, but these things are coming out where before they wouldn’t, right, so we’re gonna go back and see what can the machines do better than us, right? What do we wanna retain because human judgment at this point has not been replaced by machines. And I don’t see that being fully taken over by machines, at least not in the near future, right? So, yes, we’re ahead of the curve on a technology too, but we’re mindful. We don’t want to just jump on any new technology and overspend, but we’re always thinking two to five years ahead. I think any further out, you’re just guessing. So, but two to five years ahead with our doubling cycles lifespan, we’re always trying to kind of be – trying to match the realities with the technology available with the realities of where we see things being.

Brian Spear: Beautiful. Love everybody that, of course. And I love the way in which we’ve defined asset management, right? So not just the traditional asset management in real estate sense, but ultimately PPT, people process technology. At the end of the day, it’s all about the people getting the right guys on the bus, the wrong guys off the bus, quality culture, ensuring that you’re – appropriately providing the guidance necessary and establishing the standards and the culture that allow those individuals to thrive. And to your point about delegating and elevating and ultimately trying to fire yourself, I couldn’t agree more, right? What does this do for the organization? If you do not adopt and implement that philosophy, you end up in the scenario where you, to your point, become too lean. unbelievably mundane, trivial tasks that aren’t moving the needle as much as they otherwise could because they’re still putting out fires. But getting out in front of that, you have to have a little bit more bandwidth in terms of talent and human beings so that you can offload those lower level tasks to the next associate so that you can continue to get above the fray and have bigger vision to keep pushing the ball forward for your department, for your area, for your team, whatever that might otherwise be, and the organization as a whole. I couldn’t agree more. And a couple of different slogans that people have heard me say over and over and over inside of the organization, iterate and improve. Iterate and improve. We will do that over and over and over. inside of the organization so that we can strengthen the system, right? That’s part of our Rose execution system at the end of the day. If something is broken, let’s fix it. Don’t try to sweep it under the rug. I want you to tell me why we suck. Please tell me. We will never be frustrated that you’re informing us that we’re not doing something. You see something in our organization that’s not going to do. Boots on the ground in your role that I don’t see. We’re sitting up here in our white ivory tower. I hate using those analogies. I’ve done everything in this company. I’ve been an on-site manager for multiple months at a time, but right now I’m not there. You see it better than I do. So please, tell me what’s wrong so that we can fix it, strengthen the system, get you the resources that you need, the technology, the people, what it might be in order to make your life a little bit better.

Sam Simonian: And we want to actually take it to the next level now where people don’t have to tell you, right? So we want to empower them to have, you know, think like an owner. I had a boss that would tell me, it’s like, we don’t want reporters. I’m not running a newspaper. We don’t want reporters, right? Observe, tell us what’s going on, but then take the initiative and jump in and fix it, right? We’re not a Fortune 500 company with tens of thousands of employees, right? Yes, we’re getting more and more specialized, but… If you have to wear multiple hats in a day, just whatever’s best for the company, that’s what you got to do. Right. So just like how an owner would think and just go and fix it. And a lot of people, you know, they don’t, especially when they come from large companies, they are not used to that level of autonomy. They’re always used to, you know, asking for permission. You know, the old saying about.

Brian Spear: No, it is. It is. I’d rather ask for forgiveness.

Sam Simonian: Exactly. It’s like, you know, yes, to some degree. Absolutely. I think for a startup, you need to kind of embrace that. Right. Mistakes are going to be made. Just we’ve hired you. We trust you. Right. And that’s why you’re here. So let’s if what’s the point if I’m going to hire this really smart person and I’m going to micromanage them and hold their hand. Right. Then I could have just hired anybody if that was the only goal. So. We hire smart people and we give them latitude to do what’s best.

Brian Spear: Yeah. Yeah, it’s an upward spiral. If I have to sit over there and micromanage you, then I didn’t hire the right person along the way. It reminds me a little bit of the way in which the Ritz-Carlton solves problems on the ground floor, right? Why is it such a wonderful experience when you go into that hotel? Because they have an ongoing budget that any associate at any time can spend. I don’t know what the dollar amount is. It’s probably more than this now. But it’s like up to $1,000. Something goes awry inside of a tenant experience. Something pops up. Whatever it might otherwise be for one of those customers coming into the Ritz-Carlton. Anyone there from the bellman to the manager to whomever is there can drop a thousand bucks to solve a problem immediately because they know, meaning the owner of the business, Ritz and Carlton, understand that over the very long term, the reputation that is provided by serving the customer to the best of their ability exceeds whatever that de minimis cost is. And empowering… all of the associates to make those decisions, think about how uplifting that is for the associates, right? Because then they don’t feel like a cog in the wheel, they feel like a piece of a bigger puzzle and owning the outcome for the business as a whole. So you’re trying to ultimately create this environment that allows folks to enjoy the ride and feel as if they’re making a massive impact because they are every single day. They are the frontline associates that actually do the real work to get the job done. and you’ve got to treat them as such along the way and create an environment that rewards that behavior. So we’ve talked a lot about what happens inside of asset management, inside of Sunrise here today. It’s been a wonderful conversation regarding the organization. So before we close out here, let’s try to translate all of this into something that investors can use when they evaluate their own investment updates, okay? When an investor opens a quarterly report, What should they be able to determine about the health of the underlying asset in which they have invested? And which KPIs and measurables help them reach that conclusion?

Sam Simonian: Well, yes, we’ve spent… a reasonable amount of time, a lot of time, significant amount of time, trying to figure out what metrics to provide and what not, right? Because there are a million metrics we can provide, but the goal is not to provide every single metric that exists. The goal is to provide very quickly to investors a snapshot of how their invested dollars are performing. And so we’ve been very intentional about our KPIs that we show and our metrics. So very quickly, you can see, for instance, when you look at our DSCR and LTV that we are not heavily leveraged, right? So why is that important? Well, that gives us opportunity if we need to force correct. And if we need, there’s a cash crunch or anything, we have that cushion that a lot of companies don’t, right? So they can maybe show off a little bit higher cash on cash returns, let’s say. But if you look at the risk adjusted returns, then they’re probably not comparable. I’m sure we’re doing better than a lot of them, right? So yes, that’s one of them. So we show the cash on cash return. We show the leverage metrics. And then we also show we were trying to also present also what makes the properties a lot of investors like. understanding the day-to-day. Some people don’t, some people just want the raw metrics and some people like the day-to-day. So we’re also trying to provide some insight about what we’re doing as far as infill, whether or not a property is performing according to original underwriting and just even the small, you know, community relations and resident relations activities that go along, right? Just to bolster that community spirit, keep tenants, sticky. But there’s a but a lot of thought has gone into each page of the investor report. We get feedback and we’ve made a couple of adjustments basically every single quarter since I’ve been here in some way, shape or form. But I really do think it just kind of, our report at this point gives investors everything they need and nothing they don’t. So it’s a very efficient way for them to digest as we’re growing our portfolio, right? The information that they need.

Brian Spear: I agree. Try to meet people where they are. Some folks like to get a little more granular. Some folks like to stay a little high level. Nevertheless, we try to serve that information, whether it is via podcasts on an ongoing basis, monthly private podcasts for our partners, But the quarterly reports specifically, right, the written form, et cetera, that’s really the report card at the end of the day for folks that are in the investment game. That’s kind of the report card. And you want to show up there. So, well, in the interest of time, let’s zoom out a little bit and maybe try to summarize asset management 101, right, a handful of things to think about. One. From an asset management perspective, thinking about this, the promise, right? The underwriting, the business model, what was the promise? What did we expect when the asset was acquired? Second piece of it is performance, right? Now, from an asset management perspective, what is the actual operating evidence showing now? Are we performing the way that we would have otherwise anticipated? Moving on to priority. So from an asset management perspective, we’re trying to figure out the variance analysis. What is going right? What is going wrong? If it’s something that’s going above expectations, can we double down, double click, lean into it further, amplify that across the portfolio in its whole? Or if it’s below expectations, how do we ultimately get it back on track? So which of those variances really materially affects the cash flow, the risk, or the long-term value of that individual asset. And then last is the portfolio fit, okay? For the entirety of the portfolio, not just the individual asset, but the portfolio as a whole, does the proposed response to those variances support the outcomes that the investor is seeking, that the investors actually need along the way? Stepping back out, Asset Management 101. I feel like we did a pretty good flyover of just Asset Management High Level. Got into the weeds a little bit, which I think was a wonderful conversation. And I hope that that gives you as an investor a really good check, right, on how to go about thinking through what Asset Management means. Let’s try to round this one out here. So after more than 20 years in the game, buddy, I don’t want to age you, but you’ve been doing this for decades now, right? Life is good. You’ve done some wonderful things historically. We didn’t even get into the background operating in wonderful Opportunity Zone funds, building the biggest Opportunity Zone fund in the country, et cetera. Obviously a rich, detailed background there. But many, many years doing this. What has asset management taught you about the difference between owning an asset and truly stewarding assets? Sam, thank you very much for joining us, buddy. It is absolutely a pleasure to have you here and even more wonderful to work with you every single day, buddy. It is an honor and a privilege to have you on our team and I look forward to many, many more deep, rich conversations like the one that we just had. With that, we’ll get the heck out of here for this week, guys. But until next time, you’d be great. Thank you very much.

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