From Where I Sit: Season 2, Episode 4 with David Adelman, Campus Apartments CEO Transcript

Tom McGee:

Welcome to From Where I Sit, the podcast where we explore the forces shaping America's built economy. I'm your host, Tom McGee, president and CEO of ICSC. In discussion with prominent leaders and innovators, we cut through the noise to explore the trends and innovations influencing the future of our communities.

Welcome to this episode of From Where I Sit. Today's guest is one of the most dynamic entrepreneurial leaders in commercial real estate, private equity, and sports business. David Adelman is the CEO of Campus Apartments, where he's revolutionized student housing and urban development nationwide. Beyond real estate, David is founder of Darco Capital, his family office, and co-founder and vice chairman of Future Standard Investments, which has approximately $80 billion in assets under management, specializing in alternatives and private assets. His influence also extends to major sports and entertainment ventures as a partner in Harris Blitzer Sports & Entertainment and chairing the ambitious new 76ers arena project. David's journey from investing his bar mitzvah savings as a team to building billion-dollar enterprises is a testament to vision, ingenuity and relentless drive. David, welcome to From Where I Sit.

David Adelman:

Thank you, Tom. Good to be here. Thanks for having me.

Tom:

It’s a pleasure. I'm really looking forward to our conversation. So I want to get to you investing of our MISPA money, but I know there's an event before that even, a basketball game, 11 years old. Talk about how playing your “uncle.” So talk about that and how that led on your journey to begin what is a marvelous career.

David:

Yeah, so I guess to sum it up, my real estate career started because I had a gambling problem. I'm 11 years old. Everyone has that aunt or uncle growing up that's not really your family member, but closer than family. And I've been fortunate to have a guy named Alan Horowitz who growing up, I called my uncle, but as close to me as a father you could be. And he was a really successful and visionary guy who you know, created Campus Apartments with his mother in the late 1950s. He was a real visionary and you know, just saying that student housing could be more than just a mom-and-pop business. And so I'm 11 years old hanging out with Uncle Al and I said, do you want to go outside in the driveway and play basketball? And he said, sure. And you know, he's a really unique guy at 83 years old, still very competitive, but you know, I said something as a kid like, I'll bet you I can win.

And he said, let's bet. And you know, most people let the 11 year old kid win. Not this guy. He was going to teach me a lesson. And so essentially I said, I'll bet you. He said, well, what do want to bet? I was like, you know, didn't know. He said, do you have a baseball glove? I'm like, yeah. He goes, if I win, I keep your baseball glove. So I lost my baseball glove, my football, my basketball that we were playing with. And then when you're a kid, have like a little passbook, bank book account. You know, kids today don't know what that is.

Tom:

Oh yeah, like your savings account.

David:

Yeah, your savings account. And so I lost all of those things.

Tom:

Well, you must have played multiple games and you kept doubling down on them.

David:

I did, I was chasing the gambler addiction, I guess, and I lost it all. And so I'm sitting here today at the corner of 41st and Walnut in Philadelphia. I came here as an 11 year old kid once a week. I had to stack lumber and sweep sawdust. And each week he'd hand me back one of my things. And I remember thinking, why would anyone do real estate? This sucks. Because I was working pretty hard. Ultimately paid off my debts.

So the story goes, you asked me about the bar mitzvah and the $2,000. Two years later, you know, I had bar mitzvah, I had about $2,000 in gift money from family and friends. And my parents thought I should put it in the stock market with my grandfather who was a stockbroker. And I said, no, I want to give it to Uncle Alan and I'd like to do what he does. They were like, what, in real estate? And I was like, yeah. And so I handed Uncle Alan the money.

He said, well, which building do you want to invest in? So we got in his car, drove around what is University City in Philadelphia. And after a few minutes, I said that one. We got out of the car and he said, well, why this one? said, because it's the biggest one. You know, I didn't know how to value real estate as a 13 year old kid.

Tom:

Your site selection process has matured since then.

David:

A little bit. I don't just use the force now. Yeah. So I, you know, I go there and, I, I walked the steps and I'm like realizing that my money could probably only pay for the stair tread. And, but that's what I did. And it became a great lesson to this day. Alan is an amazing teacher and just taught me the ins and outs of the business as a kid, made sure that I did every job growing up, you know, summers and weekends and things like that. Vacations from high school and college. And I was fortunate to really have like a front row seat with a really amazing mentor who taught me the business, who seated me to get started. And it's been a great run.

Tom:

So first of all, 11 years old, that's 1983 timeframe. So you're now, and we'll get to this, but you have an ownership interest in the 76ers. In 1983, of course, they won the championship. That's the Moses Malone, Dr. J team that beat my Los Angeles Lakers, by the way, because I'm a native Los Angelino. I still remember that series very, very, very vividly.

So by the way, the lessons you learned at that point in time, just in regards to the consequences of betting, I suppose, and hard work and earning. I would imagine those have been formative throughout your, you reflect on those, I'm sure.

David:

For sure. Yes.

Tom:

So you go, you're in college, you go to the Ohio State University, and you come, you graduate from college, and then you begin, you said you worked summers with Uncle Alan, but do you go directly into Campus Apartments at that time and begin working there?

David:

I did, you know, it's funny, because I graduated on a Thursday and I started work on that Monday. Never forget it. I was just like raring to go. I'm like, let's go.

Tom:

Wow. You knew you wanted to do this. You knew you wanted to go into real estate or was it just like, this is an opportunity and maybe it works out, maybe it doesn't?

David:

You know, as crazy as it sounds, by the time I got to graduate in college, I couldn't think of anything else I wanted to do. The exception was, I thought maybe I'd go to law school, and I just realized that that was not going to be for me. I’m, you know, I'm not the best student, to be honest with you, and I just said, like, I was ready to go. And so, I remember all my friends were leaving for Europe the next day to go backpacking, and I came back to Philly, and, you know, Monday morning, showed up at the office bright and early.

Tom:

And so you start working there and you said you've done a lot of jobs and different, all the things that you needed to do in the organization. When you started, what was the size of Campus Apartments? How many employees, properties, geography?

David:

Yeah, were about, we figured back then there were about 40 employees and that would include maintenance and kind of a light construction crew because Alan would always do kind of the capital himself, you know, with in-house. And we had probably, it was a pretty large collection of buildings, you know, call it at that time, you know, I'll say maybe it was 1,200 to 1,500 units. So it was a good size business.

Tom:

Okay, yeah, yeah, he built a big portfolio at that point.

David:

He did, and it was a very concentrated portfolio within like, you know, within a mile. So it was kind of unique. And, you know, so we started at that size. And then what really happened is I had a courtside seat watching how the University of Pennsylvania handled its real estate. And I watched and I said, you know, it's very interesting. And the analogy that I kind of grew to become was if you look at universities and you say, you know, when you and I went to college, the person serving the sloppy joe sandwich at lunch was probably a university employee back then, not some outsourced provider, you know, and there's a handful from Aramark, Legends, Dexo, Levy, you know, there's a ton of those guys that are doing that. Somebody figured out at the university that it is a better use of time and resources to not be in that business and bring in a professional.

And what I noticed at Penn and then subsequently at other schools, and this is in the mid-‘90s, is that they are in the education business. They're in the real estate business as a byproduct of solving the primary objective, which is to educate students. But that doesn't mean that they're experts in that. They're experts in education. And so I looked at that and I said, well, you know what? Could I become the Aramark, Dexo, Levy of university real estate? Could I go out there and provide these services for them and to get them off the hook? And I was very fortunate that there was a guy named John Fry at the time who was the chief business officer or COO of the university at that time. And he came from non-academia. He was a consultant. So I kind of pitched my idea and he's like, I totally agree with you. We shouldn't be in this business. We should outsource it to professionals.

And so a couple of things happened between the late ‘90s and early 2000s, which is one, I took over the property management of Penn's off-campus real estate. It was about 800 or a thousand apartments, because what they had done is strategically gone out into the neighborhoods and bought property surrounding the campus in case they wanted to expand. They didn't want noxious uses there. So they wanted to control their own destiny.

And so it's a pretty sizable portfolio for a university. So we started managing their stuff in like 1999. And I'll never forget, it was kind of the first time my partner Alan and I kind of had a disagreement because he was like, we're owners. We own, we manage our own stuff. We don't want somebody else's headache. And I saw it like, wow, we were like a mom-and-pop business, did things well, but like, Excel or it was a very analog way of tracking how we were doing, but it worked for us, very small business. But I thought if I could do something for Penn, I would be forced to do something in the institutional space, right? I'd be forced to learn how to like put those systems in place. What are their expectations for reporting, financials, all of that stuff. And so like for me, I wanted to jump into the fire and just learn what they were doing and what they needed. Because I thought down the road, if I could do it for Penn, I might be able to do it for an investor down the road. Because at that point, we'd only used our own capital in deals.

Tom:

And so when did you, well that's fascinating by the way, just for them to make that decision, because that was kind of a first mover kind of decision for that.

David:

That was a big deal for them to make that I give them lot of credit.

Tom:

And you guys, as your uncle Alan said, you owned your own stuff and managed your own stuff. You didn't do third party management. What prompted them to make the bet on you guys, to pick you guys?

David:

Well, I think we're able to show one because we were already well-vested in that neighborhood. We had skin in the game. We weren't just a fee manager. had thought about just going to a fee manager, but having the skin in the game. And then the scale of the two portfolios together, operating those, created some really great efficiencies and allowed both of us to up our game.

Tom:

So when you, so you start with the Penn properties, property managing them, and then you go to Uncle Alan and you say, I want to go national, I want to go outside of Philadelphia, and what does he say?

David:

Yeah, so, you know, what really happened is I started, so in the late night, you know, so I came to the office full time in 1994. By like ‘97, ‘98, he saw that I had something in me that wanted to do more than just what he had done in his really great microcosm. And he just said, look, like you're young, you have energy, you're smart. You should go, you know, I like what we have here. I'm going to be your partner. I'm going to help you get going. put up money for me to get me going, which was amazing, but the truth of the matter was he's like, you should run this business. I don't have the, I don't want to get a, he said like, I don't want to get on a-

Tom:

You're 25, 26 years old at this point, right?

David:

Yeah. I'm 25, 26 years old. He said, I don't want to get on a plane. I said, well, look, I do, I'm young. I've got energy. I'm going to do it. And he's like, well, then you should run the business. And so it was a wild thing to be, you know, a CEO at 25, 26 years old. You have 40 plus employees at that time, all of them which are older than me. It was a unique time.

Tom:

Which is intimidating even if you're highly confident and ambitious. Just, I mean that age difference and so forth is a big deal at that point. So you've decided now, so Uncle Alan's placed faith in you and you're going to go grow the business. Where did you first go? Where was your first geography that you went to begin to build out what you've got today?

David:

We did a couple of things all around the same time. You know, we went from Philadelphia to New Jersey. We went to North Carolina. There was an opportunity that came up through one of our lenders that brought us something. Then we went to Ohio. And so we kind of like, you know, one step, then the next, then the next, then the next. And then what really put us on the map is I got approached in like 2005.

There were already one or two student housing REITs at that time and we're probably the biggest private player, one of the bigger private players at that time and the banks came to say you should go public, become a REIT. I knew i wanted to raise capital. I wasn't convinced that I was cut it cut out to be a public company CEO.

Tom:

How big were you at this point, David? What's the number of units?

David:

Yeah, so at that point maybe we were 5,000 beds at that point in time, you know, four or 5,000 beds. But I knew I needed capital because back in those days, you would do a development deal. You could finance 110%, get your money back and roll the next deal, right? It was pretty easy. But we knew we could only do so much of that. And so instead of going public, I ran a process and wound up raising. So it was interesting. Nine banks pitched me. Eight wanted me to go public and one said we think you should do a private fund or private round and then give yourself optionality. I have to give a shout out. There's a great guy at Deutsche Bank at the time and I think kind of in the early 2000s, they were one of the real leaders in real estate capital markets. A guy named Ron Blumenthal who was really senior in real estate investment banking. Him and a guy named Simon Leopold who said, we think you should do a private round. And I was far from institutional at that point.

Like I was on my way, they saw the potential, but I was, you and you know, they put a lot-

Tom:

You're still a young guy at this point. You're a young man at this point. Maybe in your late 20s.

David:

Yeah. And so I was young, I didn't have a huge track record, but I had motivation and confidence. And I think, you know, they were moved to kind of get behind me. And you know, like everyone needs a break and they were my break and you know, them vouching for me after their diligence of us. We went out and I remember saying to them, you know, listen, whatever we do, we got to raise at least $300 million. And to be clear, Tom, I had never raised a dollar prior to that. Okay, this was my first capital raise. And I say to them, well, if I'm to do this, I want $300 million. And they couldn't understand why I said, I'll tell you when we're done. Long story short, people, we tour them around. We're taking investors, showing them the stuff we're doing. And that was very early in the days of student housing. And I always tell the story that I started going to real estate conferences in like 2002, ’03 and ’04, national stuff, NAA, NMHC, you know, all different stuff, what have you. And literally like you'd have the multifamily guys, the hotel guys, the retail guys, and like they wouldn't let the student housing guys sit at their lunch table, right? I was, I'm in bad real estate, it's dirty, it's animal house. And I remember thinking to myself, like, one of us is right and one of us is wrong. Like, I see this captive audience. I see mom and dad guaranteeing the rent. I see universities that are growing and don't have enough housing. I was like, but maybe I'm missing it or maybe they're missing it. I don't know. And so I just leaned in and I didn't care that no one else wanted to do it. And we go out on this road show.

And sure enough, I raised $300 million from a global sovereign wealth fund, their first student housing investment. But what was really important to me was-

Tom:

I mean that's pretty impressive.

David:

 Well, I tell everyone, I say, look, $300 million in 2005 was a lot of money.

Tom:

Yeah, it's still a lot of money, but was a lot of money back then.

David:

A lot of money back then. And so I get the money, but then you realize, you know, back in the day, you put $300 million down and then you put leverage on it. You've got a billion dollars worth of assets. So I remember the press release was like a billion dollar joint venture. And that's what the press release.

Tom:

That's why you picked the $300 million number, okay.

David:

I did, because I said, if I'm going to do something big in this space, I'm going to do it before anyone can catch me. And went out there, raised that capital and then just started rolling up some smaller operators and at any given time we've been up to eight, 900 employees and then you scale back, you sell, you do different things. You know, I think we've been as many 25 states. I think we're in 18 or 19 states today. And really just doing three things, new construction development renovations and like rehab.

But then really what we found where there was a lot of hidden alpha was on the property management side. We realized that people that were not from this business trying to get into this business didn't have the chops for it. Way more management intensive, right? Like, you know, back then you were actually helping kids balance their checkbook to pay their rent. And so it was just a different time. We had the patience for it. Which also means we made a ton of mistakes along the way, okay? But it's the only way you learn. But we kind of just went from a premise of like, what's the right thing to do because you have somebody's kids living in your building, their most prized possession, right? And the most important thing in anyone's world. So it's like, let's start with that. Let's start with a compassion for the fact that this is generally a student's first time living away from home. You're now no longer in the dorms. You're kind of on your own. And like, how do we make that a really good experience? And that's how we, that was kind of our North Star.

Tom:

So let's delve into that a little bit deeper, because you made the point that when you were beginning this process and the other sectors of commercial real estate didn't want to sit at the table with you, and they're thinking this animal house style kind of housing and so forth, but you had a vision and your properties are anything but that. they're very well put together, very high end. Just talk about the vision of what a student living in a Campus Apartments’ property today would experience versus what people might think of when they think of student housing. Maybe you and I lived in one when were going back in the day when we were in college.

David:

Yeah, look, I lived in a townhouse with, you know, with like two bathrooms for eight guys, right? You know, today, it's bed bath parity. Everyone has their own bathroom.

Tom:

Wow. So people have their own bathrooms, individual bathrooms. Wow.

David:

Everyone has, you these are furnished units. Their own bath. And so our prototype is a four bedroom, four bath. And we furnish them. We thought that for two reasons. I thought early on that when you think of wear and tear in a building, moving furniture in and out beats the crap out of the building. And then I was also like, if we're doing development, what do you want to fit in this layout? And I was like, if we provide our own furniture, we can be, so we were getting four bedroom, four bath units and 1,600 square feet. So you can make it really efficient. And lastly, mom and dad just have to bring the kid, the laptop and their luggage, right? And they're off to the races. And so we wanted to make it really simple for them. The fitness centers, like if we sent you pictures of the stuff we have in our fitness centers, that they equal like, you know, an urban gym. You know, some of our common areas, like I joke, when we did a property at Clemson and we put a slide in from the second floor down to the first floor. It looked like Google's offices. And so, you know, it's not your grandfather's student housing.

Tom:

I have two daughters a number of years out of college. We live in New Jersey. One went to undergrad up in Boston. The other one went to undergrad in L.A. And, you know, back when I was a kid, you kind of went to college generally and most kids in the geography in which they live. I mean, they went away, but maybe it was an hour away, two hours away. It strikes me now because of technology and visibility and football programs and all that kind of stuff. Kids go farther away to college. I mean, there's plenty of kids in the Tri-State area that go down south to college now to Georgia and Clemson and Florida. I would assume that that's been a positive for the student housing industry for your business because to your point, I mean, parents are moving their kids and they don't want to have to, you know, supply furniture and so forth. And they also want to make sure they're living somewhere decent and safe and nice.

David:

You know, what's really happened is, especially the schools in the southeast, you know, all over the place, is the popularity of the college football program or basketball program helped attract and turn those schools from a in-state school to students from out-of-state. Out-of-state students also pay more than in-state students. And so you saw that schools realized that recruiting out-of-state students was valuable and important. And so what that meant to us is, your operators is those kids have more disposable income than the value students paying in state tuition and so that we can afford to build these kind of higher-end luxury student housing properties.

Tom:

Do you see, I mean, just looking ahead 10, 15 years, there's continued growth in this whole area to continue kind of professionalization of it, outsourcing of property management and so forth. It makes perfect sense. I thought your analogy between student housing and foodservice is a pretty good one, right? I mean, that makes sense. It's outside of their core competency.

David:

Yeah. You know, the way I see it is even in an environment, if you get to one where enrollments flatten or decline based on population curve, you still have aging infrastructure and you still need to update properties, renovate them, redo them. And so I think, you know, what I feel fortunate about for us and what our investors feel fortunate about when they come into one of our funds is we don't just do one thing. A lot of my peers only do development. And that's great, they do a very nice job and we're all friendly competitors. I think what makes us unique is because of the way I grew up in Penn with urban scattered site real estate, I started with the hardest thing in real estate, which is managing scattered site assets, renovating old properties from the early 1900s and going from there. So you give me a clean site and I get to build, that's easy. But give me a first generation, 1995, student housing property. I'm the perfect guy to redevelop it into something new and exciting.

Tom:

You mentioned something about parents guaranteeing the rent and so forth, which obviously makes it a pretty attractive business. What kind of impact did COVID have on, I mean, that's an interesting time period for student housing and higher education in general.

David:

Yeah. So, so, you know, Tom, the interesting thing is prior to COVID, when I raised my first fund in 2012, after I did $300 million, then went to a private equity fund model instead of having one investor. People were like, hey, online learning that's going to negate their need for student housing. And I was like, you're not going to replace the education of oneself that happens in that environment. Being in school, living on your own, the responsibility of having to do your laundry, change your sheets, make your bed, like all those things that kids need to learn isn't going to happen living at home with mom and dad. So fast forward to COVID and you had your school starting to shut down and go to online. What happened was you'd see some kids go home. Mom and dad who are working are trying to do their Zooms from home. The kids are trying to Zoom. They're getting on each other's nerves. And sure enough, the kids wind up going back to their apartment that mom and dad are paying for, being with their friends and doing school from there. And, you know, so we collected 98% of our revenue during COVID.

Tom:

Wow, that's staggering.

David:

Different from your colleagues in the retail business.

Tom:

Outside of the random, you know, issue here or there, you're probably close to 100% in general. So basically, there was almost no erosion in your business. It's crazy. You know, it's interesting, I totally agree with you too, just in regards to, you know, university and people going away to school and so forth. It's really about that's just about maturation as a person too, right? Those years are so important. And so whether with advance of technology and so forth, which I'm sure is impacting education for sure. I just don't think it's going to impact the desire and the need and really the importance of kids moving away and living on their own at that phase of their life.

So you've built this impressive business, Campus Apartments, but you're also an entrepreneur and you do a lot of other things as well. So you've set up a large family office, Darco Capital. Talk about your vision for that, your interests, what do you invest in and why did you start it?

David:

Yeah, I think the main reason I started it was I love learning about other businesses and I love meeting other entrepreneurs. So that really, my first foray outside real estate was in 2006, 2007. I started a business in the financial services space called Future Standard. And the goal was to bring alternative investments to the retail masses. And that's really turned out to be a wonderful business that we now manage about $86 billion of individual money, a little bit of institutional. And so that's been a great business.

Tom:

Wow. How do you get your clients in there? Just out of curiosity on Future Standard, are you working with independent wealth advisers or risk advisors?

David:

Yeah, so, you know, so for example, you want to go to UBS, Morgan Stanley, Merrill Lynch, a handful of others, our products are on their platform, our funds. And so, you know, we thought we were solving a problem there, which was to make alternatives available to the masses. I then created Darco Capital because I was like, I really like investing in other things. I don't need to be the control investor. I can share knowledge and experience. And you know, I always say, you have the benefit of bringing me into your deals. You got all the mistakes I've made, so you don't have to make those. And you know, I'm an entrepreneur at heart. I like starting up businesses, but this is the best of all worlds. It allows me to stay in my seat at Campus Apartments, but still back other businesses and scratch that itch a little bit. And we're in everything from fintech to climate tech to a lot of consumer products, to all different things. Obviously, I'm sure we'll talk about the sports business and things like that. And so it's been able to provide me kind of a platform to get involved in lots of different things, meet lots of great people, and to the extent that I can be an advisor and share knowledge with folks, I'm enjoying it.

Tom:

How many investments are in the Darco portfolio today, individual companies?

David:

About 85.

Tom:

That's crazy. So you're taking minority interests in a variety of different companies, generally non-controlling interest. Wow that's impressive, I'm just fascinated by it. And then go back to Future, the concept of, it's so different from real estate. I mean, what prompted you to say, I'm going to go do this. I mean, I'm going to co-found this. Because it's just so different than what you were doing at Campus Apartments.

David:

You know, I saw a mismatch in the market. And so, you know, for example, if you're, you know, a high-net-worth wealthy individual, I get access to hedge funds, private equity funds, venture capital funds, because I'm an accredited investor, right? And, you know, my father, who's a retired psychologist, did fine in life did well, you know, but not wealthy. He did 60, 40 stocks and bonds, right? That was what every financial advisor told you about. And I just thought something was wrong there. And I said, like, let's create a way for the masses to get access to something more than just stocks and bonds. So, you know, private credit, real estate, you know, all these other things that we were able to create. so, you know, knock on wood, it's actually, you know, a little bit of luck and hard work, it's kind of worked out.

Tom:

It just speaks to your entrepreneurial mindset. because they are, I mean, I get the connection and the lessons you've learned and the observations you made from your father and not having access to those things. But taking the step to actually found, know, to founding a business like that, I think is unique and it speaks to an ambition that a lot of people wouldn't have.

David:

You know, I think it's ambition, but candidly, Tom, I'm not afraid to fail. And it's, you know, and I mentor lots of people. I teach a lot and like people don't understand that because it's so like when you don't have the pressure of failure and you're loose, generally a lot of good things happen.

Tom:

Well, it that it was that non-fear of losing that prompted you to lose that basketball game, which is some pretty good things in life, right? So maybe maybe that's subliminally behind your motivation.

All right. So you are entrepreneurial. You have a visionary mindset. How did you get involved in sports? Walk me through the journey where you're now an investor in Harris Blitzer Sports.

David:

Yeah, so really fortunate. So I have two great partners and Josh Harris and David Blitzer who are just awesome guys. The Sixers were for sale, my hometown team in 2012, 2013. I had another friend of mine, Michael Rubin, who's a Philly guy. We were like, you we should buy it. And there were kind of like two main issues. One, two small details. We were busy building our respective businesses. And two, we didn't have enough money. Yeah. So the small detail of that, you know, now should we have focused on it and raised the money? Probably. Michael wound up going into the deal with those guys in a minority position. I passed, you know, fast forward, you know, what I paid to buy Michael out. I could have bought the team, but you know, life just throws you a curveball. And then what happened was a couple of years later, Josh and David bought Crystal Palace, a Premier League soccer team. And I went in on that with them. And then as time went on, my friend Michael, who created Fanatics, a brilliant company, one of the best entrepreneurs I've ever met. He-

Tom:

Close friend of yours?

David:

One of my closest friends for 25 years, yeah. He started adding sports betting at the Fanatics. And the NBA and NHL, we own the Sixers and the New Jersey Devils, the NBA and NHL said you can't own a sports book and own teams. I tell people it was one of the quickest negotiations of one of the largest, larger deals I've done. We negotiated the price in three minutes. And that was that. And it's been great. Michael is happy for me to have it. There's a Philly guy and local guy. It’s the dream of, there was always stakes in sports teams available, but to be able to kind of own a piece of your own hometown team is pretty special. And so that's been the exciting part.

Tom:

Yeah, totally special. Particularly in a community like Philadelphia where, I mean, there's just such a passion and a loyalty to the local people. Although, how did you reconcile the New Jersey Devil's ownership interest being a Philadelphia guy? I mean, you had to a little bit of a second thought about, you know, leaving the Flyers.

David:

Yeah, you know, it's funny, like my friends growing up were like, you're not really going to wear that hat and that shirt. And I have to be honest with you, like the first few times I went to games, putting it on, it felt weird. I'm all in now, love the team, love the energy. You know, I feel very connected to it. I think we, the Devils have amazing fans. But yet look, I'm a rabid Sixers fan and you know, all the other Philly sports teams are here for me. And the only time I root against the Flyers is when they're playing the doubles. Right?

Tom:

Got it. Okay, fair enough. Sports, ownership of sports franchises is heavily in the news. I mean, there was a recent, you know, the Buss family selling their majority interest in the Lakers and the valuation. How do you, how do you, as you, when you made that decision, you said it was a quick, quick conversation. Of course you guys trusted each other and had a, had a relationship, but as you evaluate ownership and sports. It's a sports franchise It's got to be a different kind of calculation than it is in a real estate deal or other businesses quite frankly Isn't it or are you approaching the same way?

David:

You know, it's interesting. I think the only analogy you could give someone is for people who invest in a restaurant or something like of a smaller scale, right? Like you're like, this will be fun. It's a local place. I'm going to, entertainment, you know, hopefully it does well and all of that. But like, you know, for me, I always believe that sports was a good business. Okay? I, you know, I knew that like, you know, this is- It reminds me, I'll tell you how it reminds me of real estate. When everyone looks at real estate from an IRR basis versus a cash on cash basis, sports is an IRR business, I'm putting the money in, you're not really focused on distributions, those are rare if you're investing them back in the team and in talent. And someday my, I don't plan on selling it while I'm still here, but when my kids or wife decide if I'm not here and they sell it, hopefully it turned out to be a good IRR.

Tom:

Yeah, I mean the analogy I suppose between it and real estate, it's a long-term investment business. mean you're betting on the valuation 20, 30 years from now potentially being much greater than-

David:

Yeah, and look, you have to put a price and a value on fun. And, you know, I'm fortunate that I'm at a stage in my life where I am, you know, I work really hard. not, I'm still, you know, I say, you know, I'm still in the middle innings of my career, but, you know, having some fun is important too.

Tom:

Talking about having fun. So the new 76ers arena, you're chairing that development process. Talk about the vision there. And then I'm going to talk a little bit about just stadiums and arenas in general, which obviously there's been a lot of advancements in that over the course of the last decade or so. But talk about the project.

David:

Yeah, no, that, yeah, so exciting. You know, I'm going to build a new arena in Philadelphia. And here's the neat part. It's for the Sixers and the Flyers, right? So it's going to be a 50-50 joint venture. I'm leading the effort on behalf of all the groups here. And I've spent the last three years traveling the world, looking at every sports venue I could find or music venue. And, you know, it's exciting for me because, for the real estate I've developed in my career very rarely is there ego driven in those things. It's more like what's the supply, what's the demand, what problem I'm trying to solve. Here, I tell, I've built a really impressive team to work on this. I wake up every day saying that we are going to build the best live entertainment venue in the world in Philadelphia. And that's our North Star. And so I think about that every day and I am in the details of the plans, like, you know, path of travel for the fans, where the bathrooms are located, how long until you get a drink or a snack, like all of these things, you know, for the players, what's their program going to be? And Philly is a very unique sports town because all of our sports properties are in one parking lot.

Tom:

They're all next to each other. Yeah, it's a wonderful experience from a fan perspective. It's wonderful.

David:

Very unique. But when you think about what Philly fans experience for a game. Their tailgating experience is driving to a parking lot and opening the trunk of your car, pulling a chair out and sitting down and having a drink and something to eat. That's the pregame experience. I'm about to introduce something that is going to change the pregame experience in Philadelphia. We're going to have retail in front of the arena, public plaza, really just a great activation site for, you know, on games, on concerts, and even on the off days as well. And so, you know, I feel fortunate to be able to do like a once in a generation project, you know, in my own hometown that will be remembered by lots of people who are going to enjoy it.

Tom:

Well, it's a labor of love for you as a lifelong Philadelphian, isn't it?

David:

Tom, it's a lot of work. Like I will tell you, it is not easy. Like it's definitely more work than I expected it to be.

Tom:

Before we leave that topic real quick you mentioned the experiential element to it So there's going to be obviously a lot of retail and entertainment options. Do you view it as a destination that people would go to even when they're not attending the game? So it'll be a destination people could utilize from a dining out and a shopping experience whether or not at the game or do you feel it's really there as an amenity for those?

David:

I think a couple things. I think that hopefully this will service the other fans going, know, baseball has 80 home games a year, the NFL is there, you so the goal is could I create a great experience so that when someone is going out to a sporting event, be it ours or theirs, that they can have a great pre and post game experience. And so, you know, I know that our building is going to house over 225, 230 nights a year. Okay, that's just us. And then you have 80 games of baseball, have concerts and other things for the Eagle Stadium. And so for us to be able to create a place that brings people together and then can be a community asset. So, can this courtyard I'm building and everything else be great for farmers markets and things like that on the weekends for the community. So these are the things we're thinking about.

Tom:

Well, to your point, mean, Philadelphia is unique in that all the sports arenas and stadiums are right next to each other. So I mean, it is an opportunity for folks to utilize it even if they're not using the arena. So finally, Philadelphia, you're a lifelong Philadelphian, very active in the community. You've been active in a lot of causes, et cetera. Talk about some of the things you've been active in and why they're so important to you, David, because I know that you've leaned in heavily in a number of different ways.

David:

Yeah, look, I think when you are fortunate and you've had some success, how can you and your family share that benefit with others? My wife was a teacher, then she got her PhD, now she's a children's book author. She makes cause-based documentaries. So she has her way of giving back when it comes to education. I'm on the board of Penn Medicine, so medical things are important to me. Community-based organizations. Jewish philanthropy, I built the Holocaust Memorial here in Philadelphia. That was a passion of importance to me based on my family history. And so for me, I just want to help and solve problems to the best we can. I want to try and motivate people to give and help people. That's how I live my life.

Tom:

Well, David, you live a great life. You're doing great things. What a broad portfolio of things that you're involved in, everything from real estate to basically private equity and alternative investments, and obviously investing in your community in Philadelphia, which you love. So it's been a pleasure to talk to you.

David:

I appreciate it, Tom, thank you.

Tom:

We could have talked a little about sports and all that kind of stuff too a lot more, because I know we're both fanatical about that, but we kept it mostly to business.

David:

Absolutely. Well, I appreciate it. Thank you for having me.

Tom:

Thanks David.

David:

Take care.

Tom:

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